JPMorgan Chase & Co.
J P MORGAN CHASE & CO (Form: FWP, Received: 11/03/2010 06:01:12)

Term sheet
To prospectus dated November 21, 2008,
prospectus supplement dated November 21, 2008 and
product supplement no. 108-A-II dated December 2, 2008

Term Sheet
Product Supplement No. 108-A-II
Registration Statement No. 333-155535
Dated November 2, 2010; Rule 433

Structured 
Investments 

     

$
10.00% per annum Upside Auto Callable Single Observation Reverse Exchangeable Notes due November 9, 2011 Linked to the Common Stock of Halliburton Company
The actual interest rate will be determined on the pricing date and will not be less than 10.00% per annum.

General

Key Terms

Reference Stock:

The common stock, par value $2.50 per share, of Halliburton Company (New York Stock Exchange symbol “HAL”). We refer to Halliburton Company as “Halliburton.”

Interest Rate:

• at least 10.00% per annum if the notes are not automatically called; or
• if the notes are automatically called:
   • at least 2.50% if the notes are automatically called on the first Call Date;
  
• at least 5.00% if the notes are automatically called on the second Call Date;
  
• at least 7.50% if the notes are automatically called on the third Call Date; or
  
• at least 10.00% if the notes are automatically called on the final Call Date,

  in each case equivalent to 10.00% per annum, paid monthly and calculated on a 30/360 basis. The actual interest rate will be determined on the Pricing Date and will not be less than 10.00% per annum.

Automatic Call:

If on any of the four (4) Call Dates, the closing price of the Reference Stock is greater than the Initial Share Price, the notes will be automatically called on that Call Date.

Payment if Called:

If the notes are automatically called, on the applicable Call Settlement Date, for each $1,000 principal amount note, you will receive $1,000 plus any accrued and unpaid interest to but excluding that Call Settlement Date.

Protection Amount:

An amount that represents at least 30.00% of the Initial Share Price, subject to adjustments

Pricing Date:

On or about November 4, 2010

Settlement Date:

On or about November 9, 2010

Call Dates*:

February 4, 2011 (first Call Date), May 4, 2011 (second Call Date), August 4, 2011 (third Call Date) and November 4, 2011 (final Call Date, which is also the Observation Date)

Call Settlement Dates*:

February 9, 2011 (first Call Settlement Date), May 9, 2011 (second Call Settlement Date), August 9, 2011 (third Call Settlement Date) and November 9, 2011 (final Call Settlement Date, which is also the Maturity Date), each of which is the third business day after the applicable Call Date specified above, provided that the final Call Settlement Date is the Maturity Date.

Observation Date:

November 4, 2011*

Maturity Date:

November 9, 2011*

CUSIP:

48124AW94

Interest Payment Dates:

Interest on the notes will be payable monthly in arrears on the 9th calendar day of each month (each such day, an “Interest Payment Date”), commencing December 9, 2010, to and including the Maturity Date, unless the notes are automatically called. If the notes are automatically called, interest will accrue to but excluding the applicable Call Settlement Date, and will be payable on each Interest Payment Date occurring before the applicable Call Settlement Date and on the applicable Call Settlement Date. See “Selected Purchase Considerations — Monthly Interest Payments” in this term sheet for more information.

Payment at Maturity:

If the notes are not automatically called, the payment at maturity, in excess of any accrued and unpaid interest, will be based on the performance of the Reference Stock. If the notes are not automatically called, for each $1,000 principal amount note, you will receive $1,000 plus any accrued and unpaid interest at maturity, unless the Final Share Price is less than the Initial Share Price by more than the Protection Amount. If the notes are not automatically called and the Final Share Price is less than the Initial Share Price by more than the Protection Amount, at maturity you will receive, in addition to any accrued and unpaid interest, instead of the principal amount of your notes, the number of shares of the Reference Stock equal to the Physical Delivery Amount (or, at our election, the Cash Value thereof). Fractional shares will be paid in cash. The market value of the Physical Delivery Amount or the Cash Value thereof will most likely be substantially less than the principal amount of your notes, and may be zero .

Physical Delivery Amount:

The number of shares of the Reference Stock, per $1,000 principal amount note, equal to $1,000 divided by the Initial Share Price, subject to adjustments

Cash Value:

The product of (1) $1,000 divided by the Initial Share Price and (2) the Final Share Price, subject to adjustments

Initial Share Price:

The closing price of the Reference Stock on the Pricing Date. The Initial Share Price is subject to adjustments in certain circumstances. See “Description of Notes — Payment at Maturity” and “General Terms of Notes — Anti-Dilution Adjustments” in the accompanying product supplement no. 108-A-II for further information about these adjustments.

Final Share Price:

The closing price of the Reference Stock on the Observation Date

*

Subject to postponement in the event of a market disruption event and as described under “Description of Notes — Automatic Call” or “Description of Notes — Payment at Maturity,” as applicable, in the accompanying product supplement no. 108-A-II

Investing in the Upside Auto Callable Single Observation Reverse Exchangeable Notes involves a number of risks. See “Risk Factors” beginning on page PS-7 of the accompanying product supplement no. 108-A-II and “Selected Risk Considerations” beginning on page TS-2 of this term sheet.

Neither the SEC nor any state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this term sheet or the accompanying prospectus supplement and prospectus. Any representation to the contrary is a criminal offense.


 

Price to Public (1)

Fees and Commissions (2)

Proceeds to Us


Per note

$

$

$


Total

$

$

$


(1)

The price to the public includes the estimated cost of hedging our obligations under the notes through one or more of our affiliates.

(2)

If the notes priced today, J.P. Morgan Securities LLC, which we refer to as JPMS, acting as agent for JPMorgan Chase & Co., would receive a commission of approximately $31.50 per $1,000 principal amount note and would use all of that commission to allow selling concessions to other affiliated or unaffiliated dealers. The concessions of approximately $31.50 per $1,000 principal amount note include concessions to be allowed to selling dealers and concessions to be allowed to any arranging dealer. This commission includes the projected profits that our affiliates expect to realize, some of which may be allowed to other unaffiliated dealers, for assuming risks inherent in hedging our obligations under the notes. The actual commission received by JPMS may be more or less than $31.50 and will depend on market conditions on the Pricing Date. In no event will the commission received by JPMS, which includes concessions to be and other amounts that may be allowed to other dealers, exceed $42.50 per $1,000 principal amount note. See “Plan of Distribution” beginning on page PS-37 of the accompanying product supplement no. 108-A-II.

The agent for this offering, JPMS, is an affiliate of ours. See “Supplemental Plan of Distribution (Conflicts of Interest)” in this term sheet.

The notes are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.

 

November 2, 2010


Additional Terms Specific to the Notes

JPMorgan Chase & Co. has filed a registration statement (including a prospectus) with the Securities and Exchange Commission, or SEC, for the offering to which this term sheet relates. Before you invest, you should read the prospectus in that registration statement and the other documents relating to this offering that JPMorgan Chase & Co. has filed with the SEC for more complete information about JPMorgan Chase & Co. and this offering. You may get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, JPMorgan Chase & Co., any agent or any dealer participating in this offering will arrange to send you the prospectus, the prospectus supplement, product supplement no. 108-A-II and this term sheet if you so request by calling toll-free 866-535-9248.

You may revoke your offer to purchase the notes at any time prior to the time at which we accept such offer by notifying the applicable agent. We reserve the right to change the terms of, or reject any offer to purchase, the notes prior to their issuance. In the event of any changes to the terms of the notes, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes in which case we may reject your offer to purchase.

You should read this term sheet together with the prospectus dated November 21, 2008, as supplemented by the prospectus supplement dated November 21, 2008 relating to our Series E medium-term notes of which these notes are a part, and the more detailed information contained in product supplement no. 108-A-II dated December 2, 2008. This term sheet, together with the documents listed below, contains the terms of the notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth in “Risk Factors” in the accompanying product supplement no. 108-A-II, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.

You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):

Our Central Index Key, or CIK, on the SEC website is 19617. As used in this term sheet, the “Company,” “we,” “us” or “our” refers to JPMorgan Chase & Co.

Supplemental Terms of the Notes

For purposes of this offering, the concept of a “Monitoring Period,” as described in the accompanying product supplement no. 108-A-II, is not applicable. Instead, if the notes are not automatically called, whether you will receive at maturity the principal amount of your notes or a number of shares of the Reference Stock equal to the Physical Delivery Amount (or, at our election, the Cash Value thereof) will depend on the closing price of the Reference Stock on a single day (the Observation Date) only, which we also refer to as the Final Share Price, as more fully described under “Key Terms — Payment at Maturity” in this term sheet. Accordingly, you should disregard the definition for the “Monitoring Period” in the accompanying product supplement no. 108-A-II, and you should deem references in the accompanying product supplement no. 108-A-II to (a) “the Monitoring Period” to be “the Observation Date,” and (b) “on any day during the Monitoring Period” or “during the Monitoring Period” to be “on the Observation Date.”

Selected Purchase Considerations


JPMorgan Structured Investments —
Upside Auto Callable Single Observation Reverse Exchangeable Notes Linked to the Common Stock of Halliburton Company

 TS-1

Selected Risk Considerations

An investment in the notes involves significant risks. Investing in the notes is not equivalent to investing directly in the Reference Stock. These risks are explained in more detail in the “Risk Factors” section of the accompanying product supplement no. 108-A-II dated December 2, 2008.


JPMorgan Structured Investments —
Upside Auto Callable Single Observation Reverse Exchangeable Notes Linked to the Common Stock of Halliburton Company

 TS-2

JPMorgan Structured Investments —
Upside Auto Callable Single Observation Reverse Exchangeable Notes Linked to the Common Stock of Halliburton Company

 TS-3

The Reference Stock

Public Information

All information contained herein on the Reference Stock and on Halliburton is derived from publicly available sources and is provided for informational purposes only. According to its publicly available filings with the SEC, Halliburton provides services and products to customers in the energy industry related to the exploration, development and production of oil and natural gas. The common stock of Halliburton, par value $2.50 per share, is registered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, and is listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of Halliburton in the accompanying product supplement no. 108-A-II. Information provided to or filed with the SEC by Halliburton pursuant to the Exchange Act can be located by reference to SEC file number 001-03492, and can be accessed through www.sec.gov. We do not make any representation that these publicly available documents are accurate or complete.

Historical Information Regarding the Reference Stock

The following graph sets forth the historical performance of the Reference Stock based on the weekly closing price (in U.S. dollars) of the Reference Stock from January 7, 2005 through October 29, 2010. The closing price of the Reference Stock on November 1, 2010 was $31.42. We obtained the closing prices and other information below from Bloomberg Financial Markets, without independent verification. The closing prices and this other information may be adjusted by Bloomberg Financial Markets for corporate actions such as stock splits, public offerings, mergers and acquisitions, spin-offs, delistings and bankruptcy. We make no representation or warranty as to the accuracy or completeness of the information obtained from Bloomberg Financial Markets.

Since its inception, the Reference Stock has experienced significant fluctuations. The historical performance of the Reference Stock should not be taken as an indication of future performance, and no assurance can be given as to the closing prices of the Reference Stock on the Call Dates or the Observation Date. We cannot give you assurance that the performance of the Reference Stock will result in the return of any of your initial investment. We make no representation as to the amount of dividends, if any, that Halliburton will pay in the future. In any event, as an investor in the notes, you will not be entitled to receive dividends, if any, that may be payable on the Reference Stock.


JPMorgan Structured Investments —
Upside Auto Callable Single Observation Reverse Exchangeable Notes Linked to the Common Stock of Halliburton Company

 TS-4

Examples of Hypothetical Payments at Maturity for Each $1,000 Principal Amount Note

The following table illustrates hypothetical payments at maturity or upon an automatic call on a $1,000 investment in the notes, based on a range of hypothetical Final Share Prices and closing prices on any of the Call Dates. The numbers appearing in the following table and examples have been rounded for ease of analysis. For this table of hypothetical payments at maturity, we have also assumed the following:

• the Initial Share Price:

$31.40

• the Protection Amount (in U.S. dollars): $9.42

• the Interest Rate:

10.00% per annum if the note is held to maturity

 

2.50% (equivalent to 10.00% per annum) if the note is automatically called on the first Call Date

 

5.00% (equivalent to 10.00% per annum) if the note is automatically called on the second Call Date

 

7.50% (equivalent to 10.00% per annum) if the note is automatically called on the third Call Date

 

10.00% (equivalent to 10.00% per annum) if the note is automatically called on the final Call Date

Hypothetical Highest
Closing Price on any
of the Call Dates

Hypothetical Final
Share Price

Hypothetical Final
Share Price
expressed as a
percentage of Initial
Share Price

Payment at
Maturity**

Payment on the
applicable Call
Settlement Date**

Total Value of Payment
Received at Maturity or
on the applicable Call
Settlement Date**

$62.80

N/A

N/A

N/A

$1,000.00

$1,000.00

$47.10

N/A

N/A

N/A

$1,000.00

$1,000.00

$39.25

N/A

N/A

N/A

$1,000.00

$1,000.00

$32.97

N/A

N/A

N/A

$1,000.00

$1,000.00

$31.40

$31.40

100.00%

$1,000.00

N/A

$1,000.00

$31.40

$29.83

95.00%

$1,000.00

N/A

$1,000.00

$28.26

$21.98

70.00%

$1,000.00

N/A

$1,000.00

$26.69

$20.41

65.00%

31 shares of the
Reference Stock or
the Cash Value
thereof

N/A

$650.00

$20.41

$15.70

50.00%

31 shares of the
Reference Stock or
the Cash Value
thereof

N/A

$500.00

$15.70

$7.85

25.00%

31 shares of the
Reference Stock or
the Cash Value
thereof

N/A

$250.00

$9.42

$0.00

0.00%

31 shares of the
Reference Stock or
the Cash Value
thereof

N/A

$0.00

**

Note that you will receive at maturity or on the applicable Call Settlement Date, as applicable, accrued and unpaid interest in cash, in addition to (1) at maturity, either shares of the Reference Stock (or, at our election, the Cash Value thereof) or the principal amount of your note in cash or (2) on the applicable Call Settlement Date, $1,000 in cash. Also note that if you receive the Physical Delivery Amount at maturity, the total value of payment received at maturity shown in the table above includes the value of any fractional shares, which will be paid in cash.

The following examples illustrate how the total value of payments received at maturity or on the applicable Call Settlement Date, as applicable, set forth in the table above are calculated.

Example 1: The closing price of the Reference Stock on the first Call Date is $32.97. Because the closing price of the Reference Stock of $32.97 on the first Call Date is greater than the Initial Share Price of $31.40, the notes are automatically called and you will receive a payment on the first Call Settlement Date of $1,000 per $1,000 principal amount note.

Example 2: The highest closing price of the Reference Stock on any of the Call Dates was $31.40, and the Final Share Price is $29.83. Because the highest closing price of the Reference Stock of $31.40 on any of the Call Dates is not greater than the Initial Share Price of $31.40, the notes are not automatically called. Because the Final Share Price of $29.83 is less than the Initial Share Price of $31.40 by not more than the Protection Amount, you will receive at maturity a payment of $1,000 per $1,000 principal amount note.

Example 3: The highest closing price of the Reference Stock on any of the Call Dates was $20.41, and the Final Share Price is $15.70, a decline of more than the Protection Amount. Because the highest closing price of the Reference Stock of $20.41 on any of the Call Dates is not greater than the Initial Share Price of $31.40, the notes are not automatically called. Because the Final Share Price of $15.70 is less than the Initial Share Price of $31.40 by more than the Protection Amount, you will receive the Physical Delivery Amount, or, at our election, the Cash Value thereof, at maturity. Because the Final Share Price of the Reference Stock is $15.70, the total value of your final payment at maturity, whether in cash or shares of the Reference Stock, is $500.00.

Regardless of the performance of the Reference Stock, you will receive interest payments, for each $1,000 principal amount note, in the aggregate amount of (1), if the notes are held to maturity, at least $100.00 over the term of the notes or (2) if the notes are automatically called: (i) at least $25.00 if called on the first Call Date from the issue date to but excluding the first Call Settlement Date, (ii) at least $50.00 if called on the second Call Date from the issue date to but excluding the second Call Settlement Date; (iii) at least $75.00 if called on the third Call Date from the issue date to but excluding the final Call Settlement Date or (iv) at least $100.00 if called on the final Call Date from the issue date to but excluding the final Call Settlement Date. The actual interest rate will be determined on the Pricing Date and will not be less than 10.00% per annum. If the notes are held to maturity, the actual number of shares of the Reference Stock, or the Cash Value thereof, you may receive at maturity and the actual Protection Amount applicable to your notes may be more or less than the amounts displayed in this hypothetical and will depend in part on the Initial Share Price.


JPMorgan Structured Investments —
Upside Auto Callable Single Observation Reverse Exchangeable Notes Linked to the Common Stock of Halliburton Company

 TS-5

Supplemental Plan of Distribution (Conflicts of Interest)

We own, directly or indirectly, all of the outstanding equity securities of JPMS, the agent for this offering. The net proceeds received from the sale of the notes will be used, in part, by JPMS or one of its affiliates in connection with hedging our obligation under the notes. In accordance with NASD Rule 2720, JPMS may not make sales in this offering to any of its discretionary accounts without the prior written approval of the customer.

 


JPMorgan Structured Investments —
Upside Auto Callable Single Observation Reverse Exchangeable Notes Linked to the Common Stock of Halliburton Company

 TS-6