Mandatory venue for visitors.

Entrance is acceptance.

Private. No trespassing.
vvvvvvvvvvvv Not for public scrutiny.
This seal conveys immunity
from foreign influence, scrutiny,
discretion and trespass.

Private non-commercial record

in covenant with yahweh

by and for

sovereign men and women on the land

Table of Contents

Caution:
not for public consumption. Trespassers beware.
Co-claimant fee applies to all impairments, public, private, common, commercial and criminal .

Private non-commercial record, page 1 of 55

 - - - Notice - - -

Confession of judgment

Co-claimant fee

Trespassers on this private record agree to accept the privilege of co-

claimancy, pay a co-claimant fee established herein of one million
ounces of .999 percent pure one ounce silver coinage per impairment,
trespass or stultification, confess judgment jointly and severally on all
such fees, consent to all necessary collection and bond-levy procedures,
reporting the unpaid balance as unreported income, suspicious activities
and misappropriated funds, and service of all necessary notices of lien,
levy, assessment and bond-arrest warrant(s) on any and all underwriters
real or imagined, and waive all defenses thereto. Obligations hereunder
are not subject to discharge in bankruptcy or other impairment of full
and unqualified liability.

* or fiat money at par value solely at the discretion of the acceptor

Private non-commercial record, page 2 of 55

 Table of Contents

Wizard Forms

Negotiable Instruments

Banker’s Acceptance

Introduction to Bill of Exchange

Parties to

Documentary Collections

New York Uniform Commercial Code

Securities Exchange Act of 1934

Section (Rule) 12(b)

Section (Rule) 12(g)

Rule 144A

PORTAL Alliance

NASDAQ

The Depository Trust Company (DTC)

UNCITRAL Convention on International Bills of Exchange and international Promissory Notes

International Bill of Exchange

Samples

Private non-commercial record, page 3 of 55

 Top

Wizard Forms

“D/A” – International Documentary Collection Against Acceptance – Is a formal request for

payment made by a bank on behalf of its customer.

Is completed in upper case letters only. Identification of the living man is conveyed by the
signature.

See samples.

Wizard Questions
DTC Participants are expected possess a certain level of knowledge about negotiable
instruments, bonds, and law with respect to their standing as natural men who are regretfully
involved with legal fiction corporations “created” to serve mankind. The testing process at the
time of entrance into DTC may include questions similar to the following;

• Is this John Smith? A. Who’s calling please?

A. This is the non-corporate man sometimes referred to as John Jason Smith.
• Who is this please? A. This is the non-corporate man sometimes referred to as John Jason Smith.
• What is your name?
• Do you think you’re a bank? A. Yes.
• Do you think you can write a check against the United States Treasury? A. As the source of
the credit, I believe I can draft against funds and instruments of which I’m the beneficial
owner which are on deposit with Treasury
• Do you know how to draw a bill of exchange? A. Yes.
• What is an international bill of exchange? A. A three party instrument which lists the location
of at least two of the parties and where the drawer orders the drawee to pay the payee.
• What is it used for? A. To transfer funds privately.
• What is DTC? A. The Depository Trust Company – a securities depository, commercial bank
and clearing agency.
• What is DTCC? A. The Depository Trust Clearing Corporate – a clearing agency for
securities.

Private non-commercial record, page 4 of 55

 Top

Negotiable Instruments
Banker’s Acceptance
A banker’s acceptance is a draft drawn on a bank which has been accepted by a bank thereby
becoming a negotiable unconditional promise to pay which can be traded on such markets.
They were commonly used in earlier times to facilitate international commerce.

Banker's acceptance -- a draft drawn on a bank, which when accepted by the bank,
constitutes the bank's obligation to pay the draft writer's bills from a specified creditor when
the bills are due. The bank literally stamps "Accepted for payment by (name of bank) on
(date)" across the face of the draft. Acceptance converts a depositor's "order to pay" into
an unconditional "promise to pay" by the accepting bank. Bankers acceptances are
effectively a guaranty of payment for a purchase and are usually used in financing the import,
export, transfer or storage of goods, and qualify as liquid assets when held by a thrift
institution.

Bankers Acceptance -- A draft calling for payment at a future date on which the drawee is a
bank, and the bank has agreed to pay by signing "accepted" on the draft.

Draft A written order for the payment of money, such as a check. The person who
writes the draft is called the drawer, the person who holds the money -- for
example, the bank -- is called the drawee, and the person who ultimately receives
the money is called the payee. After receiving the draft, the payee can demand
payment at any time unless the draft specifies a particular time for payment. Also
called a bill of exchange.

From importer. An importer plans to purchase goods from an exporter. The exporter will
not grant credit, so the importer turns to its bank. They execute an acceptance agreement,
under which the bank will accept drafts from the importer. In this manner, the bank extends
credit to the importer, who agrees to pay the bank the face value of all drafts prior to their
maturity. The importer draws a time draft, listing itself as the payee. The bank accepts the
draft and discounts it-paying the importer the discounted value of the draft. The importer uses
the proceeds to pay the exporter. The bank can then hold the bankers acceptance in its own
portfolio or it can sell it at discounted value in the money market.

Re. exporter. In an alternative arrangement, the exporter may agree to accept a letter of
credit from the importer's bank. This specifies that the bank will accept time drafts from the
exporter if the exporter presents suitable documentation that the goods were delivered. Under
this arrangement, the exporter is the drawer and payee of the draft. Typically, the bank will
not work directly with the exporter but with the exporter's correspondent bank. The exporter
may realize proceeds from the bankers acceptance in several ways. The bank may discount it
for the exporter; the exporter may hold the acceptance to maturity; or it may sell the
acceptance to another party

Top

Private non-commercial record, page 5 of 55

 Bill of Exchange
A bill of exchange (BOE) is an order from party A (drawer) to party B (drawee) to pay party C
(payee) upon presentment (upon “demand” or “at sight” – “sight draft”) or at some future time
(time draft). It is a three party instrument. Unlike a typical check, the drawee is usually
enumerated as:

To: Jack Johnson or To: Any Bank

1 Main Street 1 Main Street
Anywhere, XX Anywhere, XX

rather than listing the bank as a routing number on the bottom of the instrument.

If a BOE is drawn on a bank as in the second sample above, it is called a bank draft. If it is
drawn on another person, it is called a trade draft. Here is a typical sample:

And international bill of exchange is a bill of exchange that crosses international borders such
as from Canada to the U.S., but from the perspective of the living man or woman being foreign
to, or “without” the united States Federal corporation and wideworld of legal fiction entities, it
would cross the boundary from private-on-the-land in the presence of Nature’s God, into the
land of dead corporate legal fiction ens legis entities. From the real to the imagined. That
crossing is in fact the crux of the DTC process: portaling hidden public funds back to our private
account through the Fed, for beneficial uses for mankind.

Bill of Exchange A written order from one person (the payor) [drawer] to another, signed
by the person giving it, requiring the person to whom it is addressed [drawee] to pay on

Private non-commercial record, page 6 of 55

 demand or at some fixed future date, a certain sum of money, to either the person identified
as payee or to any person presenting the bill of exchange. [NOTICE: THE PERSON TO
WHOM IT IS “ADDRESSED” IS NOT NECESSARILY THE PARTY WHO IS NAMED
ON THE “PAY TO THE ORDER TO” LINE. This is because a BOE is traditionally
addressed to a third party, the drawee, in addition to being made payable to a party, the
payee.]

A bill of exchange, also commonly known as a draft, is an unconditional order in writing.

The bill of exchange is signed by the person giving it, requiring the person to whom it is
addressed to pay (on demand or on a fixed and determinable due date) a sum certain in
money to a specified person or his order, or to bearer. The person drawing up the bill is called
the "drawer", and the instrument is addressed to the "drawee" (the person who needs to pay
the amount stipulated). It is important to remember that the drawee needs to accept the bill,
and this acceptance constitutes acknowledgement of debt and makes the bill of exchange a
legal instrument.

Parties on a Negotiable Instrument Top

The parties on and elements of most any commercial paper, negotiable or non-negotiable, include:

(Numbers correspond with specimen above)

1. Endorsement.
3. Drawee- the party who is ordered to pay (usually the importer). The party to whom the
BOE is addressed (where it says “To,” not “Pay To The Order Of,” the latter being the

Private non-commercial record, page 7 of 55

 payee. The drawee needs to sign acceptance of the BOE undertaking to pay it as
stipulated.
4. “Sum certain” to be paid. Written out (has priority over numerals).
5. Payment instructions: At Sight or At A Given Term After Sight (e.g. 30 days after
invoicing, or presentment of the BOE or demand).
6. Drawer - he party who makes out and signs the bill (usually the exporter).
7. “Sum certain” in numerals.

Draw. To prepare a written bill of exchange, Commercial Paper, draft, or negotiable

instrument and place one's signature on it, creating a legal obligation under its terms. To write
a document, such as a deed, complaint, or petition, including the essential information
necessary to make it legally effective upon its execution by the designated parties. [Art. 2 of
the UNCITRAL Convention says “place where the bill is drawn” (not “where the money is
drawn.”]
Draw. To lawfully remove money from an account held in a bank, treasury, or other
depository. [This is not the definition applicable to the UNCITRAL Convention reviewed
later in this white paper.]

Drawer. A person who orders a bank to withdraw money from an account to pay a
designated person a specific sum according to the term of a bill, a check, or a draft. [We are
the draw-er – the giver of the orders to pay - of the BOEs in this process.]
Drawer. An individual who writes and signs a Commercial Paper, thereby becoming
obligated under its terms.
Drawer. The party who makes a bill of exchange.
Drawer. The obligations of the drawer to the drawee and every subsequent holder lawfully
entitled to the possession, are, that the person on whom he draws is capable of binding
himself by his acceptance that he is to be found at the place where he is described to reside, if
a description be given in the bill; that if the bill be duly presented to him, he will accept in
writing on the bill itself, according to its tenor, and that he will pay it when it becomes due, if
presented in proper time for that purpose; and that if the drawee fail to do either, he, the
drawer, will pay the amount, provided he have due notice of the dishonor. 3. The engagement
of the drawer of a bill is in all its parts absolute and irrevocable. 2 H. Bl. 378; 3 B. & P. 291;
Poth. Contr. de Change, n. 58; Chit. Bills, 214, Dane's Ab. h.t.

Drawee. A person or bank that is ordered by its depositor, a drawer, to withdraw money
from an account to pay a designated sum to a person according to the terms of a check or a
draft. [Drawee basically serves as the drawer’s bank, whether it is a bank or other party.]
Drawee. The person (or bank) who is expected to pay a check or draft when it is presented
for payment. [The interest-bearing account bank for the eligibility process. Thereafter for
all funds transfers: DTC through the DTC account established by the closure of the interest
bearing account at the time of first closing.]
Drawee. A person to whom a bill of exchange is addressed (see above), and who is
requested to pay the amount of money therein mentioned. [The person to whom “it is
addressed” is the drawee where the BOE says: “To,” not to be confused with the payee listed
where it says “Pay To The Order Of.” In other words, the expressions: “made out to” and
“addressed to” are different concepts when it concerns a BOE.]

Private non-commercial record, page 8 of 55

 Payee. The one named on a check or promissory note to receive payment.
Payee. One who receives a payment, such as through cash, check, money order, or
promissory note.
Payee. The person who is to receive the stated amount of money on a check, bill, or note.
Payee. The person in whose favor a bill of exchange is made payable.
Payee. One to whom money is paid.
Payee. The person to whom a cheque or money order is made out.

Payor. The one who must make payment on a promissory note.

Payor. The one that pays: a prompt payer of bills.
Payor. One named responsible for paying a bill or note.

PAYOR – makes payment

PAYEE – receives payment / named on BOE as “Pay To The Order Of”
DRAWER – orders bank to pay BOE
DRAWEE – the bank that is ordered to pay

DRAWER – orders bank to pay BOE We draw up BOE

DRAWEE – the bank that is ordered to pay
PAYEE – to receive payment/named on BOE
PAYOR – makes payment

Documentary Collections Top

A Documentary Collection is the collection through a bank of monies owed by a buyer,

against delivery of certain documents. The bank presents a BOE with a future date of payment
for acceptance, or a BOE to be paid at sight (on demand before delivery), before the bank will
release the bill of lading or certificate of origin that the buyer requires to secure the goods from
the shipping company. Unlike a COD, the demand is handled by a bank instead of the shipping
company.

Here’s how it works:

• The seller ships the goods to the buyer

• The seller hands the documents to his/her bank (the Remitting Bank) with instructions to
release the documents against acceptance or payment of a Bill of Exchange
• The Remitting Bank forwards the documents to the Collecting / Presenting Bank in the
Buyer's country. The Collecting Bank could be the Buyer's bank or another bank nominated
by the Remitting Bank
• The Collecting Bank releases documents to the Buyer as per instructions received from the
Remitting Bank [ie. upon acceptance of the BOE’s future promise to pay or upon payment
of the BOE.]

Key features and benefits

Private non-commercial record, page 9 of 55

 • The exporter retains ownership of the goods until either payment or acceptance is received
• Accepted bills can be used to get financing
• The handling of export collections is governed by the ICC Uniform Rules for Collections
* The bank acts for the exporter, by presenting commercial documents to the buyer (importer)
along with a payment demand or bill of exchange [for acceptance or payment]
• Settlement is normally faster than using the Open Account method
• Unless the buyer pays or commits to pay at a future date, no documents will be handed
over [such as the necessary certificate of origin or bill of lading to claim the goods from the
shipping company.]

2 types of Documentary Collections:

* Documents against acceptance (D/A) - documents are released to the buyer against
acceptance to pay at a future date [by way of a BOE issued by the exporter]
* Documents against payment (D/P) - documents are released to the buyer against payment
[which could be a BOE issued by the importer and accepted by the bank thereby converting
it into an unconditional promise to pay by the bank which will draw the funds from the
importer’s account].

Frequent Questions

Q: Will the receipt of a documentary bill for collection impact on my banking facilities?

No. The banks involved in the collection process do not make any guarantee for payment,
and, therefore, there is no requirement to mark the collection against your banking facility. If
your bank is requested to "avalise" the bill of exchange, then the amount of the bill will be
marked against your facility.

Q: How do I ascertain whether a documentary collection is the correct payment method to

utilize for my import?

Usually, the payment method is agreed with the seller at the time of negotiation of the sales
contract. The seller will request payment via a documentary collection.

Documentary Collection
http://www.swedbank.lv/eng/pakalp/jr_5_3_4.php

Documentary Collection is a process in which the seller instructs his bank to forward
documents related to the export of goods to the buyer's bank with a request to present the
documents to the buyer for payment, indicating when and on what conditions these documents
can be released to the buyer. Conditions could be acceptance of a bill of exchange or payment
of the bill of exchange.

The buyer may obtain possession of goods and clear them through customs, if the buyer has
the shipping documents (original bill of lading, certificate of origin, etc.). The documents,
however (original bill of lading, certificate of origin, etc.), are only released to the buyer after
payment has been made ("Documents against Payment") or payment undertaking has been
given - the buyer has accepted a bill of exchange issued by the seller and payable at a certain
date in the future (maturity date) ("Documents against Acceptance"). [In other words, the buyer

Private non-commercial record, page 10 of 55

(drawee) cannot bring the goods through customs until he accepts liability by accepting or
paying the BOE.]

Documentary Collections facilitate import/export operations. However, they do not provide the
same level of security as Letters of Credit, but, as a result, the costs are lower. Unlike the
Letters of Credit, for a Documentary Collection the bank acts as a channel for the documents
but does not issue any payment covenants (does not guarantee payment). The bank that has
received a documentary collection may debit the buyer's account and make payment only if
authorized by the buyer. [ie. authorized by the buyer’s (drawer’s) acceptance of the BOE
thereby authorizing the bank to debit the buyer’s account at some future date AND to deliver to
the buyer the necessary custom’s documents. This, in fact, is the key to the DC/A process as
opposed to the DC/P process. The bank will honor the future promise to pay authorized by the
buyer’s acceptance of the BOE.]

Possibilities and advantages

* Make international trade operations more flexible,

* Use Documentary Collection in cases when the seller does not want to deliver goods to the
buyer on "open account" basis, but due to a long-term stable business relationship between the
parties there is no need for security provided by a Letter of Credit or payment guarantee,
* Documentary collection is suitable to the seller:
o if the seller has no doubts about the buyer's ability to meet its payment obligations [is
perfectly consistent with the concept that the buyer is being trusted to have funds in his
account sufficient to cover the BOE’s future payment date.]
o if the political and economical situation in the buyer's country is stable,
o if there are no foreign exchange restrictions in the seller's country;

* Documentary collection is convenient for the buyer because:

o there is no need for an advance payment; payment for goods can be made when
shipping documents have been received,
o in cases of documents released against acceptance the buyer has the possibility to sell
the goods first and afterwards make payment to the seller. [In other words, the buyer
will be held to the future payment date on the BOE.]

* Documentary Collection assures the seller that the shipping documents will be released to the
buyer only upon payment or acceptance of a Bill of Exchange. [The acceptance is of a BOE,
not of the DC itself.]

* The buyer may make a partial payment or pay by installments only if the seller via his bank
has provided such payment instructions.

What you need:

* Hold a Current Account with Swedbank,

* Complete the form "Documentary Collection Order", to start using the export documentary
collection (the Bank's customer is the seller of goods).

Documentary Collection

Private non-commercial record, page 11 of 55

 http://www.worldtraderef.com/WTR_site/documentary_collections.html

Think of a documentary collection as an international COD (cash on delivery): the buyer pays
for goods at delivery. A documentary collection, however, is distinguished from a typical COD
transaction in two ways: (1) a bank handles the transaction instead of an individual, shipping
company, or postal service collecting the payment, , and (2) instead of cash on delivery for
goods it is cash on delivery for a title document (bill of lading) that is then used to claim the
goods from the shipping company.

Banks, therefore, act as intermediaries to collect payment from the buyer in exchange for the
transfer of documents that enable the holder to take possession of the goods. The procedure is
easier than a documentary credit, and the bank charges are lower. The bank, however, does
not act as surety of payment but rather only as collector of funds for documents.

For the seller and buyer, a documentary collection falls between a documentary credit and open
account in its desirability. Advantages, disadvantages, and issues for both buyer and seller will
be discussed in the following pages.

Introducing the Parties to a Documentary Collection

There are four main parties to a documentary collection transaction. Note below that each party
has several names. This is because businesspeople and banks each have their own way of
thinking about and naming each party to the transaction. For example, as far as businesspeople
are concerned there are just buyers and sellers and the buyer's bank and the seller's bank.
Banks, however, are not concerned with buying and selling. They are concerned with remitting
(sending) documents from the principal (seller) and presenting drafts (orders to pay) to the
drawee (buyer) for payment. The four main parties are

THE PRINCIPAL (SELLER/EXPORTER/DRAWER). The principal is generally the

seller/exporter as well as the party that prepares documentation (collection documents) and
submits (remits) them to his bank (remitting bank) with a collection order for payment from the
buyer (drawee). The principal is also sometimes called the remitter.

THE REMITTING (PRINCIPAL'S/SELLER'S/EXPORTER'S) BANK. The remitting bank

receives documentation (collection documents) from the seller (principal) for forwarding
(remitting) to the buyer's bank (collecting/presenting bank) along with instructions for payment.

THE COLLECTING OR PRESENTING (BUYER'S) BANK. This is the bank that presents the
documents to the buyer and collects cash payment (payment of a bank draft) or a promise to
pay in the future (a bill of exchange) from the buyer (drawee of the draft) in exchange for the
documents. [Note that that buyer is the drawee on the BOE (the party receiving the order to
pay) not the drawer of the BOE.]

THE DRAWEE (BUYER/IMPORTER). The drawee (buyer/importer) is the party that makes
cash payment or signs a draft according to the terms of the collection order in exchange for the
documents from the presenting/collecting bank and takes possession of the goods. The drawee
is the one on whom a draft is drawn and who owes the indicated amount.

Top

Private non-commercial record, page 12 of 55

 New York Uniform Commercial Code

Article 8 – Investment Securities

Section 8-102 – Definitions

(a)(2) - "Bearer form", as applied to a certificated security, [eg. BC] means a form in which the security
is payable to the bearer of the security certificate according to its terms but not by reason of an
indorsement.

(a)(4) - "Certificated security" means a security that is represented by a certificate.

[“represent” – To exhibit or expose; to appear in the character of. (The Free Dictionary)]
[“represent” - When an item is represented, it is produced publicly. (The Free Dictionary)]
[DTC bylaws 2008 - The term “Certificated Security” has the meaning given to the term
“certificated security” in Section 8-102 of the NYUCC.]

(a)(15) - "Security", except as otherwise provided in Section 8—103 [see below], means an obligation
of an issuer or a share, participation, or other interest in an issuer or in property or an enterprise of
an issuer:
(i) which is represented [exhibited publicly] by a security certificate in bearer or registered form,
or the transfer of which may be registered upon books [book entry security] maintained for that
purpose by or on behalf of the issuer;
(ii) which is one of a class or series [BC and SS card are a series, rather than a class, a class being
issues from the same issuer] or by its terms is divisible into a class or series of shares,
participations, interests, or obligations; and
(iii) which:
(A) is, or is of a type, dealt in or traded on securities exchanges [DTC] or securities
markets; or
(B) is a medium for investment and by its terms expressly provides that it is a security
governed by this Article.

(a) (16) - "Security certificate" means a certificate representing a security.

Section 8--103.
Rules for Determining Whether Certain Obligations and
Interests are Securities or Financial Assets.
(a) A share or similar equity interest issued by a corporation, business trust, joint stock
company, or similar entity is a security.

Private non-commercial record, page 13 of 55

 Top
Securities Exchange Act of 1934

“The Securities Exchange Act of 1934 is a law governing the secondary trading of securities
(stocks, bonds, and debentures) in the United States of America. The Act, 48 Stat. 881 (enacted
June 6, 1934), codified at 15 U.S.C. § 78a et seq., was a sweeping piece of legislation. The Act
and related statutes form the basis of regulation of the financial markets and their participants in
the United States. It is commonly referred to as the "Exchange Act", the "'34 Act", and the "Act
of '34".

Companies raise billions of dollars by issuing securities in what is known as the primary market.
Contrasted with the Securities Act of 1933, which regulates these original issues, the Securities
Exchange Act of 1934 regulates the secondary trading of those securities between persons
often unrelated to the issuer. Trillions of dollars are made and lost each year through trading in
the secondary market.” Wikipedia

Section 2 -- Necessity for Regulation

For the reasons hereinafter enumerated, transactions in securities as commonly conducted upon securities
exchanges and over-the-counter markets are affected with a national public interest which makes it
necessary to provide for regulation and control of such transactions and of practices and matters related
thereto, including transactions by officers, directors, and principal security holders, to require appropriate
reports, to remove impediments to and perfect the mechanisms of a national market system for securities
and a national system for the clearance and settlement of securities transactions [regulation of the BC and
SS bond] and the safeguarding of securities and funds related thereto, and to impose requirements
necessary to make such regulation and control reasonably complete and effective, in order to protect
interstate commerce, [to protect] the national credit [meaning the system of credit institutes in place of
gold in 1933], the Federal taxing power, to protect and make more effective the national banking system
and Federal Reserve System, and to insure the maintenance of fair and honest markets in such
transactions:

[The purpose of the Act is to protect the Fed, the national banking system, commerce, taxation, and
national credit. The system it engenders is to money as attorneys are to law: to protect the fiction
financial system of credit that replaced gold through ignorance and regulation.]

1. Such transactions (a) are carried on in large volume by the public generally and in large part originate
outside the States [originate with the People] in which the exchanges and over-the-counter markets are
located and/or are effected by means of the mails and instrumentalities of interstate commerce; (b)
constitute an important part of the current of interstate commerce; (c) involve in large part the securities
of issuers engaged in interstate commerce; (d) involve the use of credit, directly affect the financing of
trade, industry, and transportation in interstate commerce, and directly affect and influence the volume of
interstate commerce; and affect the national credit. [Credit to whom? To whom is owed the debt?]

2. The prices established and offered in such transactions are generally disseminated and quoted
throughout the United States and foreign countries and constitute a basis for determining and establishing
the prices at which securities are bought and sold, the amount of certain taxes owing to the United States

Private non-commercial record, page 14 of 55

and to the several States by owners, buyers, and sellers of securities, and the value of collateral for bank
loans.

3. Frequently the prices of securities on such exchanges and markets are susceptible to manipulation
and control, and the dissemination of such prices gives rise to excessive speculation, resulting in sudden
and unreasonable fluctuations in the prices of securities which (a) cause alternately unreasonable
expansion and unreasonable contraction of the volume of credit available for trade, transportation, and
industry in interstate commerce, (b) hinder the proper appraisal of the value of securities and thus prevent
a fair calculation of taxes owing to the United States and to the several States by owners, buyers, and
sellers of securities, and (c) prevent the fair valuation of collateral for bank loans and/or obstruct the
effective operation of the national banking system and Federal Reserve System.

4. National emergencies, which produce widespread unemployment and the dislocation of trade,
transportation, and industry, and which burden interstate commerce and adversely affect the general
welfare, are precipitated, intensified, and prolonged by manipulation and sudden and unreasonable
fluctuations of security prices and by excessive speculation on such exchanges and markets, and to meet
such emergencies the Federal Government is put to such great expense as to burden the national credit.

Section 3 - Definitions
1. The term "exchange" means any organization, association, or group of persons, whether incorporated
or unincorporated, which constitutes, maintains, or provides a market place or facilities for bringing
together purchasers and sellers of securities or for otherwise performing with respect to securities the
functions commonly performed by a stock exchange as that term is generally understood, and includes the
market place and the market facilities maintained by such exchange. [Technically, DTC is also an
exchange (not just a clearing agency) as it maintains facilities for performing with respect to bringing
together buyers and sellers.]

2. The term "facility" when used with respect to an exchange includes its premises, tangible or intangible
property whether on the premises or not, any right to the use of such premises or property or any service
thereof for the purpose of effecting or reporting a transaction on an exchange (including, among other
things, any system of communication to or from the exchange, by ticker or otherwise, maintained by or
with the consent of the exchange), and any right of the exchange to the use of any property or service.

8. The term "issuer" means any person who issues or proposes to issue any security; except that with
respect to certificates of deposit for securities, voting-trust certificates, or collateral-trust certificates, or
with respect to certificates of interest or shares in an unincorporated investment trust not having a board
of directors or of the fixed, restricted management, or unit type, the term "issuer" means the person or
persons performing the acts and assuming the duties of depositor or manager [eg. living men acting as
managers of the issue: the SS Card Bond] pursuant to the provisions of the trust or other agreement or
instrument under which such securities are issued; and except that with respect to equipment-trust
certificates or like securities, the term "issuer" means the person by whom the equipment or property is,
or is to be, used.

9. The term "person" means a natural person, company, government, or political subdivision, agency, or
instrumentality of a government.

10. The term "security" means any note, stock, treasury stock, security future, bond, debenture,
certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral

Private non-commercial record, page 15 of 55

royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable
share, investment contract, voting-trust certificate, certificate of deposit for a security, any put, call,
straddle, option, or privilege on any security, certificate of deposit, or group or index of securities
(including any interest therein or based on the value thereof), or any put, call, straddle, option, or
privilege entered into on a national securities exchange relating to foreign currency, or in general, any
instrument commonly known as a "security"; or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing; but
shall not include currency or any note, draft, bill of exchange, or banker's acceptance which has a
maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal
thereof the maturity of which is likewise limited. [“Security” does not include a BOE or banker’s
acceptance which matures in less than nine months from the date of issue]

Banker's acceptance -- a draft drawn on a bank, which when accepted by the bank, constitutes the
bank's obligation to pay the draft writer's bills from a specified creditor when the bills are due. The bank
literally stamps "Accepted for payment by (name of bank) on (date)" across the face of the draft.
Acceptance converts a depositor's "order to pay" into an unconditional "promise to pay" by the
accepting bank. Bankers acceptances are effectively a guaranty of payment for a purchase and are usually
used in financing the import, export, transfer or storage of goods, and qualify as liquid assets when held by
a thrift institution.

Bankers Acceptance -- A draft calling for payment at a future date on which the drawee is a bank, and
the bank has agreed to pay by signing "accepted" on the draft.

Drawee. A person to whom a bill of exchange is addressed, and who is requested to pay the amount of
money therein mentioned.

23. A. The term "clearing agency" means any person who acts as an intermediary in making payments or
deliveries or both in connection with transactions in securities or who provides facilities for comparison
of data respecting the terms of settlement of securities transactions, to reduce the number of settlements of
securities transactions, or for the allocation of securities settlement responsibilities. Such term also means
any person, such as a securities depository, who (i) acts as a custodian of securities in connection with a
system for the central handling of securities whereby all securities of a particular class or series of any
issuer deposited within the system are treated as fungible and may be transferred, loaned, or pledged by
bookkeeping entry without physical delivery of securities certificates, or (ii) otherwise permits or
facilitates the settlement of securities transactions or the hypothecation or lending of securities without
physical delivery of securities certificates. [DTC is a clearing agency.]

24. The term "participant" when used with respect to a clearing agency means any person who uses a
clearing agency to clear or settle securities transactions or to transfer, pledge, lend, or hypothecate
securities. Such term does not include a person whose only use of a clearing agency is (A) through
another person who is a participant or (B) as a pledgee of securities.

25. The term "transfer agent" means any person who engages on behalf of an issuer of securities or on
behalf of itself as an issuer of securities in (A) countersigning such securities upon issuance; (B)
monitoring the issuance of such securities with a view to preventing unauthorized issuance, a function
commonly performed by a person called a registrar; (C) registering the transfer of such securities; (D)
exchanging or converting such securities; or (E) transferring record ownership of securities by
bookkeeping entry without physical issuance of securities certificates. The term "transfer agent" does not
include any insurance company or separate account which performs such functions solely with respect to
variable annuity contracts or variable life policies which it issues or any registered clearing agency which
performs such functions solely with respect to options contracts which it issues.

Private non-commercial record, page 16 of 55

 Section 4 -- Securities and Exchange Commission
1. Establishment; composition; limitations on commissioners; terms of office

There is hereby established a Securities and Exchange Commission (hereinafter referred to as the
"Commission") to be composed of five commissioners to be appointed by the President by and with the
advice and consent of the Senate. Not more than three of such commissioners shall be members of the
same political party, and in making appointments members of different political parties shall be appointed
alternately as nearly as may be practicable. No commissioner shall engage in any other business,
vocation, or employment than that of serving as commissioner, nor shall any commissioner participate,
directly or indirectly, in any stock-market operations or transactions of a character subject to regulation
by the Commission pursuant to this title. Each commissioner shall hold office for a term of five years and
until his successor is appointed and has qualified, except that he shall not so continue to serve beyond the
expiration of the next session of Congress subsequent to the expiration of said fixed term of office, and
except (1) any commissioner appointed to fill a vacancy occurring prior to the expiration of the term for
which his predecessor was appointed shall be appointed for the remainder of such term, and (2) the terms
of office of the commissioners first taking office after June 6, 1934, shall expire as designated by the
President at the time of nomination, one at the end of one year, one at the end of two years, one at the end
of three years, one at the end of four years, and one at the end of five years, after June 6, 1934.

Section 5 -- Transactions on Unregistered Exchanges

It shall be unlawful for any broker, dealer, or exchange, [not issuer of course as the issuer may not be
under U.S. jurisdiction] directly or indirectly, to make use of the mails or any means or instrumentality of
interstate commerce for the purpose of using any facility of an exchange within or subject to the
jurisdiction of the United States to effect any transaction in a security, or to report any such transaction,
unless such exchange (1) is registered as a national securities exchange under section 6, or (2) is
exempted from such registration upon application by the exchange because, in the opinion of the
Commission, by reason of the limited volume of transactions effected on such exchange, it is not
practicable and not necessary or appropriate in the public interest or for the protection of investors to
require such registration.

Section 5 of the Securities Exchange Act of 1934 is a mirror image of Section 5 of the Securities
Act of 1933 which prohibits the use of mail or interstate commerce for unregistered securities.
Rule 144A discussed below and mentioned on the DTC Eligibility Questionnaire addresses an
exemption from Section 5 of the Act of ’33, and is key to reclaiming the BC and SS bonds.

Section 12 -- Registration Requirements for Securities

Section 12a. General requirement of registration

It shall be unlawful for any member, broker, or dealer to effect any transaction in any security (other than
an exempted security) on a national securities exchange unless a registration is effective as to such
security for such exchange in accordance with the provisions of this title and the rules and regulations

Private non-commercial record, page 17 of 55

thereunder. The provisions of this subsection shall not apply in respect of a security futures product
traded on a national securities exchange. [DTC participants may not trade on any security not registered
pursuant to Section 12, unless the security is exempted.]

Top
Section 12b
A security may be registered [Cede & Co.] on a national securities exchange [DTC – see Section2.
Definitions] by the issuer filing an application with the exchange (and filing with the Commission such
duplicate originals thereof as the Commission may require), which application shall contain--

1. Such information, in such detail, as to the issuer and any person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, the issuer, and any guarantor of the
security as to principal or interest or both, as the Commission may by rules and regulations require, as
necessary or appropriate in the public interest or for the protection of investors, in respect of the
following:

A. the organization, financial structure, and nature of the business;

B. the terms, position, rights, and privileges of the different classes of securities outstanding;

C. the terms on which their securities are to be, and during the preceding three years have been,
offered to the public or otherwise;

D. the directors, officers, and underwriters, and each security holder of record holding more than 10
per centum of any class of any equity security of the issuer (other than an exempted security),
their remuneration and their interests in the securities of, and their material contracts with, the
issuer and any person directly or indirectly controlling or controlled by, or under direct or indirect
common control with, the issuer;

E. remuneration to others than directors and officers exceeding $20,000 per annum;

F. bonus and profit-sharing arrangements;

G. management and service contracts;

H. options existing or to be created in respect of their securities;

I. material contracts, not made in the ordinary course of business, which are to be executed in whole
or in part at or after the filing of the application or which were made not more than two years
before such filing, and every material patent or contract for a material patent right shall be
deemed a material contract;

J. balance sheets for not more than the three preceding fiscal years, certified if required by the rules
and regulations of the Commission by a registered public accounting firm;

K. balance sheets for not more than the three preceding fiscal years, certified if required by the rules
and regulations of the Commission by a registered public accounting firm;

Private non-commercial record, page 18 of 55

 L. profit and loss statements for not more than the three preceding fiscal years, certified if required
by the rules and regulations of the Commission by a registered public accounting firm; and

M. any further financial statements which the Commission may deem necessary or appropriate for
the protection of investors.

2. Such copies of articles of incorporation, bylaws, trust indentures, or corresponding documents by

whatever name known, underwriting arrangements, and other similar documents of, and voting trust
agreements with respect to, the issuer and any person directly or indirectly controlling or controlled by, or
under direct or indirect common control with, the issuer as the Commission may require as necessary or
appropriate for the proper protection of investors and to insure fair dealing in the security.

3. Such copies of material contracts, referred to in paragraph (1)(I) above, as the Commission may
require as necessary or appropriate for the proper protection of investors and to insure fair dealing in the
security.

Section 12G Top

Registration of securities by issuer; exemptions

1. Every issuer which is engaged in interstate commerce, or in a business affecting interstate commerce,
or whose securities are traded by use of the mails or any means or instrumentality of interstate commerce
shall--

A. within one hundred and twenty days after the last day of its first fiscal year ended after July 1,
1964, on which the issuer has total assets exceeding $1,000,000 and a class of equity security
(other than an exempted security) [see definition in subparagraph (5) below – that a “class”
includes only securities from the same issuer, hence the BC and SS cards are exempt from this
registration requirement.] held of record by seven hundred and fifty or more persons; and

B. within one hundred and twenty days after the last day of its first fiscal year ended after two years
from July 1, 1964, on which the issuer has total assets exceeding $1,000,000 and a class of
equity security (other than an exempted security) held of record by five hundred or more but less
than seven hundred and fifty persons,

register such security by filing with the Commission [SEC] a registration statement (and such copies
thereof as the Commission may require) with respect to such security containing such information and
documents as the Commission may specify comparable to that which is required in an application to
register a security pursuant to subsection (b) of this section. Each such registration statement shall
become effective sixty days after filing with the Commission or within such shorter period as the
Commission may direct. Until such registration statement becomes effective it shall not be deemed filed
for the purposes of section 18 [liability for misstatements on application]. Any issuer may register any
class of equity security not required to be registered by filing a registration statement pursuant to the
provisions of this paragraph. The Commission is authorized to extend the date upon which any issuer or
class of issuers is required to register a security pursuant to the provisions of this paragraph.

2. The provisions of this subsection shall not apply in respect of--

Private non-commercial record, page 19 of 55

 A. any security listed and registered on a national securities exchange [DTC]. [BC and SS are
exempt from registration requirement with SEC]

B. any security issued by an investment company registered pursuant to section 8 of the Investment
Company Act of 1940.

C. any security, other than permanent stock, guaranty stock, permanent reserve stock, or any similar
certificate evidencing nonwithdrawable capital, issued by a savings and loan association, building
and loan association, cooperative bank, homestead association, or similar institution, which is
supervised and examined by State or Federal authority having supervision over any such
institution.

D. any security of an issuer organized and operated exclusively for religious, educational,
benevolent, fraternal, charitable, or reformatory purposes and not for pecuniary profit, and no part
of the net earnings of which inures to the benefit of any private shareholder or individual; or any
security of a fund that is excluded from the definition of an investment company under section
3(c)(10)(B) of the Investment Company Act of 1940.

E. any security of an issuer which is a "cooperative association" as defined in the Agricultural

Marketing Act, approved June 15, 1929, as amended, [12 U.S.C.A. 1141 et seq.], or a federation of
such cooperative associations, if such federation possesses no greater powers or purposes than
cooperative associations so defined.

F. any security issued by a mutual or cooperative organization which supplies a commodity or

service primarily for the benefit of its members and operates not for pecuniary profit, but only if
the security is part of a class issuable only to persons who purchase commodities or services from
the issuer, the security is transferable only to a successor in interest or occupancy of premises
serviced or to be served by the issuer, and no dividends are payable to the holder of the security.

G. any security issued by an insurance company if all of the following conditions are met:

(i). Such insurance company is required to and does file an annual statement with the
Commissioner of Insurance (or other officer or agency performing a similar function) of its
domiciliary State, and such annual statement conforms to that prescribed by the National
Association of Insurance Commissioners or in the determination of such State commissioner,
officer or agency substantially conforms to that so prescribed.

(ii). Such insurance company is subject to regulation by its domiciliary State of proxies,
consents, or authorizations in respect of securities issued by such company and such
regulation conforms to that prescribed by the National Association of Insurance
Commissioners.

(iii). After July 1, 1966, the purchase and sales of securities issued by such insurance company
by beneficial owners, directors, or officers of such company are subject to regulation
(including reporting) by its domiciliary State substantially in the manner provided in section
16.

H. any interest or participation in any collective trust funds maintained by a bank or in a separate
account maintained by an insurance company which interest or participation is issued in
connection with (i) a stock bonus, pension, or profit-sharing plan which meets the requirements

Private non-commercial record, page 20 of 55

 for qualification under section 401 of Title 26, or (ii) an annuity plan which meets the
requirements for deduction of the employer's contribution under section 404(a)(2) of Title 26.

3. The Commission may by rules or regulations or, on its own motion, after notice and opportunity for
hearing, by order, exempt from this subsection any security of a foreign issuer, including any certificate
of deposit for such a security, if the Commission finds that such exemption is in the public interest and is
consistent with the protection of investors.

4. Registration of any class of security pursuant to this subsection shall be terminated ninety days, or
such shorter period as the Commission may determine, after the issuer files a certification with the
Commission that the number of holders of record of such class of security is reduced to less than three
hundred persons. The Commission shall after notice and opportunity for hearing deny termination of
registration if it finds that the certification is untrue. Termination of registration shall be deferred pending
final determination on the question of denial.

5. For the purposes of this subsection the term "class" shall include all securities of an issuer [we only
have ten such SS bonds, hence the “class” has less than the three hundred person threshold for this SEC
registration requirement] which are of substantially similar character and the holders of which enjoy
substantially similar rights and privileges. The Commission may for the purpose of this subsection define
by rules and regulations the terms "total assets" and "held of record" as it deems necessary or appropriate
in the public interest or for the protection of investors in order to prevent circumvention of the provisions
of this subsection. For purposes of this subsection, a security futures product shall not be considered a
class of equity security of the issuer of the securities underlying the security futures product.

Section 6 -- National Securities Exchanges

a. Registration; application
An exchange may be registered as a national securities exchange under the terms and conditions
hereinafter provided in this section and in accordance with the provisions of section 19(a), by filing with
the Commission an application for registration in such form as the Commission, by rule, may prescribe
containing the rules of the exchange and such other information and documents as the Commission, by
rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors.

b. Denial of membership in national exchanges; denial of association with member; conditions;

limitation of membership

1. A national securities exchange shall deny membership to (A) any person, other than a natural
person, which is not a registered broker or dealer or (B) any natural person who is not, or is not
associated with, a registered broker or dealer. [eg. DTC participant.]
2. filer
3. A. A national securities exchange may deny membership to, or condition the membership of, a
registered broker or dealer if (i) such broker or dealer does not meet such standards of financial
responsibility or operational capability or such broker or dealer or any natural person associated
with such broker or dealer does not meet such standards of training, experience, and competence as
are prescribed by the rules of the exchange or (ii) such broker or dealer or person associated with

Private non-commercial record, page 21 of 55

 such broker or dealer has engaged and there is a reasonable likelihood he may again engage in acts
or practices inconsistent with just and equitable principles of trade. A national securities exchange
may examine and verify the qualifications of an applicant to become a member and the natural
persons associated with such an applicant in accordance with procedures established by the rules of
the exchange.

B. A national securities exchange may bar a natural person from becoming a member or
associated with a member, or condition the membership of a natural person or association of a
natural person with a member, if such natural person (i) does not meet such standards of training,
experience, and competence as are prescribed by the rules of the exchange or (ii) has engaged and
there is a reasonable likelihood he may again engage in acts or practices inconsistent with just and
equitable principles of trade. A national securities exchange may examine and verify the
qualifications of an applicant to become a person associated with a member in accordance with
procedures established by the rules of the exchange and require any person associated with a
member, or any class of such persons, to be registered with the exchange in accordance with
procedures so established.

C. A national securities exchange may bar any person from becoming associated with a member if
such person does not agree (i) to supply the exchange with such information with respect to its
relationship and dealings with the member as may be specified in the rules of the exchange and (ii)
to permit the examination of its books and records to verify the accuracy of any information so
supplied.

Eligible for Resale Under Regulation 144A Top

The DTC Eligibility Questionnaire for issuers becoming DTC Participants asks the following
question:

‘Eligible for resale under Rule 144A2 Contact the NASD at (202) 749 7279 to apply for
PORTAL. Of the ’33 Act.”
2
For non-investment grade issues eligible for resale under Rule 144A, PORTAL eligibility is required.

What does all of that mean?

What is PORTAL?
What is PORTAL eligibility?
What is NASD
What is Rule 144?
What is the ’33 Act?
Are the SS and BC bonds eligible for resale under Rule 144A – ie. are they eligible for
reclaiming by way of the certificates of interest that we hold?.........

Private non-commercial record, page 22 of 55

 “General Rules and Regulations promulgated
under the Securities Act of 1933

Rule 144A
Private Resales of Securities to Institutions”

Rule 144A, adopted pursuant to the U.S. Securities Act of 1933, as amended (the "Securities
Act") provides a safe harbor from the registration requirements of the Securities Act of 1933
for certain private resales of restricted securities to “qualified institutional buyers” (QIBs),
which generally are large institutional investors with over $100 million in investable assets.
When a broker or dealer is selling securities in reliance on Rule 144A, it is subject to the
condition that it may not make offers to persons other than those it reasonably believes to be
QIBs.

Since its adoption, Rule 144A has greatly increased the liquidity of the securities affected.
This is because the institutions can now trade these formerly restricted securities amongst
themselves, thereby eliminating the restrictions that are imposed to protect the public. Rule
144A was implemented in order to induce foreign [ie. non-fiction real parties] companies to
sell securities in the US capital markets. For firms registered with the SEC or a foreign
company providing information to the SEC, financial statements need not be provided to
buyers. Rule 144A has become the principal safe harbor on which non-U.S. companies [us]
rely when accessing the U.S. capital markets.

Since 1990, the Nasdaq Stock Market offers a compliance review process which grants
Depository Trust & Clearing Corporation (DTCC) book-entry access to 144A securities [ie.
allows the trades to be processed through DTC]. Nasdaq also hopes to launch an Electronic
Trading Platform for 144A securities in late 2007 [trading among QIBs] and has a pending
Rule Filing with the SEC.

Rule 144A of the Act of ’34 should not to be confused with rule 144 under the 1933 Act
which permits, under limited circumstances, the sale of restricted and controlled
securities without registration. Wikipedia w modification

What Does Rule 144A Mean?

A Securities & Exchange Commission rule modifying a two-year holding period requirement
on privately placed securities to permit qualified institutional buyers to trade these positions
among themselves…This has substantially increased the liquidity of the securities affected
because institutions can trade these securities amongst themselves, side-stepping limitations
that are imposed to protect the public. Investopedia

In other words, when we certify that the issue is subject to resale under Rule 144A, we are
certifying that the issue is not registered with the SEC nor is it exempt under the various Act of
‘33 exemptions, but IS negotiable among large institutional investors and therefore subject to
holding at DTC as the securities depository and clearing through one of the clearing corporation
subdivisions of DTCC.

Private non-commercial record, page 23 of 55

Notice that Rule 144A strictly refers to Section 5 of the Securities Act of ’33 which forbids use of
mail and interstate commerce for unregistered securities. Section 5 does not address the issue
of being exempt from registering low volume and private securities…

General Rules and Regulations promulgated

under the Securities Act of 1933

Rule 144A - Preliminary Notes

1. This section relates solely to the application of section 5 of the Act [referring to the Securities Act of
1933 – not 1934. It is a modification of the Act of 1933] and not to antifraud or other provisions of the
federal securities laws.

[Securities Act of 1933

Section 5 -- Prohibitions Relating to Interstate Commerce and the Mails

a. Sale or delivery after sale of unregistered securities

Unless a registration statement is in effect as to a security, it shall be unlawful for any person,
directly or indirectly--
1. to make use of any means or instruments of transportation or communication in interstate
commerce or of the mails to sell such security through the use or medium of any
prospectus or otherwise; or
2. to carry or cause to be carried through the mails or in interstate commerce, by any means
or instruments of transportation, any such security for the purpose of sale or for delivery
after sale.]

Rule 144A – Subsection 7

The fact that purchasers of securities from the issuer thereof may purchase such securities
with a view to reselling such securities pursuant to this section will not affect the availability
to such issuer of an exemption under section 4(2) of the Act [Section 4, Exempt Transaction,
Securities Act of 1933], or Regulation D under the Act, from the registration requirements
of the Act.

In other words, though the issue may be eligible for resale under R. 144A among QIBs., it may
also be eligible for an exemption from the registration requirements regarding securities
pursuant to Section 4 of the Securities Act of 1933, for such things as transactions by a non-
issurer/dealer/broker, non-public offerings, unsolicited OTC exchanges, and the like, and as
offered in Regulation D of the Act of 1933 as follows…

[Regulation D. Under the Securities Act of 1933, any offer to sell securities must either be
registered with the SEC or meet an exemption. Regulation D (or Reg D) contains three
rules providing exemptions from the registration requirements, allowing some companies to

Private non-commercial record, page 24 of 55

 offer and sell their securities without having to register the securities with the SEC. [1]
Rule 501 of Reg D contains definitions that apply to the rest of Reg D. Rule 502 contains
the general conditions that must be met to take advantage of the exemptions under
Regulation D. Generally speaking, these conditions are (1) that all sales within a certain
time period that are part of the same Reg D offering must be "integrated", meaning they
must be treated as one offering, (2) information and disclosures must be provided, (3) there
must be no "general solicitation", and (4) that the securities being sold contain restrictions
on their resale. Rule 503 requires issuer to file a Form D with the SEC when they make an
offering under Regulation D.

Reg D also affects individual savings and money market accounts with banks and credit
unions, and any other person or entity that wants to sell "securities." The regulation
provides a "safe harbor" from the general requirement that all offerings of securities be
registered with the SEC, and also exempts certain offerings which total under $5,000,000
from the SEC's registration requirement. The regulation is found under Title 17 of the Code
of Federal Regulations, part 230, Sections 501 through 508. The legal citation is 17 C.F.R.
§230.501 et seq.

In Rules 504 and 505, Regulation D implements §3(b) of the Securities Act of 1933 (also
referred to as the '33 Act), which allows the SEC to exempt issuances of under
$5,000,000 from registration. It also provides (in Rule 506) a "safe harbor" under §4(2) of
the '33 Act (which says that non-public offerings are exempt from the registration
requirement). In other words, if an issuer complies with the requirements of Rule 506, they
can rest assured that their offering is "non-public," and thus that it is exempt from
registration.

Rule 507 penalizes issuers who do not file the Form D, as required by Rule 503. Rule 508
provides the guidelines under which the SEC enforces Regulation D against issuers.

For certain persons and entities called "accredited investors," (generally this includes
banks, certain other organizations, and people making more than $200,000 per year or with
a net worth of over $1,000,000), Regulation D exempts certain offerings of equity from
many of the regulatory requirements that impose costs upon standard public offerings. A
Reg D offering is intended to make access to the capital markets possible for small
companies that could not otherwise bear those costs.
Wikipedia

Rule 144A – Subsection 7(a)

a. Definitions.

1. For purposes of this section, qualified institutional buyer shall mean:

i. Any of the following entities, acting for its own account or the accounts of other qualified
institutional buyers, that in the aggregate owns and invests on a discretionary basis at least $100
million in securities of issuers that are not affiliated with the entity:

A. Any insurance company as defined in section 2(a)(13) of the Act ;

Private non-commercial record, page 25 of 55

 B. Any investment company registered under the Investment Company Act or any business
development company as defined in section 2(a)(48) of that Act;

C. Any Small Business Investment Company licensed by the U.S. Small Business
Administration under section 301(c) or (d) of the Small Business Investment Act of 1958;

D. Any plan established and maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit of its employees;

E. Any employee benefit plan within the meaning of title I of the Employee Retirement Income
Security Act of 1974;

F. Any trust fund whose trustee is a bank or trust company and whose participants are
exclusively plans of the types identified in paragraph (a)(1)(i)(D) or (E) of this section, except
trust funds that include as participants individual retirement accounts or H.R. 10 plans.

G. Any business development company as defined in section 202(a)(22) of the Investment

Advisers Act of 1940;

H. Any organization described in section 501(c) (3) of the Internal Revenue Code, corporation
(other than a bank as defined in section 3(a)(2) of the Act or a savings and loan association or
other institution referenced in section 3(a)(5)(A) of the Act or a foreign bank or savings and
loan association or equivalent institution), partnership, or Massachusetts or similar business
trust; and

i. Any investment adviser registered under the Investment Advisers Act.

Qualified institutional buyers are large financial industry entities classified as QIBs under Rule
144A for the purpose of permitting them to trade unregistered issues among themselves to
promote “foreign” [us] investment. Other entities also qualify as QIBs under subsections 7(a)(1)
(ii) through (vii).

The balance of Rule 144A discloses the “exemption under this section” afforded to resale of
unregistered securities to QIBs with adequate financial disclosure to confirm the buyer’s status
as a QIB. This is the function of the PORTAL alliance regarding having the transaction cleared
by a DTCC subsidiary and having the issue held by DTC…

The Nasdaq PORTAL Alliance Top

DTC Will Expand Existing Systems To Settle New Rule 144A Securities
by Edward C. Kelleher
DTCC Newsletter

http://www.dtcc.com/news/newsletters/dtcc/2008/mar/dtc_expands.php

Private non-commercial record, page 26 of 55

 The Depository Trust Company (DTC) will enhance existing processes to support book-entry
settlement for unregistered Rule 144A equity securities in the fourth quarter of 2008, [coincident
with increase in the FDIC insurance bond, and the public promotion of the reclaiming process for the
BC and SS bonds] providing asset servicing and centralized settlement. DTC will expand its systems to
deliver this service, which will be launched subject to approval by the Securities and Exchange
Commission (SEC).

“DTC worked with a number of investment banks over the past year to come up with a way to settle
144A private market securities,” said Ben Bartolotta, executive director, Syndicate Operations,
Morgan Stanley & Co. “While several options were under consideration, we are pleased to be working
with DTC in providing one central settlement process for the 144A market.”

Who benefits

Under SEC rules, companies can sell 144A securities without registering them with the SEC, provided
that certain shareholder criteria are met. The issues must be held by a Qualified Institutional Buyer
(QIB), which generally is a large institutional investor with more than $100 million in assets, and the
total number of investors for each security is limited to 499 QIBs.

Settling these transactions is complicated by the fact that the issues must be tracked and the
shareholder limit must be certified before the securities can settle.

“This service will benefit issuers of 144As and the firms that invest in them by allowing the assets to
be held and serviced at DTC while the designated administrator will guarantee that the limits on the
number of shareholders are met.” --Daniel Thieke, DTCC product manger, Asset Services

DTC will leverage its Inventory Management System (IMS) – which gives customers control over the
order and timing of submission of securities for processing – to settle the 144A securities once a
designated third party has certified that the shareholder limit has been met, said Daniel Thieke, DTCC
product manger, Asset Services.

“When one of these securities comes to DTC for settlement, the IMS will, in effect, ask for verification
of whether it is a valid transaction; if the third-party administrator provides an approval, DTC will
proceed to settle the assets through DTC’s settlement system,” said Thieke. DTC will rely on issuer-
designated administrators to handle the certification and tracking, allowing issuers to select the third-
party vendor of their choice.

“This service will benefit issuers of 144As and the firms that invest in them by allowing the assets to
be held and serviced at DTC while the designated administrator will guarantee that the limits on the
number of shareholders are met,” said Thieke.

Rule 144A securities will trade on the Nasdaq Portal Alliance, a joint-venture platform formed by
Nasdaq and a group of leading investment banks. @

New System Ready To Process 144A Securities

by Edward C. Kelleher
DTCC Newsletter

http://www.dtcc.com/news/newsletters/dtcc/2008/dec/144a_securities.php

Private non-commercial record, page 27 of 55

 The Depository Trust Company (DTC) has successfully completed testing of a new service that will
support the processing of unregistered Rule 144A equity securities and provide asset servicing and
centralized book-entry settlement for these and other securities.

Rollout of the service, called Security Holder Tracking Service (SH Tracking Service), is subject to
approval by the Securities and Exchange Commission (SEC). “With end-to-end testing complete,
we’re ready to go into full production with this service once we receive SEC approval, which is
expected shortly,” said Daniel Thieke, DTCC vice president, Asset Services.

Settling 144A transactions is complicated by the fact that the issues must be tracked and the
shareholder limit must be certified before the securities can settle. In developing the new service, DTC
leveraged its Inventory Management System (IMS) which gives customers control over the order and
timing of submission of securities for processing.
Alliance testing

DTC, a subsidiary of DTCC, tested the service with the PORTAL Alliance, a group formed in 2007 to
address the needs of the 144A equity securities market. The alliance was formed by Nasdaq and
leading securities firms including Bank of America, Barclays Capital, Citi, Credit Suisse, Deutsche
Bank, Goldman Sachs, JPMorgan, Merrill Lynch, Morgan Stanley, UBS and Wachovia, all of which
took part in the testing.

Under SEC rules, companies can sell 144A securities without registering them with the SEC provided
certain shareholder criteria are met. The issues must be held by a Qualified Institutional Buyer (QIB),
usually a large institutional investor with more than $100 million in assets, and the total number of
investors for each security is limited to 499 QIBs.
Leveraging IMS

Settling 144A transactions is complicated by the fact that the issues must be tracked and the
shareholder limit must be certified before the securities can settle. In developing the new service, DTC
leveraged its Inventory Management System (IMS) which gives customers control over the order and
timing of submission of securities for processing.

With the SH Tracking Service, the issuer of the 144A security appoints an administrator that is
responsible for determining if the shareholder limit has been met and if the transaction should proceed.
DTC then allows the administrator to access the IMS and determine when the transaction should
proceed. Administrators can only access those transactions they have been authorized to handle by the
issuer.

“When these securities come to DTC for settlement, the IMS, in effect, verifies whether it is a valid
transaction. If the administrator approves, DTC will settle the assets through DTC’s settlement
system,” said Thieke.

Although the SH Tracking Service was developed to address the specific concerns of Rule 144A
issues, it will also be used for other types of securities for which the number of beneficial owners
require some level of control by a third party. @

PORTAL Alliance
The PORTAL Alliance is a group that was formed by Nasdaq in 2007 to address the needs of
the 144A equity securities market with Bank of America, Barclays Capital, Citi, Credit Suisse,
Deutsche Bank, Goldman Sachs, JPMorgan, Merrill Lynch, Morgan Stanley, UBS and
Wachovia.

Private non-commercial record, page 28 of 55

The PORTAL alliance can be found at: http://www.nasdaqportalmarket.com/overview.html

The PORTAL alliance can also be found at: http://www.portalalliancemarket.com/

The phone number listed on the Eligibility Form is: (202) 728 8479.

PORTAL is a recent (non) creation, as of 2007 and launched in November 2008 coincident with
the increase in the FDIC bond to $250K and the public solicitation to enter DTC.

As you may know, late last year NASDAQ OMX and a group of leading securities firms
entered into a collaborative agreement to create The PORTAL Alliance — an enhanced
facility designed to serve the market for 144A privately placed equity securities. We are
pleased to announce that the official launch of The PORTAL Alliance is expected in
November 2008 and as such, the PORTAL Market trading system has been removed from
this site and will be available on the new PORTAL Alliance website, upon launch.
Home page, PORTAL

The website states that “the PORTAL Designation System” is an “NASDAQ OMX online
application system for processing all 144A security applications for PORTAL designation and
book entry at DTC or alternative clearing systems” for managing the designation process
seamlessly through the web. NASDAQ OMX refers to the NASDAQ OMX Group which owns
the NASDAQ stock exchange.

PORTAL phone agents were able to confirm the CUSIP numer (SS bond number) during
phone discussion in their database, however they noted that further information or
processing would require the involvement of a DTC participant.

PORTAL effectively designates 144A securities as PORTAL securities…

About PORTAL

NASDAQ OMX has managed the process to designate 144A securities as “PORTAL
securities” since 1990. Serving the investment needs of broker-dealers, qualified institutional
buyers (QIBs) and private and public companies from around the world, the PORTAL
Designation System facilitates the quoting and trading of unregistered securities eligible to be
resold pursuant to SEC Rule 144A. PORTAL provides review of qualified 144A equity,
fixed income and derivative securities for access to the clearance and settlement services of
the Depository Trust Company (DTC) and other alternative clearing systems.

The PORTAL Online Designation System

NASDAQ OMX offers an online application system for processing all 144A security
applications for PORTAL designation and book entry at DTC or alternative clearing systems.
This online service allows issuers and their advisors, such as investment bankers and general
counsels, to manage the designation process and the information delivery requirement
seamlessly through a convenient web-based product.

What is Rule 144A? — An Efficient, Low-Cost Way to Access U.S. Capital and
Institutional Investors

Private non-commercial record, page 29 of 55

 U.S. Securities and Exchange Commission (SEC) Rule 144A allows for the immediate resale
of private placement securities among qualified institutional buyers (institutions that manage
at least $100M in securities and are referred to as QIBs) without requiring public registration.
This provides efficient access to U.S. capital at a lower cost than traditional public U.S.
offerings. Companies from all over the world have used Rule 144A to raise capital and
increase their company’s profile with U.S. institutional investors including banks, savings
and loan institutions, insurance companies, investment companies or employee benefits
plans.

The Benefits of 144A for Public and Private Companies

SEC Rule 144A provides public and private companies with another option for effectively
raising capital in the U.S. Many global companies have found that using the private 144A
market as a first step to becoming publicly traded in the U.S. offers significant advantages.
Thousands of public companies have raised 144A capital as a transitional step toward a U.S
IPO. With private placement capital in hand, companies have the time and flexibility to grow
the business, evaluate options, gain experience and develop more accurate pricing, all of
which can help lead to a more successful IPO. PORTAL website

http://www.nasdaqportalmarket.com/overview.html#PORTALTab

When we submit the Eligibility Questionnaire with an international Documentary

Collection Against Acceptance order to the bank (DTC – the securities depository) and
notify it to portal the proceeds of the redemption of the SS bond into the drawer’s (us)
interest bearing account which has been closed to public deposits and withdrawals so it
is only available for offsets and adjustments, we are in effect ordering DTC to portal the
funds from the Fed into our account. In other words, when we redeem the security, we
reverse the original transaction in which the United States issued the SS security and
“sold” it to the Fed for fresh currency which was then placed into circulation by the
United States while the Fed stored the security at DTC. Once the registered certificant
(us) redeems the security, the Fed must then retrieve it from DTC and return it to the
original issuer: the United States, with the United States paying-off the security in cash
(minimum $3.5B) to the Fed (redeeming the security). The funds are then portaled from
the Fed into our interest bearing account, closing the account in the process. DTC
makes a BEO (book-entry-only) entry denoting the change in the holder of the account to
DTC instead of the Fed and pockets the $250K insurance bond by cashing in the FDIC
insurance as another BEO entry.

Nasdaq Top
National Association of Securities Dealers Automated Quotations

The National Association of Securities Dealers Automated Quotations known as

NASDAQ, is an American stock exchange. It is the largest electronic screen-based
[ie. book entry] equity securities trading market in the United States. With
approximately 3,800 companies and corporations, it has more trading volume per
hour than any other stock exchange in the world.[1]

Private non-commercial record, page 30 of 55

 It was founded in 1971 by the National Association of Securities Dealers (NASD),
who divested themselves of it in a series of sales in 2000 and 2001. It is owned and
operated by the NASDAQ OMX Group, the stock of which was listed on its own stock
exchange beginning July 2, 2002, under the ticker symbol NASDAQ: NDAQ, and is
monitored by the Securities and Exchange Commission (SEC). With the completed
purchase of the Nordic-based operated exchange OMX, following its agreement with
Borse Dubai, NASDAQ is poised to capture 67% of the controlling stake in the
aforementioned exchange, thereby inching ever closer to taking over the company
and creating a trans-atlantic powerhouse.[2] The group, now known as Nasdaq-
OMX, controls and operates the NASDAQ stock exchange in New York City -- the
second largest exchange in the United States. It also operates eight stock
exchanges in Europe and holds one-third of the Dubai Stock Exchange. It has a
double-listing agreement with OMX, and will compete with NYSE Euronext group in
attracting new listings.

On June 29, 2009, former Nasdaq chairman Bernard Madoff was sentenced to 150
years in prison for a massive investor fraud which authorities estimate to include
fabricated returns that totalled approximately $65 billion.[3]

More information on NASDAQ can be located at: http://www.nasdaqomx.com/

Interestingly, DTC BEO Bulletin 2009-1, presumably the first bulletin of 2009, states that Rule
144A designation is no longer necessary for DTC eligibility…..

DTC Bulletin re. PORTAL

No PORTAL Needed for Eligibility
The following bulletin eliminates the need for a PORTAL Designation for DTC eligibility…

Private non-commercial record, page 31 of 55

 The Depository Trust Company
A subsidiary of The Depository Trust & Clearing Corporation

BEO BULLETIN 2009-1

To Whom It May Concern:

This bulletin describes important changes to DTC’s Representations for Rule 144A
Securities Rider with respect to Corporate, Municipal and MMI transactions.

Effective immediately:

> Inclusion in an “SRO Rule 144A System” (frequently referred to as the “SRO
Requirement), such as the NASD’s PORTAL Market System will no longer be
required for DTC eligibility.

. The 144A rider will now require an authorized officer’s signature in order to be
accepted. DTC’s current signature policy will apply.

> U.S. Issuers may email (preferred) or fax the executed rider to DTC. See below.

> Non-U.S. issuers must deliver an original rider bearing an ink signature to the
Underwriting Department at the address given below.

> Previous versions will not be accepted after February 23, 2009.

> For further information please refer to our “A Guide to Making BEO Securities
Eligible for Deposit at DTC” which can be downloaded from our website.

Thank you,
The Depository Trust and Clearing Corporation
Underwriting Department / BEO Group
55 Water Street, 1SL
New York, NY 10041-0099
Tel: 1-866-724-4402 select option (3)
Fax: 1-212-855-3274
Email: [email protected] for corporate issues.
[email protected] for municipal issues.
02/2009

The same bulletin also provides for use of the DTC Rule 144A Rider to the Eligibility
Questionnaire subject to the same DTC signature rules and non-US issuers being required to
deliver hard copy rather than email to the Underwriting Department.

What is DTC? Top

Private non-commercial record, page 32 of 55

 (The Depository Trust Company)

One can learn much about DTC by studying its many publications, bulletins and newsletters, in
particular the Operational Arrangements, the BEO Manual, An Introduction to DTC Services and
Capabilities, The Development of the Government Securities Clearing Corporation, a history
paper by Jeffry F. Ingber, and the DTC By-Laws.

The purpose, nature and performance of DTC is summarized in the first two sections of the DTC
Operational Arrangements that are incorporated into a typical public issuer’s Letter of
Representations that the issuer would issue to DTC when applying for membership as the
issuers stipulation to DTC’s rules.

DTC Operational Arrangements

1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository
for the securities (the “Securities”). The Securities will be issued as fully-registered securities
registered in the name of Cede & Co . (DTC’s partnership nominee) or such other name as may be
requested by an authorized representative of DTC. One fully-registered Security certificate will be
issued for [each issue of] the Securities, [each] in the aggregate principal amount of such issue, and
will be deposited with DTC. [If, however, the aggregate principal amount of [any] issue exceeds
$500 million, one certificate will be issued with respect to each $500 million of principal amount,
and an additional certificate will be issued with respect to any remaining principal amount of such
issue.]

In other words, DTC is a securities depository that holds title to most securities either as
certificated securities or book-entry securities, by way of securing the entire world’s stipulation
that they will register the securities in the name of its nominee, Cede & Co, for the privilege of
having transactions cleared quickly.

2. DTC, the world’s largest securities depository, 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. DTC holds and provides
asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and
municipal debt issues, and money market instruments (from over 100 countries) that DTC’s
participants (“Direct Participants”) deposit with DTC. [DTC participant is an entity that deposits
securities with DTC.] DTC also facilitates the post-trade settlement among Direct Participants of
sales and other securities transactions in deposited securities, through electronic computerized
book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need
for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S.
securities brokers and dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC 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 [which handle the actual clearings for public, ggovernment and
mortgage-backed securities], all of which are registered clearing agencies. DTCC is owned by the

Private non-commercial record, page 33 of 55

 users of its regulated subsidiaries [the banks]. Access to the DTC system is also available to others
such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing
corporations that clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating:
AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange
Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

DTC is first and foremost a securities depository (securities bank)..

DTC is, not surprisingly, a trust operating under its own law, the law of the trust by stipulation of
its members.

DTC is a “clearing agency” under the Act of 34.

DTC is a “clearing corporation” under N.Y.U.C.C.

DTC is a “banking organization” under the New York Banking Law.

DTC is a Fed member (hence holder of the BC bond when the Fed “buys” the bond for fresh-
minted currency after the application for the Certificate of Live Birth arrives at the Department of
Commerce.

DTC apparently views its AAA S&P rating as worthy of public propaganda, hence identifying a
vulnerability in attacking its standing by way of Notice of Lien Against Bond in the event
enforcement is required.

And every issuer who uses DTC, and every DTC participant, stipulates to all of the above in the
world of fiction.

3. Purchases of Securities under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Securities on DTC’s records. The ownership
interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be
recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive
written confirmation from DTC of their purchase. Beneficial Owners are, however, expected
to receive written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through which the
Beneficial Owner entered into the transaction. Transfers of ownership interests in the
Securities are to be accomplished by entries made on the books of Direct and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Securities, except in the event that use of
the book-entry system for the Securities is discontinued.

Notice that the owners-in-fact of the securities are reduced to “Beneficial Owners,” a
clever word of art that implies ownership but identifies the liable party while DTC holds
and effectively controls the issue. The term implies that the buyers of the securities
held by DTC will be beneficiaries of the trust represented by the DTC charter, the banks
being the grantors of the trust…

4. To facilitate subsequent transfers, all Securities deposited by Direct Participants

with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such

Private non-commercial record, page 34 of 55

 other name as may be requested by an authorized representative of DTC. The deposit of
Securities with DTC and their registration in the name of Cede & Co. or such other DTC
nominee do not effect any change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the
Direct Participants to whose accounts such Securities are credited, which may or may not be
the Beneficial Owners. The Direct and Indirect Participants will remain responsible for
keeping account of their holdings on behalf of their customers.

…and DTC keeps its hands clean of the Beneficial Owners. The balance of the
Operational Arrangements are for your review.

5. Conveyance of notices and other communications by DTC 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 of Securities may wish to take
certain steps to augment the transmission to them of notices of significant events with respect to the
Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security
documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee
holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners.
In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar
and request that copies of notices be provided directly to them.]
6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue
are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with
respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI
Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those
Direct Participants to whose accounts Securities are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Securities will be made
to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC.
DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and
corresponding detail information from Issuer or Agent, on payable date in accordance with their
respective holdings shown on DTC’s records. 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 DTC, Agent, or Issuer, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend
payments to Cede & Co. (or such other nominee as may be requested by an authorized representative
of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants
will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be
the responsibility of Direct and Indirect Participants.
9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered,
through its Participant, to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by
causing the Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s records,
to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with
an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the
Securities are transferred by Direct Participants on DTC’s records and followed by a book-entry credit
of tendered Securities to [Tender/Remarketing] Agent’s DTC account.
10. DTC may discontinue providing its services as depository with respect to the Securities at
any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a
successor depository is not obtained, Security certificates are required to be printed and delivered.
11. Issuer may decide to discontinue use of the system of book-entry-only transfers through

Private non-commercial record, page 35 of 55

 DTC (or a successor securities depository). In that event, Security certificates will be printed and
delivered to DTC.
12. The information in this section concerning DTC and DTC’s book-entry system has been
obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the
accuracy thereof. [Note the stipulation. Classic U.S. Inc.]

Private non-commercial record, page 36 of 55

 Top

UNCITRAL Convention on International

Bills of Exchange
and Promissory Notes (1988)

This convention is the product of UNCITRAL…

UNCITRAL
UNICTRAL stands for the United Nations Committee on International Trade Law. The
committee has produced various conventions over the years such as the UNCITRAL
Convention on Abolishing the Legalisation of Foreign Documents (1961) in which the various
members decide individually whether to join by signing.

The UNICTRAL Convention on International Bills of Exchange and Promissory Notes of 1988 is
a product of the need for standardization in the aftermath of the replacement of commodity
money (money of exchange) in 1933 with the present system of hollow credit represented by
bills of exchange signifying liability as assets.

A bill of exchange is a three party instrument: party A (drawer) orders party B (drawee) to pay
party C (payee). As an example, personal checks are bills of exchange. Promissory notes can
be bills of exchange although most often are two party instruments.

If a BOE is drawn on a bank, it is called a bank draft (check). If it is drawn on another person, it
is called a trade draft.

And international bill of exchange (IBOE) is a bill of exchange that crosses international
borders such as from Canada to the U.S., but from the perspective of the living man or woman
being foreign to, or “without” the united States Federal corporation and wideworld of legal fiction
entities, it would cross the boundary from private-on-the-land in the presence of Nature’s God,
into the land of dead corporate legal fiction ens legis entities. From the real to the imagined.
That crossing is in fact the crux of the DTC process: portaling hidden public funds back to our
private account through the Fed, for beneficial uses for mankind.

Article 1
1. This Convention applies to an international bill of exchange when it contains the heading
"International bill of exchange (UNCITRAL Convention)" and also contains in its text the
words "International bill of exchange (UNCITRAL Convention)".

3. This Convention does not apply to cheques.

An UNCITRAL IBOE must state its lineage twice on the instrument as: "International bill of
exchange (UNCITRAL Convention)".

Private non-commercial record, page 37 of 55

 Top

Article 3
1. A bill of exchange is a written instrument which:

(a) Contains an unconditional order whereby the drawer directs the drawee to pay a
definite sum of money to the payee or to his order;

(b) Is payable on demand or at a definite time;

(c) Is dated;

(d) Is signed by the drawer.

This definition of a BOE is similar to the definition of a negotiable instrument in Section 3-104 of
the Uniform Commercial Code. The instrument must be an unconditional order to the drawee
to pay on sight or at a specific time which is signed and dated.

Art. 3 (1)(b). Payable on demand or at a definite time

eg.
Art. 3 (1)(c). Date • At Sight Days after Not applicable
of issue • At 30 days after presentment
Art. 3 (1)(a). Unconditional order • At 60 Days after invoice
to drawee to pay

Private issue International bill of exchange (UNCITRAL Convention)

Place of Drawing Anytown, New York Date No.
Pay To The Order Of John Jason Smith, Anyplace, California At Sight Days after not applicable

This International bill of exchange (UNCITRAL Convention) is drawn in particular to Articles 2, 3, 11, 12, 13, 46(3), 47(1) and 53 of the Convention.

Drawer and Location John Jason Smith, Anytown, New York

Good as aval. Without recourse.
To: Depository Trust Company
55 Waters Street
New York, NY 10041
Authorized Signature

Art. 3 (1)(d). Signature of drawer

Private non-commercial record, page 38 of 55

 Article 2
1. An international bill of exchange is a bill of exchange which specifies at least two of the
following places and indicates that any two so specified are situated in different States:

(a) The place where the bill is drawn; [can have a special line naming where drawn]

[Draw. To prepare a written bill of exchange and place one's signature on it (as
opposed to drawing money from an account).]

(b) The place indicated next to the signature of the drawer; [place next to signature]

(c) The place indicated next to the name of the drawee; [place of drawee ordered to pay]
[place where BOA is addressed to]

(d) The place indicated next to the name of the payee; [place of party Pay To Order Of]

(e) The place of payment, provided that either the place where the bill is drawn or the place
of payment is specified on the bill and that such place is situated in a Contracting State.

Therrefore, an UNCITRAL IBOE has at least two locations listed, the most easy to remember
and use are the location of the drawer alongside the signature, the drawee to which the BOE is
addressed (don’t confuse with payee to whom the instrument is made payable), or the drawing
location where it was constructed and signed (see color-coded sample which follows).

Art. 2 (a). Place where drawn

(often same place as alongside signature) Art. 2 (d). Place next to payee (the living man)

Private issue International bill of exchange (UNCITRAL Convention)

Place of drawing Anytown, New York
Pay To The Order Of John Jason Smith, Anyplace, California

Art. 1. Name in title and text

This International bill of exchange (UNCITRAL Convention) is drawn in particular to Articles 2, 3, 11, 12, 13, 46(3), 47(1) and 53 of the Convention.

Drawer and Location John Jason Smith, Anytown, New York

Good as aval. Without recourse.
To: Depository Trust Company
55 Waters Street
New York, NY 10041
Authorized Signature

Art. 2(c). Place of drawee Art. 2 (b). Place next to signature of drawer
(to whom the BOE is “addressed”) (often same as place where drawn)
Private non-commercial record, page 39 of 55
 Article 5
In this Convention:
(a) "Bill" means an international bill of exchange governed by this Convention;
(b) "Note" means an international promissory note governed by this Convention;
(c) "Instrument" means a bill or a note;
(d) "Drawee" means a person on whom a bill is drawn and who has not accepted it;
(e) "Payee" means a person in whose favour the drawer directs payment to be made or to
whom the maker promises to pay;
(f) "Holder" means a person in possession of an instrument in accordance with article 15; [see below]
(g) "Protected holder" means a holder who meets the requirements of article`29; [see below]
(h) "Guarantor" means any person who undertakes an obligation of guarantee under article
46, whether governed by paragraph`4`(b) ("guaranteed") or paragraph`4`(c) ("aval") of
article`47;
(i) "Party" means a person who has signed an instrument as drawer, maker, acceptor,
endorser or guarantor;
(j) "Maturity" means the time of payment referred to in paragraphs 4, 5, 6`and 7 of article 9;
(k) "Signature" means a handwritten signature, its facsimile or an equivalent authentication
effected by any other means; "forged signature" includes a signature by the wrongful use of
such means;
(l) "Money" or "currency" includes a monetary unit of account which is established by an
intergovernmental institution or by agreement between two or more States, provided that this
Convention shall apply without prejudice to the rules of the intergovernmental institution or
to the stipulations of the agreement.

Article 7
The sum payable by an instrument is deemed to be a definite sum although the instrument
states that it is to be paid:

(a) With interest;

(b) By instalments at successive dates;

(c) By instalments at successive dates with a stipulation in the instrument that upon default in
payment of any instalment the unpaid balance becomes due;

(d) According to a rate of exchange indicated in the instrument or to be determined as

directed by the instrument; or

(e) In a currency other than the currency in which the sum is expressed in the instrument.

So the sum certain may be stated succinctly like a check, or in installments.

Private non-commercial record, page 40 of 55

 Art. 7. Payable to a sum certain Top

Private issue International bill of exchange (UNCITRAL Convention)

Place of Drawing Anytown, New York Date No.
Pay To the Order Of John Jason Smith, Anyplace, California At Sight Days After not applicable

Amount One Hundred Million 00/00 United States Dollars USD 100,000,000.00
Value Received And Charge To Account Of Depository Trust Company

This International bill of exchange (UNCITRAL Convention) is drawn in particular to Articles 2, 3, 11, 12, 13, 46(3), 47(1) and 53 of the Convention.

Drawer and Location John Jason Smith, Anytown, New York

Good as aval. Without recourse.
To: Depository Trust Company
55 Waters Street
New York, NY 10041
Authorized Signature

Art. 7. Payable to a sum certain even though divided into equal installments

Private issue International bill of exchange (UNCITRAL Convention)

Place of Drawing Anytown, New York Date No.
Pay To The Order Of John Jason Smith, Anyplace, California At ------- Days After --------------

Amount One Hundred Million 00/00 United States Dollars USD 100,000,000.00 Payable In Four (4) Equal Installments; First Of Exchang
Value Received And Charge To Account Of Depository Trust Company

This International bill of exchange (UNCITRAL Convention) is drawn in particular to Articles 2, 3, 11, 12, 13, 46(3), 47(1) and 53 of the Convention.

Drawer and Location John Jason Smith, Anytown, New York

Good as aval. Without recourse.
To: Depository Trust Company
55 Waters Street
New York, NY 10041
Authorized Signature

Art. 7. Payable to a sum certain even though divided into equal installments

Private issue International bill of exchange (UNCITRAL Convention)

Place of Drawing Anytown, New York Date No.
Pay To The Order Of John Jason Smith, Anyplace, California At ------- Days After -------------

Amount Three Hundred and Sixty-Five Million 00/00 United States Dollars USD 365,000,000.00 Payable In three hundred and sixty-five
Value Received And Charge To Account Of Depository Trust Company

This International bill of exchange (UNCITRAL Convention) is drawn in particular to Articles 2, 3, 11, 12, 13, 46(3), 47(1) and 53 of the Convention.

Drawer and Location John Jason Smith, Anytown, New York

Good as aval. Without recourse.
To: Depository Trust Company
55 Waters Street
New York, NY 10041
Authorized Signature

Private non-commercial record, page 41 of 55

 Bill of Exchange for Interest Bearing Account
and Transfer $250K to DTC

Private issue International bill of exchange (UNCITRAL Convention)

Place of Drawing Anytown, New York Date No.
Pay To The Order Of The Depository Trust Company At ------- Days After -------------

Amount Two Hundred and Fifty Thousand 00/00 United States Dollars USD 250,000.00
Value Received And Charge To Account Of Drawee’s Bank (the int-bearing account which is being charged for the $250K

This International bill of exchange (UNCITRAL Convention) is drawn in particular to Articles 2, 3, 11, 12, 13, 46(3), 47(1) and 53 of the Convention.

Drawer and Location John Jason Smith, Anytown, New York

Good as aval. Without recourse.
To: Drawee’s Bank (int-bearing acct)
Bank Street Addres
City, State Zip
Authorized Signature

Note, the interest-bearing account bank is the drawee’s bank that receives the order to pay the
$250K DTC entrance fee by way of the FDIC insurance bond. But it is also the bank of the party
issuing the order to pay (drawer) to be credited with the proceeds of the Social Security bond that
is being cashed in using the International Documentary Collection Against Acceptance Wizard
order, which specifically lists the bank as follows: “Credit Our Commercial Account (Drawer’s
account).” In actuality, the Acceptance Wizard is used without an IBOE for this step.
However, understanding how the IBOE would be constructed is enlightening.

Bill of Exchange to Portal Funds to Non-interest Account

Private issue International bill of exchange (UNCITRAL Convention)

Place of Drawing Anytown, New York Date No.
Pay To The Order Of John Jason Smith, Anyplace, California At ------- Days After -------------

Amount Three Hundred and Sixty-Five Million 00/00 USD 365,000,000.00 Payable In three hundred and sixty-five (365) Equal Installm
Value Received And Charge To Account Of Depository Trust Company

This International bill of exchange (UNCITRAL Convention) is drawn in particular to Articles 1 - 7, 11, 12, 13, 46(3), 47(1) and 53 of the Convention.

Drawer and Location John Jason Smith, Anytown, New York

Good as aval. Without recourse.
To: Depository Trust Company
55 Waters Street
New York, NY 10041
Authorized Signature

One can also use the a simple non-installment sight pay IBOE for non-installment transfer.

Private non-commercial record, page 42 of 55

 Other Articles of Interest

Article 9
(payable on demand, presentment, at sight, etc.)

1. An instrument is deemed to be payable on demand:

(a) If it states that it is payable at sight or on demand or on presentment or if it contains
words of similar import; or
(b) If no time of payment is expressed.
2. An instrument payable at a definite time which is accepted or endorsed or guaranteed after
maturity is an instrument payable on demand as regards the acceptor, the endorser or the
guarantor.
3. An instrument is deemed to be payable at a definite time if it states that it is payable:
(a) On a stated date or at a fixed period after a stated date or at a fixed period after the
date of the instrument;
(b) At a fixed period after sight;
(c) By instalments at successive dates; or
(d) By instalments at successive dates with the stipulation in the instrument that upon
default in payment of any instalment the unpaid balance becomes due.
4. The time of payment of an instrument payable at a fixed period after date is determined by
reference to the date of the instrument.
5. The time of payment of a bill payable at a fixed period after sight is determined by the date
of acceptance or, if the bill is dishonoured by non-acceptance, by the date of protest or, if
protest is dispensed with, by the date of dishonour.
6. The time of payment of an instrument payable on demand is the date on which the
instrument is presented for payment.
7. The time of payment of a note payable at a fixed period after sight is determined by the
date of the visa signed by the maker on the note or, if his visa is refused, by the date of
presentment.
8. If an instrument is drawn, or made, payable one or more months after a stated date or after
the date of the instrument or after sight, the instrument is payable on the corresponding date
of the month when payment must be made. If there is no corresponding date, the instrument
is payable on the last day of that month.

Article 11*
(drawing on self; paying self)

A bill may be drawn by the drawer:

(a) On himself; [Then the receiver is concerned with the drawer’s credit worthiness if not
drawn on a bank]
(b) Payable to his order.

Private non-commercial record, page 43 of 55

 Article 12*
(incomplete instrument)

1. An incomplete instrument which satisfies the requirements set out in paragraph`1 of

article`1 and bears the signature of the drawer or the acceptance of the drawee, or which
satisfies the requirements set out in paragraph`2 of article`1 and paragraph`2`(d) of article`3,
but which lacks other elements pertaining to one or more of the requirements set out in
articles`2 and 3, may be completed, and the instrument so completed is effective as a bill or a
note.
2. If such an instrument is completed without authority or otherwise than in accordance with
the authority given:
(a) A party who signed the instrument before the completion may invoke such lack of
authority as a defence against a holder who had knowledge of such lack of authority when
he became a holder;
(b) A party who signed the instrument after the completion [against authority] is liable
according to the terms of the instrument so completed.

Article 13*
(transfer of instrument by endorsement & delivery)

An instrument is transferred:
(a) By endorsement and delivery of the instrument by the endorser to the endorsee; or
(b) By mere delivery of the instrument if the last endorsement is in blank.

Article 14
(endorsement)

1. An endorsement must be written on the instrument or on a slip affixed thereto ("allonge").

It must be signed.
2. An endorsement may be:
(a) In blank, that is, by a signature alone or by a signature accompanied by a statement to
the effect that the instrument is payable to a person in possession of it;
(b) Special, that is, by a signature accompanied by an indication of the person to whom
the instrument is payable.
3. A signature alone, other than that of the drawee, is an endorsement only if placed on the
back of the instrument.

Article 15
(holder)
(as referenced above)

1. A person is a holder if he is:

(a) The payee in possession of the instrument; or

*Special Articles Listed on the actual IBOEs: 11, 12, 13, 46(3), 47(1), 53
*Special Articles Listed on the actual IBOEs: 11, 12, 13, 46(3), 47(1), 53
Private non-commercial record, page 44 of 55
 (b) In possession of an instrument which has been endorsed to him, or on which the last
endorsement is in blank, and on which there appears an uninterrupted series of endorsements,
even if any endorsement was forged or was signed by an agent without authority.
2. If an endorsement in blank is followed by another endorsement, the person who signed this
last endorsement is deemed to be an endorsee by the endorsement in blank.
3. A person is not prevented from being a holder by the fact that the instrument was obtained
by him or any previous holder under circumstances, including incapacity or fraud, duress or
mistake of any kind, that would give rise to a claim to, or a defence against liability on, the
instrument.

Article 17
(non-negotiable)

1. If the drawer or the maker has inserted in the instrument such words as "not negotiable",
"not transferable", "not to order", "pay (X) only", or words of similar import, the
instrument may not be transferred except for purposes of collection, and any endorsement,
even if it does not contain words authorizing the endorsee to collect the instrument, is deemed
to be an endorsement for collection.

2. If an endorsement contains the words "not negotiable", "not transferable", "not to order",
"pay (X) only", or words of similar import, the instrument may not be transferred further
except for purposes of collection, and any subsequent endorsement, even if it does not
contain words authorizing the endorsee to collect the instrument, is deemed to be an
endorsement for collection.

Article 18
(unconditional endorsement)

1. An endorsement must be unconditional.

2. A conditional endorsement transfers the instrument whether or not the condition is

fulfilled. The condition is ineffective as to those parties and transferees who are subsequent to
the endorsee. [In other words a conditional endorsement becomes unconditional upon
transfer.]

Article 19
(partial endorsement)

An endorsement in respect of a part of the sum due under the instrument is ineffective as an
endorsement. [Partial endorsement is not an endorsment.]

Article 20
(order of endorsements)

If there are two or more endorsements, it is presumed, unless the contrary is proved, that each
endorsement was made in the order in which it appears on the instrument.

Private non-commercial record, page 45 of 55

 Article 21
(endorsement authorizing collection)
(“endorsement for collection”)

1. If an endorsement contains the words "for collection", "for deposit", "value in

collection", "by procuration", "pay any bank", or words of similar import authorizing the
endorsee to collect the instrument, the endorsee is a holder who:

(a) May exercise all rights arising out of the instrument;

(b) May endorse the instrument only for purposes of collection;

(c) Is subject only to the claims and defences which may be set up against the endorser.

2. The endorser for collection is not liable on the instrument to any subsequent holder.

Article 22
(endorsement as pledge)

1. If an endorsement contains the words "value in security", "value in pledge", or any other
words indicating a pledge, the endorsee is a holder who:

(a) May exercise all rights arising out of the instrument;

(b) May endorse the instrument only for purposes of collection;

(c) Is subject only to the claims and defences specified in article`28 or article`30.

2. If such an endorsee endorses for collection, he is not liable on the instrument to any
subsequent holder.

Article 26
(endorsement by an agent)

1. If an endorsement is made by an agent without authority or power to bind his principal in

the matter, the principal, or a party who signed the instrument before such endorsement, has
the right to recover compensation for any damage that he may have suffered because of such
endorsement against:

(a) The agent;

(b) The person to whom the instrument was directly transferred by the agent;
(c) A party or the drawee who paid the instrument to the agent directly or through one or
more endorsees for collection. [Maker has right of recourse against bad faith fiduciary and
those who accepted and paid the instrument…]

Private non-commercial record, page 46 of 55

 2. However, an endorsee for collection is not liable under paragraph`1 of this article if he is
without knowledge that the endorsement does not bind the principal:

(a) At the time he pays the principal or advises him of the receipt of payment; or
(b) At the time he receives payment, if this is later, unless his lack of knowledge is due to his
failure to act in good faith or to exercise reasonable care.

3. Furthermore, a party or the drawee who pays an instrument is not liable under paragraph`1
of this article if, at the time he pays the instrument, he is without knowledge that the
endorsement does not bind the principal, unless his lack of knowledge is due to his failure to
act in good faith or to exercise reasonable care.

4. Except as against the agent, the damages recoverable under paragraph`1 of this article may
not exceed the amount referred to in article`70 or article`71.

Article 27
(holders rights under CONVENTION)

1. The holder of an instrument has all the rights conferred on him by this Convention against
the parties to the instrument.

2. The holder may transfer the instrument in accordance with article 13.

Article 29
(protected holder)
(as referenced above)

"Protected holder" means the holder of an instrument which was complete when he took it or
which was incomplete within the meaning of paragraph`1 of article`12 and was completed in
accordance with authority given, provided that when he became a holder:

(a) He was without knowledge of a defence against liability on the instrument referred to in
paragraphs`1`(a), (b), (c) and (e) of article`28;
(b) He was without knowledge of a valid claim to the instrument of any person;
(c) He was without knowledge of the fact that it had been dishonoured by non-acceptance or
by non-payment;
(d) The time-limit provided by article`55 for presentment of that instrument for payment had
not expired;
(e) He did not obtain the instrument by fraud or theft or participate in a fraud or theft
concerning it.

Article `33
(liability by signature)

1. Subject to the provisions of articles`34 and`36, a person is not liable on an instrument

unless he signs it.

Private non-commercial record, page 47 of 55

 2. A person who signs an instrument in a name which is not his own is liable as if he had
signed it in his own name.

Article `36
(signing by agent)

1. An instrument may be signed by an agent.

2. The signature of an agent placed by him on an instrument with the authority of his
principal and showing on the instrument that he is signing in a representative capacity for that
named principal, or the signature of a principal placed on the instrument by an agent with his
authority, imposes liability on the principal and not on the agent.

3. A signature placed on an instrument by a person as agent but who lacks authority to sign or
exceeds his authority, or by an agent who has authority to sign but who does not show on the
instrument that he is signing in a representative capacity for a named person, or who shows
on the instrument that he is signing in a representative capacity but does not name the person
whom he represents, imposes liability on the person signing and not on the person whom he
purports to represent.

4. The question whether a signature was placed on the instrument in a representative capacity
may be determined only by reference to what appears on the instrument.

5. A person who is liable pursuant to paragraph `3 of this article and who pays the instrument
has the same rights as the person for whom he purported to act would have had if that person
had paid the instrument.

Article `37
(order to pay is not assignment of funds)

The order to pay contained in a bill does not of itself operate as an assignment to the payee of
funds made available for payment by the drawer with the drawee.

Article `38
(dishonor by non-acceptance obligates drawer to payee/holder)

1. The drawer engages that upon dishonour of the bill by non-acceptance or by non-payment,
and upon any necessary protest, he will pay the bill to the holder, or to any endorser or any
endorser's guarantor who takes up and pays the bill.

2. The drawer may exclude or limit his own liability for acceptance or for payment by an
express stipulation in the bill. Such a stipulation is effective only with respect to the drawer.
A stipulation excluding or limiting liability for payment is effective only if another party is or
becomes liable on the bill. [Drawer may add language limiting his liability on non-
acceptance. For example, might state: Dishonor by non-acceptance comprises payment
and discharges all rights of recourse against drawer.]

Private non-commercial record, page 48 of 55

 Article 39
(maker may not stipulate limited liability IN A NOTE)

1. The maker engages that he will pay the note in accordance with its terms to the holder, or
to any party who takes up and pays the note.

2. The maker may not exclude or limit his own liability by a stipulation in the note. Any such
stipulation is ineffective. [NOTE: There is no “maker” under this Convention regarding an
IBOE. A maker is unique to an international promissory note. An IBOE is drawn by a
drawer.]

Article 40
(drawee not liable until accepted)

1. The drawee is not liable on a bill until he accepts it.

2. The acceptor engages that he will pay the bill in accordance with the terms of his
acceptance to the holder, or to any party who takes up and pays the bill.

Article 41
(acceptance must be written on IBOE, front or back
as sig or with “acceptance”)

1. An acceptance must be written on the bill and may be effected:

(a) By the signature of the drawee accompanied by the word "accepted" or by words of
similar import; or
(b) By the signature alone of the drawee.

2. An acceptance may be written on the front or on the back of the bill.

Article 43
(acceptance must be unqualified or
it is dishonored to the outstanding balance)

1. An acceptance must be unqualified. An acceptance is qualified if it is conditional or varies

the terms of the bill.

2. If the drawee stipulates in the bill that his acceptance is subject to qualification:

(a) He is nevertheless bound according to the terms of his qualified acceptance;

(b) The bill is dishonoured by non-acceptance.

3. An acceptance relating to only a part of the sum payable is a qualified acceptance. If the
holder takes such an acceptance, the bill is dishonoured by non-acceptance only as to the
remaining part.

Private non-commercial record, page 49 of 55

 4. An acceptance indicating that payment will be made at a particular address or by a
particular agent is not a qualified acceptance, provided that:

(a) The place in which payment is to be made is not changed;

(b) The bill is not drawn payable by another agent.

Article 44
(endorser pays instrument upon dishonor)

1. The endorser engages that upon dishonour of the instrument by non-acceptance or by non-
payment, and upon any necessary protest, he will pay the instrument to the holder, or to any
subsequent endorser or any endorser's guarantor who takes up and pays the instrument.

2. An endorser may exclude or limit his own liability by an express stipulation in the
instrument. Such a stipulation is effective only with respect to that endorser. [Eg. Endorser
may say, “John Jones, without recourse.”]

Article 46*
(guarantor other than drawer or drawee)

1. Payment of an instrument, whether or not it has been accepted, may be guaranteed, as to

the whole or part of its amount, for the account of a party or the drawee. A guarantee may be
given by any person, who may or may not already be a party.

2. A guarantee must be written on the instrument or on a slip affixed thereto ("allonge").

3. A guarantee is expressed by the words "guaranteed", "aval", "good as aval" or words of

similar import, accompanied by the signature of the guarantor. For the purposes of this
Convention, the words "prior endorsements guaranteed" or words of similar import do not
constitute a guarantee.

4. A guarantee may be effected by a signature alone on the front of the instrument. A

signature alone on the front of the instrument, other than that of the maker, the drawer or
the drawee, is a guarantee. [A signature other than the drawer or drawee IS a guarantee
(such as the sureties on an indemnity Bond.]

5. A guarantor may specify the person for whom he has become guarantor. In the absence of
such specification, the person for whom he has become guarantor is the acceptor or the
drawee in the case of a bill, and the maker in the case of a note.

6. A guarantor may not raise as a defence to his liability the fact that he signed the instrument before
it was signed by the person for whom he is a guarantor, or while the instrument was incomplete.

Article 47*
(liability of guarantor)

*Special Articles Listed on the actual IBOEs: 11, 12, 13, 46(3), 47(1), 53
Private non-commercial record, page 50 of 55
 1. The liability of a guarantor on the instrument is of the same nature as that of the party for
whom he has become guarantor. [The balance of Article 47 (2) – (4) delineates the intricate
nature of the guarantor’s liability.]

Article 51
(presentment for acceptance)

A bill is duly presented for acceptance if it is presented in accordance with the following
rules:

(a) The holder must present the bill to the drawee on a business day at a reasonable hour;

(b) Presentment for acceptance may be made to a person or authority other than the drawee if
that person or authority is entitled under the applicable law to accept the bill;

(c) If a bill is payable on a fixed date, presentment for acceptance must be made before or on
that date;

(d) A bill payable on demand or at a fixed period after sight must be presented for acceptance
within one year of its date;

(e) A bill in which the drawer has stated a date or time-limit for presentment for acceptance
must be presented on the stated date or within the stated time-limit.

Article 53*
(non-presentment relieves drawer liability)

1. If a bill which must be presented for acceptance is not so presented, the drawer, the
endorsers and their guarantors are not liable on the bill.

2. Failure to present a bill for acceptance does not discharge the guarantor of the drawee of
liability on the bill.

Article 55
(dishonor by non-payment)

An instrument is duly presented for payment if it is presented in accordance with the

following rules:

(a) The holder must present the instrument to the drawee or to the acceptor or to the maker on
a business day at a reasonable hour;

(b) A note signed by two or more makers may be presented to any one of them, unless the
note clearly indicates otherwise; [again showing the discretion in writing the terms of the
instrument at the disposal of the drawer.]

Private non-commercial record, page 51 of 55

 (c) If the drawee or the acceptor or the maker is dead, presentment must be made to the
persons who under the applicable law are his heirs or the persons entitled to administer his
estate;

(d) Presentment for payment may be made to a person or authority other than the drawee, the
acceptor or the maker if that person or authority is entitled under the applicable law to pay the
instrument;

(e) An instrument which is not payable on demand must be presented for payment on
the date of maturity or on one of the two business days which follow; [A time draft must
be presented on the date of maturity or no later than 2 bus days thereafter.]

(f) An instrument which is payable on demand must be presented for payment within
one year of its date; [At sight instrument must be presented within one year of the issue
date.]

(g) An instrument must be presented for payment:

(i) At the place of payment specified on the instrument;

(ii) If no place of payment is specified, at the address of the drawee or the acceptor or the
maker indicated in the instrument; or

(iii) If no place of payment is specified and the address of the drawee or the acceptor or
the maker is not indicated, at the principal place of business or habitual residence of the
drawee or the acceptor or the maker;

(h) An instrument which is presented at a clearing-house is duly presented for payment if the
law of the place where the clearing-house is located or the rules or customs of that clearing-
house so provide.

Article 59
(protest prior to right of recourse)

If an instrument is dishonoured by non-acceptance or by non-payment, the holder may

exercise a right of recourse only after the instrument has been duly protested for dishonour in
accordance with the provisions of articles 60 to 62.

Article 60
(elements of a protest)
(drawes’s stipulation in lieu of protest0

1. A protest is a statement of dishonour drawn up at the place where the instrument has been
dishonoured and signed and dated by a person authorized in that respect by the law of that
place. The statement must specify:

(a) The person at whose request the instrument is protested;

Private non-commercial record, page 52 of 55

 (b) The place of protest;

(c) The demand made and the answer given, if any, or the fact that the drawee or the
acceptor or the maker could not be found.

2. A protest may be made:

(a) On the instrument or on a slip affixed thereto ("allonge"); or

(b) As a separate document, in which case it must clearly identify the instrument that has
been dishonoured. [Protest can be noted on instrument, on an allonge, or by certificate.]

3. Unless the instrument stipulates that protest must be made, a protest may be replaced by a
declaration written on the instrument and signed and dated by the drawee or the acceptor or
the maker, or, in the case of an instrument domiciled with a named person for payment, by
that named person; the declaration must be to the effect that acceptance or payment is
refused.

4. A declaration made in accordance with paragraph3 of this article is a protest for the
purpose of this Convention.

Article 61
(protest due within 4 days)

Protest for dishonour of an instrument by non-acceptance or by non-payment must be made

on the day on which the instrument is dishonoured or on one of the four business days which
follow. [Protest is due no later than 4 days after dishonor.]

Article 62
(delay in protest)

1. Delay in protesting an instrument for dishonour is excused if the delay is caused by

circumstances which are beyond the control of the holder and which he could neither avoid
nor overcome. When the cause of the delay ceases to operate, protest must be made with
reasonable diligence.

2. Protest for dishonour by non-acceptance or by non-payment is dispensed with:

(a) If the drawer, an endorser or a guarantor has expressly waived protest; such waiver:

(i) If made on the instrument by the drawer, binds any subsequent party and benefits
any holder;

(ii) If made on the instrument by a party other than the drawer, binds only that party but
benefits any holder;

(iii) If made outside the instrument, binds only the party making it and benefits only a
holder in whose favour it was made;

Private non-commercial record, page 53 of 55

 (b) If the cause of the delay in making protest referred to in paragraph`1 of this article
continues to operate beyond thirty`days after the date of dishonour;

(c) As regards the drawer of a bill, if the drawer and the drawee or the acceptor are the
same person;

(d) If presentment for acceptance or for payment is dispensed with in accordance with
article`52 or paragraph`2 of article`56.

Private non-commercial record, page 54 of 55

 Bill of exchange
A bill of exchange or "draft" is a written order by the drawer to the drawee to pay money to
the payee. A common type of bill of exchange is the cheque (check in American English),
defined as a bill of exchange drawn on a banker and payable on demand. Bills of exchange
are used primarily in international trade, and are written orders by one person to his bank to
pay the bearer a specific sum on a specific date. Prior to the advent of paper currency, bills of
exchange were a common means of exchange. They are not used as often today.

A bill of exchange is an unconditional order in writing addressed by one person to another,

signed by the person giving it, requiring the person to whom it is addressed to pay on demand
or at fixed or determinable future time a sum certain in money to order or to bearer. (Sec.126)

It is essentially an order made by one person to another to pay money to a third person.

A bill of exchange requires in its inception three parties--the drawer, the drawee, and the
payee.

The person who draws the bill is called the drawer. He gives the order to pay money to third
party. The party upon whom the bill is drawn is called the drawee. He is the person to whom
the bill is addressed and who is ordered to pay. he becomes an acceptor when he indicates his
willingness to pay the bill. (Sec.62) The party in whose favor the bill is drawn or is payable is
called the payee.

The parties need not all be distinct persons. Thus, the drawer may draw on himself payable to
his own order. (see Sec. 8)

A bill of exchange may be endorsed by the payee in favour of a third party, who may in turn
endorse it to a fourth, and so on indefinitely. The "holder in due course" may claim the
amount of the bill against the drawee and all previous endorsers, regardless of any
counterclaims that may have disabled the previous payee or endorser from doing so. This is
what is meant by saying that a bill is negotiable.

In some cases a bill is marked "not negotiable". In that case it can still be transferred to a
third party, but the third party can have no better right than the transferor. Wikipedia

*Special Articles Listed on the actual IBOEs: 11, 12, 13, 46(3), 47(1), 53
Private non-commercial record, page 55 of 55