As filed with the Securities and Exchange Commission on January 14, 2009
Registration No. 333-155707
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective
Amendment No. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
Protective Life Insurance Company
(As sponsor and as the depositor of the Protective Life Secured Trusts described herein and as issuer of the funding agreements described herein)
(Exact name of registrant as specified in its charter)
Tennessee
(State or other jurisdiction of incorporation or organization of registrant)
63-0169720
(I.R.S. Employer Identification Number)
2801 Highway 280 South
Birmingham, Alabama 35223
(205) 268-1000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Please address a copy of all communications to:
c/o Deborah J. Long, Esq.
Executive Vice President, Secretary and General Counsel
Protective Life Corporation
2801 Highway 280 South
Birmingham, Alabama 35223
(205) 268-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Matthew E. Kaplan Steven J. Slutzky Debevoise & Plimpton LLP 919 Third Avenue New York, New York 10022 (212) 909-6000 |
Perry J. Shwachman Anthony J. Ribaudo Sidley Austin LLP One South Dearborn Street Chicago, Illinois 60603 (312) 853-7000 |
Approximate date of commencement of the proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. o
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. ý
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. o
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) of the Securities Act, check the following box. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of "accelerated filer," "large accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check One).
Large accelerated filer o | Accelerated filer o | Non-accelerated filer ý (Do not check if a smaller reporting company) |
Smaller reporting company o |
CALCULATION OF REGISTRATION FEE
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Title of each class of securities to be registered |
Amount to be registered |
Proposed maximum offering price per unit |
Proposed maximum aggregate offering price(2)(3)(4) |
Amount of registration fee(5)(6) |
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Secured Notes |
$(1) | 100% | $1(1) | $0(1) | ||||
Funding Agreements issued by Protective Life Insurance Company(7) |
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The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said section 8(a), may determine.
This Registration Statement contains:
Each offering of notes made under this Registration Statement will be made pursuant to:
in each case, any free writing prospectus relating to such offering.
The information in this prospectus supplement is not complete and may be changed. Neither Protective Life Insurance Company nor the trusts may sell these securities until the registration statement filed with the Securities and Exchange Commission is declared effective. This prospectus supplement and the accompanying prospectus are not an offer to sell these securities and are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted or would require registration or qualification under the securities laws of that jurisdiction.
SUBJECT TO COMPLETION DATED JANUARY 14, 2009
PROSPECTUS SUPPLEMENT
(To Prospectus dated , 2009)
Protective Life Insurance Company
Sponsor and Depositor
$
Secured Medium-Term Notes
(that are also Asset-Backed Securities)
Issued Through and Obligations of
Protective Life Secured Trusts
Each series of notes will be issued by a separate and distinct issuing entity in the form of a trust which:
The notes:
The funding agreements to be issued by Protective Life Insurance Company to the trusts will represent obligations of Protective Life Insurance Company only.
Unless otherwise specified in the applicable pricing supplement, your series of notes will not be listed on any securities exchange.
The specific terms of each series of notes will be as set forth in a separate pricing supplement.
See "Risk Factors" beginning on page 11 of the accompanying prospectus for a discussion of certain risks that should be considered in connection with an investment in the notes.
None of the Securities and Exchange Commission, any state securities commission or any state insurance commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus supplement, the accompanying prospectus or any pricing supplement. Any representation to the contrary is a criminal offense.
BANC OF AMERICA SECURITIES LLC
Barclays Capital J.P. Morgan Morgan Keegan & Company, Inc. UBS Investment Bank |
Citi Merrill Lynch & Co. Morgan Stanley Wachovia Securities |
The date of this prospectus supplement is , 2009.
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Page | |
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Prospectus Supplement |
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Forward Looking Information |
ii |
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Summary |
S-1 | |
About This Prospectus Supplement and the Pricing Supplements |
S-11 | |
Description of the Notes |
S-12 | |
Description of the Funding Agreements |
S-42 | |
Material U.S. Federal Income Tax Considerations |
S-44 | |
Plan of Distribution |
S-52 | |
Prospectus |
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Forward Looking Information |
2 |
|
About This Prospectus |
3 | |
Where You Can Find More Information |
4 | |
Incorporation of Certain Documents by Reference |
5 | |
Description of the Trusts |
6 | |
Risk Factors |
11 | |
Fees and Expenses |
20 | |
Use of Proceeds |
21 | |
Description of Protective Life Insurance Company |
22 | |
Description of the Notes |
23 | |
Description of the Indentures |
26 | |
Description of the Funding Agreements |
37 | |
Description of Standard Expense and Indemnity Agreement Terms |
42 | |
Description of Standard Administrative Services Agreement Terms |
43 | |
ERISA Considerations |
44 | |
Plan of Distribution |
47 | |
Legal Matters |
48 | |
Experts |
48 |
You should rely only on the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus, the applicable pricing supplement and any applicable free writing prospectus. Neither Protective Life Insurance Company nor any agent or dealer has authorized any other person to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. Neither Protective Life Insurance Company nor any trust's agents or dealers is making an offer to sell the notes in any jurisdiction where the offer or sale is not permitted. You should assume that the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus, the applicable pricing supplement or any applicable free writing prospectus is accurate only as of the date on the front cover of those documents. The business, financial condition, results of operations and prospects of Protective Life Insurance Company may have changed since that date. Capitalized terms which are not defined in this prospectus supplement will have the meanings set forth in the accompanying prospectus.
References in this prospectus supplement to "United States dollars," "U.S. dollars" or "$" are to lawful currency of the United States of America, and references to "Euro" are to the currency introduced at the start of the third stage of the European economic and monetary union pursuant to the treaty establishing the European Community, as amended. In this prospectus supplement each series of Secured Medium-Term Notes is referred to as a "series of notes" and Secured Medium-Term Notes are referred to generally as "notes."
i
This prospectus supplement, the accompanying prospectus and any pricing supplement and the information incorporated by reference in such documents may include forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The safe harbors contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 do not apply to forward looking statements regarding the trusts. These forward looking statements reflect Protective Life Insurance Company's current view with respect to future events and financial performance. The words "believe," "expect," "estimate," "project," "budget," "forecast," "anticipate," "plan," "should," "would," and similar expressions identify forward looking statements which are based on future expectations rather than on historical facts and are therefore subject to a number of risks and uncertainties, and neither Protective Life Insurance Company nor any trust's agents or dealers can give assurance that such statements will prove to be correct. You should not place undue reliance on these forward looking statements, which speak only as of their dates. Protective Life Insurance Company, and each trust's agents and dealers shall not undertake any obligation to update or review forward looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes to projections over time. Please refer to Part I, Item 1A in Protective Life's most recent Annual Report on Form 10-K and Part II, Item 1A in Protective Life's most recent Quarterly Report on Form 10-Q, in each case as amended or supplemented by any subsequent filings, for more information about factors which could affect future results.
ii
This section summarizes certain of the legal and financial terms of the notes that are described in more detail in "Description of the Notes." Final terms of any particular series of notes will be set at the time of sale and will be contained in a pricing supplement relating to that series of notes. That pricing supplement may add to, update, supplement or clarify the terms contained in this summary. In addition, you should read the more detailed information appearing elsewhere in the accompanying prospectus, this prospectus supplement, the applicable pricing supplement and any applicable free writing prospectus. References in this prospectus supplement to "Protective Life" are to Protective Life Insurance Company. References in this prospectus supplement to the "trusts" are to the Protective Life Secured Trusts. References in this prospectus supplement to an "issuing trust" are to a trust with respect to the series of notes issued and sold to the public by that trust. References in this prospectus supplement to "Wilmington" are to Wilmington Trust Company solely in its capacity as trustee of the trusts and not in its individual capacity.
The Trusts | Each series of notes will be issued by a separate newly created Delaware statutory trust or a separate newly created Delaware common law trust (each a "trust"). Each statutory trust will be established by AMACAR Pacific Corp., as administrator and trust beneficial owner, and Wilmington Trust Company, as Delaware trustee, pursuant to a certificate of trust and a statutory trust agreement. Each common law trust will be established by AMACAR Pacific Corp., as administrator and trust beneficial owner, and Wilmington Trust Company, as common law trustee, pursuant to a common law trust agreement. Each statutory trust agreement and common law trust agreement is referred to in this prospectus supplement as a "trust agreement." | |||
Sponsor and Depositor |
Protective Life Insurance Company ("Protective Life") is the sponsor of the program and the sole registrant as the depositor and issuer of the funding agreements under the program. |
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Purpose of Trusts; Depositor |
The sole purpose of each trust is to facilitate a program for the issuance, from time to time, of a series of notes to the public, which is secured by one or more funding agreements sold to, and deposited into, the issuing trust by Protective Life. The principal amount of each funding agreement sold to an issuing trust may not be increased. Each trust may issue only one series of notes. Each trust will use the net proceeds received from issuing its series of notes to acquire one or more funding agreements. Each trust will hold the collateral described below pertaining to its series of notes to fund its obligations under that series of notes. Each trust will pledge and collaterally assign the funding agreements held in that trust to the indenture trustee for the benefit of the holders of that trust's series of notes. Holders of notes of a series of notes may look only to the funding agreement(s) and any other collateral held in, or pledged and collaterally assigned to the indenture trustee by, the issuing trust for payment on their notes and not to the assets held in any other trust. |
S-1
No trust will be affiliated with Protective Life. | ||||
Below is a diagram showing the parties involved in the issuance of notes by each trust. |
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Protective Life Can Issue Medium Term Notes and Funding Agreements Directly to Investors |
Protective Life is able to issue its own medium-term notes directly to investors and does issue funding agreements directly to investors. However, by securing a trust's notes with Protective Life's funding agreements, such trust's notes are secured by an asset that would have a higher priority in insolvency than unsecured medium-term notes of Protective Life and may be entitled to receive a higher investment rating from Moody's Investors Service, Inc. than unsecured medium-term notes of Protective Life. In addition, funding agreements are very difficult to transfer and have no active secondary market. By securing each trust's notes with Protective Life's funding agreements, investors may be able to avail themselves of many of the benefits of Protective Life's funding agreements while benefiting from the liquidity afforded by each trust's medium-term notes. |
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Dealers |
Banc of America Securities LLC Barclays Capital Inc. Citigroup Global Markets Inc. J.P. Morgan Securities Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated Morgan Keegan & Company, Inc. Morgan Stanley & Co. Incorporated UBS Securities LLC Wachovia Capital Markets, LLC |
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Secured Medium-Term Notes Program |
This prospectus supplement relates to notes that each trust may issue and sell to investors under this secured medium-term notes program. |
S-2
Secured InterNotes® Program | Included in the registration statement, of which this prospectus supplement is a part, is another prospectus supplement relating to notes that may be issued and sold to retail investors by either a newly established Delaware statutory trust or a newly established Delaware common law trust under the related Secured InterNotes® program. The terms of the Secured InterNotes® are identical in all material respects to the terms of the notes to be sold to retail investors under this program, except that the Secured InterNotes®: | |||
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will be denominated in U.S. dollars only; and |
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| will not contain a provision providing for the redemption of the notes in connection with the payment of additional amounts in respect of taxes as no such additional amounts will be paid with respect to Secured InterNotes®. | |||
Amount |
A maximum of $ of notes, or the equivalent in one or more foreign currencies, may be issued in connection with this prospectus supplement, less any amount of notes previously issued under this program, the related Secured InterNotes® program or otherwise under the accompanying prospectus. |
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Flow of Funds |
Other than during an event of default under notes of a series, amounts received by or on behalf of the issuing trust will be paid: |
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first, to amounts due upon its notes; and |
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| second, with respect to any remaining funds, in accordance with its trust agreement. | |||
During an event of default under notes of a series, amounts received by or on behalf of the issuing trust will be paid: |
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first, to the payment of the reasonable and customary expenses and counsel fees incurred by the indenture trustee and any other amounts due and unpaid to the indenture trustee by the issuing trust, in an aggregate amount of no more than $250,000 for all series of notes issued by all trusts under any Protective Life secured notes program, to the extent not paid pursuant to the expense and indemnity agreements; |
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| second, to amounts due upon its notes; and | |||
| third, with respect to any remaining funds, in accordance with its trust agreement. See "Description of the IndenturesApplication of Money Collected Under the Indenture" in the accompanying prospectus. | |||
Terms of the Notes |
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Each series of notes will be the issuing trust's unconditional, direct, non recourse secured and unsubordinated obligations. |
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| Each series of notes will be secured by the collateral held in the issuing trust. |
S-3
| Each series of notes may be accelerated in the payment of principal and outstanding interest if an event of default under the notes occurs. Upon the occurrence of an event of default, the indenture trustee (described below), on behalf of the holders of notes, may proceed only against the collateral held in the issuing trust. | |||
| The notes of each series are not, and will not be, insurance contracts, insurance policies or funding agreements. | |||
| The notes of each series are not, and will not be, obligations of, or guaranteed by, Protective Life or any other insurance company or any affiliate of Protective Life. The notes will not benefit from any insurance guaranty fund coverage or any similar protection. | |||
Payment of Principal and Interest |
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Principal and interest payments, if any, on any series of notes will be made solely from the proceeds of one or more funding agreements purchased with respect to such series of notes by the issuing trust and any other collateral held in that trust. |
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| Each series of notes may be interest bearing or non interest bearing. Each series of notes may bear interest at either a fixed rate or a floating rate, or a combination of fixed and floating rates, as specified in the applicable pricing supplement. | |||
| The principal amount of each note (other than amortizing notes) will be payable on its stated maturity date, repayment date or redemption date, as specified in the applicable pricing supplement, at the corporate trust office of the paying agent or any other place the issuing trust designates. | |||
| Interest, if any, will be payable on the dates specified in the applicable pricing supplement. | |||
| A trust may issue amortizing notes that pay a level amount in respect of both interest and principal amortized over the life of the note, if specified in the applicable pricing supplement. | |||
| A trust may issue discount notes that do not bear any current interest or bear interest at a rate that is below market rates at the time of issuance. | |||
Interest |
Each fixed rate note will bear interest from its date of issue at the annual rate stated in the applicable pricing supplement until the principal is paid. |
S-4
Each floating rate note will bear interest from the date of issue until the principal is paid at a rate determined by reference to an interest rate or interest rate formula, which may be adjusted by a spread and/or spread multiplier (each as more fully described under "Description of the Notes"). The pricing supplement will designate one or more of the following base rates, along with the index maturity for that base rate: | ||||
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the CD rate, |
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| the Commercial Paper Rate, | |||
| the Federal Funds (Effective) Rate, | |||
| the Federal Funds (Open) Rate, | |||
| LIBOR, | |||
| EURIBOR, | |||
| the Treasury Rate, | |||
| the Constant Maturity Treasury Rate, | |||
| the Prime Rate, | |||
| the Constant Maturity Swap Rate, or | |||
| the Eleventh District Cost of Funds Rate. | |||
Redemption and Repayment |
A trust will redeem its series of notes if Protective Life redeems each funding agreement securing such series of notes. Except as otherwise specified in the prospectus, this prospectus supplement or the applicable pricing supplement, the funding agreement(s) securing a series of notes will not be redeemable by Protective Life and no series of notes will be repayable at the option of the holder prior to its stated maturity date. Notes that may be redeemed at a time when 25% or more of the original principal amount of such notes are outstanding will be clearly identified as "callable" in the applicable pricing supplement. Unless otherwise specified in the applicable pricing supplement, the notes will not be subject to any sinking fund. |
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Maturities |
Unless otherwise specified in the applicable pricing supplement, each series of notes will mature nine months or more from its date of original issuance, as specified in the applicable pricing supplement. Unless otherwise specified in the applicable pricing supplement, each series of notes will mature on or prior to 30 years from its date of original issuance. |
S-5
Survivor's Option | A series of notes may contain a provision (which is referred to as the "survivor's option") permitting optional repayment of notes of that series of notes prior to maturity, if requested, following the death of the beneficial owner of notes of that series of notes, so long as the notes were held by the beneficial owner or the estate of the beneficial owner for a period beginning at least six months immediately prior to the request. Your notes may not be repaid in this manner unless the pricing supplement for your series of notes provides for the survivor's option. If the pricing supplement for your series of notes provides for the survivor's option, the funding agreement securing your series of notes will contain a provision which will allow the issuing trust to tender the funding agreement in whole or in part to Protective Life. An issuing trust's ability to tender funding agreements related to its series of notes that contains a survivor's option will be subject to certain limitations set by Protective Life. As a result, your right to exercise the survivor's option is subject to limits set by Protective Life with respect to the relevant funding agreement on (1) the permitted dollar amount of total exercises by all issuing trusts in any calendar year, (2) the permitted dollar amount of particular exercises by all issuing trusts in any calendar year and (3) the permitted dollar amount of total exercises by an issuing trust with respect to a series of notes in any calendar year. Additional details on the survivor's option are described in the section titled "Description of the NotesSurvivor's Option." | |||
Currencies and Denominations |
Unless otherwise specified in the applicable pricing supplement, notes will be denominated in U.S. dollars. |
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Unless otherwise specified in the applicable pricing supplement, the notes will be issued and sold in denominations of $2,000 and multiples of $1,000 thereafter. |
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Listing |
Unless otherwise specified in the applicable pricing supplement, your series of notes will not be listed on any securities exchange. |
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Forms of Notes |
Unless otherwise specified in the applicable pricing supplement, each series of notes will be issued in fully registered form and will be initially represented by one or more book entry notes registered in the name of Cede & Co., the nominee of The Depository Trust Company, as depositary, for the accounts of its participants, including Euroclear Bank S.A./N.V. ("Euroclear"), as operator of the Euroclear System (the "Euroclear Operator"), and Clearstream Banking, societé anonyme ("Clearstream, Luxembourg"). Each book entry note will be held by the indenture trustee as custodian for the depositary. |
S-6
Clearing Systems | The Depository Trust Company and/or, in relation to any series of notes, any other clearing system as may be specified in the applicable pricing supplement. | |||
Collateral |
The notes of any series will be secured by the right, title and interest of the issuing trust in and to (1) the funding agreement(s) held in that trust, (2) all proceeds of the funding agreement(s) and all amounts and instruments on deposit from time to time in the issuing trust's collection account, (3) all books and records pertaining to the issuing trust's funding agreement(s), and (4) all rights of that trust pertaining to the foregoing. |
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The issuing trust will pledge and collaterally assign the related funding agreement(s) to the indenture trustee for the benefit of the holders of such series of notes. |
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Funding Agreements |
Each trust will use the net proceeds received from the offering of its series of notes to purchase one or more funding agreements issued by Protective Life the terms of which will be set forth in the applicable pricing supplement. The funding agreement(s) will have a principal amount equal to the sum of the principal amount of the related series of notes and the principal amount of the beneficial ownership interest in the issuing trust. The rate at which the funding agreement(s) bear interest will be equal to the rate of interest on the related series of notes. The funding agreement(s) will otherwise have substantially similar payment terms to the related series of notes. |
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The obligations of Protective Life under any funding agreement will not be guaranteed by its parent company or any of its subsidiaries or affiliates. |
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Funding agreements are unsecured obligations of Protective Life. The funding agreements will carry the financial strength rating of Protective Life as set forth in the applicable pricing supplement. |
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Under Section 56-9-330, Tennessee Code Annotated, in the event of an insolvency of a Tennessee domestic insurance company, the loss claims of holders of funding agreements rank equally with the loss claims of other policyholders of the insurer, and in a superior position to general unsecured creditors. Therefore, in the event of an insolvency of Protective Life, loss claims of a trust under each of the funding agreements held by it would rank equally with the loss claims of other policyholders of Protective Life and in a position superior to general unsecured creditors of Protective Life. See "Description of the Funding Agreements" in the accompanying prospectus. |
S-7
Rating | Unless otherwise indicated in the applicable pricing supplement, the notes and the funding agreements will have a rating of AA from Standard & Poor's Ratings Services, a division of The McGraw Hill Companies, Inc., and Protective Life anticipates that the notes and the funding agreements will be rated A1 by Moody's Investors Service, Inc. Notes of a series will be issued under the program only in the event that, at the time of issuance of such series of notes, at least one nationally recognized rating agency would assign an investment grade rating to such series of notes and the funding agreement(s) securing such series of notes. | |||
Withholding Tax |
All amounts due in respect of the notes will be made free and clear of any applicable withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or other governmental charges of whatever nature imposed or levied by or on behalf of any governmental authority, unless such withholding or deduction is required by law. Unless otherwise specified in the applicable pricing supplement, a trust will not pay any additional amounts to holders of its series of notes in respect of any such withholding or deduction. |
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All amounts due in respect of the funding agreements will be made free and clear of any applicable withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or other governmental charges of whatever nature imposed or levied by or on behalf of any governmental authority, unless such withholding or deduction is required by law. Unless otherwise specified in the applicable pricing supplement, Protective Life will not pay any additional amounts to the relevant trust in respect of any such withholding or deduction. |
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Indenture and Indenture Trustee |
Each series of notes will be issued to the public pursuant to an indenture to be entered into between the issuing trust and The Bank of New York Mellon, a New York banking corporation, in its capacity as indenture trustee. The indenture trustee will act as servicer to the program. Each indenture will be subject to the Trust Indenture Act of 1939. The indenture trustee is not affiliated with Protective Life. |
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Administration of the Trusts |
Wilmington Trust Company, a Delaware banking corporation, will be the sole trustee for each trust. Wilmington will not be obligated in any way to make payments under or in respect of the notes. Wilmington is not affiliated with Protective Life. |
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AMACAR Pacific Corp. will be the sole administrator for each trust (the "administrator"). The administrator will not be obligated in any way to make any payments under or in respect of the notes. The administrator is not affiliated with Protective Life. |
S-8
Protective Life will enter into an expense and indemnity agreement with each of the indenture trustee, Wilmington, the administrator, each trust to be formed in connection with the issuance of a series of notes and each service provider that may become a party to the agreement from time to time. Under the agreement, Protective Life will pay certain costs and expenses relating to the offering, sale and issuance of any series of notes and certain costs, expenses and taxes incurred by each issuing trust, and Protective Life will indemnify the indenture trustee, Wilmington, the administrator, each issuing trust and each service provider that may become a party to the agreement from time to time with respect to certain matters. See "Description of Standard Expense and Indemnity Agreement Terms" in the accompanying prospectus. Protective Life anticipates that the indenture trustee fees for this program will be approximately $2,500 per year for each series of notes. | ||||
Trust Beneficial Owner |
AMACAR Pacific Corp. will be the sole beneficial owner of each trust (the "trust beneficial owner"). The beneficial interest in each trust: |
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will be purchased by the trust beneficial owner for $15 (or, in the case of a trust that issues discount notes, such other amount as corresponds to the discount on such notes), |
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| will be issued in book entry form only, | |||
| will entitle the trust beneficial owner to receive payments in respect thereof on the same terms as the payments to be made to the holders of notes of the related series of notes, and | |||
| will be subordinated to the notes of the related series of notes. | |||
The trust beneficial owner will receive periodic distributions on its beneficial interest at the same rate and on the same day that holders of notes of the related series of notes receive interest payments. On the maturity date of the trust beneficial owner's beneficial interest and the related series of notes, the issuing trust will redeem the principal amount of the related series of notes to the holders of such notes and the principal amount of the beneficial interest to the trust beneficial owner. |
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The trust beneficial owner is not affiliated with Protective Life. |
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Governing Law |
Each series of notes and each indenture will be governed by, and construed in accordance with, the laws of the State of New York. Each trust agreement will be governed by, and construed in accordance with, the laws of the State of Delaware. The funding agreements will be governed by the laws of the State of Delaware. |
S-9
Material U.S. Federal Income Tax Considerations | Each trust and, by acceptance of a beneficial interest in a note, each holder of a beneficial interest in a note will agree, for U.S. federal, state and local income and franchise tax purposes, to treat (i) the relevant trust as disregarded and (ii) such note as representing debt of Protective Life. Prospective purchasers of the notes must carefully consider the tax consequences of the purchase, ownership and disposition of the notes set forth under "Material U.S. Federal Income Tax Considerations." | |||
Consolidated Earnings Ratios |
The following table sets forth, for the years and periods indicated, Protective Life's ratios of: |
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Consolidated earnings to fixed charges; |
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| Consolidated earnings to fixed charges before interest credited on investment products. |
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Nine Months Ended September 30, |
Year Ended December 31, | ||||||||||||||||||||
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2008(3) | 2007 | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
Ratio of Consolidated Earnings to Fixed Charges(1) |
0.9 | 1.4 | 1.4 | 1.5 | 1.5 | 1.6 | 1.5 | |||||||||||||||
Ratio of Consolidated Earnings to Fixed Charges Before Interest Credited on Investment Products(2) |
0.1 | 7.7 | 6.9 | 20.1 | 38.5 | 46.4 | 83.4 |
S-10
ABOUT THIS PROSPECTUS SUPPLEMENT AND THE PRICING SUPPLEMENTS
This document is a prospectus supplement and supplements a prospectus which is part of a registration statement that Protective Life has filed with the Securities and Exchange Commission (the "SEC"). This prospectus supplement provides you with a general description of the notes each trust may offer in connection with the secured medium-term notes program and supplements the description of the notes contained in the accompanying prospectus. Secured medium-term notes with a total initial public offering price or purchase price of up to $ or the equivalent amount in one or more foreign currencies may be sold, less any amount of notes previously issued under this program, the related Secured InterNotes® program or otherwise under the accompanying prospectus.
The specific terms and conditions of notes being offered will be contained in a pricing supplement. A copy of that pricing supplement will be provided to you along with a copy of this prospectus supplement and the accompanying prospectus. That pricing supplement also may add, update, supplement or clarify information in this prospectus supplement and the accompanying prospectus. You should carefully review such additional, updated, supplemental or clarifying information contained in that pricing supplement. You should read this prospectus supplement, the accompanying prospectus, the applicable pricing supplement and any applicable free writing prospectus together with the additional information that is incorporated by reference in this prospectus supplement and the accompanying prospectus. That additional information is described under the heading "Where You Can Find More Information" in the accompanying prospectus.
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The following description of the material terms of the secured medium-term notes supplements the general description of the general terms and provisions of the notes set forth in the accompanying prospectus. You should therefore review the accompanying prospectus carefully.
You should carefully review the information in this prospectus supplement. The pricing supplement for each offering of notes will contain the specific information and terms for that offering. As such, you should carefully review the information contained in the pricing supplement, including any description of the method of calculating interest on any note. The pricing supplement may also add, update, supplement or clarify information contained in this prospectus supplement or the accompanying prospectus. It is important for you to consider the information contained in the accompanying prospectus, this prospectus supplement, the applicable pricing supplement and any applicable free writing prospectus in making your investment decision.
Some technical concepts are described in this section and some capitalized terms are used in this section that are not defined in this prospectus supplement. You should refer to the standard indenture terms and the applicable form of note filed or incorporated by reference as exhibits to the registration statement to which this prospectus supplement and the accompanying prospectus relate for the full description of those concepts and complete definitions of those terms.
General
Introduction
Each trust will issue one series of notes pursuant to a separate indenture to be entered into between the issuing trust and the indenture trustee. Each indenture will be subject to, and governed by, the Trust Indenture Act of 1939.
At the date of this prospectus supplement, the notes offered pursuant to this prospectus supplement are limited to an aggregate initial public offering price or purchase price of up to $ , or its equivalent in one or more foreign or composite currencies. This amount is subject to reduction as a result of the issuance of notes under this program, the related Secured InterNotes® program or otherwise under the accompanying prospectus.
Pricing Options
Notes that bear interest will either be fixed rate notes or floating rate notes, or a combination of fixed and floating rates, as specified in the applicable pricing supplement. A trust may also issue discount notes and amortizing notes, as specified in the applicable pricing supplement.
Interest rates that are offered on the notes by separate trusts may differ depending upon, among other factors, the aggregate principal amount of notes purchased in any single transaction as well as market conditions. Notes with different variable terms other than interest rates may also be offered concurrently by separate trusts to different investors. Interest rates or formulas and other terms of notes may change from time to time, but no change of terms will affect any note previously issued by a trust or as to which a trust has accepted an offer to purchase.
Collateral
Under each indenture, each funding agreement purchased by a trust from Protective Life with the proceeds from the offering of that trust's series of notes will be collaterally assigned by the trust to the indenture trustee on behalf of the holders of that trust's series of notes. Each series of notes will be secured by a first priority perfected security interest in the "collateral," consisting of:
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The indenture trustee will hold each funding agreement purchased by a trust from Protective Life in an account for the benefit of holders of notes issued by that trust, which account will be segregated from all other accounts maintained by the indenture trustee, in its capacity as servicer.
Ranking
The notes of a series will be the issuing trust's unconditional, direct, non-recourse, secured and unsubordinated obligations and will rank equally among themselves.
Currency
Unless otherwise specified in the applicable pricing supplement, the notes of a series will be denominated in, and payments of principal, premium, if any, and/or interest, if any, in respect thereof will be made in, United States dollars. Each series of notes also may be denominated in, and payments of principal, premium, if any, and/or interest, if any, in respect thereof may be made in, a single foreign currency. The currency in which a particular series of notes is denominated (or, if that currency is no longer legal tender for the payment of public and private debts in the country issuing that currency or, in the case of Euro, in the member states of the European Union that have adopted the single currency in accordance with the Treaty establishing the European Community, as amended by the Treaty on European Union, the currency which is then legal tender in the related country or in the adopting member states of the European Union, as the case may be) is referred to as the "specified currency" with respect to such series of notes.
You will be required to pay for your notes in the specified currency. At the present time, there are limited facilities in the United States for the conversion of United States dollars into foreign currencies and vice versa, and commercial banks do not generally offer non-United States dollar checking or savings account facilities in the United States. The dealer from or through which a foreign currency note is purchased may be prepared to arrange for the conversion of United States dollars into the specified currency in order to enable you to pay for your foreign currency note, provided that you make a request to that dealer on or prior to the fifth business day (as defined below) preceding the date of delivery of the particular foreign currency note, or by any other day determined by that dealer. Each conversion will be made by a dealer on the terms and subject to the conditions, limitations and charges as that dealer may from time to time establish in accordance with its regular foreign exchange practices. You will be required to bear all costs of exchange in respect of your foreign currency note.
Forms of Notes
Each series of notes will be issued in fully registered form only, without coupons and will be initially represented by one or more book-entry notes, which will be a global security registered in the name of a nominee for The Depository Trust Company. See "Book-Entry Notes" below. Alternatively, if specified in the applicable pricing supplement, each note of a series of notes will be issued initially as a certificated note, which will be a certificate issued in definitive form.
Denominations
Unless otherwise specified in the applicable pricing supplement, the authorized denominations of notes denominated in U.S. dollars will be $2,000 and any larger amount that is a whole multiple of
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$1,000. The authorized denominations of notes that have a specified currency other than U.S. dollars will be the approximate equivalents in the specified currency.
Maturity
Unless otherwise specified in the applicable pricing supplement, each series of notes will mature on a day nine months or more from its date of issue (the "stated maturity date"), as specified in the applicable pricing supplement, unless its principal (or, any installment of its principal) becomes due and payable prior to the stated maturity date by the declaration of acceleration of maturity, notice of redemption at the issuing trust's discretion, notice of a beneficial owner's exercise of an option to elect repayment or otherwise (the stated maturity date or any date prior to the stated maturity date on which the principal amount of the particular series of notes becomes due and payable, as the case may be, is referred to in this prospectus supplement as the "maturity date"). Unless otherwise specified in the applicable pricing supplement, each series of notes will mature on or prior to 30 years from its date of issue.
Transfers and Exchanges
Book-entry notes may be transferred or exchanged only through the depositary (defined below). See "Book-Entry Notes" below. Registration of transfer or exchange of certificated notes will be made at the office or agency maintained by a trust for this purpose in the Borough of Manhattan, The City of New York, which is currently the corporate trust office of the indenture trustee. No service charge will be imposed for any such registration of transfer or exchange of notes, but a trust may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with such transfer or exchange (other than certain exchanges not involving any transfer).
Listing
Unless otherwise specified in the applicable pricing supplement, your series of notes will not be listed on any securities exchange.
Additional Information
The pricing supplement relating to each offering of notes will describe the specific terms of the notes, including:
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As used in this prospectus supplement, "business day" means:
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specified currency, is not a day on which banking institutions generally are authorized or obligated by law to close, and
As used above, a "principal financial center" means the capital city of the country issuing the specified currency. However, for U.S. dollars, Australian dollars, Canadian dollars and Swiss francs, the principal financial center will be New York City, Sydney, Toronto and Zurich, respectively.
Payment of Principal and Interest
Principal of, and any premium and interest on, each note will be made by the issuing trust solely from payments received under one or more funding agreements purchased by the issuing trust and any other collateral held in that trust in the specified currency for the note.
Unless otherwise specified in the applicable pricing supplement, payments of interest on notes, other than interest payable at stated maturity, will be made, except as provided below, by wire transfer or by check mailed to the registered holders of the notes. In the case of global securities representing book-entry notes, the payments of interest on notes will be made in accordance with existing arrangements between the indenture trustee and the depositary.
A holder of $10 million, or its equivalent in a specified currency other than U.S. dollars, or more in aggregate principal amount of certificated notes of an issuing trust will be entitled to receive payments of interest by wire transfer of immediately available funds. However, such a holder is entitled to receive the payments only if the indenture trustee receives written appropriate wire transfer instructions not later than five business days prior to the applicable interest payment date.
Unless otherwise specified in the applicable pricing supplement, principal and any premium and interest payable at the maturity date of a note will be paid in immediately available funds upon surrender of the note at the corporate trust office or agency of the trustee in New York City. In the case of global securities representing book-entry notes, principal and any premium and interest payable at stated maturity will be paid by wire transfer in immediately available funds to an account specified by the depositary.
Unless otherwise specified in this prospectus supplement or the applicable pricing supplement, if any interest payment date or the maturity date of a note falls on a day that is not a business day, the required payment of principal, premium, if any, and/or interest will be made on the next succeeding business day and no additional interest will accrue in respect of the payment made on that next succeeding business day (except in the case of a floating rate note with respect to an interest payment date that does not fall on a maturity date, additional interest will accrue in respect of the payment made on the next succeeding business day). However, with respect to interest payment dates other than the maturity date, in the case of a LIBOR note or a EURIBOR note, if the next business day falls in the next calendar month, the interest payment date will be the preceding business day. A payment may be made on the next business day with the same force and effect as if made on such date.
Unless otherwise specified in the applicable pricing supplement, if the principal of any discount note is declared to be due and payable immediately as a result of the acceleration of stated maturity, the amount of principal and interest due and payable shall be determined in the manner set forth under "Discount Notes" below.
Unless otherwise specified in the applicable pricing supplement, the record date for any interest payment date for a floating rate note or fixed rate note will be the date, whether or not a business day, fifteen calendar days immediately preceding the interest payment date.
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Withholding Tax, Payment of Additional Amounts and Tax Redemption
All amounts due in respect of the notes will be made free and clear of any applicable withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or other governmental charges of whatever nature imposed or levied by or on behalf of any governmental authority, unless such withholding or deduction is required by law. Unless otherwise specified in the applicable pricing supplement, a trust will not pay any additional amounts to holders of its series of notes in respect of any such withholding or deduction and any such withholding or deduction will not give rise to an event of default or any independent right or obligation to redeem the notes of such series. If a trust is required, or based on an opinion of independent legal counsel selected by Protective Life a material probability exists that it will be required, to pay additional amounts pursuant to the applicable pricing supplement in respect of such withholding or deduction, Protective Life will have the right to redeem the related funding agreement and, if Protective Life redeems the related funding agreement, the trust will redeem its notes as provided in the relevant indenture.
The EC Council Directive 2003/48/EC on the taxation of savings income (the "Directive") requires each EU Member State to provide to the tax authorities of other Member States details of payments of interest and other similar income paid by a person within its jurisdiction to an individual or to certain other persons in another Member State. However, for a transitional period, Austria, Belgium and Luxembourg are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). Similar reporting or withholding obligations are imposed by a number of non-EU countries adopting similar measures, including Switzerland, the Channel Islands and the Isle of Man. Prospective noteholders should consult their own advisers as to the potential consequences of the Directive and related measures.
If a "tax event" as to the relevant funding agreement(s) occurs, Protective Life will have the right to redeem the funding agreement(s) and, upon such redemption, the relevant trust will redeem its series of notes. For further discussion of "tax event" redemption, see "Description of Funding AgreementsEarly Redemption for Tax Event" in the accompanying prospectus.
Fixed Rate Notes
Each fixed rate note will bear interest from its original issue date, or from the last interest payment date to which interest has been paid or duly provided for, as the case may be, at the rate per annum stated in the applicable pricing supplement until, but excluding the date on which its principal amount is paid or made available for payment. Unless otherwise specified in the applicable pricing supplement, the rate of interest payable on fixed rate notes will not be adjusted.
Unless otherwise specified in the applicable pricing supplement, the interest payment dates for a fixed rate note will be as follows:
Unless otherwise specified in the applicable pricing supplement, interest on fixed rate notes will be computed on the basis of a 360-day year of twelve 30-day months or, in the case of an incomplete month, the number of days elapsed.
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The initial interest period is the period from the original issue date to, but not including, the first interest reset date. Each floating rate note will bear interest during the initial interest period at the initial interest rate set forth, or otherwise described, in the applicable pricing supplement. The interest reset period is the period from each interest reset date to, but not including, the following interest reset date. The initial interest period and any interest reset period is an interest period. The interest rate for each floating rate note will be determined based on an interest rate basis, the base rate, multiplied by any spread multiplier and/or plus or minus any spread. A basis point or "bp" equals one-hundredth of a percentage point. The spread is the number of basis points that may be specified in the applicable pricing supplement as applicable to the note. The spread multiplier is the percentage that may be specified in the applicable pricing supplement as an adjustment to the interest rate applicable to the note. As may otherwise be specified in the applicable pricing supplement, the spread or spread multiplier on floating rate notes may be adjusted from time to time.
The applicable pricing supplement will designate one of the following base rates as applicable to a floating rate note, along with the index maturity for that base rate:
The following terms are used in describing the various base rates.
The "index maturity" for any floating rate note is the period of maturity of the instrument or obligation from which the base rate is calculated.
"H.15 (519)" means the publication entitled "Statistical Release H.15 (519), Selected Interest Rates," or any successor publication, published weekly by the Board of Governors of the Federal Reserve System.
"H.15 Daily Update" means the daily update of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov/releases/H15/update/h15upd.htm, or any successor site or publication.
"Calculation date" means the date by which the calculation agent is to calculate the interest rate for floating rate notes which, unless otherwise specified in the applicable pricing supplement, will be the earlier of (1) the fifth business day after the related rate determination date, or if any such day is not a business day, the next business day and (2) the business day preceding the applicable interest payment date or the stated maturity; provided that with respect to LIBOR notes, EURIBOR notes and the Eleventh District Cost of Funds Rate notes, "calculation date" means the particular LIBOR
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determination date, EURIBOR determination date or Eleventh District Cost of Funds Rate determination date, as applicable.
As specified in the applicable pricing supplement, a floating rate note may also have either or both of the following, which will be expressed as a rate per annum on a simple interest basis:
In addition to any maximum interest rate that may be applicable to any floating rate note, the interest rate on a floating rate note will in no event be higher than the maximum rate permitted by applicable law. The notes will be governed by the law of New York State. As of the date of this prospectus supplement, the maximum rate of interest under provisions of the New York penal law, with a few exceptions, is 25% per annum on a simple interest basis. The maximum rate of interest only applies to obligations that are less than $2,500,000.
Unless otherwise specified in the applicable pricing supplement, The Bank of New York Mellon will be the calculation agent for each note that is a floating rate note. All determinations of interest by the calculation agent will, in the absence of manifest error, be conclusive for all purposes and binding on the holders of the floating rate notes and neither the indenture trustee nor the calculation agent shall have any liability to the holders of any notes in respect of any determination, calculation, quote or rate made or provided by the calculation agent. Upon request of the holder of any floating rate note, the calculation agent will provide the interest rate then in effect and, if determined, the interest rate that will become effective on the next interest reset date with respect to such floating rate note. The calculation agent will notify the indenture trustee, paying agent, registrar, the relevant trust, and if the notes are listed on a stock exchange, and the rules of such exchange so require, such exchange of each determination of the interest rate, interest period, and interest amount payable applicable to any floating rate note promptly after such determination is made.
If the calculation agent is incapable or unwilling to act as such or if the calculation agent fails duly to establish the interest rate for any interest accrual period or to calculate the interest amounts or any other requirements, the issuing trust will appoint the paying agent or another leading commercial bank to act as such in its place. The calculation agent may not resign its duties without a successor having been appointed as aforesaid.
The interest rate on each floating rate note will be reset on an interest reset date, which means that the interest rate is reset daily, weekly, monthly, quarterly, semiannually or annually, as specified in the applicable pricing supplement.
Unless otherwise specified in the applicable pricing supplement, the interest reset dates will be as follows:
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provided, however, that (i) the interest rate in effect from the issue date to the first interest reset date with respect to a floating rate note will be the initial interest rate (as set forth in the applicable pricing supplement) and (ii) the interest rate in effect for the ten days immediately prior to maturity will be that in effect on the tenth day preceding maturity.
If an interest reset date for any floating rate note (other than a LIBOR note or a EURIBOR note) would fall on a day that is not a business day, the interest reset date will be postponed to the next business day. If an interest reset date for a LIBOR note would fall on a day that is not a London business day, the interest reset date will be postponed to the next London business day. If an interest reset date for a EURIBOR note would fall on a day that is not a Euro business day, the interest reset date will be postponed to the next Euro business day. If postponement to the next London business day, in the case of a LIBOR note, or Euro business day, in the case of a EURIBOR note, would cause the interest reset date to be in the next calendar month, the interest reset date will instead be the immediately preceding London business day, in the case of a LIBOR note, or Euro business day, in the case of a EURIBOR note. If an auction of direct obligations of United States Treasury bills falls on a day that is an interest reset date for Treasury Rate notes, the interest reset date will be the succeeding business day.
Unless otherwise specified in the applicable pricing supplement and except as set forth below, the rate of interest that goes into effect on any interest reset date will be determined on a rate determination date preceding the interest reset date, as further described below.
Accrued interest on a floating rate note with more than one interest reset date will be calculated by multiplying the principal amount of the note by an accrued interest factor. The accrued interest factor will be computed by adding the interest factors calculated for each day in the interest period for which accrued interest is being calculated. Unless otherwise specified in the applicable pricing supplement, the interest factor for each such day will be computed by dividing the interest rate in effect on that day by 360, in the case of CD Rate notes, Commercial Paper Rate notes, Federal Funds Rate notes, LIBOR notes, EURIBOR notes, Prime Rate notes, Constant Maturity Swap Rate notes and Eleventh District Cost of Funds Rate notes. In the case of Treasury Rate notes and Constant Maturity Treasury Rate notes, the interest factor for each such day will be computed by dividing the interest rate by the actual number of days in the year. The interest factor will be expressed as a decimal calculated to seven decimal places without rounding. For purposes of making the foregoing calculation, the interest rate in effect on any interest reset date will be the applicable rate as reset on that date.
For all other floating rate notes, accrued interest will be calculated by multiplying the principal amount of the note by the interest rate in effect during the period for which accrued interest is being calculated. That product is then multiplied by the quotient obtained by dividing the number of days in the period for which accrued interest is being calculated by 360, in the case of CD Rate notes, Commercial Paper Rate notes, Federal Funds Rate notes, LIBOR notes, EURIBOR notes, Prime Rate
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notes, Constant Maturity Swap Rate notes and Eleventh District Cost of Funds Rate notes. In the case of Treasury Rate notes and Constant Maturity Treasury Rate notes, the product is multiplied by the quotient obtained by dividing the number of days in the period for which accrued interest is being calculated by the actual number of days in the year.
Unless otherwise specified in the applicable pricing supplement, all percentages resulting from any calculation of the rate of interest on a floating rate note will be rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage point rounded upward. All currency amounts used in, or resulting from, the calculation on floating rate notes will be rounded to the nearest one-hundredth of a unit. For purposes of such rounding, .005 of a unit will be rounded upward.
Unless otherwise specified in the applicable pricing supplement and except as provided below, interest will be payable as follows:
In each of these cases, interest will also be payable at maturity.
CD Rate Notes
Each CD Rate note will bear interest for each interest reset period at an interest rate based on the CD Rate and any spread or spread multiplier specified in the note and in the applicable pricing supplement.
The calculation agent will determine the CD Rate for each CD Rate determination date by the calculation date pertaining to such CD Rate determination date. The CD Rate determination date is the second business day prior to the interest reset date for each interest reset period. Unless otherwise specified in the applicable pricing supplement, the CD Rate will be the rate for negotiable certificates of deposit having the index maturity designated in the applicable pricing supplement as published in H.15 (519) under the heading "CDs (Secondary Market)."
The following procedures will be followed if the CD Rate cannot be determined as described above:
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of the secondary market offered rates as of 3:00 p.m., New York City time, on that date of three leading nonbank dealers in negotiable U.S. dollar certificates of deposit in New York City selected by the calculation agent after consultation with the relevant trust for negotiable certificates of deposit of major United States money center banks of the highest credit standing (in the market for negotiable certificates of deposit) with a remaining maturity closest to the index maturity designated in the pricing supplement in a denomination of $5,000,000.
Commercial Paper Rate Notes
Each Commercial Paper Rate note will bear interest for each interest reset period at an interest rate based on the Commercial Paper Rate and any spread or spread multiplier, specified in the note and the applicable pricing supplement.
The calculation agent will determine the Commercial Paper Rate for each Commercial Paper Rate determination date by the calculation date pertaining to such Commercial Paper Rate determination date. The Commercial Paper Rate determination date is the second business day prior to the interest reset date for each interest reset period. Unless otherwise specified in the applicable pricing supplement, the Commercial Paper Rate will be the money market yield on that date of the rate for commercial paper having the index maturity specified in the applicable pricing supplement, as the rate will be published in H.15 (519) under the heading "Commercial PaperNonfinancial."
The following procedures will be followed if the Commercial Paper Rate cannot be determined as described above:
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Money market yield will be calculated as follows:
D × 360 | ||||||||
Money market yield | = |
|
× | 100 | ||||
360 - (D × M) |
where "D" refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal, and "M" refers to the actual number of days in the specified index maturity.
Federal Funds Rate Notes
Each Federal Funds Rate note will bear interest for each interest reset period at an interest rate based on the Federal Funds Rate and any spread or spread multiplier specified in the note and the applicable pricing supplement.
The calculation agent will determine the Federal Funds Rate for each Federal Funds Rate determination date by the calculation date pertaining to such Federal Funds Rate determination date. The Federal Funds Rate determination date is the first business day prior to the interest reset date for the interest reset period.
In the case of a Federal Funds Rate note that resets daily, the interest rate on the note for the period from and including a Monday to, but excluding, the succeeding Monday will be reset by the calculation agent for the note on the second Monday, or, if not a business day, on the next business day, to a rate equal to the average of the Federal Funds Rates in effect for each such day in such week.
Federal Funds (Effective) Rate Notes
Unless otherwise specified in the applicable pricing supplement, the Federal Funds (Effective) Rate will be the rate for Federal Funds as published in H.15 (519) under the heading "Federal Funds (Effective)," as this rate is displayed on Reuters on page FEDFUNDS 1, or any successor service or page ("Reuters Page FEDFUNDS 1").
The following procedures will be followed if the Federal Funds (Effective) Rate cannot be determined as described above:
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reset period. If there was no such interest reset period, the Federal Funds (Effective) Rate will be the initial interest rate.
Federal Funds (Open) Rate Notes
Unless otherwise specified in the applicable pricing supplement, the Federal Funds (Open) Rate will be the rate for Federal Funds as published in H.15 (519) under the heading "Federal Funds" and opposite the caption "Open," as this rate is displayed on Reuters on page 5, or any successor service or page ("Reuters Page 5").
The following procedures will be followed if the Federal Funds (Open) Rate cannot be determined as described above:
LIBOR Notes
Each LIBOR note will bear interest for each interest reset period at an interest rate based on LIBOR and any spread or spread multiplier specified in the note and the applicable pricing supplement.
The calculation agent will determine LIBOR for each LIBOR determination date by the calculation date pertaining to such LIBOR determination date. The LIBOR determination date is the second London business day prior to the interest reset date for each interest reset period. A "London business day" means a day other than a Saturday or Sunday on which dealings in deposits in U.S. dollars are transacted, or with respect to any future date are expected to be transacted, in the London interbank market.
Unless otherwise specified in the applicable pricing supplement, on a LIBOR determination date, the calculation agent will determine LIBOR for each interest reset period as follows:
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If LIBOR cannot be determined on a LIBOR determination date as described above, then the calculation agent will determine LIBOR as follows:
EURIBOR Notes
Each EURIBOR note will bear interest for each interest reset period at an interest rate based on EURIBOR and any spread or spread multiplier specified in the note and the applicable pricing supplement.
The calculation agent will determine EURIBOR for each EURIBOR determination date by the calculation date pertaining to such EURIBOR determination date. The EURIBOR determination date is the second Euro business day prior to the interest reset date for each interest reset period. A "Euro business day" means a day other than a Saturday or Sunday on which the Trans European Automated Real-Time Gross Settlement Express Transfer System is open.
Unless otherwise specified in the applicable pricing supplement, EURIBOR for each interest reset period will be the offered rate for deposits in euros as sponsored, calculated and published jointly by the European Banking Federation and ACIThe Financial Markets Association, or any company established by them for purposes of establishing those rates, having the index maturity specified in the applicable pricing supplement, commencing on the interest reset date, as displayed on Reuters on page EURIBOR01, or any successor service or page used for the purpose of displaying this rate as of 11:00 A.M., Brussels time, on the EURIBOR determination date.
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If EURIBOR cannot be determined on a EURIBOR determination date as described above, then the calculation agent will determine EURIBOR as follows:
Treasury Rate Notes
Each Treasury Rate note will bear interest for each interest reset period at an interest rate based on the Treasury Rate and any spread or spread multiplier, specified in the note and the applicable pricing supplement.
The calculation agent will determine the Treasury Rate for each Treasury Rate determination date by the calculation date pertaining to such Treasury Rate determination date.
Treasury Rate Notes other than Constant Maturity Treasury Rate Notes
Unless "Constant Maturity" is specified in the applicable pricing supplement, and unless otherwise specified in the applicable pricing supplement, the Treasury Rate for each interest reset period will be the rate for the auction held on the Treasury Rate determination date for the interest reset period of U.S. treasury securities having the index maturity specified in the pricing supplement as that rate appears under the heading "INVEST RATE" on the display on Reuters (or any successor service) on page USAUCTION 10 (or any other page as may replace this page on that service) or page USAUCTION 11 (or any other page as may replace this page on that service).
If the Treasury Rate cannot be determined as described above, the following procedures will be followed in the order set forth below:
(1) If the Treasury Rate is not published prior to 3:00 p.m., New York City time on the calculation date pertaining to the Treasury Rate determination date, then the Treasury Rate for the
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interest reset period will be the auction average rate on the Treasury Rate determination date as otherwise announced by the United States Department of the Treasury. The auction average rate will be expressed as a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis.
(2) If the results of such auction are not published or reported as provided in (1) above by 3:00 p.m., New York City time, on the calculation date, or if no such auction is held on the Treasury Rate determination date, then the Treasury Rate for the interest reset period will be the rate having the index maturity specified in the pricing supplement as published in H.15 (519) under the heading "U.S. Government Securities/Treasury Bills/Auction High" or, if not yet published by 3:00 p.m., New York City time on the calculation date, the rate on the Treasury Rate determination date of treasury securities as published in H.15 Daily Update, or other recognized electronic source used for the purpose of displaying that rate, under the caption "U.S. Government Securities/Treasury Bills/Secondary Market."
(3) If by 3:00 p.m., New York City time, on the calculation date the above rate is not yet published in either H.15 (519), H.15 Daily Update or another recognized electronic source, then the Treasury Rate will be calculated as a yield to maturity of the arithmetic mean of the secondary market bid rates, as of approximately 3:30 p.m., New York City time, on the Treasury Rate determination date, of three leading primary United States government securities dealers selected by the calculation agent for the issue of treasury securities with a remaining maturity closest to the specified index maturity. The yield to maturity will be expressed as a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis.
(4) If the dealers selected by the calculation agent are not quoting bid rates as described in (3) above, then the Treasury Rate for the interest reset period will be the same as the Treasury Rate for the immediately preceding interest reset period. If there was no preceding interest reset period, the Treasury Rate will be the initial interest rate.
The Treasury Rate determination date for each interest reset period will be the day of the week in which the interest reset date for the interest reset period falls on which treasury securities would normally be auctioned. Treasury securities are normally sold at auction on Monday of each week unless that day is a legal holiday. In that case the auction is normally held on the following Tuesday, except that the auction may be held on the preceding Friday. If, as the result of a legal holiday, an auction is held on the preceding Friday, that Friday will be the Treasury Rate determination date pertaining to the interest reset period commencing in the next week. If an auction date falls on any day that would otherwise be an interest reset date for a Treasury Rate note, then that interest reset date will instead be the business day immediately following the auction date.
Constant Maturity Treasury Rate Notes
If "Constant Maturity" is specified in the applicable pricing supplement, unless otherwise specified in the applicable pricing supplement, the Treasury Rate for each interest reset period will be the rate displayed on the "designated Constant Maturity Treasury page" under the caption "Treasury Constant Maturities" under the column for the Designated CMT Maturity Index for:
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If the rate cannot be set as described above, the calculation agent will use the following methods in succession:
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The "Constant Maturity Treasury Rate determination date" will be the tenth business day prior to the interest reset date for the applicable interest reset period.
"Designated Constant Maturity Treasury page" means the display on Reuters on the page designated in the pricing supplement, or any successor service or page for the purpose of displaying Treasury Constant Maturities as reported in H.15 (519). If that page is not specified in the pricing supplement, the designated Constant Maturity Treasury page shall be FEDCMT, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the Treasury Notes (either 1, 2, 3, 5, 7, 10, 20, or 30 years) specified in the pricing supplement with respect to which the Constant Maturity Treasury Rate will be calculated. If no such maturity is specified in the pricing supplement, the Designated CMT Maturity Index shall be 2 years.
Prime Rate Notes
Each Prime Rate note will bear interest for each interest reset period at an interest rate based on the Prime Rate and any spread or spread multiplier, subject to the minimum interest rate and maximum interest rate, if any, specified in the note and the applicable pricing supplement.
The calculation agent will determine the Prime Rate for each interest reset period for each Prime Rate determination date by the calculation date pertaining to such Prime Rate determination date. The Prime Rate determination date is the second business day prior to the interest reset date for each interest reset period. Unless otherwise specified in the applicable pricing supplement, the Prime Rate will be the rate made available and subsequently published on that date in H.15 (519) under the heading "Bank Prime Loan."
The following procedures will be followed if the Prime Rate cannot be determined as described above:
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"Reuters Screen USPRIME1 page" means the display designated as page "USPRIME1" on the Reuters Monitor Money Rates Service, or any successor service or page, for the purpose of displaying prime rates or base lending rates of major United States banks.
Constant Maturity Swap Rate Notes
Each Constant Maturity Swap Rate note will bear interest for each interest reset period at an interest rate based on the Constant Maturity Sway Rate and any spread or spread multiplier, specified in the note and the applicable pricing supplement.
The calculation agent will determine the Constant Maturity Swap Rate for each Constant Maturity Swap Rate determination date by the calculation date pertaining to such Constant Maturity Swap Rate determination date. The Constant Maturity Swap Rate determination date is the second business day prior to the interest reset date for each interest reset period. Unless otherwise specified in the applicable pricing supplement, the Constant Maturity Swap Rate will be the mid-market U.S. Dollar fixed rate for a floating rate interest rate swap transaction with a term equal to the index maturity, as it appears on Reuters Page ISDAFIX1, under "USD 11am Fix."
The following procedure will be followed if the Constant Maturity Swap Rate cannot be determined as described above:
Eleventh District Cost of Funds Rate Notes
Each Eleventh District Cost of Funds Rate note will bear interest for each interest reset period at an interest rate based on the Eleventh District Cost of Funds Rate and any spread or spread multiplier, specified in the note and the applicable pricing supplement.
The calculation agent will determine the Eleventh District Cost of Funds Rate for each Eleventh District Cost of Funds Rate determination date by the calculation date pertaining to such Eleventh District Cost of Funds Rate determination date. The Eleventh District Cost of Funds determination date is the last business day of the month immediately preceding the related interest reset date on which the Federal Home Loan Bank of San Francisco publishes the Eleventh District Index. Unless otherwise specified in the applicable pricing supplement, the Eleventh District Cost of Funds Rate will be the rate equal to the monthly weighted average cost of funds for the calendar month immediately preceding the month in which the particular Eleventh District Cost of Funds Rate date falls as set forth under the caption "11th Dist COFI" on the display on Reuters (or any successor service) on page COFI/ARMS (or any other page as may replace this page on that service) ("Reuters Page COFI/ARMS") as of 11:00 A.M., San Francisco time, on that Eleventh District Cost of Funds Rate determination date.
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The following procedure will be followed if the Eleventh District Cost of Funds Rate cannot be determined as described above:
Inverse Floating Rate Notes
Any floating rate note may be designated in the applicable pricing supplement as an inverse floating rate note. In such an event, unless otherwise specified in the applicable pricing supplement, the interest rate on the floating rate note will be equal to:
However, on any inverse floating rate note, (1) the interest rate will not be less than zero and (2) the interest rate in effect for the ten days immediately prior to the date of maturity of the inverse floating rate note will be that in effect on the tenth day preceding the date of maturity.
Floating/Fixed Rate Notes
The applicable pricing supplement may provide that a note will be a floating rate note for a specified portion of its term and a fixed rate note for the remainder of its term. In such an event, the interest rate on the note will be determined as if it were a floating rate note and a fixed rate note for each such respective period, all as specified in the applicable pricing supplement.
Amortizing Notes
A trust may offer amortizing notes on which a portion or all of the principal amount is payable prior to stated maturity:
Further information concerning additional terms and conditions of any amortizing notes, including terms for repayment, will be set forth in the applicable pricing supplement.
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Discount Notes
A trust may offer notes, which are referred to as discount notes, that have an issue price (as specified in the applicable pricing supplement) that is less than 100% of the principal amount thereof (i.e. par) by more than a percentage equal to the product of 0.25% and the number of full years to the stated maturity date. Discount notes may not bear any interest currently or may bear interest at a rate that is below market rates at the time of issuance. The difference between the issue price of a discount note and par is referred to as the "discount." In the event of redemption, repayment or acceleration of maturity of discount notes, the amount payable to the holders of such discount notes will be equal to the sum of:
For purposes of determining the amount of discount that has accrued as of any date on which a redemption, repayment or acceleration of maturity occurs for a series of discount notes, a discount will be accrued using a constant yield method. The constant yield will be calculated using a 30-day month, 360-day year convention, a compounding period that, except for the initial period (as defined below), corresponds to the shortest period between interest payment dates for the applicable series of discount notes (with ratable accruals within a compounding period), a coupon rate equal to the initial coupon rate applicable to the applicable series of discount notes and an assumption that the maturity of such series of discount notes will not be accelerated. If the period from the date of issue to the first interest payment date for a series of discount notes (the "initial period") is shorter than the compounding period for such series of discount notes, a proportionate amount of the yield for an entire compounding period will be accrued. If the initial period is longer than the compounding period, then the period will be divided into a regular compounding period and a short period with the short period being treated as provided in the preceding sentence. The accrual of the applicable discount may differ from the accrual of original issue discount for federal income tax purposes, certain series of discount notes may not be treated as having original issue discount for federal income tax purposes, and certain series of notes other than discount notes may be treated as issued with original issue discount for federal income tax purposes. See "Material U.S. Federal Income Tax Considerations."
In the case of discount notes that may be redeemed at a time when 25% or more of the original principal amount of such notes are outstanding, such notes will be designated in their title as "callable" in the relevant pricing supplement.
Survivor's Option
The "survivor's option" is a provision in a note pursuant to which the issuing trust agrees to repay that note, if requested by the authorized representative of the beneficial owner of that note, following the death of the beneficial owner of the note, so long as the note was held by that beneficial owner or the estate of that beneficial owner for a period beginning at least 6 months immediately prior to the request. The pricing supplement relating to any note will state whether the survivor's option applies to your note.
If the survivor's option applies to a note, upon the valid exercise of the survivor's option, the proper tender of that note for repayment and the tender and acceptance of that portion of the funding agreement related to such note, the issuing trust will repay that note, in whole or in part, at a price equal to 100% of the principal amount of the deceased beneficial owner's beneficial interest in the note, plus accrued and unpaid interest to the date of repayment.
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If a survivor's option applies to a series of notes, the funding agreement securing such series of notes will contain a provision which will allow the issuing trust to tender the funding agreement in whole or in part to Protective Life upon a valid exercise of the survivor's option at a price equal to the principal amount of the funding agreement so tendered plus accrued and unpaid interest thereon to the date of repayment.
To be valid, the survivor's option must be exercised by or on behalf of the person who has authority to act on behalf of the deceased beneficial owner of the note (including, without limitation, the personal representative or executor of the deceased beneficial owner or the surviving joint owner with the deceased beneficial owner) under the laws of the appropriate jurisdiction. A beneficial owner of a note is a person who has the right, immediately prior to such person's death, to receive the proceeds from the disposition of that note, as well as the right to receive payments on that note.
The death of a person holding a beneficial ownership interest in a note as a joint tenant or tenant by the entirety with another person, or as a tenant in common with such deceased owner's spouse, will be deemed the death of a beneficial owner of that note, and the entire principal amount of the note so held will be subject to repayment by the issuing trust upon request. However, the death of a person holding a beneficial ownership interest in a note as tenant in common with a person other than such deceased owner's spouse will be deemed the death of a beneficial owner only with respect to such deceased person's ownership interest in the note.
The death of a person who, during his or her lifetime, was entitled to substantially all of the beneficial ownership interests in a note will be deemed the death of a beneficial owner of that note for purposes of the survivor's option, regardless of whether that beneficial owner was the registered holder of that note, if that beneficial ownership interest can be established to the satisfaction of the indenture trustee. A beneficial ownership interest will be deemed to exist in typical cases of nominee ownership, ownership under the Uniform Transfers to Minors Act or Uniform Gifts to Minors Act, community property or other joint ownership arrangements between a husband and wife. In addition, a beneficial ownership interest will be deemed to exist in custodial and trust arrangements where one person has all of the beneficial ownership interests in the applicable note during his or her lifetime.
Protective Life has the discretionary right to limit (i) the aggregate principal amount of all funding agreements securing all outstanding series of notes as to which exercises of any put option by all issuing trusts shall be accepted by Protective Life in any calendar year to an amount equal to the greater of $2,000,000 or 2% of the aggregate principal amount of all funding agreements securing all outstanding series of notes issued to retail investors under any Protective Life secured notes program as of the end of the most recent calendar year or such other greater amount as determined in accordance with the funding agreements and set forth in the pricing supplements, (ii) the aggregate principal amount of funding agreements securing notes as to which exercises of any put option by the issuing trust attributable to notes issued under any Protective Life secured notes program as to which the survivor's option has been exercised by the authorized representative of any individual deceased beneficial owner to $250,000 in any calendar year or such other greater amount as determined in accordance with the funding agreements and set forth in the pricing supplements and (iii) the aggregate principal amount of funding agreements securing a series of notes as to which exercises of any put option by the issuing trust shall be accepted as set forth in the applicable funding agreement and the applicable pricing supplement. In any such event, the relevant trust shall similarly be required to limit the aggregate principal amount of notes as to which exercises of the survivor's option shall be accepted by the issuing trust from authorized representatives of deceased beneficial owners. In addition, the exercise of the survivor's option will not be permitted for a principal amount less than $1,000, or such other authorized denomination applicable to such series of notes, or if such exercise will result in a note with a principal amount of less than $2,000, or such other minimum authorized denomination applicable to such series of notes, to remain outstanding. All other questions, other than with respect to the right to limit the aggregate principal amount of notes subject to the survivor's option that will be accepted as to any
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series of notes or in any calendar year, regarding the eligibility or validity of any exercise of the survivor's option will be determined by the indenture trustee, in its sole discretion, which determination will be final and binding on all parties.
An otherwise valid election to exercise the survivor's option may not be withdrawn. Each election to exercise the survivor's option will be accepted in the order that elections are received by the indenture trustee, except for any note the acceptance of which would contravene any of the limitations described in the preceding paragraph. Notes accepted for repayment through the exercise of the survivor's option will be repaid on the first interest payment date that occurs 20 or more calendar days after the date of the acceptance. For example, if the acceptance date of a note tendered pursuant to a valid exercise of the survivor's option is November 1, 2008 and the interest on that note is paid monthly, the issuing trust would normally, at its option, repay that note on the interest payment date occurring on December 15, 2008 because the November 15, 2008 interest payment date would occur less than 20 days from the date of acceptance. Each tendered note that is not accepted in any calendar year due to the application of any of the limitations described in clause (i) and (ii) of the preceding paragraph will be deemed to be tendered in the following calendar year in the order in which all such notes were originally tendered. If a note tendered through a valid exercise of the survivor's option is not accepted, the indenture trustee will deliver a notice by first class mail to The Depository Trust Company that states the reason that note has not been accepted for repayment.
With respect to the notes represented by a global security, The Depository Trust Company, as depositary, or its nominee is treated as the owner of the notes and will be the only entity that can exercise the survivor's option for such notes. To obtain repayment through exercise of the survivor's option for a note, the deceased beneficial owner's authorized representative must provide the following items to the broker or other entity through which the beneficial interest in the note is held by the deceased beneficial owner:
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In turn, the broker or other entity will deliver each of these items to the Direct Participant (defined below) holding the beneficial interest on behalf of the deceased beneficial owner, together with the evidence satisfactory to the indenture trustee from the broker or other entity stating that it represents the deceased beneficial owner. Such Direct Participant shall deliver such items to the indenture trustee.
Such Direct Participant will be responsible for disbursing payments received from the depositary to the representative. See "Book-Entry Notes" below.
Forms for the exercise of the survivor's option may be obtained from the indenture trustee at Corporate TrustDealing and Trading Group The Bank of New York Mellon, 101 Barclay Street7w, New York, NY 10286 (telephone (212) 815-5837, facsimile (212) 815 2830).
Book-Entry Notes
It is expected that the notes of each series, unless otherwise specified in the applicable pricing supplement, will be issued in global book entry form, and will be registered in the name of Cede & Co., as nominee of The Depository Trust Company (the "depositary"). The terms of the depository arrangements with the depositary are summarized below. Any additional or differing terms of the depositary arrangement with respect to the book-entry notes of a particular trust will be described in the applicable pricing supplement.
Upon issuance, all book-entry notes of a series will be represented by one or more global securities. Each global security representing book-entry notes will be deposited with, or on behalf of, the depositary and will be registered in the name of the depositary or a nominee of the depositary. Beneficial interests in the global securities will be represented through book-entry accounts of financial institutions acting on behalf of beneficial owners as direct or indirect participants in DTC, which may include Euroclear and Clearstream, Luxembourg. No global security may be transferred except as a whole by a nominee of the depositary to the depositary or to another nominee of the depositary, or by the depositary or another nominee of the depositary to a successor of the depositary or a nominee of a successor to the depositary.
So long as the depositary or its nominee is the registered holder of a global security, the depositary or its nominee, as the case may be, will be the sole owner of the book-entry notes represented thereby for all purposes under the indenture. Except as otherwise provided below, the Beneficial Owners (defined below) of the global security representing book-entry notes of a series will not be entitled to receive physical delivery of certificated notes and will not be considered the holders of the notes for any purpose under the indenture, and no global security representing book-entry notes shall be exchangeable or transferable. Accordingly, each Beneficial Owner must rely on the procedures of the depositary and, if that Beneficial Owner is not a Participant (defined below), on the procedures of the Participant through which that Beneficial Owner owns its interest in order to exercise any rights of a registered holder under the indenture. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of securities in certificated form. Such limits and laws may impair the ability to transfer beneficial interests in a global security representing book-entry notes.
Investors can hold interests in the notes through Clearstream, Luxembourg or through Euroclear, only if they are participants in these systems or indirectly through organizations that are participants in these systems. Because DTC will be the only registered holder of the global securities certificates, Clearstream, Luxembourg and Euroclear will hold positions through their respective U.S. depositaries, which in turn will hold positions on the books of DTC.
Each global security representing book-entry notes of a series will be exchangeable for certificated notes of like tenor and terms and of differing authorized denominations in a like aggregate principal amount, only if (i) the depositary notifies the issuing trust that it is unwilling or unable to continue as
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depositary for the global securities or the issuing trust becomes aware that the depositary has ceased to be a clearing agency registered under the Securities Exchange Act of 1934 and, in any such case the issuing trust fails to appoint a successor to the depositary within 90 calendar days, (ii) the issuing trust, in its sole discretion, determines that the global securities shall be exchangeable for certificated notes or (iii) an event of default has occurred and is continuing with respect to the notes under the indenture.
Upon any such exchange, such certificated notes shall be registered in the names of the Beneficial Owners of the global security representing book-entry notes of such series, which names shall be provided by the depositary's relevant Participants (as identified by the depositary) to the indenture trustee.
About the Depositary
The following is based on information furnished by the depositary:
The depositary will act as securities depository for the book-entry notes. The book-entry notes will be issued as fully registered securities registered in the name of Cede & Co. (the depositary's nominee) or such other name as may be requested by the depositary. One fully registered global note will be issued for each issue of book-entry notes of a series, each in the aggregate principal amount of such issue, and will be deposited with the depositary. If, however, the aggregate principal amount of any issue exceeds $500,000,000, one global note will be issued with respect to each $500,000,000 of principal amount and an additional global note will be issued with respect to any remaining principal amount of such issue.
The depositary is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. The depositary holds securities that its participants ("Direct Participants") deposit with the depositary. The depositary also facilitates the settlement among Direct Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Direct Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants of the depositary include securities brokers and dealers (including the agents and dealers retained by a trust in connection with the distribution of the notes), banks, trust companies, clearing corporations and certain other organizations. The depositary is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the depositary's system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to the depositary and its Participants are on file with the Securities and Exchange Commission.
Purchases of book-entry notes under the depositary's system must be made by or through Direct Participants, which will receive a credit for such book-entry notes on the depositary's records. The ownership interest of each actual purchaser of each book-entry note represented by a global security ("Beneficial Owner") is in turn to be recorded on the records of Direct Participants and Indirect Participants. Beneficial Owners will not receive written confirmation from the depositary of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct Participants or Indirect Participants through which such Beneficial Owner entered into the transaction. Transfers of ownership
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interests in a global security representing book-entry notes are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners of a global security representing book-entry notes will not receive certificated notes representing their ownership interests in such notes, except in the event that use of the book-entry system for such book-entry notes is discontinued as described above.
To facilitate subsequent transfers, all global securities representing book-entry notes which are deposited with, or on behalf of, the depositary are registered in the name of the depositary's nominee, Cede & Co. or such other name as may be requested by the depositary. The deposit of global securities with, or on behalf of, the depositary and their registration in the name of Cede & Co., or such other nominee, effect no change in beneficial ownership. The depositary has no knowledge of the actual Beneficial Owners of the global securities representing the book-entry notes; the depositary's records reflect only the identity of the Direct Participants to whose accounts such book-entry notes are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the depositary to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners may wish to take certain steps to augment transmission to them of notices of significant events with respect to the notes, such as redemption, tenders, defaults, and proposed amendments to the security documents. Beneficial Owners may wish to ascertain that the nominee holding the notes for their benefit has agreed to obtain and transmit notices to Beneficial Owners.
Neither the depositary nor Cede & Co. (or such other nominee of the depositary) will consent or vote with respect to the global securities representing the book-entry notes unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, the depositary mails an Omnibus Proxy to a company as soon as possible after the applicable record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the book-entry notes are credited on the applicable record date (identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest, if any, payments on the global securities representing the book-entry notes of a series will be made in immediately available funds to the depositary. The depositary's practice is to credit Direct Participants' accounts on the applicable payment date in accordance with their respective holdings shown on the depositary's records unless the depositary has reason to believe that it will not receive payment on such date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of the depositary, the indenture trustee or the relevant trust, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and/or interest, if any, to the depositary is the responsibility of the relevant trust and the indenture trustee, disbursement of such payments to Direct Participants shall be the responsibility of the depositary, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct Participants and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less than all of the book-entry notes of a series are being redeemed, the depositary's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have its book-entry notes repaid by the issuing trust, through its Participant, to the indenture trustee, and shall effect delivery of such book-entry notes by causing the Direct Participant to transfer the Participant's interest in the global
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security or securities representing such book-entry notes, on the depositary's records, to the indenture trustee. The requirement for physical delivery of book-entry notes in connection with a demand for repayment will be deemed satisfied when the ownership rights in the global security representing such book-entry notes are transferred by Direct Participants on the depositary's records. See also "Survivor's Option" above.
The depositary may discontinue providing its services as securities depositary with respect to the book-entry notes at any time by giving reasonable notice to the relevant trust or the indenture trustee. Under such circumstances, in the event that a successor securities depositary is not obtained, certificated notes are required to be printed and delivered.
An issuing trust may decide to discontinue use of the system of book-entry transfers through the depositary (or a successor securities depositary). In that event, certificated notes will be printed and delivered.
About Clearstream, Luxembourg
Clearstream, Luxembourg is incorporated under the laws of Luxembourg as a professional depositary. Clearstream, Luxembourg holds securities for its customers and facilitates the clearance and settlement of securities transactions between Clearstream, Luxembourg customers through electronic book-entry changes in accounts of Clearstream, Luxembourg customers, thus eliminating the need for physical movement of certificates. Clearstream, Luxembourg provides to its customers, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream, Luxembourg interfaces with domestic markets in a number of countries. Clearstream, Luxembourg has established an electronic bridge with the Euroclear Operator to facilitate settlement of trades between Clearstream, Luxembourg and Euroclear.
As a professional depositary, Clearstream, Luxembourg is subject to regulation by the Luxembourg Monetary Institute. Clearstream, Luxembourg customers are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations and certain other organizations. In the United States, Clearstream, Luxembourg customers are limited to securities brokers and dealers and banks. Clearstream, Luxembourg customers may include the Dealer(s) or their affiliates. Other institutions that maintain a custodial relationship with a Clearstream, Luxembourg customer may obtain indirect access to Clearstream, Luxembourg. Clearstream, Luxembourg is an indirect participant in DTC.
Distributions with respect to the notes held beneficially through Clearstream, Luxembourg will be credited to cash accounts of Clearstream, Luxembourg customers in accordance with its rules and procedures, to the extent received by Clearstream, Luxembourg.
About the Euroclear System
The Euroclear System was created to hold securities for participants of the Euroclear System and to clear and settle transactions between Euroclear participants through simultaneous electronic book-entry delivery against payment, thus eliminating the need for physical movement of certificates and risk from lack of simultaneous transfers of securities and cash. Transactions may now be settled in many currencies, including U.S. dollars and Euros. The Euroclear System provides various other services, including securities lending and borrowing and interfaces with domestic markets in several countries generally similar to the arrangements for cross market transfers with DTC described below.
The Euroclear System is operated by Euroclear under contract with Euroclear Clearance System, S.C., a Belgian cooperative corporation (the "Cooperative"). The Euroclear Operator conducts all operations and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator not the Cooperative. The Cooperative establishes policy for the Euroclear System on behalf of Euroclear participants. Euroclear participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries and may include the Dealer(s). Indirect access to the Euroclear System is also available to other firms that clear through or maintain a custodial relationship with a Euroclear participant, either directly or indirectly. Euroclear is an indirect participant in DTC.
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The Euroclear Operator is regulated and examined by the Belgian Banking Commission. Distributions with respect to notes held beneficially through Euroclear will be credited to the cash accounts of Euroclear participants in accordance with the Euroclear Terms and Conditions, to the extent received by the Euroclear Operator and by Euroclear.
Global Clearance and Settlement Procedures
Initial settlement for the notes will be made in immediately available funds. Secondary market trading between DTC participants will occur in the ordinary way, in accordance with DTC's rules, and will be settled in immediately available funds using DTC's same-day funds settlement system. Secondary market trading between Clearstream, Luxembourg participants and/or Euroclear participants will occur in the ordinary way, in accordance with the applicable rules and operating procedures of Clearstream, Luxembourg and Euroclear, and will be settled using the procedures applicable to conventional eurobonds in immediate available funds.
Cross market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream, Luxembourg or Euroclear participants, on the other, will be effected through DTC, in accordance with DTC's rules, on behalf of Euroclear or Clearstream, Luxembourg, as the case may be, by its respective depository. However, such cross market transactions will require delivery of instructions to Euroclear or Clearstream, Luxembourg, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, Luxembourg, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depository to take action to effect final settlement on its behalf by delivering or receiving notes in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream, Luxembourg participants and Euroclear participants may not deliver instructions directly to DTC.
Because of time-zone differences, credits of notes received in Clearstream, Luxembourg or Euroclear as a result of a transaction with a DTC participant will be made during subsequent securities settlement processing and will be credited the business day following the DTC settlement date. These credits or any transactions in such notes settled during such processing will be reported to the relevant Clearstream, Luxembourg participant or Euroclear participant on that business day. Cash received in Clearstream, Luxembourg or Euroclear as a result of sales of notes by or through a Clearstream, Luxembourg participant or a Euroclear participant to a DTC participant will be received with value on the DTC settlement date, but will be available in the relevant Clearstream, Luxembourg or Euroclear cash account only as of the business day following settlement in DTC.
Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of notes among participants of DTC, Clearstream, Luxembourg and Euroclear, they are under no obligation to perform or continue to perform these procedures, and these procedures may be discontinued at any time. None of the trusts, Protective Life, the indenture trustee, the trustee, the paying agent or any of the Dealer(s) will have any responsibility for the performance by DTC, Clearstream, Luxembourg or Euroclear or their respective participants of their respective obligations under the rules and procedures governing their operations.
Security; Limited Recourse
Each series of notes will solely be the obligations of the issuing trust, and will not be guaranteed by any person, including but not limited to Protective Life, any agent, any of their affiliates or any other trust. A trust's obligations under its series of notes will be secured by all of its rights and title in one or more funding agreements issued to, and deposited into, that trust by Protective Life and other rights and assets included in the applicable collateral held in that trust.
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Since Protective Life will be the sole obligor under the funding agreements, an issuing trust's ability to meet its obligations, and your ability to receive payments from that trust, with respect to a particular series of notes, will be principally dependent upon Protective Life's ability to perform its obligations under each applicable funding agreement held in the relevant trust. However, you will have no direct contractual rights against Protective Life under any such funding agreement. Under the terms of each funding agreement, recourse rights to Protective Life will belong to the relevant trust, its successors and its permitted assignees. In connection with the offering and sale of a series of notes, the issuing trust will pledge, collaterally assign and grant a first priority perfected security interest in the collateral for such series of notes to the indenture trustee on behalf of the holders of such series of notes. Accordingly, recourse to Protective Life under each such funding agreement will be enforceable only by the indenture trustee as a secured party on behalf of holders of such series of notes. See also "Description of the IndenturesNonrecourse Enforcement" in the accompanying prospectus.
Callable Notes; Optional Repayment; No Sinking Fund
If an optional redemption right is specified in the pricing supplement relating to a series of notes, and Protective Life has redeemed the related funding agreement(s) in full or in part, as applicable, the relevant trust will redeem the series of notes secured by such funding agreement(s), in full or in part as applicable, prior to the stated maturity date of such series of notes in whole or from time to time in part in increments of $1,000 or any other integral multiple of an authorized denomination specified in the applicable pricing supplement (provided that any remaining principal amount of a note of such series of notes shall be at least $2,000 or such other minimum authorized denomination applicable thereto), at the applicable redemption price (as defined below), together with unpaid interest accrued thereon to the date of redemption. Unless otherwise specified in the applicable pricing supplement, a trust must give written notice to the holders of its series of notes to be redeemed not more than 75 nor less than 30 calendar days prior to the date of redemption. "Redemption price," with respect to a series of notes, means an amount equal to the initial redemption percentage specified in the applicable pricing supplement (as adjusted by the annual redemption percentage reduction, as described in the applicable pricing supplement, if applicable) multiplied by the unpaid principal amount thereof to be redeemed. The initial redemption percentage, if any, applicable to a series of notes shall decline at each anniversary of the initial redemption date by an amount equal to the applicable annual redemption percentage reduction, if any, until the redemption price is equal to 100% of the unpaid amount of a note of such series of notes to be redeemed. Notes that may be redeemed at a time when 25% or more of the original principal amount of such notes are outstanding will be designated in their title as "callable" in the relevant pricing supplement. For a discussion of the redemption of discount notes, see "Discount Notes."
If fewer than all of the notes are to be redeemed, the indenture trustee will select the notes to be redeemed by lot or, if the notes are not in book entry form, in its discretion, on a pro rata basis. If any note is redeemed in part only, a new note in principal amount equal to the unredeemed principal portion will be issued.
If an optional repayment right is specified in the pricing supplement relating to a series of notes, such notes may be subject to repayment at the option of the holders of such series of notes on any repayment date specified in the applicable pricing supplement. On any such repayment date, unless otherwise specified in the applicable pricing supplement, the notes shall be repayable in whole or in part in increments of $1,000, or any other integral multiple of an authorized denomination specified in the applicable pricing supplement (provided that any remaining principal amount of a note of such series of notes shall be at least $2,000 or such other minimum authorized denomination applicable thereto), at the option of the holders thereof at a repayment price equal to 100% of the principal amount thereof to be repaid, together with interest thereon payable to the date of repayment. A holder of a series of notes exercising its repayment right must submit to the indenture trustee at its corporate
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trust office, or at such other place or places of which the relevant trust has notified such holder, the notes to be repaid together with the "option to elect repayment" form attached to the notes not more than 60 nor less than 30 calendar days prior to the date of repayment. Exercise of such repayment right by a holder shall be irrevocable. If a holder requests repayment in part only, a new note in principal amount equal to the principal portion of the notes not repaid will be issued. For additional information on repayment procedures relating to book entry notes see "About the Depositary."
None of the trusts will issue notes that may be repaid at the option of the holders prior to the stated maturity if such issuance would cause the relevant trust to fail to satisfy the applicable requirements for exemption under Rule 3a-7 under the Investment Company Act of 1940, as amended, and all applicable rules, regulations and interpretations thereunder.
No series of notes will be subject to, or entitled to the benefit of, any sinking fund unless otherwise specified in the applicable pricing supplement.
Purchase of Notes by Protective Life
Protective Life may at any time purchase notes at any price or prices in the open market or otherwise. Notes so purchased by Protective Life may, at Protective Life's discretion, be held, resold or surrendered to the indenture trustee for cancellation.
Other Provisions
The terms in the applicable pricing supplement may clarify or supplement any provisions relating to:
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DESCRIPTION OF THE FUNDING AGREEMENTS
Each trust will use the net proceeds from the issuance of a series of notes to purchase one or more funding agreements. The applicable funding agreement(s) will have substantially similar payment terms to the related series of notes. The applicable funding agreement(s) may be interest bearing or non-interest bearing. A funding agreement may bear interest at either a fixed or a floating rate, or a combination of fixed and floating rates, as specified in the applicable pricing supplement. The calculation of the interest rate, the dates of interest and maturity payments and such other payment terms on the funding agreement will be determined in the same manner as described above under "Description of the Notes." The deposit amount of each funding agreement (other than amortizing funding agreements) will be payable on its stated maturity date, as specified in the applicable pricing supplement. Protective Life may issue amortizing funding agreements that pay a level amount in respect of both interest and deposit amount amortized over the life of the funding agreements, if specified in the pricing supplement.
The pricing supplement relating to a series of notes will describe the following pricing terms of the related funding agreement(s):
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For a more detailed discussion of the Funding Agreements, see "Description of the Funding Agreements" in the accompanying prospectus.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material U.S. federal income tax considerations relating to the purchase, ownership and disposition of the notes by purchasers of the notes who purchase the notes in the initial offering at their issue price (determined as set forth below) and hold the notes as capital assets within the meaning of section 1221 of the Internal Revenue Code of 1986, as amended (the "Code") and, the statements of law or legal conclusions in this discussion represent the opinion of Debevoise & Plimpton LLP, special U.S. tax counsel to Protective Life ("U.S. Tax Counsel"), based on current law. This discussion does not address all of the tax considerations that may be relevant to prospective purchasers in light of their particular circumstances or to persons subject to special rules under U.S. federal tax laws, such as certain financial institutions, insurance companies, regulated investment companies, real estate investment trusts, dealers in securities, tax-exempt entities, certain former citizens or residents of the United States, persons who hold the notes as part of a "straddle," "hedging," "conversion" or other integrated transaction, persons who mark their securities to market for U.S. federal income tax purposes or persons whose functional currency is not the U.S. dollar. In addition, this discussion does not address the effect of any state, local or foreign tax laws or any U.S. federal estate, gift or alternative minimum tax considerations.
This discussion is based on the Code, the Treasury Regulations promulgated thereunder and administrative and judicial pronouncements, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. This discussion does not describe the US federal income tax considerations relating to the purchase, ownership or disposition of a "contingent payment debt instrument" (under applicable Treasury Regulations), a note with a maturity later than 30 years from its date of issuance or certain "variable rate debt instruments" (under applicable Treasury Regulations), and a general discussion of any materially different federal income tax considerations relating to any such note will be included in the applicable pricing supplement. No rulings will be sought from the U.S. Internal Revenue Service (the "IRS"), and the opinion of U.S. Tax Counsel is not binding on the IRS or the courts.
PROSPECTIVE PURCHASERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISERS AS TO THE U.S. FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
Classification of the Trusts and the Notes
In the opinion of U.S. Tax Counsel, under current law and assuming full compliance with the terms of each trust's certificate of trust (in the case of a Delaware statutory trust), trust agreement and indenture, no trust will be classified as an association (or publicly traded partnership) taxable as a corporation for U.S. federal income tax purposes. The relevant trust and the trust beneficial owner will agree, and by acceptance of a beneficial interest in a note, each holder of a beneficial interest in a note will agree, for U.S. federal, state and local income and franchise tax purposes, to treat (i) the relevant trust as disregarded and (ii) such note as representing debt of Protective Life. The remainder of this discussion assumes that the relevant trust is disregarded and the notes represent debt of Protective Life.
No statutory, judicial, or administrative authority directly addresses the U.S. federal income tax treatment of securities similar to the notes. In lieu of the above treatment, the IRS might assert that each trust should be treated as a grantor trust holding the related funding agreement(s) and other assets, if any, and the related notes as ownership interests in such trust. In that case, it is possible that certain costs and expenses that are paid by Protective Life pursuant to the applicable expense and indemnity agreement could be treated as constructively received by the trust, in which event, a U.S.
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Holder would include in income and deduct its pro rata share of these costs and expenses subject, in the case of a U.S. Holder that is an individual, estate or trust, to limitations applicable to such deductions. Alternatively, the IRS might assert that the notes issued by a trust should be treated as debt of such trust.
U.S. Holders
For purposes of the following discussion, the term "U.S. Holder" means a beneficial owner of a note that is, for U.S. federal income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation created or organized in or under the laws of the United States or any state of the United States or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of its substantial decisions, or certain electing trusts that were in existence on August 19, 1996 and were treated as domestic trusts on that date.
If an entity treated as a partnership for U.S. federal income tax purposes holds a note, the tax treatment of such partnership and each of its partners will generally depend on the status and activities of such partnership and the partner. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax adviser regarding the U.S. federal income tax considerations applicable to it and its partners of the purchase, ownership, and disposition of the notes.
Interest and Original Issue Discount
Each U.S. Holder of a note will generally include payments of "qualified stated interest" (as described below) in respect of such note in income in accordance with such U.S. Holder's method of accounting for U.S. federal income tax purposes, as ordinary interest income. In general, if the issue price of a note, determined by the first price at which a substantial amount of the notes of the related series are sold (ignoring sales to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers), is less than the "stated redemption price at maturity" (as described below) of such note by an amount equal to or more than a de minimis amount, a U.S. Holder will be considered to have purchased such note with original issue discount ("OID"). In general, the de minimis amount is equal to 1/4 of 1 percent of the stated redemption price at maturity multiplied by the number of complete years to maturity (or, in the case of a note providing for the payment of any amount other than qualified stated interest (as defined below) prior to maturity, multiplied by the weighted average maturity of the note). If a U.S. Holder acquires a note with OID, then regardless of such U.S. Holder's method of accounting, such U.S. Holder will be required to accrue its pro rata share of OID on such note on a constant yield basis and include such accruals in gross income, whether or not such U.S. Holder has received any cash payment on the notes. Any amount not treated as OID because it is de minimis generally must be included in income (generally as gain from the sale of notes) as principal payments are received on such note in the proportion that each such payment bears to the original principal amount of such note. Special rules apply to notes with a fixed maturity of one year or less. See below under "Short-Term Notes."
"Stated redemption price at maturity" means the sum of all payments to be made on a note other than payments of "qualified stated interest." Qualified stated interest generally means stated interest that is unconditionally payable at least annually at a single fixed rate.
In the case of a variable rate debt instrument (as described below), the amount of qualified stated interest and the amount of OID, if any, that accrues during an accrual period is generally determined assuming that the variable rate is a fixed rate equal to (i) in the case of a qualified floating rate or qualified inverse floating rate, the value, as of the issue date, of the qualified floating rate or qualified inverse floating rate or (ii) in the case of an objective rate (other than a qualified inverse floating rate),
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a fixed rate that reflects the yield that is reasonably expected for the debt instrument, and the qualified stated interest (or, if there is no qualified stated interest, OID) allocable to an accrual period is increased (or decreased) if the interest actually paid during an accrual period exceeds (or is less than) the interest assumed to be paid during the accrual period pursuant to clause (i) or (ii), as applicable. Special rules that apply to a variable rate debt instrument that provides for stated interest at a fixed rate will be described in the relevant pricing supplement.
A "variable rate debt instrument" is a debt instrument that (i) has an issue price that does not exceed the total noncontingent principal payments by more than an amount equal to the lesser of (a) 0.015 multiplied by the product of such total noncontingent principal payments and the number of complete years to maturity of the instrument (or, in the case of a note providing for the payment of any amount other than qualified stated interest prior to maturity, multiplied by the weighted average maturity of the note) or (b) 15 percent of the total noncontingent principal payments, (ii) provides for stated interest (compounded or paid at least annually) at the current value of (A) one or more "qualified floating rates," (B) a single fixed rate and one or more qualified floating rates, (C) a single "objective rate" or (D) a single fixed rate and a single objective rate that is a "qualified inverse floating rate," and (iii) does not provide for any principal payments that are contingent. The current value of a rate is the value of the rate on any day that is no earlier than three months prior to the first day on which that value is in effect and no later than one year following that first day.
A "qualified floating rate" is generally a floating rate under which variations in the rate can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds in the currency in which a debt instrument is denominated. A multiple of a qualified floating rate is not a qualified floating rate unless the relevant multiplier is (i) fixed at a number that is greater than 0.65 but not more than 1.35 or (ii) fixed at a number that is greater than 0.65 but not more than 1.35, increased or decreased by a fixed rate. A variable rate is not considered a qualified floating rate if the variable rate is subject to a cap, floor, governor (i.e., a restriction on the amount of increase or decrease in the stated interest rate) or similar restriction that is reasonably expected as of the issue date to cause the yield on the debt instrument to be significantly more or less than the expected yield determined without the restriction (other than a cap, floor, governor or similar restriction that is fixed throughout the term of the debt instrument).
An "objective rate" is a rate (other than a qualified floating rate) that is determined using a single fixed formula and that is based on objective financial or economic information, provided, however, that an objective rate will not include a rate based on information that is within the control of the issuer (or certain related parties of the issuer) or that is unique to the circumstances of the issuer (or certain related parties of the issuer), such as dividends, profits or the value of the issuer's stock. A "qualified inverse floating rate" is an objective rate (i) that is equal to a fixed rate minus a qualified floating rate and (ii) the variations in which can reasonably be expected to inversely reflect contemporaneous variations in the qualified floating rate (disregarding any caps, floors, governors or similar restrictions that would not, as described above, cause a rate to fail to be a qualified floating rate). Notwithstanding the first sentence of this paragraph, a rate is not an objective rate if it is reasonably expected that the average value of the rate during the first half of the note's term will be either significantly less than or significantly greater than the average value of the rate during the final half of the note's term.
If interest on a note is stated at a fixed rate for an initial period of one year or less followed by a variable rate that is either a qualified floating rate or an objective rate for a subsequent period, and the value of the variable rate on the issue date is intended to approximate the fixed rate, the fixed rate and the variable rate together constitute a single qualified floating rate or objective rate. A fixed rate and a variable rate will be conclusively presumed to meet the requirements of the preceding sentence if the value of the variable rate on the issue date does not differ from the value of the fixed rate by more than 0.25 percentage points (25 basis points).
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If a floating rate note does not qualify as a variable rate debt instrument or otherwise provides for contingent payments, or if a fixed rate note provides for contingent payments, such note may constitute a "contingent payment debt instrument." Interest payable on a contingent payment debt instrument is not treated as qualified stated interest. Special rules that apply to contingent payment debt instruments will be described in the relevant pricing supplement.
In general, the following rules apply if (i) a note provides for one or more alternative payment schedules applicable upon the occurrence of a contingency or contingencies and the timing and amounts of the payments that comprise each payment schedule are known as of the issue date and (ii) either a single payment schedule is significantly more likely than not to occur or the note provides the issuer or the holder with an unconditional option or options exercisable on one or more dates during the term of the note. If, based on all the facts and circumstances as of the issue date, a single payment schedule for a debt instrument, including the stated payment schedule, is significantly more likely than not to occur, then, in general, the yield and maturity of the note are computed based on this payment schedule. If the issuer or the holder has an unconditional option or options that, if exercised, would require payments to be made on the note under an alternative payment schedule or schedules, then (i) in the case of an option or options exercisable by the issuer, the issuer will be deemed to exercise or not exercise an option or combination of options in the manner that minimizes the yield on the note and (ii) in the case of an option or options exercisable by the holder, the holder will be deemed to exercise or not exercise an option or combination of options in the manner that maximizes the yield on the note. Notes subject to the above rules will not be treated as contingent payment debt instruments as a result of the contingencies described above. If a contingency (including the exercise of an option) actually occurs or does not occur contrary to an assumption made according to the above rules (a "Change in Circumstances"), then, except to the extent that a portion of the note is repaid as a result of a Change in Circumstances and solely for purposes of the accrual of OID, the note is treated as retired and then reissued on the date of the Change in Circumstances for an amount equal to the note's adjusted issue price on that date.
A U.S. Holder may elect to treat all interest on any note issued with OID as OID and calculate the amount includible in gross income under the constant yield method. For purposes of this election, interest includes stated interest, acquisition discount, OID, de minimis OID, market discount, de minimis market discount and unstated interest, as adjusted by any amortizable bond premium or acquisition premium. The election would be made for the taxable year in which a U.S. Holder acquires such note, and may not be revoked without the consent of the IRS.
Premium
If the amount paid by a U.S. Holder for a note exceeds the stated redemption price at maturity of such note, such U.S. Holder generally will be considered to have purchased such note with a bond premium equal in amount to such excess. In this event, such U.S. Holder may elect to amortize such bond premium, based generally on a constant yield basis, as an offset to interest income. In the case of a note that may be redeemed prior to maturity, the bond premium is calculated assuming Protective Life and the U.S. Holder will exercise or not exercise redemption rights in a manner that maximizes the U.S. Holder's yield. It is unclear how bond premium is calculated when the redemption date or the amount of any redemption premium is uncertain. A U.S. Holder that elects to amortize bond premium must reduce its tax basis in the note by the amount of the aggregate deductions allowable for the amortized bond premium. The election to amortize bond premium, once made, will apply to all debt obligations held or subsequently acquired by the electing U.S. Holder on or after the first day of the first taxable year to which the election applies, and may not be revoked without the consent of the IRS.
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Short-Term Notes
Notes that have a fixed maturity of one year or less ("Short-Term Notes") will be treated as issued with OID. In general, an individual or other U.S. Holder that reports income for U.S. federal income tax purposes under the cash method of accounting is not required to accrue such OID unless the U.S. Holder elects to do so. If such an election is not made, any gain recognized by such U.S. Holder on the sale, exchange, retirement or other disposition of a Short-Term Note will be ordinary income to the extent of the OID accrued on a straight-line basis, or upon election under the constant yield method (based on daily compounding), through the date of sale, exchange, retirement or other disposition, and a portion of the deduction otherwise allowable to such U.S. Holder for interest on borrowings allocable to the Short-Term Note will be deferred until a corresponding amount of income is realized. U.S. Holders who report income for U.S. federal income tax purposes under the accrual method of accounting and certain other holders are required to accrue OID related to a Short-Term Note as ordinary income on a straight-line basis unless an election is made to accrue the OID under a constant yield method (based on daily compounding).
Sale, Exchange, Retirement or Other Disposition of Notes
In general, a U.S. Holder of a note will have a tax basis in such note equal to the cost of the note to such U.S. Holder, increased by any amount includible in income by such U.S. Holder as OID and decreased by any amortized premium and any payments other than payments of qualified stated interest received on such note. Upon a sale, exchange, retirement or other disposition of a note, a U.S. Holder will generally recognize gain or loss equal to the difference between the amount realized on the sale, exchange, retirement or other disposition (less any accrued but unpaid qualified stated interest, which will constitute ordinary income if not previously included in income) and the U.S. Holder's tax basis in such note. Subject to the rules described below under "Foreign Currency Notes," such gain or loss will be long-term capital gain or loss if the U.S. Holder held the note for more than one year at the time of disposition. A U.S. Holder that is an individual is entitled to preferential treatment for net long-term capital gains; however, the ability of a U.S. Holder to offset capital losses against ordinary income is limited.
Foreign Currency Notes
The following discussion generally describes special rules that apply, in addition to the rules described above, to notes that are denominated in, or provide for payments determined by reference to, a currency other than the United States dollar ("Foreign Currency Notes").
The amount of qualified stated interest paid with respect to a Foreign Currency Note that is includible in income by a U.S. Holder that uses the cash method of accounting for U.S. federal income tax purposes is the U.S. dollar value of the amount paid, as determined on the date of actual or constructive receipt by such U.S. Holder, using the spot rate of exchange on such date. In the case of qualified stated interest paid to a U.S. Holder that uses the accrual method of accounting, and in the case of OID (other than OID on a Short-Term Note that is not required to be accrued) for every U.S. Holder, such U.S. Holder is required to include the U.S. dollar value of the amount of such interest income or OID that accrued during the accrual period. The U.S. dollar value of such accrued interest income or OID is determined by translating such income at the average rate of exchange for the accrual period (or, with respect to an accrual period that spans two taxable years, at the average exchange rate for the partial period within the taxable year). Alternatively, such U.S. Holder may elect to translate such income at the spot rate of exchange on the last day of the accrual period (or, with respect to an accrual period that spans two taxable years, at the spot rate in effect on the last day of the taxable year). If the last day of the accrual period is within five Business Days of the date of receipt of the accrued interest, a U.S. Holder that has made such election may translate accrued interest using the spot rate in effect on the date of receipt. The above election will apply to all debt
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obligations held by such U.S. Holder and may not be changed without the consent of the IRS. The U.S. Holder will recognize, as ordinary income or loss, foreign currency exchange gain or loss with respect to such accrued interest income or OID on the date the interest or OID is actually or constructively received, reflecting fluctuations in currency exchange rates between the exchange rate used to determine the accrued interest income or OID for the relevant accrual period and the exchange rate on the date such interest or OID is actually or constructively received.
A U.S. Holder will calculate the amortization of bond premium for a Foreign Currency Note in the applicable foreign currency. Amortization deductions attributable to a period will reduce interest payments in respect of that period, and therefore are translated into U.S. dollars at the rate used for those interest payments. Foreign currency exchange gain or loss will be realized with respect to amortized premium on a Foreign Currency Note based on the difference between the exchange rate at which the amortization deductions were translated into U.S. dollars and the exchange rate on the date when such U.S. Holder acquired the Foreign Currency Note.
The amount realized with respect to a sale, exchange, retirement or other disposition of a Foreign Currency Note generally will be the U.S. dollar value of the payment received, determined on the date of disposition of such note (using the spot rate on such date). However, with respect to Foreign Currency Notes that are traded on an established securities market, such amount realized will be determined using the spot rate on the settlement date in the case of (i) a U.S. Holder that uses the cash method of accounting or (ii) a U.S. Holder that uses the accrual method of accounting that elects such treatment. This election may not be changed without the consent of the IRS. Gain or loss that is recognized will be ordinary income or loss to the extent it is attributable to fluctuations in currency rates between the date of purchase and the date of sale, exchange, retirement or other disposition. Such foreign currency gain (or loss) will be recognized only to the extent of the total gain (or loss) realized by the U.S. Holder on the sale, exchange, retirement or other disposition of the Foreign Currency Note. Any gain (or loss) realized by a U.S. Holder in excess of such foreign currency gain (or loss) generally will be capital gain or loss.
A U.S. Holder will recognize an amount of gain or loss on a sale or exchange of any non-U.S. currency equal to the difference between (i) the amount of U.S. dollars, or the fair market value in U.S. dollars of any other property, received in such sale or exchange and (ii) the tax basis of such non-U.S. currency.
A note that provides for payments in more than one currency generally will be treated as a "contingent payment debt instrument," and the special rules applicable to such instruments will be described in the applicable pricing supplement.
Aggregation Rules
The Treasury Regulations relating to OID contain special aggregation rules stating in general that, subject to certain exceptions, debt instruments issued in the same transaction or related transactions to a single purchaser may be treated as a single debt instrument with a single issue price, maturity date, yield to maturity and stated redemption price at maturity for purposes of the OID rules. Under certain circumstances, these provisions could apply to a U.S. Holder that purchased notes from more than one Series of notes.
Non-U.S. Holders
For purposes of the following discussion, the term "Non-U.S. Holder" means a beneficial owner of a note other than a U.S. Holder and other than an entity treated as a partnership for U.S. federal
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income tax purposes. Under present U.S. federal income tax law, and subject to the discussion below concerning backup withholding:
(a) payments of principal, premium, and interest (including OID) with respect to a note held by or for a Non-U.S. Holder will not be subject to U.S. federal withholding tax, provided that, in the case of amounts treated as interest (including OID), (i) such interest is not received by a bank on an extension of credit made pursuant to a loan agreement entered in the ordinary course of its trade or business, (ii) such Non-U.S. Holder does not own, actually or constructively, 10% or more of the total combined voting power of all classes of stock of Protective Life or the trust beneficial owner entitled to vote, (iii) such Non-U.S. Holder is not a controlled foreign corporation, within the meaning of section 957(a) of the Code, that is related, directly or indirectly, to Protective Life or the trust beneficial owner through stock ownership, (iv) such interest is not contingent interest described in section 871(h)(4)(A) of the Code and (v) the statement requirement set forth in section 871(h) or section 881(c) of the Code (described below) has been fulfilled with respect to such Non-U.S. Holder; and
(b) a Non-U.S. Holder will generally not be subject to U.S. federal income tax on gain (excluding any amount treated as interest) realized on the sale, exchange, retirement or other disposition of a note, unless (i) such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of such sale, exchange, retirement or other disposition and certain other conditions are met or (ii) such gain is effectively connected with the conduct, by such Non-U.S. Holder, of a trade or business in the United States.
In general, sections 871(h) and 881(c) of the Code require that, in order to obtain the exemption from withholding tax described in paragraph (a) above, the Non-U.S. Holder must file a statement with the withholding agent to the effect that the Non-U.S. Holder is not a United States person. Such requirement generally will be fulfilled if the Non-U.S. Holder certifies on IRS Form W-8BEN, under penalties of perjury, that it is not a United States person and provides its name and address. Applicable Treasury Regulations provide alternative methods for satisfying this requirement.
If a Non-U.S. Holder is engaged in a trade or business in the United States, and if any amount treated as interest for U.S. federal income tax purposes on a note or gain realized on the sale, exchange, retirement or other disposition of a note is effectively connected with the conduct of such trade or business, the Non-U.S. Holder, although exempt from the withholding tax described in paragraph (a) above, will generally be subject to regular U.S. federal income tax on such effectively connected income in the same manner as if it were a U.S. Holder (except to the extent otherwise provided by an applicable tax treaty). In lieu of the certificate described in the preceding paragraph, such Non-U.S. Holder will be required to provide an IRS Form W-8ECI to the withholding agent in order to claim an exemption from withholding tax. In addition, if such Non-U.S. Holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% (or a lower rate provided by an applicable tax treaty) of its effectively connected earnings and profits for the taxable year, subject to certain adjustments.
Backup Withholding and Information Reporting
Backup withholding at applicable rates and information reporting requirements generally apply to interest (including OID) and principal payments made to, and to the proceeds of sales by, certain non-corporate U.S. Holders. A U.S. Holder not otherwise exempt from backup withholding generally can avoid backup withholding by providing an IRS Form W-9.
A Non-U.S. Holder may also be subject to backup withholding and information reporting requirements unless such Non-U.S. Holder complies with certain reporting procedures (usually satisfied by providing an IRS Form W-8BEN) or otherwise establishes an exemption. However, backup withholding does not apply to payments on a note made outside the U.S. to certain offshore accounts.
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Additional backup withholding and information reporting requirements with respect to the payment of proceeds from the disposition of a note by a Non-U.S. Holder are as follows:
In addition, the amount of interest (including OID) paid with respect to a note to or on behalf of a Non-U.S. Holder and the amount of tax, if any, withheld from such payments must generally be reported annually to such Non-U.S. Holder and the IRS. The IRS may make such information available under the provisions of an applicable income tax treaty to the tax authorities in the country in which a Non-U.S. Holder is a resident.
Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the beneficial owner's U.S. federal income tax liability provided the required information is furnished on a timely basis to the IRS.
Non-U.S. Holders should consult their tax advisors regarding the application of information reporting and backup withholding in their particular situations.
Disclosure Requirements for Certain Holders Recognizing Significant Losses
A U.S. Holder or Non-U.S. Holder that claims significant losses in respect of a note for U.S. federal income tax purposes (generally (i) $10 million or more in a taxable year or $20 million or more in any combination of taxable years for corporations or partnerships all of whose partners are corporations, (ii) $2 million or more in a taxable year or $4 million or more in any combination of taxable years for all other taxpayers, or (iii) $50,000 or more in a taxable year for individuals or trusts with respect to a foreign currency transaction) may be subject to certain disclosure requirements for "reportable transactions." Prospective purchasers should consult their own tax advisers concerning any possible disclosure obligation with respect to the notes.
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The notes will be offered by an issuing trust through one or more of Banc of America Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc., J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Keegan & Company, Inc., Morgan Stanley & Co. Incorporated, UBS Securities LLC and Wachovia Capital Markets, LLC, each as agent or principal (the "Dealers") in accordance with a distribution agreement to be entered into among Protective Life, the issuing trust, and the applicable Dealer(s) (the "distribution agreement"). Each Dealer may sell notes it purchases from each issuing trust at a discount as principal for its own account or for resale to one or more purchasers at varying prices related to prevailing market prices or at a fixed public offering price. Unless otherwise specified in the applicable pricing supplement, any note purchased by a Dealer as principal will be purchased at 100% of the principal amount or face amount less a percentage equal to the commission applicable to an agency sale of a note of identical maturity. After any initial public offering of notes to be resold to purchasers at a fixed public offering price, the public offering price and any concession or discount may be changed. In addition, each Dealer may offer and sell notes purchased by it as principal to other dealers. These notes may be sold at a discount which, unless otherwise specified in the applicable pricing supplement, will not exceed the discount to be received by the applicable Dealer.
Each Dealer may also agree to use its reasonable efforts, on an agency basis, to solicit orders to purchase notes. An issuing trust will have the sole right to accept orders to purchase notes and may reject proposed purchases in whole or in part. Each Dealer, as agent, will have the right to reject any proposed purchase in whole or in part. Each trust reserves the right to withdraw, cancel or modify the offer made by this prospectus supplement, the accompanying prospectus or any pricing supplement without notice. Unless otherwise specified in the applicable pricing supplement, the issuing trust will pay the applicable Dealer(s) a commission of not less than 0.125% to not more than 0.875% of the principal amount of notes sold through it, depending upon the stated maturity.
In connection with an offering of notes purchased by one or more Dealers as principal on a fixed offering price basis, such Dealer(s) will be permitted to engage in transactions that stabilize the price of notes. These transactions may consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of notes. If the Dealer creates or the Dealers create, as the case may be, a short position in notes, that is, if it sells or they sell notes in an aggregate principal amount exceeding that set forth in the applicable pricing supplement, such Dealer(s) may reduce that short position by purchasing notes in the open market. In general, purchase of notes for the purpose of stabilization or to reduce a short position could cause the price of notes to be higher than it might be in the absence of such purchases.
None of Protective Life, any trust or any of the Dealers makes any representation or prediction as to the direction or magnitude of any effect that the transactions described in the immediately preceding paragraph may have on the price of notes. In addition, none of Protective Life, any trust or any of the Dealers makes any representation that the Dealers will engage in any such transactions or that such transactions, once commenced, will not be discontinued without notice.
A trust may appoint agents (either as agent or principal), other than or in addition to the Dealer(s), with respect to the notes. Any other agents will be named in the applicable pricing supplement and those agents will enter into the relevant distribution agreement.
No note will have an established trading market when issued. Unless otherwise specified in the applicable pricing supplement, the notes will not be listed on any securities exchange. The Dealer(s) or other agents may make a market in the notes, but they are not obligated to do so. The Dealer(s) or other agents may discontinue any market making at any time without notice, at their sole discretion. There can be no assurance of the existence or liquidity of a secondary market for any notes, or that the maximum amount of notes will be sold.
S-52
The Dealer(s) and other agents, whether acting as agent or principal, are underwriters within the meaning of the Securities Act of 1933 with respect to the notes being distributed and the funding agreement purchased by the issuing trust. Each trust and Protective Life will agree to indemnify the Dealer(s) and other agents against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments that the Dealer(s) or other agents may be required to make relating to these liabilities. Each trust and Protective Life will reimburse the Dealer(s) or other agents for customary legal and other expenses, incurred by them in connection with the offer and sale of the notes.
Protective Life is a statutory issuer of the notes under the Securities Act of 1933.
Unless otherwise specified in the applicable pricing supplement, payment of the purchase price of the notes will be required to be made in immediately available funds in New York City on the date of settlement.
Concurrently with the offering of notes through the Dealer(s) and possibly other agents as described in this prospectus supplement, a separate trust may issue other notes under the accompanying prospectus and this or a different prospectus supplement.
This prospectus supplement, the accompanying prospectus and the related pricing supplement may be used by the Dealer(s) or other agents in connection with offers and sales of the notes offered by this prospectus supplement in market making transactions at negotiated prices related to prevailing market prices at the time of sale. The Dealer(s) or other agents may act as principal or agent in such transactions.
S-53
$
Protective Life Insurance Company
Sponsor and Depositor
Secured Medium-Term Notes
Issued Through
Protective Life Secured Trusts
PROSPECTUS SUPPLEMENT
BANC OF AMERICA SECURITIES LLC
BARCLAYS CAPITAL
CITI
J.P. MORGAN
MERRILL LYNCH & CO.
MORGAN KEEGAN & COMPANY, INC.
MORGAN STANLEY
UBS INVESTMENT BANK
WACHOVIA SECURITIES
, 2009
The information in this prospectus supplement is not complete and may be changed. Neither Protective Life Insurance Company nor the trusts may sell these securities until the registration statement filed with the Securities and Exchange Commission is declared effective. This prospectus supplement and the accompanying prospectus are not an offer to sell these securities and are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted or would require registration or qualification under the securities laws of that jurisdiction.
SUBJECT TO COMPLETION DATED JANUARY 14, 2009
PROSPECTUS SUPPLEMENT
(To Prospectus dated , 2009)
Protective Life Insurance Company
Sponsor and Depositor
$
Secured InterNotes®
(that are also Asset-Backed Securities)
Issued Through and Obligations of
Protective Life Secured Trusts
Each series of notes will be issued by a separate and distinct issuing entity in the form of a trust which:
The notes:
The funding agreements to be issued by Protective Life Insurance Company to the trusts will represent obligations of Protective Life Insurance Company only.
Unless otherwise specified in the applicable pricing supplement, your series of notes will not be listed on any securities exchange. The specific terms of each series of notes will be as set forth in a separate pricing supplement.
See "Risk Factors" beginning on page 11 of the accompanying prospectus for a discussion of certain risks that should be considered in connection with an investment in the notes.
None of the Securities and Exchange Commission, any state securities commission or any state insurance commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus supplement, the accompanying prospectus or any pricing supplement. Any representation to the contrary is a criminal offense.
Joint Lead Managers and Lead Agents
Banc of America Securities LLC | Incapital LLC | |
Agents |
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Charles Schwab & Co., Inc. Edward D. Jones & Co., L.P. Merrill Lynch & Co. Morgan Stanley UBS Investment Bank |
Citi Fidelity Capital Markets, A Division of National Financial Services LLC RBC Dain Rauscher, Inc. Wachovia Securities |
The date of this prospectus supplement is , 2009.
InterNotes® is a registered servicemark of Incapital Holdings LLC
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Page | |
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Prospectus Supplement |
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Forward Looking Information |
ii |
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Summary |
S-1 | |
About This Prospectus Supplement and the Pricing Supplements |
S-11 | |
Description of the Notes |
S-12 | |
Description of the Funding Agreements |
S-39 | |
Material U.S. Federal Income Tax Considerations |
S-41 | |
Plan of Distribution |
S-46 | |
Prospectus |
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Forward Looking Information |
2 |
|
About This Prospectus |
3 | |
Where You Can Find More Information |
4 | |
Incorporation of Certain Documents by Reference |
5 | |
Description of the Trusts |
6 | |
Risk Factors |
11 | |
Fees and Expenses |
20 | |
Use of Proceeds |
21 | |
Description of Protective Life Insurance Company |
22 | |
Description of the Notes |
23 | |
Description of the Indentures |
26 | |
Description of the Funding Agreements |
37 | |
Description of Standard Expense and Indemnity Agreement Terms |
42 | |
Description of Standard Administrative Services Agreement Terms |
43 | |
ERISA Considerations |
44 | |
Plan of Distribution |
47 | |
Legal Matters |
48 | |
Experts |
48 |
You should rely only on the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus, the applicable pricing supplement and any applicable free writing prospectus. Neither Protective Life Insurance Company nor any agent or dealer has authorized any other person to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. Neither Protective Life Insurance Company nor any trust's agents or dealers is making an offer to sell the notes in any jurisdiction where the offer or sale is not permitted. You should assume that the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus, the applicable pricing supplement or any applicable free writing prospectus is accurate only as of the date on the front cover of those documents. The business, financial condition, results of operations and prospects of Protective Life Insurance Company may have changed since that date. Capitalized terms which are not defined in this prospectus supplement will have the meanings set forth in the accompanying prospectus.
References in this prospectus supplement to "United States dollars," "U.S. dollars" or "$" are to lawful currency of the United States of America. In this prospectus supplement each series of Secured InterNotes® is referred to as a "series of notes" and the Secured InterNotes® are referred to generally as "notes."
i
This prospectus supplement, the accompanying prospectus and any pricing supplement and the information incorporated by reference in such documents may include forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The safe harbors contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 do not apply to forward looking statements regarding the trusts. These forward looking statements reflect Protective Life Insurance Company's current view with respect to future events and financial performance. The words "believe," "expect," "estimate," "project," "budget," "forecast," "anticipate," "plan," "should," "would," and similar expressions identify forward looking statements which are based on future expectations rather than on historical facts and are therefore subject to a number of risks and uncertainties, and neither Protective Life Insurance Company nor any trust's agents or dealers can give assurance that such statements will prove to be correct. You should not place undue reliance on these forward looking statements, which speak only as of their dates. Protective Life Insurance Company, and each trust's agents and dealers shall not undertake any obligation to update or review forward looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes to projections over time. Please refer to Part I, Item 1A in Protective Life's most recent Annual Report on Form 10-K and Part II, Item 1A in Protective Life's most recent Quarterly Report on Form 10-Q, in each case as amended or supplemented by any subsequent filings, for more information about factors which could affect future results.
ii
This section summarizes certain of the legal and financial terms of the notes that are described in more detail in "Description of the Notes." Final terms of any particular series of notes will be set at the time of sale and will be contained in a pricing supplement relating to that series of notes. That pricing supplement may add to, update, supplement or clarify the terms contained in this summary. In addition, you should read the more detailed information appearing elsewhere in the accompanying prospectus, this prospectus supplement, the applicable pricing supplement and any applicable free writing prospectus. References in this prospectus supplement to "Protective Life" are to Protective Life Insurance Company. References in this prospectus supplement to the "trusts" are to the Protective Life Secured Trusts. References in this prospectus supplement to an "issuing trust" are to a trust with respect to the series of notes issued and sold to the public by that trust. References in this prospectus supplement to "Wilmington" are to Wilmington Trust Company solely in its capacity as trustee of the trusts and not in its individual capacity.
The Trusts |
Each series of notes will be issued by a separate newly created Delaware statutory trust or a separate newly created Delaware common law trust (each a "trust"). Each statutory trust will be established by AMACAR Pacific Corp., as administrator and trust beneficial owner, and Wilmington Trust Company, as Delaware trustee, pursuant to a certificate of trust and a statutory trust agreement. Each common law trust will be established by AMACAR Pacific Corp., as administrator and trust beneficial owner, and Wilmington Trust Company, as common law trustee, pursuant to a common law trust agreement. Each statutory trust agreement and common law trust agreement is referred to in this prospectus supplement as a "trust agreement." | ||||
Sponsor and Depositor |
Protective Life Insurance Company ("Protective Life") is the sponsor of the program and the sole registrant as the depositor and issuer of the funding agreements under the program. |
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Purpose of Trusts; Depositor |
The sole purpose of each trust is to facilitate a program for the issuance, from time to time, of a series of notes to the public, which is secured by one or more funding agreements sold to, and deposited into, the issuing trust by Protective Life. The principal amount of each funding agreement sold to an issuing trust may not be increased. Each trust may issue only one series of notes. Each trust will use the net proceeds received from issuing its series of notes to acquire one or more funding agreements. Each trust will hold the collateral described below pertaining to its series of notes to fund its obligations under that series of notes. Each trust will pledge and collaterally assign the funding agreements held in that trust to the indenture trustee for the benefit of the holders of that trust's series of notes. Holders of notes of a series of notes may look only to the funding agreement(s) and any other collateral held in, or pledged and collaterally assigned to the indenture trustee by, the issuing trust for payment on their notes and not to the assets held in any other trust. |
S-1
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No trust will be affiliated with Protective Life. |
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Below is a diagram showing the parties involved in the issuance of notes by each trust. |
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Protective Life Can Issue Medium-Term Notes and Funding Agreements Directly to Investors |
Protective Life is able to issue its own medium-term notes directly to investors and does issue funding agreements directly to investors. However, by securing a trust's notes with Protective Life's funding agreements, such trust's notes are secured by an asset that would have a higher priority in insolvency than unsecured medium-term notes of Protective Life and may be entitled to receive a higher investment rating from Moody's Investors Service, Inc. than unsecured medium-term notes of Protective Life. In addition, funding agreements are very difficult to transfer and have no active secondary market. By securing each trust's notes with Protective Life's funding agreements, investors may be able to avail themselves of many of the benefits of Protective Life's funding agreements while benefiting from the liquidity afforded by each trust's medium-term notes. |
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Purchasing Agent |
Incapital LLC |
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Joint Lead Managers and Lead Agents |
Banc of America Securities LLC and Incapital LLC |
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Agents |
Charles Schwab & Company, Incorporated |
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Title of notes |
Protective Life Secured InterNotes® |
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Secured InterNotes® Program |
This prospectus supplement relates to notes that each trust may issue and sell to retail investors under this Secured InterNotes® program. |
S-2
Secured Medium-Term |
Included in the registration statement, of which this prospectus supplement is a part, is another prospectus supplement relating to notes that may be issued and sold to investors by either a newly established Delaware statutory trust or a newly established Delaware common law trust under the related secured medium-term notes program. The terms of the secured medium-term notes are identical in all material respects to the terms of the notes to be sold under this program except that secured medium-term notes to be sold to institutional investors: |
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may be denominated in one or more foreign currencies; and |
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may contain a provision providing for the redemption of the notes if Protective Life is required to pay additional amounts under the related funding agreements in respect of taxes pursuant to the applicable pricing supplement and Protective Life exercises its corresponding right to redeem the funding agreements. |
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Amount |
A maximum of $ of notes may be issued in connection with this prospectus supplement, less any amount of notes previously issued under this program, the related secured medium term notes program or otherwise under the accompanying prospectus. |
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Flow of Funds |
Other than during an event of default under notes of a series, amounts received by or on behalf of the issuing trust will be paid: |
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first, to amounts due upon its notes; and |
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second, with respect to any remaining funds, in accordance with its trust agreement. |
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During an event of default under notes of a series, amounts received by or on behalf of the issuing trust will be paid: |
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first, to the payment of the reasonable and customary expenses and counsel fees incurred by the indenture trustee and any other amounts due and unpaid to the indenture trustee by the issuing trust, in an aggregate amount of no more than $250,000 for all series of notes issued by all trusts under any Protective Life secured notes program, to the extent not paid pursuant to the expense and indemnity agreements; |
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second, to amounts due upon its notes; and |
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third, with respect to any remaining funds, in accordance with its trust agreement. See "Description of the IndenturesApplication of Money Collected Under the Indenture" in the accompanying prospectus. |
S-3
Terms of the notes: |
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Status |
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Each series of notes will be the issuing trust's unconditional, direct, non-recourse secured and unsubordinated obligations. |
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Each series of notes will be secured by the collateral held in the issuing trust. |
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Each series of notes may be accelerated in the payment of principal and outstanding interest if an event of default under the notes occurs. Upon the occurrence of an event of default, the indenture trustee (described below), on behalf of the holders of notes, may proceed only against the collateral held in the issuing trust. |
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The notes of each series are not, and will not be, insurance contracts, insurance policies or funding agreements. |
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The notes of each series are not and will not be obligations of, or guaranteed by, Protective Life or any other insurance company or any affiliate of Protective Life. The notes will not benefit from any insurance guaranty fund coverage or any similar protection. |
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Maturities |
Unless otherwise specified in the applicable pricing supplement, each series of notes will mature nine months or more from its date of original issuance, as specified in the applicable pricing supplement. Each series of notes will mature on or prior to 30 years from its date of original issuance. |
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Payment of Principal and Interest |
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Principal and interest payments, if any, on any series of notes will be made solely from the proceeds of one or more funding agreements purchased with respect to such series of notes by the issuing trust and any other collateral held in that trust. |
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Each series of notes may be interest bearing or non interest bearing. Each series of notes may bear interest at either a fixed rate or a floating rate, or a combination of fixed and floating rates, as specified in the applicable pricing supplement. |
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The principal amount of each note (other than amortizing notes) will be payable on its stated maturity date, repayment date or redemption date, as specified in the applicable pricing supplement, at the corporate trust office of the paying agent or any other place the issuing trust designates. |
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Interest, if any, will be payable on the dates specified in the applicable pricing supplement. |
S-4
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A trust may issue amortizing notes that pay a level amount in respect of both interest and principal amortized over the life of the note, if specified in the applicable pricing supplement. |
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A trust may issue discount notes that do not bear any current interest or bear interest at a rate that is below market rates at the time of issuance. |
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Interest |
Each fixed rate note will bear interest from its date of issue at the annual rate stated in the applicable pricing supplement until the principal is paid. |
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Each floating rate note will bear interest from the date of issue until the principal is paid at a rate determined by reference to an interest rate or interest rate formula, which may be adjusted by a spread and/or spread multiplier (each as more fully described under "Description of the Notes"). The pricing supplement will designate one or more of the following base rates, along with the index maturity for that base rate: |
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the CD rate, |
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| the Commercial Paper Rate, | |||
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| the Federal Funds (Effective) Rate, | |||
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| the Federal Funds (Open) Rate, | |||
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| LIBOR, | |||
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| EURIBOR, | |||
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| the Treasury Rate, | |||
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| the Constant Maturity Treasury Rate, | |||
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| the Prime Rate, | |||
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| the Constant Maturity Swap Rate, or | |||
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| the Eleventh District Cost of Funds Rate. | |||
Redemption and Repayment |
A trust will redeem its series of notes if Protective Life redeems each funding agreement securing such series of notes. Except as otherwise specified in the prospectus, this prospectus supplement or the applicable pricing supplement, the funding agreement(s) securing a series of notes will not be redeemable by Protective Life and no series of notes will be repayable at the option of the holder prior to its stated maturity date. Notes that may be redeemed at a time when 25% or more of the original principal amount of such notes are outstanding will be clearly identified as "callable" in the applicable pricing supplement. Unless otherwise specified in the applicable pricing supplement, the notes will not be subject to any sinking fund. |
S-5
Survivor's Option |
A series of notes may contain a provision (which is referred to as the "survivor's option") permitting optional repayment of notes of that series of notes prior to maturity, if requested, following the death of the beneficial owner of notes of that series of notes, so long as the notes were held by the beneficial owner or the estate of the beneficial owner for a period beginning at least six months immediately prior to the request. Your notes may not be repaid in this manner unless the pricing supplement for your series of notes provides for the survivor's option. If the pricing supplement for your series of notes provides for the survivor's option, the funding agreement securing your series of notes will contain a provision which will allow the issuing trust to tender the funding agreement in whole or in part to Protective Life. An issuing trust's ability to tender funding agreements related to its series of notes that contains a survivor's option will be subject to certain limitations set by Protective Life. As a result, your right to exercise the survivor's option is subject to limits set by Protective Life with respect to the relevant funding agreement on (1) the permitted dollar amount of total exercises by all issuing trusts in any calendar year, (2) the permitted dollar amount of particular exercises by all issuing trusts in any calendar year and (3) the permitted dollar amount of total exercises by an issuing trust with respect to a series of notes in any calendar year. Additional details on the survivor's option are described in the section titled "Description of the NotesSurvivor's Option." |
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Denominations |
The notes will be issued and sold in denominations of $2,000 and multiples of $1,000 thereafter, in denominations of $25 and multiples of $25 or in such other denomination and multiple of that denomination specified in the applicable pricing supplement. |
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Listing |
Unless otherwise specified in the applicable pricing supplement, your series of notes will not be listed on any securities exchange. |
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Sale and Clearance |
Each trust will sell notes in the United States only. Each series of notes will be issued in book entry form only and cleared through The Depository Trust Company. Each book entry note will be held by the indenture trustee as custodian for The Depository Trust Company or its nominee. |
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Collateral |
The notes of any series will be secured by the right, title and interest of the issuing trust in and to (1) the funding agreement(s) held in that trust, (2) all proceeds of the funding agreement(s) and all amounts and instruments on deposit from time to time in the issuing trust's collection account, (3) all books and records pertaining to the issuing trust's funding agreement(s), and (4) all rights of that trust pertaining to the foregoing. |
S-6
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The issuing trust will pledge and collaterally assign the related funding agreement(s) to the indenture trustee for the benefit of the holders of such series of notes. |
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Funding Agreements |
Each trust will use the net proceeds received from the offering of its series of notes to purchase one or more funding agreements issued by Protective Life the terms of which will be set forth in the applicable pricing supplement. The funding agreement(s) will have a principal amount equal to the sum of the principal amount of the related series of notes and the principal amount of the beneficial ownership interest in the issuing trust. The rate at which the funding agreement(s) bear interest will be equal to the rate of interest on the related series of notes. The funding agreement(s) will otherwise have substantially similar payment terms to the related series of notes. |
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The obligations of Protective Life under any funding agreement will not be guaranteed by its parent company or any of its subsidiaries or affiliates. |
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Funding agreements are unsecured obligations of Protective Life. The funding agreements will carry the financial strength rating of Protective Life as set forth in the applicable pricing supplement. |
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Under Section 56-9-330, Tennessee Code Annotated, in the event of an insolvency of a Tennessee domestic insurance company, the loss claims of holders of funding agreements rank equally with the loss claims of other policyholders of the insurer, and in a superior position to general unsecured creditors. Therefore, in the event of an insolvency of Protective Life, loss claims of a trust under each of the funding agreements held by it would rank equally with the loss claims of other policyholders of Protective Life and in a position superior to general unsecured creditors of Protective Life. See "Description of the Funding Agreements" in the accompanying prospectus. |
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Rating |
Unless otherwise indicated in the applicable pricing supplement, the notes and the funding agreements will have a rating of AA from Standard & Poor's Ratings Services, a division of The McGraw Hill Companies, Inc., and Protective Life anticipates that the notes and the funding agreements will be rated A1 by Moody's Investors Service, Inc. Notes of a series will be issued under the program only in the event that, at the time of issuance of such series of notes, at least one nationally recognized rating agency would assign an investment grade rating to such series of notes and the funding agreement(s) securing such series of notes. |
S-7
Indenture and Indenture Trustee |
Each series of notes will be issued to the public pursuant to an indenture to be entered into between the issuing trust and The Bank of New York Mellon, a New York banking corporation, in its capacity as indenture trustee. The indenture trustee will act as servicer to the program. Each indenture will be subject to the Trust Indenture Act of 1939. The indenture trustee is not affiliated with Protective Life. |
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Administration of the Trusts |
Wilmington Trust Company, a Delaware banking corporation, will be the sole trustee for each trust. Wilmington will not be obligated in any way to make payments under or in respect of the notes. Wilmington is not affiliated with Protective Life. |
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AMACAR Pacific Corp. will be the sole administrator for each trust (the "administrator"). The administrator will not be obligated in any way to make any payments under or in respect of the notes. The administrator is not affiliated with Protective Life. |
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Protective Life will enter into an expense and indemnity agreement with each of the indenture trustee, Wilmington, the administrator, each trust to be formed in connection with the issuance of a series of notes and each service provider that may become a party to the agreement from time to time. Under the agreement, Protective Life will pay certain costs and expenses relating to the offering, sale and issuance of any series of notes and certain costs, expenses and taxes incurred by each issuing trust, and Protective Life will indemnify the indenture trustee, Wilmington, the administrator, each issuing trust and each service provider that may become a party to the agreement from time to time with respect to certain matters. See "Description of Standard Expense and Indemnity Agreement Terms" in the accompanying prospectus. Protective Life anticipates that the indenture trustee fees for this program will be approximately $2,500 per year for each series of notes. |
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Trust Beneficial Owner |
AMACAR Pacific Corp. will be the sole beneficial owner of each trust (the "trust beneficial owner"). The beneficial interest in each trust: |
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will be purchased by the trust beneficial owner for $15 (or, in the case of a trust that issues discount notes, such other amount as corresponds to the discount on such notes), |
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| will be issued in book entry form only, | ||
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| will entitle the trust beneficial owner to receive payments in respect thereof on the same terms as the payments to be made to the holders of notes of the related series of notes, and | ||
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| will be subordinated to the notes of the related series of notes. |
S-8
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The trust beneficial owner will receive periodic distributions on its beneficial interest at the same rate and on the same day that holders of notes of the related series of notes receive interest payments. On the maturity date of the trust beneficial owner's beneficial interest and the related series of notes, the issuing trust will redeem the principal amount of the related series of notes to the holders of such notes and the principal amount of the beneficial interest to the trust beneficial owner. |
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The trust beneficial owner is not affiliated with Protective Life. |
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Selling Group |
The agents and dealers comprising the selling group are broker dealers and securities firms. The agents, including the purchasing agent, will enter into a selling agent agreement with each trust and Protective Life. Dealers who are members of the selling group have executed a master selected dealer agreement with the purchasing agent. The agents and the dealers have agreed to market and sell the notes in accordance with the terms of those respective agreements and all other applicable laws and regulations. You may call the purchasing agent at 1-877-284-2663 for a list of selling group members. |
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Material U.S. Federal Income Tax Considerations |
Each trust and, by acceptance of a beneficial interest in a note, each holder of a beneficial interest in a note will agree, for U.S. federal, state and local income and franchise tax purposes, to treat (i) the relevant trust as disregarded and (ii) such note as representing debt of Protective Life. Prospective purchasers of the notes must carefully consider the tax consequences of the purchase, ownership and disposition of the notes set forth under "Material U.S. Federal Income Tax Considerations." |
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Consolidated Earnings Ratios |
The following table sets forth, for the years and periods indicated, Protective Life's ratios of: |
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Consolidated earnings to fixed charges; |
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| Consolidated earnings to fixed charges before interest credited on investment products. |
S-9
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Nine Months Ended September 30, |
Year Ended December 31, | ||||||||||||||||||||
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2008(3) | 2007 | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
Ratio of Consolidated Earnings to |
0.9 | 1.4 | 1.4 | 1.5 | 1.5 | 1.6 | 1.5 | |||||||||||||||
Ratio of Consolidated Earnings to Fixed Charges Before Interest Credited on Investment |
0.1 | 7.7 | 6.9 | 20.1 | 38.5 | 46.4 | 83.4 |
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ABOUT THIS PROSPECTUS SUPPLEMENT AND THE PRICING SUPPLEMENTS
This document is a prospectus supplement and supplements a prospectus which is part of a registration statement that Protective Life has filed with the Securities and Exchange Commission (the "SEC"). This prospectus supplement provides you with a general description of the notes each trust may offer in connection with this Secured InterNotes® program and supplements the description of the notes contained in the accompanying prospectus. Secured InterNotes® with a total initial public offering price or purchase price of up to $ may be sold, less any amount of notes previously issued under this program, the related secured medium-term notes program or otherwise under the accompanying prospectus.
The specific terms and conditions of notes being offered will be contained in a pricing supplement. A copy of that pricing supplement along with a copy of this prospectus supplement and the accompanying prospectus will be provided to you by a member of the selling group on the issuing trust's behalf. That pricing supplement also may add, update, supplement or clarify information in this prospectus supplement and the accompanying prospectus. You should carefully review such additional, updated, supplemental or clarifying information contained in that pricing supplement. You should read this prospectus supplement, the accompanying prospectus, the applicable pricing supplement and any applicable free writing prospectus together with the additional information that is incorporated by reference in this prospectus supplement and the accompanying prospectus. That additional information is described under the heading "Where You Can Find More Information" in the accompanying prospectus.
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The following description of the material terms of the Secured InterNotes® supplements the general description of the general terms and provisions of the notes set forth in the accompanying prospectus. You should therefore review the accompanying prospectus carefully. You should carefully review the information in this prospectus supplement. The pricing supplement for each offering of notes will contain the specific information and terms for that offering. As such, you should carefully review the information contained in the pricing supplement, including any description of the method of calculating interest on any note. The pricing supplement may also add, update, supplement or clarify information contained in this prospectus supplement or the accompanying prospectus. It is important for you to consider the information contained in the accompanying prospectus, this prospectus supplement, the applicable pricing supplement and any applicable free writing prospectus in making your investment decision.
Some technical concepts are described in this section and some capitalized terms are used in this section that are not defined in this prospectus supplement. You should refer to the standard indenture terms and the applicable form of note filed or incorporated by reference as exhibits to the registration statement to which this prospectus supplement and the accompanying prospectus relate for the full description of those concepts and complete definitions of those terms.
General
Introduction
Each trust will issue one series of notes pursuant to a separate indenture to be entered into between the issuing trust and the indenture trustee. Each indenture will be subject to, and governed by, the Trust Indenture Act of 1939.
At the date of this prospectus supplement, the notes offered pursuant to this prospectus supplement are limited to an aggregate initial public offering price or purchase price of up to $ . This amount is subject to reduction as a result of the issuance of notes under this program, the related secured medium-term notes program or otherwise under the accompanying prospectus.
Pricing Options
Notes that bear interest will either be fixed rate notes or floating rate notes, or a combination of fixed and floating rates, as specified in the applicable pricing supplement. A trust may also issue discount notes and amortizing notes, as specified in the applicable pricing supplement.
Interest rates that are offered on the notes by separate trusts may differ depending upon, among other factors, the aggregate principal amount of notes purchased in any single transaction as well as market conditions. Notes with different variable terms other than interest rates may also be offered concurrently by separate trusts to different investors. Interest rates or formulas and other terms of notes may change from time to time, but no change of terms will affect any note previously issued by a trust or as to which a trust has accepted an offer to purchase.
Collateral
Under each indenture, each funding agreement purchased by a trust from Protective Life with the proceeds from the offering of that trust's series of notes will be collaterally assigned by the trust to the indenture trustee on behalf of the holders of that trust's series of notes. Each series of notes will be secured by a first priority perfected security interest in the "collateral," consisting of:
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The indenture trustee will hold each funding agreement purchased by a trust from Protective Life in an account for the benefit of holders of notes issued by that trust, which account will be segregated from all other accounts maintained by the indenture trustee, in its capacity as servicer.
Ranking
The notes of a series will be the issuing trust's unconditional, direct, non-recourse, secured and unsubordinated obligations and will rank equally among themselves.
Maturities
Unless otherwise specified in the applicable pricing supplement, each series of notes will mature on a day nine months or more from its date of issue (the "stated maturity date"), as specified in the applicable pricing supplement, unless its principal (or, any installment of its principal) becomes due and payable prior to the stated maturity date by the declaration of acceleration of maturity, notice of redemption at the issuing trust's discretion, notice of a beneficial owner's exercise of an option to elect repayment or otherwise (the stated maturity date or any date prior to the stated maturity date on which the principal amount of the particular series of notes becomes due and payable, as the case may be, is referred to in this prospectus supplement as the "maturity date"). Unless otherwise specified in the applicable pricing supplement, each series of notes will mature on or prior to 30 years from its date of issue.
Currency
The notes of each series will be denominated in, and payments of principal, premium, if any, and/or interest, if any, and any other amounts in respect of the notes will be made in, U.S. dollars.
Form of Notes; Denominations
Each series of notes will be issued in book-entry form represented by one or more fully registered book-entry securities registered in the name of Cede & Co., the nominee of The Depository Trust Company, as depositary. Each book-entry note will be held by the indenture trustee as custodian for the depositary. The minimum denominations of each note will be $2,000 and integral multiples of $1,000 thereafter, $25 and integral multiples of $25 or such other denomination and multiple of that denomination specified in the applicable pricing supplement.
Pricing Supplement
The pricing supplement relating to each offering of notes will describe the specific terms of the notes, including:
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As used in this prospectus supplement, "business day" means:
Payments
Principal of and interest on the notes will be paid to owners of a beneficial interest in the notes in accordance with the arrangements then in place between the paying agent and The Depository Trust Company (referred to as the "depositary") and its participants as described under "Book-Entry Notes." Interest on each note will be payable either monthly, quarterly, semi-annually or annually on each interest payment date and at the note's stated maturity or on the date of redemption or repayment if a note is redeemed or repaid prior to maturity. Interest is payable to the person in whose name a note is registered at the close of business on the record date before each interest payment date. Interest payable at the note's stated maturity, on a date of redemption or repayment or in connection with the exercise of a survivor's option is payable to the person to whom principal is payable.
Unless otherwise specified in this prospectus supplement or the applicable pricing supplement, if any interest payment date or the maturity date of a note falls on a day that is not a business day, the required payment of principal, premium, if any, and/or interest will be made on the next succeeding business day and no additional interest will accrue in respect of the payment made on that next succeeding business day (except in the case of a floating rate note with respect to an interest payment date that does not fall on a maturity date, additional interest will accrue in respect of the payment made on the next succeeding business day). However, with respect to interest payment dates other than the maturity date, in the case of a LIBOR note or a EURIBOR note, if the next business day falls in the next calendar month, the interest payment date will be the preceding business day. A payment may be made on the next business day with the same force and effect as if made on such date.
Unless otherwise specified in the applicable pricing supplement, if the principal of any discount note is declared to be due and payable immediately as a result of the acceleration of stated maturity, the amount of principal and interest due and payable shall be determined in the manner set forth under "Discount Notes" below.
Unless otherwise specified in the applicable pricing supplement, the record date for any interest payment date for a floating rate note or fixed rate note will be the date, whether or not a business day, fifteen calendar days immediately preceding the interest payment date.
Protective Life will pay, pursuant to the expense and indemnity agreements, any administrative costs imposed by banks in connection with making payments in immediately available funds, but any tax, assessment or governmental charge imposed upon any payments on a note, including, without limitation, any withholding tax, is the responsibility of the holder of a beneficial interest in such note in respect of which such payments are made.
Transfers and Exchanges
Book-entry notes may be transferred or exchanged only through the depositary. See "Book-Entry Notes." No service charge will be imposed for any such registration of transfer or exchange of notes, but a trust may require payment of a sum sufficient to cover any tax or other governmental charge that
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may be imposed in connection with such transfer or exchange (other than certain exchanges not involving any transfer).
Listing
Unless otherwise specified in the applicable pricing supplement, your series of notes will not be listed on any securities exchange.
Security; Limited Recourse
Each series of notes will solely be the obligations of the issuing trust, and will not be guaranteed by any person, including but not limited to Protective Life, any agent, any of their affiliates or any other trust. A trust's obligations under its series of notes will be secured by all of its rights and title in one or more funding agreements issued to, and deposited into, that trust by Protective Life and other rights and assets included in the applicable collateral held in that trust.
Since Protective Life will be the sole obligor under the funding agreements, an issuing trust's ability to meet its obligations, and your ability to receive payments from that trust, with respect to a particular series of notes, will be principally dependent upon Protective Life's ability to perform its obligations under each applicable funding agreement held in the relevant trust. However, you will have no direct contractual rights against Protective Life under any such funding agreement. Under the terms of each funding agreement, recourse rights to Protective Life will belong to the relevant trust, its successors and its permitted assignees. In connection with the offering and sale of a series of notes, the issuing trust will pledge, collaterally assign and grant a first priority perfected security interest in the collateral for such series of notes to the indenture trustee on behalf of the holders of such series of notes. Accordingly, recourse to Protective Life under each such funding agreement will be enforceable only by the indenture trustee as a secured party on behalf of holders of such series of notes. See also "Description of the IndenturesNonrecourse Enforcement" in the accompanying prospectus.
Fixed Rate Notes
Each fixed rate note will bear interest from its original issue date, or from the last interest payment date to which interest has been paid or duly provided for, as the case may be, at the rate per annum stated in the applicable pricing supplement until, but excluding the date on which its principal amount is paid or made available for payment. Unless otherwise specified in the applicable pricing supplement, the rate of interest payable on fixed rate notes will not be adjusted.
Unless otherwise specified in the applicable pricing supplement, the interest payment dates for a fixed rate note will be as follows:
Unless otherwise specified in the applicable pricing supplement, interest on fixed rate notes will be computed on the basis of a 360-day year of twelve 30-day months or, in the case of an incomplete month, the number of days elapsed.
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The initial interest period is the period from the original issue date to, but not including, the first interest reset date. Each floating rate note will bear interest during the initial interest period at the initial interest rate set forth, or otherwise described, in the applicable pricing supplement. The interest reset period is the period from each interest reset date to, but not including, the following interest reset date. The initial interest period and any interest reset period is an interest period. The interest rate for each floating rate note will be determined based on an interest rate basis, the base rate, multiplied by any spread multiplier and/or plus or minus any spread. A basis point or "bp" equals one-hundredth of a percentage point. The spread is the number of basis points that may be specified in the applicable pricing supplement as applicable to the note. The spread multiplier is the percentage that may be specified in the applicable pricing supplement as an adjustment to the interest rate applicable to the note. As may otherwise be specified in the applicable pricing supplement, the spread or spread multiplier on floating rate notes may be adjusted from time to time.
The applicable pricing supplement will designate one of the following base rates as applicable to a floating rate note, along with the index maturity for that base rate:
The following terms are used in describing the various base rates.
The "index maturity" for any floating rate note is the period of maturity of the instrument or obligation from which the base rate is calculated.
"H.15(519)" means the publication entitled "Statistical Release H.15(519), Selected Interest Rates," or any successor publication, published weekly by the Board of Governors of the Federal Reserve System.
"H.15 Daily Update" means the daily update of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov/releases/H15/update/h15upd.htm, or any successor site or publication.
"Calculation date" means the date by which the calculation agent is to calculate the interest rate for floating rate notes which, unless otherwise specified in the applicable pricing supplement, will be the earlier of (1) the fifth business day after the related rate determination date, or if any such day is not a business day, the next business day and (2) the business day preceding the applicable interest payment date or the stated maturity; provided that with respect to LIBOR notes, EURIBOR notes and the Eleventh District Cost of Funds Rate notes, "calculation date" means the particular LIBOR
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determination date, EURIBOR determination date or Eleventh District Cost of Funds Rate determination date, as applicable.
As specified in the applicable pricing supplement, a floating rate note may also have either or both of the following, which will be expressed as a rate per annum on a simple interest basis:
In addition to any maximum interest rate that may be applicable to any floating rate note, the interest rate on a floating rate note will in no event be higher than the maximum rate permitted by applicable law. The notes will be governed by the law of New York State. As of the date of this prospectus supplement, the maximum rate of interest under provisions of the New York penal law, with a few exceptions, is 25% per annum on a simple interest basis. The maximum rate of interest only applies to obligations that are less than $2,500,000.
Unless otherwise specified in the applicable pricing supplement, The Bank of New York Mellon will be the calculation agent for each note that is a floating rate note. All determinations of interest by the calculation agent will, in the absence of manifest error, be conclusive for all purposes and binding on the holders of the floating rate notes and neither the indenture trustee nor the calculation agent shall have any liability to the holders of any notes in respect of any determination, calculation, quote or rate made or provided by the calculation agent. Upon request of the holder of any floating rate note, the calculation agent will provide the interest rate then in effect and, if determined, the interest rate that will become effective on the next interest reset date with respect to such floating rate note. The calculation agent will notify the indenture trustee, paying agent, registrar, the relevant trust, and if the notes are listed on a stock exchange, and the rules of such exchange so require, such exchange of each determination of the interest rate, interest period, and interest amount payable applicable to any floating rate note promptly after such determination is made.
If the calculation agent is incapable or unwilling to act as such or if the calculation agent fails duly to establish the interest rate for any interest accrual period or to calculate the interest amounts or any other requirements, the issuing trust will appoint the paying agent or another leading commercial bank to act as such in its place. The calculation agent may not resign its duties without a successor having been appointed as aforesaid.
The interest rate on each floating rate note will be reset on an interest reset date, which means that the interest rate is reset daily, weekly, monthly, quarterly, semiannually or annually, as specified in the applicable pricing supplement.
Unless otherwise specified in the applicable pricing supplement, the interest reset dates will be as follows:
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provided, however, that (i) the interest rate in effect from the issue date to the first interest reset date with respect to a floating rate note will be the initial interest rate (as set forth in the applicable pricing supplement) and (ii) the interest rate in effect for the ten days immediately prior to maturity will be that in effect on the tenth day preceding maturity.
If an interest reset date for any floating rate note (other than a LIBOR note or a EURIBOR note) would fall on a day that is not a business day, the interest reset date will be postponed to the next business day. If an interest reset date for a LIBOR note would fall on a day that is not a London business day, the interest reset date will be postponed to the next London business day. If an interest reset date for a EURIBOR note would fall on a day that is not a Euro business day, the interest reset date will be postponed to the next Euro business day. If postponement to the next London business day, in the case of a LIBOR note, or Euro business day, in the case of a EURIBOR note, would cause the interest reset date to be in the next calendar month, the interest reset date will instead be the immediately preceding London business day, in the case of a LIBOR note, or Euro business day, in the case of a EURIBOR note. If an auction of direct obligations of United States Treasury bills falls on a day that is an interest reset date for Treasury Rate notes, the interest reset date will be the succeeding business day.
Unless otherwise specified in the applicable pricing supplement and except as set forth below, the rate of interest that goes into effect on any interest reset date will be determined on a rate determination date preceding the interest reset date, as further described below.
Accrued interest on a floating rate note with more than one interest reset date will be calculated by multiplying the principal amount of the note by an accrued interest factor. The accrued interest factor will be computed by adding the interest factors calculated for each day in the interest period for which accrued interest is being calculated. Unless otherwise specified in the applicable pricing supplement, the interest factor for each such day will be computed by dividing the interest rate in effect on that day by 360, in the case of CD Rate notes, Commercial Paper Rate notes, Federal Funds Rate notes, LIBOR notes, EURIBOR notes, Prime Rate notes, Constant Maturity Swap Rate notes and Eleventh District Cost of Funds Rate notes. In the case of Treasury Rate notes and Constant Maturity Treasury Rate notes, the interest factor for each such day will be computed by dividing the interest rate by the actual number of days in the year. The interest factor will be expressed as a decimal calculated to seven decimal places without rounding. For purposes of making the foregoing calculation, the interest rate in effect on any interest reset date will be the applicable rate as reset on that date.
For all other floating rate notes, accrued interest will be calculated by multiplying the principal amount of the note by the interest rate in effect during the period for which accrued interest is being calculated. That product is then multiplied by the quotient obtained by dividing the number of days in the period for which accrued interest is being calculated by 360, in the case of CD Rate notes, Commercial Paper Rate notes, Federal Funds Rate notes, LIBOR notes, EURIBOR notes, Prime Rate
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notes, Constant Maturity Swap Rate notes and Eleventh District Cost of Funds Rate notes. In the case of Treasury Rate notes and Constant Maturity Treasury Rate notes, the product is multiplied by the quotient obtained by dividing the number of days in the period for which accrued interest is being calculated by the actual number of days in the year.
Unless otherwise specified in the applicable pricing supplement, all percentages resulting from any calculation of the rate of interest on a floating rate note will be rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage point rounded upward. All currency amounts used in, or resulting from, the calculation on floating rate notes will be rounded to the nearest one-hundredth of a unit. For purposes of such rounding, .005 of a unit will be rounded upward.
Unless otherwise specified in the applicable pricing supplement and except as provided below, interest will be payable as follows:
In each of these cases, interest will also be payable at maturity.
CD Rate Notes
Each CD Rate note will bear interest for each interest reset period at an interest rate based on the CD Rate and any spread or spread multiplier specified in the note and in the applicable pricing supplement.
The calculation agent will determine the CD Rate for each CD Rate determination date by the calculation date pertaining to such CD Rate determination date. The CD Rate determination date is the second business day prior to the interest reset date for each interest reset period. Unless otherwise specified in the applicable pricing supplement, the CD Rate will be the rate for negotiable certificates of deposit having the index maturity designated in the applicable pricing supplement as published in H.15(519) under the heading "CDs (Secondary Market)."
The following procedures will be followed if the CD Rate cannot be determined as described above:
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of the secondary market offered rates as of 3:00 p.m., New York City time, on that date of three leading nonbank dealers in negotiable U.S. dollar certificates of deposit in New York City selected by the calculation agent after consultation with the relevant trust for negotiable certificates of deposit of major United States money center banks of the highest credit standing (in the market for negotiable certificates of deposit) with a remaining maturity closest to the index maturity designated in the pricing supplement in a denomination of $5,000,000.
Commercial Paper Rate Notes
Each Commercial Paper Rate note will bear interest for each interest reset period at an interest rate based on the Commercial Paper Rate and any spread or spread multiplier, specified in the note and the applicable pricing supplement.
The calculation agent will determine the Commercial Paper Rate for each Commercial Paper Rate determination date by the calculation date pertaining to such Commercial Paper Rate determination date. The Commercial Paper Rate determination date is the second business day prior to the interest reset date for each interest reset period. Unless otherwise specified in the applicable pricing supplement, the Commercial Paper Rate will be the money market yield on that date of the rate for commercial paper having the index maturity specified in the applicable pricing supplement, as the rate will be published in H.15 (519) under the heading "Commercial PaperNonfinancial."
The following procedures will be followed if the Commercial Paper Rate cannot be determined as described above:
Money market yield will be calculated as follows:
Money market yield= | D × 360 360 - (D × M) |
× 100 |
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where "D" refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal, and "M" refers to the actual number of days in the specified index maturity.
Federal Funds Rate Notes
Each Federal Funds Rate note will bear interest for each interest reset period at an interest rate based on the Federal Funds Rate and any spread or spread multiplier specified in the note and the applicable pricing supplement.
The calculation agent will determine the Federal Funds Rate for each Federal Funds Rate determination date by the calculation date pertaining to such Federal Funds Rate determination date. The Federal Funds Rate determination date is the first business day prior to the interest reset date for the interest reset period.
In the case of a Federal Funds Rate note that resets daily, the interest rate on the note for the period from and including a Monday to, but excluding, the succeeding Monday will be reset by the calculation agent for the note on the second Monday, or, if not a business day, on the next business day, to a rate equal to the average of the Federal Funds Rates in effect for each such day in such week.
Federal Funds (Effective) Rate Notes
Unless otherwise specified in the applicable pricing supplement, the Federal Funds (Effective) Rate will be the rate for Federal Funds as published in H.15(519) under the heading "Federal Funds (Effective)," as this rate is displayed on Reuters on page FEDFUNDS 1, or any successor service or page ("Reuters Page FEDFUNDS 1").
The following procedures will be followed if the Federal Funds (Effective) Rate cannot be determined as described above:
Federal Funds (Open) Rate Notes
Unless otherwise specified in the applicable pricing supplement, the Federal Funds (Open) Rate will be the rate for Federal Funds as published in H.15(519) under the heading "Federal Funds" and
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opposite the caption "Open," as this rate is displayed on Reuters on page 5, or any successor service or page ("Reuters Page 5").
The following procedures will be followed if the Federal Funds (Open) Rate cannot be determined as described above:
LIBOR Notes
Each LIBOR note will bear interest for each interest reset period at an interest rate based on LIBOR and any spread or spread multiplier specified in the note and the applicable pricing supplement.
The calculation agent will determine LIBOR for each LIBOR determination date by the calculation date pertaining to such LIBOR determination date. The LIBOR determination date is the second London business day prior to the interest reset date for each interest reset period. A "London business day" means a day other than a Saturday or Sunday on which dealings in deposits in U.S. dollars are transacted, or with respect to any future date are expected to be transacted, in the London interbank market.
Unless otherwise specified in the applicable pricing supplement, on a LIBOR determination date, the calculation agent will determine LIBOR for each interest reset period as follows:
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If LIBOR cannot be determined on a LIBOR determination date as described above, then the calculation agent will determine LIBOR as follows:
(1) If two or more quotations are provided, LIBOR for the interest reset period will be the arithmetic mean of the quotations.
(2) If fewer than two quotations are provided, the calculation agent will select three major banks in New York City after consultation with the relevant trust and follow the steps in the two bullet points below.
EURIBOR Notes
Each EURIBOR note will bear interest for each interest reset period at an interest rate based on EURIBOR and any spread or spread multiplier specified in the note and the applicable pricing supplement.
The calculation agent will determine EURIBOR for each EURIBOR determination date by the calculation date pertaining to such EURIBOR determination date. The EURIBOR determination date is the second Euro business day prior to the interest reset date for each interest reset period. A "Euro business day" means a day other than a Saturday or Sunday on which the Trans European Automated Real-Time Gross Settlement Express Transfer System is open.
Unless otherwise specified in the applicable pricing supplement, EURIBOR for each interest reset period will be the offered rate for deposits in euros as sponsored, calculated and published jointly by the European Banking Federation and ACIThe Financial Markets Association, or any company established by them for purposes of establishing those rates, having the index maturity specified in the applicable pricing supplement, commencing on the interest reset date, as displayed on Reuters on page EURIBOR01, or any successor service or page used for the purpose of displaying this rate as of 11:00 A.M., Brussels time, on the EURIBOR determination date.
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If EURIBOR cannot be determined on a EURIBOR determination date as described above, then the calculation agent will determine EURIBOR as follows:
(1) If two or more quotations are provided, EURIBOR for the interest reset period will be the arithmetic mean of the quotations.
(2) If fewer than two quotations are provided, the calculation agent will select three major banks in the euro-zone after consultation with the relevant trust and follow the steps in the two bullet points below.
Treasury Rate Notes
Each Treasury Rate note will bear interest for each interest reset period at an interest rate based on the Treasury Rate and any spread or spread multiplier, specified in the note and the applicable pricing supplement.
The calculation agent will determine the Treasury Rate for each Treasury Rate determination date by the calculation date pertaining to such Treasury Rate determination date.
Treasury Rate Notes other than Constant Maturity Treasury Rate Notes
Unless "Constant Maturity" is specified in the applicable pricing supplement, and unless otherwise specified in the applicable pricing supplement, the Treasury Rate for each interest reset period will be the rate for the auction held on the Treasury Rate determination date for the interest reset period of U.S. treasury securities having the index maturity specified in the pricing supplement as that rate appears under the heading "INVEST RATE" on the display on Reuters (or any successor service) on page USAUCTION 10 (or any other page as may replace this page on that service) or page USAUCTION 11 (or any other page as may replace this page on that service).
If the Treasury Rate cannot be determined as described above, the following procedures will be followed in the order set forth below:
(1) If the Treasury Rate is not published prior to 3:00 p.m., New York City time on the calculation date pertaining to the Treasury Rate determination date, then the Treasury Rate for the
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interest reset period will be the auction average rate on the Treasury Rate determination date as otherwise announced by the United States Department of the Treasury. The auction average rate will be expressed as a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis.
(2) If the results of such auction are not published or reported as provided in (1) above by 3:00 p.m., New York City time, on the calculation date, or if no such auction is held on the Treasury Rate determination date, then the Treasury Rate for the interest reset period will be the rate having the index maturity specified in the pricing supplement as published in H.15 (519) under the heading "U.S. Government Securities/Treasury Bills/Auction High" or, if not yet published by 3:00 p.m., New York City time on the calculation date, the rate on the Treasury Rate determination date of treasury securities as published in H.15 Daily Update, or other recognized electronic source used for the purpose of displaying that rate, under the caption "U.S. Government Securities/Treasury Bills/Secondary Market."
(3) If by 3:00 p.m., New York City time, on the calculation date the above rate is not yet published in either H.15(519), H.15 Daily Update or another recognized electronic source, then the Treasury Rate will be calculated as a yield to maturity of the arithmetic mean of the secondary market bid rates, as of approximately 3:30 p.m., New York City time, on the Treasury Rate determination date, of three leading primary United States government securities dealers selected by the calculation agent for the issue of treasury securities with a remaining maturity closest to the specified index maturity. The yield to maturity will be expressed as a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis.
(4) If the dealers selected by the calculation agent are not quoting bid rates as described in (3) above, then the Treasury Rate for the interest reset period will be the same as the Treasury Rate for the immediately preceding interest reset period. If there was no preceding interest reset period, the Treasury Rate will be the initial interest rate.
The Treasury Rate determination date for each interest reset period will be the day of the week in which the interest reset date for the interest reset period falls on which treasury securities would normally be auctioned. Treasury securities are normally sold at auction on Monday of each week unless that day is a legal holiday. In that case the auction is normally held on the following Tuesday, except that the auction may be held on the preceding Friday. If, as the result of a legal holiday, an auction is held on the preceding Friday, that Friday will be the Treasury Rate determination date pertaining to the interest reset period commencing in the next week. If an auction date falls on any day that would otherwise be an interest reset date for a Treasury Rate note, then that interest reset date will instead be the business day immediately following the auction date.
Constant Maturity Treasury Rate Notes
If "Constant Maturity" is specified in the applicable pricing supplement, unless otherwise specified in the applicable pricing supplement, the Treasury Rate for each interest reset period will be the rate displayed on the "designated Constant Maturity Treasury page" under the caption "Treasury Constant Maturities" under the column for the Designated CMT Maturity Index for:
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If the rate cannot be set as described above, the calculation agent will use the following methods in succession:
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The "Constant Maturity Treasury Rate determination date" will be the tenth business day prior to the interest reset date for the applicable interest reset period.
"Designated Constant Maturity Treasury page" means the display on Reuters on the page designated in the pricing supplement, or any successor service or page for the purpose of displaying Treasury Constant Maturities as reported in H.15(519). If that page is not specified in the pricing supplement, the designated Constant Maturity Treasury page shall be FEDCMT, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the Treasury Notes (either 1, 2, 3, 5, 7, 10, 20, or 30 years) specified in the pricing supplement with respect to which the Constant Maturity Treasury Rate will be calculated. If no such maturity is specified in the pricing supplement, the Designated CMT Maturity Index shall be 2 years.
Prime Rate Notes
Each Prime Rate note will bear interest for each interest reset period at an interest rate based on the Prime Rate and any spread or spread multiplier, subject to the minimum interest rate and maximum interest rate, if any, specified in the note and the applicable pricing supplement.
The calculation agent will determine the Prime Rate for each interest reset period for each Prime Rate determination date by the calculation date pertaining to such Prime Rate determination date. The Prime Rate determination date is the second business day prior to the interest reset date for each interest reset period. Unless otherwise specified in the applicable pricing supplement, the Prime Rate will be the rate made available and subsequently published on that date in H.15(519) under the heading "Bank Prime Loan."
The following procedures will be followed if the Prime Rate cannot be determined as described above:
"Reuters Screen USPRIME1 page" means the display designated as page "USPRIME1" on the Reuters Monitor Money Rates Service, or any successor service or page, for the purpose of displaying prime rates or base lending rates of major United States banks.
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Constant Maturity Swap Rate Notes
Each Constant Maturity Swap Rate note will bear interest for each interest reset period at an interest rate based on the Constant Maturity Sway Rate and any spread or spread multiplier, specified in the note and the applicable pricing supplement.
The calculation agent will determine the Constant Maturity Swap Rate for each Constant Maturity Swap Rate determination date by the calculation date pertaining to such Constant Maturity Swap Rate determination date. The Constant Maturity Swap Rate determination date is the second business day prior to the interest reset date for each interest reset period. Unless otherwise specified in the applicable pricing supplement, the Constant Maturity Swap Rate will be the mid-market U.S. Dollar fixed rate for a floating rate interest rate swap transaction with a term equal to the index maturity, as it appears on Reuters Page ISDAFIX1, under "USD 11am Fix."
The following procedure will be followed if the Constant Maturity Swap Rate cannot be determined as described above:
Eleventh District Cost of Funds Rate Notes
Each Eleventh District Cost of Funds Rate note will bear interest for each interest reset period at an interest rate based on the Eleventh District Cost of Funds Rate and any spread or spread multiplier, specified in the note and the applicable pricing supplement.
The calculation agent will determine the Eleventh District Cost of Funds Rate for each Eleventh District Cost of Funds Rate determination date by the calculation date pertaining to such Eleventh District Cost of Funds Rate determination date. The Eleventh District Cost of Funds determination date is the last business day of the month immediately preceding the related interest reset date on which the Federal Home Loan Bank of San Francisco publishes the Eleventh District Index. Unless otherwise specified in the applicable pricing supplement, the Eleventh District Cost of Funds Rate will be the rate equal to the monthly weighted average cost of funds for the calendar month immediately preceding the month in which the particular Eleventh District Cost of Funds Rate date falls as set forth under the caption "11th Dist COFI" on the display on Reuters (or any successor service) on page COFI/ARMS (or any other page as may replace this page on that service) ("Reuters Page COFI/ARMS") as of 11:00 A.M., San Francisco time, on that Eleventh District Cost of Funds Rate determination date.
The following procedure will be followed if the Eleventh District Cost of Funds Rate cannot be determined as described above:
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paid by member institutions of the Eleventh Federal Home Loan Bank District that was most recently announced (the "Eleventh District Index") by the Federal Home Loan Bank of San Francisco as the cost of funds for the calendar month immediately preceding that Eleventh District Cost of Funds Rate determination date.
Inverse Floating Rate Notes
Any floating rate note may be designated in the applicable pricing supplement as an inverse floating rate note. In such an event, unless otherwise specified in the applicable pricing supplement, the interest rate on the floating rate note will be equal to:
However, on any inverse floating rate note, (1) the interest rate will not be less than zero and (2) the interest rate in effect for the ten days immediately prior to the date of maturity of the inverse floating rate note will be that in effect on the tenth day preceding the date of maturity.
Floating/Fixed Rate Notes
The applicable pricing supplement may provide that a note will be a floating rate note for a specified portion of its term and a fixed rate note for the remainder of its term. In such an event, the interest rate on the note will be determined as if it were a floating rate note and a fixed rate note for each such respective period, all as specified in the applicable pricing supplement.
Amortizing Notes
A trust may offer amortizing notes on which a portion or all of the principal amount is payable prior to stated maturity:
Further information concerning additional terms and conditions of any amortizing notes, including terms for repayment, will be set forth in the applicable pricing supplement.
Discount Notes
A trust may offer notes, which are referred to as discount notes, that have an issue price (as specified in the applicable pricing supplement) that is less than 100% of the principal amount thereof (i.e. par) by more than a percentage equal to the product of 0.25% and the number of full years to the
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stated maturity date. Discount notes may not bear any interest currently or may bear interest at a rate that is below market rates at the time of issuance. The difference between the issue price of a discount note and par is referred to as the "discount." In the event of redemption, repayment or acceleration of maturity of discount notes, the amount payable to the holders of such discount notes will be equal to the sum of:
For purposes of determining the amount of discount that has accrued as of any date on which a redemption, repayment or acceleration of maturity occurs for a series of discount notes, a discount will be accrued using a constant yield method. The constant yield will be calculated using a 30-day month, 360-day year convention, a compounding period that, except for the initial period (as defined below), corresponds to the shortest period between interest payment dates for the applicable series of discount notes (with ratable accruals within a compounding period), a coupon rate equal to the initial coupon rate applicable to the applicable series of discount notes and an assumption that the maturity of such series of discount notes will not be accelerated. If the period from the date of issue to the first interest payment date for a series of discount notes (the "initial period") is shorter than the compounding period for such series of discount notes, a proportionate amount of the yield for an entire compounding period will be accrued. If the initial period is longer than the compounding period, then the period will be divided into a regular compounding period and a short period with the short period being treated as provided in the preceding sentence. The accrual of the applicable discount may differ from the accrual of original issue discount for federal income tax purposes, certain series of discount notes may not be treated as having original issue discount for federal income tax purposes, and certain series of notes other than discount notes may be treated as issued with original issue discount for federal income tax purposes. See "Material U.S. Federal Income Tax Considerations."
In the case of discount notes that may be redeemed at a time when 25% or more of the original principal amount of such notes are outstanding, such notes will be designated in their title as "callable" in the relevant pricing supplement.
Callable Notes; Optional Repayment; No Sinking Fund
If an optional redemption right is specified in the pricing supplement relating to a series of notes and Protective Life has redeemed the related funding agreement(s) in full or in part, as applicable, the relevant trust will redeem the series of notes secured by such funding agreement(s), in full or in part as applicable, prior to the stated maturity date of such series of notes in whole or from time to time in part in increments of $1,000 or $25, as applicable, or any other integral multiple of an authorized denomination specified in the applicable pricing supplement (provided that any remaining principal amount of a note of such series of notes shall be at least $2,000 in the case of notes issued in minimum denominations of $2,000 or $25 in the case of notes issued in minimum denominations of $25, or such other minimum authorized denomination applicable to such series of notes), at the applicable redemption price, together with unpaid interest accrued thereon to the date of redemption. Unless otherwise specified in the applicable pricing supplement, a trust must give written notice to the holders of its series of notes to be redeemed not more than 75 nor less than 30 calendar days prior to the date of redemption. "Redemption price," with respect to a series of notes, means an amount equal to the initial redemption percentage specified in the applicable pricing supplement (as adjusted by the annual redemption percentage reduction, as described in the applicable pricing supplement, if applicable) multiplied by the unpaid principal amount of the series of notes to be redeemed. The initial
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redemption percentage, if any, applicable to a series of notes shall decline at each anniversary of the initial redemption date by an amount equal to the applicable annual redemption percentage reduction, if any, until the redemption price is equal to 100% of the unpaid amount of the series of notes to be redeemed. Notes that may be redeemed at a time when 25% or more of the original principal amount of such notes are outstanding will be designated in their title as "callable" in the relevant pricing supplement. For a discussion of the redemption of discount notes see "Discount Notes."
If fewer than all of the notes are to be redeemed, the indenture trustee will select the notes to be redeemed by lot or, if the notes are not in book entry form, in its discretion, on a pro rata basis. If any note is redeemed in part only, a new note in principal amount equal to the unredeemed principal portion will be issued.
If an optional repayment right is specified in the pricing supplement relating to a series of notes, such notes may be subject to repayment at the option of the holders of such series of notes on any repayment date specified in the applicable pricing supplement. On any such repayment date, unless otherwise specified in the applicable pricing supplement, the notes shall be repayable in whole or in part in increments of $1,000 or $25, as applicable, or any other integral multiple of an authorized denomination specified in the applicable pricing supplement (provided that any remaining principal amount of a note of such series of notes shall be at least $2,000 in the case of notes issued in minimum denominations of $2,000 or $25 in the case of notes issued in minimum denominations of $25, or such other minimum authorized denomination applicable to such series of notes), at the option of the holders thereof at a repayment price equal to 100% of the principal amount thereof to be repaid, together with interest thereon payable to the date of repayment. A holder of a series of notes exercising its repayment right must submit to the indenture trustee at its corporate trust office, or at such other place or places of which the relevant trust has notified such holder, the notes to be repaid together with the "option to elect repayment" form attached to the notes not more than 60 nor less than 30 calendar days prior to the date of repayment. Exercise of such repayment right by a holder shall be irrevocable. If a holder requests repayment in part only, a new note in principal amount equal to the principal portion of the notes not repaid will be issued. For additional information on repayment procedures relating to book entry notes see "Book Entry Notes."
None of the trusts will issue notes that may be repaid at the option of the holders prior to the stated maturity if such issuance would cause the relevant trust to fail to satisfy the applicable requirements for exemption under Rule 3a-7 under the Investment Company Act of 1940, as amended, and all applicable rules, regulations and interpretations thereunder.
No series of notes will be subject to, or entitled to the benefit of, any sinking fund unless otherwise specified in the applicable pricing supplement.
Tax Redemption
If a "tax event" as to the relevant funding agreement(s) occurs, Protective Life will have the right to redeem the funding agreement(s) and, upon such redemption, the relevant trust will redeem its series of notes. For further discussion of "tax event" redemption, see "Description of Funding AgreementsEarly Redemption for Tax Event" in the accompanying prospectus.
Purchase of Notes by Protective Life
Protective Life may at any time purchase notes at any price or prices in the open market or otherwise. Notes so purchased by Protective Life may, at Protective Life's discretion, be held, resold or surrendered to the indenture trustee for cancellation.
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The "survivor's option" is a provision in a note pursuant to which the issuing trust agrees to repay that note, if requested by the authorized representative of the beneficial owner of that note, following the death of the beneficial owner of the note, so long as the note was held by that beneficial owner or the estate of that beneficial owner for a period beginning at least 6 months immediately prior to the request. The pricing supplement relating to any note will state whether the survivor's option applies to your note.
If the survivor's option applies to a note, upon the valid exercise of the survivor's option, the proper tender of that note for repayment and the tender and acceptance of that portion of the funding agreement related to such note, the issuing trust will repay that note, in whole or in part, at a price equal to 100% of the principal amount of the deceased beneficial owner's beneficial interest in the note, plus accrued and unpaid interest to the date of repayment.
If a survivor's option applies to a series of notes, the funding agreement securing such series of notes will contain a provision which will allow the issuing trust to tender the funding agreement in whole or in part to Protective Life upon a valid exercise of the survivor's option at a price equal to the principal amount of the funding agreement so tendered plus accrued and unpaid interest thereon to the date of repayment.
To be valid, the survivor's option must be exercised by or on behalf of the person who has authority to act on behalf of the deceased beneficial owner of the note (including, without limitation, the personal representative or executor of the deceased beneficial owner or the surviving joint owner with the deceased beneficial owner) under the laws of the appropriate jurisdiction. A beneficial owner of a note is a person who has the right, immediately prior to such person's death, to receive the proceeds from the disposition of that note, as well as the right to receive payments on that note.
The death of a person holding a beneficial ownership interest in a note as a joint tenant or tenant by the entirety with another person, or as a tenant in common with such deceased owner's spouse, will be deemed the death of a beneficial owner of that note, and the entire principal amount of the note so held will be subject to repayment by the issuing trust upon request. However, the death of a person holding a beneficial ownership interest in a note as tenant in common with a person other than such deceased owner's spouse will be deemed the death of a beneficial owner only with respect to such deceased person's ownership interest in the note.
The death of a person who, during his or her lifetime, was entitled to substantially all of the beneficial ownership interests in a note will be deemed the death of a beneficial owner of that note for purposes of the survivor's option, regardless of whether that beneficial owner was the registered holder of that note, if that beneficial ownership interest can be established to the satisfaction of the indenture trustee. A beneficial ownership interest will be deemed to exist in typical cases of nominee ownership, ownership under the Uniform Transfers to Minors Act or Uniform Gifts to Minors Act, community property or other joint ownership arrangements between a husband and wife. In addition, a beneficial ownership interest will be deemed to exist in custodial and trust arrangements where one person has all of the beneficial ownership interests in the applicable note during his or her lifetime.
Protective Life has the discretionary right to limit (i) the aggregate principal amount of all funding agreements securing all outstanding series of notes as to which exercises of any put option by all issuing trusts shall be accepted by Protective Life in any calendar year to an amount equal to the greater of $2,000,000 or 2% of the aggregate principal amount of all funding agreements securing all outstanding series of notes issued to retail investors under any Protective Life secured notes program as of the end of the most recent calendar year or such other greater amount as determined in accordance with the funding agreements and set forth in the pricing supplements, (ii) the aggregate principal amount of funding agreements securing notes as to which exercises of any put option by the issuing trust
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attributable to notes issued under any Protective Life secured notes program as to which the survivor's option has been exercised by the authorized representative of any individual deceased beneficial owner to $250,000 in any calendar year or such other greater amount as determined in accordance with the funding agreements and set forth in the pricing supplements and (iii) the aggregate principal amount of funding agreements securing a series of notes as to which exercises of any put option by the issuing trust shall be accepted as set forth in the applicable funding agreement and the applicable pricing supplement. In any such event, the relevant trust shall similarly be required to limit the aggregate principal amount of notes as to which exercises of the survivor's option shall be accepted by the issuing trust from authorized representatives of deceased beneficial owners. In addition, the exercise of the survivor's option will not be permitted for a principal amount less than $1,000 in the case of notes issued in minimum denominations of $2,000 or, $25 in the case of notes issued in minimum denominations of $25, or such other authorized denomination applicable to such series of notes, or if such exercise will result in a note with a principal amount of less than $2,000 in the case of notes issued in minimum denominations of $2,000 or, $25 in the case of notes issued in minimum denominations of $25, or such other minimum authorized denomination applicable to such series of notes, to remain outstanding. All other questions, other than with respect to the right to limit the aggregate principal amount of notes subject to the survivor's option that will be accepted as to any series of notes or in any calendar year, regarding the eligibility or validity of any exercise of the survivor's option will be determined by the indenture trustee, in its sole discretion, which determination will be final and binding on all parties.
An otherwise valid election to exercise the survivor's option may not be withdrawn. Each election to exercise the survivor's option will be accepted in the order that elections are received by the indenture trustee, except for any note the acceptance of which would contravene any of the limitations described in the preceding paragraph. Notes accepted for repayment through the exercise of the survivor's option will be repaid on the first interest payment date that occurs 20 or more calendar days after the date of the acceptance. For example, if the acceptance date of a note tendered pursuant to a valid exercise of the survivor's option is November 1, 2008 and the interest on that note is paid monthly, the issuing trust would normally, at its option, repay that note on the interest payment date occurring on December 15, 2008 because the November 15, 2008 interest payment date would occur less than 20 days from the date of acceptance. Each tendered note that is not accepted in any calendar year due to the application of any of the limitations described in clause (i) and (ii) of the preceding paragraph will be deemed to be tendered in the following calendar year in the order in which all such notes were originally tendered. If a note tendered through a valid exercise of the survivor's option is not accepted, the indenture trustee will deliver a notice by first class mail to The Depository Trust Company that states the reason that note has not been accepted for repayment.
With respect to the notes represented by a global security, The Depository Trust Company, as depositary, or its nominee is treated as the owner of the notes and will be the only entity that can exercise the survivor's option for such notes. To obtain repayment through exercise of the survivor's option for a note, the deceased beneficial owner's authorized representative must provide the following items to the broker or other entity through which the beneficial interest in the note is held by the deceased beneficial owner:
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In turn, the broker or other entity will deliver each of these items to the Direct Participant (defined below) holding the beneficial interest on behalf of the deceased beneficial owner, together with the evidence satisfactory to the indenture trustee from the broker or other entity stating that it represents the deceased beneficial owner. Such Direct Participant shall deliver such items to the indenture trustee.
Such Direct Participant will be responsible for disbursing payments received from the depositary to the representative. See "Book-Entry Notes" below.
Forms for the exercise of the survivor's option may be obtained from the indenture trustee at Corporate TrustDealing and Trading Group The Bank of New York Mellon, 101 Barclay Street - 7w, New York, NY 10286 (telephone (212) 815 5837, facsimile (212) 815 2830).
Other Provisions
The terms in the applicable pricing supplement may clarify or supplement any provisions relating to:
Book-Entry Notes
It is expected that the notes of each series will be issued in book entry form, and will be registered in the name of Cede & Co., as nominee of The Depository Trust Company (the "depositary"). The terms of the depository arrangements with the depositary are summarized below. Any additional or differing terms of the depositary arrangement with respect to the book-entry notes of a particular trust will be described in the applicable pricing supplement.
Upon issuance, all book-entry notes of a series will be represented by one or more global securities. Each global security representing book-entry notes will be deposited with, or on behalf of, the depositary and will be registered in the name of the depositary or a nominee of the depositary. No
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global security may be transferred except as a whole by a nominee of the depositary to the depositary or to another nominee of the depositary, or by the depositary or another nominee of the depositary to a successor of the depositary or a nominee of a successor to the depositary.
So long as the depositary or its nominee is the registered holder of a global security, the depositary or its nominee, as the case may be, will be the sole owner of the book-entry notes represented thereby for all purposes under the indenture. Except as otherwise provided below, the Beneficial Owners (defined below) of the global security representing book-entry notes of a series will not be entitled to receive physical delivery of certificated notes and will not be considered the holders of the notes for any purpose under the indenture, and no global security representing book-entry notes shall be exchangeable or transferable. Accordingly, each Beneficial Owner must rely on the procedures of the depositary and, if that Beneficial Owner is not a Participant (defined below), on the procedures of the Participant through which that Beneficial Owner owns its interest in order to exercise any rights of a registered holder under the indenture. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of securities in certificated form. Such limits and laws may impair the ability to transfer beneficial interests in a global security representing book-entry notes.
Each global security representing book-entry notes of a series will be exchangeable for certificated notes of like tenor and terms and of differing authorized denominations in a like aggregate principal amount, only if (1) the depositary notifies the issuing trust that it is unwilling or unable to continue as depositary for the global securities or the issuing trust becomes aware that the depositary has ceased to be a clearing agency registered under the Securities Exchange Act of 1934 and, in any such case the issuing trust fails to appoint a successor to the depositary within 90 calendar days, (2) the issuing trust, in its sole discretion, determines that the global securities shall be exchangeable for certificated notes or (3) an event of default has occurred and is continuing with respect to the notes under the indenture.
Upon any such exchange, such certificated notes shall be registered in the names of the Beneficial Owners of the global security representing book-entry notes of such series, which names shall be provided by the depositary's relevant Participants (as identified by the depositary) to the indenture trustee.
The following is based on information furnished by the depositary:
The depositary will act as securities depository for the book-entry notes. The book-entry notes will be issued as fully registered securities registered in the name of Cede & Co. (the depositary's nominee) or such other name as may be requested by the depositary. One fully registered global note will be issued for each issue of book-entry notes of a series, each in the aggregate principal amount of such issue, and will be deposited with the depositary. If, however, the aggregate principal amount of any issue exceeds $500,000,000, one global note will be issued with respect to each $500,000,000 of principal amount and an additional global note will be issued with respect to any remaining principal amount of such issue.
The depositary is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. The depositary holds securities that its participants ("Direct Participants") deposit with the depositary. The depositary also facilitates the settlement among Direct Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Direct Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants of the depositary include securities brokers and dealers (including the agents and dealers retained by a trust in connection with the distribution of the notes), banks, trust companies, clearing corporations and certain other organizations. The depositary is a wholly-owned subsidiary of The Depository Trust & Clearing
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Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the depositary's system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to the depositary and its Participants are on file with the Securities and Exchange Commission.
Purchases of book-entry notes under the depositary's system must be made by or through Direct Participants, which will receive a credit for such book-entry notes on the depositary's records. The ownership interest of each actual purchaser of each book-entry note represented by a global security ("Beneficial Owner") is in turn to be recorded on the records of Direct Participants and Indirect Participants. Beneficial Owners will not receive written confirmation from the depositary of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct Participants or Indirect Participants through which such Beneficial Owner entered into the transaction. Transfers of ownership interests in a global security representing book-entry notes are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners of a global security representing book-entry notes will not receive certificated notes representing their ownership interests in such notes, except in the event that use of the book-entry system for such book-entry notes is discontinued as described above.
To facilitate subsequent transfers, all global securities representing book-entry notes which are deposited with, or on behalf of, the depositary are registered in the name of the depositary's nominee, Cede & Co. or such other name as may be requested by the depositary. The deposit of global securities with, or on behalf of, the depositary and their registration in the name of Cede & Co., or such other nominee, effect no change in beneficial ownership. The depositary has no knowledge of the actual Beneficial Owners of the global securities representing the book-entry notes; the depositary's records reflect only the identity of the Direct Participants to whose accounts such book-entry notes are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the depositary to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners may wish to take certain steps to augment transmission to them of notices of significant events with respect to the notes, such as redemption, tenders, defaults, and proposed amendments to the security documents. Beneficial Owners may wish to ascertain that the nominee holding the notes for their benefit has agreed to obtain and transmit notices to Beneficial Owners.
Neither the depositary nor Cede & Co. (or such other nominee of the depositary) will consent or vote with respect to the global securities representing the book-entry notes unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, the depositary mails an Omnibus Proxy to a company as soon as possible after the applicable record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the book-entry notes are credited on the applicable record date (identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest, if any, payments on the global securities representing the book-entry notes of a series will be made in immediately available funds to the depositary. The depositary's practice is to credit Direct Participants' accounts on the applicable payment date in accordance with their respective holdings shown on the depositary's records unless the depositary has
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reason to believe that it will not receive payment on such date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of the depositary, the indenture trustee or the relevant trust, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and/or interest, if any, to the depositary is the responsibility of the relevant trust and the indenture trustee, disbursement of such payments to Direct Participants shall be the responsibility of the depositary, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct Participants and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less than all of the book-entry notes of a series are being redeemed, the depositary's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have its book-entry notes repaid by the issuing trust, through its Participant, to the indenture trustee, and shall effect delivery of such book-entry notes by causing the Direct Participant to transfer the Participant's interest in the global security or securities representing such book-entry notes, on the depositary's records, to the indenture trustee. The requirement for physical delivery of book-entry notes in connection with a demand for repayment will be deemed satisfied when the ownership rights in the global security representing such book-entry notes are transferred by Direct Participants on the depositary's records. See also "Survivor's Option" above.
The depositary may discontinue providing its services as securities depositary with respect to the book-entry notes at any time by giving reasonable notice to the relevant trust or the indenture trustee. Under such circumstances, in the event that a successor securities depositary is not obtained, certificated notes are required to be printed and delivered.
An issuing trust may decide to discontinue use of the system of book-entry transfers through the depositary (or a successor securities depositary). In that event, certificated notes will be printed and delivered.
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DESCRIPTION OF THE FUNDING AGREEMENTS
Each trust will use the net proceeds from the issuance of a series of notes to purchase one or more funding agreements. The applicable funding agreement(s) will have substantially similar payment terms to the related series of notes. The applicable funding agreement(s) may be interest bearing or non-interest bearing. A funding agreement may bear interest at either a fixed or a floating rate, or a combination of fixed and floating rates, as specified in the applicable pricing supplement. The calculation of the interest rate, the dates of interest and maturity payments and such other payment terms on the funding agreement will be determined in the same manner as described above under "Description of the Notes." The deposit amount of each funding agreement (other than amortizing funding agreements) will be payable on its stated maturity date, as specified in the applicable pricing supplement. Protective Life may issue amortizing funding agreements that pay a level amount in respect of both interest and deposit amount amortized over the life of the funding agreements, if specified in the pricing supplement.
The pricing supplement relating to a series of notes will describe the following pricing terms of the related funding agreement(s):
(1) is a fixed rate funding agreement,
(2) is a floating rate funding agreement,
(3) is an amortizing funding agreement, meaning that a portion or all of the deposit amount is payable prior to the stated maturity in accordance with a schedule or by application of a formula, and/or
(4) is a discount funding agreement that does not bear interest currently or bears interest at a rate that is below market rates at the effective date;
(1) the base rate,
(2) the initial interest rate,
(3) the interest reset period or the interest reset dates,
(4) the interest payment dates,
(5) the index maturity,
(6) any maximum interest rate,
(7) any minimum interest rate,
(8) the spread or spread multiplier, and
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(9) any other terms relating to the particular method of calculating the interest rate for the funding agreement and whether and how the spread or spread multiplier may be changed prior to stated maturity;
For a more detailed discussion of the Funding Agreements, see "Description of the Funding Agreements" in the accompanying prospectus.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material U.S. federal income tax considerations relating to the purchase, ownership and disposition of the notes by U.S. Holders (as defined below) who purchase the notes in the initial offering at their issue price (determined as set forth below) and hold the notes as capital assets within the meaning of section 1221 of the Internal Revenue Code of 1986, as amended (the "Code") and, the statements of law or legal conclusions in this discussion represent the opinion of Debevoise & Plimpton LLP, special U.S. tax counsel to Protective Life ("U.S. Tax Counsel"), based on current law. This discussion does not address all of the tax considerations that may be relevant to prospective purchasers in light of their particular circumstances or to persons subject to special rules under U.S. federal tax laws, such as certain financial institutions, insurance companies, regulated investment companies, real estate investment trusts, dealers in securities, tax-exempt entities, certain former citizens or residents of the United States, persons who hold the notes as part of a "straddle," "hedging," "conversion" or other integrated transaction, persons who mark their securities to market for U.S. federal income tax purposes or persons whose functional currency is not the U.S. dollar. In addition, this discussion does not address the effect of any state, local or foreign tax laws or any U.S. federal estate, gift or alternative minimum tax considerations.
This discussion is based on the Code, the Treasury Regulations promulgated thereunder and administrative and judicial pronouncements, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. This discussion does not describe the US federal income tax considerations relating to the purchase, ownership or disposition of a "contingent payment debt instrument" (under applicable Treasury Regulations), a note with a maturity later than 30 years from its date of issuance or certain "variable rate debt instruments" (under applicable Treasury Regulations), and a general discussion of any materially different federal income tax considerations relating to any such note will be included in the applicable pricing supplement. No rulings will be sought from the U.S. Internal Revenue Service (the "IRS"), and the opinion of U.S. Tax Counsel is not binding on the IRS or the courts.
For purposes of the following discussion, the term "U.S. Holder" means a beneficial owner of a note that is, for U.S. federal income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation created or organized in or under the laws of the United States or any state of the United States or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of its substantial decisions, or certain electing trusts that were in existence on August 19, 1996 and were treated as domestic trusts on that date.
If an entity treated as a partnership for U.S. federal income tax purposes holds a note, the tax treatment of such partnership and each of its partners will generally depend on the status and activities of such partnership and the partner. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax adviser regarding the U.S. federal income tax considerations applicable to it and its partners of the purchase, ownership, and disposition of the notes.
PROSPECTIVE PURCHASERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISERS AS TO THE U.S. FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
Classification of the Trusts and the Notes
In the opinion of U.S. Tax Counsel, under current law and assuming full compliance with the terms of each trust's certificate of trust (in the case of a Delaware statutory trust), trust agreement and
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indenture, no trust will be classified as an association (or publicly traded partnership) taxable as a corporation for U.S. federal income tax purposes. The relevant trust and the trust beneficial owner will agree, and by acceptance of a beneficial interest in a note, each holder of a beneficial interest in a note will agree, for U.S. federal, state and local income and franchise tax purposes, to treat (i) the relevant trust as disregarded and (ii) such note as representing debt of Protective Life. The remainder of this discussion assumes that the relevant trust is disregarded and the notes represent debt of Protective Life.
No statutory, judicial, or administrative authority directly addresses the U.S. federal income tax treatment of securities similar to the notes. In lieu of the above treatment, the IRS might assert that each trust should be treated as a grantor trust holding the related funding agreement(s) and other assets, if any, and the related notes as ownership interests in such trust. In that case, it is possible that certain costs and expenses that are paid by Protective Life pursuant to the applicable expense and indemnity agreement could be treated as constructively received by the trust, in which event, a U.S. Holder would include in income and deduct its pro rata share of these costs and expenses subject, in the case of a U.S. Holder that is an individual, estate or trust, to limitations applicable to such deductions. Alternatively, the IRS might assert that the notes issued by a trust should be treated as debt of such trust.
Interest and Original Issue Discount
Each U.S. Holder of a note will generally include payments of "qualified stated interest" (as described below) in respect of such note in income in accordance with such U.S. Holder's method of accounting for U.S. federal income tax purposes, as ordinary interest income. In general, if the issue price of a note, determined by the first price at which a substantial amount of the notes of the related series are sold (ignoring sales to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers), is less than the "stated redemption price at maturity" (as described below) of such note by an amount equal to or more than a de minimis amount, a U.S. Holder will be considered to have purchased such note with original issue discount ("OID"). In general, the de minimis amount is equal to 1/4 of 1 percent of the stated redemption price at maturity multiplied by the number of complete years to maturity (or, in the case of a note providing for the payment of any amount other than qualified stated interest (as defined below) prior to maturity, multiplied by the weighted average maturity of the note). If a U.S. Holder acquires a note with OID, then regardless of such U.S. Holder's method of accounting, such U.S. Holder will be required to accrue its pro rata share of OID on such note on a constant yield basis and include such accruals in gross income, whether or not such U.S. Holder has received any cash payment on the notes. Any amount not treated as OID because it is de minimis generally must be included in income (generally as gain from the sale of notes) as principal payments are received on such note in the proportion that each such payment bears to the original principal amount of such note. Special rules apply to notes with a fixed maturity of one year or less. See below under "Short-Term Notes."
"Stated redemption price at maturity" means the sum of all payments to be made on a note other than payments of "qualified stated interest." Qualified stated interest generally means stated interest that is unconditionally payable at least annually at a single fixed rate.
In the case of a variable rate debt instrument (as described below), the amount of qualified stated interest and the amount of OID, if any, that accrues during an accrual period is generally determined assuming that the variable rate is a fixed rate equal to (i) in the case of a qualified floating rate or qualified inverse floating rate, the value, as of the issue date, of the qualified floating rate or qualified inverse floating rate or (ii) in the case of an objective rate (other than a qualified inverse floating rate), a fixed rate that reflects the yield that is reasonably expected for the debt instrument, and the qualified stated interest (or, if there is no qualified stated interest, OID) allocable to an accrual period is increased (or decreased) if the interest actually paid during an accrual period exceeds (or is less than)
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the interest assumed to be paid during the accrual period pursuant to clause (i) or (ii), as applicable. Special rules that apply to a variable rate debt instrument that provides for stated interest at a fixed rate will be described in the relevant pricing supplement.
A "variable rate debt instrument" is a debt instrument that (i) has an issue price that does not exceed the total noncontingent principal payments by more than an amount equal to the lesser of (a) 0.015 multiplied by the product of such total noncontingent principal payments and the number of complete years to maturity of the instrument (or, in the case of a note providing for the payment of any amount other than qualified stated interest prior to maturity, multiplied by the weighted average maturity of the note) or (b) 15 percent of the total noncontingent principal payments, (ii) provides for stated interest (compounded or paid at least annually) at the current value of (A) one or more "qualified floating rates," (B) a single fixed rate and one or more qualified floating rates, (C) a single "objective rate" or (D) a single fixed rate and a single objective rate that is a "qualified inverse floating rate," and (iii) does not provide for any principal payments that are contingent. The current value of a rate is the value of the rate on any day that is no earlier than three months prior to the first day on which that value is in effect and no later than one year following that first day.
A "qualified floating rate" is generally a floating rate under which variations in the rate can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds in the currency in which a debt instrument is denominated. A multiple of a qualified floating rate is not a qualified floating rate unless the relevant multiplier is (i) fixed at a number that is greater than 0.65 but not more than 1.35 or (ii) fixed at a number that is greater than 0.65 but not more than 1.35, increased or decreased by a fixed rate. A variable rate is not considered a qualified floating rate if the variable rate is subject to a cap, floor, governor (i.e., a restriction on the amount of increase or decrease in the stated interest rate) or similar restriction that is reasonably expected as of the issue date to cause the yield on the debt instrument to be significantly more or less than the expected yield determined without the restriction (other than a cap, floor, governor or similar restriction that is fixed throughout the term of the debt instrument).
An "objective rate" is a rate (other than a qualified floating rate) that is determined using a single fixed formula and that is based on objective financial or economic information, provided, however, that an objective rate will not include a rate based on information that is within the control of the issuer (or certain related parties of the issuer) or that is unique to the circumstances of the issuer (or certain related parties of the issuer), such as dividends, profits or the value of the issuer's stock. A "qualified inverse floating rate" is an objective rate (i) that is equal to a fixed rate minus a qualified floating rate and (ii) the variations in which can reasonably be expected to inversely reflect contemporaneous variations in the qualified floating rate (disregarding any caps, floors, governors or similar restrictions that would not, as described above, cause a rate to fail to be a qualified floating rate). Notwithstanding the first sentence of this paragraph, a rate is not an objective rate if it is reasonably expected that the average value of the rate during the first half of the note's term will be either significantly less than or significantly greater than the average value of the rate during the final half of the note's term.
If interest on a note is stated at a fixed rate for an initial period of one year or less followed by a variable rate that is either a qualified floating rate or an objective rate for a subsequent period, and the value of the variable rate on the issue date is intended to approximate the fixed rate, the fixed rate and the variable rate together constitute a single qualified floating rate or objective rate. A fixed rate and a variable rate will be conclusively presumed to meet the requirements of the preceding sentence if the value of the variable rate on the issue date does not differ from the value of the fixed rate by more than 0.25 percentage points (25 basis points).
If a floating rate note does not qualify as a variable rate debt instrument or otherwise provides for contingent payments, or if a fixed rate note provides for contingent payments, such note may constitute a "contingent payment debt instrument." Interest payable on a contingent payment debt instrument is
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not treated as qualified stated interest. Special rules that apply to contingent payment debt instruments will be described in the relevant pricing supplement.
In general, the following rules apply if (i) a note provides for one or more alternative payment schedules applicable upon the occurrence of a contingency or contingencies and the timing and amounts of the payments that comprise each payment schedule are known as of the issue date and (ii) either a single payment schedule is significantly more likely than not to occur or the note provides the issuer or the holder with an unconditional option or options exercisable on one or more dates during the term of the note. If, based on all the facts and circumstances as of the issue date, a single payment schedule for a debt instrument, including the stated payment schedule, is significantly more likely than not to occur, then, in general, the yield and maturity of the note are computed based on this payment schedule. If the issuer or the holder has an unconditional option or options that, if exercised, would require payments to be made on the note under an alternative payment schedule or schedules, then (i) in the case of an option or options exercisable by the issuer, the issuer will be deemed to exercise or not exercise an option or combination of options in the manner that minimizes the yield on the note and (ii) in the case of an option or options exercisable by the holder, the holder will be deemed to exercise or not exercise an option or combination of options in the manner that maximizes the yield on the note. Notes subject to the above rules will not be treated as contingent payment debt instruments as a result of the contingencies described above. If a contingency (including the exercise of an option) actually occurs or does not occur contrary to an assumption made according to the above rules (a "Change in Circumstances"), then, except to the extent that a portion of the note is repaid as a result of a Change in Circumstances and solely for purposes of the accrual of OID, the note is treated as retired and then reissued on the date of the Change in Circumstances for an amount equal to the note's adjusted issue price on that date.
A U.S. Holder may elect to treat all interest on any note issued with OID as OID and calculate the amount includible in gross income under the constant yield method. For purposes of this election, interest includes stated interest, acquisition discount, OID, de minimis OID, market discount, de minimis market discount and unstated interest, as adjusted by any amortizable bond premium or acquisition premium. The election would be made for the taxable year in which a U.S. Holder acquires such note, and may not be revoked without the consent of the IRS.
Premium
If the amount paid by a U.S. Holder for a note exceeds the stated redemption price at maturity of such note, such U.S. Holder generally will be considered to have purchased such note with a bond premium equal in amount to such excess. In this event, such U.S. Holder may elect to amortize such bond premium, based generally on a constant yield basis, as an offset to interest income. In the case of a note that may be redeemed prior to maturity, the bond premium is calculated assuming Protective Life and the U.S. Holder will exercise or not exercise redemption rights in a manner that maximizes the U.S. Holder's yield. It is unclear how bond premium is calculated when the redemption date or the amount of any redemption premium is uncertain. A U.S. Holder that elects to amortize bond premium must reduce its tax basis in the note by the amount of the aggregate deductions allowable for the amortized bond premium. The election to amortize bond premium, once made, will apply to all debt obligations held or subsequently acquired by the electing U.S. Holder on or after the first day of the first taxable year to which the election applies, and may not be revoked without the consent of the IRS.
Short-Term Notes
Notes that have a fixed maturity of one year or less ("Short-Term Notes") will be treated as issued with OID. In general, an individual or other U.S. Holder that reports income for U.S. federal income tax purposes under the cash method of accounting is not required to accrue such OID unless the U.S. Holder elects to do so. If such an election is not made, any gain recognized by such U.S. Holder on the
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sale, exchange, retirement or other disposition of a Short-Term Note will be ordinary income to the extent of the OID accrued on a straight-line basis, or upon election under the constant yield method (based on daily compounding), through the date of sale, exchange, retirement or other disposition, and a portion of the deduction otherwise allowable to such U.S. Holder for interest on borrowings allocable to the Short-Term Note will be deferred until a corresponding amount of income is realized. U.S. Holders who report income for U.S. federal income tax purposes under the accrual method of accounting and certain other holders are required to accrue OID related to a Short-Term Note as ordinary income on a straight-line basis unless an election is made to accrue the OID under a constant yield method (based on daily compounding).
Sale, Exchange, Retirement or Other Disposition of Notes
In general, a U.S. Holder of a note will have a tax basis in such note equal to the cost of the note to such U.S. Holder, increased by any amount includible in income by such U.S. Holder as OID and decreased by any amortized premium and any payments other than payments of qualified stated interest received on such note. Upon a sale, exchange, retirement or other disposition of a note, a U.S. Holder will generally recognize gain or loss equal to the difference between the amount realized on the sale, exchange, retirement or other disposition (less any accrued but unpaid qualified stated interest, which will constitute ordinary income if not previously included in income) and the U.S. Holder's tax basis in such note. Such gain or loss will be long-term capital gain or loss if the U.S. Holder held the note for more than one year at the time of disposition. A U.S. Holder that is an individual is entitled to preferential treatment for net long-term capital gains; however, the ability of a U.S. Holder to offset capital losses against ordinary income is limited.
Aggregation Rules
The Treasury Regulations relating to OID contain special aggregation rules stating in general that, subject to certain exceptions, debt instruments issued in the same transaction or related transactions to a single purchaser may be treated as a single debt instrument with a single issue price, maturity date, yield to maturity and stated redemption price at maturity for purposes of the OID rules. Under certain circumstances, these provisions could apply to a U.S. Holder that purchased notes from more than one Series of notes.
Backup Withholding and Information Reporting
Backup withholding at applicable rates and information reporting requirements generally apply to interest (including OID) and principal payments made to, and to the proceeds of sales by, certain non-corporate U.S. Holders. A U.S. Holder not otherwise exempt from backup withholding generally can avoid backup withholding by providing an IRS Form W-9. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the beneficial owner's U.S. federal income tax liability provided the required information is furnished on a timely basis to the IRS.
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Under the terms of a selling agent agreement, each series of notes will be offered by an issuing trust to the purchasing agent for subsequent resale to the agents and other dealers who are broker dealers and securities firms. The agents, including the purchasing agent, are parties to that agreement. The notes will be offered for sale in the United States only. Dealers who are members of the selling group have executed a master selected dealer agreement with the purchasing agent. The agents have agreed to use their reasonable best efforts to solicit offers from investors to purchase the notes. A trust also may appoint additional agents to solicit offers to purchase the notes. Any solicitation and sale of the notes through those additional agents, however, will be on the same terms and conditions to which the original agents have agreed. A trust will pay the purchasing agent a gross selling concession to be divided among the purchasing agent and the other agents as they agree. The concession is payable to the purchasing agent in the form of a discount ranging from 0.2% to 3% of the non-discounted price for each note sold. However, a trust may also pay the purchasing agent a concession greater than or less than the range specified above. The gross selling concession that a trust will pay to the purchasing agent will be set forth in the applicable pricing supplement. The purchasing agent also may sell notes to dealers at a discount not in excess of the concession received from a trust. In certain cases, the purchasing agent and the other agents and dealers may agree that the purchasing agent will retain the entire gross selling concession. It is anticipated that in these circumstances the other agents and dealers will be compensated based on a percentage of assets under management. A trust will disclose any particular arrangements in the applicable pricing supplement.
Following the solicitation of orders, each of the agents, severally and not jointly, may purchase notes as principal for its own account from the purchasing agent. Unless otherwise specified in the applicable pricing supplement, these notes will be purchased by the agents and resold by them to one or more investors at a fixed public offering price. After the initial public offering of notes to be resold by an agent to investors, the public offering price (in the case of notes to be resold at a fixed public offering price), concession and discount may be changed.
An issuing trust will have the sole right to accept offers to purchase notes and may reject any proposed offer to purchase notes in whole or in part. Each agent also has the right, in its discretion reasonably exercised, to reject any proposed offer to purchase notes in whole or in part. Each trust reserves the right to withdraw, cancel or modify any offer without notice. A trust may also change the terms, including the interest rate it will pay on its notes, at any time prior to its acceptance of an offer to purchase.
Each agent, including the purchasing agent, is an "underwriter" within the meaning of the Securities Act of 1933, as amended, with respect to the notes being distributed and the funding agreement purchased by the issuing trust. Each trust and Protective Life will agree to indemnify the agents against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments the agents may be required to make in respect of such liabilities. Each trust and Protective Life will agree to reimburse the agents for certain expenses.
Protective Life is a statutory issuer of the notes under the Securities Act of 1933.
No note will have an established trading market when issued. Unless otherwise specified in the applicable pricing supplement, the notes will not be listed on any securities exchange. However, the agents have advised that they may purchase and sell notes in the secondary market as permitted by applicable laws and regulations. The agents are not obligated to make a market in the notes, and they may discontinue making a market in the notes at any time without notice. There can be no assurance regarding the development, liquidity or maintenance of any trading market for any notes. All secondary trading in the notes will settle in immediately available funds.
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In connection with certain offerings of notes, the rules of the SEC permit the purchasing agent to engage in transactions that may stabilize the price of the notes. The purchasing agent will conduct these activities for the agents. These transactions may consist of short sales, stabilizing transactions and purchases to cover positions created by short sales. A short sale is the sale by the purchasing agent of a greater amount of notes than the amount the purchasing agent has agreed to purchase in connection with an offering of notes. Stabilizing transactions consist of certain bids or purchases made by the purchasing agent to prevent or retard a decline in the price of the notes while an offering of notes is in process. In general, these purchases or bids for the notes for the purpose of stabilization or to reduce a syndicate short position could cause the price of the notes to be higher than it might otherwise be in the absence of those purchases or bids. No trust or the purchasing agent makes any representation or prediction as to the direction or magnitude of any effect that these transactions may have on the price of any notes. In addition, no trust or the purchasing agent makes any representation that, once commenced, these transactions will not be discontinued without notice. The purchasing agent is not required to engage in these activities and may end any of these activities at any time.
The agents or dealers to or through which a trust may sell notes may engage in transactions with such trust and perform services for such trust in the ordinary course of business.
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The information in this prospectus is not complete and may be changed. Neither Protective Life Insurance Company nor the trusts may sell these securities until the registration statement filed with the Securities and Exchange Commission is declared effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted or would require registration or qualification under the securities laws of that jurisdiction.
SUBJECT TO COMPLETION DATED JANUARY 14, 2009
PROSPECTUS
Protective Life Insurance Company
Sponsor and Depositor
$
Secured Notes
(that are also Asset-Backed Securities)
Issued Through and Obligations of
Protective Life Secured Trusts
Each series of notes will be issued by a separate and distinct issuing entity in the form of a trust which:
The notes:
The funding agreements issued by Protective Life Insurance Company to the trusts will represent obligations of Protective Life Insurance Company only.
A trust may offer notes in any of the following ways:
A description of how an issuing trust will offer its notes will be made in an accompanying prospectus supplement or pricing supplement for the offering.
See "Risk Factors" beginning on page 11 of this prospectus for a discussion of certain risks that should be considered in connection with an investment in the notes.
None of the Securities and Exchange Commission, any state securities commission or any state insurance 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.
The date of this prospectus is , 2009
This prospectus, the accompanying prospectus supplement, any pricing supplement and any applicable free writing prospectus and the information incorporated by reference in such documents may include forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The safe harbors contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 do not apply to forward looking statements regarding the trusts. These forward looking statements reflect Protective Life Insurance Company's current view with respect to future events and financial performance. The words "believe," "expect," "estimate," "project," "budget," "forecast," "anticipate," "plan," "should," "would," and similar expressions identify forward looking statements which are based on future expectations rather than on historical facts and are therefore subject to a number of risks and uncertainties, and neither Protective Life Insurance Company nor any of a trust's agents or dealers can give assurance that such statements will prove to be correct. You should not place undue reliance on these forward looking statements, which speak only as of their dates. Protective Life Insurance Company, and each trust's agents and dealers shall not undertake and expressly disclaim any obligation to update or review forward looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes to projections over time. Please refer to Part I, Item 1A in Protective Life's most recent Annual Report on Form 10-K and Part II, Item 1A in Protective Life's most recent Quarterly Report on Form 10-Q , in each case as amended or supplemented by any subsequent filings, for more information about factors which could affect future results.
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This prospectus is part of a registration statement that Protective Life Insurance Company filed with the Securities and Exchange Commission (the "SEC") utilizing a "shelf" registration process. Under this process, up to a total amount of $ in aggregate principal amount of the notes or the equivalent amount in one or more foreign currencies described in this prospectus may be sold by the trusts. This prospectus provides a general description of the notes. An accompanying prospectus supplement to this prospectus will provide the specific terms of the notes. Each time a trust offers to sell notes, it may also provide a pricing supplement to this prospectus and the applicable prospectus supplement that will contain specific information about the terms of that offering. The pricing supplement may also add to, update, supplement or clarify the information contained in this prospectus and the applicable prospectus supplement and, accordingly, before you agree to purchase any notes, you should read this prospectus, the applicable prospectus supplement, any pricing supplement and any applicable free writing prospectus together with the information described under the heading "Where You Can Find More Information." In this prospectus, "Protective Life" refers to Protective Life Insurance Company, "PLC" refers to Protective Life Corporation, "trust" refers to each newly created Protective Life Secured Trust and "issuing trust" refers to a trust with respect to the series of notes issued and sold to the public by that trust and, in the case of a common law trust, acting by and through Wilmington. In this Prospectus, references to "Wilmington" are to Wilmington Trust Company solely in its capacity as trustee of the trusts and not in its individual capacity. In this Prospectus each series of Secured Notes is referred to as a "series of notes" and the Secured Notes are referred to generally as "notes."
You should rely only on the information contained or incorporated by reference in this prospectus, the applicable prospectus supplement, any pricing supplement and any applicable free writing prospectus. No one has been authorized to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. Neither Protective Life nor any agent or dealer is making an offer to sell the notes in any jurisdiction where the offer to sell the notes is not permitted. You should assume that the information appearing in this prospectus, the applicable prospectus supplement, any pricing supplement or any applicable free writing prospectus, as well as information previously filed with the Securities and Exchange Commission and incorporated by reference, is accurate as of the date on the front cover of those documents only. Protective Life's business, financial condition, results of operations and prospects may have changed since that date. For more detail on the terms of the notes, you should read the exhibits filed with or incorporated by reference in the registration statement.
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WHERE YOU CAN FIND MORE INFORMATION
This prospectus, which constitutes part of the registration statement, does not contain all of the information set forth in the registration statement. Parts of the registration statement are omitted from this prospectus in accordance with the rules and regulations of the SEC. The registration statement, including the exhibits filed with or incorporated by reference in the registration statement, contains additional relevant information about Protective Life. Protective Life is subject to the informational requirements of the Securities Exchange Act of 1934, and in compliance with such laws Protective Life files annual, quarterly and current reports, proxy statements and other information with the SEC. You can read and copy any reports or other information Protective Life files at the SEC's public reference room at 100 F Street, N.E., Room 1850, Washington, D.C. 20549. You can also request copies of Protective Life's documents upon payment of a duplicating fee, by writing to the SEC's public reference room. You can obtain information regarding the public reference room by calling the SEC at 1-800-SEC-0330. Protective Life filings are available to the public from commercial document retrieval services and over the internet at http://www.sec.gov. (This uniform resource locator (URL) is an inactive textual reference only and is not intended to incorporate the SEC web site into this prospectus).
Investors will be able to access (i) distribution reports on Form 10-D and current reports on Form 8-K, as applicable, with respect to the trusts formed under the programs and (ii) annual reports with respect to the trusts on Form 10-K, in each case only on the SEC's web site (which is at http://www.sec.gov) and only to the extent such reports are required to be filed. (This URL is an inactive textual reference only and is not intended to incorporate the SEC web site into this prospectus.) As depositor, Protective Life will file these reports on behalf of each trust and reports with respect to a particular issuing trust can be accessed under that trust's name. Protective Life will not make these reports available on its web site due to the volume of such reports required to be filed.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows Protective Life to "incorporate by reference" information that Protective Life files with the SEC into this prospectus and any accompanying prospectus supplement and pricing supplement, which means that incorporated documents are considered part of this prospectus and any accompanying prospectus supplement and pricing supplement. Protective Life can disclose important information to you by referring you to those documents. Information that Protective Life files with the SEC will automatically update and supersede the information in this prospectus.
This prospectus and any accompanying prospectus supplement and pricing supplement incorporates by reference the following documents:
This prospectus and any accompanying prospectus supplement and pricing supplement also incorporates by reference all documents that Protective Life files with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, and, to the extent, if any, Protective Life designates therein, information furnished to the SEC in reports on Form 8-K, after the date of this prospectus and prior to the termination of the offering of the notes. These documents contain important information about Protective Life and its finances.
You may request a copy of any documents incorporated by reference in this prospectus and any accompanying prospectus supplement and pricing supplement (including any exhibits that are specifically incorporated by reference in them), at no cost, by writing or telephoning to the following address or telephone number:
Protective Life Insurance Company 2801 Highway 280 South Birmingham, Alabama 35223 Attention: Investor Relations Tel: (205) 268 1000 |
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The following includes a general description of the trusts and the material provisions of the form of certificate of trust (in the case of a Delaware statutory trust) and the standard statutory trust terms which will be incorporated by reference into each statutory trust agreement and the standard common law trust terms which will be incorporated by reference into each common law trust agreement and other related documents. The statutory trust agreement and the common law trust agreement are included in the form of omnibus instrument. This summary is not complete and you should read the detailed provisions of such documents. Copies of the form of certificate of trust, standard statutory trust terms, standard common law trust terms and form of omnibus instrument have been filed as exhibits to the registration statement of which this prospectus is a part and are incorporated into this prospectus by reference and the executed copies of each certificate of trust, statutory trust agreement and common law trust agreement may be inspected during normal business hours at the trusts' office at c/o Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, DE 19890. References in this prospectus to "Wilmington" are to Wilmington Trust Company solely in its capacity as trustee of the trusts and not in its individual capacity.
General
Each series of notes will be issued by either:
Each statutory trust will:
Each certificate of trust will be executed by Wilmington Trust Company, as Delaware trustee (the "Delaware trustee") and each statutory trust's activities will be governed by the terms contained in the relevant statutory trust agreement.
Upon the execution and filing of a certificate of trust for a statutory trust by the Delaware trustee, the Delaware trustee and AMACAR Pacific Corp., as administrator and trust beneficial owner, will execute a statutory trust agreement. The statutory trust agreement will incorporate all of the terms and provisions of the standard statutory trust terms and, thereafter, will constitute a stand alone organizational document governing the activities of the relevant statutory trust. The Delaware trustee and the administrator will manage the affairs of each statutory trust pursuant to the terms of the relevant statutory trust agreement and the relevant administrative services agreement, respectively, and the trust beneficial owner will purchase the beneficial interest in each statutory trust.
Each common law trust will be similar in most respects to a statutory trust. No certificate of trust is required to form a common law trust and therefore no filing with the Secretary of State for the State of Delaware is required; however, each common law trust will:
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As with each statutory trust, in connection with the issuance of a series of notes, Wilmington Trust Company, as trustee (the "common law trustee"), and AMACAR Pacific Corp., as administrator will execute a common law trust agreement. The common law trust agreement will incorporate all of the terms and provisions of the standard common law trust terms and, thereafter, will constitute a stand alone organizational document governing the activities of the relevant common law trust. The common law trustee and the administrator will manage the affairs of each common law trust pursuant to the terms of the relevant common law trust agreement.
In connection with the issuance of a series of notes by a trust, such trust will, among other things:
Each series of notes will be secured by a first priority perfected security interest in the related funding agreement(s).
The sole purpose of each trust is to issue and sell one series of notes to investors, to use the net proceeds of such sale to acquire one or more funding agreements from Protective Life, to pledge and collaterally assign its interest in each funding agreement purchased with the net proceeds from the issuance of its series of notes to The Bank of New York Mellon, as indenture trustee, on behalf of that trust's series of notes, and to engage in other activities necessary or incidental thereto. No trust shall take any action not expressly provided for in its trust agreement or in the relevant indenture. See "Description of the IndenturesCovenants."
Each trust's principal executive offices will be located at c/o Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, DE 19890 and its telephone number is (302) 636-6000.
Nature of Each Trust
The applicable series of notes and the liabilities, obligations and expenses related to such series of notes will constitute debt, liabilities, obligations and expenses incurred, contracted for or otherwise of the applicable trust.
As separate and distinct special purpose trusts, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular trust will be enforceable only against the assets of such trust and not against the assets of any other trust or against Protective Life's assets. In addition, none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to Protective Life or any trust will be enforceable against the assets of any other trust. See "Description of the IndenturesNonrecourse Enforcement."
Application of Money Received by Wilmington on Behalf of a Trust.
Except for payments made in connection with the liquidation of a trust, all monies and other property received by Wilmington on behalf of a trust in respect of the collateral shall be distributed as follows:
first, to the indenture trustee for the payment of all amounts then due and unpaid upon the applicable notes, if any, in accordance with the applicable indenture; and
second, to the trust beneficial owner all of the amounts that would be payable to the trust beneficial owner if the trust beneficial owner held a note with an original principal amount of $15. Any remaining monies and other property shall be distributed ratably in proportion to their original
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principal amounts to the holders of notes last noted in the register as the holders of the notes and trust beneficial owner (as if the trust beneficial owner held a note with an original principal amount of $15).
Upon the liquidation of a trust, the remaining collateral and any other assets held in the trust shall be liquidated, and the trust shall be wound-up by Wilmington in accordance with Section 3808(d) and (e) of the Delaware Statutory Trust Act. In such event, (i) the trust shall first pay all amounts due and unpaid on the notes, if any, in accordance with the applicable indenture, (ii) the trust shall then pay any other claims, including expenses relating to such liquidation to the extent not paid, or reasonably provided for, pursuant to the applicable expense and indemnity agreement, and (iii) the trust shall then pay to the trust beneficial owner all of the amounts that would be payable under the indenture to the trust beneficial owner if the trust beneficial owner held a note with an original principal amount of $15. Any remaining monies and other property shall be paid ratably in proportion to their original principal amounts to the holders last noted in the register as the holders of the notes and the trust beneficial owner (as if the trust beneficial owner held a note with an original principal amount of $15 and as if each such holder continued to hold its notes after all amounts due on such notes under the indenture have been paid).
Bankruptcy Concerns
In the trust agreement, the trustee and the trust beneficial owner agree that neither party will institute against the trust any bankruptcy proceeding. Also, in the indenture, the indenture trustee agrees that it will not institute against the trust any bankruptcy proceeding for payments due the indenture trustee. However, during certain events of default, the indenture trustee (on behalf of the holders of notes) or the holders of more than 25% in aggregate principal amount of outstanding notes may accelerate payments of principal and interest under the notes as well as, under certain circumstances, institute judicial or other proceedings against the trust. If a bankruptcy proceeding is commenced against a trust, Protective Life does not anticipate that the assets of the trust will be consolidated with the assets of any other party. As the sole asset of each trust is one or more funding agreements issued by Protective Life, upon a proceeding for Protective Life's liquidation, rehabilitation, conservation or supervision or similar event, an event of default under the notes issued by each trust will occur and the indenture trustee on behalf of the noteholders will have a claim against Protective Life in such proceeding. No other creditors or policyholders of Protective Life should have a claim against the funding agreement(s) held by each trust or any claims thereunder. For information on priority of claims with respect to the funding agreements see "Description of The Funding AgreementsPriority."
The Trustee and Administrator
Pursuant to each trust agreement, Wilmington will act as the sole trustee of each trust. Wilmington, on behalf of each trust, will enter into an administrative services agreement (the "administrative services agreement"), with AMACAR Pacific Corp., in its capacity as administrator of each trust. As provided in the administrative services agreement for each trust, the administrator will conduct the activities of each trust. See "Description of Standard Administrative Services Agreement Terms."
The trustee will not be liable under the trust agreement(s) under any circumstances or for any action or failure to act, except for (i) its own willful misconduct, bad faith or negligence, (ii) its failure to use ordinary care to disburse funds, or (iii) the inaccuracy of any representation or warranty contained in the trust agreement(s) made by the trustee.
The trustee may resign by giving at least 90 days' written notice to the trust beneficial owner and the indenture trustee. If at any time the trustee ceases to be eligible to serve as the trustee under a trust agreement, or the trustee is unable to serve as trustee, or is bankrupt or insolvent, then the trust beneficial owner and indenture trustee may remove the trustee. No resignation or removal of the
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trustee and no appointment of a successor trustee shall become effective until the acceptance of appointment by the successor trustee.
The trustee is also acting as trustee under Protective Life's existing secured notes programs under which approximately $4.6 billion of secured notes have been issued (the "Existing Programs"), which programs are substantially similar to this program and has acted in such capacity since November 2003. The trustee has also served as trustee in connection with numerous registered and unregistered transactions involving the securitization of funding agreements since 1996.
The Trust Beneficial Owner
AMACAR Pacific Corp. is the sole beneficial owner of each trust (the "trust beneficial owner"). The beneficial interest in each trust:
The trust beneficial owner will receive periodic distributions on its beneficial interest at the same rate and on the same day that holders of notes of the related series of notes receive interest payments. On the maturity date of the trust beneficial owner's beneficial interest and the related series of notes, the issuing trust will redeem the principal amount of the related series of notes to the holders of such notes and the principal amount of the beneficial interest to the trust beneficial owner.
No Affiliation
None of Protective Life or any of its officers, directors, subsidiaries or affiliates will own any beneficial interest in any trust nor will any of these persons or entities entered into any agreement with any trust other than in furtherance of the issuance of notes from time to time as contemplated by this prospectus.
Neither Protective Life nor any of its officers, directors, subsidiaries or affiliates is affiliated with Wilmington, the trust beneficial owner, the administrator or the indenture trustee.
According to AMACAR Pacific Corp. no beneficial owner of AMACAR Pacific Corp. is in any way affiliated with Protective Life.
Recordkeeping
The assets associated with each trust formed in connection with this secured notes program will be held and accounted for separately from the assets of any other trust or Protective Life.
The trusts will be subject to certain reporting requirements under the Exchange Act.
Legal Proceedings
As of January 13, 2009, there are no legal proceedings against Protective Life, the indenture trustee, the trustee or the administrator that are material to investors.
Expenses
Protective Life will enter into an expense and indemnity agreement with each of Wilmington, the indenture trustee, the administrator, each trust to be formed in connection with the issuance of a series of notes and each service provider that may become a party to the agreement from time to time.
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Under each expense and indemnity agreement, Protective Life will pay certain of the costs and expenses relating to the offering, sale and issuance of the issuing trust's series of notes and certain costs, expenses and taxes incurred by the issuing trust and will indemnify Wilmington, the indenture trustee, the administrator, each issuing trust and each service provider that may become a party to the agreement from time to time with respect to certain matters. See "Description of Standard Expense and Indemnity Agreement Terms."
Amendment
Each trust agreement may be amended by the trustee and the trust beneficial owner:
Subject to the second and third bullet points above, the trustee and the trust beneficial owner may amend the trust agreement, without the consent of any noteholder, at any time to the extent necessary to ensure that the applicable trust will be either disregarded or treated as a grantor trust (assuming that any such trust were not disregarded) for U.S. federal income tax purposes or to ensure that the applicable trust will not be required to register as an investment company under the Investment Company Act of 1940, as amended. The administrator shall advise each rating agency that is then rating the program or any series of notes of any such amendment.
Fiscal Year End
Unless otherwise specified in the applicable pricing supplement, the fiscal year of each trust will end on December 31.
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Your investment in the notes will involve certain risks, including without limitation the following risks and the risks described under Item 1A in Protective Life's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, in each case as amended or supplemented by any subsequent filings. This prospectus, the accompanying prospectus supplement and any pricing supplement do not describe all of those risks. The business, financial condition, results of operations and prospects of any trust and Protective Life may have changed since that date.
In consultation with your own financial and legal advisors, you should carefully consider the information included in or incorporated by reference in this prospectus, the accompanying prospectus supplement, any applicable pricing supplement and any applicable free writing prospectus, and pay special attention to the following discussion of risks before deciding whether an investment in the notes is suitable for you. The notes will not be an appropriate investment for you if you are not knowledgeable about significant features of the notes or financial matters in general. You should not purchase notes unless you understand, and know that you can bear, these investment risks.
Because each trust will rely on the payments it receives on the funding agreements to fund all payments on the related notes, you are making an investment decision regarding the funding agreements as well as the related notes. You should carefully review the information in this prospectus, the accompanying prospectus supplement, the related pricing supplement and any applicable free writing prospectus about the notes and the funding agreements.
Risk Factors Relating to the Trusts
Each trust will have limited resources and therefore its ability to make timely payments with respect to its series of notes will depend on Protective Life making payments under the related funding agreement(s).
Each trust's principal assets will be one or more funding agreements issued by Protective Life. Each series of notes will be secured by one or more funding agreements together with all of the proceeds in respect of and all amounts and instruments on deposit from time to time in the relevant collection account, and all of the books and records pertaining to, such funding agreements and all of the issuing trust's rights thereto, which is collectively referred to in this prospectus as the collateral. The debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular trust will be enforceable against only the assets held in such trust and not against the assets of any other trust or Protective Life. No series of notes will have any right to receive payments from the collateral owned by any other trust or from the assets of Protective Life or any of its affiliates. Accordingly, a trust will only be able to make timely payments with respect to a series of notes if Protective Life has made all required payments under the funding agreement(s) securing the related series of notes. The marketability, liquidity and value of the notes may be substantially impaired to the extent Protective Life is less able to meet, or is perceived as being less able to meet, its obligations under the funding agreements.
Any ratings downgrade with respect to Protective Life or its affiliates could materially and adversely affect the ability of holders of notes to receive payments owed under such notes. Moreover, should Protective Life become the subject of administrative supervision, insolvency, liquidation, rehabilitation, reorganization, conservation or other similar proceedings (collectively, "Insolvency Proceedings") under any applicable laws, the indenture trustee for the benefit of the holders of notes of any series then outstanding, may be stayed during the pendency of Insolvency Proceedings from collecting any payments under the relevant funding agreements and from exercising any collateral management rights, that would otherwise be available to the indenture trustee as the secured party. Collateral management rights permit the indenture trustee to manage the assets held in a trust. The
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indenture trustee may not be able to recover any payments under the funding agreements from Protective Life should there be insufficient assets to provide for these payments.
In addition, under certain circumstances, payments made by Protective Life to the indenture trustee or to a trust may be sought to be recovered in Insolvency Proceedings as preferential payments or pursuant to other similar theories. You should be aware, therefore, that Insolvency Proceedings with respect to Protective Life could cause a significant delay in receiving payments due under the notes and could materially and adversely affect the timing and the amounts, if any, to be paid to you under the notes. You should note that as of September 30, 2008, $2.7 billion of assets of Protective Life which are held in separate accounts are not available to satisfy obligations of Protective Life under the funding agreements. At September 30, 2008, Protective Life had approximately $38.3 billion in its general account from which to satisfy its obligations under the funding agreements and its other insurance liabilities. At September 30, 2008, Protective Life had approximately $35.6 billion of liabilities related to insurance contracts and policies and general operating liabilities that would be required to be satisfied out of its general account.
Protective Life's business, financial condition, results of operations or prospects and its ability to meet its obligations under the funding agreements are directly affected by the risks and other factors described in Protective Life's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, in each case as amended or supplemented by any subsequent filings, and incorporated herein by reference. Before you invest in the notes, you should review these risks and other factors.
The notes of a series are the issuing trust's obligations only and are not obligations of, or guaranteed by, Protective Life or any of its affiliates.
The notes will not be obligations of, and will not be guaranteed by, Protective Life, PLC or any of their respective subsidiaries or affiliates. Except for Protective Life's payment obligations under the funding agreements and the expense and indemnity agreements, none of these entities nor any agent, trustee or beneficial owner of a trust (including the trust beneficial owner) is under any obligation to provide funds or capital to a trust. In addition, the notes will not benefit from any insurance guarantee fund coverage or any similar protection. The net worth of each trust will be approximately $15 at inception. The net worth of any trust is not expected to increase materially.
No trust will have any prior operating history.
Each trust will exist solely to:
No trust will have any prior operating history.
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Risk Factors Relating to the Notes
The notes of a series are the non-recourse obligations of the issuing trust and your claims as a holder of a series of notes are limited to the amount of the applicable collateral.
The notes of a series are payable only from the collateral held as security for notes of a series by the issuing trust. If any event of default occurs under any series of notes, the rights of the holders of the series of notes and the indenture trustee, acting on behalf of such holders, will be limited to a proceeding against the applicable collateral. Furthermore, no holder or the indenture trustee, acting on behalf of such holder, will have the ability to proceed against any of Protective Life, its officers, directors, affiliates, employees or agents or any other trust or any of an issuing trust's trustees, beneficial owners (including the trust beneficial owner) or agents, or any of their respective officers, directors, affiliates, employees or agents, except with respect to enforcing obligations under the relevant funding agreement(s) against Protective Life. All claims of the holders of a series of notes in excess of amounts received from the related collateral will be extinguished.
Noteholders will not have any direct contractual rights against Protective Life under any funding agreement.
The funding agreements issued by Protective Life to a trust will be contractual obligations between Protective Life and such trust. Once a trust collaterally assigns and pledges all of its rights and privileges in the funding agreements to the indenture trustee for the benefit of the holders of notes of its series of notes to secure its obligations under such notes, the indenture trustee will be the only party with recourse rights against Protective Life under the funding agreements. If the indenture trustee fails to enforce the terms of the funding agreements, then holders of notes representing at least 50% of the aggregate principal amount of the outstanding notes of the series of notes have the right to direct the time, method and place of conducting any proceedings for exercising any remedy available to the indenture trustee with respect to the related funding agreements. See "Description of the IndenturesNonrecourse Enforcement."
An event of default under the notes may not constitute an "event of default" under the applicable funding agreement.
In certain circumstances an event of default under a series of notes may not constitute an event of default under the applicable funding agreement.
To the extent that:
it is possible that a trust's obligations under its series of notes may be accelerated while the obligations of Protective Life under the applicable funding agreement may not be similarly accelerated. If this occurs, the indenture trustee may have no or limited ability to proceed against the applicable funding agreement and the related collateral and holders of that trust's notes may not be paid in full, or in a timely manner upon such acceleration. See "Description of the IndentureEvents of Default" and "Description of the Funding AgreementsCertain Terms and Conditions" in this prospectus.
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Payments under funding agreements may be insufficient to pay principal and interest under the notes.
Payments of the principal of and interest on a series of notes will be made solely from the payments the issuing trust receives under the applicable funding agreement(s). Unless otherwise specified in the applicable prospectus supplement or pricing supplement, Protective Life will not pay any additional amounts in respect of a funding agreement to compensate for any withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or governmental charges of whatever nature imposed or levied on payments in respect of a funding agreement, by or on behalf of any governmental authority and each holder of a note of the related series of notes will be deemed for all purposes to have received cash in an amount equal to the portion of such withholding or deduction that is attributable to such holder's interest in the notes, as equitably determined by the issuing trust. Under this circumstance, a trust will not actually pay, or cause to be paid, to such holder all of the amounts which would have been receivable by such holder in the absence of such taxes, duties, levies, assessments or other governmental charges. See also "The notes could be deemed to be contracts of insurance or participations in the funding agreements, which could subject holders of the notes to certain regulatory requirements and reduce the marketability and market value of the notes" immediately below.
The notes could be deemed to be contracts of insurance or participations in the funding agreements, which could subject holders of the notes to certain regulatory requirements and reduce the marketability and market value of the notes.
The laws and regulations of the states of the United States and the District of Columbia (the "Covered Jurisdictions") contain broad definitions of the activities that may constitute the conduct of the insurance business in the Covered Jurisdictions. Because the primary asset of each trust will be one or more funding agreements issued by a life insurance company, it is possible that a trust's issuance of notes or the performance of its obligations under the notes, including the payment or prepayment of amounts due under the notes, or the purchase, resale or assignment of the notes by any investor or any person who acquires the notes directly or indirectly from such investor (1) could be characterized by one or more jurisdictions as the conduct of the business of insurance by the issuing trust, such investor or such other person or (2) could otherwise subject the issuing trust, such investor or such other person to regulation under the insurance laws of one or more Covered Jurisdictions. This could, among other effects, require such persons to be subject to regulatory licensure or other qualifications and levels of compliance that cannot practically be achieved. Failure to comply with such requirements could subject such person to regulatory penalties. In the event a trust is subject to any such penalties or any other liabilities resulting from such regulation, payments under funding agreements may be insufficient to pay principal and interest under the notes. In addition, any such failure to comply or the threat of any such regulation could reduce liquidity with respect to the notes, prevent an investor from transferring notes and reduce the marketability and market value of the notes. Therefore, any such regulation or threat of regulation by any one or more Covered Jurisdictions could result in an investor either being unable to liquidate its investment in the notes or, upon any such liquidation, receiving a value significantly less than the initial investment in the notes.
Protective Life believes that (1) the notes should not be subject to regulation as participations in the funding agreements themselves or otherwise constitute insurance contracts under the insurance laws of the Covered Jurisdictions and (2) the notes should not subject any trust, any investor or any person who acquires the notes directly or indirectly from such investor and/or persons engaged in the sale, solicitation or negotiation or purchasing the notes in the Covered Jurisdictions to regulation as doing an insurance business or engaging in the sale, solicitation or negotiation of insurance, as contemplated by the insurance laws in the Covered Jurisdictions by virtue of their activities in connection with the purchase, resale and/or assignment of the notes. There are, however, wide variations in the insurance laws of the Covered Jurisdictions, subtle nuances in their application, and a general absence of any
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consistent pattern of interpretation or enforcement. Insurance regulatory authorities have broad discretionary powers in administering the insurance laws, including the authority to modify or withdraw a regulatory interpretation, impose new rules, and take a position contrary to Protective Life's. In addition, state courts are not bound by any regulatory interpretations and could take a position contrary to Protective Life's. Consequently, there can be no assurance that the purchase, resale or assignment of the notes will not subject the parties to such transaction to regulation or enforcement proceedings under the insurance laws of one or more Covered Jurisdictions.
Any survivor's option may be subject to certain limitations.
Under the Secured InterNotes® program and the secured medium-term notes program, Protective Life has the discretionary right to limit the aggregate principal amount of:
In any such event, each trust shall similarly be required to limit the aggregate principal amount of notes as to which exercises of the survivor's option shall be accepted by it. Accordingly, no assurance can be given that the exercise of the survivor's option for a desired amount will be accepted as to any series of notes or in any single calendar year.
Redemption may adversely affect your return on the notes.
If the funding agreement(s) related to your notes are redeemable at Protective Life's option, including Protective Life's right to redeem such funding agreement if it is, or a material probability exists that it will be, required under the relevant pricing supplement to pay additional amounts in connection with any withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or governmental charges of whatever nature imposed or levied on payments in respect of such funding agreement or the notes such funding agreement secures, by or on behalf of any governmental authority, or upon the occurrence of a "tax event" (as defined under "Description of Funding AgreementsEarly Redemption for Tax Event"), the relevant trust will redeem your notes if Protective Life chooses to redeem the related funding agreement(s). Prevailing interest rates at the time your notes are redeemed may be lower than the rate borne by the notes as of their original issue date. In such a case, you generally will not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as your notes being redeemed. Protective Life's redemption right also may adversely impact your ability to sell your notes.
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There may not be any trading market for your notes; many factors affect the trading and market value of your notes.
Upon issuance, a series of notes will not have an established trading market. There can be no assurances that a trading market for your notes will ever develop or be maintained if developed. In addition to the issuing trust's and Protective Life's creditworthiness, many factors affect the trading market for, and trading value of, your notes. These factors include:
There may be a limited number of buyers if you decide to sell your notes. This may affect the price you receive for your notes or your ability to sell your notes at all. In addition, notes that are designed for specific investment objectives or strategies often experience a more limited trading market and more price volatility than those not so designed. You should not purchase notes unless you understand and know you can bear all of the investment risks associated with your notes.
In addition, during the last 18 months, disruption in the global credit markets coupled with the re-pricing of credit risk created and continues to create extremely difficult market conditions and volatility in the financial markets. Initially, the concerns on the part of market participants were focused on the subprime segment of the mortgage-backed securities market. However, these concerns have since expanded to include a broad range of mortgage- and asset-backed and other fixed income securities, including those rated investment grade, the U.S. and international credit and interbank money markets generally, and a wide range of financial institutions and markets, asset classes and sectors, including securities similar to the notes and notes issued under the Existing Programs. As a result of these disruptions, some of the largest companies in the financial sector have received government support, been acquired by stronger firms or been allowed to fail. These unprecedented events have been accompanied by extremely poor performance in fixed income markets generally, including the markets for securities similar to the notes and notes issued under the Existing Programs. These conditions resulted in greater volatility, less liquidity and widening of credit spreads, and there can be no assurance that these conditions will not continue or worsen and these conditions could have a negative effect on the trading value of your notes and your ability to sell your notes.
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If a trust issues notes denominated in a foreign currency, those notes are subject to exchange rate and exchange control risks.
If you invest in notes that are denominated and/or payable in a currency other than U.S. dollars, which are referred to in this prospectus and the accompanying prospectus supplement as foreign currency notes, you will be subject to significant risks not associated with an investment in a debt security denominated and payable in U.S. dollars. The risks include, but are not limited to:
The existence, magnitude and longevity of these risks generally depend on factors over which the trusts have no control and which cannot be readily foreseen, such as:
Moreover, if payments on your foreign currency notes are determined by reference to a formula containing a multiplier or leverage factor, the effect of any change in the exchange rates between the applicable currencies will be magnified. In recent years, exchange rates between certain currencies have been highly volatile and volatility between these currencies or with other currencies may be expected in the future. Fluctuations between currencies in the past are not necessarily indicative, however, of fluctuations that may occur in the future. Depreciation of your payment currency would result in a decrease (1) in the U.S. dollar equivalent yield of your foreign currency notes, (2) in the U.S. dollar equivalent value of the principal and any premium payable at maturity or any earlier redemption of your foreign currency notes and (3) generally, in the U.S. dollar equivalent market value of your foreign currency notes.
Governments have imposed from time to time, and may in the future impose, exchange controls that could affect exchange rates as well as the availability of a specified currency other than U.S. dollars at the time of payment of principal, any premium, or interest on a foreign currency note. Governments may use a variety of techniques, such as intervention by a country's central bank, the imposition of regulatory controls or taxes or changes in interest rates to influence the exchange rates of their currencies. Governments may also alter the exchange rate or relative exchange characteristics by a devaluation or revaluation of a currency. There can be no assurance that exchange controls will not restrict or prohibit payments of principal, any premium, or interest denominated in any such specified currency.
Even if there are no actual exchange controls, it is possible that the specified currency would not be available to an issuing trust when payments on its notes are due because of circumstances beyond that issuing trust's control. In this event, an issuing trust will make required payments in U.S. dollars on the basis described in the accompanying prospectus supplement or the applicable pricing supplement. You should consult your own financial and legal advisors as to the risks of an investment in notes denominated in a currency other than U.S. dollars.
Except for certain tax matters discussed in the prospectus supplement for the secured medium-term notes program, the information set forth in this prospectus and the accompanying prospectus supplement is directed to prospective purchasers of notes who are United States residents.
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Protective Life disclaims any responsibility to advise prospective purchasers who are residents of countries other than the United States regarding any matters that may affect the purchase or holding of, or receipt of payments of principal, premium or interest on, notes. Such persons should consult their advisors with regard to these matters.
Ratings of the program and any rated series of notes may not reflect all risks of an investment in the notes and may change over the course of the program.
In the event that a specific series of notes is rated by a rating agency, the ratings of such notes will primarily reflect the financial strength of Protective Life and will change in accordance with the rating of Protective Life's financial strength and with any change in the priority status of funding agreement obligations under Tennessee law. Any rating is not a recommendation to purchase, sell or hold any particular security, including the notes. Such ratings do not comment as to the market price or suitability of the notes for a particular investor. In addition, there can be no assurance that a rating will be maintained for any given period of time or that a rating will not be lowered or withdrawn in its entirety. The ratings of the secured medium-term note program and Secured InterNotes® program and any rated series of notes issued under these programs may not reflect the potential impact of all risks related to structure and other factors on any trading market for, or trading value of, your notes.
An increase in market interest rates could result in a decrease in the value of any notes bearing interest at a fixed rate.
If market interest rates increase above the interest rate of notes bearing interest at a fixed rate, such notes bearing interest at a fixed rate generally decline in value because debt instruments of the same face value priced at market interest rates will yield higher income. Consequently, if you purchase fixed rate notes and market interest rates increase above the fixed interest rate on the notes you have purchased, the market value of your notes may decline. Protective Life can give no assurance regarding the future level of market interest rates, particularly in light of the conditions resulting from the credit crisis that began in mid-2007.
If you purchase discount notes, the amount payable to you upon early redemption, repayment of acceleration of these notes may be less than the principal amount (i.e., par) of the notes plus accrued but unpaid interest and premium, if any.
If you purchase discount notes, the amount payable to you upon early redemption, repayment or acceleration of these notes may be less than the principal amount thereof plus accrued and unpaid interest. The amount payable will be determined by the formula set forth in the applicable prospectus supplement or pricing supplement.
The market for your notes could be negatively affected by regulatory changes.
Notes are sold to investors under an exemption to the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, that permits the trusts to issue the notes to retail investors without registering as an investment company, provided that the notes have an investment grade rating at the time of original sale. Recent events in the debt markets, including defaults on asset-backed securities that had an investment grade rating at the time of sale, have prompted broad based regulatory reviews, including a review of the regulations that permit the sale of certain asset-backed securities based upon the ratings of such securities. In particular, the SEC has solicited comments on proposed rule changes that would eliminate the ability of the trusts to sell the notes to investors unless a different exemption is used. Currently, there is no such exemption under which retail investors could purchase the notes. If these rules are adopted or other unforeseen regulatory changes are enacted that affect the ability of the trusts to issue notes, the secondary market for your notes could be negatively affected and, as a result, the market price of your notes could decrease.
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Risk Factors Relating to the Collateral
The funding agreements are unsecured obligations of Protective Life. If the funding agreements were not determined to be insurance contracts, they would be accorded the same priority in an insolvency of Protective Life as its other general unsecured obligations.
The primary assets held in each trust will be one or more funding agreements. The ability to receive payments on a series of the notes will principally depend on payments under each related funding agreement. Although each trust will purchase the funding agreements, it also will grant a security interest in, pledge and collaterally assign each funding agreement to the indenture trustee, on behalf of the note holders of the related series of notes to secure its obligations under its series of notes.
The funding agreements are unsecured obligations of Protective Life and, in the event of Protective Life's insolvency, will be subject to the provisions of Title 56, the Tennessee Code Annotated, particularly those contained in Tennessee's Insurers Rehabilitation and Liquidation Act (the "Tennessee Insolvency Statute"). The Tennessee Insolvency Statute establishes the priorities for paying claims against the estate of an insolvent Tennessee insurance company. William L. McCarty, Protective Life's internal Tennessee counsel ("Tennessee counsel"), has opined, in a legal opinion dated , that, subject to the limitations, qualifications and assumptions set forth in its opinion letter, in a properly prepared and presented case, a court applying Tennessee law would conclude that loss claims in respect of each funding agreement are entitled to distribution ranking equally with loss claims made under other insurance policies and annuities issued by Protective Life, as well as with claims of the Tennessee Life and Health Insurance Guaranty Association and any similar organization in another state, in accordance with the Tennessee Insolvency Statute.
Tennessee counsel has advised that its opinion is based on its interpretation of the relevant provisions of the Tennessee Insolvency Statute as of the date of the opinion. However, the Tennessee Insolvency Statute and regulations, interpretations, and decisions are subject to change, either prospectively or retroactively, and many of the issues addressed in counsel's opinion depend upon a facts and circumstances analysis and have received little or no administrative or judicial consideration. Therefore, the Tennessee Commissioner of Commerce and Insurance, in his/her capacity as liquidator, rehabilitator or otherwise, or the courts could disagree in whole or in part with the analysis of Tennessee counsel provided in its opinion. In the event a court determines that the relevant funding agreements are not insurance contracts, the indenture trustee, as owner of the relevant funding agreements, on behalf of the holders of the relevant series of notes, would not be accorded priority status ranking equally with other loss claims as identified in the prior paragraph and would be accorded the lower priority associated with general unsecured obligations of Protective Life. See "Description of the Funding AgreementsPriority" in this prospectus.
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Other than in the case of an event of default under the indenture or the liquidation of a trust, no fees or expenses are payable out of the cash flows of any trust's assets. However, in the case of an event of default under the indenture or the liquidation of a trust, to the extent not paid pursuant to the applicable expense and indemnity agreement, the indenture trustee, the administrator, the trust beneficial owner, the trustee and any service provider appointed from time to time may be paid out of the applicable trust's assets as described in the table below:
Circumstances Giving Rise to Payment of Expenses |
Party Receiving such Fees and Expenses |
Distribution Priority |
General Purpose | Source of Funds | Amount Payable | |||||
---|---|---|---|---|---|---|---|---|---|---|
Event of default under indenture | Indenture trustee | First priority | Reasonable and customary expenses and counsel fees incurred by the indenture trustee and any other amounts due and unpaid to the indenture trustee by the trust | Amounts collected by the indenture trustee following an event of default under the indenture or then held or thereafter received as security with respect to the notes | Actual fees and expenses (in an aggregate amount of no more than $250,000 for all notes issued under any Protective Life secured notes program to the extent not paid pursuant to the expense and indemnity agreement between Protective Life and the indenture trustee) | |||||
Liquidation of the trust |
Indenture trustee, trustee, administrator, trust beneficial owner and any service provider appointed from time to time |
Second priority (after the payment of all amounts due and unpaid on the notes, if any, of the applicable trust) |
Any claims, including expenses relating to such liquidation |
The collateral and any other assets of a trust upon the liquidation of such trust |
Actual expenses (to the extent not paid, or reasonably provided for, pursuant to the applicable expense and indemnity agreement) |
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Each trust will use the net proceeds from the issuance of its series of notes to the public and its beneficial ownership interest to the trust beneficial owner to purchase one or more funding agreements issued to, and deposited into, that trust by Protective Life. Protective Life intends to use the net proceeds from the sale to each trust of funding agreements to purchase investment assets which Protective Life expects will generate investment income in excess of amounts payable under those funding agreements.
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DESCRIPTION OF PROTECTIVE LIFE INSURANCE COMPANY
Protective Life Insurance Company, a stock life insurance company, was founded in 1907. Protective Life is a wholly owned and the largest operating subsidiary of Protective Life Corporation ("PLC"), an insurance holding company whose common stock is traded on the New York Stock Exchange (symbol: PL). Protective Life provides financial services through the production, distribution, and administration of insurance and investment products. Protective Life's principal executive offices are located at 2801 Highway 280 South, Birmingham, Alabama 35223, and its telephone number is (205) 268 1000.
In connection with the issuance of a series of notes by an issuing trust, Protective Life will issue one or more funding agreements to such issuing trust with pricing terms substantially similar to that trust's series of notes, will make payments under the funding agreement(s), as required, and will file the reports for the issuing trust, as required by the Exchange Act. Protective Life has been engaged in the securitization of funding agreements as sponsor or depositor in connection with its existing secured notes programs (the "Existing Programs"). The first such program was declared effective in November 2003. Protective Life has also been engaged in the securitization of funding agreements in connection with private placement facilities similar in structure to this program since 1997. Protective Life engaged in commercial mortgage securitizations between 1996 and 1998.
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The following is a general description of the terms of the notes. Specific terms of a series of notes and the extent to which these general provisions apply to that series of notes will be provided in a prospectus supplement and, if applicable, pricing supplement to this prospectus.
Each series of notes will be issued by a trust under a separate indenture to be entered into between the issuing trust or in the case of a common law trust, Wilmington, and The Bank of New York Mellon, as trustee (the "indenture trustee"). Each indenture will incorporate the standard indenture terms by reference therein. The indenture is included in the form of omnibus instrument. Copies of the standard indenture terms and the form of omnibus instrument are filed or incorporated by reference as exhibits to the registration statement of which this prospectus is a part and are incorporated into this prospectus by reference. The following summary highlights some of the provisions of the relevant indenture, but it may not contain all of the information that is important to you. As used under this caption, the term "notes" includes the notes being offered by this prospectus and all other notes issued by the trusts under an indenture.
General
No indenture will limit the amount of notes that may be issued by a trust. A trust may issue only one series of notes. A series of notes will be the issuing trust's secured, direct, non-recourse and unsubordinated obligations. Each series of notes will be secured by one or more funding agreements relating to that series of notes.
The prospectus supplement and/or the pricing supplement for each offering of a series of notes will provide the following terms, where applicable:
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A trust may issue notes at a discount below their stated principal amount, bearing no interest or interest at a rate that at the time of issuance is below market rates.
Certain federal income tax considerations and other relevant considerations will be described in the applicable prospectus supplement and/or pricing supplement.
Unless otherwise provided in the prospectus supplement and/or pricing supplement for an offering, payments on the notes will be made at the offices of the indenture trustee in New York, New York, although a trust may make payments of interest by check mailed to the holders. Notes may be transferred or exchanged at the office or agency maintained for that purpose, subject to the limitations provided in the indenture, without any service charge except for any tax or governmental charges.
A trust will redeem its notes if Protective Life redeems each funding agreement securing the notes of such series. Protective Life will have the right to redeem a funding agreement (i) if it is required, or based on an opinion of independent legal counsel selected by Protective Life a material probability exists that it will be required, under the relevant pricing supplement to pay additional amounts in connection with any withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or governmental charges of whatever nature imposed or levied on payments in respect of such funding agreement or the notes that such funding agreement secures, by or on behalf of any governmental authority, (ii) upon the occurrence of a "tax event" (as defined under "Description of Funding AgreementsEarly Redemption for Tax Event") or (iii) if such redemption right is otherwise specified in the relevant pricing supplement. Protective Life may only redeem a funding agreement by giving not less than 30 and no more than 75 days prior written notice and by paying to the relevant trust the outstanding principal of and accrued but unpaid interest on the relevant funding agreement or such other amount as is specified in the applicable prospectus supplement or pricing supplement. In the event that any funding agreements are redeemed only in part, the trust will redeem its notes only in part and the indenture trustee will select the notes to be redeemed by lot or, if the notes are not in book entry form, in its discretion, on a pro rata basis. If any note is redeemed in part only, a new note in principal amount equal to the unredeemed principal portion will be issued. Notes that may be redeemed at a time when 25% or more of the original principal amount of such notes are outstanding will be designated in their title as "callable" in the relevant pricing supplement.
Any money that an issuing trust pays for principal of (and premium, if any) or any interest on any note that remains unclaimed at the end of two years will be repaid by the indenture trustee and/or paying agent to Protective Life in accordance with its instructions to the indenture trustee and pursuant to the applicable funding agreement(s). Afterwards, the holder of such note may look only to Protective Life for payment.
Each indenture and the notes will be governed by and construed and enforced in accordance with the internal laws of the State of New York.
At the time of the sale of a series of notes, at least one nationally recognized statistical rating organization will have rated the notes in one of its generic rating categories which signifies investment grade.
Interest Rate Calculation
Each fixed rate note offered to investors will bear interest at the rate specified in the applicable pricing supplement. Each floating rate note offered to investors will bear interest at a rate determined by reference to one or more of the following interest rate bases, which will be specified in the applicable pricing supplement:
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These interest rate bases are further described in the prospectus supplements to this prospectus under "Description of the Notes."
Global Securities
If any notes are issuable in book-entry form, the applicable prospectus supplement and/or pricing supplement will describe the circumstances, if any, under which beneficial owners of interests in the book-entry security may obtain certificated notes. Payments on a book-entry security will be made in the manner described in the prospectus supplement.
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This section provides a summary of the material terms and conditions of each indenture pursuant to which any series of notes will be issued. Unless otherwise specified, all references to any Program Document (as defined below) in this section shall mean that Program Document with respect to any trust or the particular trust in question, as the case may be.
Covenants
Each trust will issue its series of notes under a new indenture to be entered into between the issuing trust and indenture trustee. Under the relevant indenture, a trust will make certain covenants to the indenture trustee. In addition, each indenture requires a trust to hold funds in trust for payments under the notes issued by that trust, pay to the indenture trustee principal, interest and premium (if any) due on the notes issued by that trust and take all necessary action to protect the collateral held by that trust. Further, a trust is obligated to deliver to the indenture trustee an annual statement certifying its compliance with the conditions, performance of obligations and adherence to covenants under the relevant indenture. In addition to its other covenants, each trust will agree not to, so long as any notes of the notes of the series of notes issued by that trust are outstanding, take any of the following actions, except as otherwise permitted by the indenture:
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Events of Default
Upon the occurrence of an Event of Default, the notes of a series of notes may become due and payable at an amount equal to the outstanding principal amount plus accrued but unpaid interest and any other amounts payable or, if such notes are non-interest bearing, the amortized face amount of such notes or such other redemption amount as may be specified in the applicable pricing supplement.
The following will be Events of Default under the notes of any series of notes:
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such event described in this clause (2) shall continue for 60 days unless dismissed, bonded or discharged;
When an Event of Default specified in the fourth, fifth or eighth bullet point above shall have occurred and be continuing, the indenture trustee or the holder(s) of at least 25% in aggregate principal amount of the outstanding notes of the affected series may, by written notice to the issuing trust and the indenture trustee (if applicable), declare the principal of and all accrued and unpaid interest and any other amounts payable on the notes of such series to be due and payable. Such amounts shall become due and payable on the date the written declaration is received by the issuing trust. This provision, however, is subject to the condition that if, at any time after the principal of the notes of such series shall have been so declared due and payable, and before any judgment or decree for the payment of the monies due shall have been obtained or entered, the holder(s) of at least 662/3% in aggregate principal amount of the notes of such series then outstanding by written notice to the issuing trust and the indenture trustee may rescind and annul such declaration and its consequences with respect solely to such series, subject to certain conditions, but no such rescission and annulment shall affect any subsequent default or shall impair any right consequent thereon. If an Event of Default specified in the first, second, third, sixth or seventh bullet point above occurs, the principal of and accrued interest on the notes of such series will be immediately due and payable without any declaration or other action by the issuing trust, the indenture trustee or the holder of any note. Nothing in the notes will prevent any relevant holder from enforcing its right to receive payment of the principal of and interest on such notes, or any other amount payable under such notes or the indenture, when and to the extent such payments become due.
The Events of Default described above are different from the funding agreement defaults described later in this prospectus under the heading "Description of the Funding Agreements." In certain circumstances, an Event of Default may occur and give rise to an acceleration of principal and interest on the notes of a series without there being a corresponding funding agreement default and acceleration of payment obligations under the related funding agreement. In such a case, there would be no funds available to pay the accelerated principal and interest under the notes. In such a case, the indenture trustee, acting for the benefit of the holders of the applicable series of notes, will be limited to a proceeding against the funding agreement(s) and the related collateral. However, because under such circumstances Protective Life would not be under any obligation to accelerate its payment obligations under the funding agreement(s), the indenture trustee could only:
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Any such disposition of collateral could be made on unfavorable terms and result in material losses to the holders of the applicable series of notes.
The trust will promptly inform the indenture trustee in writing of the occurrence of an Event of Default or an occurrence, with notice or the lapse of time, that would become an Event of Default. The indenture trustee will promptly provide notice of such event to each rating agency then rating the applicable series of notes and, within 90 days of becoming aware of such event, the indenture trustee will provide notice of such event to the holders of the applicable series of notes.
Each year during which the applicable series of notes remains outstanding, the trust will provide evidence to the indenture trustee of the absence or an occurrence of an Event of Default concerning the series of notes.
For purposes of this prospectus, "business day" shall have the meaning set forth in the applicable prospectus supplement or the applicable pricing supplement.
Application of Money Collected Under the Indenture
Following an Event of Default and during the continuance thereof, with respect to a series of notes, any moneys that may then be held or thereafter received by the indenture trustee as security with respect to the notes of such series shall be held in the relevant collection account and shall be applied in the following order, at the dates and manner fixed by the indenture trustee:
first, to the payment of the reasonable and customary expenses and counsel fees incurred by the indenture trustee and any other amounts due and unpaid to the indenture trustee by the issuing trust, in an aggregate amount of no more than $250,000 for all series of notes issued by all trusts under any Protective Life secured notes program, to the extent not paid pursuant to the expense and indemnity agreements;
second, to the payment of the amounts then due and unpaid upon the notes of the series for principal and interest and all other amounts in respect of which or for the benefit of which such amount has been collected, ratably, without preference or priority of any kind, according to the aggregate principal amounts due and payable on such notes; and
third, any remaining balance shall be paid to the issuing trust and such remaining balance shall be distributed by Wilmington in accordance with the relevant trust agreement as described under "Description of the TrustsApplication of Money Received by Wilmington on Behalf of a Trust."
If no Event of Default exists, the following priority of payments shall apply:
first, to the payment of the amounts, for principal and interest and all such other amounts respectively, then due and unpaid upon the notes of the series for principal and interest and all other amounts in respect of which or for the benefit of which such amount has been collected, ratably, without preference or priority of any kind, according to the aggregate principal amounts due and payable on such notes; and
second, any remaining balance shall be paid to the issuing trust and such remaining balance shall be distributed by Wilmington in accordance with the relevant trust agreement as described under "Description of the TrustsApplication of Money Received by Wilmington on Behalf of a Trust."
Except as expressly set forth in the relevant indenture, none of the indenture trustee, any paying agents, registrar or any of their successors, employees, officers, directors, affiliates or agents shall have any claim or rights of any nature in or to the relevant collateral, whether as a result of set-off, banker's lien or otherwise.
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The holder(s) of a majority in aggregate principal amount of the notes of any series at the time outstanding, who provide the indenture trustee with indemnification satisfactory to the indenture trustee, shall have the right to direct the time, method, and place of conducting any proceeding for exercising any remedy available to the indenture trustee, or exercising any trust or power conferred on the indenture trustee by the relevant indenture, in each case solely in respect of such series of notes subject to certain conditions in such indenture.
No holder of the notes of a series of notes shall have any right to institute any proceedings, judicial or otherwise, with respect to the indenture or any agreement or instrument included in the collateral for such series of notes or for the appointment of a receiver or trustee, unless:
With respect to the above, no holder(s) of notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of the relevant indenture to affect, disturb or prejudice the rights of any other holder of any note of the relevant series of notes or to obtain or to seek to obtain priority or preference over any other holder of any note of the relevant series of notes to enforce any right under the indenture, except in the manner therein provided and for the equal and ratable benefit of all the holders of the notes of the relevant series of notes.
Reports to Holders
As depositor, Protective Life will file, if required, a distribution report with respect to each trust on Form 10-D within fifteen days or Form 8-K within four business days, as applicable, following any distribution made or scheduled to be made on the notes of a series. Each Form 10-D or Form 8-K, as applicable, will contain the relevant payment information, the current principal amount of the notes and the applicable funding agreement and the compensation received by the indenture trustee during the period relating to such payment. As depositor, if required, Protective Life will also file an annual report with respect to each trust on Form 10-K, which annual report will include certain exhibits regarding compliance with servicing criteria and a certification by an appropriate officer of Protective Life as to such compliance and the sufficiency of such report and any distribution report for the same period. For information on how you can request copies of these reports, see "Where You Can Find More Information" above.
In accordance with the terms of the indenture and the Trust Indenture Act of 1939, as amended, on or before May 15th of each year, to the extent required by the Trust Indenture Act, the indenture trustee will be required to transmit by mail to registered holders of notes reports dated as of March 15
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of such year with respect to certain matters, including any changes to the eligibility and qualifications of the indenture trustee, conflicting interests of the indenture trustee, certain unpaid advances made by the indenture trustee, and any actions by the indenture trustee that materially affect the applicable notes or collateral. A copy of each such report shall, at the time of such transmission to holders of notes, be filed with each stock exchange upon which the applicable notes may be listed, and also with the SEC.
Modifications and Amendments
Modifications and Amendments Without Consent of Holders
Each trust may enter into a supplemental indenture to the relevant indenture with the indenture trustee at any time, without the consent of any holder of its notes for the purpose of:
The indenture trustee shall advise each rating agency that is then rating the program or any series of notes of any such supplemental indenture.
Modifications and Amendments With Consent of Holders
Each trust and the indenture trustee may enter into one or more supplemental indentures for the purpose of making any amendment or modification to the notes of a series issued by such trust or the relevant indenture or modifying in any manner the rights of any holder of such notes with consent of the holder(s) representing at least a majority in aggregate principal amount of the notes of such series
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at the time outstanding. However, no such supplemental indenture may, without the affirmative consent or affirmative vote of the holder of each note of the relevant series affected thereby:
The indenture trustee shall advise each rating agency that is then rating the program or any series of notes of any such supplemental indenture.
No trust will enter into any supplemental indenture with the indenture trustee (either with or without the consent of the holders of notes issued by such trust) that would cause such trust not to be either disregarded or treated as a grantor trust (assuming the trust was not disregarded) for U.S. federal income tax purposes.
Indenture Trustee and Servicer
Under each indenture, if an Event of Default with respect to any series of notes has occurred and is continuing, the indenture trustee is obligated to exercise such of the rights and powers vested in it by the indenture, and to use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.
Except during the continuance of an Event of Default, each indenture provides that the indenture trustee shall perform only those duties that are specifically set forth therein, and no implied covenants or obligations of the indenture trustee will be read into the indenture.
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No provision of any indenture will be construed to relieve the indenture trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
The indenture trustee may resign, with respect to a particular series of notes, at any time by giving not less than 90 days' prior written notice thereof to the relevant trust and the holders of the affected series of notes. If no successor indenture trustee shall have accepted appointment within 30 days after the giving of such notice of resignation, the resigning indenture trustee may petition any court of competent jurisdiction for the appointment of a successor indenture trustee.
Holders of a majority in aggregate principal amount of the notes of each series at the time outstanding may at any time remove the indenture trustee with respect to the notes of such series and appoint a successor indenture trustee with respect to the notes of such series by delivering to the indenture trustee so removed, to the successor indenture trustee so appointed and to the relevant trust the evidence required for such action by the relevant indenture.
If at any time:
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then, the relevant trust (except upon the occurrence and during the continuation of an Event of Default) or such applicable holders of notes may remove the indenture trustee with respect to such series of notes and appoint a successor indenture trustee.
If the indenture trustee resigns, is removed or becomes incapable of acting, or if a vacancy occurs in the office of the indenture trustee for any reason, the relevant trust shall promptly appoint a successor indenture trustee. No resignation or removal of the indenture trustee and no appointment of a successor indenture trustee shall become effective until the acceptance of appointment by the successor indenture trustee. If within one year after such resignation, removal or incapability or the occurrence of such vacancy, a successor indenture trustee shall be appointed by holders of notes under the relevant indenture representing at least 50% of the aggregate principal amount of the outstanding notes of the series delivered to the relevant trust and the retiring indenture trustee, the successor indenture trustee so appointed shall, upon its acceptance of such appointment, become the successor indenture trustee and supersede the successor indenture trustee appointed by the relevant trust.
In addition to the right of petition given to the resigning indenture trustee and the right of removal given to each trust pursuant to the preceding paragraph, any holder who has been a bona fide holder of notes of the relevant series of notes for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor indenture trustee or the removal of the indenture trustee and the appointment of a successor indenture trustee, as the case may be.
The indenture trustee and each successor indenture trustee must be a United States person within the meaning of section 7701(a)(30) of the Code.
The Bank of New York Mellon, in its capacities as indenture trustee and paying agent under each indenture, will perform the functions of the servicer (as defined in Item 1101 of Regulation AB) under the program. The Bank of New York Mellon has acted as collateral manager and in other capacities in connection with various types of securitization transactions, including tender option bonds, mortgage-backed securities, collateralized debt obligations, asset-backed securities, and funding agreement backed notes programs since 1994. The Bank of New York Mellon and its affiliates have served as indenture trustee on both registered and unregistered transactions involving the securitization of funding agreements since 1997. The Bank of New York Mellon is also acting as indenture trustee under Protective Life's Existing Programs and has acted in such capacity since November 2003. The aggregate amount of outstanding registered funding agreements managed by The Bank of New York Mellon in connection with the Existing Programs is approximately $3.0 billion as of January 13, 2009.
Meetings of Holders
A meeting of holders of notes of any series may be called at any time and from time to time pursuant to the relevant indenture to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by the indenture to be made, given or taken by such holders of such series of notes.
Unless otherwise provided in a note certificate representing the notes of a particular series, the indenture trustee may at any time call a meeting of holders of notes of any series for any purpose specified in the preceding paragraph, to be held at such time and at such place in The City of New York or at such other place as the indenture trustee shall determine. Notice of every meeting of such holders of notes of any series, setting forth the time and the place of such meeting and in general
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terms the action proposed to be taken at such meeting, must be given not less than twenty-one (21) nor more than one hundred eighty (180) days prior to the date fixed for the meeting.
Subject to the provisions under "Modifications and Amendments" above and Section 316 of the Trust Indenture Act, any resolution passed or decision taken at any meeting of holders of notes of a series duly held in accordance with the indenture will be binding on all of the holders of notes of such series, whether or not such holders were present or represented at the meeting.
Nonrecourse Enforcement
Notwithstanding anything to the contrary contained in the indenture or the notes, other than as described below, none of Protective Life, its officers, directors, affiliates, employees or agents, any trust and none of such trust's trustees, beneficial owners (including the trust beneficial owner) or agents, or any of their respective officers, directors, affiliates, employees or agents, all of whom are referred to collectively in this prospectus and the accompanying prospectus supplement as the "nonrecourse parties," will be personally liable for the payment of any principal, interest or any other sums at any time owing under the terms of any notes. If any Event of Default shall occur with respect to any notes of any series, the right of the holder(s) of notes of such series and the indenture trustee on behalf of such holder(s) in connection with a claim on such series of notes will be limited solely to a proceeding against the collateral for such series of notes.
Neither such holder(s) nor the indenture trustee on behalf of such holder(s) will have the right to proceed against the nonrecourse parties or the assets of any other trust to enforce the relevant series of notes (except that to the extent they exercise their rights, if any, to seize the relevant funding agreement(s), they may enforce the funding agreement(s) against Protective Life) or for any deficiency judgment remaining after foreclosure of any property included in the collateral. However, this will not in any manner or way constitute or be deemed a release of the debt or other obligations evidenced by the notes or otherwise affect or impair the enforceability against the assets of the relevant trust of the collateral or any other instrument or agreement evidencing, securing or relating to the indebtedness or the obligations evidenced by the notes. The holders of notes are not precluded from foreclosing upon any property included in the collateral.
In addition, since Protective Life is the registrant, purchasers of notes may proceed directly against Protective Life to enforce their rights under the U.S. federal and state securities laws.
Miscellaneous
Notices
All notices regarding notes may be sent by overnight courier or first class mail (or equivalent) or (if posted to an overseas address) by airmail, postage prepaid, to the registered owners of the notes as their names appear in the note register maintained by the registrar or, for book-entry notes, notice may be given to The Depository Trust Company for communication by it to its accountholders or by delivery.
Governing Law; Submission to Jurisdiction
Each indenture and the notes of each series shall be governed by, and construed in accordance with, the laws of the State of New York, except to the extent that the validity or perfection of the ownership of and security interest in the relevant funding agreement(s) held in the relevant trust or remedies under the indenture in respect thereof may be governed by the laws of a jurisdiction other than the State of New York. All judicial proceedings brought against any trust, or the indenture trustee arising out of or relating to the indenture, any note or any portion of the collateral may be brought in a U.S. federal court located in New York City, the Borough of Manhattan, provided that the pricing supplement for any series of notes may specify other jurisdictions as to which a trust may consent to the nonexclusive jurisdiction of its courts with respect to its series of notes.
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DESCRIPTION OF THE FUNDING AGREEMENTS
This section provides a summary of the material terms and conditions of the funding agreements. Specific terms of a funding agreement issued with respect to a series of notes and the extent to which these general provisions apply to that funding agreement will be provided in a prospectus supplement and, if applicable, pricing supplement to this prospectus. This summary is not complete and you should read the detailed provisions of the funding agreements. A copy of the form of funding agreement is filed or incorporated by reference as an exhibit to the registration statement of which this prospectus is a part and is incorporated into this prospectus by reference. Capitalized terms used in this summary have the same meanings as those used in the funding agreements unless the context otherwise requires.
General
Each funding agreement will be issued to, and deposited into, a trust by Protective Life and will be held as part of separate collateral for the benefit of the holders of the series of notes issued by that trust. Each funding agreement will represent an unsecured obligation of Protective Life. As set forth below under the heading "Priority," Tennessee counsel has provided a legal opinion that the payment obligations of Protective Life under each funding agreement would be accorded a Class Two priority in the event of the insolvency of Protective Life and would be equal with claims made by policyholders, beneficiaries and insureds under insurance policies and annuities issued by Protective Life, as well as with claims of the Tennessee Life and Health Insurance Guaranty Association and any similar organization in another state, and senior to general unsecured obligations of Protective Life. The applicable funding agreement will have substantially similar payment terms to the related series of notes, including the rate of interest, interest payment dates and the stated maturity date. The repayment of principal on such funding agreement will occur at the stated date of maturity of the funding agreement, or, under certain circumstances specified by the terms of the funding agreement, at a date prior to maturity. Amounts received by a trust in respect of interest or principal on a funding agreement will be applied to all payments due the holders of notes of the related series of notes and beneficial interests for that trust. Additional terms of each funding agreement will be described in the related pricing supplement.
The funding agreements will represent general account policyholder obligations of Protective Life. They will fall into a broad category of insurance products commonly referred to as asset accumulation products. As such, the proceeds from the sale of funding agreements will be invested by Protective Life in a portfolio of assets designed to meet the contractual obligations under the funding agreements and Protective Life's other general account liabilities. Protective Life will earn the spread differential between the cost of its obligations under the funding agreements and the yield on its invested assets. Protective Life may periodically, consistent with its past practice and subject to all applicable regulatory restrictions on its insurance operations, dividend a portion of the spread income to PLC.
Unless otherwise set forth in the applicable pricing supplement, the funding agreements will be rated AA by Standard & Poor's Rating Services, a division of The McGraw Hill Companies, Inc. and Protective Life anticipates that the funding agreements will be rated A1 by Moody's Investors Service, Inc.
Agreed Tax Treatment
Each funding agreement will provide that the relevant trust and Protective Life each agree to treat the funding agreement as debt of Protective Life for U.S. federal, state and local income and franchise tax purposes.
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Priority
As a Tennessee domiciled insurance company, Protective Life is subject to Tennessee's insurance laws, including its liquidation, rehabilitation and other delinquency proceeding provisions. William L. McCarty, internal Tennessee counsel to Protective Life ("Tennessee counsel"), has provided an opinion that, subject to the limitations, qualifications and assumptions set forth in its opinion letter, in a properly prepared and presented case, a court applying Tennessee law would conclude that under Tennessee insurance laws loss claims under the funding agreements would be accorded a Class Two priority in the event of the liquidation of, or other delinquency proceeding with respect to, Protective Life. Accordingly, loss claims under the funding agreements securing a particular series of notes would be accorded a Class Two priority, together with loss claims under other insurance policies and annuities of Protective Life, as well as with claims of the Tennessee Life and Health Guaranty Association and any similar organization in another state, and would be senior to the general unsecured obligations of Protective Life in the event of Protective Life's insolvency.
The scope of the Tennessee counsel opinion regarding a delinquency proceeding with respect to Protective Life is limited to a Tennessee delinquency proceeding under Tennessee law and to only those claims that are made in domiciliary proceedings in a Tennessee court. Delinquency proceedings under Tennessee law with respect to a Tennessee insurer are exclusive only in Tennessee, and ancillary proceedings to wind up or rehabilitate the insurer may also be conducted in other states in which it was engaged in the business of insurance. In an ancillary proceeding, the procedure for bringing, and the priority of, claims will be determined by local law.
The opinion of Tennessee counsel recites basic facts with respect to the transaction in which the funding agreement is to be issued, and those facts are implicitly assumed in connection with the rendering of the opinion. The limitations and qualifications in the opinion are that it is limited to the application of the law of the State of Tennessee and federal law of the United States; that no opinion is expressed as to the status of any funding agreement under the Tennessee Insurance Guaranty Association Act, Tennessee Code Annotated section 56-12-101, et seq., or the Tennessee Life and Health Insurance Guaranty Association Act, Tennessee Code Annotated section 56-12-201, et seq.; and that the opinion is rendered solely as of the date thereof.
In the event that the funding agreements were not afforded Class Two priority in an insolvency of Protective Life, the funding agreements would be accorded the lower priority associated with general unsecured obligations of Protective Life. The obligations of Protective Life under the funding agreements are not guaranteed by any other person, including but not limited to, any of its subsidiaries or affiliates.
Certain Terms and Conditions
Eligibility Criteria. Each funding agreement issued by Protective Life may be interest bearing or non-interest bearing and each interest bearing funding agreement may bear interest at a fixed or floating rate, or a combination of such rates, as specified in the related pricing supplement. Any funding agreement which bears interest at a floating rate will have such rate determined by reference to one or more benchmark interest rates, including the CD rate, the Commercial Paper Rate, the Federal Funds (Effective) Rate, the Federal Funds (Open) Rate, LIBOR, EURIBOR, the Treasury Rate, the Constant Maturity Treasury Rate, the Prime Rate, the Constant Maturity Swap Rate and the Eleventh District Cost of Funds Rate. Each funding agreement will generally pay interest, if any, at stated payment dates set forth in the related pricing supplement and/or at maturity.
Each funding agreement will have a principal amount denominated in the same currency as the notes such funding agreement secures, which currently is expected to be U.S. dollars. Each funding agreement will pay principal on scheduled payment dates and/or at maturity thereof, as specified in the related pricing supplement, and will not provide a grace period for any payment of principal. If
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specified in the related pricing supplement, a funding agreement may be callable by Protective Life or puttable by its holder, in whole or in part, upon notice to the other party in respect thereto; provided, in either case, that the relevant series of notes contains substantially the same call and put terms and no funding agreement may be put or called without the simultaneous put or call of the related series of notes. A more detailed discussion of the circumstances under which Protective Life might be able to call the funding agreements related to a series of notes, if any, and the required payment for any such call will be included in the applicable prospectus supplement or pricing supplement.
Funding Account. The amount initially paid to Protective Life in respect of each funding agreement will be credited to the funding account established under each funding agreement. Unless otherwise specified in the applicable pricing supplement, or the terms of a particular offering of a series of notes otherwise requires, at the end of any day, the amount of such funding account will be equal to the amount or amounts received plus interest thereon (credited daily), less the amounts withdrawn from it. Unless otherwise specified in the applicable pricing supplement, or the terms of a particular offering of a series of notes otherwise requires, Protective Life will dispose of the account under each funding agreement, by withdrawal and payment to the relevant trust, as follows: (a) on the first interest payment date, all interest accrued since the effective date of such funding agreement; (b) on each subsequent interest payment date, all interest accrued since the last interest payment date; and (c) on the maturity date of such funding agreement, the principal amount and the remaining balance of the related account, including accrued but unpaid interest on such amounts.
Funding Agreement Default. Each of the following events will constitute an event of default (a "funding agreement default") under each of the funding agreements:
Upon the occurrence and continuance of a funding agreement default, the relevant trust has the right, in addition to any other rights and remedies it may have at law or in equity, to immediately demand payment of all principal and accrued and unpaid interest to such date under the affected funding agreements. In addition, under each indenture, the indenture trustee is empowered to (i) exercise the right to accelerate and demand immediate payment of the affected funding agreements upon the occurrence of an event of default thereunder and (ii) provide written notice to Protective Life of any failure by Protective Life to pay principal or interest on the affected funding agreements.
Callable Notes; Optional Repayment
If a redemption right is specified in the pricing supplement related to a series of notes, Protective Life may redeem the related funding agreement(s) in full or part, as applicable, prior to the stated maturity date of such funding agreement(s) in whole or from time to time in part in increments of $1,000 or any other integral multiple of an authorized denomination specified in the applicable pricing supplement (provided that any remaining principal amount thereof shall be at least $2,000 or such
39
other minimum authorized denomination applicable thereto), at the applicable redemption price (as defined below), together with unpaid interest accrued thereon to the date of redemption. Unless otherwise specified in the applicable pricing supplement, Protective Life must give written notice to the trust not more than 75 nor less than 35 calendar days prior to the date of redemption. "Redemption price," with respect to a funding agreement, means an amount equal to the initial redemption percentage specified in the applicable pricing supplement (as adjusted by the annual redemption percentage reduction, as described in the pricing supplement, if applicable) multiplied by the unpaid principal amount to be redeemed. The initial redemption percentage, if any, applicable to a funding agreement shall decline at each anniversary of the initial redemption date by an amount equal to the applicable annual redemption percentage reduction, if any, until the redemption price is equal to 100% of the unpaid amount thereof to be redeemed. Notes that may be redeemed at a time when 25% or more of the original principal amount of such notes are outstanding will be designated in their title as "callable" in the relevant pricing supplement.
If a repayment right is specified in the pricing supplement relating to a series of notes, the related funding agreement(s) may be subject to repayment at the request of the relevant trust, upon the valid exercise of the repayment right in the related notes by the holder of such notes, on any repayment date specified in the applicable pricing supplement. On any such repayment date, unless otherwise specified in the applicable pricing supplement, the funding agreement(s) shall be repayable in whole or in part in increments of $1,000 or any other integral multiple of an authorized denomination specified in the applicable pricing supplement (provided that any remaining principal amount thereof shall be at least $2,000 or such other minimum authorized denomination applicable thereto) at the request of the relevant trust at a repayment price equal to 100% of the principal amount thereof to be repaid, together with interest thereon payable to the date of repayment. Exercise of such repayment right by a trust shall be irrevocable.
None of the trusts will issue notes that may be repaid at the option of the holders prior to the stated maturity if such issuance would cause the relevant trust to fail to satisfy the applicable requirements for exemption under Rule 3a-7 under the Investment Company Act of 1940, as amended, and all applicable rules, regulations and interpretations thereunder.
Survivor's Option
Unless a funding agreement has been declared due and payable prior to its stated maturity date by reason of any event of default thereunder, or has been previously redeemed or otherwise repaid, a trust may request repayment of such funding agreement upon the valid exercise of the survivor's option in the related notes by the authorized representative of the deceased beneficial owner of such notes. If a survivor's option is specified in your notes it will be more fully described in the prospectus supplement relating to your notes.
Restrictions on Transfer
Each funding agreement will contain provisions prohibiting the owner of the funding agreement from transferring or assigning the funding agreement or any right to receive payments under the funding agreement to any other person without the express written consent of Protective Life and the written affirmation of Protective Life that it has changed its books and records to reflect the transfer or assignment or right to receive payments under the funding agreement.
Withholding Tax and Payment of Additional Amounts
All amounts due in respect of the funding agreements will be made free and clear of any applicable withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or other governmental charges of whatever nature imposed or levied by or on behalf of
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any governmental authority, unless such withholding or deduction is required by law. Unless otherwise specified in the applicable pricing supplement, Protective Life will not pay any additional amounts to the relevant trust in respect of any such withholding or deduction and each holder of a note of the series of notes issued by such trust will be deemed for all purposes to have received cash in an amount equal to the portion of such withholding or deduction that is attributable to such holder's interest in the notes as equitably determined by that trust. Any such withholding or deduction will not give rise to an event of default or any independent right or obligation to redeem the affected funding agreement or the notes of the related series of notes. If Protective Life is required, or based on an opinion of independent legal counsel selected by Protective Life a material probability exists that it will be required, to pay additional amounts pursuant to the applicable pricing supplement in respect of such withholding or deduction, Protective Life will have the right to redeem the affected funding agreement and, if Protective Life redeems the affected funding agreement, the relevant trust will redeem the notes issued by such trust as provided in the relevant indenture. Protective Life may redeem such funding agreement by giving not less than 30 and no more than 75 days prior written notice to the relevant trust and by paying to such trust the outstanding principal of, and accrued but unpaid interest on, the relevant funding agreement or such other amount as is specified in the applicable prospectus supplement or pricing supplement.
Early Redemption for Tax Event
Each funding agreement will provide that upon the occurrence of a Tax Event (as described below), Protective Life may redeem such funding agreement by giving not less than 30 and no more than 75 days prior written notice to the relevant trust and by paying to such trust the outstanding principal of and accrued but unpaid interest on the relevant funding agreement or such other amount as is specified in the applicable prospectus supplement or pricing supplement. If Protective Life redeems a funding agreement, the relevant trust will redeem the notes of the series of notes issued by such trust and secured by such funding agreement as provided in the indenture. The term "Tax Event" means that Protective Life shall have received an opinion of independent legal counsel stating in effect that as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority therefor or therein or (b) any amendment to, or change in, an interpretation or application of any such laws or regulations by any governmental authority in the United States, which amendment or change is enacted, promulgated, issued or announced on or after the date the applicable funding agreement is entered into, there is more than an insubstantial risk that (i) the relevant trust is, or will be within 90 days of the date thereof, subject to U.S. federal income tax with respect to interest accrued or received on the relevant funding agreement or (ii) the relevant trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges.
Governing Law
Each funding agreement will be governed by, and construed in accordance with, the laws of the State of Delaware without regard to conflict of law principles.
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DESCRIPTION OF STANDARD EXPENSE AND INDEMNITY AGREEMENT TERMS
This section provides a summary of the material terms and conditions of the standard expense and indemnity agreement terms, which will be incorporated by reference into each expense and indemnity agreement to be entered into by Wilmington, the indenture trustee, the administrator, each trust to be formed in connection with the issuance of a series of notes and each service provider that may become a party to the agreement from time to time. The expense and indemnity agreement is included in the form of omnibus instrument. This summary is not complete and you should read the detailed provisions of the standard expense and indemnity agreement terms, and the applicable expense and indemnity agreement. Copies of the standard expense and indemnity agreement terms and the form of omnibus instrument have been filed as exhibits to the registration statement of which this prospectus is a part and are incorporated into this prospectus by reference.
Pursuant to the standard expense and indemnity agreement terms and each expense and indemnity agreement, Protective Life will pay the costs and expenses relating to the offering, sale and issuance of any series of notes and costs, expenses and taxes incurred by each issuing trust other than certain excluded amounts described below and will indemnify the indenture trustee, the administrator, each issuing trust and each service provider that may become a party to the agreement from time to time with respect to certain matters.
Under each expense and indemnity agreement, Protective Life will not be obligated to pay any costs, expenses, taxes or other amounts that are considered excluded amounts. Excluded amounts include:
The standard expense and indemnity agreement terms and each expense and indemnity agreement will be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles.
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DESCRIPTION OF STANDARD ADMINISTRATIVE SERVICES AGREEMENT TERMS
This section provides a summary of the material terms and conditions of the standard administrative services terms, which will be incorporated by reference into each administrative services agreement to be entered into between the administrator and each trust to be formed in connection with the issuance of a series of notes. The administrative services agreement is included in the form of omnibus instrument. This summary is not complete and you should read the detailed provisions of the standard administrative services terms and the applicable administrative services agreement. Copies of the standard administrative services terms and the form of omnibus instrument have been filed as exhibits to the registration statement of which this prospectus is a part and are incorporated into this prospectus by reference.
Pursuant to the standard administrative services terms and each administrative services agreement, the administrator will perform various financial, statistical, accounting and other services for the trust, including maintenance of books and records, preparation, upon request, of amendments to and waivers under certain documents, holding, maintaining and preserving executed copies of certain documents; upon receipt of notice, taking certain actions to enforce agreements as to which the trust is a party, preparing certain documents for signature by the trust, obtaining services of outside counsel, accountants and/or other outside service providers, other actions incidental or reasonably necessary to accomplish the foregoing and certain other actions specifically directed by the issuing trust.
The standard administrative services terms and each administrative services agreement will be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles.
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The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), imposes certain requirements on "employee benefit plans" (as defined in Section 3(3) of ERISA) subject to ERISA, including entities such as collective investment funds whose underlying assets include the assets of such plans (collectively, "ERISA plans"), and on those persons who are fiduciaries with respect to ERISA plans. Investments by ERISA plans are subject to ERISA's general fiduciary requirements, including the requirement of investment prudence and diversification and the requirement that an ERISA plan's investments be made in accordance with the documents governing the ERISA plan. Each fiduciary of an ERISA plan should consider the fiduciary standards of ERISA in the context of the ERISA plan's particular circumstances before authorizing an investment in the notes. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the ERISA plan.
Under U.S. Department of Labor regulations at 29 C.F.R. § 2510.3-101, as in effect from time to time (the "plan asset regulations"), a trust's assets may be deemed to be "plan assets" of an ERISA plan or a "plan" such as an individual retirement account or a Keogh plan (as defined in Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), other than a governmental or church plan described in Section 4975(g)(2) or (3) of the Code) (together with ERISA plans, "plans") for purposes of ERISA and Section 4975 of the Code if a plan or a person investing "plan assets" of a plan acquires an equity interest in a trust and none of the exceptions contained in the plan asset regulations are applicable. An equity interest is defined under the plan asset regulations as an interest other than an instrument that is treated as indebtedness under applicable local law and has no substantial equity features. There is very little pertinent authority on the issue of what constitutes an equity interest for purposes of the plan asset regulations. Accordingly, whether the notes would be treated as debt or equity for purposes of the plan asset regulations is unclear. Since, however, the holders of notes of a series will have recourse only to the relevant collateral that secures such series of notes, if the notes were treated as equity interests, the related funding agreements would be treated as assets of any plan holding a note.
Even if the notes were treated as equity interests for purposes of the plan asset regulations, because (a) it is expected that the funding agreements will be treated as debt, rather than equity, for federal tax purposes and (b) the funding agreements should not be deemed to have any "substantial equity features," none of the assets underlying the funding agreements should be treated as "plan assets" for purposes of the plan asset regulations. Those conclusions are based, in part, upon the traditional debt features of the funding agreements, including the reasonable expectation of purchasers of the notes that the payments due under the funding agreements will be paid when due, as well as the absence of conversion rights, warrants and other typical equity features assuming that the term of the funding agreements will not exceed 30 years.
Moreover, since Wilmington has no discretionary authority with respect to the funding agreements (except potentially in an event of default), even if the funding agreements are treated as assets of a plan holding a note, Wilmington should not be treated as having acted in a fiduciary capacity with respect to the funding agreements and the treatment of the funding agreements as plan assets should not, absent other factors that do not appear to be present, give rise to a violation of the prohibited transaction rules of ERISA or Section 4975 of the Code.
Therefore, subject to the considerations described herein, the notes are eligible for purchase by plans, any entity whose underlying assets include "plan assets" by reason of any plan's investment in the entity ("plan asset entity") and any person investing "plan assets" of any plan.
Section 406 of ERISA and Section 4975 of the Code also prohibit plans from engaging in certain transactions involving "plan assets" with persons who are "parties in interest" under ERISA or
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"disqualified persons" under the Code with respect to such plans (together, "parties in interest"), unless a statutory or administrative exemption is available. For example, if either a trust or Protective Life are a party in interest with respect to a plan (either directly or by reason of its ownership of its subsidiaries), the purchase of the notes by or on behalf of the plan would likely be a prohibited transaction under Section 406(a)(1) of ERISA and Section 4975(c)(1) of the Code, unless exemptive relief were available under an applicable administrative exemption (see below). A party in interest that engages in a prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code, unless a statutory or administrative exemption is available.
The U.S. Department of Labor ("DOL") has issued five prohibited transaction class exemptions ("PTCEs") that may provide exemptive relief for direct or indirect prohibited transactions resulting from the purchase and holding of the notes by or on behalf of a plan. Those class exemptions are PTCE 96-23 (for certain transactions determined by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company pooled separate accounts) and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). There can be no assurances that any of these class exemptions or any other exemptions will be available with respect to any particular transaction involving the notes. In addition, a purchaser of the notes should be aware that even if the conditions specified in one or more of the above referenced exemptions are met, the scope of the exemptive relief provided by the exemption might not cover all acts which might be construed as prohibited transactions.
Accordingly, the notes may not be purchased or held by any plan, any plan asset entity or any person investing "plan assets" of any plan, unless the purchase and holding of the notes is not a prohibited transaction or is exempt under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or any other prohibited transaction exemption issued by the DOL. Any purchaser of the notes or any interest therein, including in the secondary market, will be deemed to have represented that, among other things, either it is not a plan or other plan asset entity and is not purchasing the notes (and if a trust's underlying assets are treated as "plan assets," its indirect purchase and holding of the collateral securing the notes) on behalf of or with "plan assets" of any plan or other plan asset entity; or its purchase and holding of the notes is exempt under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable exemption, and that such representations shall be deemed to be made each day from the date on which the purchaser purchases through and including the date on which the purchaser disposes of the notes.
Moreover, the notes may not be purchased or held by any plan, any plan asset entity or any person investing "plan assets" of any plan if a trust or any of its affiliates (a) have investment or administrative discretion with respect to the assets of the plan used to effect such purchase; (b) have authority or responsibility to give, or regularly give, investment advice with respect to such assets, for a fee and pursuant to an agreement or understanding that such advice (1) will serve as a primary basis for investment decisions with respect to such assets, and (2) will be based on the particular investment needs of such plan; or (c) unless PTCE 95-60, 91-38 or 90-1 applies, are an employer maintaining or contributing to such plan.
Any insurance company proposing to invest assets of its general account in the notes should consider the implications of the United States Supreme Court's decision in John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank, 510 U.S. 86, 114 S. Ct. 517 (1993), in which the United States Supreme Court held that in certain circumstances assets in a life insurance company's general account are treated as assets of a plan that owns a policy or other contract with such insurance company, as well as the effect of Section 401(c) of ERISA as interpreted by regulations issued by the U.S. Department of Labor in January 2000.
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Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other persons considering purchasing notes on behalf of or with "plan assets" of any plan or plan asset entity consult with their counsel regarding the potential consequences under ERISA and the Code and the availability of exemptive relief under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14.
Governmental plans (as defined in Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA), while not subject to the fiduciary responsibility provisions of ERISA or the provisions of Section 4975 of the Code, may nevertheless be subject to state, local or other federal laws that are substantially similar to the foregoing provisions of ERISA and the Code. No view is expressed as to whether an investment in the notes (and any continued holding of the notes), or the operation and administration of the relevant trust, is appropriate or permissible for any governmental plan or church plan, or under any state, local or other law respecting such plan. Any purchaser of the notes or any interest therein, including in the secondary market, will be deemed to have represented that, among other things either (a) it is not a government plan or a church plan or any entity the assets of which are treated as including assets of such plans and it is not purchasing the notes on behalf of or with assets of any such plan or entity or (b) its purchase, holding and disposition of the notes is not in violation of the laws applicable to any such governmental plan or church plan, and that such representations shall be deemed to be made each day from the date on which the purchaser purchases, through and including the date on which the purchaser disposes of the notes. Fiduciaries of any such plans should consult with their counsel before purchasing any notes.
The sale of any notes to a plan is in no respect a representation by any party or entity that such an investment meets all relevant legal requirements with respect to investments by plans generally or any particular plan, or that such an investment is appropriate for plans generally or any particular plan.
Notwithstanding the above, with regard to a particular trust, the sale of notes to plans, or a person utilizing the plan assets of plans, might not be allowed, or might only be allowed subject to certain additional conditions, in which case the applicable pricing supplement will disclose the prohibition or such additional conditions.
THE ERISA CONSIDERATIONS SET FORTH ABOVE ARE ONLY INTENDED AS A SUMMARY AND MAY NOT BE APPLICABLE DEPENDING UPON A PLAN'S SPECIFIC FACTS AND CIRCUMSTANCES. PLAN FIDUCIARIES SHOULD CONSULT THEIR OWN ADVISORS WITH RESPECT TO THE ADVISABILITY OF AN INVESTMENT IN THE NOTES, AND POTENTIALLY ADVERSE CONSEQUENCES OF SUCH INVESTMENT, INCLUDING WITHOUT LIMITATION THE POSSIBLE EFFECTS OF CHANGES IN APPLICABLE LAWS.
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The notes may be offered in any of the following ways:
The means by which a particular offering will be made, including the names of any underwriters, the purchase price of the securities, the proceeds of the offering and any underwriters' discounts or commissions, will be described in the prospectus supplement or pricing supplement for the offering. If underwriters or dealers are used in the sale, the underwriters or dealers will acquire the notes for their own account and may resell them in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. Notes may be offered to the public either through underwriting syndicates represented by managing underwriters or by underwriters without a syndicate. Unless otherwise described in the applicable prospectus supplement or pricing supplement, the obligations of the underwriters to purchase notes will be subject to certain conditions precedent, and the underwriters must purchase all of such notes if they buy any of them. The underwriters may change any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers from time to time.
Notes may also be sold directly or through designated agents. Any agent involved in the offer or sale of notes will be named, and any commissions payable to such agent will be described, in the applicable prospectus supplement or pricing supplement. Unless otherwise indicated in a pricing supplement, an agent will act on a best efforts basis for the period of its appointment.
Any underwriters, dealers or agents participating in the distribution of notes will be "underwriters," with respect to the notes being distributed by them and the funding agreements being purchased by the issuing trust, and any discounts or commissions received by them on the sale or resale of notes may be deemed to be underwriting discounts and commissions under the Securities Act of 1933, as amended (the "Securities Act"). Agents and underwriters may be entitled under agreements entered into with a trust and Protective Life to indemnification against certain civil liabilities, including liabilities under the Securities Act, or to contribution with respect to payments that the agents or underwriters may be required to make in respect of such liabilities. Agents and underwriters may be customers of, engage in transactions with, or perform services for, a trust or Protective Life or a trust's respective subsidiaries or affiliates in the ordinary course of business.
Protective Life is a statutory issuer of the notes under the Securities Act.
If so indicated in the applicable prospectus supplement or pricing supplement, a trust will authorize agents and underwriters to solicit offers by certain institutions to purchase its notes at the public offering price set forth in the prospectus supplement or pricing supplement pursuant to delayed delivery contracts providing for payment and delivery on the date or dates stated in the prospectus supplement or pricing supplement. These delayed delivery contracts will be subject only to those conditions described in the applicable prospectus supplement or pricing supplement, and the applicable prospectus supplement or pricing supplement will describe the commissions payable for the solicitation.
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Certain matters regarding the notes and their offering will be passed upon:
Opinions issued in connection with future offerings may be issued by counsel other than those listed above. The name of any such counsel other than those listed above will be included in the applicable pricing supplement or prospectus supplement.
The consolidated balance sheets of Protective Life as of December 31, 2007 and 2006 and the related consolidated statements of income, share owner's equity and cash flows for each of the three years in the period ended December 31, 2007 and the related financial statement schedules which are incorporated by reference in this prospectus from Protective Life's Annual Report on Form 10-K for the year ended December 31, 2007 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth those expenses to be incurred by Protective Life Insurance Company in connection with the issuance and distribution of the securities being registered. Except for the Securities and Exchange Commission filing fee, all amounts shown are estimates.
Securities and Exchange Commission filing fee |
$ | 0 | (1) | |
Fees and expenses of Trustees and Administrator |
$ | 130,000 | ||
Printing and engraving expenses |
$ | 50,000 | ||
Accountant's fees and expenses |
$ | 30,000 | ||
Legal fees and expenses |
$ | 200,000 | ||
Rating agency fees |
$ | 400,000 | ||
Miscellaneous expenses |
$ | 50,000 | ||
Total |
$ | 860,000 | ||
Item 15. Indemnification of Directors and Officers.
Protective Life Insurance Company
The Tennessee Business Corporation Act ("TBCA") provides that a corporation may indemnify an individual made a party to a proceeding because the individual is or was a director or officer of the corporation against liability incurred in connection with the proceeding if: (a) such person acted in good faith; (b) in the case of conduct in an official capacity with the corporation, he or she reasonably believed such conduct was in the corporation's best interests; (c) in all other cases, he or she reasonably believed that his or her conduct was at least not opposed to the best interests of the corporation; and (d) in connection with any criminal proceeding, such person had no reasonable cause to believe his or her conduct was unlawful. In actions brought by or in the right of the corporation, however, the TBCA provides that no indemnification may be made if the director or officer was adjudged to be liable to the corporation. The TBCA also provides that in connection with any proceeding charging improper personal benefit to an officer or director, no indemnification may be made if such officer or director is adjudged liable on the basis that such personal benefit was improperly received. Unless the corporation's charter provides otherwise, in cases where the director or officer is wholly successful, on the merits or otherwise, in the defense of any proceeding instigated because of his or her status as a director or officer of a corporation, the TBCA mandates that the corporation indemnify the director or officer against reasonable expenses incurred in the proceeding. Unless the corporation's charter provides otherwise, the TBCA provides that a court of competent jurisdiction, upon application, may order that officer or director be indemnified for reasonable expenses if, in consideration of all relevant circumstances, the court determines that such individual is fairly and
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reasonably entitled to mandatory indemnification or that such individual is fairly and reasonably entitled to indemnification, notwithstanding the fact that (a) such officer or director was adjudged liable to the corporation in a proceeding by or in the right of the corporation; (b) such officer or director was adjudged liable on the basis that personal benefit was improperly received by him or her; or (c) such officer or director breached the relevant duty of care to the corporation.
Article XI of Protective Life's by-laws provide, in substance, that it shall indemnify any person who was, is or is threatened to be made, a party to any claim, action, suit or proceeding, other than an action by or in the right of Protective Life, by reason of the fact that he or she is or was an officer, director, employee or agent of Protective Life, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such claim, action, suit or proceeding if such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of Protective Life and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. If the action or suit is or was by or in the right of Protective Life to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of Protective Life, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of Protective Life, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to Protective Life unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. To the extent that any officer or director has been successful on the merits or otherwise in defense of any such action, suit or proceeding, or in defense of any claim, issue or matter therein, he or she shall be indemnified by Protective Life against expenses (including attorneys' fees) actually and reasonably incurred in connection therewith, notwithstanding that he or she has not been successful on any other claim, issue or matter in any such action, suit or proceeding. Unless ordered by a court, indemnification shall be made by Protective Life only as authorized in the specific case upon a determination that indemnification of the officer or director is proper in the circumstances because he or she has met the applicable standard of conduct. Such determination shall be made (a) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to or who have been wholly successful on the merits or otherwise with respect to such claim, action, suit or proceeding, or (b) if such quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion or (c) by Protective Life's shareholders.
In addition, the executive officers and directors are insured by Protective Life's Directors' and Officers' Liability Insurance Policy including Company Reimbursement.
A list of Exhibits filed herewith is contained on the Index to Exhibits and is incorporated herein by reference.
(a) Rule 415 Offering.
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The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by such registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
Provided further, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment is provided pursuant to Item 1100(c) of Regulation AB (17 CFR 229.1100(c)).
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
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date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(b) Filings Incorporating Subsequent Exchange Act Documents by Reference.
The undersigned registrant hereby undertakes that, for purpose of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) Acceleration of Effectiveness.
Insofar as indemnifications for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
II-4
(d) Filings regarding asset-backed securities incorporating by reference subsequent Exchange Act documents by third parties.
The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 of a third-party that is incorporated by reference in the registration statement in accordance with Item 1100(c)(1) of Regulation AB shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(e) Filings regarding asset-backed securities that provide certain information through an internet website.
The undersigned registrant hereby undertakes that, except as otherwise provided by Item 1105 of Regulation AB, information provided in response to that Item pursuant to Rule 312 of Regulation S-T through the specified Internet address in the prospectus is deemed to be a part of the prospectus included in the registration statement. In addition, the undersigned registrant hereby undertakes to provide to any person without charge, upon request, a copy of the information provided in response to Item 1105 of Regulation AB pursuant to Rule 312 of Regulation S-T through the specified Internet address as of the date of the prospectus included in the registration statement if a subsequent update or change is made to the information.
II-5
Pursuant to the requirements of the Securities Act of 1933, Protective Life Insurance Company (i) certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and (ii) has duly caused this Amendment No. 1 to the registration statement on Form S-3 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Burbank, State of California, on this 14th day of January, 2009.
Protective Life Insurance Company | |||
By: |
/s/ JUDY WILSON Name: Judy Wilson Title: Senior Vice President |
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to the registration statement on Form S-3 has been signed by the following persons in the capacities and on the dates indicated.
Signature
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Title
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Date
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* John D. Johns |
Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer) | January 14, 2009 | ||
* Richard J. Bielenn |
Vice Chairman of the Board and Chief Financial Officer (Principal Financial Officer) |
January 14, 2009 |
||
* Steven G. Walker |
Senior Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer) |
January 14, 2009 |
||
* John D. Johns |
Director |
January 14, 2009 |
||
* Richard J. Bielen |
Director |
January 14, 2009 |
||
* Carolyn Johnson |
Director |
January 14, 2009 |
*By: | /s/ JUDY WILSON As Attorney-in-Fact |
January 14, 2009 |
II-6
EXHIBIT INDEX
Exhibit Number
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Description | ||
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1.1 | Standard Selling Agent Agreement Terms (Secured InterNotes®) | ||
1.2 | Selling Agent Agreement (Secured InterNotes®) (included in Section F to the Form of Omnibus Instrument filed as Exhibit 4.14 hereto) | ||
1.3 | Standard Distribution Agreement Terms (Secured Medium-Term Notes) | ||
1.4 | Distribution Agreement (Secured Medium-Term Notes) (included in Section G to the Form of Omnibus Instrument filed as Exhibit 4.14 hereto) | ||
4.1 | Standard Indenture Terms (incorporated herein by reference to Exhibit 4.1 to Protective Life Insurance Company's Registration Statement on Form S-3 (Registration No. 333-126757)) | ||
4.2 | Indenture (included in Section E to the Form of Omnibus Instrument filed as Exhibit 4.14 hereto) | ||
4.3 | Form of Retail Global Note (Secured InterNotes®) | ||
4.4 | Form of Institutional Global Note (Secured Medium-Term Notes) | ||
4.5 | Form of Definitive Note | ||
4.6 | Form of Certificate of Trust (incorporated herein by reference to Exhibit 4.6 to Protective Life Insurance Company's Registration Statement on Form S-3 (Registration No. 333-100944)) | ||
4.7 | Standard Statutory Trust Terms (incorporated herein by reference to Exhibit 4.7 to Protective Life Insurance Company's Registration Statement on Form S-3 (Registration No. 333-126757)) | ||
4.8 | Statutory Trust Agreement (included in Section A to the Form of Omnibus Instrument filed as Exhibit 4.14 hereto) | ||
4.9 | Standard Common Law Trust Terms (incorporated herein by reference to Exhibit 4.9 to Protective Life Insurance Company's Registration Statement on Form S-3 (Registration No. 333-126757)) | ||
4.10 | Common Law Trust Agreement (included in Section A to the Form of Omnibus Instrument filed as Exhibit 4.14 hereto) | ||
4.11 | Form of Funding Agreement (incorporated herein by reference to Exhibit 4.11 to Protective Life Insurance Company's Registration Statement on Form S-3 (Registration No. 333-126757)) | ||
4.12 | Standard Administrative Services Terms (incorporated herein by reference to Exhibit 4.12 to Protective Life Insurance Company's Registration Statement on Form S-3 (Registration No. 333-126757)) | ||
4.13 | Administrative Services Agreement (included in Section B to the Form of Omnibus Instrument filed as Exhibit 4.14 hereto) | ||
4.14 | Form of Omnibus Instrument | ||
5.1 | Opinion of Nancy Kane, in-house counsel to Protective Life Insurance Company* | ||
5.2 | Opinion of Richards, Layton & Finger, P.A., Special Delaware Counsel to Protective Life Insurance Company* | ||
5.3 | Opinion of Bass, Berry & Sims PLC, Special Tennessee Counsel to Protective Life Insurance Company* | ||
8 | Opinion of Debevoise & Plimpton LLP (re: tax matters)* | ||
10.1 | Standard Expense and Indemnity Agreement Terms (incorporated herein by reference to Exhibit 10.1 to Protective Life Insurance Company's Registration Statement on Form S-3 (Registration No. 333-126757)) | ||
10.2 | Expense and Indemnity Agreement (included in Section C to the Form of Omnibus Instrument filed as Exhibit 4.14 hereto) |
Exhibit Number
|
Description | ||
---|---|---|---|
12.1 | Statement Regarding Computation of Ratio of Earnings to Fixed Charges (incorporated herein by reference to Exhibit 12 to Protective Life Insurance Company's Quarterly Report on Form 10-Q filed on November 14, 2008) | ||
23.1 | Consent of PricewaterhouseCoopers LLP | ||
23.2 | Consent of Nancy Kane (included in Exhibit 5.1)* | ||
23.3 | Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2)* | ||
23.4 | Consent of Bass, Berry & Sims PLC (included in Exhibit 5.3)* | ||
23.5 | Consent of Debevoise & Plimpton LLP (included in Exhibit 8)* | ||
23.6 | Consent of William L. McCarty* | ||
24.1 | Power of Attorney of Board of Directors and Officers | ||
25.1 | Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of The Bank of New York Mellon as Indenture Trustee under the Indenture | ||
99.1 | Form of Retail Pricing Supplement | ||
99.2 | Form of Institutional Pricing Supplement |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 (Registration No. 333-155707) of our report dated March 28, 2008 relating to the financial statements and financial statement schedules, which appears in Protective Life Insurance Companys Annual Report on Form 10-K for the year ended December 31, 2007. We also consent to the reference to us under the heading Experts in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Birmingham, Alabama
Exhibit 99.1
Pricing Supplement No. · Dated: |
Rule 424(b)(·) |
(To Prospectus Dated , 200 , and |
File No. · |
Prospectus Supplement dated , 200 ) |
|
Pricing Supplement No. |
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This Pricing Supplement consists of · pages |
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Protective Life Insurance Company
Sponsor and Depositor
InterNotes®
Issued Through
Protective Life Secured Trust ·
1. The Notes
Trade Date:
Original Issue Date:
Minimum Denominations/Increments: $
CUSIP |
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PRINCIPAL |
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PRICE |
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CONCESSION |
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NET |
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INTEREST |
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INTEREST |
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STATED |
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SURVIVORS |
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REDEMPTION |
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REPAYMENT |
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SECURITIES EXCHANGE |
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FUNDING |
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Terms of Survivors Option:
1
Annual Put Limitation: |
¨ $2,000,000 or 2%; or |
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¨ $ or % |
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Individual Put Limitation: |
¨ $250,000; or |
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¨ $ |
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Trust Put Limitation: $
Optional Redemption Terms:
Optional Redemption Dates:
Initial Redemption Percentage:
Annual Percentage Reduction (if any):
Redemption: |
¨ In whole only and not in part |
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¨ May be in whole or in part |
Optional Repayment Terms:
Optional Repayment Dates:
Optional Repayment: |
¨ In whole only and not in part |
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¨ May be in whole or in part |
Form of trust: ¨ Delaware statutory trust ¨ Delaware common law trust
Trust Expiration Date:
Special Tax Considerations:
Rating of Notes: S&P Moodys
Securities Exchange Listing: ¨ No ¨ Yes, Name of Exchange:
Additional Terms:
Agents:
2. The Funding Agreement(s)
Funding Agreement Issuer: Protective Life Insurance Company
Deposit Amount:
Effective Date:
Interest Rate:
Interest Payment Frequency:
Stated Maturity Date:
Survivors Option: ¨ Yes ¨ No
If yes:
Annual Put Limitation: |
¨ $2,000,000 or 2%; or |
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¨ $ or % |
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Individual Put Limitation: |
¨ $250,000; or |
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¨ $ |
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Trust Put Limitation: $ |
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Redemption: ¨ Yes ¨ No
Early Redemption Dates:
2
Initial Redemption Percentage: |
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Annual Percentage Reduction (if any): |
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Redemption: |
¨ In whole only and not in part |
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¨ May be in whole or in part |
Repayment: ¨ Yes ¨ No
Repayment Dates: |
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Repayment: |
¨ In whole only and not in part |
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¨ May be in whole or in part |
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Rating of Funding Agreement: S&P Moodys
Additional Terms:
3. Other Information
Rating of Program: S&P Moodys
Protective Life Insurance Company Insurer Financial Strength Rating: S&P Moodys
Protective Securities, a division of ProEquities, Inc. and an affiliate of Protective Life Insurance Company, is acting as an agent in connection with this offering.
3
Exhibit 99.2
Pricing Supplement No. · Dated: |
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Rule 424(b)(·) |
(To Prospectus Dated ,
200 , and |
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File No. · |
Pricing Supplement No. |
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This Pricing Supplement consists of · pages |
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Protective Life Insurance Company
Sponsor and Depositor
Secured Medium-Term Notes
Issued Through
Protective Life Secured Trust ·
The description in this pricing supplement of the particular terms of the Secured Medium-Term Notes offered hereby and the Funding Agreement(s) sold by Protective Life Insurance Company to the Trust specified herein supplements the description of the general terms and provisions of the notes and the funding agreement(s) set forth in the accompanying prospectus and prospectus supplement, to which reference is hereby made.
1. The Notes
Principal Amount:
Price to Public:
Net Proceeds to the Trust:
Dealers Discount:
Original Issue Date:
Stated Maturity Date:
Specified Currency:
Interest Payment Dates:
Initial Interest Payment Date:
Regular Record Dates:
Type of Interest Rate: o Fixed Rate o Floating Rate
Fixed Rate Notes:
Interest Rate:
Floating Rate Notes:
Initial Interest Rate:
Initial Interest Reset Date:
Base Rate:
o CD Rate |
o Commercial Paper Rate |
o Constant Maturity Treasury Rate |
o Federal Funds Rate |
o LIBOR |
o Treasury Rate |
o Prime Rate |
o Other (See Attached) |
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If LIBOR: o LIBOR Reuters Page o LIBOR Telerate Page |
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Designated LIBOR Currency: |
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If Constant Maturity Treasury Rate: |
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Designated CMT Telerate Page: o 7051 o 7052 |
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If 7052: o Weekly Average o Monthly Average |
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Designated CMT Maturity Index: |
Interest Reset Dates:
Interest Rate Determination Dates:
Index Maturity:
Spread (+/-):
Spread Multiplier:
Maximum Interest Rate: o Yes % o No
Minimum Interest Rate: o Yes % o No
Inverse Floating Rate Note o Yes o No
Fixed Interest Rate:
Floating Rate/Fixed Rate Note o Yes o No
Fixed Interest Rate:
Fixed Rate Commencement Date:
Calculation Agent:
Exchange Rate Agent:
2
Computation of Interest (not applicable unless different than as specified in the prospectus and prospectus supplement):
Day Count Convention (not applicable unless different than as specified in the prospectus and prospectus supplement):
Amortizing Note: o Yes (See Attached) o No
Optional Redemption: o Yes o No
Optional Redemption Dates:
Initial Redemption Percentage:
Annual Percentage Reduction (if any):
Redemption: |
o In whole only and not in part |
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o May be in whole or in part |
Optional Repayment: o Yes o No
Optional Repayment Dates:
Optional Repayment: |
o In whole only and not in part |
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o May be in whole or in part |
Discount Note: o Yes o No
Total Amount of Discount:
Yield to Maturity:
Sinking Fund (not applicable unless specified):
Additional Amounts to be Paid for Withholding Tax (not applicable unless specified):
Securities Exchange Listing: o No o Yes, Name of Exchange:
Authorized Denominations:
CUSIP:
Form of trust: o Delaware statutory trust o Delaware common law trust
Trust Expiration Date:
Rating of Notes: S&P Moodys
Dealer(s) Purchasing Notes as Principal: |
o Yes |
o No |
If yes:
Dealer(s) |
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Principal Amount |
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Total: |
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3
Dealer(s) Acting as Agent: |
o Yes |
o No |
If yes:
Dealer(s) |
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Principal Amount |
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Total: |
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2. The Funding Agreement(s)
Funding Agreement Issuer: Protective Life Insurance Company
Funding Agreement No.:
Deposit Amount:
Effective Date:
Stated Maturity Date:
Specified Currency:
Interest Payment Dates:
Initial Interest Payment Date:
Type of Interest Rate: o Fixed Rate o Floating Rate
For Fixed Rate Funding Agreements:
Interest Rate:
For Floating Rate Funding Agreements:
Initial Interest Rate:
Initial Interest Reset Date:
Base Rate:
o CD Rate |
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o Commercial Paper Rate |
o Constant Maturity Treasury Rate |
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o Federal Funds Rate |
o LIBOR |
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o Treasury Rate |
4
o Prime Rate |
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o Other (See Attached) |
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If LIBOR: o LIBOR Reuters Page |
o LIBOR Telerate Page |
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Designated LIBOR Currency: |
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If Constant Maturity Treasury Rate: |
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Designated CMT Telerate Page: o 7051 o 7052 |
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If 7052: o Weekly Average o Monthly Average |
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Designated CMT Maturity Index: |
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Interest Reset Dates: |
|||||
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Interest Rate Determination Date: |
|||||
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Index Maturity: |
|||||
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|||||
Spread (+/-): |
|||||
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Spread Multiplier: |
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Adjustments to Spread or Spread Multiplier: |
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Maximum Interest Rate: |
o Yes % |
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o No |
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Minimum Interest Rate: |
o Yes % |
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o No |
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Inverse Floating Rate Funding Agreement o Yes |
o No |
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Fixed Interest Rate: |
|||||
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Floating Rate/Fixed Rate Funding Agreement o Yes |
o No |
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Fixed Interest Rate: |
|||||
Fixed Rate Commencement Date: |
|||||
Computation of Interest (not applicable unless different than as specified in the prospectus and prospectus supplement):
Day Count Convention (not applicable unless different than as specified in the prospectus and prospectus supplement):
Amortizing Funding Agreement: o Yes (See Attached) o No
Early Redemption: o Yes o No
Early Redemption Dates:
Initial Redemption Percentage:
Annual Percentage Reduction (if any):
Redemption: o In whole only and not in part
5
o May be in whole or in part
Repayment: |
o Yes |
o No |
||
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Repayment Dates: |
|||
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Repayment: |
o In whole only and not in part |
||
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o May be in whole or in part |
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Discount Funding Agreement: o Yes o No
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Total Amount of Discount: |
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Yield to Maturity: |
Additional Amounts to be Paid For Withholding Tax (not applicable unless specified):
Rating of the Funding Agreement: S&P |
Moodys |
Additional Terms:
3. Other Information
Rating of Program: S&P Moodys
Protective Life Insurance Company Insurer Financial Strength Rating: S&P Moodys
6
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end
[LETTERHEAD OF DEBEVOISE & PLIMPTON LLP]
January 14, 2009
By EDGAR
Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Mail Stop 3561
Washington, D.C. 20549-0305
Attention: Ms. Amanda McManus
Re: | Protective Life Insurance Company Registration Statement on Form S-3. Filed November 26, 2008 File No. 333-155707 |
Dear Ms. McManus:
On behalf of Protective Life Insurance Company, a Tennessee stock life insurance company ("Protective Life"), we are writing to respond to the comments of the Staff of the Commission, with respect to the above referenced Registration Statement (the "Registration Statement"), in the letter dated December 24, 2008 (the "Comment Letter"), addressed to Deborah J. Long, Esq., Senior Vice President, Secretary and General Counsel of Protective Life. The bold numbered paragraphs and headings below are taken from the Comment Letter, and Protective Life's responses to each such comment follow in plain text.
Protective Life is filing, via EDGAR, Amendment No. 1 ("Amendment No. 1") to the Registration Statement. Enclosed with the paper copy of this letter are two copies of a clean version of Amendment No. 1, as well as two copies of a blacklined version of Amendment No. 1, marked to show changes from the Registration Statement. Page references in the responses below are to Amendment No. 1. Terms used herein but not otherwise defined will have the meanings set forth in Amendment No. 1.
Registration Statement on Form S-3
General
Protective Life hereby confirms that Protective Life and each issuing entity previously established, directly or indirectly, by Protective Life or any affiliate of Protective Life have been current and timely with Exchange Act reporting during the last twelve months with respect to asset-backed securities involving the same asset class as the notes registered under the Registration Statement. Protective Life respectfully advises the Staff that none of its affiliates have offered a class of asset-backed securities involving the same class of assets as this offering. Protective Life has supplementally attached hereto as Annex I a list of CIK codes and Commission file numbers for each issuing entity that has offered a class of asset-backed securities involving the same asset class as the securities registered on the Registration Statement under Protective Life's existing secured notes programs (File Nos. 333-100944 and 333-126757) (the "Existing Programs") Annex I also includes the CUSIP numbers, issuance dates and maturity dates for the notes issued by such issuing entities.
Protective Life hereby confirms that all material terms to be included in the finalized agreements will also be disclosed in the applicable final Rule 424(b) prospectus, or that finalized agreements will be filed simultaneously with or prior to the applicable final prospectus.
Protective Life hereby confirms that it will file unqualified legal and tax opinions in connection with each takedown.
Consistent with the response to Staff comment 2 above, Protective Life hereby confirms that it plans to file the finalized agreements, including the exhibits to these agreements, as an exhibit to the Registration Statement or under cover of Form 8-K and incorporated by reference into the Registration Statement prior to or at the time of each takedown or alternatively that all the material terms will have already been disclosed in the applicable final Rule 424 prospectus.
In response to the Staff's comment, Protective Life informs the Staff that, consistent with past practice in connection with the Existing Programs, each issuing entity will file an annual report from each party participating in the servicing functions on assessment of compliance with servicing criteria for asset-backed securities as well as an attestation report from an independent registered public accounting firm pursuant to Exchange Act Rule 15d-18 and Item 1122 of Regulation AB as exhibits to such issuing entity's annual reports on Form 10-K to the extent such issuing entities are required to file such reports.
In response to the Staff's comment, Protective Life has filed the forms of pricing supplements as exhibits 99.1 and 99.2 to Amendment No. 1.
2
Protective Life respectfully advises the Staff that the Registration Statement contains all information that is required to be included therein and omits only specific pricing terms as permitted by Rule 430A and information that is not currently known or reasonably available to Protective Life as permitted by Rules 409 and 430B. Such omitted information will be included in pricing supplements or prospectus supplements relating to each series of notes filed pursuant to Rule 424(b), and the filing date of a prospectus containing information omitted from a prospectus in reliance on Rule 430B shall be deemed a new effective date of the part of the registration statement relating to the securities to which such form of Rule 424(b) prospectus relates. Protective Life advises the Staff that the terms noted in the bullet points above should be considered pricing information or information that is not currently known or reasonably available to Protective Life for the reasons indicated in the corresponding paragraphs below.
Additional terms of the notes may be pricing information or information that is not currently known or reasonably available to Protective Life. In the course of establishing the pricing terms of a series of notes, potential investors, in particular institutional investors making reverse inquiries, may request terms of a series of notes that do not conflict with the indenture or otherwise result in the creation of a new class of securities that must be registered by a new registration statement or post-effective amendment, but are not variable terms that are typically subject to change in each offering. Such additional terms of the notes could affect the rate of interest that the issuing trust would have to pay on the relevant notes. Examples include payment of additional amounts in respect of withholding taxes, which is not typically a variable term but is noted as a possibility in the Registration Statement. A pricing supplement may also specify a paying agent other than the indenture trustee or information about the agents for the offering.
Protective Life respectfully advises the Staff that each prospectus supplement included in the Registration Statement includes a section captioned "Material U.S. Federal Income Tax Considerations" that describes certain federal income tax considerations relevant to holders of notes sold pursuant to such prospectus supplement, and accordingly such sections will be included in the Registration Statement at the time it becomes effective. In addition, a description of certain additional federal tax considerations may be pricing information or information that is not currently known or reasonably available to Protective Life because additional or different tax disclosure could be required in certain circumstances, such as in the case of a series of notes with maturities of greater than 30 years, the issuance of which is noted as a possibility in the Registration Statement. Such federal income tax considerations could affect the rate of interest that the issuing trust would have to pay on the relevant notes.
Additional events of default may be pricing information or information that is not currently known or reasonably available to Protective Life. In the course of establishing the pricing terms of a series of notes, potential investors, in particular institutional investors making reverse inquiries, may request additional events of default. Additional events of default affect the rate of interest that the issuing trust would have to pay on the relevant notes. Each additional event of default increases the investors'
3
protection against non-performance by the issuing trust. As such, the issuing trust may be able to pay a lower rate of interest on the relevant notes.
A different use of proceeds is information that is not currently known or reasonably available to Protective Life because Protective Life may have as yet unknown funding needs in the future that require it to issue notes to raise proceeds for a use or uses other than that described in the base prospectus. Protective Life notes that it is common market practice for S-3 registrants to provide a use of proceeds in a base prospectus that includes a proviso that a different use of proceeds may be provided in a prospectus supplement or pricing supplement for a specific offering.
Base Prospectus
General
In response to the Staff's comment, Protective Life has removed all uses of the first person to refer to Protective Life. Protective Life has revised the disclosure under the caption "Forward Looking Information" in the base prospectus and both prospectus supplements to prominently indicate that the Private Securities Litigation Reform Act is not available to the issuing entities and to clarify the references to Protective Life's 10-K.
Protective Life respectfully advises the Staff that the descriptions of material agreements and the program in the base prospectus are supplemented by the applicable prospectus supplement filed as part of the Registration Statement, and will be further supplemented by a pricing supplement or prospectus supplement in connection with each offering. The base prospectus describes only the general terms of the agreements and the program. The prospectus supplements filed as part of the Registration Statement, which are specific to offerings of InterNotes to retail investors or medium-term notes to institutional or retail investors, provide further detailed information applicable to the offerings. Protective Life believes that the base prospectus when taken together with the applicable prospectus supplement as further supplemented by a pricing supplement or prospectus supplement relating to a particular series of notes will provide a complete summary of the material terms of each agreement and of the securities being offered. Protective Life believes that it would be misleading to tell investors that the base prospectus is a complete summary of the material agreements or the program.
Risk Factors, page 11
4
In response to the Staff's comment, Protective Life has revised the risk factor captioned "There may not be any trading market for your notes; many factors affect the trading and market value of your notes" in the base prospectus and directs the Staff's attention to the references to current market conditions in the risk factor captioned "An increase in market rates could result in a decrease in the value of any notes bearing interest at a fixed rate" in the base prospectus. Protective Life advises the Staff that the potential impact to Protective Life due to the current economic climate is discussed under Part II, Item 1A. Risk Factors ("Item 1A.") in Protective Life's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008, which report is incorporated by reference in the Registration Statement, under the captions "The Company's investments are subject to market and credit risks. These risks could be heightened during periods of extreme volatility or disruption in financial and credit markets", "Credit market volatility or disruption could adversely impact the Company's financial condition or results from operations", "Disruption of the capital and credit markets could negatively affect the Company's ability to meet its liquidity needs" and "There can be no assurance that the actions of the U.S. Government or other governmental and regulatory bodies for the purpose of stabilizing the financial markets will achieve the intended effect." A copy of Item 1A. is attached hereto as Annex II.
Description of the Notes, page 23
Consistent with the response to Staff comment 9 above, Protective Life respectfully advises the Staff that the Description of the Notes in the base prospectus is supplemented by the applicable prospectus supplement filed as part of the Registration Statement, and will be further supplemented by a pricing supplement or prospectus supplement in connection with each offering. The base prospectus describes only the general terms of the notes to be offered under the Registration Statement. The prospectus supplements filed as part of the Registration Statement, which are specific to offerings of InterNotes to retail investors or medium-term notes to institutional or retail investors, provide further detailed information applicable to each series of notes. Protective Life believes that the base prospectus when taken together with the applicable prospectus supplement as further supplemented by a pricing supplement or prospectus supplement relating to a particular series of notes will provide a complete summary of the material terms of each series of notes being offered. Protective Life believes that it would be misleading to tell investors that the base prospectus is a complete summary of the material terms of the notes.
Interest Rate Calculation, page 24
Protective Life hereby confirms that any interest rate will be based on an index customarily used to measure interest in debt transactions and will not be an index based on securities or commodities prices.
Description of the Funding Agreements, Page 37
General, page 37
5
Protective Life respectfully advises the Staff that there are no arrangements to have the ratings monitored while the securities are outstanding. Protective Life also respectfully advises the Staff that while the expected credit ratings for the notes are disclosed in the Registration Statement, the credit ratings for each series of notes will be disclosed in the relevant pricing supplement or prospectus supplement, and the issuance and sale of the notes is not conditioned on the assignment of a rating by one or more rating agencies.
Part II
Undertakings, page II-2
In response to the Staff's comment, Protective Life has revised the undertakings.
Prospectus Supplement
Material U.S. Federal Income Tax Consideration
In response to the Staff's comment, Protective Life has clarified, at the beginning of each section, that the disclosure is not merely a discussion, but in fact represents the opinion of Protective Life's counsel as to the material tax consequences of an investment in the notes. Protective Life respectfully advises the Staff that Protective Life intends to file an opinion of tax counsel as Exhibit 8.1 in an amendment to the Registration Statement.
* * * * *
6
If you have any questions regarding this letter, please do not hesitate to call Matthew E. Kaplan at (212) 909 7334 or Andrew P. Hughes at (212) 909 6079.
Sincerely, | |||
/s/ Matthew E. Kaplan Matthew E. Kaplan |
cc: | John Stickel | |||
Securities and Exchange Commission | ||||
Deborah J. Long, Esq. | ||||
Protective Life Insurance Company | ||||
Judy Wilson | ||||
Protective Life Insurance Company | ||||
Max Berueffy | ||||
Protective Life Insurance Company | ||||
Perry J. Shwachman | ||||
Sidley Austin LLP | ||||
Anthony J. Ribaudo | ||||
Sidley Austin LLP |
7
PROTECTIVE LIFE SECURED TRUSTS | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Trust
|
Cusip | CIK | Commission File No. |
Issue Date |
Maturity Date |
|||||||||||
Registration File No.: 333-100944 |
||||||||||||||||
2003-1 | 74367FAA6 | 0001285169 | 333-100944-02 | 11/24/03 | 11/24/08 | |||||||||||
2004-1 | 74367CAA3 | 0001285494 | 333-100944-03 | 01/15/04 | 01/15/10 | |||||||||||
2004-2 | 74367CAB1 | 0001285495 | 333-100944-04 | 01/15/04 | 01/15/19 | |||||||||||
2004-3 | 74367CAC9 | 0001285498 | 333-100944-05 | 01/15/04 | 01/15/29 | |||||||||||
2004-4 | 74367CAD7 | 0001285499 | 333-100944-06 | 01/23/04 | 01/15/09 | |||||||||||
2004-5 | 74367CAE5 | 0001285501 | 333-100944-07 | 01/23/04 | 01/15/19 | |||||||||||
2004-6 | 74367CAF2 | 0001285502 | 333-100944-08 | 01/29/04 | 01/15/11 | |||||||||||
2004-8 | 74367CAH8 | 0001285503 | 333-100944-09 | 02/26/04 | 08/15/10 | |||||||||||
2004-9 | 74367CAJ4 | 0001285504 | 333-100944-10 | 02/26/04 | 02/15/20 | |||||||||||
2004-10 | 74367CAK1 | 0001285506 | 333-100944-11 | 03/04/04 | 03/15/11 | |||||||||||
2004-11 | 74367CAL9 | 0001285507 | 333-100944-12 | 03/04/04 | 03/15/29 | |||||||||||
2004-12 | 74367CAM7 | 0001285508 | 333-100944-13 | 03/11/04 | 03/15/10 | |||||||||||
2004-13 | 74367CAN5 | 0001285509 | 333-100944-14 | 03/11/04 | 03/15/24 | |||||||||||
2004-14 | 74367CAP0 | 0001285510 | 333-100944-15 | 03/18/04 | 03/15/11 | |||||||||||
2004-15 | 74367CAQ8 | 0001285511 | 333-100944-16 | 03/18/04 | 03/15/20 | |||||||||||
2004-16 | 74367CAR6 | 0001285512 | 333-100944-17 | 03/25/04 | 03/15/14 | |||||||||||
2004-17 | 74367CAS4 | 0001285513 | 333-100944-18 | 03/25/04 | 03/15/24 | |||||||||||
2004-7 | 74367CAG0 | 0001285517 | 333-100944-19 | 01/29/04 | 01/15/15 | |||||||||||
2004-19 | 74367CAU9 | 0001285658 | 333-100944-20 | 04/01/04 | 04/15/18 | |||||||||||
2004-18 | 74367CAT2 | 0001285661 | 333-100944-21 | 04/01/04 | 04/15/09 | |||||||||||
2004-A | 74367FAB4 | 0001286060 | 333-100944-22 | 04/07/04 | 04/01/11 | |||||||||||
2004-21 | 74367CAW5 | 0001286305 | 333-100944-23 | 04/08/04 | 04/15/19 | |||||||||||
2004-20 | 74367CAV7 | 0001286306 | 333-100944-24 | 04/08/04 | 10/15/12 | |||||||||||
2004-23 | 74367CAY1 | 0001287008 | 333-100944-25 | 04/15/04 | 04/15/14 | |||||||||||
2004-22 | 74367CAX3 | 0001287009 | 333-100944-26 | 04/15/04 | 07/15/10 | |||||||||||
2004-25 | 74367CBA2 | 0001287928 | 333-100944-27 | 04/22/04 | 04/15/19 | |||||||||||
2004-24 | 74367CAZ8 | 0001287929 | 333-100944-28 | 04/22/04 | 04/15/13 | |||||||||||
2004-27 | 74367CBC8 | 0001290906 | 333-100944-29 | 05/20/04 | 05/15/29 | |||||||||||
2004-26 | 74367CBB0 | 0001290935 | 333-100944-30 | 05/20/04 | 05/15/12 | |||||||||||
2004-28 | 74367CBD6 | 0001291723 | 333-100944-31 | 05/27/04 | 05/15/12 | |||||||||||
2004-29 | 74367CBE4 | 0001291727 | 333-100944-32 | 05/27/04 | 05/15/29 | |||||||||||
2004-30 | 74367CBF1 | 0001293273 | 333-100944-33 | 06/10/04 | 06/15/10 | |||||||||||
2004-31 | 74367CBG9 | 0001293274 | 333-100944-34 | 06/10/04 | 06/15/24 | |||||||||||
2004-32 | 74367CBH7 | 0001295966 | 333-100944-35 | 07/01/04 | 07/15/10 | |||||||||||
2004-33 | 74367CBJ3 | 0001295967 | 333-100944-36 | 07/01/04 | 07/10/12 | |||||||||||
2004-34 | 74367CBK0 | 0001296535 | 333-100944-37 | 07/09/04 | 01/15/11 | |||||||||||
2004-35 | 74367CBL8 | 0001296536 | 333-100944-38 | 07/09/04 | 07/10/12 | |||||||||||
2004-B | 74367FAC2 | 0001296865 | 333-100944-39 | 07/14/04 | 04/13/07 | |||||||||||
2004-37 | 74367CBN4 | 0001297785 | 333-100944-40 | 07/22/04 | 07/10/12 | |||||||||||
2004-36 | 74367CBM6 | 0001297786 | 333-100944-41 | 07/22/04 | 04/15/11 | |||||||||||
2004-38 | 74367CBP9 | 0001300729 | 333-100944-42 | 08/19/04 | 08/10/14 |
PROTECTIVE LIFE SECURED TRUSTS | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Trust
|
Cusip | CIK | Commission File No. |
Issue Date |
Maturity Date |
|||||||||||
2004-39 | 74367CBQ7 | 0001301976 | 333-100944-43 | 09/02/04 | 09/15/11 | |||||||||||
2004-40 | 74367CBR5 | 0001301977 | 333-100944-44 | 09/02/04 | 09/10/14 | |||||||||||
2004-C | 74367FAD0 | 0001302952 | 333-100944-45 | 09/15/04 | 03/15/06 | |||||||||||
2004-41 | 74367CBS3 | 0001303025 | 333-100944-46 | 09/16/04 | 09/10/11 | |||||||||||
2004-43 | 74367CBU8 | 0001304527 | 333-100944-47 | 09/30/04 | 09/10/14 | |||||||||||
2004-42 | 74367CBT1 | 0001304536 | 333-100944-48 | 09/30/04 | 09/15/11 | |||||||||||
2004-D | 74367FAE8 | 0001305038 | 333-100944-49 | 10/07/04 | 10/07/09 | |||||||||||
2004-45 | 74367CBW4 | 0001305226 | 333-100944-50 | 10/15/04 | 10/10/12 | |||||||||||
2004-44 | 74367CBV6 | 0001305229 | 333-100944-51 | 10/15/04 | 10/15/11 | |||||||||||
2004-47 | 74367CBY0 | 0001306401 | 333-100944-52 | 10/21/04 | 10/10/14 | |||||||||||
2004-46 | 74367CBX2 | 0001306402 | 333-100944-53 | 10/21/04 | 10/15/11 | |||||||||||
2004-49 | 74367CCA1 | 0001309522 | 333-100944-54 | 11/26/04 | 11/10/14 | |||||||||||
2004-48 | 74367CBZ7 | 0001309523 | 333-100944-55 | 11/26/04 | 11/15/11 | |||||||||||
2004-51 | 74367CCC7 | 0001310957 | 333-100944-56 | 12/09/04 | 12/15/24 | |||||||||||
2004-50 | 74367CCB9 | 0001310958 | 333-100944-57 | 12/09/04 | 12/10/11 | |||||||||||
2004-53 | 74367CCE3 | 0001312128 | 333-100944-58 | 12/23/04 | 12/15/29 | |||||||||||
2004-52 | 74367CCD5 | 0001312129 | 333-100944-59 | 12/23/04 | 12/10/14 | |||||||||||
2005-A | 74367FAF5 | 0001314020 | 333-100944-60 | 01/14/05 | 01/14/08 | |||||||||||
2005-1 | 74367CCF0 | 0001314737 | 333-100944-61 | 01/21/05 | 01/15/13 | |||||||||||
2005-2 | 74367CCG8 | 0001314739 | 333-100944-62 | 01/21/05 | 01/10/15 | |||||||||||
2005-4 | 74367CCH6 | 0001319333 | 333-100944-63 | 03/03/05 | 03/15/20 | |||||||||||
2005-3 | 74367CCJ2 | 0001319334 | 333-100944-64 | 03/03/05 | 03/10/12 | |||||||||||
2005-5 | 74367CCK9 | 0001320763 | 333-100944-65 | 03/17/05 | 03/15/15 | |||||||||||
2005-6 | 74367CCL7 | 0001320764 | 333-100944-66 | 03/17/05 | 03/10/12 | |||||||||||
2005-7 | 74367CCM5 | 0001322056 | 333-100944-67 | 03/31/05 | 03/10/15 | |||||||||||
2005-9 | 74367CCP8 | 0001323533 | 333-100944-68 | 04/14/05 | 04/15/15 | |||||||||||
2005-8 | 74367CCN3 | 0001323534 | 333-100944-69 | 04/14/05 | 04/10/15 | |||||||||||
2005-10 | 74367CCQ6 | 0001324233 | 333-100944-70 | 04/21/05 | 05/10/10 | |||||||||||
2005-B | 74367FAG3 | 0001327080 | 333-100944-71 | 05/18/05 | 05/16/08 | |||||||||||
2005-12 | 74367CCS2 | 0001328194 | 333-100944-72 | 05/26/05 | 05/10/12 | |||||||||||
2005-11 | 74367CCR4 | 0001328195 | 333-100944-73 | 05/26/05 | 05/15/15 | |||||||||||
2005-13 | 74367CCT0 | 0001328881 | 333-100944-74 | 06/03/05 | 06/15/10 | |||||||||||
2005-14 | 74367CCU7 | 0001329400 | 333-100944-75 | 06/09/05 | 06/10/12 | |||||||||||
2005-16 | 74367CCW3 | 0001330788 | 333-100944-76 | 06/23/05 | 06/15/17 | |||||||||||
2005-15 | 74367CCV5 | 0001330789 | 333-100944-77 | 06/23/05 | 06/10/15 | |||||||||||
2005-17 | 74367CCX1 | 0001332252 | 333-100944-78 | 07/08/05 | 07/15/17 | |||||||||||
2005-18 | 74367CCY9 | 0001333530 | 333-100944-79 | 07/21/05 | 07/15/17 | |||||||||||
2005-C | 74367FAH1 | 0001335830 | 333-100944-80 | 08/11/05 | 08/16/10 | |||||||||||
Registration File No.: 333-126757 |
||||||||||||||||
2005-19 | 74367CCZ6 | 0001338601 | 333-126757-01 | 09/15/05 | 09/15/13 | |||||||||||
2005-20 | 74367CDA0 | 0001339899 | 333-126757-02 | 09/29/05 | 09/15/14 | |||||||||||
2005-21 | 74367CDB8 | 0001341248 | 333-126757-03 | 10/14/05 | 10/15/14 |
PROTECTIVE LIFE SECURED TRUSTS | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Trust
|
Cusip | CIK | Commission File No. |
Issue Date |
Maturity Date |
|||||||||||
2005-D | 74367FAJ7 | 0001343435 | 333-126757-04 | 11/09/05 | 11/09/10 | |||||||||||
2005-22 | 74367CDC6 | 0001345048 | 333-126757-05 | 11/25/05 | 11/15/25 | |||||||||||
2005-23 | 74367CDD4 | 0001346049 | 333-126757-06 | 12/08/05 | 12/15/13 | |||||||||||
2005-24 | 74367CDE2 | 0001347344 | 333-126757-07 | 12/22/05 | 12/15/13 | |||||||||||
2006-2 | 74367CDG7 | 0001353234 | 333-126757-08 | 02/16/06 | 02/15/09 | |||||||||||
2006-3 | 74367CDH5 | 0001354679 | 333-126757-09 | 03/02/06 | 03/15/14 | |||||||||||
2006-4 | 74367CDJ1 | 0001356095 | 333-126757-10 | 03/16/06 | 03/15/15 | |||||||||||
2006-5 | 74367CDK8 | 0001357542 | 333-126757-11 | 03/30/06 | 03/15/12 | |||||||||||
2006-6 | 74367CDL6 | 0001358933 | 333-126757-12 | 04/13/06 | 04/15/16 | |||||||||||
2006-7 | 74367CDM4 | 0001363669 | 333-126757-13 | 05/25/06 | 05/15/18 | |||||||||||
2006-8 | 74367CDN2 | 0001365188 | 333-126757-14 | 06/08/06 | 06/15/11 | |||||||||||
2006-9 | 74367CDP7 | 0001365189 | 333-126757-15 | 06/08/06 | 06/15/17 | |||||||||||
2006-11 | 74367CDR3 | 0001366554 | 333-126757-16 | 06/22/06 | 06/15/17 | |||||||||||
2006-10 | 74367CDQ5 | 0001366555 | 333-126757-17 | 06/22/06 | 06/15/11 | |||||||||||
2006-12 | 74367CDS1 | 0001368191 | 333-126757-18 | 07/06/06 | 07/15/21 | |||||||||||
2006-14 | 74367CDU6 | 0001369105 | 333-126757-19 | 07/20/06 | 07/15/18 | |||||||||||
2006-13 | 74367CDT9 | 0001369106 | 333-126757-20 | 07/20/06 | 07/15/15 | |||||||||||
2006-16 | 74367CDW2 | 0001372862 | 333-126757-21 | 08/17/06 | 02/15/08 | |||||||||||
2006-15 | 74367CDV4 | 0001373457 | 333-126757-22 | 08/24/06 | 08/15/18 | |||||||||||
2006-17 | 74367CDX0 | 0001374591 | 333-126757-23 | 09/08/06 | 09/15/18 | |||||||||||
2006-18 | 74367CDY8 | 0001375755 | 333-126757-24 | 09/21/06 | 09/15/14 | |||||||||||
2006-19 | 74367CDZ5 | 0001377137 | 333-126757-25 | 10/05/06 | 10/15/26 | |||||||||||
2006-20 | 74367CEA9 | 0001378335 | 333-126757-26 | 10/19/06 | 10/15/14 | |||||||||||
2006-21 | 74367CEB7 | 0001382131 | 333-126757-27 | 11/30/06 | 11/15/15 | |||||||||||
2006-22 | 74367CEC5 | 0001383245 | 333-126757-28 | 12/14/06 | 12/15/16 | |||||||||||
2007-1 | 74367CED3 | 0001387373 | 333-126757-29 | 01/25/07 | 01/15/17 | |||||||||||
2007-2 | 74367CEE1 | 0001391293 | 333-126757-30 | 03/01/07 | 03/15/15 | |||||||||||
2007-3 | 74367CEF8 | 0001392903 | 333-126757-31 | 03/15/07 | 03/15/14 | |||||||||||
2007-4 | 74367CEG6 | 0001394461 | 333-126757-32 | 03/29/07 | 03/15/15 | |||||||||||
2007-5 | 74367CEH4 | 0001395974 | 333-126757-33 | 04/12/07 | 04/15/15 | |||||||||||
2007-A | 74367FAK4 | 0001400735 | 333-126757-34 | 05/29/07 | 05/29/12 | |||||||||||
2007-6 | 74367CEJ0 | 0001401934 | 333-126757-35 | 06/07/07 | 06/15/14 | |||||||||||
2007-7 | 74367CEK7 | 0001401937 | 333-126757-36 | 06/07/07 | 06/15/16 | |||||||||||
2007-8 | 74367CEL5 | 0001402717 | 333-126757-37 | 06/14/07 | 06/15/23 | |||||||||||
2007-9 | 74367CEM3 | 0001403583 | 333-126757-38 | 06/21/07 | 06/15/23 | |||||||||||
2007-10 | 74367CEN1 | 0001404506 | 333-126757-39 | 06/28/07 | 06/15/27 | |||||||||||
2007-11 | 74367CEP6 | 0001405999 | 333-126757-40 | 07/12/07 | 07/15/27 | |||||||||||
2007-12 | 74367CEQ4 | 0001406883 | 333-126757-41 | 07/19/07 | 07/15/27 | |||||||||||
2007-13 | 74367CER2 | 0001409635 | 333-126757-42 | 08/16/07 | 08/15/27 | |||||||||||
2007-14 | 74367CES0 | 0001410252 | 333-126757-43 | 08/23/07 | 08/15/22 | |||||||||||
2007-B | 74367FAL2 | 0001410568 | 333-126757-44 | 08/28/07 | 08/28/12 | |||||||||||
2007-15 | 74367CET8 | 0001411992 | 333-126757-45 | 09/13/07 | 09/15/17 | |||||||||||
2007-C | 74367FAM0 | 0001412419 | 333-126757-46 | 09/18/07 | 09/17/10 |
PROTECTIVE LIFE SECURED TRUSTS | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Trust
|
Cusip | CIK | Commission File No. |
Issue Date |
Maturity Date |
|||||||||||
2007-16 | 74367CEU5 | 0001412584 | 333-126757-47 | 09/20/07 | 09/15/27 | |||||||||||
2007-17 | 74367CEV3 | 0001413393 | 333-126757-48 | 09/27/07 | 09/15/19 | |||||||||||
2007-D | 74367FAN8 | 0001413490 | 333-126757-49 | 09/28/07 | 09/28/12 | |||||||||||
2007-18 | 74367CEW1 | 0001413889 | 333-126757-50 | 10/04/07 | 10/15/19 | |||||||||||
2007-19 | 74367CEX9 | 0001414619 | 333-126757-51 | 10/12/07 | 10/15/19 | |||||||||||
2007-20 | 74367CEY7 | 0001419341 | 333-126757-52 | 11/29/07 | 11/15/19 | |||||||||||
2007-21 | 74367CEZ4 | 0001420072 | 333-126757-53 | 12/06/07 | 12/15/18 | |||||||||||
2007-22 | 74367CFA8 | 0001421470 | 333-126757-54 | 12/20/07 | 12/15/18 | |||||||||||
2008-A | 74367FAP3 | 0001423738 | 333-126757-55 | 01/18/08 | 01/15/09 | |||||||||||
2008-B | 74367FAQ1 | 0001423739 | 333-126757-56 | 01/18/08 | 01/15/10 | |||||||||||
2008-C | 74367FAR9 | 0001423740 | 333-126757-57 | 01/18/08 | 01/18/11 | |||||||||||
2008-2 | 74367CFC4 | 0001423859 | 333-126757-58 | 01/17/08 | 01/15/09 | |||||||||||
2008-1 | 74367CFB6 | 0001424605 | 333-126757-59 | 01/25/08 | 01/15/18 | |||||||||||
2008-3 | 74367CFD2 | 0001427502 | 333-126757-60 | 02/22/08 | 02/15/13 | |||||||||||
2008-4 | 74367CFE0 | 0001428137 | 333-126757-61 | 02/28/08 | 02/15/14 | |||||||||||
2008-5 | 74367CFF7 | 0001428723 | 333-126757-62 | 03/06/08 | 03/15/13 | |||||||||||
2008-6 | 74367CFG5 | 0001429328 | 333-126757-63 | 03/13/08 | 03/15/13 | |||||||||||
2008-7 | 74367CFH3 | 0001429921 | 333-126757-64 | 03/20/08 | 03/15/13 | |||||||||||
2008-8 | 74367CFJ9 | 0001430577 | 333-126757-65 | 03/27/08 | 03/15/13 | |||||||||||
2008-9 | 74367CFK6 | 0001431125 | 333-126757-66 | 04/03/08 | 04/15/13 | |||||||||||
2008-10 | 74367CFL4 | 0001431748 | 333-126757-67 | 04/10/08 | 04/15/13 | |||||||||||
2008-11 | 74367CFM2 | 0001432265 | 333-126757-68 | 04/17/08 | 10/15/13 | |||||||||||
2008-12 | 74367CFN0 | 0001436086 | 333-126757-69 | 05/30/08 | 05/15/13 | |||||||||||
2008-13 | 74367CFP5 | 0001436571 | 333-126757-70 | 06/05/08 | 06/15/13 | |||||||||||
2008-14 | 74367CFQ3 | 0001437207 | 333-126757-71 | 06/12/08 | 06/15/12 | |||||||||||
2008-15 | 74367CFR1 | 0001437685 | 333-126757-72 | 06/19/08 | 06/15/12 | |||||||||||
2008-16 | 74367CFS9 | 0001438347 | 333-126757-73 | 06/26/08 | 06/15/11 | |||||||||||
2008-17 | 74367CFT7 | 0001438932 | 333-126757-74 | 07/03/08 | 07/15/11 | |||||||||||
2008-18 | 74367CFU4 | 0001439351 | 333-126757-75 | 07/10/08 | 07/15/12 | |||||||||||
2008-19 | 74367CFV2 | 0001439968 | 333-126757-76 | 07/17/08 | 07/15/12 | |||||||||||
2008-20 | 74367CFW0 | 0001443813 | 333-126757-77 | 08/27/08 | 08/15/33 |
The operating results of companies in the insurance industry have historically been subject to significant fluctuations. The factors which could affect the Company's future results include, but are not limited to, general economic conditions and the risks and uncertainties. In addition to the factors listed in the following paragraphs within this section and other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, Risk Factors and Cautionary Factors that may Affect Future Results in the Company's Annual Report on Form 10-K for the year ended December 31, 2007, which could materially affect the Company's business, financial condition, or future results of operations.
A ratings downgrade or other negative action by a ratings organization could adversely affect the Company.
Various Nationally Recognized Statistical Rating Organizations ("rating organizations") review the financial performance and condition of insurers, including the Company, and publish their financial strength ratings as indicators of an insurer's ability to meet policyholder and contract holder obligations. These ratings are important to maintaining public confidence in the Company's products, its ability to market its products and its competitive position. A downgrade or other negative action by a ratings organization with respect to the financial strength ratings of the Company could adversely affect the Company in many ways, including the following: reducing new sales of insurance and investment products; adversely affecting relationships with distributors and sales agents; increasing the number or amount of policy surrenders and withdrawals of funds; requiring a reduction in prices for the Company's insurance products and services in order to remain competitive; and adversely affecting the Company's ability to obtain reinsurance at a reasonable price on reasonable terms or at all. A downgrade of sufficient magnitude could result in the Company being required to collateralize reserves, balances or obligations under reinsurance, funding, swap and securitization agreements. A downgrade of sufficient magnitude could also result in the termination of funding and swap agreements.
Rating organizations assign ratings based upon several factors. While most of the factors relate to the rated company, some of the factors relate to the views of the rating organization, general economic conditions and circumstances outside the rated company's control. In addition, rating organizations use various models and formulas to assess the strength of a rated company, and from time to time rating organizations have, in their discretion, altered the models. Changes to the models could impact the rating organizations' judgment of the rating to be assigned to the rated company. The Company cannot predict what actions the rating organizations may take, or what actions the Company may take in response to the actions of the rating organizations, which could adversely affect the Company.
The Company may be required to establish a valuation allowance against its deferred tax assets, which could materially adversely affect the Company's results of operations, financial condition and capital position.
Deferred tax assets refer to assets that are attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The realization of the deferred tax assets is dependent upon the generation of sufficient future taxable income, including capital gains. If it is determined that the deferred tax assets cannot be realized a deferred tax valuation allowance must be established.
Based on the Company's current assessment of future taxable income, including available tax planning opportunities, the Company anticipates that it is more likely than not that it will generate sufficient taxable income to realize its deferred tax assets, and, therefore, the Company did not record a valuation allowance against its deferred tax assets as of September 30, 2008. If future events differ from the Company's current forecasts, a valuation allowance may need to be established, which could
have a material adverse effect on the Company's results of operations, financial condition and capital position.
The Company's investments are subject to market and credit risks. These risks could be heightened during periods of extreme volatility or disruption in financial and credit markets.
The Company's invested assets and derivative financial instruments are subject to customary risks of credit defaults and changes in market values. These risks could be heightened during periods of extreme volatility or disruption in the financial and credit markets. A widening of credit spreads will increase the unrealized losses in the Company's investment portfolio. The factors affecting the financial and credit markets could lead to other-than-temporary impairments of assets in the Company's investment portfolio.
The value of the Company's commercial mortgage loan portfolio depends in part on the financial condition of the tenants occupying the properties that the Company has financed. Factors that may affect the overall default rate on, and market value of, the Company's invested assets, derivative financial instruments, and mortgage loans include interest rate levels, financial market performance, and general economic conditions as well as particular circumstances affecting the businesses of individual borrowers and tenants.
Significant continued financial and credit market volatility, changes in interest rates and credit spreads, credit defaults, market illiquidity, declines in equity prices, and declines in general economic conditions, either alone or in combination, could have a material adverse impact on the Company's results of operations, financial condition or cash flows through realized losses, impairments and changes in unrealized loss positions. In addition, market volatility can make it difficult for the Company to value certain of its assets, especially if trading becomes less frequent. Valuations may include assumptions or estimates that may have significant period-to-period changes that could have an adverse impact on the Company's results of operations or financial condition.
Credit market volatility or disruption could adversely impact the Company's financial condition or results from operations.
The Company's statutory surplus is also impacted by widening credit spreads as a result of the accounting for the assets and liabilities on its fixed market value adjusted ("MVA") annuities. Statutory separate account assets supporting the fixed MVA annuities are recorded at fair value. In determining the statutory reserve for the fixed MVA annuities, the Company is required to use current crediting rates in the U.S. In many capital market scenarios, current crediting rates in the U.S. are highly correlated with market rates implicit in the fair value of statutory separate account assets. As a result, the change in the statutory reserve from period to period will likely substantially offset the change in the fair value of the statutory separate account assets. However, in periods of volatile credit markets, such as those the Company is now experiencing, actual credit spreads on investment assets may increase sharply for certain sub-sectors of the overall credit market, resulting in statutory separate account asset market value losses. As actual credit spreads are not fully reflected in current crediting rates in the U.S., the calculation of statutory reserves will not substantially offset the change in fair value of the statutory separate account assets resulting in reductions in statutory surplus. This has resulted and may continue to result in the need to devote significant additional capital to support the product.
Disruption of the capital and credit markets could negatively affect the Company's ability to meet its liquidity needs.
The Company needs liquidity to meet its obligations to its policyholders and its debt holders, and to pay its operating expenses. The Company's sources of liquidity include insurance premiums, annuity considerations, deposit funds, cash flow from investments and assets, and other income from its operations. In normal credit and capital market conditions, the Company's sources of liquidity also
include, either directly or through PLC, a variety of short and long-term borrowing arrangements, including issuing debt securities, as well as raising capital by issuing a variety of equity securities.
When the credit and capital markets are disrupted as they have been recently, the Company may not be able, either directly or through PLC, to borrow or raise equity capital, or the cost of borrowing or raising equity capital may be prohibitively high. If the Company's internal sources of liquidity are inadequate during such periods, the Company could suffer negative effects from not being able, either directly or through PLC, to borrow or raise capital, or from having to do so on unfavorable terms. The negative effects could include being forced to sell assets at a loss, a lowering of the Company's financial strength ratings, and the possibility that customers, lenders, ratings agencies or regulators develop a negative perception of the Company's financial prospects, which could lead to further adverse effects on the Company.
Difficult conditions in the economy generally could adversely affect the Company's business and results from operations.
A general economic slowdown could adversely affect the Company in the form of consumer behavior and pressure on the Company's investment portfolios. Consumer behavior could include decreased demand for the Company's products and elevated levels of policy lapses, policy loans, withdrawals and surrenders. The Company's investment and mortgage loan portfolios could be adversely affected as a result of deteriorating financial and business conditions affecting the issuers of the securities in the Company's investment portfolio and the Company's commercial mortgage loan borrowers and their tenants.
There can be no assurance that the actions of the U.S. Government or other governmental and regulatory bodies for the purpose of stabilizing the financial markets will achieve the intended effect.
On October 3, 2008, President Bush signed the Emergency Economic Stabilization Act of 2008 (the "EESA") into law. Pursuant to the EESA, the U.S. Treasury has the authority to, among other things, purchase up to $700 billion of securities from financial institutions for the purpose of stabilizing the financial markets. Under EESA and the Troubled Asset Relief Program ("TARP") Capital Purchase Plan, the U.S. Treasury has begun making equity investments in U.S. banks. Under EESA, Treasury has the power to expand its investments to include insurers, and there are reports that the Treasury is considering such action. The Company cannot predict whether Treasury will include insurers in its program or, if it does, the criteria it will use in selecting participants. In addition, the Company cannot predict whether participation, or lack thereof, would be viewed positively or negatively. If Treasury fails to include insurers in its programs, insurers could be at a competitive disadvantage as compared to other financial services companies. The Company cannot predict what other actions Treasury or other governmental and regulatory bodies may take, nor can there be any assurance as to the impact any governmental or regulatory actions will have on the financial markets, the economy or the Company.