<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 29, 2000
REGISTRATION NO. 333-[ ]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
THE CHASE MANHATTAN CORPORATION
(TO BE RENAMED J.P. MORGAN CHASE & CO.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 13-2624428
(STATE OR OTHER JURISDICTION OR INCORPORATION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
JPM CAPITAL TRUST I
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
JPM CAPITAL TRUST II
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
270 PARK AVENUE
NEW YORK, NEW YORK 10017
TEL. NO. (212) 270-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ANTHONY J. HORAN
SECRETARY
THE CHASE MANHATTAN CORPORATION
270 PARK AVENUE
NEW YORK, NEW YORK 10017
TEL. NO.: (212) 270-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES OF NOTICE TO:
NEILA RADIN, ESQ.
THE CHASE MANHATTAN CORPORATION
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(212) 270-6000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement as
determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) OFFERING PRICE PRICE PER UNIT REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred Securities of JPM Capital Trusts I and
II................................................ $0 $0
---------------------------------------------------------------------------------------------------------------------------------
Junior Subordinated Debt Securities of J.P. Morgan
Chase & Co. ...................................... $0 $0
---------------------------------------------------------------------------------------------------------------------------------
Guarantees of the Preferred Securities of JPM
Capital Trusts I and II by J.P. Morgan Chase &
Co.(2)............................................
---------------------------------------------------------------------------------------------------------------------------------
Total............................................... $0 $0
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This registration statement relates only to market-making transactions by
and through affiliates of the registrants of (A) the 7.54% Cumulative
Capital Securities, previously registered by J.P. Morgan & Co. Incorporated
and JPM Capital Trust I pursuant to the Registration Statement on Form S-3
(Registration Nos. 333-15079 and 333-15079-01) and (B) the 7.95% Cumulative
Capital Securities previously registered by J.P. Morgan & Co. Incorporated
and JPM Capital Trust II pursuant to the Registration Statement on Form S-3
(Registration Nos. 333-20427 and 333-20427-01).
(2) In addition to the Preferred Securities Guarantees and the Junior
Subordinated Debt Securities, The Chase Manhattan Corporation (to be renamed
J.P. Morgan Chase & Co.) is also registering under this registration
statement certain other back-up obligations of J.P. Morgan Chase & Co. Such
back-up obligations include its obligations under the Indenture (as defined)
and under the Amended and Restated Declaration of each of JPM Capital Trust
I and JPM Capital Trust II (the "Trusts") pursuant to which J.P. Morgan
Chase & Co. will agree, among other things, to pay all debts and obligations
(other than with respect to the Preferred Securities) of the relevant Trust,
and all costs or expenses of the relevant Trust, including all fees,
expenses and taxes of such Trust. No separate consideration will be received
by J.P. Morgan Chase & Co. for the Preferred Securities Guarantees or such
other back-up obligations.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
PROSPECTUS
$750,000,000
JPM CAPITAL TRUST I
7.54% Cumulative Capital Securities
(Liquidation Amount $1,000 per Capital Security)
fully and unconditionally guaranteed as set forth in this document by
J.P. MORGAN CHASE & CO.
------------------------
This Prospectus covers the remarketing from time to time of the 7.54% Cumulative
Capital Securities (the "Preferred Securities" or "Capital Securities") by
affiliates of J.P. Morgan Chase & Co. (as successor to J.P. Morgan & Co.
Incorporated) and JPM Capital Trust I. The Capital Securities were originally
offered pursuant to the Prospectus Supplement and Base Prospectus, dated
November 26, 1996, attached to this Prospectus and constituting a part of this
Prospectus. References to J.P. Morgan & Co. Incorporated or the Company in the
attached Prospectus Supplement and Base Prospectus refer to J.P. Morgan Chase &
Co., where applicable.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE S-3 FOR A DISCUSSION OF CERTAIN FACTORS
THAT YOU SHOULD CONSIDER BEFORE INVESTING IN THE CAPITAL SECURITIES.
THE CAPITAL SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL
AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED OF THE CAPITAL SECURITIES OR DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is [ ].
<PAGE> 3
J.P. MORGAN CHASE & CO.
On December 31, 2000, J.P. Morgan & Co. Incorporated ("J.P. Morgan") merged
with and into The Chase Manhattan Corporation ("Chase"). Upon completion of the
merger, Chase changed its name to J.P. Morgan Chase & Co. ("we" or "the
Company"). The merger was accounted for as a pooling of interests. As a result,
financial information prepared following completion of the merger and
incorporated by reference in this Prospectus will present the combined results
of Chase and J.P. Morgan as if the merger had been in effect for all periods
presented.
We are a global financial services firm with operations in over 60
countries. Our principal bank subsidiaries are The Chase Manhattan Bank ("Chase
Bank") and Morgan Guaranty Trust Company of New York ("Morgan Bank"), each of
which is a New York banking corporation headquartered in New York City; and
Chase Manhattan Bank USA, National Association, headquartered in Delaware. Our
principal non-bank subsidiaries are our investment bank subsidiaries, Chase
Securities Inc. and J.P. Morgan Securities Inc. We expect Chase Bank to merge
with Morgan Bank and Chase Securities Inc. to merge with J.P. Morgan Securities
Inc. in mid-2001. Unless the context otherwise requires, references in this
Prospectus to Chase Bank, Morgan Bank, Chase Securities Inc. and J.P. Morgan
Securities Inc. also refer to the successor corporations in those mergers.
Our activities are internally organized, for management reporting purposes,
into five major businesses: Investment Bank; Wealth Management; Treasury &
Securities Services; J.P. Morgan Partners; and Consumer Services. We have
presented a brief description of those businesses below.
INVESTMENT BANK: Among the products and services provided by us through
the Investment Bank are our securities underwriting and financial advisory,
trading, mergers and acquisitions advisory, and corporate lending and
syndication businesses.
WEALTH MANAGEMENT: Wealth Management includes our asset management
businesses, including our mutual funds; our institutional money management and
cash management businesses; and our private bank, which provides wealth
management solutions for a global client base of high net worth individuals and
families.
TREASURY & SECURITIES SERVICES: Treasury & Securities Services is a
recognized leader in information and transaction processing services, moving
trillions of dollars daily in securities and cash for its wholesale clients.
Treasury & Securities Services also includes our custody, cash management, trust
and other fiduciary services businesses.
J.P. MORGAN PARTNERS: J.P. Morgan Partners is one of the world's largest
and most diversified private equity investment firms, with total funds under
management in excess of $20 billion.
CONSUMER SERVICES: Consumer Services serves over 30 million consumer,
small business and middle-market customers nationwide. Consumer Services offers
a wide variety of financial products and services, including consumer banking,
credit cards, mortgage services and consumer finance services, through a diverse
array of distribution channels, including the Internet and branch and ATM
networks.
2
<PAGE> 4
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, --------------------------------
2000 1999 1998 1997 1996 1995
----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Excluding Interest on Deposits................ 2.01 2.64 1.84 1.82 1.66 1.90
Including Interest on Deposits................ 1.45 1.71 1.43 1.43 1.32 1.41
Earnings to Combined Fixed Charges and Preferred
Stock Dividend Requirements:
Excluding Interest on Deposits................ 1.99 2.61 1.82 1.77 1.60 1.82
Including Interest on Deposits................ 1.44 1.70 1.42 1.41 1.30 1.38
</TABLE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus:
- Chase's Annual Report on Form 10-K and Form 10-K/A for the year ended
December 31, 1999,
- Chase's Quarterly Reports on Form 10-Q for the quarters ended March 31,
2000, June 30, 2000 and September 30, 2000, and
- Chase's Current Reports on Form 8-K filed on January 21, 2000, February
9, 2000, March 22, 2000, April 11, 2000, April 19, 2000, May 22, 2000,
June 12, 2000, June 20, 2000, July 20, 2000, August 3, 2000, September
18, 2000, October 19, 2000, November 1, 2000, November 28, 2000, November
29, 2000, December 1, 2000, December 14, 2000 and December 26, 2000.
In addition, all reports and definitive proxy or information statements
filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Capital Securities shall be deemed to be incorporated by
reference into this Prospectus and to be a part of this Prospectus from the date
of filing such documents. Any statement contained in this Prospectus or in a
document incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus or in any
subsequently filed document which also is or is deemed to be incorporated by
reference in this Prospectus modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the foregoing documents
incorporated herein by reference (other than exhibits to such documents).
Written requests should be directed to the Office of the Secretary, J.P. Morgan
Chase & Co., 270 Park Avenue, New York, New York 10017. Telephone requests may
be directed to (212) 270-6000.
EXPERTS
The financial statements of Chase incorporated in this Prospectus by
reference to the Annual Report of Chase on Form 10-K for the year ended December
31, 1999 have been incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in auditing and accounting.
3
<PAGE> 5
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 26, 1996)
$750,000,000
JPM CAPITAL TRUST I
7.54% Cumulative Capital Securities
(Liquidation Amount $1,000 per Capital Security)
fully and unconditionally guaranteed as set forth herein by
J.P. MORGAN & CO. INCORPORATED
The 7.54% Cumulative Capital Securities (the "Preferred Securities" or the
"Capital Securities") offered hereby represent preferred undivided beneficial
interests in the assets of JPM Capital Trust I, a statutory business trust
formed under the laws of the State of Delaware (the "Trust"). J.P. Morgan & Co.
Incorporated, a Delaware corporation (the "Company"), will directly or
indirectly own all the common securities (the "Common Securities" and, together
with the Preferred Securities, the "Trust Securities") representing common
undivided beneficial interests in the assets of the Trust. The Trust exists for
the sole purpose of issuing the Preferred Securities and Common Securities and
investing the proceeds thereof in an equivalent amount of 7.54% Junior
Subordinated Debentures due 2027 of the Company ("Junior Subordinated
Debentures").
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE S-3 FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN THE PREFERRED SECURITIES.
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND JPM CAPITAL TRUST I
PUBLIC(1) COMMISSIONS(2) (1)(3)(4)
-------------------------------------------------------------------------------------------------------------------
Per Preferred Security $1,000 (3) $1,000
-------------------------------------------------------------------------------------------------------------------
Total $750,000,000 (3) $750,000,000
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued distributions, if any, from December 4, 1996, to date of
delivery.
(2) See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in Junior Subordinated Debentures, the Company
has agreed to pay to the Underwriters as compensation ("Underwriters'
Compensation") for their arranging the investment therein of such proceeds
$10 per Preferred Security (or $7,500,000 in the aggregate). See
"Underwriting".
(4) Before deducting expenses payable by the Company estimated to be $100,000.
The Preferred Securities are offered by the Underwriters, subject to prior sale,
when, as and if delivered to and accepted by the Underwriters, and subject to
their right to reject orders in whole or in part. It is expected that delivery
of the Preferred Securities will be made in book-entry form through the
facilities of The Depository Trust Company, on or about December 4, 1996,
against payment therefor in immediately available funds.
J.P. MORGAN & CO.
CITICORP SECURITIES, INC.
CS FIRST BOSTON
MERRILL LYNCH & CO.
SMITH BARNEY INC.
November 26, 1996.
<PAGE> 6
(Continued from previous page)
The Preferred Securities and the Common Securities will rank pari passu
with each other and will have equivalent terms; provided that (i) if an Event of
Default (as defined herein) under the Declaration (as defined herein) occurs and
is continuing, the holders of Preferred Securities will have a priority over
holders of the Common Securities with respect to distributions and payments upon
liquidation, redemption or otherwise and (ii) holders of Common Securities have
the exclusive right (subject to the terms of the Declaration) to appoint,
replace or remove Trustees (as defined in the accompanying Prospectus) and to
increase or decrease the number of Trustees.
Holders of the Preferred Securities will be entitled to receive cumulative
cash distributions at an annual rate of 7.54% of the stated liquidation amount
of $1,000 per Preferred Security, accruing from the date of original issuance of
the Preferred Securities and payable semi-annually, in arrears, on January 15
and July 15 of each year, commencing on July 15, 1997 ("distributions"). Cash
distributions in arrears for more than one semi-annual interest period will bear
interest thereon at the annual rate of 7.54% (to the extent permitted by
applicable law), compounded semi-annually. The term "distributions" as used
herein includes such cash distributions and any such interest payable unless
otherwise stated.
The distribution rate and the distribution and other payment dates for the
Preferred Securities will correspond to the interest rate and the interest and
other payment dates on the Junior Subordinated Debentures deposited in the Trust
as trust assets. If principal or interest is not paid on the Junior Subordinated
Debentures, including as a result of the Company's election to extend the
interest payment period on the Junior Subordinated Debentures as described
below, the Trust will not make payments on the Trust Securities. The Junior
Subordinated Debentures provide that, so long as the Company shall not be in
default in the payment of interest on the Junior Subordinated Debentures, the
Company shall have the right to defer payments of interest on the Junior
Subordinated Debentures by extending the interest payment period from time to
time for a period not exceeding 10 consecutive semi-annual interest periods
(each, a "Deferral Period"). No interest shall be due and payable during a
Deferral Period and, as a consequence, distributions on the Trust Securities
will also be deferred, but at the end of such Deferral Period the Company shall
pay all interest then accrued and unpaid on the Junior Subordinated Debentures,
together with interest thereon at the same rate specified for the Junior
Subordinated Debentures to the extent permitted by applicable law, compounded
semi-annually ("Compounded Interest"). All references herein to interest shall
include Compounded Interest unless otherwise stated. There could be multiple
Deferral Periods of varying lengths throughout the term of the Junior
Subordinated Debentures, each not to exceed 10 consecutive semi-annual interest
periods or to cause any extension beyond the maturity of the Junior Subordinated
Debentures. During any such Deferral Period, the Company may not declare or pay
dividends on, or redeem, purchase, acquire or make a distribution or liquidation
payment with respect to, any of its common stock or preferred stock or make any
guarantee payments with respect thereto; provided, however, that the foregoing
restrictions shall not apply to (i) dividends, redemptions, purchases,
acquisitions, distributions or payments made by the Company by way of issuance
of shares of its capital stock, (ii) payments of accrued dividends by the
Company upon the redemption, exchange or conversion of any preferred stock of
the Company as may be outstanding from time to time in accordance with the terms
of such preferred stock, (iii) cash payments made by the Company in lieu of
delivering fractional shares upon the redemption, exchange or conversion of any
preferred stock of the Company as may be outstanding from time to time in
accordance with the terms of such preferred stock, (iv) repurchases, redemptions
or other acquisitions of shares of capital stock of the company in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of employees, officers, directors or consultants, or (v) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of such rights pursuant thereto. See
"Risk Factors -- Option to Extend Interest Payment Period; Tax Impact of
Extension;" "Description of the Junior Subordinated Debentures -- Interest" and
"-- Option to Extend Interest Payment Period."
The payment of distributions out of moneys held by the Property Trustee (as
defined in the accompanying Prospectus) and payments on liquidation of the Trust
and on redemption of Preferred Securities, as set forth below, are guaranteed by
the Company on a subordinated basis as and to the extent described herein
i
<PAGE> 7
(the "Preferred Securities Guarantee"). See "Description of the Preferred
Securities Guarantees" in the accompanying Prospectus. The Preferred Securities
Guarantee covers payments of distributions and other payments on the Preferred
Securities only if and to the extent that the Trust has funds available therefor
which will not be the case unless the Company has made a payment of interest or
principal or other payments on the Junior Subordinated Debentures held by the
Trust as its sole asset. The Preferred Securities Guarantee, when taken together
with the Company's obligations under the Junior Subordinated Debentures and the
Indenture (as defined herein) and its obligations under the Declaration,
including its obligation to pay all costs, expenses, debts and other obligations
of the Trust (other than with respect to the Trust Securities), provides a full
and unconditional guarantee of amounts due on the Preferred Securities. The
obligations of the Company under the Preferred Securities Guarantee are
subordinate and junior in right of payment to all other indebtedness,
liabilities and obligations of the Company and any guarantees, endorsements or
other contingent obligations of the Company in respect of such indebtedness,
liabilities or obligations, including Junior Subordinated Debt Securities (as
defined in the accompanying Prospectus) and senior to all capital stock now or
hereafter issued by the Company and to any guarantee now or hereafter entered
into by the Company in respect of its capital stock. The obligations of the
Company under the Junior Subordinated Debentures are subordinate and junior in
right of payment to all present and future Senior Indebtedness, Subordinated
Indebtedness and Derivative Obligations of the Company (as such terms are
defined in the accompanying Prospectus). Because the Company is a holding
company, the Junior Subordinated Debentures (and the Company's obligations under
the Preferred Securities Guarantee) are also effectively subordinated to all
existing and future liabilities of the Company's subsidiaries, except to the
extent that the Company is a creditor of the subsidiaries recognized as such.
The Preferred Securities are subject to mandatory redemption, in whole or
in part, upon repayment of the Junior Subordinated Debentures at maturity or
their earlier redemption. Subject to the Company having received prior approval
of the Federal Reserve to do so if then required under applicable capital
guidelines or policies of the Federal Reserve, the Junior Subordinated
Debentures may be redeemed by the Company (in whole or in part) from time to
time prior to maturity on or after January 15, 2007, or at any time in certain
circumstances upon the occurrence of a Tax Event or Capital Treatment Event
(each as defined herein). If the Company redeems Junior Subordinated Debentures,
the Trust must redeem Trust Securities having an aggregate liquidation amount
equal to the aggregate principal amount of the Junior Subordinated Debentures so
redeemed at the Redemption Price (as defined herein). See "Description of the
Preferred Securities -- Mandatory Redemption." The Preferred Securities will be
redeemed upon maturity of the Junior Subordinated Debentures. The Junior
Subordinated Debentures mature on January 15, 2027. In addition, upon the
occurrence of a Special Event (as defined herein) arising from a change in law
or a change in legal interpretation, unless the Junior Subordinated Debentures
are redeemed in the limited circumstances described below and subject to the
Company having received prior approval from the Federal Reserve for such
dissolution if then required under applicable capital guidelines or policies of
the Federal Reserve, the Trust shall be dissolved with the result that the
Junior Subordinated Debentures will be distributed to the holders of the
Preferred Securities, on a pro rata basis, in lieu of any cash distribution. In
the case of a Special Event that is a Tax Event, the Company will have the right
in certain circumstances, subject to the Company having received prior approval
of the Federal Reserve to do so if then required under applicable capital
guidelines or policies of the Federal Reserve, to redeem the Junior Subordinated
Debentures, which would result in the redemption by the Trust of the Trust
Securities in the same amount on a pro rata basis.
In the event of the voluntary or involuntary dissolution of the Trust, the
holders of the Preferred Securities will be entitled to receive, for each
Preferred Security, a liquidation amount of $1,000 plus accrued and unpaid
distributions thereon (including interest thereon) to the date of payment,
unless in connection with such dissolution, the Junior Subordinated Debentures
are distributed to the holders of the Preferred Securities. See "Description of
the Preferred Securities -- Liquidation Distribution Upon Dissolution."
ii
<PAGE> 8
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus Supplement or the Prospectus and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company, the Trust or the Underwriters. This Prospectus Supplement and the
Prospectus do not constitute an offer to sell or the solicitation of an offer to
buy such securities in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus Supplement or the Prospectus
nor any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof or that the information herein is correct as of any time
subsequent to its date.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors................................................ S-3
Selected Consolidated Financial Data of J.P. Morgan & Co.
Incorporated.............................................. S-8
Capitalization of J.P. Morgan & Co. Incorporated............ S-10
JPM Capital Trust I......................................... S-12
Accounting Treatment........................................ S-12
Use of Proceeds............................................. S-13
Description of the Preferred Securities..................... S-13
Description of the Preferred Securities Guarantee........... S-26
Description of the Junior Subordinated Debentures........... S-29
Relationship Between the Preferred Securities, the Junior
Subordinated Debentures and the Preferred Securities
Guarantee................................................. S-34
Taxation.................................................... S-35
ERISA Matters............................................... S-38
Underwriting................................................ S-39
PROSPECTUS
Available Information....................................... 2
Incorporation of Certain Documents by Reference............. 2
J.P. Morgan & Co. Incorporated.............................. 3
J.P. Morgan Consolidated Ratio of Earnings to Fixed
Charges................................................... 6
J.P. Morgan Consolidated Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends..................... 6
Use of Proceeds............................................. 6
The JPM Trusts.............................................. 7
Description of the Preferred Securities..................... 11
Description of the Preferred Securities Guarantees.......... 12
Description of the Junior Subordinated Debt Securities...... 15
ERISA Matters............................................... 22
Plan of Distribution........................................ 22
Legal Opinions.............................................. 24
Experts..................................................... 24
</TABLE>
S-2
<PAGE> 9
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following matters:
RANKING OF SUBORDINATED OBLIGATIONS UNDER PREFERRED SECURITIES GUARANTEE AND
JUNIOR SUBORDINATED DEBENTURES; DEPENDENCE ON THE COMPANY
The obligations of the Company under the Junior Subordinated Debentures are
unsecured obligations of the Company and will be subordinate and junior in right
of payment to Senior Indebtedness, Subordinated Indebtedness and Derivative
Obligations of the Company (as such terms are defined herein) but senior to its
capital stock. The Company's obligations under the Preferred Securities
Guarantee are unsecured and will rank (i) subordinate and junior in right of
payment to all other indebtedness, liabilities and obligations of the Company
and any guarantees, endorsements or other contingent obligations of the Company
in respect of such indebtedness, liabilities or obligations, including the
Junior Subordinated Debentures and any other series of Junior Subordinated Debt
Securities, except those made pari passu or subordinate by their terms, and (ii)
senior to all capital stock now or hereafter issued by the Company and to any
guarantee now or hereafter entered into by the Company in respect of its capital
stock. Because the Company is a holding company, the Junior Subordinated
Debentures (and the Company's obligations under the Preferred Securities
Guarantee) are also effectively subordinated to all existing and future
liabilities of the Company's subsidiaries, except to the extent that the Company
is a creditor of the subsidiaries recognized as such. There are no terms in the
Preferred Securities, the Junior Subordinated Debentures or the Preferred
Securities Guarantee that limit the Company's ability to incur additional
indebtedness or other obligations, including indebtedness or obligations that
rank senior to or pari passu with the Junior Subordinated Debentures and the
Preferred Securities Guarantee, or the ability of its subsidiaries to incur
additional indebtedness. See "Description of the Preferred Securities
Guarantees -- Status of the Preferred Securities Guarantees" and "Description of
the Junior Subordinated Debt Securities -- Subordination" in the accompanying
Prospectus.
The Trust's ability to make distributions and other payments on the
Preferred Securities is solely dependent upon the Company making interest and
other payments on the Junior Subordinated Debentures deposited as trust assets
as and when required. If the Company were not to make distributions or other
payments on the Junior Subordinated Debentures for any reason, including as a
result of the Company's election to defer the payment of interest on the Junior
Subordinated Debentures by extending the interest period on the Junior
Subordinated Debentures, the Trust will not make payments on the Trust
Securities. In such an event, holders of the Preferred Securities would not be
able to rely on the Preferred Securities Guarantee since distributions and other
payments on the Preferred Securities are subject to the Preferred Securities
Guarantee only if and to the extent that the Company has made a payment to the
Property Trustee of interest or principal on the Junior Subordinated Debentures
deposited in the Trust as trust assets. Instead, holders of Preferred Securities
would rely on the enforcement (i) by the Property Trustee of its rights as
registered holder of the Junior Subordinated Debentures against the Company
pursuant to the terms of the Indenture or (ii) by such holder of Preferred
Securities of its right against the Company to directly enforce payments of
principal and interest on the Junior Subordinated Debentures. However, if the
Trust's failure to make distributions on the Preferred Securities is a
consequence of the Company's exercise of its right to extend the interest
payment period for the Junior Subordinated Debentures, neither the Property
Trustee nor any holder of Preferred Securities will have any right to enforce
the payment of distributions on the Preferred Securities until an Event of
Default under the Declaration shall have occurred. The Company's obligations
under the Preferred Securities Guarantee are subordinate and junior in right of
payment to all other indebtedness, liabilities and obligations of the Company
and any guarantees, endorsements or other contingent obligations of the Company
in respect of such indebtedness, liabilities or obligations, including the
Junior Subordinated Debentures, and any other series of Junior Subordinated Debt
Securities except those made pari passu or subordinate by their terms to the
Preferred Securities Guarantee, and senior to its capital stock or to any
guarantee of the Company in respect of its capital stock. The Declaration
provides that each holder of
S-3
<PAGE> 10
Preferred Securities, by acceptance thereof, agrees to the provisions of the
Preferred Securities Guarantee, including the subordination provisions thereof,
and of the Indenture.
The Declaration provides that the Company shall pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs and
expenses of the Trust, including any taxes and all costs and expenses with
respect thereto, to which the Trust may become subject, except for United States
withholding taxes. No assurance can be given that the Company will have
sufficient resources to enable it to pay such debts, obligations, costs and
expenses on behalf of the Trust.
If an Event of Default (as defined herein) occurs and is continuing, then
the holders of Preferred Securities would rely on the enforcement by the
Property Trustee of its rights as a holder of the Junior Subordinated Debentures
against the Company. In addition, the holders of a majority in liquidation
amount of the Preferred Securities will have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Property Trustee or to direct the exercise of any trust or power conferred upon
the Property Trustee under the Declaration, including the right to direct the
Property Trustee to exercise the remedies available to it as a holder of the
Junior Subordinated Debentures. If the Property Trustee fails to enforce its
rights under the Junior Subordinated Debentures, any holder of Preferred
Securities may, to the extent permitted by applicable law, after a period of 30
days has elapsed from such holder's written request, directly institute a legal
proceeding against the Company to enforce the Property Trustee's rights under
the Junior Subordinated Debentures without first instituting any legal
proceeding against the Property Trustee or any other person or entity. If an
Event of Default occurs and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Junior Subordinated
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), then a holder of Preferred
Securities may also directly institute a proceeding for enforcement of payment
to such holder of the principal of or interest on Junior Subordinated Debentures
having a principal amount equal to the aggregate liquidation amount of the
Preferred Securities held by such holder (a "Direct Action") on or after the
respective due date specified in the Junior Subordinated Debentures without
first (i) directing the Property Trustee to enforce the terms of the Junior
Subordinated Debentures or (ii) instituting a legal proceeding against the
Company to enforce the Property Trustee's rights under the Junior Subordinated
Debentures. In connection with such Direct Action, the Company will be
subrogated to the rights of such holder of Preferred Securities under the
Declaration to the extent of any payment made by the Company to such holder of
Preferred Securities in such Direct Action. The holders of Preferred Securities
will not be able to exercise directly any other remedy available to the holders
of the Junior Subordinated Debentures unless the Property Trustee first fails to
do so.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX IMPACT OF EXTENSION
So long as the Company shall not be in default in the payment of interest
on the Junior Subordinated Debentures, the Company has the right under the
Indenture to defer payments of interest on the Junior Subordinated Debentures by
extending the interest payment period from time to time on the Junior
Subordinated Debentures for a Deferral Period not exceeding 10 consecutive
semi-annual interest periods, during which no interest shall be due and payable.
Semi-annual distributions on the Preferred Securities would not be made by the
Trust during any such Deferral Period (but would continue to accrue with
interest thereon at the rate of 7.54% per annum, compounded semi-annually). If
the Company exercises the right to extend an interest payment period, the
Company may not during such Deferral Period declare or pay dividends on, or
redeem, purchase, acquire or make a distribution or liquidation payment with
respect to, any of its common stock or preferred stock or make any guarantee
payments with respect thereto; provided, however, that the foregoing
restrictions shall not apply to (i) dividends, redemptions, purchases,
acquisitions, distributions or payments made by the Company by way of issuance
of shares of its capital stock, (ii) payments of accrued dividends by the
Company upon the redemption, exchange or conversion of any preferred stock of
the Company as may be outstanding from time to time in accordance with the terms
of such preferred stock, (iii) cash payments made by the Company in lieu of
delivering fractional shares upon the redemption, exchange or conversion of any
preferred stock of the Company as may be outstanding from time to time in
accordance with the terms of such preferred stock, (iv) repurchases, redemptions
or other
S-4
<PAGE> 11
acquisitions of shares of capital stock of the Company in connection with any
employment contract, benefit plan or other similar arrangement with or for the
benefit of employees, officers, directors or consultants, or (v) any declaration
of a dividend in connection with the implementation of a stockholders' rights
plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of such rights pursuant thereto. See "Description of
the Junior Subordinated Debentures -- Option to Extend Interest Payment Period"
for a description of certain terms of the outstanding preferred stock of the
Company.
Prior to the termination of any Deferral Period, the Company may further
extend such Deferral Period; provided that such Deferral Period together with
all such previous and further extensions thereof may not exceed 10 consecutive
semi-annual interest periods. Upon the termination of any Deferral Period and
the payment of all amounts then due, the Company may commence a new Deferral
Period, subject to the above requirements. The Company may also prepay at any
time all or any portion of the interest accrued during a Deferral Period.
Consequently, there could be multiple Deferral Periods of varying lengths
throughout the term of the Junior Subordinated Debentures, each not to exceed 10
consecutive semi-annual interest periods or to cause any extension beyond the
maturity of the Junior Subordinated Debentures. See "Description of the
Preferred Securities -- Distributions" and "Description of the Junior
Subordinated Debentures -- Option to Extend Interest Payment Period."
If a Deferral Period occurs, the Junior Subordinated Debentures will be
treated as having "original issue discount" for United States Federal income tax
purposes at all times after the beginning of the first Deferral Period,
including after the termination of the Deferral Period. During such times,
holders of Preferred Securities will be required to include their pro rata share
of original issue discount in gross income as it accrues for United States
Federal income tax purposes in advance of the receipt of cash, even though no
cash distributions will be made during a Deferral Period. Even before the
beginning of the First Deferral Period, while the Company will take the position
that original issue discount does not arise, it is possible that all of a
holder's taxable interest income with respect to the Junior Subordinated
Debentures will be accounted for as original issue discount and actual
distributions of stated interest will not be separately reported as taxable
income. See "Taxation -- Original Issue Discount". The Company has no current
intention of exercising its option to defer payments of interest.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence and during the continuation of a Tax Event or
Investment Company Event (each as defined herein), which may occur at any time,
the Trust shall, unless the Junior Subordinated Debentures are redeemed in the
limited circumstances described below and subject to the Company having received
prior approval of the Federal Reserve for such dissolution if then required
under applicable capital guidelines or policies of the Federal Reserve, be
dissolved with the result that, in the manner described in "Description of the
Preferred Securities-Liquidation Distribution Upon Dissolution", after
satisfaction of liabilities to creditors of the Trust, Junior Subordinated
Debentures having an aggregate principal amount equal to the aggregate stated
liquidation amount of, and bearing accrued and unpaid interest in an amount
equal to the accrued and unpaid distributions on, the Preferred Securities and
the Common Securities would be distributed on a Pro Rata Basis (as defined under
the caption "JPM Trusts" in the accompanying Prospectus) to the holders of the
Preferred Securities and the Common Securities in liquidation of the Trust. In
the case of a Tax Event or Capital Treatment Event (as defined herein), in
certain circumstances, the Company shall have the right, subject to the Company
having received prior approval of the Federal Reserve to do so if then required
under applicable capital guidelines or policies of the Federal Reserve, to
redeem the Junior Subordinated Debentures, in whole but not in part, in which
event the Trust will redeem Preferred Securities and Common Securities on a Pro
Rata Basis to the same extent as the Junior Subordinated Debentures are
redeemed. Any such redemption which occurs prior to January 15, 2007 shall be at
a price equal to the Make-Whole Amount (as defined herein). There can be no
assurance as to the market prices for Preferred Securities or the Junior
Subordinated Debentures which may be distributed in exchange for Preferred
Securities if a dissolution and liquidation of the Trust were to occur.
Accordingly, the Preferred Securities that an investor may purchase, or the
Junior Subordinated Debentures that the investor may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that the investor
paid to purchase the Preferred Securities offered hereby.
S-5
<PAGE> 12
Because holders of Preferred Securities may receive Junior Subordinated
Debentures upon the occurrence of a Special Event, prospective purchasers of
Preferred Securities are also making an investment decision with regard to the
Junior Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein and in the
accompanying Prospectus. See "Description of the Preferred Securities -- Special
Event Redemption or Distribution" and "Description of the Junior Subordinated
Debentures -- General."
Recent Clinton Administration proposals would prevent the Company from
deducting interest on the Junior Subordinated Debentures. The proposals would
have applied to instruments issued on or after December 7, 1995. However, the
Chairmen of the Senate Finance and House Ways and Means Committees have issued a
joint statement stating their intention that the proposals, if enacted, would
not apply to instruments issued prior to the date of appropriate Congressional
action. No such Congressional action has yet occurred. Nevertheless, there can
be no assurance that future legislation would not prevent the Company from
deducting interest on the Junior Subordinated Debentures. Such legislation would
constitute a Tax Event and could result in the distribution of the Junior
Subordinated Debentures to holders of the Preferred Securities or, in certain
circumstances, the redemption of the Junior Subordinated Debentures by the
Company and the distribution of the resulting cash in redemption of the
Preferred Securities. See "Description of the Preferred Securities -- Special
Event Redemption or Distribution."
Under current United States Federal income tax law, a distribution of the
Junior Subordinated Debentures upon a Tax Event or Investment Company Event
would not be a taxable event to holders of the Preferred Securities. See
"Taxation -- Distribution of Junior Subordinated Debentures to Holders of
Preferred Securities."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights, but will
not be able to appoint, remove or replace, or to increase or decrease the number
of, Trustees, which rights are vested exclusively in the Common Securities.
TRADING PRICES
The Preferred Securities constitute a new issue of securities with no
established trading market. Although the Underwriters have indicated to the
Company and the Trust that they intend to make a market in the Preferred
Securities as permitted by applicable laws and regulations, the Underwriters are
not obligated to do so and may discontinue any such market-making at any time
without notice. Accordingly, no assurance can be given as to the liquidity of,
or trading markets for, the Preferred Securities.
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder who disposes of its Preferred Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Junior Subordinated Debentures
through the date of disposition in income as ordinary income, and to add such
amount to a holder's adjusted tax basis in a holder's pro rata share of the
underlying Junior Subordinated Debentures deemed disposed of. Accordingly, such
a holder will recognize a capital loss to the extent the selling price (which
may not fully reflect the value of accrued but unpaid interest) is less than the
holder's adjusted tax basis (which will include accrued but unpaid interest).
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States Federal income tax purposes. See
"Taxation -- Accrual of Original Issue Discount and Premium" and "-- Disposition
of the Preferred Securities."
POTENTIAL MARKET VOLATILITY DURING DEFERRAL PERIOD
As described above, the Company has the right to extend an interest payment
period on the Junior Subordinated Debentures from time to time for a period not
exceeding 10 consecutive semi-annual interest periods. If the Company determines
to extend an interest payment period, or if the Company thereafter extends a
Deferral Period or prepays interest accrued during a Deferral Period as
described above, the market
S-6
<PAGE> 13
price of the Preferred Securities is likely to be affected. In addition, as a
result of such rights, the market price of the Preferred Securities (which
represent an undivided interest in Junior Subordinated Debentures) may be more
volatile than other securities on which original issue discount accrues that do
not have such rights. A holder that disposes of its Preferred Securities during
a Deferral Period, therefore, may not receive the same return on its investment
as a holder that continues to hold its Preferred Securities. See "Description of
the Junior Subordinated Debentures -- Option to Extend Interest Payment Period."
THE FOLLOWING INFORMATION CONCERNING THE COMPANY, JPM CAPITAL TRUST I, THE
PREFERRED SECURITIES, THE PREFERRED SECURITIES GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES IS IN ADDITION TO, AND SHOULD BE READ IN CONJUNCTION
WITH, THE INFORMATION CONTAINED IN THE ACCOMPANYING PROSPECTUS. CAPITALIZED
TERMS USED IN THIS PROSPECTUS SUPPLEMENT HAVE THE SAME MEANINGS AS IN THE
ACCOMPANYING PROSPECTUS.
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<PAGE> 14
SELECTED CONSOLIDATED FINANCIAL DATA OF
J.P. MORGAN & CO. INCORPORATED
The following tables set forth certain condensed financial data with
respect to the Company selected from the unaudited consolidated financial
statements appearing in the Report on Form 10-Q for the quarter ended September
30, 1996, and from the audited consolidated financial statements appearing in
the Annual Report on Form 10-K for the year ended December 31, 1995, which are
incorporated herein by reference. This information should be read in conjunction
with the other details of financial information concerning the Company appearing
in the aforementioned documents.
SUMMARY FINANCIAL INFORMATION
DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- --------- --------- --------- --------- ---------
(UNAUDITED) (AUDITED) (AUDITED) (AUDITED) (AUDITED) (AUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA
Total interest revenue........ $ 7,788 $ 7,328 $ 9,937 $ 8,379 $ 7,442 $ 7,281 $ 7,786
Total noninterest revenue..... 3,832 2,871 3,901 3,536 4,499 2,950 2,528
Total revenues................ 11,620 10,199 13,838 11,915 11,941 10,231 10,314
Net interest revenue.......... 1,218 1,515 2,003 1,981 1,772 1,708 1,484
Provision for credit losses... -- -- -- -- -- 55 40
Total operating expenses...... 3,326 3,008 3,998 3,692 3,580 2,854 2,487
Net income.................... 1,155 930 1,296 1,215 1,586(a) 1,582(b) 1,146(c)
At period-end:
Total assets................ 211,648 178,331 184,879 154,917 133,888 103,197 103,468
Long-term debt(d)........... 11,916 9,450 9,327 6,802 5,276 5,443 5,395
Stockholders' equity........ 11,078 10,113 10,451 9,568 9,859 7,308 6,068
Common stockholders'
equity.................... 10,384 9,619 9,957 9,074 9,365 6,814 5,574
Per common share:
Net income(e)............... $ 5.60 $ 4.62 $ 6.42 $ 6.02 $ 7.80(a) $ 7.95(b) $ 5.80(c)
Book value.................. 50.71(f) 46.73(g) 47.25(h) 35.56 29.41
Dividends declared.......... 2.43 2.25 3.06 2.79 2.48 2.23 1/2 2.03
EARNINGS RATIOS
Net income as % of:
Average total assets........ 0.55% 0.53% 0.73%(f) 0.70%(g) 1.08%(h)(i) 1.32%(j) 1.05%(k)
Average stockholders'
equity.................... 10.6 9.5 13.2(f) 12.5(g) 19.8(h)(i) 22.5(j) 20.4(k)
Average common stockholders'
equity.................... 11.3(m) 10.0%(m) 13.6(f) 12.9(g) 20.9(h)(i) 23.9(j) 21.9(k)
DIVIDEND PAYOUT RATIO
Dividends declared per
common share as % of net
income per common share... 43.4% 48.7% 47.7% 46.3% 31.8%(i) 28.1%(j) 35.0%(k)
CAPITAL RATIOS
Average stockholders' equity
as % of average total
assets...................... 5.2% 5.6% 5.5%(f) 5.7%(g) 5.5%(h) 5.8% 5.2%
Common stockholders' equity as
% of:
Average total assets........ 5.0 5.5 5.6(f) 5.3(g) 6.4(h) 5.7 5.1
Total year-end assets....... 4.9 5.4 5.4(f) 5.9(g) 7.0(h) 6.6 5.4
Total stockholders' equity as
% of:
Average total assets........ 5.3 5.8 5.9(f) 5.5(g) 6.7(h) 6.1 5.6
Total year-end assets....... 5.2 5.7 5.7(f) 6.2(g) 7.4(h) 7.1 5.9
Tier 1 risk-based capital
ratio(l).................... 8.1 8.5 8.8 9.6 9.3 8.9 6.9
Total risk-based capital
ratio(l).................... 11.7 12.5 13.0 14.2 13.0 13.0 10.7
Leverage ratio(l)............. 6.2 6.3 6.1 6.5 7.3 7.1 5.8
OTHER SELECTED DATA
Common shares outstanding at
period-end (in thousands)... 185,917 187,570 187,116 187,701 193,087 191,610 189,529
Total employees at
period-end................ 15,188 16,394 15,613 17,055 15,193 14,368 13,323
</TABLE>
S-8
<PAGE> 15
---------------
(a) Net income in 1993 includes a $137 million ($0.68 per share) charge related
to the cumulative effect of a change in accounting for postretirement
benefits adopted January 1, 1993.
(b) Net income in 1992 includes $452 million ($2.29 per share) related to the
cumulative effect of a change in accounting for income taxes adopted
retroactive to January 1, 1992. As a result of applying the new method of
accounting for income taxes, income before the cumulative effect of the
change for 1992 was reduced by $252 million, or $1.26 per share ($1.27 per
share assuming full dilution); net income was increased by $200 million, or
$1.03 per share ($1.02 per share assuming full dilution).
(c) Net income in 1991 includes $32 million ($0.17 per share) related to the
extraordinary gain on early retirement of debt.
(d) Includes $3,590 million, $3,197 million, $2,459 million, $2,300 million and
$2,080 million of long-term debt qualifying as risk-based capital in 1995,
1994, 1993, 1992 and 1991 respectively. Also incudes $3,740 million and
$3,422 million for the periods ended September 30, 1996 and 1995
respectively.
(e) Earnings per share amounts for 1994 and 1993 represent both primary and
fully diluted earnings per share; earnings per share amounts for 1995, 1992
and 1991 represent primary earnings per share. For the period ended
September 30, 1996 fully diluted earnings per share were $5.57. For 1995
fully diluted earnings per share were $6.36. For the period ended September
30, 1995 fully diluted earnings per share were $4.57. For 1992 fully diluted
earnings per share before and after the cumulative effect of the change in
accounting were $5.63 and $7.92 respectively. For 1991 fully diluted
earnings per share before and after the extraordinary gain were $5.58 and
$5.75 respectively.
(f) Excluding the effect of SFAS No. 115, the book value per common share would
have been $47.83 for the twelve months ended December 31, 1995; net income
would have been 0.73% of average total assets, 13.78% of average
stockholders' equity, and 14.3% of average common stockholders' equity;
average stockholders' equity would have been 5.3% of average total assets;
common stockholders' equity would have been 5.29% of average total assets
and 5.11% of total year-end assets; and total stockholders' equity would
have been 5.57% of average total assets and 5.37% of total year-end assets.
(g) Excluding the effect of SFAS No. 115, the book value per common share would
have been $44.39 for the twelve months ended December 31, 1994; net income
would have been 0.71% of average total assets, 13.6% of average
stockholders' equity, and 14.2% of average common stockholders' equity;
average stockholders' equity would have been 5.2% of average total assets;
common stockholders' equity would have been 5.0% of average total assets and
5.6% of total year-end assets; total stockholders' equity would have been
5.3% of average total assets and 5.9% of total year-end assets.
(h) Excluding the effect of adopting SFAS No. 115 at December 31, 1993, the book
value per common share would have been $41.37; net income would have been
1.09% of average total assets, 19.8% of average stockholders' equity, and
20.9% of average common stockholders' equity; average stockholders' equity
would have been 5.5% of average total assets; common stockholders' equity
would have been 5.6% of average total assets and 6.2% of total year-end
assets; total stockholders' equity would have been 6.0% of average total
assets and 6.6% of total year-end assets.
(i) Excluding the cumulative effect of the accounting change for postretirement
benefits, 1993 net income would have been 1.18% of average total assets,
21.1% of average stockholders' equity, and 22.3% of average common
stockholders' equity; dividends declared per common share would have been
29.3% of income per common share before the accounting change.
(j) Excluding the cumulative effect of the accounting change for income taxes,
1992 net income would have been 0.94% of average total assets, 17.2% of
average stockholders' equity, and 18.3% of average common stockholders'
equity; dividends declared per common share would have been 39.5% of income
per common share before the accounting change.
(k) Excluding the effect of the extraordinary gain on early retirement of debt,
1991 net income would have been 1.03% of average total assets, 19.8% of
average stockholders' equity, and 21.3% of average common stockholders'
equity; dividends declared per common share would have been 36.1% of income
per common share before the extraordinary gain.
(l) In accordance with Federal Reserve Board guidelines, the effect of SFAS No.
115 and the equity, assets, and off-balance-sheet exposures of J.P. Morgan
Securities Inc. are excluded.
(m) Excluding the effect of SFAS No. 115, the annualized rate of return on
average common stockholders' equity would have been 15.5% and 13.8% for the
nine months ended September 30, 1996 and 1995, respectively.
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<PAGE> 16
CAPITALIZATION OF J.P. MORGAN & CO. INCORPORATED
The consolidated capitalization of the Company and its consolidated
subsidiaries at September 30, 1996, and as adjusted for the issuance of the
Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary
Grantor Trust Holding Solely Junior Subordinated Debentures of the Company,
follows:
<TABLE>
<CAPTION>
(US$ IN MILLIONS)
(UNAUDITED)
OUTSTANDING AS ADJUSTED
----------- -----------
<S> <C> <C>
Long-term debt qualifying as risk-based capital:
J.P. Morgan (parent)
Zero-coupon subordinated notes due 1998................ $ 352 $ 352
4 3/4% convertible debentures due 1998................. 2 2
7 5/8% subordinated notes due 1998-2004................ 747 747
Floating-rate subordinated notes due 2000-2005......... 940 940
5 3/4%-7 1/4% subordinated notes due 2002-2011......... 824 824
8% subordinated Italian lire notes due 2003(1)......... 85 85
6 1/4%-8 1/2% subordinated notes due 2003-2010......... 749 749
6 7/8% subordinated Canadian dollar notes due
2004(1)............................................... 185 185
4.78% subordinated Japanese yen loan due 2005(1)....... 90 90
7.69% Medium-Term notes due 2011....................... 75 75
Floating-rate, Medium-Term notes due 2026.............. 5 5
Morgan Guaranty
7 3/8% subordinated notes due 2002..................... 199 199
------- -------
4,253 4,253
Less: amortization for risk-based capital purposes..... 513 513
------- -------
Total long-term debt qualifying as risk-based
capital............................................... 3,740 3,740
------- -------
Long-term debt not qualifying as risk-based capital:
J.P. Morgan (parent)
6 1/2%-8% notes due 1997............................... 801 801
14 1/2% South African rand notes due 1997(1)........... 55 55
Floating-rate notes due 1997........................... 500 500
Floating-rate Medium-Term notes due 1997-2006.......... 370 370
4 5/8%-7 1/4% Deutsche mark notes due 1998-2000(1)..... 366 366
4 1/2% Mandatorily Exchangeable notes due 1998......... 13 13
6%-6.36% Medium-Term notes due 1998-2001............... 81 81
3 3/4%-5 1/2% Swiss franc notes due 1999-2003(1)....... 569 569
6% Netherlands guilder notes due 2000(1)............... 147 147
8.95% Italian lire notes due 2001(1)................... 167 167
6 5/8% French franc notes due 2008(1).................. 185 185
7.7% notes, Series B-E due 2008-2009................... 425 425
7 1/2% convertible mortgage loan due 2018.............. 406 406
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
(US$ IN MILLIONS)
(UNAUDITED)
OUTSTANDING AS ADJUSTED
----------- -----------
<S> <C> <C>
Morgan Guaranty
Zero-coupon notes due 1996-1997........................ 6 6
Zero-coupon notes due 1996-1997........................ 15 15
7%-8.11% notes due 1996-1998........................... 422 422
Floating-rate Deutsche mark notes issued by J.P. Morgan
Holding Deutschland GmbH due 1996-1997(1)(2).......... 7 7
11 3/8% Italian lire notes due 1997(1)................. 115 115
Floating-rate Portuguese escudo notes due
1998-2006(1).......................................... 148 148
Floating-rate notes due 1998........................... 800 800
Floating-rate notes due 1998-2011...................... 703 703
5.78%-10% notes due 1999-2004.......................... 927 927
6.06% notes due 2001................................... 40 40
8.0% Australian dollar notes due 2001(1)............... 106 106
British pound financing obligation(1).................. 289 289
------- -------
7,663 7,663
Add: amortization for risk-based capital purposes...... 513 513
------- -------
Total long-term debt not qualifying as risk-based
capital............................................... 8,176 8,176
------- -------
Total long-term debt(3)................................ 11,916 11,916
------- -------
Company-Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Grantor Trust Holding Solely
Junior Subordinated Debentures of the Company(4).......... -- 750
------- -------
Stockholders' equity:
Preferred stock (authorized: 10,400,000 shares; issued and
outstanding: 2,444,300 shares of adjustable rate
cumulative preferred stock; 250,000 shares of variable
cumulative preferred stock; 400,000 shares of fixed
cumulative preferred stock)............................ 694 694
Common stock, $2.50 par value (authorized: 500,000,000
shares; issued: 200,684,623 shares).................... 502 502
Capital surplus........................................... 1,442 1,442
Retained earnings......................................... 8,392 8,392
Net unrealized gains on investment securities, net of
taxes.................................................. 317 317
Other..................................................... 754 754
Less: Treasury stock (14,767,312 shares) at cost....... (1,023) (1,023)
------- -------
Total stockholders' equity........................... 11,078 11,078
------- -------
Total long-term debt, Company-Obligated
Manditorily Redeemable Preferred Securities of
Subsidiary Grantor Trust Holding Solely Junior
Subordinated Debentures of the Company, and
stockholders' equity............................ $22,994 $23,744
======= =======
</TABLE>
---------------
NOTES:
(1) The following exchange rates were utilized to convert non-U.S. dollar notes
outstanding at September 30, 1996:
<TABLE>
<S> <C> <C> <C>
British pound................. 0.639 Italian lire.................. 1,526.33
Canadian dollar............... 1.362 Japanese yen.................. 111.00
Swiss franc................... 1.254 Portuguese escudo............. 155.20
Netherlands guilder........... 1.712 South African rand............ 4.535
Deutsche mark................. 1.527 Australian dollar............. 1.280
French Franc.................. 5.171
</TABLE>
(2) Payment of principal and interest unconditionally guaranteed by J.P. Morgan
& Co. Incorporated.
S-11
<PAGE> 18
(3) The capitalization table does not include significant amounts of deposit
liabilities, including deposit notes, and short-term obligations incurred by
J.P. Morgan & Co. Incorporated and its consolidated subsidiaries in the
ordinary course of business, including federal funds purchased, securities
sold under repurchase agreements and commercial paper.
(4) The assets of the Subsidiary Grantor Trust consist solely of $773.2 million
aggregate principal amount of the 7.54% Junior Subordinated Debentures due
2027 of the Company.
Events subsequent to September 30, 1996:
New Issues:
$2 billion Floating-rate notes due 1997, $90 million Japanese Yen 2.52% notes
due 2003, $300 million 6% notes due 1998, $150 million Floating-rate notes due
1998, $197 million Italian lire Floating-rate notes due 1998, $315 million
British pound 7.75% notes due 2003, $13.5 million Floating-rate notes due 2006,
$5 million Floating-rate Subordinated Medium-Term notes due 2026
Maturities:
$20 million 7.137% notes due 1998
Except as noted above there has been no material change to the consolidated
capitalization of J.P. Morgan and its consolidated subsidiaries, as adjusted,
since September 30, 1996
JPM CAPITAL TRUST I
JPM Capital Trust I is a statutory business trust formed on October 29,
1996, under the Delaware Business Trust Act (the "Business Trust Act") pursuant
to a declaration of trust among the Trustees and the Company and the filing of a
certificate of trust with the Secretary of State of the State of Delaware. Such
declaration will be amended and restated in its entirety (as so amended and
restated, the "Declaration") substantially in the form filed as an exhibit to
the Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus form a part, as of the date the Preferred Securities are
initially issued. The Declaration is qualified under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Upon issuance of the Preferred
Securities, the holders thereof will own all the issued and outstanding
Preferred Securities. The Company will acquire Common Securities in an amount
equal to at least 3% of the total capital of the Trust and will own, directly or
indirectly, all the issued and outstanding Common Securities. The Trust exists
for the purpose of (a) issuing its Trust Securities for cash and investing the
gross proceeds thereof in an equivalent amount of Junior Subordinated Debentures
and (b) engaging in such other activities as are necessary, convenient or
incidental thereto. The rights of the holders of the Trust Securities, including
economic rights, rights to information and voting rights, are as set forth in
the Declaration, the Business Trust Act and the Trust Indenture Act. The
Declaration does not permit the incurrence by the Trust of any indebtedness for
borrowed money or the making of any investment other than in the Junior
Subordinated Debentures. In the Declaration, the Company has agreed to pay for
all debts and obligations (other than with respect to the Trust Securities) and
all costs and expenses of the Trust, including the fees and expenses of the
Trustees and any taxes and all costs and expenses with respect thereto, to which
the Trust may become subject, except for United States withholding taxes.
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with the
Company's financial statements, with the Preferred Securities shown as
"Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary
Grantor Trust Holding Solely Junior Subordinated Debentures of the Company". The
assets of the Subsidiary Grantor Trust consist solely of $773.2 million
aggregate principal amount of the 7.54% Junior Subordinated Debentures due 2027
of the Company.
The Company has agreed that future financial reports of the Company will:
(i) present the Preferred Securities issued by other JPM Trusts on the Company's
balance sheet as a separate line item entitled
S-12
<PAGE> 19
"Company -- Obligated Mandatorily Redeemable Preferred Securities of Subsidiary
Grantor Trusts Holding Solely Junior Subordinated Debentures of the Company";
(ii) include in a footnote to the financial statements disclosure that the sole
assets of the trusts are the Junior Subordinated Debentures (specifying as to
each trust the principal amount, interest rate and maturity date of Junior
Subordinated Debentures held) and whether Staff Accounting Bulletin 53 treatment
is sought; (iii) include, in an audited footnote to the financial statements,
disclosure that (a) the JPM Trusts are wholly owned, (b) the sole assets of the
JPM Trusts are the Junior Subordinated Debentures (specifying as to each trust
the principal amount,interest rate and maturity date of the Junior Subordinated
Debentures held), and (c) the obligations of the Company under the documents, in
the aggregate, constitute a full and unconditional guarantee by the Company of
the JPM Trusts' obligations under the Preferred Securities issued by each JPM
Trust.
USE OF PROCEEDS
The Trust will use the proceeds from the sale of the Preferred Securities
to purchase Junior Subordinated Debentures from the Company. The net proceeds
from the sale of the Junior Subordinated Debentures will be used by the Company
for general corporate purposes, including investment in equity and debt
securities and interest-bearing deposits of subsidiaries, the repurchase of
issued and outstanding preferred and/or common shares of the Company and other
general corporate purposes as may be determined by management.
The Company is required by the Federal Reserve to maintain certain levels
of capital for bank regulatory purposes. On October 21, 1996, the Federal
Reserve announced that cumulative preferred securities having the
characteristics of the Preferred Securities could be included as Tier 1 capital
for bank holding companies. Such Tier 1 capital treatment, together with the
Company's ability to deduct, for income tax purposes, interest payable on the
Junior Subordinated Debentures, will provide the Company with a more
cost-effective means of obtaining capital for regulatory purposes than other
Tier 1 capital alternatives currently available to it.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration which is qualified under the Trust Indenture Act. The Property
Trustee, First Trust of New York, National Association, but not the other
Trustees of the Trust, will act as the indenture trustee for purposes of the
Trust Indenture Act. The terms of the Preferred Securities and the Declaration
include those stated in the Declaration and those made part of the Declaration
by the Trust Indenture Act and the Business Trust Act. The following summarizes
the material terms and provisions of the Preferred Securities and is qualified
in its entirety by reference to, the Declaration, which has been filed as an
exhibit to the Registration Statement of which this Prospectus Supplement forms
a part, the Business Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Trust to issue the Preferred Securities,
which represent preferred undivided beneficial interests in the assets of the
Trust, and the Common Securities, which represent common undivided beneficial
interests in the assets of the Trust. All the Common Securities will be owned,
directly or indirectly, by the Company. The Common Securities and the Preferred
Securities rank pari passu with each other and will have equivalent terms except
that (i) if an Event of Default under the Declaration occurs and is continuing,
the holders of Preferred Securities will have a priority over holders of the
Common Securities with respect to distributions and payments upon liquidation,
redemption or otherwise and (ii) holders of Common Securities have the exclusive
right (subject to the terms of the Declaration) to appoint, remove or replace
Trustees and to increase or decrease the number of Trustees. The Declaration
does not permit the issuance by the Trust of any securities or other evidences
of beneficial ownership of, or beneficial interests in, the Trust other than the
Preferred Securities and the Common Securities, and does not permit the
incurrence of any indebtedness for borrowed money by the Trust or the making of
any investment other than in the Junior Subordinated Debentures. Pursuant to the
Declaration, the Property Trustee will have legal title to, and will hold, the
Junior Subordinated Debentures as trust assets for the benefit of the holders of
the Preferred Securities and the Common Securities. The payment of distributions
out of moneys held by the Property
S-13
<PAGE> 20
Trustee and payments on redemption of the Preferred Securities or liquidation of
the Trust are guaranteed by the Company on a subordinated basis as and to the
extent described under "Description of the Preferred Securities Guarantees" in
the accompanying Prospectus. The Property Trustee will hold the Preferred
Securities Guarantee for the benefit of holders of the Preferred Securities. The
Preferred Securities Guarantee, when taken together with the Company's
obligations under the Junior Subordinated Debentures and the Indenture and its
obligations under the Declaration, provides a full and unconditional guarantee
from the time of issuance of the Preferred Securities of amounts due on the
Preferred Securities. The Preferred Securities Guarantee itself, however, covers
distributions and other payments on the Preferred Securities only if and to the
extent that the Company has made a payment to the Property Trustee of interest
or principal on the Junior Subordinated Debentures deposited in the Trust as
trust assets.
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of 7.54% of the stated liquidation amount of $1,000 per Preferred Security.
Distributions in arrears for more than one semi-annual period will bear interest
thereon at the rate per annum of 7.54% (to the extent permitted by law),
compounded semi-annually. The term "distributions" as used herein includes any
such interest payable unless otherwise stated. The amount of distributions
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months.
Distributions on the Preferred Securities will be cumulative, will accrue
from the original date of issuance and, except as otherwise described below,
will be payable semi-annually in arrears on January 15 and July 15 of each year,
commencing on July 15, 1997, but only if, and to the extent that, interest
payments are made in respect of Junior Subordinated Debentures held by the
Property Trustee.
So long as the Company shall not be in default in the payment of interest
on the Junior Subordinated Debentures, the Company has the right under the
Indenture to defer payments of interest on the Junior Subordinated Debentures by
extending the interest payment period from time to time on the Junior
Subordinated Debentures for a period not exceeding 10 consecutive semi-annual
interest periods and, as a consequence, the Trust would defer semi-annual
distributions on the Preferred Securities (though such distributions would
continue to accrue with interest thereon at the rate of 7.54% per annum,
compounded semi-annually) during any such Deferral Period. If the Company
exercises the right to extend an interest payment period, the Company may not
declare or pay dividends on, or redeem, purchase, acquire or make a distribution
or liquidation payment with respect to, any of its common stock or preferred
stock during such Deferral Period or make any guarantee payments with respect
thereto; provided, however, that the foregoing restrictions shall not apply to
(i) dividends, redemptions, purchases, acquisitions, distributions or payments
made by the Company by way of issuance of shares of its capital stock , (ii)
payments of accrued dividends by the Company upon the redemption, exchange or
conversion of any preferred stock of the Company as may be outstanding from time
to time in accordance with the terms of such preferred stock, (iii) cash
payments made by the Company in lieu of delivering fractional shares upon the
redemption, exchange or conversion of any preferred stock of the Company as may
be outstanding from time to time in accordance with the terms of such preferred
stock, (iv) repurchases, redemptions or other acquisitions of shares of capital
stock of the Company in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of employees, officers,
directors or consultants, or (v) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of such
rights pursuant thereto. Prior to the termination of any such Deferral Period,
the Company may further extend such Deferral Period; provided that such Deferral
Period together with all such previous and further extensions thereof may not
exceed 10 consecutive semi-annual interest periods and may not extend beyond the
maturity of the Junior Subordinated Debentures. Upon the termination of any
Deferral Period and the payment of all amounts then due, the Company may
commence a new Deferral Period, subject to the above requirements. The Company
may also prepay at any time all or any portion of the interest accrued during a
Deferral Period. Consequently, there could be multiple Deferral Periods of
varying lengths throughout the term of the Junior Subordinated Debentures, each
not to exceed 10 consecutive semi-annual interest periods or to cause any
extension beyond the maturity of the Junior Subordinated Debentures.
S-14
<PAGE> 21
See "Risk Factors -- Option to Extend Interest Payment Period; Tax Impact of
Extension;" "Description of the Junior Subordinated Debentures -- Interest" and
"-- Option to Extend Interest Payment Period." Subject to prepayments as
described above, payments of accrued distributions will be payable to holders of
Preferred Securities as they appear on the books and records of the Trust on the
first record date after the end of a Deferral Period.
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Property Trustee has cash on hand in the Property Account
to permit such payment. The funds available for distribution to the holders of
the Preferred Securities will be limited to payments received by the Property
Trustee in respect of the Junior Subordinated Debentures that are deposited in
the Trust as trust assets. See "Description of the Junior Subordinated
Debentures." If the Company does not make interest payments on the Junior
Subordinated Debentures, the Property Trustee will not make distributions on the
Preferred Securities. Under the Declaration, if and to the extent the Company
does make interest payments on the Junior Subordinated Debentures deposited in
the Trust as trust assets, the Property Trustee is obligated to make
distributions on the Trust Securities on a Pro Rata Basis. The payment of
distributions on the Preferred Securities is guaranteed by the Company on a
subordinated basis as and to the extent set forth under "Description of the
Preferred Securities Guarantees" in the accompanying Prospectus. The Preferred
Securities Guarantee, when taken together with the Company's obligations under
the Junior Subordinated Debentures and the Indenture and its obligations under
the Declaration, provides a full and unconditional guarantee from the time of
issuance of the Preferred Securities of amounts due on the Preferred Securities.
The Preferred Securities Guarantee itself, however covers distributions and
other payments on the Preferred Securities only if and to the extent that the
Company has made a payment to the Property Trustee of interest or principal on
the Junior Subordinated Debentures deposited in the Trust as trust assets.
Distributions on the Preferred Securities will be made to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates. As long as the Preferred Securities remain in book-entry form, the
relevant record dates will be one Business Day (as defined herein) prior to the
relevant distribution payment date. Distributions payable on any Preferred
Securities that are not punctually paid on any distribution payment date as a
result of the Company having failed to make the corresponding interest payment
on the Junior Subordinated Debentures will forthwith cease to be payable to the
person in whose name such Preferred Security is registered on the relevant
record date, and such defaulted distribution will instead be payable to the
person in whose name such Preferred Security is registered on the special record
date established by the Regular Trustees, which record date shall correspond to
the special record date or other specified date determined in accordance with
the Indenture; provided, however, that distributions shall not be considered
payable on any distribution payment date falling within a Deferral Period unless
the Company has elected to make a full or partial payment of interest accrued on
the Junior Subordinated Debentures on such distribution payment date.
Distributions on the Preferred Securities will be paid through the Property
Trustee who will hold amounts received in respect of the Junior Subordinated
Debentures in the Property Account for the benefit of the holders of the
Preferred Securities and the Common Securities. Subject to any applicable laws
and regulations and the provisions of the Declaration, each such payment will be
made as described under "Book-Entry Only Issuance -- The Depository Trust
Company" below. In the event that the Preferred Securities do not continue to
remain in book-entry form, the Regular Trustees shall have the right to select
relevant record dates which shall be more than one Business Day prior to the
relevant payment dates. The Declaration provides that the payment dates or
record dates for the Preferred Securities shall be the same as the payment dates
and record dates for the Junior Subordinated Debentures. All distributions paid
with respect to the Trust Securities shall be paid on a Pro Rata Basis to the
holders thereof entitled thereto. If any date on which distributions are to be
made on the Preferred Securities is not a Business Day, then payment of the
distribution to be made on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay) except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date.
"Business Day" shall mean any day other
S-15
<PAGE> 22
than Saturday, Sunday or any other day on which banking institutions in the City
of New York in the State of New York are permitted or required by any applicable
law to close.
REDEMPTION
The Company has the right to redeem the Junior Subordinated Debentures on
or after January 15, 2007, in whole at any time or in part from time to time. A
redemption of the Junior Subordinated Debentures would cause a mandatory
redemption of Preferred Securities and Common Securities having an aggregate
liquidation amount equal to the principal amount of Junior Subordinated
Debentures redeemed. The "Redemption Price", in the case of such a redemption
shall equal the following prices expressed in percentages of the stated
liquidation amount together with accrued distributions to but excluding the date
fixed for redemption. If redeemed during the 12-month period beginning January
15;
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
--------------------------------------------------------- ----------
<S> <C>
2007..................................................... 103.770%
2008..................................................... 103.393%
2009..................................................... 103.016%
2010..................................................... 102.639%
2011..................................................... 102.262%
2012..................................................... 101.885%
2013..................................................... 101.508%
2014..................................................... 101.131%
2015..................................................... 100.754%
2016..................................................... 100.377%
</TABLE>
and at 100% on or after January 15, 2017.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time, a Tax Event or an Investment Company Event (each as
hereinafter defined, and each, along with a Capital Treatment Event, a "Special
Event") shall occur and be continuing, the Trust may, unless the Junior
Subordinated Debentures are redeemed in the limited circumstances described
below and subject to the Company having received prior approval of the Federal
Reserve for such dissolution if then required under applicable capital
guidelines or policies of the Federal Reserve, be dissolved with the result
that, after satisfaction of liabilities to creditors of the Trust, Junior
Subordinated Debentures with an aggregate principal amount equal to the
aggregate stated liquidation amount of the Preferred Securities and the Common
Securities would be distributed on a Pro Rata Basis to the holders of the
Preferred Securities and the Common Securities in liquidation of such holders'
interests in the Trust, within 90 days following the occurrence of such Special
Event; provided, however, that in the case of the occurrence of a Tax Event, as
a condition of such dissolution and distribution, the Regular Trustees shall
have received an opinion of nationally recognized independent tax counsel
experienced in such matters (a "No Recognition Opinion"), which opinion may rely
on any then applicable published revenue rulings of the Internal Revenue
Service, to the effect that the holders of the Preferred Securities will not
recognize any gain or loss for United States Federal income tax purposes as a
result of such dissolution and distribution of Junior Subordinated Debentures;
and, provided further, that, if at the time there is available to the Trust the
opportunity to eliminate, within such 90 day period, the Special Event by taking
some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure, which has no adverse effect on
the Trust or the Company or the holders of the Preferred Securities, the Trust
will pursue such measure in lieu of dissolution. Furthermore, if in the case of
the occurrence of a Tax Event, (i) the Regular Trustees have received an opinion
(a "Redemption Tax Opinion") of nationally recognized independent tax counsel
experienced in such matters that, as a result of a Tax Event, there is more than
an insubstantial risk that the Company would be precluded from deducting the
interest on the Junior Subordinated Debentures for United States Federal income
tax purposes even if the Junior Subordinated Debentures were distributed to the
holders of Trust Securities in liquidation of such holders' interests in the
Trust as described above or (ii) the Regular Trustees shall have been informed
by such tax counsel that a No Recognition Opinion cannot be
S-16
<PAGE> 23
delivered to the Trust, the Company shall have the right, subject to the Company
having received prior approval of the Federal Reserve to do so if then required
under applicable capital guidelines or policies of the Federal Reserve, upon not
less than 30 nor more than 60 days notice, to redeem the Junior Subordinated
Debentures in whole but not in part for cash within 90 days following the
occurrence of such Tax Event, and promptly following such redemption Preferred
Securities and Common Securities with an aggregate liquidation amount equal to
the aggregate principal amount of the Junior Subordinated Debentures so redeemed
will be redeemed by the Trust at the Redemption Price on a Pro Rata Basis;
provided, however, that if at the time there is available to the Company or the
Regular Trustees (as defined in the accompanying Prospectus) the opportunity to
eliminate, within such 90 day period, the Tax Event by taking some ministerial
action, such as filing a form or making an election, or pursuing some other
similar reasonable measure, which has no adverse effect on the Trust, the
Company or the holders of the Preferred Securities, the Company will pursue such
measure in lieu of redemption and provided further that the Company shall have
no right to redeem the Junior Subordinated Debentures while the Regular Trustees
on behalf of the Trust are pursuing any such ministerial action. The Common
Securities will be redeemed on a Pro Rata Basis with the Preferred Securities,
except that if an Event of Default under the Declaration has occurred and is
continuing, the Preferred Securities will have a priority over the Common
Securities with respect to payment of the Redemption Price.
The "Redemption Price," in the case of a redemption following a Tax Event
or Capital Treatment Event prior to January 15, 2007, shall equal for each
Preferred Security the Make-Whole Amount for a corresponding $1,000 principal
amount of Junior Subordinated Debentures together with accrued distributions to
but excluding the date fixed for redemption. The "Make-Whole Amount" shall be
equal to the greater of (i) 100% of the principal amount of such Junior
Subordinated Debentures or (ii) as determined by a Quotation Agent (as defined
below), the sum of the present values of the remaining scheduled payments of
principal, premium and interest thereon through January 15, 2007 discounted to
the prepayment date on a semi-annual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Adjusted Treasury Rate.
"Adjusted Treasury Rate" means, with respect to any prepayment date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such prepayment date plus (i) prior to or on January 15,
1998, 0.90%, and (ii) after January 15, 1998, 0.50%.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term through January 15, 2007 of the Junior Subordinated Debentures that would
be utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term through January 15, 2007 of the Junior
Subordinated Debentures.
"Quotation Agent" means J.P. Morgan Securities Inc. and its respective
successors; provided, however, that if the foregoing shall cease to be a primary
U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer.
"Reference Treasury Dealer" means (i) the Quotation Agent and (ii) any other
Primary Treasury Dealer selected by the Indenture Trustee after consultation
with the Company.
"Comparable Treasury Price" means, with respect to any prepayment date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) the third
Business Day preceding such prepayment date, as set forth in the most recent
weekly statistical release (or any successor release) published by the Federal
Reserve and designated "H.15(519)" or (ii) if such release (or any successor
release) is not published or does not contain such prices during the week
preceding such Business Day, (A) the average of the Reference Treasury Dealer
Quotations for such prepayment date, after excluding the highest and lowest such
Reference Treasury Dealer Quotations, or (B) if the Indenture Trustee obtains
fewer than three such Reference Treasury Dealer Quotations, the average of all
such Quotations.
S-17
<PAGE> 24
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any prepayment date, the average, as determined by
the Indenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Indenture Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day preceding such prepayment date.
"Tax Event" means that the Regular Trustees shall have obtained an opinion
of a nationally recognized independent tax counsel experienced in such matters
(a "Dissolution Tax Opinion") to the effect that on or after the date of this
Prospectus Supplement as a result of (a) any amendment to, or change in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, (b) any amendment to, or
change in, an interpretation or application of any such laws or regulations by
any legislative body, court, governmental agency or regulatory authority
(including the enactment of any legislation and the publication of any judicial
decision or regulatory determination), (c) any interpretation or pronouncement
that provides for a position with respect to such laws or regulations that
differs from the theretofore generally accepted position or (d) any action taken
by any governmental agency or regulatory authority, which amendment or change is
enacted, promulgated, issued or effective or which interpretation or
pronouncement is issued or announced or which action is taken, in each case on
or after the date of this Prospectus Supplement, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the date
thereof, subject to United States Federal income tax with respect to income
accrued or received on the Junior Subordinated Debentures, (ii) the Trust is, or
will be within 90 days of the date thereof, subject to more than a de minimis
amount of other taxes, duties or other governmental charges or (iii) interest
payable by the Company to the Trust on the Junior Subordinated Debentures is
not, or within 90 days of the date thereof will not be, deductible by the
Company for United States Federal income tax purposes.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent counsel experienced in
practice under the Investment Company Act of 1940, as amended (the "1940 Act"),
that as a result of the occurrence of a change in law or regulation or a change
in interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
there is more than an insubstantial risk that the Trust is or will be considered
an "investment company" which is required to be registered under the 1940 Act,
which Change in 1940 Act Law becomes effective on or after the date of this
Prospectus Supplement.
"Capital Treatment Event" means that the Company has reasonably determined
that, as the result of the occurrence of a change in law or regulation or a
change in the interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority, there is
more than an insubstantial risk that the Company will not be able to treat the
minority interest in the Trust as "Tier 1 capital" (or the equivalent) for
purposes of the capital adequacy guidelines of the Federal Reserve, as then in
effect and applicable to the Company.
On the date fixed for any distribution of Junior Subordinated Debentures,
upon dissolution of the Trust, (i) the Preferred Securities and the Common
Securities will no longer be deemed to be outstanding, (ii) the depositary or
its nominee, as the record holder of the Preferred Securities, will receive a
registered global certificate or certificates representing the Junior
Subordinated Debentures to be delivered upon such distribution and (iii) any
certificates representing Preferred Securities not held by the depositary or its
nominee will be deemed to represent Junior Subordinated Debentures having an
aggregate principal amount equal to the aggregate stated liquidation amount of,
with an interest rate identical to the distribution rate of, and accrued and
unpaid interest equal to accrued and unpaid distributions on, such Preferred
Securities, until such certificates are presented to the Company or its agent
for transfer or reissuance.
There can be no assurance as to the market price for the Junior
Subordinated Debentures which may be distributed in exchange for Preferred
Securities if a dissolution and liquidation of the Trust were to occur.
Accordingly, the Junior Subordinated Debentures which a holder of Preferred
Securities may subsequently receive upon the dissolution of the Trust may trade
at a discount to the price of the Preferred Securities exchanged.
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MANDATORY REDEMPTION
Upon the repayment of the Junior Subordinated Debentures, whether at
maturity, upon redemption or otherwise, the proceeds from such repayment will be
promptly applied to redeem Preferred Securities and Common Securities having an
aggregate liquidation amount equal to the Junior Subordinated Debentures so
repaid, upon not less than 30 nor more than 60 days' notice, at the Redemption
Price. The Common Securities will be entitled to be redeemed on a Pro Rata Basis
with the Preferred Securities, except that if an Event of Default under the
Declaration has occurred and is continuing, the Preferred Securities will have a
priority over the Common Securities with respect to payment of the Redemption
Price. Subject to the foregoing, if fewer than all outstanding Preferred
Securities and Common Securities are to be redeemed, the Preferred Securities
and Common Securities will be redeemed on a Pro Rata Basis. In the event fewer
than all outstanding Preferred Securities are to be redeemed, Preferred
Securities registered in the name of and held by DTC or its nominee will be
redeemed as described under "Description of Preferred Securities --
Book-Entry-Only Issuance; The Depository Trust Company" below.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all semi-annual distribution periods terminating on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable) then, by 12:00 noon, New York City
time, on the redemption date and provided that the Company has paid to the
Property Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Junior Subordinated Debentures, the Trust will
irrevocably deposit with the Depositary funds sufficient to pay the applicable
Redemption Price and will give the Depositary irrevocable instructions and
authority to pay the Redemption Price to the holders of the Preferred
Securities. See "Book-Entry Only Issuance-The Depository Trust Company." If
notice of redemption shall have been given and funds deposited as required,
then, immediately prior to the close of business on the redemption date,
distributions will cease to accrue on the Preferred Securities called for
redemption, such Preferred Securities shall no longer be deemed to be
outstanding and all rights of holders of such Preferred Securities so called for
redemption will cease, except the right of the holders of such Preferred
Securities to receive the Redemption Price, but without interest on such
Redemption Price. Neither the Trustees nor the Trust shall be required to
register or cause to be registered the transfer of any Preferred Securities
which have been so called for redemption. If any date fixed for redemption of
Preferred Securities is not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay)
except that, if such Business Day falls in the next calendar year, such payment
will be made on the immediately preceding Business Day, in each case with the
same force and effect as if made on such date fixed for redemption. If the
Company fails to repay Junior Subordinated Debentures on maturity or on the date
fixed for redemption or if payment of the Redemption Price in respect of
Preferred Securities is improperly withheld or refused and not paid by the
Property Trustee or by the Company pursuant to the Preferred Securities
Guarantee described under "Description of the Preferred Securities Guarantees"
in the accompanying Prospectus, distributions on the Preferred Securities will
continue to accrue, from the original redemption date of the Preferred
Securities to the date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
Redemption Price.
In the event that fewer than all the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed pro rata as described
below under "Book Entry Only Issuance -- The Depository Trust Company."
Subject to the foregoing and applicable law (including, without limitation,
United States Federal securities laws), the Company or any of its subsidiaries
may at any time and from time to time purchase outstanding Preferred Securities
by tender, in the open market or by private agreement.
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<PAGE> 26
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Declaration, the Trust shall dissolve: (i) on January 15,
2027: (ii) when all the Trust Securities shall have been called for redemption
and the amounts necessary for redemption thereof shall have been paid to the
holders of Trust Securities in accordance with the terms of the Trust
Securities; or (iii) when all the Junior Subordinated Debentures shall have been
distributed to the holders of Trust Securities in exchange for all the Trust
Securities in accordance with the terms of the Trust Securities.
In the event of any voluntary or involuntary dissolution of the Trust, the
holders of the Preferred Securities and Common Securities at the date of
dissolution of the Trust will be entitled to receive on a Pro Rata Basis solely
out of the assets of the Trust, after satisfaction of liabilities to creditors
(to the extent not satisfied by the Company as provided in the Declaration), an
amount equal to the aggregate of the stated liquidation amount of $1,000 per
Trust Security plus accrued and unpaid distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"), unless, in
connection with such dissolution, Junior Subordinated Debentures in an aggregate
principal amount equal to the aggregate stated liquidation amount of such Trust
Securities and bearing accrued and unpaid interest in an amount equal to the
accrued and unpaid distributions on such Trust Securities shall be distributed
on a Pro Rata Basis to the holders of the Preferred Securities and the Common
Securities in exchange therefor.
If, upon any such dissolution, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities and the Common Securities shall, subject to
the following sentence, be paid on a Pro Rata Basis. The holders of the Common
Securities will be entitled to receive distributions upon any such dissolution
on a Pro Rata Basis with the holders of the Preferred Securities, except that if
an Event of Default under the Declaration has occurred and is continuing, the
Preferred Securities shall have a priority over the Common Securities with
respect to payment of the Liquidation Distribution.
NO MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE TRUST
The Trust may not merge or consolidate with or into, or be replaced by, or
sell, transfer or lease all or substantially all its properties and assets to,
any corporation or other entity or, except as expressly permitted hereby, sell
or transfer any junior subordinated debentures to any corporation or other
entity.
DECLARATION EVENTS OF DEFAULT
An Indenture Event of Default (as defined in the accompanying Prospectus)
will constitute an event of default under the Declaration with respect to the
Trust Securities (an "Event of Default"); provided that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any such Event of Default with respect to the Common Securities until all Events
of Default with respect to the Preferred Securities have been cured or waived.
Until all such Events of Default with respect to the Preferred Securities have
been so cured or waived, the Property Trustee will be deemed to be acting solely
on behalf of the holders of the Preferred Securities, and only the holders of
the Preferred Securities will have the right to direct the Property Trustee with
respect to certain matters under the Declaration and consequently under the
Indenture. In the event that any Event of Default with respect to the Preferred
Securities is waived by the holders of the Preferred Securities as provided in
the Declaration, the holders of Common Securities pursuant to the Declaration
have agreed that such waiver also constitutes a waiver of such Event of Default
with respect to the Common Securities for all purposes under the Declaration
without any further act, vote or consent of the holders of the Common
Securities. See "Voting Rights."
Upon the occurrence of an Event of Default, the Property Trustee as the
holder of all the Junior Subordinated Debentures will have the right under the
Indenture to declare the principal of, and interest on, the Junior Subordinated
Debentures to be immediately due and payable. In addition, the Property Trustee
will have the power to exercise all rights, powers and privileges under the
Indenture. If the Property Trustee fails to enforce its rights under the
Indenture, any holder of Preferred Securities may, to the extent permitted by
applicable law, after a period of 30 days has elapsed from such holder's written
request to the Property Trustee to enforce such rights, institute a legal
proceeding against the Company to enforce the Property Trustee's
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<PAGE> 27
rights. Notwithstanding the foregoing, if an Event of Default has occurred and
is continuing and such event is attributable to the failure of the Company to
pay interest or principal on the Junior Subordinated Debentures on the date such
interest or principal is otherwise payable (or in the case of redemption, the
redemption date), then a holder of Preferred Securities may directly institute
suit against the Company for enforcement of payment to such holder of the
principal of or interest on Junior Subordinated Debentures having a principal
amount equal to the aggregate liquidation amount of the Preferred Securities
held by such holder on or after the respective due date specified in the Junior
Subordinated Debentures. The holders of Preferred Securities will not be able to
exercise directly against the Company any other remedy available to the holders
of the Junior Subordinated Debentures unless the Property Trustee first fails to
do so. See "Description of the Junior Subordinated Debentures."
VOTING RIGHTS
Except as provided below, under "Modification and Amendment of the
Declaration" and "Description of the Preferred Securities Guarantees --
Amendments and Assignment" in the accompanying Prospectus and as otherwise
required by the Business Trust Act, the Trust Indenture Act or the Declaration,
the holders of the Preferred Securities will have no voting rights.
Subject to the requirements of the second to last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Preferred Securities have the right (i) on behalf of all holders of Preferred
Securities, to waive any past default that is waivable under the Declaration and
(ii) to direct the time, method and place of conducting any proceeding for any
remedy available to the Property Trustee, or exercising any trust or power
conferred upon the Property Trustee under the Declaration, including the right
to direct the Property Trustee, as the holder of the Junior Subordinated
Debentures, to (A) direct the time, method and place of conducting any
proceeding for any remedy available to the Indenture Trustee (as defined
herein), or executing any trust or power conferred on the Indenture Trustee with
respect to the Junior Subordinated Debentures, (B) waive any past default that
is waivable under Section 6.01(c) of the Indenture, or (C) exercise any right to
rescind or annul a declaration that the principal of all the Junior Subordinated
Debentures shall be due and payable; provided, however, that where a consent
under the Indenture would require the consent of (a) holders of Junior
Subordinated Debentures representing a specified percentage greater than a
majority in principal amount of the Junior Subordinated Debentures or (b) each
holder of Junior Subordinated Debentures affected thereby, no such consent shall
be given by the Property Trustee without the prior consent of, in the case of
clause (a) above, holders of Preferred Securities representing such specified
percentage of the aggregate liquidation amount of the Preferred Securities or,
in the case of clause (b) above, each holder of Preferred Securities affected
thereby. The Property Trustee shall not revoke any action previously authorized
or approved by a vote of the holders of Preferred Securities. The Property
Trustee shall notify all holders of record of Preferred Securities of any notice
of default received from the Indenture Trustee with respect to the Junior
Subordinated Debentures. Other than with respect to directing the time, method
and place of conducting any proceeding for any remedy available to the Property
Trustee or the Indenture Trustee as set forth above, the Property Trustee shall
be under no obligation to take any of the foregoing actions at the direction of
the holders of the Preferred Securities unless the Property Trustee shall have
obtained an opinion of nationally recognized independent tax counsel recognized
as expert in such matters to the effect that the Trust will not be classified
for United States Federal income tax purposes as an association taxable as a
corporation or a partnership on account of such action and will be treated as a
grantor trust for United States Federal income tax purposes following such
action. If the Property Trustee fails to enforce its rights under the
Declaration (including, without limitation, its rights, powers and privileges as
a holder of the Junior Subordinated Debentures under the Indenture), any holder
of Preferred Securities may, to the extent permitted by applicable law, after a
period of 30 days has elapsed from such holder's written request to the Property
Trustee to enforce such rights, institute a legal proceeding directly against
the Company to enforce the Property Trustee's rights under the Declaration,
without first instituting a legal proceeding against the Property Trustee or any
other person.
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<PAGE> 28
A waiver of an Indenture Event of Default by the Property Trustee at the
direction of holders of the Preferred Securities will constitute a waiver of the
corresponding Event of Default under the Declaration in respect of the Trust
Securities.
In the event the consent of the Property Trustee as the holder of the
Junior Subordinated Debentures is required under the Indenture with respect to
any amendment, modification or termination of the Indenture or the Junior
Subordinated Debentures, the Property Trustee shall request the direction of the
holders of the Trust Securities with respect to such amendment, modification or
termination and shall vote with respect to such amendment, modification or
termination as directed by a majority in liquidation amount of the Trust
Securities voting together as a single class; provided, however, that where any
such amendment, modification or termination under the Indenture would require
the consent or vote of (1) holders of Junior Subordinated Debentures
representing a specified percentage greater than a majority in principal amount
of the Junior Subordinated Debentures or (2) each holder of Junior Subordinated
Debentures, the Property Trustee may only give such consent or vote, in the case
of clause (1), at the direction of the holders of Trust Securities representing
such specified percentage of the aggregate liquidation amount of the Trust
Securities or, in the case of clause (2), as directed by each holder of Trust
Securities; and, provided further, however, that the Property Trustee shall be
under no obligation to take any such action in accordance with the directions of
the holders of the Trust Securities unless the Property Trustee has obtained an
opinion of nationally recognized independent tax counsel recognized as expert in
such matters to the effect that the Trust will not be classified for United
States Federal income tax purposes as an association taxable as a corporation or
a partnership on account of such action and will be treated as a grantor trust
for United States Federal income tax purposes following such action.
Any required approval or direction of holders of Preferred Securities may
be given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all the holders of Trust Securities or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Preferred Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken; (ii) a description of any resolution proposed
for adoption at such meeting on which such holders are entitled to vote or of
such matter upon which written consent is sought; and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the holders of Preferred Securities will be required
for the Trust to redeem and cancel Preferred Securities or distribute Junior
Subordinated Debentures in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities at such time that are owned by the Company or by any entity directly
or indirectly controlling or controlled by or under direct or indirect common
control with the Company shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if they were not outstanding.
The procedures by which persons owning Preferred Securities registered in
the name of and held by DTC or its nominee may exercise their voting rights are
described under "Description of Preferred Securities -- Book-Entry Only
Issuance; The Depository Trust Company" below.
Holders of the Preferred Securities will have no rights to increase or
decrease the number of Trustees or to appoint, remove or replace a Trustee,
which rights are vested exclusively in the holders of the Common Securities.
MODIFICATION AND AMENDMENT OF THE DECLARATION
The Declaration may be modified and amended with the approval of a majority
of the Regular Trustees, provided that, if any proposed modification or
amendment provides for, or the Regular Trustees otherwise propose to effect, (a)
any action that would adversely affect the powers, preferences or special rights
of the Trust Securities, whether by way of amendment to the Declaration or
otherwise, or (b) the dissolution,
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<PAGE> 29
liquidation, winding-up or termination of the Trust other than pursuant to the
terms of the Declaration, then the holders of the outstanding Trust Securities
as a class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of at
least 66 2/3% in liquidation amount of the Trust Securities, provided that if
any amendment or proposal referred to above would adversely affect only the
Preferred Securities or the Common Securities, then only the affected class will
be entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of 66 2/3% in liquidation amount
of such class of Trust Securities.
Notwithstanding the foregoing, (i) no amendment or modification may be made
to the Declaration unless the Regular Trustees shall have obtained (a) either a
ruling from the Internal Revenue Service or a written unqualified opinion of
nationally recognized independent tax counsel experienced in such matters to the
effect that such amendment will not cause the Trust to be classified for United
States Federal income tax purposes as an association taxable as a corporation or
a partnership and to the effect that the Trust will continue to be treated as a
grantor trust for purposes of United States Federal income taxation and (b) a
written unqualified opinion of nationally recognized independent counsel
experienced in such matters to the effect that such amendment will not cause the
Trust to be an "investment company" which is required to be registered under the
1940 Act; (ii) certain specified provisions of the Declaration may not be
amended without the consent of all the holders of the Trust Securities; (iii) no
amendment which adversely affects the rights, powers and privileges of the
Property Trustee or the Delaware Trustee shall be made without the consent of
the Property Trustee or the Delaware Trustee, as applicable; (iv) Article IV of
the Declaration relating to the obligation of the Company to purchase the Common
Securities and to pay certain obligations and expenses of the Trust as described
under "The JPM Trusts" in the accompanying Prospectus may not be amended without
the consent of the Company; and (v) the rights of holders of Common Securities
under Article V of the Declaration to increase or decrease the number of, and to
appoint, replace or remove, Trustees shall not be amended without the consent of
each holder of Common Securities.
The Declaration further provides that it may be amended without the consent
of the holders of the Trust Securities to (i) cure any ambiguity; (ii) correct
or supplement any provision in the Declaration that may be defective or
inconsistent with any other provision of the Declaration; (iii) to add to the
covenants, restrictions or obligations of the Company; and (iv) to conform to
changes in, or a change in interpretation or application of, certain 1940 Act
requirements by the Securities and Exchange Commission (the "Commission"), which
amendment does not adversely affect the rights, preferences or privileges of the
holders.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Preferred Securities. The Preferred Securities will be issued only as fully
registered securities registered in the name of DTC or its nominee. One or more
fully-registered global Preferred Securities certificates (each a "Preferred
Securities Global Certificate"), representing the total aggregate number of
Preferred Securities, will be issued and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in a global Preferred
Security.
DTC 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 securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations ("Direct Participants").
DTC is owned by a number of its Direct Participants and by the NYSE, the
American Stock Exchange, Inc., and the
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<PAGE> 30
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.
Upon issuance of a Preferred Securities Global Certificate, DTC will credit
on its book-entry registration and transfer system the number of Preferred
Securities represented by such Preferred Securities Global Certificate to the
accounts of institutions that have accounts with DTC. Ownership of beneficial
interests in a Preferred Securities Global Certificate will be limited to
Participants or persons that may hold interests through Participants. The
ownership interest of each actual purchaser of each Preferred Security
("Beneficial Owner") is in turn to be recorded on the Direct Participants' and
the Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchases, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct Participants or the
Indirect Participants through which the Beneficial Owners purchased Preferred
Securities. Transfers of ownership interests in the Preferred Securities are to
be accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers. So long as DTC, or its
nominee, is the owner of a Preferred Securities Global Certificate, DTC or such
nominee, as the case may be, will be considered the sole owner and holder of
record of the Preferred Securities represented by such Preferred Securities
Global Certificate for all purposes.
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.
Redemption notices shall be sent to Cede & Co. If less than all the
Preferred Securities are being redeemed, DTC will reduce pro rata (subject to
adjustment to eliminate fractional Preferred Securities) the amount of interest
of each Direct Participant in the Preferred Securities to be redeemed.
Although voting with respect to the Preferred Securities is limited, in
those instances in which a vote is required, neither DTC nor Cede & Co. itself
will consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an omnibus proxy to the Trust 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 the Preferred
Securities are credited on the record date (identified in a listing attached to
the omnibus proxy).
Distribution payments on the Preferred Securities represented by a
Preferred Securities Global Certificate will be made by the Property Trustee to
DTC. DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices and will be the responsibility of
such Participants and not of DTC, the Trust or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of distributions to DTC is the responsibility of the Trust, disbursement
of such payments to Direct Participants is the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners is the responsibility of
Direct Participants and Indirect Participants.
Except as provided herein, a Beneficial Owner in a Preferred Securities
Global Certificate will not be entitled to receive physical delivery of
Preferred Securities. Accordingly, each Beneficial Owner must rely on the
procedures of DTC to exercise any rights under the Preferred Securities.
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<PAGE> 31
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust and the Property Trustee. Under such circumstances, if a successor
securities depositary is not obtained, Preferred Security certificates will be
required to be printed and delivered. Additionally, the Trust may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary). In that event, certificates for the Preferred Securities
will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Trust and the Company believe to be
reliable, but the Trust and the Company take no responsibility for the accuracy
thereof.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
In the event the Preferred Securities do not remain in book-entry only
form, the following provisions will apply:
Payment of distributions and payments on redemption of the Preferred
Securities will be payable, the transfer of the Preferred Securities will be
registrable and Preferred Securities will be exchangeable for Preferred
Securities of other denominations of a like aggregate liquidation amount at the
principal corporate trust office of the Property Trustee in The City of New
York; provided that payment of distributions may be made at the option of the
Regular Trustees on behalf of the Trust by check mailed to the address of the
persons entitled thereto and that the payment on redemption of any Preferred
Security will be made only upon surrender of such Preferred Security to the
Property Trustee.
First Trust of New York, National Association or one of its affiliates will
act as registrar and transfer agent for the Preferred Securities. First Trust of
New York, National Association will also act as paying agent and, with the
consent of the Regular Trustees, may designate additional paying agents.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or the Company may require) in respect of any tax or
other governmental charges that may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to a default with respect to the Trust
Securities, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care as
a prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provision, the Property Trustee is under no obligation to
exercise any of the powers vested in it by the Declaration at the request of any
holder of Preferred Securities, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The Property Trustee is not required to expend or risk its own funds or
otherwise incur personal financial liability in the performance of its duties if
the Property Trustee reasonably believes that repayment or adequate indemnity is
not reasonably assured to it.
The Property Trustee is a depositary for funds and performs other services
for, and transacts other banking business with, the Company in the normal course
of business.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to principles of conflicts of laws.
MISCELLANEOUS
The Regular Trustees are authorized and directed to take such action as
they deem reasonable in order that the Trust will not be deemed to be an
"investment company" required to be registered under the 1940 Act
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<PAGE> 32
or that the Trust will not be classified for United States Federal income tax
purposes as an association taxable as a corporation or a partnership and will be
treated as a grantor trust for United States Federal income tax purposes. In
this connection, the Regular Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of the Trust or the
Declaration, that the Regular Trustees determine in their discretion to be
reasonable and necessary or desirable for such purposes, as long as such action
does not adversely affect the interests of holders of the Trust Securities.
The Company and the Regular Trustees on behalf of the Trust will be
required to provide to the Property Trustee annually a certificate as to whether
or not the Company and the Trust, respectively, is in compliance with all the
conditions and covenants under the Declaration.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE
Set forth below is a summary of information concerning the Preferred
Securities Guarantee that will be executed and delivered by the Company for the
benefit of the holders from time to time of the Preferred Securities. The
Preferred Securities Guarantee will be qualified under the Trust Indenture Act
and will be held by First Trust of New York, National Association, acting in its
capacity as indenture trustee with respect thereto, for the benefit of holders
of the Preferred Securities of the Trust. The terms of the Preferred Securities
Guarantee will be those set forth in the Preferred Securities Guarantee and
those made part of the Preferred Securities Guarantee by the Trust Indenture
Act. This description summarizes the material terms of the Preferred Securities
Guarantee and is qualified in its entirety by reference to the Preferred
Securities Guarantee, and the Trust Indenture Act. Section references used
herein are references to the provisions of the Preferred Securities Guarantee.
GENERAL
Pursuant to the Preferred Securities Guarantee, the Company will
irrevocably and unconditionally agree, to the extent set forth therein, to pay
in full, to the holders of the Preferred Securities, the Guarantee Payments (as
defined herein), to the extent not paid by the Trust, regardless of any defense,
right of set-off or counterclaim that the Trust may have or assert. The
following payments or distributions with respect to Preferred Securities to the
extent not paid or made by the Trust (the "Guarantee Payments"), will be subject
to the Preferred Securities Guarantee (without duplication): (i) any accrued and
unpaid distributions on Preferred Securities, and the redemption price,
including all accrued and unpaid distributions to the date of redemption, with
respect to any Preferred Securities called for redemption by the Trust, but if
and only to the extent that in each case the Company has made a payment to the
Property Trustee of interest or principal on the Junior Subordinated Debt
Securities deposited in the Trust as trust assets, and (ii) upon a voluntary or
involuntary liquidation, dissolution, winding-up or termination of the Trust
(other than in connection with the distribution of such Junior Subordinated Debt
Securities to the holders of the Preferred Securities or the redemption of all
the Preferred Securities upon the maturity or redemption of such Junior
Subordinated Debt Securities) the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid distributions on the Preferred Securities to
the date of payment, to the extent the Trust has funds available therefor, or
(b) the amount of assets of the Trust remaining available for distribution to
holders of the Preferred Securities upon liquidation of the Trust. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Company to the holders of the Preferred Securities or by
causing the Trust to pay such amounts to such holders.
The Company's obligations under the Declaration, the Preferred Securities
Guarantee, the Junior Subordinated Debt Securities purchased by the Trust and
the Indenture in the aggregate will provide a full and unconditional guarantee
on a subordinated basis by the Company of payments due on the Preferred
Securities. However, the Preferred Securities Guarantee covers distributions and
other payments on the Preferred Securities only if and to the extent that the
Company has made a payment to the Property Trustee of interest or principal on
the Junior Subordinated Debt Securities deposited in the Trust as trust assets.
If the Company does not make interest or principal payments on the Junior
Subordinated Debt Securities deposited
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in the Trust as trust assets, the Property Trustee will not make distributions
on the Preferred Securities of the Trust and the Trust will not have funds
available therefor.
CERTAIN COVENANTS OF THE COMPANY
In the Preferred Securities Guarantee, the Company will covenant that, so
long as any Preferred Securities remain outstanding, the Company will not
declare or pay any dividends on, or redeem, purchase, acquire or make a
distribution or liquidation payment with respect to, any of its common stock or
preferred stock or make any guarantee payment with respect thereto, if at such
time (i) the Company shall be in default with respect to its Guarantee Payments
or other payment obligations under such Preferred Securities Guarantee, (ii)
there shall have occurred any Declaration Event of Default or (iii) in the event
that Junior Subordinated Debt Securities are issued to the Trust in connection
with the issuance of Trust Securities by the Trust, the Company shall have given
notice of its election to defer payments of interest on such Junior Subordinated
Debt Securities by extending the interest payment period as provided in the
terms of the Junior Subordinated Debt Securities and such period, or any
extension thereof, is continuing; provided, however, that the foregoing
restrictions shall not apply to (i) dividends, redemptions, purchases,
acquisitions, distributions or payments made by the Company by way of issuance
of shares of its capital stock, (ii) payments of accrued dividends by the
Company upon the redemption, exchange or conversion of any preferred stock of
the Company as may be outstanding from time to time in accordance with the terms
of such preferred stock, (iii) cash payments made by the Company in lieu of
delivering fractional shares upon the redemption, exchange or conversion of any
preferred stock of the Company as may be outstanding from time to time in
accordance with the terms of such preferred stock, (iv) repurchase, redemptions
or other acquisitions of shares of capital stock of the Company in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of employees, officers, directors or consultants, or (v) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of such rights pursuant thereto. In
addition, so long as any Preferred Securities remain outstanding, the Company
has agreed (i) to remain the sole direct or indirect owner of all the
outstanding Common Securities and not to cause or permit such Common Securities
to be transferred except to the extent permitted by the Declaration, provided
that any permitted successor of the Company under the Indenture may succeed to
the Company's ownership of such Common Securities, and (ii) to use reasonable
efforts to cause the Trust to continue to be treated as a grantor trust for
United States Federal income tax purposes, except in connection with a
distribution of Junior Subordinated Debt Securities. (Section 6.01)
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of the applicable Preferred Securities (in which case no consent will
be required), the Preferred Securities Guarantee may be amended only with the
prior approval of the holders of not less than 66 2/3% in liquidation amount of
the outstanding Preferred Securities. (Section 9.02) All guarantees and
agreements contained in the Preferred Securities Guarantee shall bind the
successors, assignees, receivers, trustees and representatives of the Company
and shall inure to the benefit of the holders of the Preferred Securities then
outstanding. Except in connection with a consolidation, merger or sale involving
the Company that is permitted under the Indenture, the Company may not assign
its obligations under the Preferred Securities Guarantee. (Section 9.01)
TERMINATION OF THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee will terminate and be of no further
force and effect upon full payment of the redemption price of all Preferred
Securities, or upon distribution of the Junior Subordinated Debt Securities to
the holders of the Preferred Securities in exchange for all the Preferred
Securities, or upon full payment of the amounts payable upon liquidation of the
Trust. Notwithstanding the foregoing, the Preferred Securities Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of Preferred Securities must restore payment of any sums paid
under such Preferred Securities or such Preferred Securities Guarantee. (Section
7.01)
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<PAGE> 34
STATUS OF THE PREFERRED SECURITIES GUARANTEE
The Company's obligations under the Preferred Securities Guarantee to make
the Guarantee Payments will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
indebtedness, liabilities and obligations of the Company and any guarantees,
endorsements or other contingent obligations of the Company in respect of such
indebtedness, liabilities or obligations, including the Junior Subordinated Debt
Securities, except those made pari passu or subordinate by their terms, and (ii)
senior to all capital stock now or hereafter issued by the Company and to any
guarantee now or hereafter entered into by the Company in respect of any of its
capital stock. The Company's obligations under the Preferred Securities
Guarantee will rank pari passu with any other Preferred Securities Guarantee.
(Section 6.02) Because the Company is a holding company, the Company's
obligations under the Preferred Securities Guarantee are also effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, except to the extent that the Company is a creditor of the
subsidiaries recognized as such. The Declaration provides that each holder of
Preferred Securities, by acceptance thereof, agrees to the subordination
provisions and other terms of the Preferred Securities Guarantee.
The Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the Company to enforce its rights under the
Preferred Securities Guarantee without first instituting a legal proceeding
against any other person or entity). The Preferred Securities Guarantee will be
deposited with First Trust of New York, National Association, as indenture
trustee, to be held for the benefit of the holders of the Preferred Securities.
First Trust of New York, National Association shall enforce such Preferred
Securities Guarantee on behalf of the holders of the Preferred Securities. The
holders of not less than a majority in aggregate liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available in respect of the Preferred
Securities Guarantee, including the giving of directions to First Trust of New
York, National Association. If First Trust of New York, National Association
fails to enforce the Preferred Securities Guarantee as above provided, any
holder of Preferred Securities may institute a legal proceeding directly against
the Company to enforce its rights under such Preferred Securities Guarantee,
without first instituting a legal proceeding against the Trust or any other
person or entity.
MISCELLANEOUS
The Company will be required to provide annually to First Trust of New
York, National Association a statement as to the performance by the Company of
certain of its obligations under the Preferred Securities Guarantee and as to
any default in such performance. The Company is required to file annually with
First Trust of New York, National Association an officer's certificate as to the
Company's compliance with all conditions to be complied with by it under the
Preferred Securities Guarantee. (Section 2.04)
First Trust of New York, National Association, prior to the occurrence of a
default, undertakes to perform only such duties as are specifically set forth in
the Preferred Securities Guarantee and, after default with respect to the
Preferred Securities Guarantee, shall exercise the same degree of care as a
prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provision, First Trust of New York, National Association is
under no obligation to exercise any of the powers vested in it by the Preferred
Securities Guarantee at the request of any holder of Preferred Securities unless
it is offered reasonable indemnity against the costs, expenses and liabilities
that might be incurred thereby. (Section 3.02)
GOVERNING LAW
The Preferred Securities Guarantee will be governed by, and construed in
accordance with, the laws of the State of New York.
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<PAGE> 35
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Set forth below is a description of the Junior Subordinated Debentures in
which the Trust will invest the proceeds from the issuance and sale of the Trust
Securities and which will be deposited in the Trust as trust assets. The terms
of the Junior Subordinated Debentures include those stated in the Indenture
dated as of November 1, 1996, between the Company and First Trust of New York,
National Association, as trustee (the "Indenture Trustee"), as supplemented by
the First Supplemental Indenture dated as of December 4, 1996, between the
Company and the Indenture Trustee (as so supplemented, the "Indenture"), forms
of which have been filed as exhibits to the Registration Statement of which this
Prospectus Supplement forms a part, and those made part of the Indenture by the
Trust Indenture Act. This description supplements the description of the general
terms and provisions of the Subordinated Debt Securities set forth in the
accompanying Prospectus under the caption "Description of the Junior
Subordinated Debt Securities." The following description does not purport to be
complete and is qualified in its entirety by reference to the Indenture and the
Trust Indenture Act. Whenever particular provisions or defined terms in the
Indenture are referred to herein, such provisions or defined terms are
incorporated by reference herein. Section references used herein are references
to provisions of the Indenture.
The Indenture does not limit the aggregate principal amount of indebtedness
which may be issued thereunder and provides that junior subordinated debentures
may be issued thereunder from time to time in one or more series (collectively,
together with the Junior Subordinated Debentures, the "Subordinated
Debentures"). The Junior Subordinated Debentures constitute a separate series
under the Indenture.
Under certain circumstances involving the dissolution of the Trust
following the occurrence of a Special Event, Junior Subordinated Debentures may
be distributed to the holders of the Trust Securities upon dissolution of the
Trust. See "Description of the Preferred Securities -- Special Event Redemption
or Distribution."
GENERAL
The Junior Subordinated Debentures are unsecured, subordinated obligations
of the Company, limited in aggregate principal amount to an amount equal to the
sum of (i) the stated liquidation amount of the Preferred Securities issued by
the Trust and (ii) the proceeds received by the Trust upon issuance of the
Common Securities to the Company (which proceeds will be used to purchase an
equal principal amount of Junior Subordinated Debentures).
The entire principal amount of the Junior Subordinated Debentures will
become due and payable, together with any accrued and unpaid interest thereon,
on January 15, 2027 (such date, the "Stated Maturity"). The Junior Subordinated
Debentures are not subject to any sinking fund.
The Junior Subordinated Debentures are subordinate in right of payment to
Senior Indebtedness, Subordinated Indebtedness and Derivative Obligations (as
such terms are defined in the accompanying Prospectus) of the Company. At
September 30, 1996, the amount of Senior Indebtedness, Subordinated Indebtedness
and Derivative Obligations was approximately $12.4 billion. See "Description of
the Junior Subordinated Debt Securities -- Subordination" in the Prospectus.
If Junior Subordinated Debentures are distributed to holders of Preferred
Securities upon dissolution of the Trust, such Junior Subordinated Debentures
will initially be issued as a Global Security (as defined below). As described
herein, under certain limited circumstances, Junior Subordinated Debentures may
be issued in certificated form in exchange for a Global Security. See
"Book-Entry and Settlement" below. In the event that Junior Subordinated
Debentures are issued in certificated form, such Junior Subordinated Debentures
will be in denominations of $1,000 and integral multiples thereof and may be
transferred or exchanged at the offices described below. Payments on Junior
Subordinated Debentures issued as a Global Security will be made to DTC, a
successor depositary or, in the event that no depositary is used, to a paying
agent for the Junior Subordinated Debentures.
In the event that Junior Subordinated Debentures are issued in certificated
form, payments of principal and interest will be payable, the transfer of the
Junior Subordinated Debentures will be registrable and Junior
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<PAGE> 36
Subordinated Debentures will be exchangeable for Junior Subordinated Debentures
of other denominations of a like aggregate principal amount at the corporate
trust office of the Indenture Trustee in The City of New York; provided that
payment of interest may be made at the option of the Company by check mailed to
the address of the persons entitled thereto and that the payment of principal
with respect to any Junior Subordinated Debenture will be made only upon
surrender of such Junior Subordinated Debenture to the Indenture Trustee.
OPTIONAL REDEMPTION
Except as provided below, the Junior Subordinated Debentures may not be
redeemed prior to January 15, 2007. Subject to the Company having received prior
approval of the Federal Reserve to do so if then required under applicable
capital guidelines or policies of the Federal Reserve, the Company shall have
the right to redeem the Junior Subordinated Debentures, in whole or in part,
from time to time, on or after January 15, 2007, upon not less than 30 nor more
than 60 days notice, at a redemption price equal to the following prices,
expressed in percentages of principal amount, plus any accrued and unpaid
interest to the redemption date, including interest accrued during a Deferral
Period. If redeemed during the 12-month period beginning January 15:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
--------------------------------------------------------- ----------
<S> <C>
2007..................................................... 103.770%
2008..................................................... 103.393%
2009..................................................... 103.016%
2010..................................................... 102.639%
2011..................................................... 102.262%
2012..................................................... 101.885%
2013..................................................... 101.508%
2014..................................................... 101.131%
2015..................................................... 100.754%
2016..................................................... 100.377%
</TABLE>
and at 100% on or after January 15, 2017.
The Company will also have the right to redeem the Junior Subordinated
Debentures at any time upon the occurrence of a Capital Treatment Event or upon
the occurrence of a Tax Event if certain conditions are met as described under
"Description of the Preferred Securities -- Special Event Redemption or
Distribution", subject in each case to the Company having received prior
approval of the Federal Reserve for such redemption if then required under
applicable capital guidelines or policies of the Federal Reserve.
If the Company gives a notice of redemption in respect of Junior
Subordinated Debentures (which notice will be irrevocable) then, by 12:00 noon,
New York City time, on the redemption date, the Company will deposit irrevocably
with the Indenture Trustee funds sufficient to pay the applicable redemption
price and will give irrevocable instructions and authority to pay such
redemption price to the holders of the Junior Subordinated Debentures. If notice
of redemption shall have been given and funds deposited as required, then, upon
the date of such deposit, interest will cease to accrue on the Junior
Subordinated Debentures called for redemption, such Junior Subordinated
Debentures will no longer be deemed to be outstanding and all rights of holders
of such Junior Subordinated Debentures so called for redemption will cease,
except the right of the holders of such Junior Subordinated Debentures to
receive the applicable redemption price, but without interest on such redemption
price. If any date fixed for redemption of Junior Subordinated Debentures is not
a Business Day, then payment of the redemption price payable on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay) except that, if such
Business Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date fixed for redemption. If payment of the redemption price
in respect of Junior Subordinated Debentures is
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<PAGE> 37
improperly withheld or refused and not paid by the Company, interest on such
Junior Subordinated Debentures will continue to accrue, from the original
redemption date to the date of payment, in which case the actual payment date
will be considered the date fixed for redemption for purposes of calculating the
applicable redemption price. If fewer than all the Junior Subordinated
Debentures are to be redeemed, the Junior Subordinated Debentures to be redeemed
shall be selected by lot or pro rata or in some other equitable manner
determined by the Indenture Trustee.
In the event of any redemption in part, the Company shall not be required
to (i) issue, register the transfer of or exchange any Junior Subordinated
Debentures during a period beginning at the opening of business 15 days before
any selection for redemption of Junior Subordinated Debentures and ending at the
close of business on the earliest date on which the relevant notice of
redemption is deemed to have been given to all holders of Junior Subordinated
Debentures to be redeemed and (ii) register the transfer of or exchange any
Junior Subordinated Debentures so selected for redemption, in whole or in part,
except the unredeemed portion of any Junior Subordinated Debentures being
redeemed in part. (Section 3.02)
INTEREST
The Junior Subordinated Debentures will bear interest at the rate of 7.54%
per annum from the original date of issuance. Interest will be payable
semi-annually in arrears on January 15 and July 15 of each year (each, an
"Interest Payment Date"), commencing on July 15, 1997, to the person in whose
name such Junior Subordinated Debenture is registered, subject to certain
exceptions, at the close of business on the Business Day next preceding such
Interest Payment Date. In the event (i) the Preferred Securities shall not
continue to remain in book-entry only form or (ii) if, following distribution of
the Junior Subordinated Debentures to holders of Trust Securities upon
dissolution of the Trust as described under "Description of the Preferred
Securities," the Junior Subordinated Debentures shall not continue to remain in
book-entry only form, the relevant record date will be the June 30th or the
December 31st immediately preceding the relevant Interest Payment Date. Interest
payable on any Junior Subordinated Debenture that is not punctually paid or duly
provided for on any interest payment date will forthwith cease to be payable to
the person in whose name such Junior Subordinated Debenture is registered on the
relevant record date, and such defaulted interest will instead be payable to the
person in whose name such Junior Subordinated Debenture is registered on the
special record date or other specified date determined in accordance with the
Indenture; provided, however, that interest, shall not be considered payable by
the Company on any Interest Payment Date falling within a Deferral Period unless
the Company has elected to make a full or partial payment of interest accrued on
the Junior Subordinated Debentures on such Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. If any date on which interest is
payable on the Junior Subordinated Debentures is not a Business Day, then
payment of the interest payable on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as the Company shall not be in default in the payment of interest
on the Junior Subordinated Debentures, the Company shall have the right to
extend the interest payment period from time to time for a period not exceeding
10 consecutive semi-annual interest periods. The Company has no current
intention of exercising its right to extend an interest payment period. No
interest shall be due and payable during a Deferral Period, except at the end
thereof. During any Deferral Period, the Company shall not declare or pay any
dividends on, or redeem, purchase, acquire or make a distribution or liquidation
payment with respect to, any of its common stock or preferred stock or make any
guarantee payments with respect thereto; provided, however, that the foregoing
restrictions shall not apply to (i) dividends, redemptions, purchases,
acquisitions, distributions or payments made by the Company by way of issuance
of shares of its capital stock, (ii) payments of accrued dividends by the
Company upon the redemption, exchange or conversion of any preferred stock of
the Company as may be outstanding from time to time in accordance with the terms
of such
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<PAGE> 38
preferred stock, (iii) cash payments made by the Company in lieu of delivering
fractional shares upon the redemption, exchange or conversion of any preferred
stock of the Company as may be outstanding from time to time in accordance with
the terms of such preferred stock, (iv) repurchases, redemptions or other
acquisitions of shares of capital stock of the Company in connection with any
employment contract, benefit plan or other similar arrangement with or for the
benefit of employees, officers, directors or consultants, or (v) any declaration
of a dividend in connection with the implementation of a stockholders' rights
plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of such rights pursuant thereto.
Prior to the termination of any such Deferral Period, the Company may
further extend the interest payment period; provided that such Deferral Period
together with all such previous and further extensions thereof may not exceed 10
consecutive semi-annual interest periods and may not extend beyond the maturity
of the Junior Subordinated Debentures. On the first Interest Payment Date
occurring on or after the end of each Deferral Period, the Company shall pay to
the holders of Junior Subordinated Debentures of record on the record date for
such Interest Payment Date (regardless of who the holders of record may have
been on other dates during the Deferral Period) all accrued and unpaid interest
on the Junior Subordinated Debentures, together with interest thereon at a rate
of 7.54% to the extent permitted by applicable law, compounded semi-annually
("Compounded Interest"). Upon the termination of any Deferral Period and the
payment of all amounts then due, the Company may commence a new Deferral Period,
subject to the above requirements. The Company may also prepay at any time all
or any portion of the interest accrued during a Deferral Period. Consequently,
there could be multiple Deferral Periods of varying lengths throughout the term
of the Junior Subordinated Debentures, each not to exceed 10 consecutive
semi-annual interest periods or to cause any extension beyond maturity of the
Junior Subordinated Debentures. The failure by the Company to make interest
payments during a Deferral Period would not constitute a Default or an Event of
Default under the Indenture or the Company's currently outstanding indebtedness.
If the Property Trustee shall be the sole holder of the Junior Subordinated
Debentures, the Company shall give the Property Trustee notice of its selection
of such Deferral Period one Business Day prior to the earlier of (i) the next
succeeding date on which the distributions on the Preferred Securities are
payable or (ii) the date the Trust is required to give notice to any
self-regulatory organization or to holders of the Preferred Securities of the
record date or the payment date for such distribution. The Trust shall give
notice of the Company's selection of such Deferral Period to the holders of the
Preferred Securities.
If Junior Subordinated Debentures have been distributed to holders of Trust
Securities, the Company shall give the holders of the Junior Subordinated
Debentures notice of its selection of such Deferral Period ten Business Days
prior to the earlier of (i) the next succeeding Interest Payment Date or (ii)
the date the Company is required to give notice to any self-regulatory
organization or to holders of the Junior Subordinated Debentures of the record
or payment date for such related interest payment.
COMPOUNDED INTEREST
Payments of Compounded Interest on the Junior Subordinated Debentures held
by the Trust will be available to pay any interest on distributions in arrears
in respect of the Preferred Securities pursuant to the terms thereof.
INDENTURE EVENTS OF DEFAULT
If any Indenture Event of Default shall occur and be continuing, the
Property Trustee, as the holder of the Junior Subordinated Debt Securities, will
have the right to declare the principal of and the interest on the Junior
Subordinated Debt Securities (including any Compound Interest) and any other
amounts payable under the Indenture to be forthwith due and payable and to
enforce its other rights as a creditor with respect to the Junior Subordinated
Debt Securities. See "Description of Junior Subordinated Debt Securities--Events
of Default" in the accompanying Prospectus for a description of the Indenture
Events of Default. An Indenture Event of Default also constitutes a Declaration
Event of Default. The holders of Preferred Securities in certain circumstances
have the right to direct the Property Trustee to exercise its rights as the
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<PAGE> 39
holder of the Junior Subordinated Debt Securities. See "Description of Preferred
Securities -- Declaration Events of Default" and "-- Voting Rights".
BOOK-ENTRY AND SETTLEMENT
If any Junior Subordinated Debentures are distributed to holders of
Preferred Securities (see "Description of the Preferred Securities"), such
Junior Subordinated Debentures will be issued in the form of one or more global
certificates (each a "Global Security") registered in the name of the depositary
or its nominee. Except under the limited circumstances described below, Junior
Subordinated Debentures represented by the Global Security will not be
exchangeable for, and will not otherwise be issuable as, Junior Subordinated
Debentures in definitive form. The Global Securities described above may not be
transferred except by the depositary to a nominee of the depositary or by a
nominee of the depositary to the depositary or another nominee of the depositary
or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
Subordinated Debentures in definitive form and will not be considered the
holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Junior Subordinated Debentures
shall be exchangeable, except for another Global Security of like denomination
and tenor to be registered in the name of the depositary or its nominee or to a
successor depositary or its nominee. Accordingly, each Beneficial owner must
rely on the procedures of the depositary or if such person is not a Participant,
on the procedures of the Participant through which such person owns its interest
to exercise any rights of a holder under the Indenture. If Junior Subordinated
Debentures are distributed to holders of Preferred Securities, DTC will act as
securities depositary for the Junior Subordinated Debentures.
For a description of DTC and DTC's book-entry system, see "Description of
Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust
Company." As of the date of this Prospectus Supplement, the description herein
of DTC's book-entry system and DTC's practices as they relate to purchases,
transfers, notices and payments with respect to the Preferred Securities apply
in all material respects to any debt obligations represented by one or more
Global Securities held by DTC. The Company may appoint a successor to DTC or any
successor depositary in the event DTC or such successor depositary is unable or
unwilling to continue as a depositary for the Global Securities.
None of the Company, the Indenture Trustee, any paying agent and any other
agent of the Company or the Indenture Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in a Global Security for such Junior
Subordinated Debentures or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
A Global Security shall be exchangeable for Junior Subordinated Debentures
registered in the names of persons other than the depositary or its nominee only
if (i) the depositary notifies the Company that it is unwilling or unable to
continue as a depositary for such Global Security and no successor depositary
shall have been appointed; (ii) the depositary, at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the depositary
is required to be so registered to act as such depositary and no successor
depositary shall have been appointed; (iii) the Company, in its sole discretion,
determines that such Global Security shall be so exchangeable; or (iv) there
shall have occurred an Indenture Event of Default with respect to such Junior
Subordinated Debentures. Any Global Security that is exchangeable pursuant to
the preceding sentence shall be exchangeable for Junior Subordinated Debentures
registered in such names as the depositary shall direct. It is expected that
such instructions will be based upon directions received by the depositary from
its Participants with respect to ownership of beneficial interests in such
Global Security.
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<PAGE> 40
RELATIONSHIP BETWEEN THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND
THE PREFERRED SECURITIES GUARANTEE
As set forth in the Declaration, the Trust exists for the sole purpose of
(a) issuing and selling the Trust Securities evidencing undivided beneficial
interests in the assets of the Trust and investing the proceeds from such
issuance and sale in the Junior Subordinated Debentures and (b) engaging in such
other activities as are necessary, convenient or incidental thereto.
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
distributions and other payments due on the Preferred Securities primarily
because (i) the aggregate principal amount of Junior Subordinated Debentures
held as trust assets will be equal to the sum of the aggregate stated
liquidation amount of the Trust Securities; (ii) the interest rate and interest
and other payment dates on the Junior Subordinated Debentures will match the
distribution rate and distribution and other payment dates for the Preferred
Securities; (iii) the Declaration provides that the Company shall pay for all
debts and obligations (other than with respect to the Trust Securities) and all
costs and expenses of the Trust, including any taxes and all costs and expenses
with respect thereto, to which the Trust may become subject, except for United
States withholding taxes; and (iv) the Declaration further provides that the
Trustees shall not cause or permit the Trust, among other things, to engage in
any activity that is not consistent with the limited purposes of the Trust. With
respect to clause (iii) above, however, no assurance can be given that the
Company will have sufficient resources to enable it to pay such debts,
obligations, costs and expenses on behalf of the Trust.
Payments of distributions and other payments due on the Preferred
Securities are guaranteed by the Company on a subordinated basis as and to the
extent set forth under "Description of the Preferred Securities Guarantees", in
the accompanying Prospectus. If the Company does not make interest or other
payments on the Junior Subordinated Debentures, the Trust will not make
distributions or other payments on the Preferred Securities. Under the
Declaration, if and to the extent the Company does make interest or other
payments on the Junior Subordinated Debentures, the Property Trustee is
obligated to make distributions or other payments on the Preferred Securities.
The Preferred Securities Guarantee is a full and unconditional guarantee from
the time of issuance of the Preferred Securities, but the Preferred Securities
Guarantee covers distributions and other payments on the Preferred Securities
only if and to the extent that the Company has made a payment to the Property
Trustee of interest or principal on the Junior Subordinated Debentures deposited
in the Trust as trust assets.
The Property Trustee will have the Power to exercise all rights, powers and
privileges under the Indenture with respect to the Junior Subordinated
Debentures, including its rights as the holder of the Junior Subordinated
Debentures to enforce the Company's obligations under the Junior Subordinated
Debentures upon the occurrence of an Indenture Event of Default, and will also
have the right to enforce the Preferred Securities Guarantee on behalf of the
holders of the Preferred Securities. In addition, the holders of at least a
majority in liquidation amount of the Preferred Securities will have the right
to direct the Property Trustee with respect to certain matters under the
Declaration and the Preferred Securities Guarantee. If the Property Trustee
fails to enforce its rights under the Indenture, any holder of Preferred
Securities may, to the extent permitted by applicable law, after a period of 30
days has elapsed from such holder's written request to the Property Trustee to
enforce such rights, institute a legal proceeding against the Company to enforce
the Property Trustee's rights under the Junior Subordinated Debentures without
first instituting any legal proceeding against the Property Trustee or any other
person or entity. Notwithstanding the foregoing, if an Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Company to pay interest or principal on the Junior Subordinated Debentures on
the date such interest or principal is otherwise payable (or in the case of
redemption, the redemption date), then a holder of Preferred Securities may
directly institute suit against the Company for enforcement of payment to such
holder of the principal of or interest on Junior Subordinated Debentures having
a principal amount equal to the aggregate liquidation amount of the Preferred
Securities held by such holder on or after the respective due date specified in
the Junior Subordinated Debentures. The holders of Preferred Securities will not
be able to exercise directly against the Company any other remedy available to
the holders of the Junior Subordinated Debentures unless
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the Property Trustee first fails to do so. If the Property Trustee fails to
enforce the Preferred Securities Guarantee, to the extent permitted by
applicable law, any holder of Preferred Securities may institute a legal
proceeding directly against the Company to enforce the Property Trustee's rights
under the Preferred Securities Guarantee without first instituting a legal
proceeding against the Trust, the Property Trustee or any other person or
entity. Notwithstanding the foregoing, if the Company has failed to make a
Guarantee Payment, a holder of Preferred Securities may directly institute a
proceeding against the Company for enforcement of such holder's right to receive
payment under the Guarantee. The Company waives any right or remedy to require
that any action be brought first against the Trust or any other person or entity
before proceeding directly against the Company. See "Description of the
Preferred Securities" and "Description of the Preferred Securities Guarantees"
in the accompanying Prospectus.
The above mechanisms and obligations, taken together, provide a full and
unconditional guarantee by the Company of payments due on the Preferred
Securities.
TAXATION
In the opinion of Cravath, Swaine & Moore, counsel to the Company and the
Trust ("Tax Counsel"), the following are the material United States Federal
income tax consequences of the ownership and disposition of Preferred
Securities. Unless otherwise stated, this summary deals only with Preferred
Securities held as capital assets by holders who acquire the Preferred
Securities upon original issuance ("Initial Holders"). It does not deal with
special classes of holders, such as dealers in securities or currencies, life
insurance companies, persons holding Preferred Securities as part of a straddle
or as part of a hedging or conversion transaction, or persons whose functional
currency is not the United States dollar. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations thereunder
and administrative and judicial interpretations thereof are of the date hereof,
all of which are subject to change (possibly on a retroactive basis).
INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF PREFERRED
SECURITIES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF
ANY STATE, LOCAL OR OTHER TAX LAWS.
CLASSIFICATION OF THE TRUST
In the opinion of Tax Counsel, under current law and assuming full
compliance with the terms of the Declaration, the Trust will be classified for
United States Federal income tax purposes as a grantor trust and not as a
partnership or an association taxable as a corporation. Accordingly, each holder
of Preferred Securities (a "Securityholder") will be considered the owner of a
pro rata portion of the Junior Subordinated Debentures held by the Trust and
will be required to include in gross income the pro rata share of income accrued
on the Junior Subordinated Debentures.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In the opinion of Tax Counsel, under current law and assuming full
compliance with the Indenture, the Junior Subordinated Notes will be classified
for United States Federal income tax purposes as indebtedness of the Company.
INTEREST AND ORIGINAL ISSUE DISCOUNT
If a Deferral Period occurs, the Junior Subordinated Debentures would be
considered to have original issue discount at all times after the beginning of
the first Deferral Period, including after the termination of the Deferral
Period. In addition, the Company's option to defer the payment of interest on
the Junior Subordinated Debentures during a Deferral Period might cause the
Junior Subordinated Debentures to be considered initially to be issued with
original issue discount. The Company believes, and will take the position, that
this latter result will not arise because of an exception in the Treasury
Regulations that applies when there
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is only a "remote" likelihood that a Deferral Period will occur. Assuming that
the likelihood of a Deferral Period is in fact remote, Tax Counsel believes that
this position is correct although there is no authority directly on point and
the Internal Revenue Service could take a contrary position.
If the original issue discount rules apply to the Junior Subordinated
Debentures (either following the occurrence of a Deferral Period or initially),
each Securityholder, whether on the cash or accrual method of accounting, will
be required to accrue its pro rata share of original issue discount into income
in accordance with a constant yield method based on the compounding of interest.
As a result, income will be required to be reported by Securityholders before
the receipt of cash attributable to such income, and, in particular, income will
be reported during a Deferral Period even though no cash distributions are being
made. If the original issue discount rules apply for a period during which cash
distributions are currently being made, the sum of the daily accruals of income
for a quarterly period for a Securityholder that purchased the Preferred
Securities for their liquidation value will equal the cash distribution received
by the Securityholder for such quarter, assuming no disposition prior to the
record date for such distribution.
If the original issue discount rules apply, actual distributions of stated
interest will not be separately reported as income. A Securityholder's tax basis
for the Junior Subordinated Debentures will be increased by original issue
discount accrued into income, and decreased by cash distributions of interest.
If the original issue discount rules do not apply, stated interest will be
includable in a holder's gross income as ordinary interest income in accordance
with such holder's regular method of tax accounting.
Whether or not the original issue discount rules apply, no portion of the
amounts received on the Preferred Securities will be eligible for the corporate
dividends received deduction.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF PREFERRED
SECURITIES
Under current law, a distribution by the Trust of the Junior Subordinated
Debentures as described under the caption "Description of the Preferred
Securities -- Special Event Redemption or Distribution" will be non-taxable and
will result in the Securityholder receiving directly such Securityholder's pro
rata share of the Junior Subordinated Debentures previously held indirectly
through the Trust, with a holding period and tax basis equal to the holding
period and adjusted tax basis such Securityholder was considered to have had in
such Securityholder's pro rata share of the underlying Junior Subordinated
Debentures immediately prior to such distribution. If, however, the special
event giving rise to the distribution is a Tax Event which results in the Trust
being treated as an association taxable as a corporation, the distribution would
constitute a taxable event to holders of the Preferred Securities.
MARKET DISCOUNT AND BOND PREMIUM
Securityholders other than Initial Holders may be considered to have
acquired their pro rata interest in the Junior Subordinated Debentures with
market discount, acquisition premium or amortizable bond premium. Such holders
are advised to consult their tax advisors as to the income tax consequences of
the acquisition, ownership and disposition of the Preferred Securities.
DISPOSITION OF THE PREFERRED SECURITIES
Upon a sale, exchange or other disposition of the Preferred Securities
(including a distribution of cash in redemption of a Securityholder's Preferred
Securities upon redemption or repayment of the underlying Junior Subordinated
Debentures, but excluding the distribution of Junior Subordinated Debentures), a
Securityholder will be considered to have disposed of all or part of such
Securityholder's pro rata share of the Junior Subordinated Debentures, and will
recognize gain or loss equal to the difference between the amount realized
(other than amounts attributable to accrued but unpaid stated interest that is
not treated as original issue discount) and the Securityholder's adjusted tax
basis in such Securityholder's pro rata share of the underlying Junior
Subordinated Debentures deemed disposed of. A holder's adjusted tax basis in the
Preferred Securities generally will be its initial purchase price increased by
original issue discount previously includable in such holder's gross income to
the date of disposition and decreased by payments (other than payments of stated
interest that are not treated as original issue discount) received on the
Preferred Securities. Gain or loss will
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<PAGE> 43
be capital gain or loss (except to the extent of any accrued interest or market
discount not previously included in income). See "Market Discount and Bond
Premium" above. Such gain or loss will be long-term capital gain or loss if the
Preferred Securities have been held for more than one year.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
individual, corporation, partnership, estate or trust that is, as to the United
States, a non-resident alien individual or a foreign corporation, partnership,
estate or trust.
Under present United States Federal income tax law:
(i) payments by the Trust or any of its paying agents to any holder of
a Preferred Security who or which is a United States Alien Holder will not
be subject to United States Federal income or withholding tax, provided
that (a) the beneficial owner of the Preferred Security does not actually
or constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote; (b) the beneficial owner
of the Preferred Security is not a controlled foreign corporation that is
related to the Company through stock ownership; and (c) either (A) the
beneficial owner of the Preferred Security certifies to the Trust or its
agent, under penalties of perjury, generally on IRS Form W-8, that it is
not a United States holder and provides its name and address or (B) a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business
(a "Financial Institution") and holds the Preferred Security certifies to
the Trust or its agent under penalties of perjury that such statement has
been received from the beneficial owner by it or by a Financial Institution
between it and the beneficial owner and furnishes the Trust or its agent
with a copy thereof; and
(ii) A United States Alien Holder of a Preferred Security will not be
subject to United States Federal income or withholding tax on any gain
realized upon the sale or other disposition of a Preferred Security unless
(a) the United States Alien Holder is an individual who is present in the
United States for 183 days or more in the taxable year of disposition, and
certain other conditions apply or (b) the gain is effectively connected
with the conduct by the United States Alien Holder of a trade or business
in the United States.
INFORMATION REPORTING TO HOLDERS
The Trust will report the interest paid or the original issue discount that
accrued during the year with respect to the Junior Subordinated Debentures, and
any gross proceeds received by the Trust from the retirement or redemption of
the Junior Subordinated Debentures, annually to the holders of record of the
Preferred Securities and the Internal Revenue Service. The Trust currently
intends to deliver such reports to holders of record prior to January 31
following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, Preferred Securities may
be subject to a "backup" withholding tax of 31% unless the holder complies with
certain identification requirements. Any withheld amounts will generally be
allowed as a credit against the holder's Federal income tax, provided the
required information is timely filed with the Internal Revenue Service.
POSSIBLE TAX LAW CHANGES
On March 19, 1996, the Clinton Administration proposed legislation (the
"Proposed Legislation") which would, among other things, generally deny
corporate issuers a deduction for interest in respect of certain debt
obligations, such as the Junior Subordinated Debentures, issued on or after
December 7, 1995 if such debt obligations have a maximum term in excess of 20
years and are not shown as indebtedness on the issuer's applicable consolidated
balance sheet. On March 29, 1996, Senate Finance Committee Chairman William V.
Roth, Jr. and House Ways and Means Committee Chairman Bill Archer issued a joint
statement (the "Joint
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<PAGE> 44
Statement") indicating their intent that the Proposed Legislation, if adopted by
either of the tax-writing committees of Congress, would have an effective date
that is no earlier than the date of "appropriate Congressional action." In
addition, subsequent to the publication of the Joint Statement, Senator Daniel
Patrick Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel wrote
letters to the Treasury Department (the "Democrat Letters"), which concurred
with the view expressed in the Joint Statement. No such Congressional action has
yet occurred. If the principles contained in the Joint Statement and the
Democrat Letters were followed and if the Proposed Legislation were enacted,
such legislation would not apply to the Junior Subordinated Debentures. There
can be no assurance, however, that the effective date guidance contained in the
Joint Statement and the Democrat Letters will be incorporated into the Proposed
Legislation, if enacted, or that other legislation enacted after the date hereof
will not otherwise adversely affect the ability of the Company to deduct the
interest payable on the Junior Subordinated Debentures. Such a change could give
rise to a Tax Event. See "Description of the Preferred Securities -- Special
Event Redemption or Distribution."
ERISA MATTERS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Internal Revenue Code of 1986, as amended (the "Code") set forth certain
restrictions on (a) employee benefit plans (as defined in section 3(3) of ERISA,
(b) plans described in Section 4975(e) (1) of the Code, including individual
retirement accounts and Keogh plans, (c) any entity whose underlying assets
include plan assets by reason of a plans' investment in such entity (each of
(a), (b) and (c) hereinafter referred to as a "Plan") and (d) persons who have
certain specified relationships to such Plans ("parties in interest" under ERISA
and "disqualified persons" under the Code).
ERISA imposes specific requirements on fiduciaries of Plans subject to
ERISA, namely, that they make prudent investments, that they diversify
investments, and they make investments in accordance with the Plan documents and
in the best interests of participants and their beneficiaries. In accordance
with these general fiduciary standards, a Plan fiduciary should determine
whether an investment in the Preferred Securities is permitted under the
governing Plan instruments and is appropriate for the Plan in view of its
overall investment policy and the composition and diversification of its
portfolio.
Section 406 of ERISA and Section 4975 of the Code prohibit a Plan from
engaging in certain transactions involving "plan assets" with "parties in
interest" or "disqualified persons". ERISA and the Code do not define "plan
assets". However, the U.S. Department of Labor has issued a final regulation
(the "Plan Assets Regulation") concerning the definition of what constitutes
plan assets of a Plan. That regulation generally provides in relevant part that
the underlying assets of an entity in which a Plan makes an equity investment
will be deemed, for purposes of ERISA, to be assets of the investing Plan,
unless (i) equity participation by "benefit plan investors" is not
"significant", (ii) the entity qualifies as an "operating company" as defined in
the Plan Assets Regulation or (iii) certain other requirements are met.
The Company and certain affiliates of the Company may each be considered a
"party in interest" (within the meaning of ERISA) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to many Plans that
are subject to ERISA or Section 4975 of the Code (including individual
retirement accounts and Keogh plans). The purchase of Preferred Securities by a
Plan that is subject to the fiduciary responsibility provisions of ERISA or the
prohibited transaction provisions of Section 4975 of the Code (including
individual retirement arrangements and other plans described in Section 4975(e)
(1) of the Code) and with respect to which the Company, or any affiliate of the
Company is a service provider (or otherwise is a party in interest or a
disqualified person) may constitute or result in a prohibited transaction under
ERISA or Section 4975 of the Code, unless such Preferred Securities are acquired
pursuant to and in accordance with an applicable exemption. Any pension or other
employee benefit plan proposing to acquire any Preferred Securities should
consult with its counsel.
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<PAGE> 45
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
dated the date hereof (the "Underwriting Agreement"), the Company and the Trust
have agreed that the Trust will sell to each of the Underwriters named below,
and each of the Underwriters, for whom J.P. Morgan Securities Inc. is acting as
representative (the "Representative"), has severally agreed to purchase from the
Trust, the number of Preferred Securities set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
J.P. Morgan Securities Inc.................................. 150,000
Citicorp Securities, Inc.................................... 150,000
CS First Boston Corporation................................. 150,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 150,000
Smith Barney Inc............................................ 150,000
-------
Total........................................ 750,000
=======
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all the
Preferred Securities offered hereby if any Preferred Securities are purchased by
the Underwriters. In the event of default by an Underwriter, the Underwriting
Agreement provides that, in certain circumstances, the purchase commitment of
the nondefaulting Underwriters may be increased or the Underwriting Agreement
may be terminated.
The Company has been advised by the Representative that the Underwriters
propose initially to offer the Preferred Securities to the public at the public
offering price set forth on the cover page of this Prospectus Supplement, and to
certain dealers at such price less a concession not in excess of $6.00 per
Preferred Security. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $2.50 per Preferred Security to certain brokers and
dealers. After the initial public offering, the public offering price and such
concessions may be changed.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures of the
Company, the Underwriting Agreement provides that the Company will pay as
compensation ("Underwriters' Compensation") for the Underwriters' arranging the
investment therein of such proceeds $10 per Preferred Security or $7,500,000 in
the aggregate.
The Underwriters have advised the Trust that they intend to make a market
in the Preferred Securities. The Underwriters will have no obligation to make a
market in the Preferred Securities, however, and may cease market making
activities, if commenced, at any time.
The Representative is a wholly-owned subsidiary of the Company. The
underwriting of the Preferred Securities offered hereby is being conducted in
accordance with Rule 2720 of the NASD Conduct Rules.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or
contribute to payments which the Underwriters may be required to make in respect
thereof.
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<PAGE> 46
PROSPECTUS
J.P. MORGAN & CO. INCORPORATED
JUNIOR SUBORDINATED DEBT SECURITIES
JPM CAPITAL TRUST I
JPM CAPITAL TRUST II
JPM CAPITAL TRUST III
JPM CAPITAL TRUST IV
Preferred Securities Fully and Unconditionally guaranteed as
Set Forth Herein by J.P. Morgan & Co. Incorporated
J.P. Morgan & Co. Incorporated ("J.P. Morgan" or the "Company") may offer, from
time to time, junior subordinated debt securities (the "Junior Subordinated Debt
Securities") consisting of debentures, notes or other evidences of indebtedness
in one or more series and in amounts, at prices and on terms to be determined at
or prior to the time of any such offering. The Junior Subordinated Debt
Securities when issued will be unsecured obligations of the Company. The
Company's obligations under the Junior Subordinated Debt Securities will be
subordinate and junior in right of payment to all Senior Indebtedness,
Subordinated Indebtedness and Derivative Obligations of the Company (as such
terms are defined herein) of the Company.
JPM Capital Trust I, JPM Capital Trust II, JPM Capital Trust III and JPM Capital
Trust IV (the "JPM Trusts"), each a statutory business trust formed under the
laws of the State of Delaware, may offer and sell, from time to time, preferred
securities ("Preferred Securities") representing undivided beneficial interests
in the assets of the respective JPM Trust. The payment of periodic cash
distributions ("distributions") with respect to Preferred Securities of a JPM
Trust out of moneys held by the Property Trustee (as defined herein) and
payments on liquidation of such JPM Trust and on redemption of Preferred
Securities of such JPM Trust will be guaranteed by the Company on a subordinated
basis to the extent described herein (each such guarantee, a "Preferred
Securities Guarantee"). See "Description of the Preferred Securities
Guarantees". The Preferred Securities Guarantee covers payments of distributions
and other payments on the Preferred Securities only if and to the extent that
the applicable JPM Trust has funds available therefor which will not be the case
unless the Company has made a payment of interest or principal or other payments
on the Junior Subordinated Debt Securities held by such JPM Trust as its sole
asset. The Preferred Securities Guarantees, when taken together with the
Company's obligations under the Junior Subordinated Debt Securities held by a
JPM Trust and the Indenture (as defined herein) and its obligations under the
Amended and Restated Declaration of such JPM Trust, including its obligation to
pay all costs, expenses, debts and other obligations of such JPM Trust (other
than with respect to the Trust Securities (as defined herein)), will provide a
full and unconditional guarantee of amounts due on the Preferred Securities of
such JPM Trust. Junior Subordinated Debt Securities may be issued and sold, from
time to time, in one or more series by the Company to a JPM Trust, or a trustee
of such JPM Trust, in connection with the investment of the proceeds from the
offering of Preferred Securities and Common Securities (as defined herein) of
such JPM Trust. The Junior Subordinated Debt Securities purchased by a JPM Trust
may be subsequently distributed pro rata to holders of Preferred Securities and
Common Securities of such JPM Trust in connection with the dissolution of such
JPM Trust upon the occurrence of certain events as may be described in an
accompanying Prospectus Supplement.
Specific terms of the Junior Subordinated Debt Securities of any series or the
Preferred Securities of any JPM Trust in respect of which this Prospectus is
being delivered (the "Offered Securities") will be set forth in a Prospectus
Supplement with respect to such Offered Securities, which will describe, without
limitation and where applicable, the following: (i) in the case of Junior
Subordinated Debt Securities, the specific designation, aggregate principal
amount, authorized denomination, maturity, premium, if any, redemption or
sinking fund provisions, if any, interest rate (which may be fixed or variable),
if any, time and method of calculating interest payments, if any, dates on which
premium, if any, and interest, if any, will be payable, right of the Company, if
any, to defer payment of interest on the Junior Subordinated Debt Securities and
the maximum length of such deferral period, the initial public offering price,
and any listing on a securities exchange and other specific terms of the
offering; and (ii) in the case of Preferred Securities, the specific
designation, number of securities, liquidation amount per security, initial
public offering price, and any listing on a securities exchange, distribution
rate (or method of calculation thereof), dates on which distributions shall be
payable and dates from which distributions shall accrue, voting rights (if any),
terms for any conversion or exchange into other securities, any redemption or
sinking fund provisions, any other rights, preferences, privileges, limitations
or restrictions relating to the Preferred Securities and the terms upon which
the proceeds of the sale of the Preferred Securities shall be used to purchase a
specific series of Junior Subordinated Debt Securities of the Company. Unless
otherwise indicated in an accompanying Prospectus Supplement, the Company does
not intend to list any of the Offered Securities on a national securities
exchange.
The Offered Securities may be offered in amounts, at prices and on terms to be
determined at the time of offering. Any Prospectus Supplement relating to any
series of Offered Securities will contain information concerning certain United
States Federal income tax considerations, if applicable, to the Offered
Securities. By separate prospectus, the form of which is included in the
Registration Statement of which this Prospectus is a part, the Company may offer
from time to time senior debt securities and/or subordinated debt securities
each of which will be direct, unsecured obligations of the Company. The
aggregate initial public offering price of the securities to be offered by this
Prospectus and such other prospectus shall not exceed $1,000,000,000.
The Offered Securities may be sold (i) directly to purchasers, (ii) through
agents designated from time to time, (iii) to dealers or (iv) through
underwriters or a group of underwriters. If agents of the Company and/or any JPM
Trust or underwriters are involved in the sale of the Offered Securities, their
names will be set forth in the applicable Prospectus Supplement. If agents of
the Company and/or any JPM Trust, or underwriters or dealers are involved in the
sale of the Offered Securities, descriptions of their compensation and
indemnification arrangements and the net proceeds to the Company and/or any JPM
Trust will be set forth in the applicable Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF OFFERED SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
This Prospectus and the related Prospectus Supplement may be used by direct or
indirect wholly-owned subsidiaries of the Company in connection with offers and
sales related to secondary market transactions in the Offered Securities. Such
subsidiaries may act as principal or agent in such transactions. Such sales will
be made at prices related to prevailing market prices at the time of sale.
November 26, 1996.
<PAGE> 47
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus and the Prospectus Supplement in connection with the offering made
hereby, and if given or made such information or representation must not be
relied upon as having been authorized by J.P. Morgan or by another person.
AVAILABLE INFORMATION
J.P. Morgan is subject to the information requirements of the Securities
Exchange Act of 1934 (the "1934 Act") and in accordance therewith files reports
and other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549; Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven World Trade
Center, 13th floor, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Such material may also
be accessed electronically by means of the Commission's home page on the
Internet at http://www.sec.gov. Such reports, proxy statements and other
information concerning J.P. Morgan may also be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. This
Prospectus does not contain all information set forth in the Registration
Statement and exhibits thereto which J.P. Morgan has filed with the Commission
under the Securities Act of 1933 and to which reference is hereby made.
No separate financial statements of any of the JPM Trusts have been
included or incorporated by reference herein. The Company and the JPM Trusts do
not consider that such financial statements would be material to holders of the
Preferred Securities because (i) all the voting securities of each JPM Trust
will be owned, directly or indirectly, by the Company, a reporting company under
the 1934 Act, (ii) each JPM Trust is a newly formed special purpose entity, has
no operating history, has no independent operations and is not engaged in, and
does not propose to engage in, any activity other than issuing Trust Securities
(as defined herein) representing undivided beneficial interests in the assets of
such JPM Trust and investing the proceeds thereof in Junior Subordinated Debt
Securities issued by the Company and (iii) the obligations of each JPM Trust
under the Preferred Securities of such JPM Trust will be fully and
unconditionally guaranteed by the Company as described herein. See "The JPM
Trusts", "Description of the Preferred Securities", "Description of the
Preferred Securities Guarantees" and "Description of the Junior Subordinated
Debt Securities". The JPM Trusts are business trusts formed under the laws of
the State of Delaware. The Company, as of the date of this Prospectus,
beneficially owns all the beneficial interests in each JPM Trust.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
J.P. Morgan hereby incorporates by reference in this Prospectus J.P.
Morgan's Annual Report on Form 10-K for the year ended December 31, 1995
(included in its Annual Report to Stockholders), J.P. Morgan's Quarterly Reports
on Form 10-Q for the quarters ended March 31, 1996, June 30, 1996 and September
30, 1996 and J.P. Morgan's Reports on Form 8-K dated January 11, 1996, February
6, 1996, February 20, 1996, February 23, 1996, April 11, 1996, May 13, 1996,
July 11, 1996, August 13, 1996 and October 10, 1996 heretofore filed pursuant to
Section 13 of the 1934 Act.
In addition, all reports and definitive proxy or information statements
filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent
to the date of this Prospectus and prior to the termination of the offering of
the Securities shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein or in the accompanying Prospectus Supplement
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
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J.P. Morgan will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the foregoing documents
incorporated herein by reference (other than exhibits to such documents).
Written requests should be directed to the Office of the Secretary, J.P. Morgan
& Co. Incorporated, 60 Wall Street, New York, New York 10260-0060. Telephone
requests may be directed to (212) 648-3380.
J.P. MORGAN & CO. INCORPORATED
J.P. Morgan, whose origins date to a merchant banking firm founded in
London in 1838, is the holding company for subsidiaries engaged globally in
providing a wide range of financial services to corporations, governments,
financial institutions, institutional investors, professional firms, privately
held companies, nonprofit organizations, and financially sophisticated
individuals. J.P. Morgan's activities are summarized as follows:
FINANCE AND ADVISORY
Finance and Advisory encompasses the sophisticated advisory, capital
raising, and financing work that J.P. Morgan does for its broad base of clients
around the world. These clients include corporations, governments,
municipalities, and financial institutions, and the expertise J.P. Morgan offers
them is based on in-depth knowledge of their needs and the industries and
financial markets in which they operate. Linking clients to the full range of
J.P. Morgan's financial capabilities is a global network of senior client
managers.
In partnership with clients, J.P. Morgan's advisory professionals explore
the risks and rewards of such strategic alternatives as mergers and
acquisitions, divestitures, privatizations, and recapitalizations. J.P. Morgan
also advises clients on their capital structures, looking for ways to unlock
value and seize opportunities.
J.P. Morgan's debt underwriting, equities, and credit businesses provide
the capabilities to raise the necessary capital and execute the appropriate
strategies.
In J.P. Morgan's equities business, underwriting is complemented by its
ability to provide clients with liquidity in the secondary markets through its
global sales and trading network. J.P. Morgan also applies its expertise in the
equities markets to structuring equity derivatives as a means of helping clients
manage market volatility. High-quality equity research is integral to all
aspects of its business.
J.P. Morgan's credit capabilities include meeting clients' financing needs
by issuing and syndicating loans and other credit facilities.
SALES AND TRADING
Sales and Trading provides clients with around-the-clock access to global
markets. J.P. Morgan makes markets in fixed income, foreign exchange, and
commodity instruments; it serves as a counterparty to help clients manage risks;
and it provides financial and economic research to help clients assess
opportunities and track performance. To function effectively in its role as a
market-maker, it also takes positions. J.P. Morgan's clients include
corporations, central banks, governments and their agencies, financial
institutions, pension funds, mutual funds, and leveraged funds.
J.P. Morgan's fixed income activities encompass acting as a primary dealer
in U.S. and foreign government securities; making markets in options, money
market instruments, U.S. government agency securities, and corporate debt
securities; and helping clients manage their exposure to fluctuating interest
and foreign exchange rates by structuring, executing, and making markets in
riskmanagement instruments.
J.P. Morgan's foreign exchange capabilities include executing spot
transactions and structuring transactions to help clients manage their foreign
currency exposures. In commodities, J.P. Morgan makes markets in precious
metals, base metals, and energy products and develops hedging and financial
strategies for clients.
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<PAGE> 49
J.P. Morgan's emerging markets activities, while principally related to
fixed income activities, cross all markets, and J.P. Morgan's worldwide network
enables it to fulfill its role as a market-maker and provide clients with a
steady flow of market information.
In addition to J.P. Morgan's client-focused businesses, it has a separate
proprietary unit that engages in transactions for its own account across all
markets.
ASSET MANAGEMENT AND SERVICING
Asset Management and Servicing activities encompass designing and executing
investment strategies and providing administrative and brokerage services. J.P.
Morgan's clients include corporations, financial and governmental institutions,
and high net worth individuals.
J.P. Morgan tailors its asset management capabilities for both
institutional and private clients. For institutional clients, it offers such
services as the management of employee-benefit-plan assets, executing investment
strategies across the spectrum of asset classes in all major markets.
J.P. Morgan's private banking group helps high net worth individuals plan
and execute their investment strategies with a broad range of capabilities,
which include managed investment and trust portfolios, Morgan-advised mutual
funds, and a full-service brokerage unit. Credit, deposit, trust, and estate
services are also provided to private clients.
J.P. Morgan's exchange traded products professionals provide institutional
clients with worldwide access to major exchanges by acting as futures and
options brokers in executing and clearing contracts.
J.P. Morgan provides such operational services as the administration of
depositary receipt programs and global trust and agency services. It operates
the Euroclear System, the world's largest clearance and settlement system for
internationally traded securities, and offers credit and deposit services to
Euroclear participants.
EQUITY INVESTMENTS
J.P. Morgan invests its capital in the private equity of rapidly growing
companies, management buyouts, privatizations, and recapitalizations. These
investments are made and managed with the objective of maximizing total
return -- both long-term appreciation and net realized gains. While each
opportunity for investment is evaluated to achieve the firm's desired balance
between risk and return, many of these opportunities arise from its client
relationships.
J.P. Morgan's equity investment portfolio consists of approximately 95
investments diversified by industry, geography, and year of investment. J.P.
Morgan's goal is to maintain a diversified portfolio capable of generating
significant returns over time. This is a high-risk, high-reward business, and
the firm operates under a variety of legal and regulatory restrictions in
managing the portfolio.
Investments are generally held for three to seven years, depending on J.P.
Morgan's view of when a sale will produce optimal returns. Typically,
investments are harvested through a public offering of securities or the sale of
the investment. While realization of gains in the portfolio accelerates during
periods of strong equity and merger markets, the process of assessing and
managing the risks and rewards of new opportunities and existing investments
continues throughout market cycles.
ASSET AND LIABILITY MANAGEMENT
Asset and Liability Management activities include managing the firm's
interest rate risk as it relates to nontrading-related assets, liabilities, and
off-balance-sheet activities and managing the firm's overall liquidity risk.
J.P. Morgan's objective when it comes to interest rate risk management is
to create longer-term value, which is realized over time primarily as net
interest revenue and net investment securities gains. J.P. Morgan's primary
focus is on achieving a desired overall interest rate profile, which may change
over time, based on
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<PAGE> 50
management's longer-term view of global interest rate trends and economic
conditions. A variety of instruments -- in numerous currencies both on- and
off-balance-sheet -- are used in an integrated manner to achieve this objective.
J.P. Morgan manages the maturity and repricing imbalances between its
assets and liabilities through the use of investments in the more liquid fixed
income markets worldwide and derivatives. Asset and liability management swaps
are used to hedge exposures; to modify the interest rate characteristics of
specified assets or liabilities; and, in the case of risk-adjusting swaps, to
adjust Morgan's overall interest rate risk profile.
The firm's liquidity risk profile is managed to ensure that even under
adverse conditions, it has the ability to access funds at a reasonable cost. A
strong capital position is therefore an integral part of our liquidity
management because it enables us to raise funds as inexpensively as possible in
a variety of international markets.
REGULATION
J.P. Morgan is subject to regulation under the Bank Holding Company Act of
1956 (the "Act"). Under the Act, J.P. Morgan is required to file certain reports
with the Board of Governors of the Federal Reserve System (the "Board") and is
subject to examination by the Board. The Act generally precludes J.P. Morgan and
its subsidiaries from engaging in nonbanking activities, or from acquiring more
than 5% of any class of voting securities of any company engaging in such
activities, unless the Board has determined, by order or regulation, that such
proposed activities are closely related to banking. Federal law and Board
interpretations limit the extent to which J.P. Morgan and its subsidiaries can
engage in certain aspects of the securities business. Under Board policy, J.P.
Morgan is expected to act as a source of financial strength to each subsidiary
bank and to commit resources to support such subsidiary bank, even in
circumstances where J.P. Morgan might not be in a financial position to do so.
The Glass-Steagall Act prohibits affiliates of banks that are members of
the Federal Reserve System, including J.P. Morgan Securities Inc. ("JPMSI"),
from being "engaged principally" in bank-ineligible underwriting and dealing
activities (mainly corporate debt and equity securities). As interpreted by the
Board, this prohibition currently restricts JPMSI's gross revenues from such
activities to a maximum of 10% of its total gross revenues. The Board has
proposed a modification to its interpretation which would increase such limit to
25% of total gross revenues, but there can be no assurance that such
modification will be adopted. J.P. Morgan will continue to seek ways to expand
the limits on such activities and to achieve the reform of the Glass-Steagall
Act necessary to achieve its long-term objectives.
Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), J.P.
Morgan's largest subsidiary, is a member of the Federal Reserve System and a
member of the Federal Deposit Insurance Corporation ("FDIC"). Its business is
subject to both U.S. federal and state law and to examination and regulation by
U.S. federal and state banking authorities. J.P. Morgan and its nonbank
subsidiaries are affiliates of Morgan Guaranty within the meaning of the
applicable federal statutes. Morgan Guaranty is subject to restrictions on loans
and extensions of credit to J.P. Morgan and certain other affiliates and on
certain other types of transactions with them or involving their securities.
Among other wholly owned subsidiaries:
JPMSI is a broker-dealer registered with the Securities and Exchange
Commission and is a member of the National Association of Securities
Dealers, the New York Stock Exchange, and other exchanges.
J.P. Morgan Futures Inc. is subject to regulation by the Commodity Futures
Trading Commission, the National Futures Association, and the commodity
exchanges and clearinghouses of which it is a member.
J.P. Morgan Investment Management Inc. is registered with the Securities
and Exchange Commission as an investment adviser under the Investment
Advisers Act of 1940, as amended.
J.P. Morgan subsidiaries conducting business in other countries are also
subject to regulations and restrictions imposed by those jurisdictions,
including capital requirements.
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The principal executive office of J.P. Morgan is located at 60 Wall Street,
New York, New York 10260-0060, and its telephone number of (212) 483-2323.
J.P. MORGAN CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ---------------------------------------------------
1996 1995 1994 1993 1992 1991
------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Excluding Interest on Deposits.............. 1.36 1.35 1.40 1.70(a) 1.53(b) 1.42(c)
Including Interest on Deposits.............. 1.26 1.24 1.28 1.46(a) 1.31(b) 1.23(c)
</TABLE>
---------------
(a) For the year ended December 31, 1993, the ratio of earnings to fixed
charges, including the cumulative effect of a change in the method of
accounting for postretirement benefits other than pensions, was 1.64
excluding interest on deposits and 1.43 including interest on deposits.
(b) For the year ended December 31, 1992, the ratio of earnings to fixed
charges, including the cumulative effect of a change in the method of
accounting for income taxes, was 1.67 excluding interest on deposits and
1.39 including interest on deposits.
(c) For the year ended December 31, 1991, the ratio of earnings to fixed
charges, including the extraordinary gain on early retirement of debt, was
1.43 excluding interest on deposits and 1.24 including interest on deposits.
J.P. MORGAN CONSOLIDATED RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ---------------------------------------------------
1996 1995 1994 1993 1992 1991
------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Excluding Interest on Deposits.............. 1.35 1.34 1.39 1.69(a) 1.52(b) 1.40(c)
Including Interest on Deposits.............. 1.25 1.23 1.27 1.46(a) 1.31(b) 1.22(c)
</TABLE>
---------------
(a) For the year ended December 31, 1993, the ratio of earnings to combined
fixed charges and preferred stock dividends, including the cumulative effect
of a change in the method of accounting for postretirement benefits other
than pensions, was 1.63 excluding interest on deposits and 1.42 including
interest on deposits.
(b) For the year ended December 31, 1992, the ratio of earnings to combined
fixed charges and preferred stock dividends, including the cumulative effect
of a change in the method of accounting for income taxes, was 1.65 excluding
interest on deposits and 1.39 including interest on deposits.
(c) For the year ended December 31, 1991, the ratio of earnings to combined
fixed charges and preferred stock dividends, including the extraordinary
gain on early retirement of debt, was 1.41 excluding interest on deposits
and 1.23 including interest on deposits.
USE OF PROCEEDS
Each JPM Trust will use the proceeds from the sale of the Preferred
Securities to purchase Junior Subordinated Debt Securities from J.P. Morgan.
Unless otherwise indicated in the applicable Prospectus Supplement, the net
proceeds from the sale of the Junior Subordinated Debt Securities will be used
by J.P. Morgan for general corporate purposes, including investment in equity
and debt securities and interest-bearing deposits of subsidiaries, the
repurchase of issued and outstanding preferred and/or common shares of J.P.
Morgan and other general corporate purposes as may be determined by management.
Pending such use, J.P. Morgan may temporarily invest the net proceeds or may use
them to reduce short-term indebtedness.
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<PAGE> 52
THE JPM TRUSTS
Each of JPM Capital Trust I, JPM Capital Trust II, JPM Capital Trust III
and JPM Capital Trust IV is a business trust formed on October 29, 1996 under
the Delaware Business Trust Act (the "Business Trust Act") pursuant to a
separate declaration of trust among the Trustees (as defined herein) of such JPM
Trust and the Company and the filing of a certificate of trust with the
Secretary of State of the State of Delaware. Such declaration will be amended
and restated in its entirety (as so amended and restated, the "Declaration")
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus forms a part, as of the date the Preferred Securities of
such JPM Trust are initially issued. Each Declaration will be qualified under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
This description summarizes the material terms of the Declarations and is
qualified in its entirety by reference to the form of Declaration, which has
been filed as an exhibit to the Registration Statement of which this Prospectus
is a part, and the Trust Indenture Act.
TRUST SECURITIES
Upon issuance of any Preferred Securities by a JPM Trust, the holders
thereof will own all the issued and outstanding Preferred Securities of such JPM
Trust. The Company will acquire securities representing common undivided
beneficial interests in the assets of each JPM Trust (the "Common Securities"
and, together with the Preferred Securities, the "Trust Securities") in an
amount equal to at least 3% of the total capital of such JPM Trust and will own,
directly or indirectly, all the issued and outstanding Common Securities of each
JPM Trust. The Preferred Securities and the Common Securities will rank pari
passu with each other and will have equivalent terms; provided that (i) if a
Declaration Event of Default (as defined herein) under the Declaration of a JPM
Trust occurs and is continuing, the holders of Preferred Securities of such JPM
Trust will have a priority over holders of the Common Securities of such JPM
Trust with respect to payments in respect of distributions and payments upon
liquidation, redemption and maturity and (ii) holders of Common Securities have
the exclusive right (subject to the terms of the Declaration) to appoint, remove
or replace the Trustees and to increase or decrease the number of Trustees. Each
JPM Trust exists for the purpose of (a) issuing its Preferred Securities, (b)
issuing its Common Securities to the Company, (c) investing the gross proceeds
from the sale of the Trust Securities in Junior Subordinated Debt Securities of
the Company and (d) engaging in only such other activities as are necessary,
convenient or incidental thereto. The rights of the holders of the Preferred
Securities, including economic rights, rights to information and voting rights,
are set forth in the applicable Declaration, the Business Trust Act and the
Trust Indenture Act.
POWERS AND DUTIES OF TRUSTEES
The number of trustees (the "Trustees") of each JPM Trust shall initially
be five. Three of such Trustees (the "Regular Trustees") are individuals who are
employees or officers of the Company. The fourth such trustee will be First
Trust of New York, National Association, which is unaffiliated with the Company
and which will serve as the property trustee (the "Property Trustee") and act as
the indenture trustee for purposes of the Trust Indenture Act. The fifth such
trustee is Wilmington Trust Company, which has its principal place of business
in the State of Delaware (the "Delaware Trustee"). Pursuant to each Declaration,
legal title to the Junior Subordinated Debt Securities purchased by a JPM Trust
will be held by the Property Trustee for the benefit of the holders of the Trust
Securities of such JPM Trust, and the Property Trustee will have the power to
exercise all rights, powers and privileges under the Indenture (as defined under
"Description of the Junior Subordinated Debt Securities") with respect to such
Junior Subordinated Debt Securities. In addition, the Property Trustee will
maintain exclusive control of a segregated non-interest-bearing bank account
(the "Property Account") to hold all payments in respect of the Junior
Subordinated Debt Securities purchased by a JPM Trust for the benefit of the
holders of Trust Securities. The Property Trustee will promptly make
distributions to the holders of the Trust Securities of a JPM Trust out of funds
from the Property Account of such JPM Trust. The Preferred Securities Guarantees
are separately qualified under the Trust Indenture Act and will be held by First
Trust of New York, National Association, acting in its capacity as indenture
trustee with respect thereto, for the benefit of the holders of the applicable
Preferred Securities. As used in this
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<PAGE> 53
Prospectus and any accompanying Prospectus Supplement, the term "Property
Trustee" with respect to a JPM Trust refers to First Trust of New York, National
Association acting either in its capacity as a Trustee under the relevant
Declaration and the holder of legal title to the Junior Subordinated Debt
Securities purchased by such Trust or in its capacity as indenture trustee
under, and the holder of, the applicable Preferred Securities Guarantee, as the
context may require. The Company, as the direct or indirect owner of all the
Common Securities of each JPM Trust, will have the exclusive right (subject to
the terms of the related Declaration) to appoint, remove or replace Trustees and
to increase or decrease the number of Trustees, provided that the number of
Trustees shall be at least five and the majority of Trustees shall be Regular
Trustees. The term of a JPM Trust will be set forth in the applicable Prospectus
Supplement, but may terminate earlier as provided in the Declaration of such JPM
Trust.
The duties and obligations of the Trustees of a JPM Trust shall be governed
by the Declaration of such JPM Trust. Under its Declaration, each JPM Trust
shall not, and the Trustees of such JPM Trust shall cause such JPM Trust not to,
engage in any activity other than in connection with the purposes of such JPM
Trust or other than as required or authorized by such Declaration. In
particular, each JPM Trust shall not, and the Trustees of such JPM Trust shall
cause such JPM Trust not to, (a) invest any proceeds received by such JPM Trust
from holding the Junior Subordinated Debt Securities purchased by such JPM
Trust, but shall promptly distribute from the Property Account of such JPM Trust
all such proceeds to holders of its Trust Securities pursuant to the terms of
the Declaration of such JPM Trust and of such Trust Securities; (b) acquire any
assets other than as expressly provided in such Declaration; (c) possess Trust
property for other than a Trust purpose; (d) make any loans, other than loans
represented by such Junior Subordinated Debt Securities; (e) possess any power
or otherwise act in such a way as to vary the assets of such JPM Trust or the
terms of its Trust Securities in any way whatsoever; (f) issue any securities or
other evidences of beneficial ownership of, or beneficial interests in, such JPM
Trust other than its Trust Securities; (g) incur any indebtedness for borrowed
money or (h)(i) direct the time, method and place of exercising any trust or
power conferred upon the Indenture Trustee (as defined under "Description of the
Junior Subordinated Debt Securities") with respect to the Junior Subordinated
Debt Securities deposited in such JPM Trust as trust assets or upon the Property
Trustee of such JPM Trust with respect to its Preferred Securities, (ii) waive
any past default that is waivable under the applicable Indenture or such
Declaration, (iii) exercise any right to rescind or annul any declaration that
the principal of all of the Junior Subordinated Debt Securities deposited in
such JPM Trust as trust assets shall be due and payable or (iv) consent to any
amendment, modification or termination of such Indenture or such Junior
Subordinated Debt Securities or such Declaration, in each case where such
consent shall be required, unless in the case of this clause (h) the Property
Trustee shall have received an unqualified opinion of nationally recognized
independent tax counsel recognized as expert in such matters to the effect that
such action will not cause such JPM Trust to be classified for United States
Federal income tax purposes as an association taxable as a corporation or a
partnership and that such JPM Trust will continue to be classified as a grantor
trust for United States Federal income tax purposes.
BOOKS AND RECORDS
The books and records of each JPM Trust will be maintained at the principal
office of such JPM Trust and will be open for inspection by a holder of
Preferred Securities of such JPM Trust or such holder's representative for any
purpose reasonably related to such holder's interest in such JPM Trust during
normal business hours. Each holder of Preferred Securities will be furnished
annually with unaudited financial statements of the applicable JPM Trust as soon
as available after the end of such JPM Trust's fiscal year.
VOTING
Except as set forth below or as provided under the Business Trust Act, the
applicable Declaration and the Trust Indenture Act, holders of Preferred
Securities will have no voting rights.
If any proposed amendment to the Declaration of a JPM Trust provides for,
or the Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to such Declaration or otherwise, or
(ii) the dissolution, winding-up or termination of the Trust, other than in
connection with the distribution of Junior
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<PAGE> 54
Subordinated Debentures held by the Property Trustee, upon the occurrence of a
Special Event or in connection with the redemption of Preferred Securities as a
consequence of a redemption of such Junior Subordinated Debentures, then the
holders of outstanding Trust Securities will be entitled to vote on such
amendment or proposal as a class and such amendment or proposal shall not be
effective except with the approval of the holders of Trust Securities
representing 66- 2/3% in liquidation amount of such Trust Securities; provided,
however, that if any amendment or proposal referred to in clause (i) above would
adversely affect only the Preferred Trust Securities or the Common Securities,
then only the affected class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of 66- 2/3% in liquidation amount of such class of Trust Securities.
THE PROPERTY TRUSTEE
The Property Trustee, for the benefit of the holders of the Trust
Securities of a JPM Trust, is authorized under each Declaration to exercise all
rights under the Indenture with respect to the Junior Subordinated Debt
Securities deposited in such JPM Trust as trust assets, including its rights as
the holder of such Junior Subordinated Debt Securities to enforce the Company's
obligations under such Junior Subordinated Debt Securities upon the occurrence
of an Indenture Event of Default. The Property Trustee is also authorized to
enforce the rights of holders of Preferred Securities of a JPM Trust under the
related Preferred Securities Guarantee. If any JPM Trust's failure to make
distributions on the Preferred Securities of such JPM Trust is a consequence of
the Company's exercise of any right under the terms of the Junior Subordinated
Debt Securities deposited in such JPM Trust as trust assets to extend the
interest payment period for such Junior Subordinated Debt Securities, the
Property Trustee will have no right to enforce the payment of distributions on
such Preferred Securities until a Declaration Event of Default shall have
occurred. Holders of at least a majority in liquidation amount of the Preferred
Securities of a JPM Trust will have the right to direct the Property Trustee for
such JPM Trust with respect to certain matters under the Declaration for such
JPM Trust and the related Preferred Securities Guarantee. If the Property
Trustee fails to enforce its rights under the Indenture or fails to enforce the
applicable Preferred Securities Guarantee, to the extent permitted by applicable
law, any holder of Preferred Securities of a JPM Trust may institute a legal
proceeding against the Company to enforce such rights or such Preferred
Securities Guarantee, as the case may be.
DISTRIBUTIONS
Pursuant to each Declaration, distributions on the Preferred Securities of
a JPM Trust must be paid on the dates payable to the extent that the Property
Trustee has cash on hand in the Property Account of such JPM Trust to permit
such payment. The funds available for distribution to the holders of the
Preferred Securities of a JPM Trust will be limited to payments received by the
Property Trustee in respect of the Junior Subordinated Debt Securities that are
deposited in such JPM Trust as trust assets. If the Company does not make
interest payments on the Junior Subordinated Debt Securities deposited in a JPM
Trust as trust assets, the Property Trustee will not make distributions on the
Preferred Securities of such JPM Trust. Under the Declaration, if and to the
extent the Company does make interest payments on the Junior Subordinated Debt
Securities deposited in a JPM Trust as trust assets, the Property Trustee is
obligated to make distributions on the Trust Securities of such JPM Trust on a
Pro Rata Basis (as defined below). The payment of distributions on the Preferred
Securities of a JPM Trust is guaranteed by the Company on a subordinated basis
as and to the extent set forth under "Description of the Preferred Securities
Guarantees." A Preferred Securities Guarantee, when taken together with the
Company's obligations under the Junior Subordinated Debentures and the Indenture
and its obligations under the Declaration, provides a full and unconditional
guarantee from the time of issuance of the Preferred Securities of a JPM Trust
of amounts due on such Preferred Securities. Such Preferred Securities Guarantee
itself, however, covers distributions and other payments on such Preferred
Securities only if and to the extent that the Company has made a payment to the
Property Trustee of interest or principal on the Junior Subordinated Debt
Securities deposited in such JPM Trust as trust assets. As used in this
Prospectus, the term "Pro Rata Basis" shall mean pro rata to each holder of
Trust Securities of a JPM Trust according to the aggregate liquidation amount of
the Trust Securities of such JPM Trust held by the relevant holder in relation
to the aggregate liquidation amount of all Trust Securities of such JPM Trust
outstanding unless, in relation to a payment, a Declaration Event of Default
under the Declaration
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<PAGE> 55
has occurred and is continuing, in which case any funds available to make such
payment shall be paid first to each holder of the Preferred Securities of such
JPM Trust pro rata according to the aggregate liquidation amount of the
Preferred Securities held by the relevant holder in relation to the aggregate
liquidation amount of all the Preferred Securities of such JPM Trust
outstanding, and only after satisfaction of all amounts owed to the holders of
such Preferred Securities, to each holder of Common Securities of such JPM Trust
pro rata according to the aggregate liquidation amount of such Common Securities
held by the relevant holder in relation to the aggregate liquidation amount of
all Common Securities of such JPM Trust outstanding.
EVENTS OF DEFAULT
If an Indenture Event of Default occurs and is continuing with respect to
Junior Subordinated Debt Securities deposited in a JPM Trust as trust assets, an
Event of Default under the Declaration (a "Declaration Event of Default") of
such JPM Trust will occur and be continuing with respect to any outstanding
Trust Securities of such JPM Trust. In such event, each Declaration provides
that the holders of Common Securities of the applicable JPM Trust will be deemed
to have waived any such Declaration Event of Default with respect to such Common
Securities until all Declaration Events of Default with respect to the Preferred
Securities of such JPM Trust have been cured or waived. Until all such
Declaration Events of Default with respect to the Preferred Securities of such
JPM Trust have been so cured or waived, the Property Trustee will be deemed to
be acting solely on behalf of the holders of the Preferred Securities of such
JPM Trust and only the holders of such Preferred Securities will have the right
to direct the Property Trustee with respect to certain matters under such
Declaration and consequently under the Indenture. In the event that any
Declaration Event of Default with respect to the Preferred Securities of a JPM
Trust is waived by the holders of the Preferred Securities of such JPM Trust as
provided in the Declaration of such JPM Trust, the holders of Common Securities
of such JPM Trust pursuant to such Declaration have agreed that such waiver also
constitutes a waiver of such Declaration Event of Default with respect to such
Common Securities for all purposes under such Declaration without any further
act, vote or consent of the holders of such Common Securities.
RECORD HOLDERS
Each Declaration provides that the Trustees of the applicable JPM Trust may
treat the person in whose name a certificate representing Preferred Securities
of such JPM Trust is registered on the books and records of such JPM Trust as
the sole holder thereof and of the Preferred Securities represented thereby for
purposes of receiving distributions and for all other purposes and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such certificate or in the Preferred Securities represented thereby on the part
of any person, whether or not such JPM Trust shall have actual or other notice
thereof. Preferred Securities will be issued in fully registered form. Unless
otherwise specified in a Prospectus Supplement, Preferred Securities will be
represented by a global certificate registered on the books and records of such
JPM Trust in the name of a depositary (the "Depositary") named in an
accompanying Prospectus Supplement or its nominee. Under each Declaration:
(i) the applicable JPM Trust and the Trustees thereof shall be
entitled to deal with the Depositary (or any successor depositary) for all
purposes, including the payment of distributions and receiving approvals,
votes or consents under such Declaration and, except as set forth in such
Declaration with respect to the Property Trustee, shall have no obligation
to persons owning a beneficial interest in Preferred Securities of such JPM
Trust ("Preferred Security Beneficial Owners") registered in the name of
and held by the Depositary or its nominee; and
(ii) the rights of Preferred Security Beneficial Owners shall be
exercised only through the Depositary (or any successor depositary) and
shall be limited to those established by law and agreements between such
Preferred Security Beneficial Owners and the Depositary and/or its
participants. With respect to Preferred Securities registered in the name
of and held by the Depositary or its nominee, all notices and other
communications required under such Declaration shall be given to, and all
distributions on such Preferred Securities shall be given or made to, the
Depositary (or its successor).
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The specific terms of the depositary arrangement with respect to the Preferred
Securities of a JPM Trust will be disclosed in the applicable Prospectus
Supplement.
DEBTS AND OBLIGATIONS
In each Declaration, the Company has agreed to pay for all debts and
obligations (other than with respect to the Trust Securities of the applicable
JPM Trust) and all costs and expenses of such JPM Trust, including the fees and
expenses of its Trustees and any taxes and all costs and expenses with respect
thereto, to which such JPM Trust may become subject, except for United States
withholding taxes. The foregoing obligations of the Company under each
Declaration are for the benefit of, and shall be enforceable by, any person to
whom any such debts, obligations, costs, expenses and taxes are owed (a
"Creditor") whether or not such Creditor has received notice thereof. Any such
Creditor may enforce such obligations of the Company directly against the
Company and the Company has irrevocably waived any right or remedy to require
that any such Creditor take any action against any JPM Trust or any other person
before proceeding against the Company. The Company has agreed in each
Declaration to execute such additional agreements as may be necessary or
desirable in order to give full effect to the foregoing.
The business address of each JPM Trust is c/o J.P. Morgan & Co.
Incorporated, 60 Wall Street, New York, NY 10260-0060, telephone number (212)
483-2323.
DESCRIPTION OF THE PREFERRED SECURITIES
Each JPM Trust may issue, from time to time, only one series of Preferred
Securities having terms described in the Prospectus Supplement relating thereto.
The Declaration of each JPM Trust authorizes the Regular Trustees of such JPM
Trust to issue on behalf of such JPM Trust one series of Preferred Securities.
Each Declaration will be qualified as an indenture under the Trust Indenture
Act. The Preferred Securities will have such terms, including distributions,
redemption, voting, liquidation rights and such other preferred, deferred or
other special rights or such restrictions as shall be set forth in the related
Declaration or made part of such Declaration by the Trust Indenture Act.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a JPM Trust for specific terms, including (i) the specific
designation of such Preferred Securities, (ii) the number of Preferred
Securities issued by such JPM Trust, (iii) the annual distribution rate (or
method of calculation thereof) for Preferred Securities issued by such JPM
Trust, the date or dates upon which such distributions shall be payable and the
record date or dates for the payment of such distributions, (iv) whether
distributions on Preferred Securities issued by such JPM Trust shall be
cumulative, and, in the case of Preferred Securities having such cumulative
distribution rights, the date or dates or method of determining the date or
dates from which distributions on Preferred Securities issued by such JPM Trust
shall be cumulative, (v) the amount or amounts which shall be paid out of the
assets of such JPM Trust to the holders of Preferred Securities of such JPM
Trust upon voluntary or involuntary liquidation, dissolution, winding-up or
termination of such JPM Trust, (vi) the obligation or right, if any, of such JPM
Trust to purchase or redeem Preferred Securities issued by such JPM Trust
(including with the proceeds of any redemption of Subordinated Debt Securities
held by such JPM Trust) and the price or prices at which, the period or periods
within which and the terms and conditions upon which Preferred Securities issued
by such JPM Trust shall or may be purchased or redeemed, in whole or in part,
pursuant to such obligation or right, (vii) the voting rights, if any, of
Preferred Securities issued by such JPM Trust in addition to those required by
law, including the number of votes per Preferred Security and any requirement
for the approval by the holders of Preferred Securities, or of Preferred
Securities issued by one or more JPM Trusts, or of both, as a condition to
specified actions or amendments to the Declaration of such JPM Trust, (viii)
terms for any conversion or exchange into other securities and (ix) any other
relevant rights, preferences, privileges, limitations or restrictions of
Preferred Securities issued by such JPM Trust consistent with the Declaration of
such JPM Trust or with applicable law. All Preferred Securities offered hereby
will be fully and unconditionally guaranteed by the Company as set forth below
under "Description of the Preferred Securities Guarantees." Certain United
States Federal income tax considerations applicable to any offering of Preferred
Securities will be described in the Prospectus Supplement relating thereto.
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In connection with the issuance of Preferred Securities, each JPM Trust
will issue one series of Common Securities. The Declaration of each JPM Trust
authorizes the Regular Trustees of such JPM Trust to issue on behalf of such JPM
Trust one series of Common Securities having such terms including distributions,
redemption, voting, liquidation rights or such restrictions as shall be set
forth therein. The terms of the Common Securities issued by a JPM Trust will be
substantially identical to the terms of the Preferred Securities issued by such
JPM Trust and the Common Securities will rank pari passu and payments will be
made thereon on a Pro Rata Basis with the Preferred Securities except that, if a
Declaration Event of Default occurs and is continuing, the rights of the holders
of such Common Securities to payment in respect of distributions and payments
upon liquidation, redemption and maturity will be subordinated to the rights of
the holders of such Preferred Securities. Except in certain limited
circumstances, the Common Securities issued by a JPM Trust will also carry the
right to vote and to appoint, remove or replace any of the Trustees of such JPM
Trust. All the Common Securities of a JPM Trust will be directly or indirectly
owned by the Company.
If an Event of Default with respect to the Declaration of any JPM Trust
occurs and is continuing, then the holders of Preferred Securities of such JPM
Trust would rely on the enforcement by the Property Trustee of its rights as a
holder of the Junior Subordinated Debt Securities deposited in such JPM Trust
against the Company. In addition, the holders of a majority in liquidation
amount of such Preferred Securities will have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Property Trustee or to direct the exercise of any trust or power conferred upon
the Property Trustee under such Declaration, including the right to direct the
Property Trustee to exercise the remedies available to it as a holder of such
Junior Subordinated Debt Securities. If the Property Trustee fails to enforce
its rights under such Junior Subordinated Debt Securities deposited in such JPM
Trust, any holder of such Preferred Securities may, to the extent permitted by
applicable law, after a period of 30 days has elapsed from such holder's written
request, institute a legal proceeding against the Company to enforce the
Property Trustee's rights under such Junior Subordinated Debt Securities without
first instituting any legal proceeding against the Property Trustee or any other
person or entity. If an Event of Default with respect to the Declaration of any
JPM Trust occurs and is continuing and such event is attributable to the failure
of the Company to pay interest or principal on the Junior Subordinated Debt
Securities on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), then a holder of Preferred
Securities of such JPM Trust may also directly institute a proceeding for
enforcement of payment to such holder of the principal of or interest on such
Junior Subordinated Debt Securities having a principal amount equal to the
aggregate liquidation amount of such Preferred Securities held by such holder (a
"Direct Action") on or after the respective due date specified in such Junior
Subordinated Debt Securities without first (i) directing the Property Trustee to
enforce the terms of such Junior Subordinated Debt Securities or (ii)
instituting a legal proceeding against the Company to enforce the Property
Trustee's rights under such Junior Subordinated Debt Securities. In connection
with such Direct Action, the Company will be subrogated to the rights of such
holder of such Preferred Securities under such Declaration to the extent of any
payment made by the Company to such holder of such Preferred Securities in such
Direct Action. The Holders of Preferred Securities of a JPM Trust will not be
able to exercise directly any other remedy available to the holders of the
Junior Subordinated Debt Securities unless the Property Trustee first fails to
do so.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Preferred
Securities Guarantees that will be executed and delivered by the Company for the
benefit of the holders from time to time of Preferred Securities of a JPM Trust.
Each Preferred Security Guarantee will be separately qualified under the Trust
Indenture Act and will be held by First Trust of New York, National Association,
acting in its capacity as indenture trustee with respect thereto, for the
benefit of holders of the Preferred Securities of the applicable JPM Trust. The
terms of each Preferred Securities Guarantee will be those set forth in such
Preferred Securities Guarantee and those made part of such Preferred Securities
Guarantee by the Trust Indenture Act. This description summarizes the material
terms of the Preferred Securities Guarantees and is qualified in its entirety by
reference to the form of Preferred Securities Guarantee, which is filed as an
exhibit to the Registration
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Statement of which this Prospectus forms a part, and the Trust Indenture Act.
Section references used herein are references to the provisions of the form of
Preferred Securities Guarantee.
GENERAL
Pursuant to each Preferred Securities Guarantee, the Company will
irrevocably and unconditionally agree, to the extent set forth therein, to pay
in full, to the holders of the Preferred Securities issued by the applicable JPM
Trust, the Guarantee Payments (as defined herein), to the extent not paid by
such JPM Trust, regardless of any defense, right of set-off or counterclaim that
such JPM Trust may have or assert. The following payments or distributions with
respect to Preferred Securities issued by a JPM Trust to the extent not paid or
made by such JPM Trust (the "Guarantee Payments"), will be subject to the
Preferred Securities Guarantee (without duplication): (i) any accrued and unpaid
distributions on such Preferred Securities, but only if and to the extent that
in each case the Company has made a payment to the Property Trustee of interest
on the Junior Subordinated Debt Securities, (ii) the redemption price, including
all accrued and unpaid distributions to the date of redemption, with respect to
any Preferred Securities called for redemption by such JPM Trust, but if and
only to the extent that in each case the Company has made a payment to the
Property Trustee of interest or principal on the Junior Subordinated Debt
Securities deposited in such JPM Trust as trust assets, and (iii) upon a
voluntary or involuntary liquidation, dissolution, winding-up or termination of
such JPM Trust (other than in connection with the distribution of such Junior
Subordinated Debt Securities to the holders of such Preferred Securities or the
redemption of all such Preferred Securities upon the maturity or redemption of
such Junior Subordinated Debt Securities) the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid distributions on such Preferred
Securities to the date of payment, to the extent such JPM Trust has funds
available therefor, and (b) the amount of assets of such JPM Trust remaining
available for distribution to holders of such Preferred Securities upon
liquidation of such JPM Trust. The Company's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Company to the holders of the applicable Preferred Securities or by causing the
applicable JPM Trust to pay such amounts to such holders.
The Company's obligations under the Declaration for each JPM Trust, the
Preferred Securities Guarantee issued with respect to Preferred Securities
issued by such JPM Trust, the Junior Subordinated Debt Securities purchased by
such JPM Trust and the Indenture in the aggregate will provide a full and
unconditional guarantee on a subordinated basis by the Company of payments due
on the Preferred Securities issued by such JPM Trust. However, the Preferred
Securities Guarantees cover distributions and other payments on such Preferred
Securities only if and to the extent that the Company has made a payment to the
Property Trustee of interest or principal on the Junior Subordinated Debt
Securities deposited in the applicable JPM Trust as trust assets. If the Company
does not make interest or principal payments on the Junior Subordinated Debt
Securities deposited in the applicable JPM Trust as trust assets, the Property
Trust will not make distributions on the Preferred Securities of such JPM Trust
and the JPM Trust will not have funds available therefor.
CERTAIN COVENANTS OF THE COMPANY
In each Preferred Securities Guarantee, the Company will covenant that, so
long as any Preferred Securities issued by the applicable JPM Trust remain
outstanding, the Company will not declare or pay any dividends on, or redeem,
purchase, acquire or make a distribution or liquidation payment with respect to,
any of its common stock or preferred stock or make any guarantee payment with
respect thereto, if at such time (i) the Company shall be in default with
respect to its Guarantee Payments or other payment obligations under such
Preferred Securities Guarantee, (ii) there shall have occurred any Event of
Default under the related Declaration or (iii) in the event that Junior
Subordinated Debt Securities are issued to the applicable JPM Trust in
connection with the issuance of Trust Securities by such JPM Trust, the Company
shall have given notice of its election to defer payments of interest on such
Junior Subordinated Debt Securities by extending the interest payment period as
provided in the terms of the Junior Subordinated Debt Securities and such
period, or any extension thereof, is continuing; provided, however, that the
foregoing restrictions shall not apply to (i) dividends, redemptions, purchases,
acquisitions, distributions or payments made by the Company
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by way of issuance of shares of its capital stock, (ii) payments of accrued
dividends by the Company upon the redemption, exchange or conversion of any
preferred stock of the Company as may be outstanding from time to time in
accordance with the terms of such preferred stock, (iii) cash payments made by
the Company in lieu of delivering fractional shares upon the redemption,
exchange or conversion of any preferred stock of the Company as may be
outstanding from time to time in accordance with the terms of such preferred
stock, (iv) repurchases, redemptions or other acquisitions of shares of capital
stock of the Company in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of employees, officers,
directors or consultants, or (v) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of such
rights pursuant thereto. In addition, so long as any Preferred Securities of a
JPM Trust remain outstanding, the Company has agreed (i) to remain the sole
direct or indirect owner of all the outstanding Common Securities issued by such
JPM Trust and not to cause or permit such Common Securities to be transferred
except to the extent permitted by the Declaration of such JPM Trust, provided
that any permitted successor of the Company under the Indenture may succeed to
the Company's ownership of such Common Securities, and (ii) to use reasonable
efforts to cause such JPM Trust to continue to be treated as a grantor trust for
United States Federal income tax purposes, except in connection with a
distribution of Junior Subordinated Debt Securities. (Section 6.01)
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of the applicable Preferred Securities (in which case no consent will
be required), each Preferred Securities Guarantee may be amended only with the
prior approval of the holders of not less than 66- 2/3% in liquidation amount of
the outstanding Preferred Securities issued by the applicable JPM Trust. The
manner of obtaining any such approval of holders of such Preferred Securities
will be set forth in an accompanying Prospectus Supplement. (Section 9.02) All
guarantees and agreements contained in a Preferred Securities Guarantee shall
bind the successors, assignees, receivers, trustees and representatives of the
Company and shall inure to the benefit of the holders of the Preferred
Securities of the applicable JPM Trust then outstanding. Except in connection
with a consolidation, merger or sale involving the Company that is permitted
under the Indenture, the Company may not assign its obligations under any
Preferred Securities Guarantee. (Section 9.01)
TERMINATION OF THE PREFERRED SECURITIES GUARANTEES
Each Preferred Securities Guarantee will terminate and be of no further
force and effect as to the Preferred Securities issued by the applicable JPM
Trust upon full payment of the redemption price of all Preferred Securities of
such JPM Trust, or upon distribution of the Junior Subordinated Debt Securities
to the holders of the Preferred Securities of such JPM Trust in exchange for all
the Preferred Securities issued by such JPM Trust, or upon full payment of the
amounts payable upon liquidation of such JPM Trust. Notwithstanding the
foregoing, each Preferred Securities Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of Preferred
Securities issued by the applicable JPM Trust must restore payment of any sums
paid under such Preferred Securities or such Preferred Securities Guarantee.
(Section 7.01)
STATUS OF THE PREFERRED SECURITIES GUARANTEES
The Company's obligations under each Preferred Securities Guarantee to make
the Guarantee Payments will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
indebtedness, liabilities and obligations of the Company and any guarantees,
endorsements or other contingent obligations of the Company in respect of such
indebtedness, liabilities or obligations, including the Junior Subordinated Debt
Securities, except those made pari passu or subordinate by their terms, and (ii)
senior to all capital stock now or hereafter issued by the Company and to any
guarantee now or hereafter entered into by the Company in respect of any of its
capital stock. The Company's obligations under each Preferred Securities
Guarantee will rank pari passu with each other Preferred Securities Guarantee.
(Section 6.02) Because the Company is a holding company, the Company's
obligations
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under each Preferred Securities Guarantee are also effectively subordinated to
all existing and future liabilities of the Company's subsidiaries, except to the
extent that the Company is a creditor of the subsidiaries recognized as such.
Each Declaration provides that each holder of Preferred Securities issued by the
applicable JPM Trust, by acceptance thereof, agrees to the subordination
provisions and other terms of the related Preferred Securities Guarantee.
Each Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the Company to enforce its rights under such
Preferred Securities Guarantee without first instituting a legal proceeding
against any other person or entity). Each Preferred Securities Guarantee will be
deposited with First Trust of New York, National Association, as indenture
trustee, to be held for the benefit of the holders of the Preferred Securities
issued by the applicable JPM Trust. First Trust of New York, National
Association shall enforce such Preferred Securities Guarantee on behalf of the
holders of such Preferred Securities. The holders of not less than a majority in
aggregate liquidation amount of the Preferred Securities issued by the
applicable JPM Trust have the right to direct the time, method and place of
conducting any proceeding for any remedy available in respect of the related
Preferred Securities Guarantee, including the giving of directions to First
Trust of New York, National Association. If First Trust of New York, National
Association fails to enforce a Preferred Securities Guarantee as above provided,
any holder of Preferred Securities issued by the applicable JPM Trust may
institute a legal proceeding directly against the Company to enforce its rights
under such Preferred Securities Guarantee, without first instituting a legal
proceeding against the applicable JPM Trust or any other person or entity.
Notwithstanding the foregoing, if the Company has failed to make a Guarantee
Payment, a holder of Preferred Securities may directly institute a proceeding
against the Company for enforcement of such holder's right to receive payment
under the Preferred Securities Guarantee. The Company waives any right or remedy
to require that any action be brought first against a JPM Trust or any other
person or entity before proceeding directly against the Company.
MISCELLANEOUS
The Company will be required to provide annually to First Trust of New
York, National Association a statement as to the performance by the Company of
certain of its obligations under each Preferred Securities Guarantee and as to
any default in such performance. The Company is required to file annually with
First Trust of New York, National Association an officer's certificate as to the
Company's compliance with all conditions to be complied with by it under each
Preferred Securities Guarantee. (Section 2.04)
First Trust of New York, National Association, prior to the occurrence of a
default, undertakes to perform only such duties as are specifically set forth in
the applicable Preferred Securities Guarantee and, after default with respect to
a Preferred Securities Guarantee, shall exercise the same degree of care as a
prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provision, First Trust of New York, National Association is
under no obligation to exercise any of the powers vested in it by a Preferred
Securities Guarantee at the request of any holder of Preferred Securities unless
it is offered reasonable indemnity against the costs, expenses and liabilities
that might be incurred thereby. (Section 3.02)
GOVERNING LAW
The Preferred Securities Guarantees will be governed by, and construed in
accordance with, the laws of the State of New York.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
Junior Subordinated Debt Securities may be issued from time to time in one
or more series under an Indenture, which term includes all supplements thereto,
(the "Indenture") between the Company and First Trust of New York, National
Association, as trustee (the "Indenture Trustee"). The Indenture has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part. The following description summarizes the material terms of the Indenture,
and is qualified in its entirety by reference to the Indenture and the Trust
Indenture Act. Whenever particular provisions or defined terms in the Indenture
are referred to
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herein, such provisions or defined terms are incorporated by reference herein.
Section references used herein are references to provisions of the Indenture.
GENERAL
The Junior Subordinated Debt Securities will be unsecured, junior
subordinated obligations of the Company. The Indenture does not limit the amount
of additional indebtedness the Company or any of its subsidiaries may incur.
Since the Company is a holding company, the Company's rights and the rights of
its creditors, including the holders of Junior Subordinated Debt Securities, to
participate in the assets of any subsidiary upon the latter's liquidation or
recapitalization will be subject to the prior claims of the subsidiary's
creditors, except to the extent that the Company may itself be a creditor with
recognized claims against the subsidiary.
The Indenture does not limit the aggregate principal amount of indebtedness
which may be issued thereunder and provides that Junior Subordinated Debt
Securities may be issued thereunder from time to time in one or more series. The
Junior Subordinated Debt Securities are issuable in one or more series pursuant
to an indenture supplemental to the Indenture.
In the event Junior Subordinated Debt Securities are issued to a JPM Trust
or a Trustee of such JPM Trust in connection with the issuance of Trust
Securities by such JPM Trust, such Junior Subordinated Debt Securities
subsequently may be distributed pro rata to the holders of such Trust Securities
in connection with the dissolution of such JPM Trust upon the occurrence of
certain events described in the applicable Prospectus Supplement. Only one
series of Junior Subordinated Debt Securities will be issued to a JPM Trust or a
Trustee of such JPM Trust in connection with the issuance of Trust Securities by
such JPM Trust.
Reference is made to the Prospectus Supplement which will accompany this
Prospectus for the following terms of the series of Junior Subordinated Debt
Securities being offered thereby (to the extent such terms are applicable to the
Junior Subordinated Debt Securities): (i) the specific designation of such
Junior Subordinated Debt Securities, aggregate principal amount and purchase
price; (ii) any limit on the aggregate principal amount of such Junior
Subordinated Debt Securities; (iii) the date or dates on which the principal of
such Junior Subordinated Debt Securities is payable and the right, if any, to
extend such date or dates; (iv) the rate or rates at which such Junior
Subordinated Debt Securities will bear interest or the method of calculating
such rate or rates, if any; (v) the date or dates from which such interest shall
accrue, the interest payment dates on which such interest will be payable or the
manner of determination of such interest payment dates and the record dates for
the determination of holders to whom interest is payable on any such interest
payment dates; (vi) the right, if any, to extend the interest payment periods
and the duration of such extension; (vii) the period or periods within which,
the price or prices at which, and the terms and conditions upon which, such
Junior Subordinated Debt Securities may be redeemed, in whole or in part, at the
option of the Company; (viii) the obligation, if any, of the Company to redeem
or purchase such Junior Subordinated Debt Securities pursuant to any sinking
fund or analogous provisions or at the option of the holder thereof and the
period or periods for which, the price or prices at which, and the terms and
conditions upon which, such Junior Subordinated Debt Securities shall be
redeemed or purchased, in whole or part, pursuant to such obligation; (ix) any
applicable United States Federal income tax consequences, including whether and
under what circumstances the Company will pay additional amounts on the Junior
Subordinated Debt Securities held by a person who is not a U.S. person in
respect of any tax, assessment or governmental charge withheld or deducted and,
if so, whether the Company will have the option to redeem such Junior
Subordinated Debt Securities rather than pay such additional amounts; (x) the
form of such Junior Subordinated Debt Securities; (xi) if other than
denominations of $25 or any integral multiple thereof, the denominations in
which such Junior Subordinated Debt Securities shall be issuable; (xii) any and
all other terms with respect to such series, including any modification of or
additions to the events of default or covenants provided for with respect to the
Junior Subordinated Debt Securities, and any terms which may be required by or
advisable under applicable laws or regulations not inconsistent with the
Indenture; and (xiii) whether such Junior Subordinated Debt Securities are
issuable as a global security, and in such case, the identity of the depositary.
(Section 2.3)
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Unless otherwise indicated in the applicable Prospectus Supplement, the
Junior Subordinated Debentures will be issued in United States dollars in fully
registered form without coupons in denominations of $25 or integral multiples
thereof. Junior Subordinated Debt Securities may be presented for exchange and
transfer in the manner, at the places and subject to the restrictions set forth
in the Indenture. Such services will be provided without charge, other than any
tax or other governmental charge payable in connection therewith, but subject to
the limitations provided in the Indenture. (Section 2.8)
Junior Subordinated Debt Securities may bear interest at a fixed rate or a
floating rate. Junior Subordinated Debt Securities bearing no interest or
interest at a rate that at the time of issuance is below the prevailing market
rate will be sold at a discount below their stated principal amount. Special
United States Federal income tax considerations applicable to any such
discounted Junior Subordinated Debt Securities or to certain Junior Subordinated
Debt Securities issued at par which are treated as having been issued at a
discount for United States Federal income tax purposes will be described in the
applicable Prospectus Supplement.
CERTAIN COVENANTS OF THE COMPANY APPLICABLE TO THE JUNIOR SUBORDINATED DEBT
SECURITIES
If Junior Subordinated Debt Securities are issued to a JPM Trust in
connection with the issuance of Trust Securities by such JPM Trust, the Company
will covenant in the Indenture that, so long as the Preferred Securities of such
JPM Trust remain outstanding, the Company will not declare or pay any dividends
on, or redeem, purchase, acquire or make a distribution or liquidation payment
with respect to, any of its common stock or preferred stock or make any
guarantee payments with respect thereto if at such time (i) the Company shall be
in default with respect to its Guarantee Payments or other payment obligations
under the related Preferred Securities Guarantee, (ii) there shall have occurred
any Indenture Event of Default with respect to such Junior Subordinated Debt
Securities or (iii) in the event that Junior Subordinated Debt Securities are
issued to a JPM Trust in connection with the issuance of Trust Securities by
such JPM Trust, the Company shall have given notice of its election to defer
payments of interest on such Junior Subordinated Debt Securities by extending
the interest payment period as provided in the terms of such Junior Subordinated
Debt Securities and such period, or any extension thereof, is continuing;
provided, however, that the foregoing restrictions shall not apply to (i)
dividends, redemptions, purchases, acquisitions, distributions or payments made
by the Company by way of issuance of shares of its capital stock, (ii) payments
of accrued dividends by the Company upon the redemption, exchange or conversion
of any preferred stock of the Company as may be outstanding from time to time in
accordance with the terms of such preferred stock or (iii) cash payments made by
the Company in lieu of delivering fractional shares upon the redemption,
exchange or conversion of any preferred stock of the Company as may be
outstanding from time to time in accordance with the terms of such preferred
stock. In addition, if Junior Subordinated Debt Securities are issued to a JPM
Trust in connection with the issuance of Trust Securities by such JPM Trust, for
so long as the Preferred Securities of such JPM Trust remain outstanding, the
Company has agreed (i) to remain the sole direct or indirect owner of all the
outstanding Common Securities issued by such JPM Trust and not to cause or
permit such Common Securities to be transferred except to the extent permitted
by the Declaration of such JPM Trust; provided that any permitted successor of
the Company under the Indenture may succeed to the Company's ownership of such
Common Securities, (ii) to comply fully with all its obligations and agreements
contained in such Declaration and (iii) not to take any action which would cause
such JPM Trust to cease to be treated as a grantor trust for United States
Federal income tax purposes, except in connection with a distribution of Junior
Subordinated Debt Securities.
SUBORDINATION
The Junior Subordinated Debt Securities will be unsecured and will be
subordinate in right of payment to all Senior Indebtedness, Subordinated
Indebtedness and to Derivative Obligations (as such terms are defined below) of
J.P. Morgan, whether outstanding as of this date or hereafter incurred. In
addition, since J.P. Morgan is a holding company, the right of J.P. Morgan to
participate as a shareholder in any distribution of assets of any subsidiary
upon its liquidation or reorganization or otherwise (and thus the ability of
holders of the Junior Subordinated Debt Securities to benefit as creditors of
J.P. Morgan from such distribution) is
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subject to the prior claims of creditors of any such subsidiary. J.P. Morgan and
its subsidiaries are subject to claims by creditors for long-term and short-term
debt obligations, including substantial obligations for federal funds purchased
and securities sold under repurchase agreement, as well as deposit liabilities.
There are also various legal limitations on the extent to which subsidiaries of
J.P. Morgan may pay dividends or otherwise supply funds to J.P. Morgan.
The Junior Subordinated Debt Securities will be subordinate in right of
payment as provided in the Indenture to all Senior Indebtedness, Subordinated
Indebtedness and Derivative Obligations of J.P. Morgan. No payment pursuant to
the Junior Subordinated Debt Securities may be made and no holder of the Junior
Subordinated Debt Securities or any coupon appertaining thereto shall be
entitled to demand or receive any such payment (i) unless all amounts of
principal, premium, if any, and interest then due on all Senior Indebtedness,
Subordinated Indebtedness and Derivative Obligations of J.P. Morgan shall have
been paid in full or duly provided for or (ii) if, at the time of such payment
or immediately after giving effect thereto, there shall exist with respect to
any given Senior Indebtedness, Subordinated Indebtedness or Derivative
Obligations of J.P. Morgan any event of default permitting the holders thereof
to accelerate the maturity or payment thereof or any event which, with notice or
lapse of time, or both, will become such an event of default. (Section 10.2)
In the event of the acceleration of the maturity of any Junior Subordinated
Debt Securities, the holders of all Senior Indebtedness, Subordinated
Indebtedness and Derivative Obligations outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon acceleration) before the holders of
Junior Subordinated Debt Securities will be entitled to receive or retain any
payment on the Junior Subordinated Debt Securities; provided, however, that
holders of Subordinated Debt shall not be entitled to receive payment of any
such amounts in preference to the Junior Subordinated Debt Securities to the
extent that such Subordinated Debt is by its terms subordinated to trade
creditors.
Upon any distribution of the assets of J.P. Morgan upon dissolution,
winding up, liquidation or reorganization, the holders of Senior Indebtedness,
Subordinated Indebtedness and Derivative Obligations of J.P. Morgan will be
entitled to receive payment in full of principal, premium, if any, and interest
before any payment may be made on the Junior Subordinated Debt Securities. By
reason of such subordination, in the event of a bankruptcy or insolvency of J.P.
Morgan, holders of Senior Indebtedness, Subordinated Indebtedness and Derivative
Obligations of J.P. Morgan may receive more, ratably, and holders of the Junior
Subordinated Debt Securities may receive less, ratably, than the other creditors
of J.P. Morgan. Such subordination will not prevent the occurrence of any Event
of Default in respect of the Junior Subordinated Debt Securities. The Indenture
does not limit the amount of Senior Indebtedness, Subordinated Indebtedness or
Derivative Obligations J.P. Morgan may incur.
Senior Indebtedness of J.P. Morgan is defined as the principal of, premium,
if any, and interest on (a) all Debt of J.P. Morgan, whether outstanding on the
date of execution of the Indenture or thereafter created, assumed or incurred,
except such Debt as is by its terms expressly stated to be not superior in right
of payment to the Junior Subordinated Debt Securities or to rank pari passu with
the Junior Subordinated Debt Securities and (b) any deferrals, renewals or
extensions of any such Senior Indebtedness; provided, however, that Senior
Indebtedness shall not be deemed to include (i) Debt which by its terms is
subordinated to trade accounts payable or accrued liabilities arising in the
ordinary course of business to the extent that payments made to the holders of
such Debt by the holders of the Junior Subordinated Debt Securities as a result
of the subordination provisions of the Indenture would be greater than they
otherwise would have been as a result of any obligation of such holders to pay
amounts over to the obligees on such trade accounts payable or accrued
liabilities arising in the ordinary course of business as a result of
subordination provisions to which such Debt is subject; (ii) Debt which
constitutes Subordinated Indebtedness and (iii) any other debt securities issued
pursuant to the Indenture.
"Subordinated Indebtedness" is defined as the principal of, premium, if
any, and interest, on Debt, whether outstanding on the date of the execution of
the Indenture or thereafter incurred, which is by its terms
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expressly provided to be junior and subordinate to other Debt of J.P. Morgan
(other than the Junior Subordinated Debt Securities).
The term "Debt" as used in the foregoing definitions shall mean any
obligation of, or any obligation guaranteed by, J.P. Morgan for the repayment of
borrowed money, whether or not evidenced by bonds, debentures, notes or other
written instruments, and any deferred obligation for the payment of the purchase
price of property or assets (but shall not include trade accounts payable or
accrued liabilities arising in the ordinary course of business). The term "pari
passu" as used herein shall mean ranking equally in right of payment in the
event of J.P. Morgan's bankruptcy. (Section 1.1)
"Derivative Obligations" of J.P. Morgan are defined in the Indenture as
obligations of J.P. Morgan to make payments on claims in respect of derivative
products such as interest and foreign exchange rate contracts, commodity
contracts and similar arrangements; provided, however, that Derivative
Obligations do not include claims in respect of Senior Indebtedness,
Subordinated Indebtedness or obligations which, by their terms, are expressly
stated not to be superior in right of payment to the Junior Subordinated Debt
Securities or to rank pari passu with the Junior Subordinated Debt Securities.
For purposes of this definition, "claim" has the meaning assigned thereto in
Section 101(4) of the United States Bankruptcy code of 1978, as amended and in
effect on the date of the Indenture. (Section 1.1)
The Prospectus Supplement will set forth the aggregate amount of
outstanding indebtedness as of the most recent practicable date that by the
terms of such debt securities would be senior to the Junior Subordinated Debt
Securities and any limitation on the issuance of such additional senior
indebtedness.
Notwithstanding anything to the contrary in the Indenture or the Junior
Subordinated Debt Securities, Senior Indebtedness and Subordinated Indebtedness
shall not include (i) any indebtedness of the Company which, by its terms or the
terms of the instrument creating or evidencing it, is subordinate in right of
payment to, or pari passu with, the Junior Subordinated Debt Securities, as the
case may be, and in particular, the Junior Subordinated Debt Securities shall
rank pari passu with respect to all other debt securities and guarantees in
respect thereof issued to any other trusts, partnerships or other entity
affiliated with the Company which is a financing vehicle of the Company in
connection with the issuance of preferred securities by such financing vehicle,
or (ii) any indebtedness of the Company to a subsidiary of the Company.
EVENTS OF DEFAULT, WAIVER, NOTICE
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Indenture Event of
Default" with respect to each series of Junior Subordinated Debt Securities:
(a) failure for 30 days to pay interest on the Junior Subordinated
Debt Securities of such series when due; provided that a valid extension of
the interest payment period by the Company shall not constitute a default
in the payment of interest for this purpose;
(b) failure to pay principal of or premium, if any, on the Junior
Subordinated Debt Securities of such series when due whether at maturity,
upon redemption, by declaration or otherwise;
(c) failure to observe or perform any other covenant contained in the
Indenture with respect to such series for 90 days after written notice to
the Company from the Indenture Trustee or the holders of at least 25% in
principal amount of the outstanding Junior Subordinated Debt Securities of
such series; or
(d) certain events in bankruptcy, insolvency or reorganization of the
Company.
In each and every such case, unless the principal of all the Junior Subordinated
Debt Securities of such series shall have already become due and payable, either
the Indenture Trustee or the holders of not less than 25% in aggregate principal
amount of the Junior Subordinated Debt Securities of such series then
outstanding, by notice in writing to the Company (and to the Indenture Trustee
if given by such holders), may declare the principal of all the Junior
Subordinated Debt Securities of such series to be due and payable immediately,
and upon any such declaration the same shall become and shall be immediately due
and payable. (Section 6.01(b))
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The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities of the applicable series have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee. (Section 6.06) The Indenture Trustee or the
holders of not less than 25% in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities of such series may declare the principal due
and payable immediately upon an Indenture Event of Default with respect to such
series, but the holders of a majority in aggregate outstanding principal amount
of Junior Subordinated Debt Securities of such series may annul such declaration
and waive the default if the default has been cured and a sum sufficient to pay
all matured installments of interest and principal otherwise than by
acceleration and any premium has been deposited with the Indenture Trustee.
(Sections 6.01(b) and 6.01(c))
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities of a series may, on behalf of the holders of
all the Junior Subordinated Debt Securities of such series, waive any past
default, except a default in the payment of principal, premium, if any, or
interest on Junior Subordinated Securities of such series (unless such default
has been cured and a sum sufficient to pay all matured installments of interest
and principal otherwise than by acceleration and any premium has been deposited
with the Indenture Trustee) or a call for redemption of Junior Subordinated Debt
Securities of such series. (Section 6.06) The Company is required to file
annually with the Indenture Trustee a certificate as to whether or not the
Company is in compliance with all the conditions and covenants under the
Indenture. (Section 5.03(d))
If a series of Junior Subordinated Debt Securities is issued to a JPM Trust
in connection with the issuance of Trust Securities of such JPM Trust, then,
under the applicable Declaration, an Indenture Event of Default with respect to
such series of Junior Subordinated Debt Securities will constitute a Declaration
Event of Default.
MODIFICATION OF THE INDENTURES; WAIVER OF COMPLIANCE
The Indenture contains provisions permitting J.P. Morgan and the Trustee,
with the consent of the holders of not less than a majority in principal amount
of the respective Junior Subordinated Debt Securities of all series affected by
such modification or waiver at the time outstanding (voting as one class), to
modify the Indenture or any supplemental indenture or the rights of the holders
of the respective Junior Subordinated Debt Securities, or waive compliance by
J.P. Morgan with any of its obligations thereunder, provided that no such
modification or waiver shall (i) extend the final maturity of any respective
Junior Subordinated Debt Security, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, or change the
currency or currency unit of payment thereof, or change the method in which
amounts of payments of principal or interest thereon are determined, or reduce
the portion of the principal amount of an original issue discount Junior
Subordinated Debt Security due and payable upon acceleration of the maturity
thereof or the portion of the principal amount thereof provable in bankruptcy,
or reduce any amount payable upon redemption of any Junior Subordinated Debt
Security, or impair or affect the right of a holder to institute suit for the
payment thereof or, if the Junior Subordinated Debt Securities provide therefor,
any right of repayment at the option of the holder of a Junior Subordinated Debt
Security, without the consent of the holder of each respective Junior
Subordinated Debt Security so affected or (ii) reduce the aforesaid percentage
of Junior Subordinated Debt Securities of any series, the consent of the holders
of which is required for any such modification, without the consent of the
holder of each Junior Subordinated Debt Security so affected. (Sections 8.2 and
8.6)
In the event the consent of the Property Trustee as the holder of the
Junior Subordinated Debentures is required under the Indenture with respect to
any amendment, modification or termination of the Indenture or the Junior
Subordinated Debentures, the Property Trustee shall request the direction of the
holders of the Trust Securities with respect to such amendment, modification or
termination and shall vote with respect to such amendment, modification or
termination as directed by a majority in liquidation amount of the Trust
Securities voting together as a single class; provided, however, that where any
such amendment, modification or termination under the Indenture would require
the consent or vote of (1) holders of Junior Subordinated Debentures
representing a specified percentage greater than a majority in principal amount
of the Junior
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Subordinated Debentures or (2) each holder of Junior Subordinated Debentures,
the Property Trustee may only give such consent or vote, in the case of clause
(1), at the direction of the holders of Trust Securities representing such
specified percentage of the aggregate liquidation amount of the Trust Securities
or, in the case of clause (2), as directed by each holder of Trust Securities;
and, provided further, however, that the Property Trustee shall be under no
obligation to take any such action in accordance with the directions of the
holders of the Trust Securities unless the Property Trustee has obtained an
opinion of nationally recognized independent tax counsel recognized as expert in
such matters to the effect that the Trust will not be classified for United
States Federal income tax purposes as an association taxable as a corporation or
a partnership on account of such action and will be treated as a grantor trust
for United States Federal income tax purposes following such action.
The Indenture also permits J.P. Morgan and the Trustee to amend such
Indenture in certain circumstances without the consent of the holders of Junior
Subordinated Debt Securities to evidence the merger of J.P. Morgan, the
replacement of the Trustee, to effect modifications which do not affect any
series of Junior Subordinated Debt Security already outstanding, and for certain
other purposes. (Section 8.1)
CONSOLIDATIONS, MERGERS AND SALES OF ASSETS
J.P. Morgan may not merge or consolidate with any other corporation or sell
or convey all or substantially all of its assets to any Person, unless either
J.P. Morgan shall be the continuing corporation or the successor corporation
shall be a corporation organized under the laws of the United States or any
state thereof and shall expressly assume the payment of the principal of and
interest on the Junior Subordinated Debt Securities and the performance and
observance of all the covenants and conditions of the Indenture binding upon
J.P. Morgan, and J.P. Morgan or such successor corporation shall not,
immediately after such merger or consolidation, or such sale or conveyance, be
in default in the performance of any such covenant or condition. (Article Nine)
BOOK ENTRY AND SETTLEMENT
If any Junior Subordinated Debt Securities of a series are represented by
one or more global securities (each, a "Global Security"), the applicable
Prospectus Supplement will describe the circumstances, if any, under which
beneficial owners of interests in any such Global Security may exchange such
interests for Junior Subordinated Debt Securities of such series and of like
tenor and principal amount in any authorized form and denomination. Principal
of, and any premium and interest on, a Global Security will be payable in the
manner described in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any
portion of a series of Junior Subordinated Debt Securities to be represented by
a Global Security will be described in the applicable Prospectus Supplement.
GOVERNING LAW
The Indenture and the Junior Subordinated Debt Securities will be governed
by, and construed in accordance with, the laws of the State of New York.
(Section 12.8)
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. (Section 7.01) Subject to such provision, the
Indenture Trustee is under no obligation to exercise any of the powers vested in
it by the Indenture at the request of any holder of Junior Subordinated Debt
Securities, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities that might be incurred thereby. (Section 7.02)
The Indenture Trustee is not required to expend or risk its own funds or
otherwise incur personal financial liability in the performance of its duties if
the Indenture Trustee reasonably believes that repayment or adequate indemnity
is not reasonably assured to it. (Section 7.01)
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First Trust of New York, National Association is a depositary for funds and
performs other services for, and transacts other banking business with, the
Company in the normal course of business.
POSSIBLE TAX LAW CHANGES
On March 19, 1996, the Clinton Administration proposed legislation (the
"Proposed Legislation") which would, among other things, generally deny
corporate issuers a deduction for interest in respect of certain debt
obligations, such as the Junior Subordinated Debentures, issued on or after
December 7, 1995 if such debt obligations have a maximum term in excess of 20
years and are not shown as indebtedness on the issuer's applicable consolidated
balance sheet. On March 29, 1996, Senate Finance Committee Chairman William V.
Roth, Jr. and House Ways and Means Committee Chairman Bill Archer issued a joint
statement (the "Joint Statement") indicating their intent that the Proposed
Legislation, if adopted by either of the tax-writing committees of Congress,
would have an effective date that is no earlier than the date of "appropriate
Congressional action." In addition, subsequent to the publication of the Joint
Statement, Senator Daniel Patrick Moynihan and Representatives Sam M. Gibbons
and Charles B. Rangel wrote letters to the Treasury Department (the "Democrat
Letters"), which concurred with the view expressed in the Joint Statement. No
such Congressional action has yet occurred. If the principles contained in the
Joint Statement and the Democrat Letters were followed and if the Proposed
Legislation were enacted, such legislation would not apply to the Junior
Subordinated Debentures. There can be no assurance, however, that the effective
date guidance contained in the Joint Statement and the Democrat Letters will be
incorporated into the Proposed Legislation, if enacted, or that other
legislation enacted after the date hereof will not otherwise adversely affect
the ability of the Company to deduct the interest payable on the Junior
Subordinated Debentures. Such a change could give the Company the right to cause
an early redemption.
ERISA MATTERS
The Company and certain affiliates of the Company may each be considered a
"party in interest" (within the meaning of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) or a "disqualified person" (within
the meaning of Section 4975 of the Internal Revenue Code of 1986, as amended
(the "Code")) with respect to many employee benefit plans ("Plans") that are
subject to ERISA. The purchase of Offered Securities by a Plan that is subject
to the fiduciary responsibility provisions of ERISA or the prohibited
transaction provisions of Section 4975 of the Code (including individual
retirement arrangements and other plans described in Section 4975(e)(1) of the
Code) and with respect to which the Company, or any affiliate of the Company is
a service provider (or otherwise is a party in interest or a disqualified
person) may constitute or result in a prohibited transaction under ERISA or
Section 4975 of the Code, unless such Offered Securities are acquired pursuant
to and in accordance with an applicable exemption. Any pension or other employee
benefit plan proposing to acquire any Offered Securities should consult with its
counsel.
PLAN OF DISTRIBUTION
The Company may sell any series of Junior Subordinated Debt Securities and
the JPM Trusts may sell the Preferred Securities being offered hereby (i)
through agents, (ii) through underwriters, (iii) through dealers and (iv)
directly to purchasers. Any such persons may be customers of, engage in
transactions with, or perform services for, J.P. Morgan in the ordinary course
of business.
Offered Securities may be offered and sold through agents designated by
J.P. Morgan from time to time. Any such agent involved in the offer or sale of
the Securities in respect of which this Prospectus is delivered will be named,
and any commissions payable by J.P. Morgan to such agent will be set forth, in
the Prospectus Supplement. Unless otherwise indicated in the Prospectus
Supplement, any such agent will be acting on a best efforts basis for the period
of its appointment (ordinarily five business days or less). Any such agent may
be deemed to be an underwriter, as that term is defined in the Securities Act of
1933, as amended, of the Offered Securities so offered and sold. Agents may be
entitled under agreements which may be entered into with J.P. Morgan to
indemnification by J.P. Morgan against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
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If an underwriter or underwriters are utilized in the sale of the Offered
Securities, J.P. Morgan will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is reached,
and the names of the specific managing underwriter or underwriters, as well as
any other underwriters, and the terms of the transaction, including compensation
of the underwriters and dealers, if any, will be set forth in the Prospectus
Supplement which will be used by the underwriters to make resales of the Offered
Securities in respect of which this Prospectus is delivered to the public.
Underwriters will acquire Offered Securities for their own account and may
resell such Offered Securities from time to time in one or more transactions,
including negotiated transactions, at fixed public offering prices or at varying
prices determined at the time of sale. Offered Securities may be offered to the
public either through underwriting syndicates represented by managing
underwriters, or directly by the managing underwriters. The underwriters may be
entitled, under the relevant underwriting agreement, to indemnification by J.P.
Morgan against certain liabilities, including liabilities under the Securities
Act of 1933, as amended. Only underwriters named in the Prospectus Supplement
are deemed to be underwriters in connection with the Offered Securities offered
thereby. If any underwriter or underwriters are utilized in the sale of the
Offered Securities, the underwriting agreement provides that the obligations of
the underwriters are subject to certain conditions precedent and that the
underwriters with respect to a sale of Offered Securities will be obligated to
purchase all such Offered Securities if any are purchased.
If a dealer is utilized in the sale of the Offered Securities in respect of
which this Prospectus is delivered, J.P. Morgan will sell such Offered
Securities to the dealer, as principal. The dealer may then resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale. Any such dealer may be deemed to be an underwriter, as such
term is defined in the Securities Act of 1933, as amended, of the Offered
Securities so offered and sold. Dealers may be entitled, under agreements which
may be entered into with J.P. Morgan, to indemnification by J.P. Morgan against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended. The name of the dealer and the terms of the transaction will be set
forth in the Prospectus Supplement relating thereto.
Offers to purchase Offered Securities may be solicited directly by J.P.
Morgan and sales thereof may be made by J.P. Morgan directly to institutional
investors or others, who may be deemed to be underwriters within the meaning of
the Securities Act of 1933, as amended, with respect to any sale thereof. The
terms of any such sales will be described in the Prospectus Supplement relating
thereto.
If so indicated in the Prospectus Supplement, J.P. Morgan will authorize
agents and underwriters to solicit offers by certain institutions to purchase
Offered Securities from J.P. Morgan at the public offering price set forth in
the Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on the date stated in the Prospectus
Supplement. Each Contract will be for an amount no less than, and, unless J.P.
Morgan otherwise agrees, the aggregate principal amount of Securities sold
pursuant to Contracts shall be not less nor more than, the respective amounts
stated in the Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and other institutions but shall in all cases be subject to the
approval of J.P. Morgan.
Contracts will not be subject to any conditions except that any related
sale of Offered Securities to underwriters shall have occurred and the purchase
by an institution of the Offered Securities covered by its Contract shall not at
the time of delivery be prohibited under the laws of any jurisdiction in the
United States to which such institution is subject. A commission indicated in
the Prospectus Supplement will be paid to underwriters and agents soliciting
purchases of Offered Securities pursuant to Contracts accepted by J.P. Morgan.
The place and time of delivery of the Offered Securities in respect of
which this Prospectus is delivered are set forth in the accompanying Prospectus
Supplement.
This Prospectus and related Prospectus Supplement may be used by direct or
indirect wholly-owned subsidiaries of J.P. Morgan in connection with offers and
sales related to secondary market transactions in the Offered Securities. Such
subsidiaries may act as principal or agent in such transactions. Such sales will
be made at prices related to prevailing market prices at the time of a sale.
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The offer and sale of the Offered Securities by an affiliate of J.P. Morgan
will comply with the requirements of Rule 2720 of the Conduct Rules of the
National Association of Securities Dealers, Inc. (the "NASD") regarding
underwriting of securities of an affiliate. Accordingly, an affiliate of J.P.
Morgan that is a member of the NASD may participate in a public offering and
sale of Offered Securities if the offering is of a class of securities rated
investment grade by a nationally recognized statistical rating organization. In
addition, an affiliate of J.P. Morgan that is a member of the NASD may
participate in any public offering and sale of the Offered Securities if the
price at which an equity issue is distributed to the public is no higher or the
yield at which a debt issue is distributed to the public is no lower than that
recommended by a "qualified independent underwriter" (determined to be so
qualified by the NASD prior to commencement of such offering), in each case in
compliance with the provisions of Rule 2720 of the Conduct Rules.
Each NASD member participating in offers and sales of the Offered
Securities will not execute a transaction in the Offered Securities in a
discretionary account without the prior written specific approval of the
member's customer.
Certain of the underwrites or agents and their associates may be customers
of, engage in transactions with, and perform services for, J.P. Morgan in the
ordinary course of business. Agents and underwriters may be customers of, engage
in transactions with, or perform services for, the Company in the ordinary
course of business.
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, certain
matters of Delaware law relating to the validity of the Preferred Securities
will be passed upon by Morris, Nichols, Arsht & Tunnell, Wilmington, Delaware.
The validity of the Preferred Securities Guarantees and the Junior Subordinated
Debt Securities and certain other matters will be passed upon for the Company by
Gene A. Capello, Vice President and Assistant General Counsel of J.P. Morgan,
and for the agents or underwriters, if any, by Cravath, Swaine & Moore, New
York, New York.
EXPERTS
The audited financial statements contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1995 (included in J.P. Morgan's
Annual Report to Stockholders) are incorporated by reference in this Prospectus
in reliance upon the report of Price Waterhouse LLP, independent accountants,
given upon the authority of said firm as experts in auditing and accounting.
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PROSPECTUS
$400,000,000
JPM CAPITAL TRUST II
7.95% Cumulative Capital Securities
(Liquidation Amount $1,000 per Capital Security)
fully and unconditionally guaranteed as set forth in this document by
J.P. MORGAN CHASE & CO.
------------------------
This Prospectus covers the remarketing from time to time of the 7.95% Cumulative
Capital Securities (the "Preferred Securities" or "Capital Securities") by
affiliates of J.P. Morgan Chase & Co. (as successor to J.P. Morgan & Co.
Incorporated) and JPM Capital Trust II. The Capital Securities were originally
offered pursuant to the Prospectus Supplement, dated January 29, 1997, and Base
Prospectus, dated January 28, 1997, attached to this Prospectus and constituting
a part of this Prospectus. References to J.P. Morgan & Co. Incorporated or the
Company in the attached Prospectus Supplement and Base Prospectus refer to J.P.
Morgan Chase & Co., where applicable.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE S-3 FOR A DISCUSSION OF CERTAIN FACTORS
THAT YOU SHOULD CONSIDER BEFORE INVESTING IN THE CAPITAL SECURITIES.
THE CAPITAL SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL
AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED OF THE CAPITAL SECURITIES OR DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is [ ].
<PAGE> 71
J.P. MORGAN CHASE & CO.
On December 31, 2000, J.P. Morgan & Co. Incorporated ("J.P. Morgan") merged
with and into The Chase Manhattan Corporation ("Chase"). Upon completion of the
merger, Chase changed its name to J.P. Morgan Chase & Co. ("we" or "the
Company"). The merger was accounted for as a pooling of interests. As a result,
financial information prepared following completion of the merger and
incorporated by reference in this Prospectus will present the combined results
of Chase and J.P. Morgan as if the merger had been in effect for all periods
presented.
We are a global financial services firm with operations in over 60
countries. Our principal bank subsidiaries are The Chase Manhattan Bank ("Chase
Bank") and Morgan Guaranty Trust Company of New York ("Morgan Bank"), each of
which is a New York banking corporation headquartered in New York City; and
Chase Manhattan Bank USA, National Association, headquartered in Delaware. Our
principal non-bank subsidiaries are our investment bank subsidiaries, Chase
Securities Inc. and J.P. Morgan Securities Inc. We expect Chase Bank to merge
with Morgan Bank and Chase Securities Inc. to merge with J.P. Morgan Securities
Inc. in mid-2001. Unless the context otherwise requires, references in this
Prospectus to Chase Bank, Morgan Bank, Chase Securities Inc. and J.P. Morgan
Securities Inc. also refer to the successor corporations in those mergers.
Our activities are internally organized, for management reporting purposes,
into five major businesses: Investment Bank; Wealth Management; Treasury &
Securities Services; J.P. Morgan Partners; and Consumer Services. We have
presented a brief description of those businesses below.
INVESTMENT BANK: Among the products and services provided by us through
the Investment Bank are our securities underwriting and financial advisory,
trading, mergers and acquisitions advisory, and corporate lending and
syndication businesses.
WEALTH MANAGEMENT: Wealth Management includes our asset management
businesses, including our mutual funds; our institutional money management and
cash management businesses; and our private bank, which provides wealth
management solutions for a global client base of high net worth individuals and
families.
TREASURY & SECURITIES SERVICES: Treasury & Securities Services is a
recognized leader in information and transaction processing services, moving
trillions of dollars daily in securities and cash for its wholesale clients.
Treasury & Securities Services also includes our custody, cash management, trust
and other fiduciary services businesses.
J.P. MORGAN PARTNERS: J.P. Morgan Partners is one of the world's largest
and most diversified private equity investment firms, with total funds under
management in excess of $20 billion.
CONSUMER SERVICES: Consumer Services serves over 30 million consumer,
small business and middle-market customers nationwide. Consumer Services offers
a wide variety of financial products and services, including consumer banking,
credit cards, mortgage services and consumer finance services, through a diverse
array of distribution channels, including the Internet and branch and ATM
networks.
2
<PAGE> 72
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, --------------------------------
2000 1999 1998 1997 1996 1995
----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings to Fixed Charges:
Excluding Interest on Deposits................ 2.01 2.64 1.84 1.82 1.66 1.90
Including Interest on Deposits................ 1.45 1.71 1.43 1.43 1.32 1.41
Earnings to Combined Fixed Charges and Preferred
Stock Dividend Requirements:
Excluding Interest on Deposits................ 1.99 2.61 1.82 1.77 1.60 1.82
Including Interest on Deposits................ 1.44 1.70 1.42 1.41 1.30 1.38
</TABLE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus:
- Chase's Annual Report on Form 10-K and Form 10-K/A for the year ended
December 31, 1999,
- Chase's Quarterly Reports on Form 10-Q, for the quarters ended March 31,
2000, June 30, 2000 and September 30, 2000, and
- Chase's Current Reports on Form 8-K filed on January 21, 2000, February
9, 2000, March 22, 2000, April 11, 2000, April 19, 2000, May 22, 2000,
June 12, 2000, June 20, 2000, July 20, 2000, August 3, 2000, September
18, 2000, October 19, 2000, November 1, 2000, November 28, 2000, November
29, 2000, December 1, 2000, December 14, 2000 and December 26, 2000.
In addition, all reports and definitive proxy or information statements
filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Capital Securities shall be deemed to be incorporated by
reference into this Prospectus and to be a part of this Prospectus from the date
of filing such documents. Any statement contained in this Prospectus or in a
document incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus or in any
subsequently filed document which also is or is deemed to be incorporated by
reference in this Prospectus modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the foregoing documents
incorporated herein by reference (other than exhibits to such documents).
Written requests should be directed to the Office of the Secretary, J.P. Morgan
Chase & Co., 270 Park Avenue, New York, New York 10017. Telephone requests may
be directed to (212) 270-6000.
EXPERTS
The financial statements of Chase incorporated in this Prospectus by
reference to the Annual Report of Chase on Form 10-K for the year ended December
31, 1999 have been incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in auditing and accounting.
3
<PAGE> 73
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 28, 1997)
$400,000,000
JPM CAPITAL TRUST II
7.95% Cumulative Capital Securities
(Liquidation Amount $1,000 per Capital Security)
fully and unconditionally guaranteed as set forth herein by
J.P. MORGAN & CO. INCORPORATED
The 7.95% Cumulative Capital Securities (the "Preferred Securities" or the
"Capital Securities") offered hereby represent preferred undivided beneficial
interests in the assets of JPM Capital Trust II, a statutory business trust
formed under the laws of the State of Delaware (the "Trust"). J.P. Morgan & Co.
Incorporated, a Delaware corporation (the "Company"), will directly or
indirectly own all the common securities (the "Common Securities" and, together
with the Preferred Securities, the "Trust Securities") representing common
undivided beneficial interests in the assets of the Trust. The Trust exists for
the sole purpose of issuing the Preferred Securities and Common Securities and
investing the proceeds thereof in an equivalent amount of 7.95% Junior
Subordinated Debentures due 2027 of the Company ("Junior Subordinated
Debentures").
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE S-3 FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN THE PREFERRED SECURITIES.
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND JPM CAPITAL TRUST II
PUBLIC(1) COMMISSIONS(2) (1)(3)(4)
-------------------------------------------------------------------------------------------------------------------
Per Preferred Security $1,000 (3) $1,000
-------------------------------------------------------------------------------------------------------------------
Total $400,000,000 (3) $400,000,000
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued distributions, if any, from February 3, 1997, to date of
delivery.
(2) See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in Junior Subordinated Debentures, the Company
has agreed to pay to the Underwriters as compensation ("Underwriters'
Compensation") for their arranging the investment therein of such proceeds
$10 per Preferred Security (or $4,000,000 in the aggregate). See
"Underwriting".
(4) Before deducting expenses payable by the Company estimated to be $100,000.
The Preferred Securities are offered by the Underwriters, subject to prior sale,
when, as and if delivered to and accepted by the Underwriters, and subject to
their right to reject orders in whole or in part. It is expected that delivery
of the Preferred Securities will be made in book-entry form through the
facilities of The Depository Trust Company, on or about February 3, 1997,
against payment therefor in immediately available funds.
J.P. MORGAN & CO.
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
January 29, 1997.
<PAGE> 74
(Continued from previous page)
The Preferred Securities and the Common Securities will rank pari passu
with each other and will have equivalent terms; provided that (i) if an Event of
Default (as defined herein) under the Declaration (as defined herein) occurs and
is continuing, the holders of Preferred Securities will have a priority over
holders of the Common Securities with respect to distributions and payments upon
liquidation, redemption or otherwise and (ii) holders of Common Securities have
the exclusive right (subject to the terms of the Declaration) to appoint,
replace or remove Trustees (as defined in the accompanying Prospectus) and to
increase or decrease the number of Trustees.
Holders of the Preferred Securities will be entitled to receive cumulative
cash distributions at an annual rate of 7.95% of the stated liquidation amount
of $1,000 per Preferred Security, accruing from the date of original issuance of
the Preferred Securities and payable semi-annually, in arrears, on February 1
and August 1 of each year, commencing on August 1, 1997 ("distributions"). Cash
distributions in arrears for more than one semi-annual interest period will bear
interest thereon at the annual rate of 7.95% (to the extent permitted by
applicable law), compounded semi-annually. The term "distributions" as used
herein includes such cash distributions and any such interest payable unless
otherwise stated.
The distribution rate and the distribution and other payment dates for the
Preferred Securities will correspond to the interest rate and the interest and
other payment dates on the Junior Subordinated Debentures deposited in the Trust
as trust assets. If principal or interest is not paid on the Junior Subordinated
Debentures, including as a result of the Company's election to extend the
interest payment period on the Junior Subordinated Debentures as described
below, the Trust will not make payments on the Trust Securities. The Junior
Subordinated Debentures provide that, so long as the Company shall not be in
default in the payment of interest on the Junior Subordinated Debentures, the
Company shall have the right to defer payments of interest on the Junior
Subordinated Debentures by extending the interest payment period from time to
time for a period not exceeding 10 consecutive semi-annual interest periods
(each, a "Deferral Period"). No interest shall be due and payable during a
Deferral Period and, as a consequence, distributions on the Trust Securities
will also be deferred, but at the end of such Deferral Period the Company shall
pay all interest then accrued and unpaid on the Junior Subordinated Debentures,
together with interest thereon at the same rate specified for the Junior
Subordinated Debentures to the extent permitted by applicable law, compounded
semi-annually ("Compounded Interest"). All references herein to interest shall
include Compounded Interest unless otherwise stated. There could be multiple
Deferral Periods of varying lengths throughout the term of the Junior
Subordinated Debentures, each not to exceed 10 consecutive semi-annual interest
periods or to cause any extension beyond the maturity of the Junior Subordinated
Debentures. During any such Deferral Period, the Company may not declare or pay
dividends on, or redeem, purchase, acquire or make a distribution or liquidation
payment with respect to, any of its common stock or preferred stock or make any
guarantee payments with respect thereto; provided, however, that the foregoing
restrictions shall not apply to (i) dividends, redemptions, purchases,
acquisitions, distributions or payments made by the Company by way of issuance
of shares of its capital stock, (ii) payments of accrued dividends by the
Company upon the redemption, exchange or conversion of any preferred stock of
the Company as may be outstanding from time to time in accordance with the terms
of such preferred stock, (iii) cash payments made by the Company in lieu of
delivering fractional shares upon the redemption, exchange or conversion of any
preferred stock of the Company as may be outstanding from time to time in
accordance with the terms of such preferred stock, (iv) repurchases, redemptions
or other acquisitions of shares of capital stock of the company in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of employees, officers, directors or consultants, or (v) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of such rights pursuant thereto. See
"Risk Factors -- Option to Extend Interest Payment Period; Tax Impact of
Extension;" "Description of the Junior Subordinated Debentures -- Interest" and
"-- Option to Extend Interest Payment Period."
The payment of distributions out of moneys held by the Property Trustee (as
defined in the accompanying Prospectus) and payments on liquidation of the Trust
and on redemption of Preferred Securities, as set forth below, are guaranteed by
the Company on a subordinated basis as and to the extent described herein
i
<PAGE> 75
(the "Preferred Securities Guarantee"). See "Description of the Preferred
Securities Guarantees" in the accompanying Prospectus. The Preferred Securities
Guarantee covers payments of distributions and other payments on the Preferred
Securities only if and to the extent that the Trust has funds available therefor
which will not be the case unless the Company has made a payment of interest or
principal or other payments on the Junior Subordinated Debentures held by the
Trust as its sole asset. The Preferred Securities Guarantee, when taken together
with the Company's obligations under the Junior Subordinated Debentures and the
Indenture (as defined herein) and its obligations under the Declaration,
including its obligation to pay all costs, expenses, debts and other obligations
of the Trust (other than with respect to the Trust Securities), provides a full
and unconditional guarantee of amounts due on the Preferred Securities. The
obligations of the Company under the Preferred Securities Guarantee are
subordinate and junior in right of payment to all other indebtedness,
liabilities and obligations of the Company and any guarantees, endorsements or
other contingent obligations of the Company in respect of such indebtedness,
liabilities or obligations, including Junior Subordinated Debt Securities (as
defined in the accompanying Prospectus) and senior to all capital stock now or
hereafter issued by the Company and to any guarantee now or hereafter entered
into by the Company in respect of its capital stock. The obligations of the
Company under the Junior Subordinated Debentures are subordinate and junior in
right of payment to all present and future Senior Indebtedness, Subordinated
Indebtedness and Derivative Obligations of the Company (as such terms are
defined in the accompanying Prospectus). Because the Company is a holding
company, the Junior Subordinated Debentures (and the Company's obligations under
the Preferred Securities Guarantee) are also effectively subordinated to all
existing and future liabilities of the Company's subsidiaries, except to the
extent that the Company is a creditor of the subsidiaries recognized as such.
The Preferred Securities are subject to mandatory redemption, in whole or
in part, upon repayment of the Junior Subordinated Debentures at maturity or
their earlier redemption. Subject to the Company having received prior approval
of the Federal Reserve to do so if then required under applicable capital
guidelines or policies of the Federal Reserve, the Junior Subordinated
Debentures may be redeemed by the Company (in whole or in part) from time to
time prior to maturity on or after February 1, 2007, or at any time in certain
circumstances upon the occurrence of a Tax Event or Capital Treatment Event
(each as defined herein). If the Company redeems Junior Subordinated Debentures,
the Trust must redeem Trust Securities having an aggregate liquidation amount
equal to the aggregate principal amount of the Junior Subordinated Debentures so
redeemed at $1,000 per Trust Security plus accrued and unpaid distributions
thereon (the "Redemption Price") to the date fixed for redemption. See
"Description of the Preferred Securities -- Mandatory Redemption." The Preferred
Securities will be redeemed upon maturity of the Junior Subordinated Debentures.
The Junior Subordinated Debentures mature on February 1, 2027. In addition, upon
the occurrence of a Special Event (as defined herein) arising from a change in
law or a change in legal interpretation, unless the maturity of the Junior
Subordinated Debentures is advanced or they are redeemed in the limited
circumstances described below and subject to the Company having received prior
approval from the Federal Reserve for such dissolution if then required under
applicable capital guidelines or policies of the Federal Reserve, the Trust
shall be dissolved with the result that the Junior Subordinated Debentures will
be distributed to the holders of the Preferred Securities, on a pro rata basis,
in lieu of any cash distribution. In the case of a Special Event that is a Tax
Event or a Capital Treatment Event, the Company will have the right in certain
circumstances, subject to the Company having received prior approval of the
Federal Reserve to do so if then required under applicable capital guidelines or
policies of the Federal Reserve, to redeem the Junior Subordinated Debentures,
which would result in the redemption by the Trust of the Trust Securities in the
same amount on a pro rata basis.
In the event of the voluntary or involuntary dissolution of the Trust, the
holders of the Preferred Securities will be entitled to receive, for each
Preferred Security, a liquidation amount of $1,000 plus accrued and unpaid
distributions thereon (including interest thereon) to the date of payment,
unless in connection with such dissolution, the Junior Subordinated Debentures
are distributed to the holders of the Preferred Securities. See "Description of
the Preferred Securities -- Liquidation Distribution Upon Dissolution."
The Preferred Securities will be represented by global certificates
registered in the name of The Depository Trust Company ("DTC") or its nominee.
Beneficial interests in the Preferred Securities will be
ii
<PAGE> 76
shown on, and transfers thereof will be effected only through, records
maintained by DTC and its participants, including depositories for Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear"), and CEDEL Bank societe anonyme ("Cedel"). Except
as described herein, Preferred Securities in certificated form will not be
issued in exchange for the global certificates. See "Description of the
Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust
Company." A portion of the Preferred Securities will be offered by the
Underwriters specified herein directly or through their representative selling
agents outside the United States. Investors may elect to hold beneficial
interest in the Preferred Securities through either DTC (in the United States),
Cedel or Euroclear (outside the United States), if they are participants of such
systems, or indirectly through organizations which are participants in such
systems.
iii
<PAGE> 77
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus Supplement or the Prospectus and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company, the Trust or the Underwriters. This Prospectus Supplement and the
Prospectus do not constitute an offer to sell or the solicitation of an offer to
buy such securities in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus Supplement or the Prospectus
nor any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof or that the information herein is correct as of any time
subsequent to its date.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors................................................ S-3
JPM Capital Trust II........................................ S-7
Accounting Treatment........................................ S-7
Use of Proceeds............................................. S-8
Description of the Preferred Securities..................... S-8
Description of the Preferred Securities Guarantee........... S-21
Description of the Junior Subordinated Debentures........... S-23
Relationship Between the Preferred Securities, the Junior
Subordinated Debentures and the Preferred Securities
Guarantee................................................. S-29
Taxation.................................................... S-30
ERISA Matters............................................... S-33
Underwriting................................................ S-35
PROSPECTUS
Available Information....................................... 2
Incorporation of Certain Documents by Reference............. 2
J.P. Morgan & Co. Incorporated.............................. 3
J.P. Morgan Consolidated Ratio of Earnings to Fixed
Charges................................................... 6
J.P. Morgan Consolidated Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends..................... 6
Use of Proceeds............................................. 6
The JPM Trusts.............................................. 7
Description of the Preferred Securities..................... 11
Description of the Preferred Securities Guarantees.......... 12
Description of the Junior Subordinated Debt Securities...... 15
ERISA Matters............................................... 22
Plan of Distribution........................................ 22
Legal Opinions.............................................. 24
Experts..................................................... 24
</TABLE>
S-2
<PAGE> 78
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following matters:
RANKING OF SUBORDINATED OBLIGATIONS UNDER PREFERRED SECURITIES GUARANTEE AND
JUNIOR SUBORDINATED DEBENTURES; DEPENDENCE ON THE COMPANY
The obligations of the Company under the Junior Subordinated Debentures are
unsecured obligations of the Company and will be subordinate and junior in right
of payment to Senior Indebtedness, Subordinated Indebtedness and Derivative
Obligations of the Company (as such terms are defined herein) but senior to its
capital stock. The Company's obligations under the Preferred Securities
Guarantee are unsecured and will rank (i) subordinate and junior in right of
payment to all other indebtedness, liabilities and obligations of the Company
and any guarantees, endorsements or other contingent obligations of the Company
in respect of such indebtedness, liabilities or obligations, including the
Junior Subordinated Debentures and any other series of Junior Subordinated Debt
Securities, except those made pari passu or subordinate by their terms, and (ii)
senior to all capital stock now or hereafter issued by the Company and to any
guarantee now or hereafter entered into by the Company in respect of its capital
stock. Because the Company is a holding company, the Junior Subordinated
Debentures (and the Company's obligations under the Preferred Securities
Guarantee) are also effectively subordinated to all existing and future
liabilities of the Company's subsidiaries, except to the extent that the Company
is a creditor of the subsidiaries recognized as such. There are no terms in the
Preferred Securities, the Junior Subordinated Debentures or the Preferred
Securities Guarantee that limit the Company's ability to incur additional
indebtedness or other obligations, including indebtedness or obligations that
rank senior to or pari passu with the Junior Subordinated Debentures and the
Preferred Securities Guarantee, or the ability of its subsidiaries to incur
additional indebtedness. See "Description of the Preferred Securities
Guarantees -- Status of the Preferred Securities Guarantees" and "Description of
the Junior Subordinated Debt Securities -- Subordination" in the accompanying
Prospectus.
The Trust's ability to make distributions and other payments on the
Preferred Securities is solely dependent upon the Company making interest and
other payments on the Junior Subordinated Debentures deposited as trust assets
as and when required. If the Company were not to make distributions or other
payments on the Junior Subordinated Debentures for any reason, including as a
result of the Company's election to defer the payment of interest on the Junior
Subordinated Debentures by extending the interest period on the Junior
Subordinated Debentures, the Trust will not make payments on the Trust
Securities. In such an event, holders of the Preferred Securities would not be
able to rely on the Preferred Securities Guarantee since distributions and other
payments on the Preferred Securities are subject to the Preferred Securities
Guarantee only if and to the extent that the Company has made a payment to the
Property Trustee of interest or principal on the Junior Subordinated Debentures
deposited in the Trust as trust assets. Instead, holders of Preferred Securities
would rely on the enforcement (i) by the Property Trustee of its rights as
registered holder of the Junior Subordinated Debentures against the Company
pursuant to the terms of the Indenture or (ii) by such holder of Preferred
Securities of its right against the Company to directly enforce payments of
principal and interest on the Junior Subordinated Debentures. However, if the
Trust's failure to make distributions on the Preferred Securities is a
consequence of the Company's exercise of its right to extend the interest
payment period for the Junior Subordinated Debentures, neither the Property
Trustee nor any holder of Preferred Securities will have any right to enforce
the payment of distributions on the Preferred Securities until an Event of
Default under the Declaration shall have occurred. The Company's obligations
under the Preferred Securities Guarantee are subordinate and junior in right of
payment to all other indebtedness, liabilities and obligations of the Company
and any guarantees, endorsements or other contingent obligations of the Company
in respect of such indebtedness, liabilities or obligations, including the
Junior Subordinated Debentures, and any other series of Junior Subordinated Debt
Securities except those made pari passu or subordinate by their terms to the
Preferred Securities Guarantee, and senior to its capital stock or to any
guarantee of the Company in respect of its capital stock. The Declaration
provides that each holder of
S-3
<PAGE> 79
Preferred Securities, by acceptance thereof, agrees to the provisions of the
Preferred Securities Guarantee, including the subordination provisions thereof,
and of the Indenture.
The Declaration provides that the Company shall pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs and
expenses of the Trust, including any taxes and all costs and expenses with
respect thereto, to which the Trust may become subject, except for United States
withholding taxes. No assurance can be given that the Company will have
sufficient resources to enable it to pay such debts, obligations, costs and
expenses on behalf of the Trust.
If an Event of Default (as defined herein) occurs and is continuing, then
the holders of Preferred Securities would rely on the enforcement by the
Property Trustee of its rights as a holder of the Junior Subordinated Debentures
against the Company. In addition, the holders of a majority in liquidation
amount of the Preferred Securities will have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Property Trustee or to direct the exercise of any trust or power conferred upon
the Property Trustee under the Declaration, including the right to direct the
Property Trustee to exercise the remedies available to it as a holder of the
Junior Subordinated Debentures. If the Property Trustee fails to enforce its
rights under the Junior Subordinated Debentures, any holder of Preferred
Securities may, to the extent permitted by applicable law, after a period of 30
days has elapsed from such holder's written request, directly institute a legal
proceeding against the Company to enforce the Property Trustee's rights under
the Junior Subordinated Debentures without first instituting any legal
proceeding against the Property Trustee or any other person or entity. If an
Event of Default occurs and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Junior Subordinated
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), then a holder of Preferred
Securities may also directly institute a proceeding for enforcement of payment
to such holder of the principal of or interest on Junior Subordinated Debentures
having a principal amount equal to the aggregate liquidation amount of the
Preferred Securities held by such holder (a "Direct Action") on or after the
respective due date specified in the Junior Subordinated Debentures without
first (i) directing the Property Trustee to enforce the terms of the Junior
Subordinated Debentures or (ii) instituting a legal proceeding against the
Company to enforce the Property Trustee's rights under the Junior Subordinated
Debentures. In connection with such Direct Action, the Company will be
subrogated to the rights of such holder of Preferred Securities under the
Declaration to the extent of any payment made by the Company to such holder of
Preferred Securities in such Direct Action. The holders of Preferred Securities
will not be able to exercise directly any other remedy available to the holders
of the Junior Subordinated Debentures unless the Property Trustee first fails to
do so.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX IMPACT OF EXTENSION
So long as the Company shall not be in default in the payment of interest
on the Junior Subordinated Debentures, the Company has the right under the
Indenture to defer payments of interest on the Junior Subordinated Debentures by
extending the interest payment period from time to time on the Junior
Subordinated Debentures for a Deferral Period not exceeding 10 consecutive
semi-annual interest periods, during which no interest shall be due and payable.
Semi-annual distributions on the Preferred Securities would not be made by the
Trust during any such Deferral Period (but would continue to accrue with
interest thereon at the rate of 7.95% per annum, compounded semi-annually). If
the Company exercises the right to extend an interest payment period, the
Company may not during such Deferral Period declare or pay dividends on, or
redeem, purchase, acquire or make a distribution or liquidation payment with
respect to, any of its common stock or preferred stock or make any guarantee
payments with respect thereto; provided, however, that the foregoing
restrictions shall not apply to (i) dividends, redemptions, purchases,
acquisitions, distributions or payments made by the Company by way of issuance
of shares of its capital stock, (ii) payments of accrued dividends by the
Company upon the redemption, exchange or conversion of any preferred stock of
the Company as may be outstanding from time to time in accordance with the terms
of such preferred stock, (iii) cash payments made by the Company in lieu of
delivering fractional shares upon the redemption, exchange or conversion of any
preferred stock of the Company as may be outstanding from time to time in
accordance with the terms of such preferred stock, (iv) repurchases, redemptions
or other
S-4
<PAGE> 80
acquisitions of shares of capital stock of the Company in connection with any
employment contract, benefit plan or other similar arrangement with or for the
benefit of employees, officers, directors or consultants, or (v) any declaration
of a dividend in connection with the implementation of a stockholders' rights
plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of such rights pursuant thereto. See "Description of
the Junior Subordinated Debentures -- Option to Extend Interest Payment Period"
for a description of certain terms of the outstanding preferred stock of the
Company.
Prior to the termination of any Deferral Period, the Company may further
extend such Deferral Period; provided that such Deferral Period together with
all such previous and further extensions thereof may not exceed 10 consecutive
semi-annual interest periods. Upon the termination of any Deferral Period and
the payment of all amounts then due, the Company may commence a new Deferral
Period, subject to the above requirements. The Company may also prepay at any
time all or any portion of the interest accrued during a Deferral Period.
Consequently, there could be multiple Deferral Periods of varying lengths
throughout the term of the Junior Subordinated Debentures, each not to exceed 10
consecutive semi-annual interest periods or to cause any extension beyond the
maturity of the Junior Subordinated Debentures. See "Description of the
Preferred Securities -- Distributions" and "Description of the Junior
Subordinated Debentures -- Option to Extend Interest Payment Period."
If a Deferral Period occurs, the Junior Subordinated Debentures will be
treated as having "original issue discount" for United States Federal income tax
purposes at all times after the beginning of the first Deferral Period,
including after the termination of the Deferral Period. During such times,
holders of Preferred Securities will be required to include their pro rata share
of original issue discount in gross income as it accrues for United States
Federal income tax purposes in advance of the receipt of cash, even though no
cash distributions will be made during a Deferral Period. Even before the
beginning of the First Deferral Period, while the Company will take the position
that original issue discount does not arise, it is possible that all of a
holder's taxable interest income with respect to the Junior Subordinated
Debentures will be accounted for as original issue discount and actual
distributions of stated interest will not be separately reported as taxable
income. See "Taxation -- Original Issue Discount". The Company has no current
intention of exercising its option to defer payments of interest.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION; ADVANCEMENT OF MATURITY
Upon the occurrence and during the continuation of a Special Event (as
defined herein), which may occur at any time, the Trust may, subject to the
Company having received prior approval of the Federal Reserve for such
dissolution if then required under applicable capital guidelines or policies of
the Federal Reserve, be dissolved with the result that, in the manner described
in "Description of the Preferred Securities-Liquidation Distribution Upon
Dissolution", after satisfaction of liabilities to creditors of the Trust,
Junior Subordinated Debentures having an aggregate principal amount equal to the
aggregate stated liquidation amount of, and bearing accrued and unpaid interest
in an amount equal to the accrued and unpaid distributions on, the Preferred
Securities and the Common Securities would be distributed on a Pro Rata Basis
(as defined under the caption "JPM Trusts" in the accompanying Prospectus) to
the holders of the Preferred Securities and the Common Securities in liquidation
of the Trust. In the case of a Tax Event or Capital Treatment Event (as defined
herein), the Company shall have the right, if certain conditions are met and
subject to the Company having received prior approval of the Federal Reserve to
do so if then required under applicable capital guidelines or policies of the
Federal Reserve, (i) to advance the maturity of the Junior Subordinated Debt
Securities to a date not earlier than February 1, 2017 and thereby cause the
Preferred Securities to be redeemed on such earlier date or (ii) if a Tax Event
or Capital Treatment Event, as the case may be, continues notwithstanding the
taking of such actions, to redeem the Junior Subordinated Debentures, in whole
but not in part, at a redemption price equal to the principal amount of, plus
accrued interest on, the Junior Subordinated Debentures in which event the Trust
will redeem Preferred Securities and Common Securities on a Pro Rata Basis to
the same extent as the Junior Subordinated Debentures are redeemed. There can be
no assurance as to the market prices for Preferred Securities or the Junior
Subordinated Debentures which may be distributed in exchange for Preferred
Securities if a dissolution and liquidation of the Trust were to occur.
Accordingly, the Preferred Securities that an investor may purchase, or the
Junior Subordinated
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Debentures that the investor may receive on dissolution and liquidation of the
Trust, may trade at a discount to the price that the investor paid to purchase
the Preferred Securities offered hereby. Because holders of Preferred Securities
may receive Junior Subordinated Debentures upon the occurrence of a Special
Event, prospective purchasers of Preferred Securities are also making an
investment decision with regard to the Junior Subordinated Debentures and should
carefully review all the information regarding the Junior Subordinated
Debentures contained herein and in the accompanying Prospectus. See "Description
of the Preferred Securities -- Special Event Redemption or Distribution" and
"Description of the Junior Subordinated Debentures -- General."
Recent Clinton Administration proposals would prevent the Company from
deducting interest on the Junior Subordinated Debentures. The proposals would
have applied to instruments issued on or after December 7, 1995. However, the
Chairmen of the Senate Finance and House Ways and Means Committees have issued a
joint statement stating their intention that the proposals, if enacted, would
not apply to instruments issued prior to the date of appropriate Congressional
action. No such Congressional action has yet occurred, although similar
legislation is expected again to be proposed by the Clinton Administration in
early February of 1997. Nevertheless, there can be no assurance that future
legislation would not prevent the Company from deducting interest on the Junior
Subordinated Debentures. Such legislation would constitute a Tax Event and could
result in the distribution of the Junior Subordinated Debentures to holders of
the Preferred Securities or, in certain circumstances, the advancement of the
maturity or redemption of the Junior Subordinated Debentures by the Company and
the distribution of the resulting cash in redemption of the Preferred
Securities. See "Description of the Preferred Securities -- Special Event
Redemption or Distribution."
Under current United States Federal income tax law, a distribution of the
Junior Subordinated Debentures upon a Tax Event or Investment Company Event
would not be a taxable event to holders of the Preferred Securities. See
"Taxation -- Distribution of Junior Subordinated Debentures to Holders of
Preferred Securities."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights, but will
not be able to appoint, remove or replace, or to increase or decrease the number
of, Trustees, which rights are vested exclusively in the Common Securities.
TRADING PRICES
The Preferred Securities constitute a new issue of securities with no
established trading market. Although the Underwriters have indicated to the
Company and the Trust that they intend to make a market in the Preferred
Securities as permitted by applicable laws and regulations, the Underwriters are
not obligated to do so and may discontinue any such market-making at any time
without notice. Accordingly, no assurance can be given as to the liquidity of,
or trading markets for, the Preferred Securities.
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder who disposes of its Preferred Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Junior Subordinated Debentures
through the date of disposition in income as ordinary income, and to add such
amount to a holder's adjusted tax basis in a holder's pro rata share of the
underlying Junior Subordinated Debentures deemed disposed of. Accordingly, such
a holder will recognize a capital loss to the extent the selling price (which
may not fully reflect the value of accrued but unpaid interest) is less than the
holder's adjusted tax basis (which will include accrued but unpaid interest).
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States Federal income tax purposes. See
"Taxation -- Accrual of Original Issue Discount and Premium" and "-- Disposition
of the Preferred Securities."
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POTENTIAL MARKET VOLATILITY DURING DEFERRAL PERIOD
As described above, the Company has the right to extend an interest payment
period on the Junior Subordinated Debentures from time to time for a period not
exceeding 10 consecutive semi-annual interest periods. If the Company determines
to extend an interest payment period, or if the Company thereafter extends a
Deferral Period or prepays interest accrued during a Deferral Period as
described above, the market price of the Preferred Securities is likely to be
affected. In addition, as a result of such rights, the market price of the
Preferred Securities (which represent an undivided interest in Junior
Subordinated Debentures) may be more volatile than other securities on which
original issue discount accrues that do not have such rights. A holder that
disposes of its Preferred Securities during a Deferral Period, therefore, may
not receive the same return on its investment as a holder that continues to hold
its Preferred Securities. See "Description of the Junior Subordinated
Debentures -- Option to Extend Interest Payment Period."
THE FOLLOWING INFORMATION CONCERNING THE COMPANY, JPM CAPITAL TRUST II, THE
PREFERRED SECURITIES, THE PREFERRED SECURITIES GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES IS IN ADDITION TO, AND SHOULD BE READ IN CONJUNCTION
WITH, THE INFORMATION CONTAINED IN THE ACCOMPANYING PROSPECTUS. CAPITALIZED
TERMS USED IN THIS PROSPECTUS SUPPLEMENT HAVE THE SAME MEANINGS AS IN THE
ACCOMPANYING PROSPECTUS.
JPM CAPITAL TRUST II
JPM Capital Trust II is a statutory business trust formed on October 29,
1996, under the Delaware Business Trust Act (the "Business Trust Act") pursuant
to a declaration of trust among the Trustees and the Company and the filing of a
certificate of trust with the Secretary of State of the State of Delaware. Such
declaration will be amended and restated in its entirety (as so amended and
restated, the "Declaration") substantially in the form filed as an exhibit to
the Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus form a part, as of the date the Preferred Securities are
initially issued. The Declaration is qualified under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Upon issuance of the Preferred
Securities, the holders thereof will own all the issued and outstanding
Preferred Securities. The Company will acquire Common Securities in an amount
equal to at least 3% of the total capital of the Trust and will own, directly or
indirectly, all the issued and outstanding Common Securities. The Trust exists
for the purpose of (a) issuing its Trust Securities for cash and investing the
gross proceeds thereof in an equivalent amount of Junior Subordinated Debentures
and (b) engaging in such other activities as are necessary, convenient or
incidental thereto. The rights of the holders of the Trust Securities, including
economic rights, rights to information and voting rights, are as set forth in
the Declaration, the Business Trust Act and the Trust Indenture Act. The
Declaration does not permit the incurrence by the Trust of any indebtedness for
borrowed money or the making of any investment other than in the Junior
Subordinated Debentures. In the Declaration, the Company has agreed to pay for
all debts and obligations (other than with respect to the Trust Securities) and
all costs and expenses of the Trust, including the fees and expenses of the
Trustees and any taxes and all costs and expenses with respect thereto, to which
the Trust may become subject, except for United States withholding taxes.
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with the
Company's financial statements, with the Preferred Securities included in the
caption "Company-Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Grantor Trusts Holding Solely Junior Subordinated Debentures of the
Company". The assets of JPM Capital Trust II consist solely of $412.4 million
aggregate principal amount of the 7.95% Junior Subordinated Debentures due 2027
of the Company.
The Company has agreed that future financial reports of the Company will:
(i) include the Preferred Securities issued by other JPM Trusts on the Company's
balance sheet in the caption entitled "Company -- Obligated Mandatorily
Redeemable Preferred Securities of Subsidiary Grantor Trusts Holding Solely
Junior
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Subordinated Debentures of the Company"; (ii) include in a footnote to the
financial statements disclosure that the sole assets of the trusts are the
Junior Subordinated Debentures (specifying as to each trust the principal
amount, interest rate and maturity date of Junior Subordinated Debentures held)
and whether Staff Accounting Bulletin 53 treatment is sought; (iii) include, in
an audited footnote to the financial statements, disclosure that (a) the JPM
Trusts are wholly owned, (b) the sole assets of the JPM Trusts are the Junior
Subordinated Debentures (specifying as to each trust the principal amount,
interest rate and maturity date of the Junior Subordinated Debentures held), and
(c) the obligations of the Company under the documents, in the aggregate,
constitute a full and unconditional guarantee by the Company of the JPM Trusts'
obligations under the Preferred Securities issued by each JPM Trust.
USE OF PROCEEDS
The Trust will use the proceeds from the sale of the Preferred Securities
to purchase Junior Subordinated Debentures from the Company. The net proceeds
from the sale of the Junior Subordinated Debentures will be used by the Company
for general corporate purposes, including investment in equity and debt
securities and interest-bearing deposits of subsidiaries, the repurchase of
issued and outstanding preferred and/or common shares of the Company and other
general corporate purposes as may be determined by management.
The Company is required by the Federal Reserve to maintain certain levels
of capital for bank regulatory purposes. On October 21, 1996, the Federal
Reserve announced that cumulative preferred securities having the
characteristics of the Preferred Securities could be included as Tier 1 capital
for bank holding companies. Such Tier 1 capital treatment, together with the
Company's ability to deduct, for income tax purposes, interest payable on the
Junior Subordinated Debentures, will provide the Company with a more
cost-effective means of obtaining capital for regulatory purposes than other
Tier 1 capital alternatives currently available to it.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration which is qualified under the Trust Indenture Act. The Property
Trustee, First Trust of New York, National Association, but not the other
Trustees of the Trust, will act as the indenture trustee for purposes of the
Trust Indenture Act. The terms of the Preferred Securities and the Declaration
include those stated in the Declaration and those made part of the Declaration
by the Trust Indenture Act and the Business Trust Act. The following summarizes
the material terms and provisions of the Preferred Securities and is qualified
in its entirety by reference to, the Declaration, which has been filed as an
exhibit to the Registration Statement of which this Prospectus Supplement forms
a part, the Business Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Trust to issue the Preferred Securities,
which represent preferred undivided beneficial interests in the assets of the
Trust, and the Common Securities, which represent common undivided beneficial
interests in the assets of the Trust. All the Common Securities will be owned,
directly or indirectly, by the Company. The Common Securities and the Preferred
Securities rank pari passu with each other and will have equivalent terms except
that (i) if an Event of Default under the Declaration occurs and is continuing,
the holders of Preferred Securities will have a priority over holders of the
Common Securities with respect to distributions and payments upon liquidation,
redemption or otherwise and (ii) holders of Common Securities have the exclusive
right (subject to the terms of the Declaration) to appoint, remove or replace
Trustees and to increase or decrease the number of Trustees. The Declaration
does not permit the issuance by the Trust of any securities or other evidences
of beneficial ownership of, or beneficial interests in, the Trust other than the
Preferred Securities and the Common Securities, and does not permit the
incurrence of any indebtedness for borrowed money by the Trust or the making of
any investment other than in the Junior Subordinated Debentures. Pursuant to the
Declaration, the Property Trustee will have legal title to, and will hold, the
Junior Subordinated Debentures as trust assets for the benefit of the holders of
the Preferred Securities and the Common Securities. The payment of distributions
out of moneys held by the Property Trustee and payments on redemption of the
Preferred Securities or liquidation of the Trust are guaranteed by
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the Company on a subordinated basis as and to the extent described under
"Description of the Preferred Securities Guarantees" in the accompanying
Prospectus. The Property Trustee will hold the Preferred Securities Guarantee
for the benefit of holders of the Preferred Securities. The Preferred Securities
Guarantee, when taken together with the Company's obligations under the Junior
Subordinated Debentures and the Indenture and its obligations under the
Declaration, provides a full and unconditional guarantee from the time of
issuance of the Preferred Securities of amounts due on the Preferred Securities.
The Preferred Securities Guarantee itself, however, covers distributions and
other payments on the Preferred Securities only if and to the extent that the
Company has made a payment to the Property Trustee of interest or principal on
the Junior Subordinated Debentures deposited in the Trust as trust assets.
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of 7.95% of the stated liquidation amount of $1,000 per Preferred Security.
Distributions in arrears for more than one semi-annual period will bear interest
thereon at the rate per annum of 7.95% (to the extent permitted by law),
compounded semi-annually. The term "distributions" as used herein includes any
such interest payable unless otherwise stated. The amount of distributions
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months.
Distributions on the Preferred Securities will be cumulative, will accrue
from the original date of issuance and, except as otherwise described below,
will be payable semi-annually in arrears on February 1 and August 1 of each
year, commencing on August 1, 1997, but only if, and to the extent that,
interest payments are made in respect of Junior Subordinated Debentures held by
the Property Trustee.
So long as the Company shall not be in default in the payment of interest
on the Junior Subordinated Debentures, the Company has the right under the
Indenture to defer payments of interest on the Junior Subordinated Debentures by
extending the interest payment period from time to time on the Junior
Subordinated Debentures for a period not exceeding 10 consecutive semi-annual
interest periods and, as a consequence, the Trust would defer semi-annual
distributions on the Preferred Securities (though such distributions would
continue to accrue with interest thereon at the rate of 7.95% per annum,
compounded semi-annually) during any such Deferral Period. If the Company
exercises the right to extend an interest payment period, the Company may not
declare or pay dividends on, or redeem, purchase, acquire or make a distribution
or liquidation payment with respect to, any of its common stock or preferred
stock during such Deferral Period or make any guarantee payments with respect
thereto; provided, however, that the foregoing restrictions shall not apply to
(i) dividends, redemptions, purchases, acquisitions, distributions or payments
made by the Company by way of issuance of shares of its capital stock , (ii)
payments of accrued dividends by the Company upon the redemption, exchange or
conversion of any preferred stock of the Company as may be outstanding from time
to time in accordance with the terms of such preferred stock, (iii) cash
payments made by the Company in lieu of delivering fractional shares upon the
redemption, exchange or conversion of any preferred stock of the Company as may
be outstanding from time to time in accordance with the terms of such preferred
stock, (iv) repurchases, redemptions or other acquisitions of shares of capital
stock of the Company in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of employees, officers,
directors or consultants, or (v) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of such
rights pursuant thereto. Prior to the termination of any such Deferral Period,
the Company may further extend such Deferral Period; provided that such Deferral
Period together with all such previous and further extensions thereof may not
exceed 10 consecutive semi-annual interest periods and may not extend beyond the
maturity of the Junior Subordinated Debentures. Upon the termination of any
Deferral Period and the payment of all amounts then due, the Company may
commence a new Deferral Period, subject to the above requirements. The Company
may also prepay at any time all or any portion of the interest accrued during a
Deferral Period. Consequently, there could be multiple Deferral Periods of
varying lengths throughout the term of the Junior Subordinated Debentures, each
not to exceed 10 consecutive semi-annual interest periods or to cause any
extension beyond the maturity of the Junior Subordinated Debentures. See "Risk
Factors -- Option to Extend Interest Payment Period; Tax Impact of Extension;"
"Description of
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the Junior Subordinated Debentures -- Interest" and "-- Option to Extend
Interest Payment Period." Subject to prepayments as described above, payments of
accrued distributions will be payable to holders of Preferred Securities as they
appear on the books and records of the Trust on the first record date after the
end of a Deferral Period.
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Property Trustee has cash on hand in the Property Account
to permit such payment. The funds available for distribution to the holders of
the Preferred Securities will be limited to payments received by the Property
Trustee in respect of the Junior Subordinated Debentures that are deposited in
the Trust as trust assets. See "Description of the Junior Subordinated
Debentures." If the Company does not make interest payments on the Junior
Subordinated Debentures, the Property Trustee will not make distributions on the
Preferred Securities. Under the Declaration, if and to the extent the Company
does make interest payments on the Junior Subordinated Debentures deposited in
the Trust as trust assets, the Property Trustee is obligated to make
distributions on the Trust Securities on a Pro Rata Basis. The payment of
distributions on the Preferred Securities is guaranteed by the Company on a
subordinated basis as and to the extent set forth under "Description of the
Preferred Securities Guarantees" in the accompanying Prospectus. The Preferred
Securities Guarantee, when taken together with the Company's obligations under
the Junior Subordinated Debentures and the Indenture and its obligations under
the Declaration, provides a full and unconditional guarantee from the time of
issuance of the Preferred Securities of amounts due on the Preferred Securities.
The Preferred Securities Guarantee itself, however covers distributions and
other payments on the Preferred Securities only if and to the extent that the
Company has made a payment to the Property Trustee of interest or principal on
the Junior Subordinated Debentures deposited in the Trust as trust assets.
Distributions on the Preferred Securities will be made to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates. As long as the Preferred Securities remain in book-entry form, the
relevant record dates will be one Business Day (as defined herein) prior to the
relevant distribution payment date. Distributions payable on any Preferred
Securities that are not punctually paid on any distribution payment date as a
result of the Company having failed to make the corresponding interest payment
on the Junior Subordinated Debentures will forthwith cease to be payable to the
person in whose name such Preferred Security is registered on the relevant
record date, and such defaulted distribution will instead be payable to the
person in whose name such Preferred Security is registered on the special record
date established by the Regular Trustees, which record date shall correspond to
the special record date or other specified date determined in accordance with
the Indenture; provided, however, that distributions shall not be considered
payable on any distribution payment date falling within a Deferral Period unless
the Company has elected to make a full or partial payment of interest accrued on
the Junior Subordinated Debentures on such distribution payment date.
Distributions on the Preferred Securities will be paid through the Property
Trustee who will hold amounts received in respect of the Junior Subordinated
Debentures in the Property Account for the benefit of the holders of the
Preferred Securities and the Common Securities. Subject to any applicable laws
and regulations and the provisions of the Declaration, each such payment will be
made as described under "Book-Entry Only Issuance -- The Depository Trust
Company" below. In the event that the Preferred Securities do not continue to
remain in book-entry form, the Regular Trustees shall have the right to select
relevant record dates which shall be more than one Business Day prior to the
relevant payment dates. The Declaration provides that the payment dates or
record dates for the Preferred Securities shall be the same as the payment dates
and record dates for the Junior Subordinated Debentures. All distributions paid
with respect to the Trust Securities shall be paid on a Pro Rata Basis to the
holders thereof entitled thereto. If any date on which distributions are to be
made on the Preferred Securities is not a Business Day, then payment of the
distribution to be made on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay) except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date.
"Business Day" shall mean any day other
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than Saturday, Sunday or any other day on which banking institutions in the City
of New York in the State of New York are permitted or required by any applicable
law to close.
REDEMPTION
The Company has the right to redeem the Junior Subordinated Debentures on
or after February 1, 2007, in whole at any time or in part from time to time. A
redemption of the Junior Subordinated Debentures would cause a mandatory
redemption of Preferred Securities and Common Securities having an aggregate
liquidation amount equal to the principal amount of Junior Subordinated
Debentures redeemed. The "Redemption Price", in the case of such a redemption
shall equal the following prices expressed in percentages of the stated
liquidation amount together with accrued distributions to but excluding the date
fixed for redemption. If redeemed during the 12-month period beginning February
1;
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2007........................................................ 103.9750%
2008........................................................ 103.5775%
2009........................................................ 103.1800%
2010........................................................ 102.7825%
2011........................................................ 102.3850%
2012........................................................ 101.9875%
2013........................................................ 101.5900%
2014........................................................ 101.1925%
2015........................................................ 100.7950%
2016........................................................ 100.3975%
</TABLE>
and at 100% on or after February 1, 2017.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time an Investment Company Event, a Tax Event or a Capital
Treatment Event (each as hereinafter defined, and any one of which, a "Special
Event") shall occur and be continuing, the Trust may, subject to the Company
having received prior approval of the Federal Reserve for such dissolution if
then required under applicable capital guidelines or policies of the Federal
Reserve, be dissolved with the result that, after satisfaction of liabilities to
creditors of the Trust, Junior Subordinated Debentures with an aggregate
principal amount equal to the aggregate stated liquidation amount of the
Preferred Securities and the Common Securities would be distributed on a Pro
Rata Basis to the holders of the Preferred Securities and the Common Securities
in liquidation of such holders' interests in the Trust, within 90 days following
the occurrence of such Investment Company Event.
If a Tax Event or a Capital Treatment Event occurs and
(i) in the opinion of counsel to the Company experienced in such
matters, there would, after effecting the termination of the Trust and the
distribution of the Junior Subordinated Debentures to the holders of the
Preferred Securities in exchange therefor upon liquidation of the Trust, be
more than an insubstantial risk that an Adverse Tax Consequence (as defined
herein) would continue to exist, or
(ii) in the reasonable determination of the Company, there would,
after effecting the termination of the Trust and the distribution of the
Junior Subordinated Debentures to the holders of the Preferred Securities
in exchange therefor upon liquidation of the Trust, be more than an
insubstantial risk that the Company will not be entitled to treat an amount
equal to the liquidation amount of the Preferred Securities as "Tier 1
Capital" (or the equivalent thereof) for the purposes of the capital
adequacy guidelines of the Federal Reserve, as then in effect and
applicable to the Company, or
(iii) the Junior Subordinated Debentures are not held by the Trust;
then the Company shall have the right (a) to advance the Stated Maturity of the
Junior Subordinated Debentures to the minimum extent required, but in any event
to a date not earlier than February 1, 2017 and
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thereby cause the Preferred Securities to be redeemed on such earlier date (the
action referred to in this clause (a) being referred to herein as a "Maturity
Advancement"), such that, in the opinion of counsel to the Company experienced
in such matters, after advancing the Stated Maturity, interest paid on the
Junior Subordinated Debentures would be deductible for United States Federal
income tax purposes, or (b) if either (x) in the opinion of counsel to the
Company experienced in such matters, there would in all cases, after effecting a
Maturity Advancement, be more than an insubstantial risk that an Adverse Tax
Consequence would continue to exist or (y) in the reasonable determination of
the Company, there would in all cases, after effecting a Maturity Advancement,
be more than an insubstantial risk that the Company will not be entitled to
treat an amount equal to the liquidation amount of the Preferred Securities as
"Tier 1 Capital" (or the then equivalent thereof) for purposes of the capital
adequacy guidelines of the Federal Reserve, as then in effect and applicable to
the Company, to redeem the Junior Subordinated Debentures, in whole but not in
part, at any time within 90 days following the occurrence of the Tax Event or
Capital Treatment Event at a redemption price equal to 100% of the principal
amount thereof plus accrued and unpaid interest thereon to the redemption date.
Promptly following such redemption Preferred Securities and Common
Securities with an aggregate liquidation amount equal to the aggregate principal
amount of the Junior Subordinated Debentures so redeemed will be redeemed by the
Trust at the redemption price on a Pro Rata Basis. The Common Securities will be
redeemed on a Pro Rata Basis with the Preferred Securities, except that if an
Event of Default under the Declaration has occurred and is continuing, the
Preferred Securities will have a priority over the Common Securities with
respect to payment of the Redemption Price.
"Tax Event" means that the Regular Trustees shall have obtained an opinion
of a nationally recognized independent tax counsel experienced in such matters
(a "Dissolution Tax Opinion") to the effect that on or after the date of this
Prospectus Supplement as a result of (a) any amendment to, or change in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, (b) any amendment to, or
change in, an interpretation or application of any such laws or regulations by
any legislative body, court, governmental agency or regulatory authority
(including the enactment of any legislation and the publication of any judicial
decision or regulatory determination), (c) any interpretation or pronouncement
that provides for a position with respect to such laws or regulations that
differs from the theretofore generally accepted position or (d) any action taken
by any governmental agency or regulatory authority, which amendment or change is
enacted, promulgated, issued or effective or which interpretation or
pronouncement is issued or announced or which action is taken, in each case on
or after the date of this Prospectus Supplement, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the date
thereof, subject to United States Federal income tax with respect to income
accrued or received on the Junior Subordinated Debentures, (ii) the Trust is, or
will be within 90 days of the date thereof, subject to more than a de minimis
amount of other taxes, duties or other governmental charges or (iii) interest
payable by the Company to the Trust on the Junior Subordinated Debentures is
not, or within 90 days of the date thereof will not be, deductible by the
Company for United States Federal income tax purposes (each of the circumstances
referred to in clauses (i), (ii) and (iii) being referred to as an "Adverse Tax
Consequence").
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent counsel experienced in
practice under the Investment Company Act of 1940, as amended (the "1940 Act"),
that as a result of the occurrence of a change in law or regulation or a change
in interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
there is more than an insubstantial risk that the Trust is or will be considered
an "investment company" which is required to be registered under the 1940 Act,
which Change in 1940 Act Law becomes effective on or after the date of this
Prospectus Supplement.
"Capital Treatment Event" means that the Company has reasonably determined
that, as the result of the occurrence of a change in law or regulation or a
change in the interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority, there is
more than an insubstantial risk that the Company will not be able to treat the
minority interest in the Trust as "Tier 1 capital" (or the equivalent) for
purposes of the capital adequacy guidelines of the Federal Reserve, as then in
effect and applicable to the Company.
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On the date fixed for any distribution of Junior Subordinated Debentures,
upon dissolution of the Trust, (i) the Preferred Securities and the Common
Securities will no longer be deemed to be outstanding, (ii) the depositary or
its nominee, as the record holder of the Preferred Securities, will receive a
registered global certificate or certificates representing the Junior
Subordinated Debentures to be delivered upon such distribution and (iii) any
certificates representing Preferred Securities not held by the depositary or its
nominee will be deemed to represent Junior Subordinated Debentures having an
aggregate principal amount equal to the aggregate stated liquidation amount of,
with an interest rate identical to the distribution rate of, and accrued and
unpaid interest equal to accrued and unpaid distributions on, such Preferred
Securities, until such certificates are presented to the Company or its agent
for transfer or reissuance.
There can be no assurance as to the market price for the Junior
Subordinated Debentures which may be distributed in exchange for Preferred
Securities if a dissolution and liquidation of the Trust were to occur.
Accordingly, the Junior Subordinated Debentures which a holder of Preferred
Securities may subsequently receive upon the dissolution of the Trust may trade
at a discount to the price of the Preferred Securities exchanged.
MANDATORY REDEMPTION
Upon the repayment of the Junior Subordinated Debentures, whether at
maturity, upon redemption or otherwise, the proceeds from such repayment will be
promptly applied to redeem Preferred Securities and Common Securities having an
aggregate liquidation amount equal to the Junior Subordinated Debentures so
repaid, upon not less than 30 nor more than 60 days' notice, at the Redemption
Price. The Common Securities will be entitled to be redeemed on a Pro Rata Basis
with the Preferred Securities, except that if an Event of Default under the
Declaration has occurred and is continuing, the Preferred Securities will have a
priority over the Common Securities with respect to payment of the Redemption
Price. Subject to the foregoing, if fewer than all outstanding Preferred
Securities and Common Securities are to be redeemed, the Preferred Securities
and Common Securities will be redeemed on a Pro Rata Basis. In the event fewer
than all outstanding Preferred Securities are to be redeemed, Preferred
Securities registered in the name of and held by DTC or its nominee will be
redeemed as described under "Description of Preferred Securities -- Book-Entry-
Only Issuance -- The Depository Trust Company" below.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all semi-annual distribution periods terminating on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable) then, by 12:00 noon, New York City
time, on the redemption date and provided that the Company has paid to the
Property Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Junior Subordinated Debentures, the Trust will
irrevocably deposit with the Depositary funds sufficient to pay the applicable
Redemption Price and will give the Depositary irrevocable instructions and
authority to pay the Redemption Price to the holders of the Preferred
Securities. See "Book-Entry Only Issuance-The Depository Trust Company." If
notice of redemption shall have been given and funds deposited as required,
then, immediately prior to the close of business on the redemption date,
distributions will cease to accrue on the Preferred Securities called for
redemption, such Preferred Securities shall no longer be deemed to be
outstanding and all rights of holders of such Preferred Securities so called for
redemption will cease, except the right of the holders of such Preferred
Securities to receive the Redemption Price, but without interest on such
Redemption Price. Neither the Trustees nor the Trust shall be required to
register or cause to be registered the transfer of any Preferred Securities
which have been so called for redemption. If any date fixed for redemption of
Preferred Securities is not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay)
except that, if such Business Day falls in the next calendar year, such payment
will be made on the immediately preceding Business Day, in each case with the
same force and effect as if made on such date fixed for redemption. If the
Company fails to
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repay Junior Subordinated Debentures on maturity or on the date fixed for
redemption or if payment of the Redemption Price in respect of Preferred
Securities is improperly withheld or refused and not paid by the Property
Trustee or by the Company pursuant to the Preferred Securities Guarantee
described under "Description of the Preferred Securities Guarantees" in the
accompanying Prospectus, distributions on the Preferred Securities will continue
to accrue, from the original redemption date of the Preferred Securities to the
date of payment, in which case the actual payment date will be considered the
date fixed for redemption for purposes of calculating the Redemption Price.
In the event that fewer than all the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed pro rata as described
below under "Book Entry Only Issuance -- The Depository Trust Company."
Subject to the foregoing and applicable law (including, without limitation,
United States Federal securities laws), the Company or any of its subsidiaries
may at any time and from time to time purchase outstanding Preferred Securities
by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Declaration, the Trust shall dissolve: (i) on February 1,
2027; (ii) when all the Trust Securities shall have been called for redemption
and the amounts necessary for redemption thereof shall have been paid to the
holders of Trust Securities in accordance with the terms of the Trust
Securities; or (iii) when all the Junior Subordinated Debentures shall have been
distributed to the holders of Trust Securities in exchange for all the Trust
Securities in accordance with the terms of the Trust Securities.
In the event of any voluntary or involuntary dissolution of the Trust, the
holders of the Preferred Securities and Common Securities at the date of
dissolution of the Trust will be entitled to receive on a Pro Rata Basis solely
out of the assets of the Trust, after satisfaction of liabilities to creditors
(to the extent not satisfied by the Company as provided in the Declaration), an
amount equal to the aggregate of the stated liquidation amount of $1,000 per
Trust Security plus accrued and unpaid distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"), unless, in
connection with such dissolution, Junior Subordinated Debentures in an aggregate
principal amount equal to the aggregate stated liquidation amount of such Trust
Securities and bearing accrued and unpaid interest in an amount equal to the
accrued and unpaid distributions on such Trust Securities shall be distributed
on a Pro Rata Basis to the holders of the Preferred Securities and the Common
Securities in exchange therefor.
If, upon any such dissolution, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities and the Common Securities shall, subject to
the following sentence, be paid on a Pro Rata Basis. The holders of the Common
Securities will be entitled to receive distributions upon any such dissolution
on a Pro Rata Basis with the holders of the Preferred Securities, except that if
an Event of Default under the Declaration has occurred and is continuing, the
Preferred Securities shall have a priority over the Common Securities with
respect to payment of the Liquidation Distribution.
NO MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE TRUST
The Trust may not merge or consolidate with or into, or be replaced by, or
sell, transfer or lease all or substantially all its properties and assets to,
any corporation or other entity or, except as expressly permitted hereby, sell
or transfer any junior subordinated debentures to any corporation or other
entity.
DECLARATION EVENTS OF DEFAULT
An Indenture Event of Default (as defined in the accompanying Prospectus)
will constitute an event of default under the Declaration with respect to the
Trust Securities (an "Event of Default"); provided that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any such Event of Default with respect to the Common Securities until all Events
of Default with respect to the Preferred Securities have been cured or waived.
Until all such Events of Default with respect to the Preferred
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Securities have been so cured or waived, the Property Trustee will be deemed to
be acting solely on behalf of the holders of the Preferred Securities, and only
the holders of the Preferred Securities will have the right to direct the
Property Trustee with respect to certain matters under the Declaration and
consequently under the Indenture. In the event that any Event of Default with
respect to the Preferred Securities is waived by the holders of the Preferred
Securities as provided in the Declaration, the holders of Common Securities
pursuant to the Declaration have agreed that such waiver also constitutes a
waiver of such Event of Default with respect to the Common Securities for all
purposes under the Declaration without any further act, vote or consent of the
holders of the Common Securities. See "Voting Rights."
Upon the occurrence of an Event of Default, the Property Trustee as the
holder of all the Junior Subordinated Debentures will have the right under the
Indenture to declare the principal of, and interest on, the Junior Subordinated
Debentures to be immediately due and payable. In addition, the Property Trustee
will have the power to exercise all rights, powers and privileges under the
Indenture. If the Property Trustee fails to enforce its rights under the
Indenture, any holder of Preferred Securities may, to the extent permitted by
applicable law, after a period of 30 days has elapsed from such holder's written
request to the Property Trustee to enforce such rights, institute a legal
proceeding against the Company to enforce the Property Trustee's rights.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Company to pay
interest or principal on the Junior Subordinated Debentures on the date such
interest or principal is otherwise payable (or in the case of redemption, the
redemption date), then a holder of Preferred Securities may directly institute
suit against the Company for enforcement of payment to such holder of the
principal of or interest on Junior Subordinated Debentures having a principal
amount equal to the aggregate liquidation amount of the Preferred Securities
held by such holder on or after the respective due date specified in the Junior
Subordinated Debentures. The holders of Preferred Securities will not be able to
exercise directly against the Company any other remedy available to the holders
of the Junior Subordinated Debentures unless the Property Trustee first fails to
do so. See "Description of the Junior Subordinated Debentures."
VOTING RIGHTS
Except as provided below, under "Modification and Amendment of the
Declaration" and "Description of the Preferred Securities
Guarantees -- Amendments and Assignment" in the accompanying Prospectus and as
otherwise required by the Business Trust Act, the Trust Indenture Act or the
Declaration, the holders of the Preferred Securities will have no voting rights.
Subject to the requirements of the second to last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Preferred Securities have the right (i) on behalf of all holders of Preferred
Securities, to waive any past default that is waivable under the Declaration and
(ii) to direct the time, method and place of conducting any proceeding for any
remedy available to the Property Trustee, or exercising any trust or power
conferred upon the Property Trustee under the Declaration, including the right
to direct the Property Trustee, as the holder of the Junior Subordinated
Debentures, to (A) direct the time, method and place of conducting any
proceeding for any remedy available to the Indenture Trustee (as defined
herein), or executing any trust or power conferred on the Indenture Trustee with
respect to the Junior Subordinated Debentures, (B) waive any past default that
is waivable under Section 6.01(c) of the Indenture, or (C) exercise any right to
rescind or annul a declaration that the principal of all the Junior Subordinated
Debentures shall be due and payable; provided, however, that where a consent
under the Indenture would require the consent of (a) holders of Junior
Subordinated Debentures representing a specified percentage greater than a
majority in principal amount of the Junior Subordinated Debentures or (b) each
holder of Junior Subordinated Debentures affected thereby, no such consent shall
be given by the Property Trustee without the prior consent of, in the case of
clause (a) above, holders of Preferred Securities representing such specified
percentage of the aggregate liquidation amount of the Preferred Securities or,
in the case of clause (b) above, each holder of Preferred Securities affected
thereby. The Property Trustee shall not revoke any action previously authorized
or approved by a vote of the holders of Preferred Securities. The Property
Trustee shall notify all holders of record of Preferred Securities of any notice
of default received from the Indenture Trustee with respect to the Junior
Subordinated Debentures. Other than with respect to directing the time,
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method and place of conducting any proceeding for any remedy available to the
Property Trustee or the Indenture Trustee as set forth above, the Property
Trustee shall be under no obligation to take any of the foregoing actions at the
direction of the holders of the Preferred Securities unless the Property Trustee
shall have obtained an opinion of nationally recognized independent tax counsel
recognized as expert in such matters to the effect that the Trust will not be
classified for United States Federal income tax purposes as an association
taxable as a corporation or a partnership on account of such action and will be
treated as a grantor trust for United States Federal income tax purposes
following such action. If the Property Trustee fails to enforce its rights under
the Declaration (including, without limitation, its rights, powers and
privileges as a holder of the Junior Subordinated Debentures under the
Indenture), any holder of Preferred Securities may, to the extent permitted by
applicable law, after a period of 30 days has elapsed from such holder's written
request to the Property Trustee to enforce such rights, institute a legal
proceeding directly against the Company to enforce the Property Trustee's rights
under the Declaration, without first instituting a legal proceeding against the
Property Trustee or any other person.
A waiver of an Indenture Event of Default by the Property Trustee at the
direction of holders of the Preferred Securities will constitute a waiver of the
corresponding Event of Default under the Declaration in respect of the Trust
Securities.
In the event the consent of the Property Trustee as the holder of the
Junior Subordinated Debentures is required under the Indenture with respect to
any amendment, modification or termination of the Indenture or the Junior
Subordinated Debentures, the Property Trustee shall request the direction of the
holders of the Trust Securities with respect to such amendment, modification or
termination and shall vote with respect to such amendment, modification or
termination as directed by a majority in liquidation amount of the Trust
Securities voting together as a single class; provided, however, that where any
such amendment, modification or termination under the Indenture would require
the consent or vote of (1) holders of Junior Subordinated Debentures
representing a specified percentage greater than a majority in principal amount
of the Junior Subordinated Debentures or (2) each holder of Junior Subordinated
Debentures, the Property Trustee may only give such consent or vote, in the case
of clause (1), at the direction of the holders of Trust Securities representing
such specified percentage of the aggregate liquidation amount of the Trust
Securities or, in the case of clause (2), as directed by each holder of Trust
Securities; and, provided further, however, that the Property Trustee shall be
under no obligation to take any such action in accordance with the directions of
the holders of the Trust Securities unless the Property Trustee has obtained an
opinion of nationally recognized independent tax counsel recognized as expert in
such matters to the effect that the Trust will not be classified for United
States Federal income tax purposes as an association taxable as a corporation or
a partnership on account of such action and will be treated as a grantor trust
for United States Federal income tax purposes following such action.
Any required approval or direction of holders of Preferred Securities may
be given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all the holders of Trust Securities or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Preferred Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken; (ii) a description of any resolution proposed
for adoption at such meeting on which such holders are entitled to vote or of
such matter upon which written consent is sought; and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the holders of Preferred Securities will be required
for the Trust to redeem and cancel Preferred Securities or distribute Junior
Subordinated Debentures in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities at such time that are owned by the Company or by any entity directly
or indirectly controlling or controlled by or under direct or indirect common
control with the Company shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if they were not outstanding.
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The procedures by which persons owning Preferred Securities registered in
the name of and held by DTC or its nominee may exercise their voting rights are
described under "Description of Preferred Securities -- Book-Entry Only
Issuance; The Depository Trust Company" below.
Holders of the Preferred Securities will have no rights to increase or
decrease the number of Trustees or to appoint, remove or replace a Trustee,
which rights are vested exclusively in the holders of the Common Securities.
MODIFICATION AND AMENDMENT OF THE DECLARATION
The Declaration may be modified and amended with the approval of a majority
of the Regular Trustees, provided that, if any proposed modification or
amendment provides for, or the Regular Trustees otherwise propose to effect, (a)
any action that would adversely affect the powers, preferences or special rights
of the Trust Securities, whether by way of amendment to the Declaration or
otherwise, or (b) the dissolution, liquidation, winding-up or termination of the
Trust other than pursuant to the terms of the Declaration, then the holders of
the outstanding Trust Securities as a class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of at least 66 2/3% in liquidation amount of the Trust
Securities, provided that if any amendment or proposal referred to above would
adversely affect only the Preferred Securities or the Common Securities, then
only the affected class will be entitled to vote on such amendment or proposal
and such amendment or proposal shall not be effective except with the approval
of 66 2/3% in liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, (i) no amendment or modification may be made
to the Declaration unless the Regular Trustees shall have obtained (a) either a
ruling from the Internal Revenue Service or a written unqualified opinion of
nationally recognized independent tax counsel experienced in such matters to the
effect that such amendment will not cause the Trust to be classified for United
States Federal income tax purposes as an association taxable as a corporation or
a partnership and to the effect that the Trust will continue to be treated as a
grantor trust for purposes of United States Federal income taxation and (b) a
written unqualified opinion of nationally recognized independent counsel
experienced in such matters to the effect that such amendment will not cause the
Trust to be an "investment company" which is required to be registered under the
1940 Act; (ii) certain specified provisions of the Declaration may not be
amended without the consent of all the holders of the Trust Securities; (iii) no
amendment which adversely affects the rights, powers and privileges of the
Property Trustee or the Delaware Trustee shall be made without the consent of
the Property Trustee or the Delaware Trustee, as applicable; (iv) Article IV of
the Declaration relating to the obligation of the Company to purchase the Common
Securities and to pay certain obligations and expenses of the Trust as described
under "The JPM Trusts" in the accompanying Prospectus may not be amended without
the consent of the Company; and (v) the rights of holders of Common Securities
under Article V of the Declaration to increase or decrease the number of, and to
appoint, replace or remove, Trustees shall not be amended without the consent of
each holder of Common Securities.
The Declaration further provides that it may be amended without the consent
of the holders of the Trust Securities to (i) cure any ambiguity; (ii) correct
or supplement any provision in the Declaration that may be defective or
inconsistent with any other provision of the Declaration; (iii) to add to the
covenants, restrictions or obligations of the Company; and (iv) to conform to
changes in, or a change in interpretation or application of, certain 1940 Act
requirements by the Securities and Exchange Commission (the "Commission"), which
amendment does not adversely affect the rights, preferences or privileges of the
holders.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company will act as securities depositary for the
Preferred Securities. The Preferred Securities will be issued only as fully
registered securities registered in the name of DTC or its nominee. One or more
fully-registered global Preferred Securities certificates (each a "Preferred
Securities Global Certificate"), representing the total aggregate number of
Preferred Securities, will be issued and will be deposited with DTC.
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The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in a global Preferred
Security.
DTC 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 securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations ("Direct Participants").
DTC is owned by a number of its Direct Participants and by the NYSE, the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Upon issuance of a Preferred Securities Global Certificate, DTC will credit
on its book-entry registration and transfer system the number of Preferred
Securities represented by such Preferred Securities Global Certificate to the
accounts of institutions that have accounts with DTC. Ownership of beneficial
interests in a Preferred Securities Global Certificate will be limited to
Participants or persons that may hold interests through Participants. The
ownership interest of each actual purchaser of each Preferred Security
("Beneficial Owner") is in turn to be recorded on the Direct Participants' and
the Indirect Participants' records, including Euroclear and Cedel. Beneficial
Owners will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct Participants or the Indirect Participants through which the
Beneficial Owners purchased Preferred Securities. Transfers of ownership
interests in the Preferred Securities are to be accomplished by entries made on
the books of Participants acting on behalf of Beneficial Owners.
Transfers between Participants will be effected in accordance with DTC's
procedures and will be settled in same-day funds. Transfers between participants
in Euroclear and Cedel will be effected in the ordinary way in accordance with
their respective rules and operating procedures.
Cross-market transfers between Participants, on the one hand, and Euroclear
participants or Cedel participants, on the other hand, will be effected in DTC
in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case may
be, by its respective depositary; however, such cross-market transactions will
require delivery of instructions to Euroclear or Cedel, as the case may be, by
the counterparty in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
Cedel, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests in
the Preferred Securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Euroclear participants and Cedel participants may not deliver instructions
directly to the depositaries for Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Preferred Security from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear participant or Cedel participant, during the securities
settlement processing day (which must be a business day for Euroclear and Cedel,
as the case may be) immediately following the DTC settlement date. Cash received
in Euroclear or Cedel as a result of sales of interests in a Preferred Security
by or through a Euroclear or Cedel participant to a Participant in DTC will be
received with value on the DTC settlement date but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following the DTC settlement date.
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DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers. So long as DTC, or its
nominee, is the owner of a Preferred Securities Global Certificate, DTC or such
nominee, as the case may be, will be considered the sole owner and holder of
record of the Preferred Securities represented by such Preferred Securities
Global Certificate for all purposes.
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.
Redemption notices shall be sent to Cede & Co. If less than all the
Preferred Securities are being redeemed, DTC will reduce pro rata (subject to
adjustment to eliminate fractional Preferred Securities) the amount of interest
of each Direct Participant in the Preferred Securities to be redeemed.
Although voting with respect to the Preferred Securities is limited, in
those instances in which a vote is required, neither DTC nor Cede & Co. itself
will consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an omnibus proxy to the Trust 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 the Preferred
Securities are credited on the record date (identified in a listing attached to
the omnibus proxy).
Distribution payments on the Preferred Securities represented by a
Preferred Securities Global Certificate will be made by the Property Trustee to
DTC. DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices and will be the responsibility of
such Participants and not of DTC, the Trust or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of distributions to DTC is the responsibility of the Trust, disbursement
of such payments to Direct Participants is the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners is the responsibility of
Direct Participants and Indirect Participants.
Except as provided herein, a Beneficial Owner in a Preferred Securities
Global Certificate will not be entitled to receive physical delivery of
Preferred Securities. Accordingly, each Beneficial Owner must rely on the
procedures of DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust and the Property Trustee. Under such circumstances, if a successor
securities depositary is not obtained, Preferred Security certificates will be
required to be printed and delivered. Additionally, the Trust may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary). In that event, certificates for the Preferred Securities
will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Trust and the Company believe to be
reliable, but the Trust and the Company take no responsibility for the accuracy
thereof.
PAYMENT
Payments in respect of the Preferred Securities represented by the Global
Certificates shall be made to DTC, which shall credit the relevant accounts at
DTC on the applicable distribution dates or, in the case of Preferred Securities
represented by Certificated Securities, such payments shall be made by check
mailed to the address of the holder entitled thereto as such address shall
appear on the Securities Register.
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REGISTRAR, TRANSFER AGENT AND PAYING AGENT
In the event the Preferred Securities do not remain in book-entry only
form, the following provisions will apply:
Payment of distributions and payments on redemption of the Preferred
Securities will be payable, the transfer of the Preferred Securities will be
registrable and Preferred Securities will be exchangeable for Preferred
Securities of other denominations of a like aggregate liquidation amount at the
principal corporate trust office of the Property Trustee in The City of New
York; provided that payment of distributions may be made at the option of the
Regular Trustees on behalf of the Trust by check mailed to the address of the
persons entitled thereto and that the payment on redemption of any Preferred
Security will be made only upon surrender of such Preferred Security to the
Property Trustee.
First Trust of New York, National Association or one of its affiliates will
act as registrar and transfer agent for the Preferred Securities. First Trust of
New York, National Association will also act as paying agent and, with the
consent of the Regular Trustees, may designate additional paying agents.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or the Company may require) in respect of any tax or
other governmental charges that may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to a default with respect to the Trust
Securities, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care as
a prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provision, the Property Trustee is under no obligation to
exercise any of the powers vested in it by the Declaration at the request of any
holder of Preferred Securities, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The Property Trustee is not required to expend or risk its own funds or
otherwise incur personal financial liability in the performance of its duties if
the Property Trustee reasonably believes that repayment or adequate indemnity is
not reasonably assured to it.
The Property Trustee is a depositary for funds and performs other services
for, and transacts other banking business with, the Company in the normal course
of business.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to principles of conflicts of laws.
MISCELLANEOUS
The Regular Trustees are authorized and directed to take such action as
they deem reasonable in order that the Trust will not be deemed to be an
"investment company" required to be registered under the 1940 Act or that the
Trust will not be classified for United States Federal income tax purposes as an
association taxable as a corporation or a partnership and will be treated as a
grantor trust for United States Federal income tax purposes. In this connection,
the Regular Trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of the Trust or the Declaration, that
the Regular Trustees determine in their discretion to be reasonable and
necessary or desirable for such purposes, as long as such action does not
adversely affect the interests of holders of the Trust Securities.
The Company and the Regular Trustees on behalf of the Trust will be
required to provide to the Property Trustee annually a certificate as to whether
or not the Company and the Trust, respectively, is in compliance with all the
conditions and covenants under the Declaration.
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DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE
Set forth below is a summary of information concerning the Preferred
Securities Guarantee that will be executed and delivered by the Company for the
benefit of the holders from time to time of the Preferred Securities. The
Preferred Securities Guarantee will be qualified under the Trust Indenture Act
and will be held by First Trust of New York, National Association, acting in its
capacity as indenture trustee with respect thereto, for the benefit of holders
of the Preferred Securities of the Trust. The terms of the Preferred Securities
Guarantee will be those set forth in the Preferred Securities Guarantee and
those made part of the Preferred Securities Guarantee by the Trust Indenture
Act. This description summarizes the material terms of the Preferred Securities
Guarantee and is qualified in its entirety by reference to the Preferred
Securities Guarantee, and the Trust Indenture Act. Section references used
herein are references to the provisions of the Preferred Securities Guarantee.
GENERAL
Pursuant to the Preferred Securities Guarantee, the Company will
irrevocably and unconditionally agree, to the extent set forth therein, to pay
in full, to the holders of the Preferred Securities, the Guarantee Payments (as
defined herein), to the extent not paid by the Trust, regardless of any defense,
right of set-off or counterclaim that the Trust may have or assert. The
following payments or distributions with respect to Preferred Securities to the
extent not paid or made by the Trust (the "Guarantee Payments"), will be subject
to the Preferred Securities Guarantee (without duplication): (i) any accrued and
unpaid distributions on Preferred Securities, and the redemption price,
including all accrued and unpaid distributions to the date of redemption, with
respect to any Preferred Securities called for redemption by the Trust, but if
and only to the extent that in each case the Company has made a payment to the
Property Trustee of interest or principal on the Junior Subordinated Debt
Securities deposited in the Trust as trust assets, and (ii) upon a voluntary or
involuntary liquidation, dissolution, winding-up or termination of the Trust
(other than in connection with the distribution of such Junior Subordinated Debt
Securities to the holders of the Preferred Securities or the redemption of all
the Preferred Securities upon the maturity or redemption of such Junior
Subordinated Debt Securities) the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid distributions on the Preferred Securities to
the date of payment, to the extent the Trust has funds available therefor, or
(b) the amount of assets of the Trust remaining available for distribution to
holders of the Preferred Securities upon liquidation of the Trust. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Company to the holders of the Preferred Securities or by
causing the Trust to pay such amounts to such holders.
The Company's obligations under the Declaration, the Preferred Securities
Guarantee, the Junior Subordinated Debt Securities purchased by the Trust and
the Indenture in the aggregate will provide a full and unconditional guarantee
on a subordinated basis by the Company of payments due on the Preferred
Securities. However, the Preferred Securities Guarantee covers distributions and
other payments on the Preferred Securities only if and to the extent that the
Company has made a payment to the Property Trustee of interest or principal on
the Junior Subordinated Debt Securities deposited in the Trust as trust assets.
If the Company does not make interest or principal payments on the Junior
Subordinated Debt Securities deposited in the Trust as trust assets, the
Property Trustee will not make distributions on the Preferred Securities of the
Trust and the Trust will not have funds available therefor.
CERTAIN COVENANTS OF THE COMPANY
In the Preferred Securities Guarantee, the Company will covenant that, so
long as any Preferred Securities remain outstanding, the Company will not
declare or pay any dividends on, or redeem, purchase, acquire or make a
distribution or liquidation payment with respect to, any of its common stock or
preferred stock or make any guarantee payment with respect thereto, if at such
time (i) the Company shall be in default with respect to its Guarantee Payments
or other payment obligations under such Preferred Securities Guarantee, (ii)
there shall have occurred any Declaration Event of Default or (iii) in the event
that Junior Subordinated Debt Securities are issued to the Trust in connection
with the issuance of Trust Securities by the Trust, the Company shall have given
notice of its election to defer payments of interest on such Junior
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Subordinated Debt Securities by extending the interest payment period as
provided in the terms of the Junior Subordinated Debt Securities and such
period, or any extension thereof, is continuing; provided, however, that the
foregoing restrictions shall not apply to (i) dividends, redemptions, purchases,
acquisitions, distributions or payments made by the Company by way of issuance
of shares of its capital stock, (ii) payments of accrued dividends by the
Company upon the redemption, exchange or conversion of any preferred stock of
the Company as may be outstanding from time to time in accordance with the terms
of such preferred stock, (iii) cash payments made by the Company in lieu of
delivering fractional shares upon the redemption, exchange or conversion of any
preferred stock of the Company as may be outstanding from time to time in
accordance with the terms of such preferred stock, (iv) repurchase, redemptions
or other acquisitions of shares of capital stock of the Company in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of employees, officers, directors or consultants, or (v) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of such rights pursuant thereto. In
addition, so long as any Preferred Securities remain outstanding, the Company
has agreed (i) to remain the sole direct or indirect owner of all the
outstanding Common Securities and not to cause or permit such Common Securities
to be transferred except to the extent permitted by the Declaration, provided
that any permitted successor of the Company under the Indenture may succeed to
the Company's ownership of such Common Securities, and (ii) to use reasonable
efforts to cause the Trust to continue to be treated as a grantor trust for
United States Federal income tax purposes, except in connection with a
distribution of Junior Subordinated Debt Securities. (Section 6.01)
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of the applicable Preferred Securities (in which case no consent will
be required), the Preferred Securities Guarantee may be amended only with the
prior approval of the holders of not less than 66 2/3% in liquidation amount of
the outstanding Preferred Securities. (Section 9.02) All guarantees and
agreements contained in the Preferred Securities Guarantee shall bind the
successors, assignees, receivers, trustees and representatives of the Company
and shall inure to the benefit of the holders of the Preferred Securities then
outstanding. Except in connection with a consolidation, merger or sale involving
the Company that is permitted under the Indenture, the Company may not assign
its obligations under the Preferred Securities Guarantee. (Section 9.01)
TERMINATION OF THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee will terminate and be of no further
force and effect upon full payment of the redemption price of all Preferred
Securities, or upon distribution of the Junior Subordinated Debt Securities to
the holders of the Preferred Securities in exchange for all the Preferred
Securities, or upon full payment of the amounts payable upon liquidation of the
Trust. Notwithstanding the foregoing, the Preferred Securities Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of Preferred Securities must restore payment of any sums paid
under such Preferred Securities or such Preferred Securities Guarantee. (Section
7.01)
STATUS OF THE PREFERRED SECURITIES GUARANTEE
The Company's obligations under the Preferred Securities Guarantee to make
the Guarantee Payments will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
indebtedness, liabilities and obligations of the Company and any guarantees,
endorsements or other contingent obligations of the Company in respect of such
indebtedness, liabilities or obligations, including the Junior Subordinated Debt
Securities, except those made pari passu or subordinate by their terms, and (ii)
senior to all capital stock now or hereafter issued by the Company and to any
guarantee now or hereafter entered into by the Company in respect of any of its
capital stock. The Company's obligations under the Preferred Securities
Guarantee will rank pari passu with any other Preferred Securities Guarantee.
(Section 6.02) Because the Company is a holding company, the Company's
obligations under the Preferred Securities Guarantee are also effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, except to the extent that the Company is a creditor of the
subsidiaries recognized as
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such. The Declaration provides that each holder of Preferred Securities, by
acceptance thereof, agrees to the subordination provisions and other terms of
the Preferred Securities Guarantee.
The Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the Company to enforce its rights under the
Preferred Securities Guarantee without first instituting a legal proceeding
against any other person or entity). The Preferred Securities Guarantee will be
deposited with First Trust of New York, National Association, as indenture
trustee, to be held for the benefit of the holders of the Preferred Securities.
First Trust of New York, National Association shall enforce such Preferred
Securities Guarantee on behalf of the holders of the Preferred Securities. The
holders of not less than a majority in aggregate liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available in respect of the Preferred
Securities Guarantee, including the giving of directions to First Trust of New
York, National Association. If First Trust of New York, National Association
fails to enforce the Preferred Securities Guarantee as above provided, any
holder of Preferred Securities may institute a legal proceeding directly against
the Company to enforce its rights under such Preferred Securities Guarantee,
without first instituting a legal proceeding against the Trust or any other
person or entity.
MISCELLANEOUS
The Company will be required to provide annually to First Trust of New
York, National Association a statement as to the performance by the Company of
certain of its obligations under the Preferred Securities Guarantee and as to
any default in such performance. The Company is required to file annually with
First Trust of New York, National Association an officer's certificate as to the
Company's compliance with all conditions to be complied with by it under the
Preferred Securities Guarantee. (Section 2.04)
First Trust of New York, National Association, prior to the occurrence of a
default, undertakes to perform only such duties as are specifically set forth in
the Preferred Securities Guarantee and, after default with respect to the
Preferred Securities Guarantee, shall exercise the same degree of care as a
prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provision, First Trust of New York, National Association is
under no obligation to exercise any of the powers vested in it by the Preferred
Securities Guarantee at the request of any holder of Preferred Securities unless
it is offered reasonable indemnity against the costs, expenses and liabilities
that might be incurred thereby. (Section 3.02)
GOVERNING LAW
The Preferred Securities Guarantee will be governed by, and construed in
accordance with, the laws of the State of New York.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Set forth below is a description of the Junior Subordinated Debentures in
which the Trust will invest the proceeds from the issuance and sale of the Trust
Securities and which will be deposited in the Trust as trust assets. The terms
of the Junior Subordinated Debentures include those stated in the Indenture
dated as of November 1, 1996, between the Company and First Trust of New York,
National Association, as trustee (the "Indenture Trustee"), as supplemented by
the Second Supplemental Indenture dated as of February 3, 1997, between the
Company and the Indenture Trustee (as so supplemented, the "Indenture"), forms
of which have been filed as exhibits to the Registration Statement of which this
Prospectus Supplement forms a part, and those made part of the Indenture by the
Trust Indenture Act. This description supplements the description of the general
terms and provisions of the Subordinated Debt Securities set forth in the
accompanying Prospectus under the caption "Description of the Junior
Subordinated Debt Securities." The following description does not purport to be
complete and is qualified in its entirety by reference to the Indenture and the
Trust Indenture Act. Whenever particular provisions or defined terms in the
Indenture are referred to herein, such provisions or defined terms are
incorporated by reference herein. Section references used herein are references
to provisions of the Indenture.
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The Indenture does not limit the aggregate principal amount of indebtedness
which may be issued thereunder and provides that junior subordinated debentures
may be issued thereunder from time to time in one or more series (collectively,
together with the Junior Subordinated Debentures, the "Subordinated
Debentures"). The Junior Subordinated Debentures constitute a separate series
under the Indenture.
Under certain circumstances involving the dissolution of the Trust
following the occurrence of a Special Event, Junior Subordinated Debentures may
be distributed to the holders of the Trust Securities upon dissolution of the
Trust. See "Description of the Preferred Securities -- Special Event Redemption
or Distribution."
GENERAL
The Junior Subordinated Debentures are unsecured, subordinated obligations
of the Company, limited in aggregate principal amount to an amount equal to the
sum of (i) the stated liquidation amount of the Preferred Securities issued by
the Trust and (ii) the proceeds received by the Trust upon issuance of the
Common Securities to the Company (which proceeds will be used to purchase an
equal principal amount of Junior Subordinated Debentures).
The entire principal amount of the Junior Subordinated Debentures will
become due and payable, together with any accrued and unpaid interest thereon,
on February 1, 2027 (such date, the "Stated Maturity"). The Junior Subordinated
Debentures are not subject to any sinking fund.
The Junior Subordinated Debentures are subordinate in right of payment to
Senior Indebtedness, Subordinated Indebtedness and Derivative Obligations (as
such terms are defined in the accompanying Prospectus) of the Company. At
December 31, 1996, the amount of Senior Indebtedness, Subordinated Indebtedness
and Derivative Obligations was approximately $13.1 billion. See "Description of
the Junior Subordinated Debt Securities -- Subordination" in the Prospectus.
If Junior Subordinated Debentures are distributed to holders of Preferred
Securities upon dissolution of the Trust, such Junior Subordinated Debentures
will initially be issued as a Global Security (as defined below). As described
herein, under certain limited circumstances, Junior Subordinated Debentures may
be issued in certificated form in exchange for a Global Security. See
"Book-Entry and Settlement" below. In the event that Junior Subordinated
Debentures are issued in certificated form, such Junior Subordinated Debentures
will be in denominations of $1,000 and integral multiples thereof and may be
transferred or exchanged at the offices described below. Payments on Junior
Subordinated Debentures issued as a Global Security will be made to DTC, a
successor depositary or, in the event that no depositary is used, to a paying
agent for the Junior Subordinated Debentures.
In the event that Junior Subordinated Debentures are issued in certificated
form, payments of principal and interest will be payable, the transfer of the
Junior Subordinated Debentures will be registrable and Junior Subordinated
Debentures will be exchangeable for Junior Subordinated Debentures of other
denominations of a like aggregate principal amount at the corporate trust office
of the Indenture Trustee in The City of New York; provided that payment of
interest may be made at the option of the Company by check mailed to the address
of the persons entitled thereto and that the payment of principal with respect
to any Junior Subordinated Debenture will be made only upon surrender of such
Junior Subordinated Debenture to the Indenture Trustee.
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OPTIONAL REDEMPTION
Except as provided below, the Junior Subordinated Debentures may not be
redeemed prior to February 1, 2007. Subject to the Company having received prior
approval of the Federal Reserve to do so if then required under applicable
capital guidelines or policies of the Federal Reserve, the Company shall have
the right to redeem the Junior Subordinated Debentures, in whole or in part,
from time to time, on or after February 1, 2007, upon not less than 30 nor more
than 60 days notice, at a redemption price equal to the following prices,
expressed in percentages of principal amount, plus any accrued and unpaid
interest to the redemption date, including interest accrued during a Deferral
Period. If redeemed during the 12-month period beginning February 1:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2007........................................................ 103.9750%
2008........................................................ 103.5775%
2009........................................................ 103.1800%
2010........................................................ 102.7825%
2011........................................................ 102.3850%
2012........................................................ 101.9875%
2013........................................................ 101.5900%
2014........................................................ 101.1925%
2015........................................................ 100.7950%
2016........................................................ 100.3975%
</TABLE>
and at 100% on or after February 1, 2017.
TAX EVENT OR CAPITAL TREATMENT EVENT REDEMPTION
If a Tax Event or a Capital Treatment Event occurs and
(i) in the opinion of counsel to the Company experienced in such
matters, there would, after effecting the termination of the Trust and the
distribution of the Junior Subordinated Debentures to the holders of the
Preferred Securities in exchange therefor upon liquidation of the Trust, be
more than an insubstantial risk that an Adverse Tax Consequence (as defined
herein) would continue to exist,
(ii) in the reasonable determination of the Company, there would,
after effecting the termination of the Trust and the distribution of the
Junior Subordinated Debentures to the holders of the Preferred Securities
in exchange therefor upon liquidation of the Trust, be more than an
insubstantial risk that the Company will not be entitled to treat an amount
equal to the liquidation amount of the Preferred Securities as "Tier 1
Capital" (or the equivalent thereof) for the purposes of the capital
adequacy guidelines of the Federal Reserve, as then in effect and
applicable to the Company, or
(iii) the Junior Subordinated Debentures are not held by the Trust;
then the Company shall have the right (a) to advance the Stated Maturity of the
Junior Subordinated Debentures to the minimum extent required, but in any event
to a date not earlier than February 1, 2017 (the action referred to in this
clause (a) being referred to herein as a "Maturity Advancement"), such that, in
the opinion of counsel to the Company experienced in such matters, after
advancing the Stated Maturity, interest paid on the Junior Subordinated
Debentures would be deductible for United States Federal income tax purposes, or
(b) if either (x) in the opinion of counsel to the Company experienced in such
matters, there would in all cases, after effecting a Maturity Advancement, be
more than an insubstantial risk that an Adverse Tax Consequence would continue
to exist or (y) in the reasonable determination of the Company, there would in
all cases, after effecting a Maturity Advancement, be more than an insubstantial
risk that the Company will not be entitled to treat an amount equal to the
liquidation amount of the Preferred Securities as "Tier 1 Capital" (or the then
equivalent thereof) for purposes of the capital adequacy guidelines of the
Federal Reserve, as then in effect and applicable to the Company, to redeem the
Junior Subordinated Debentures, in
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whole but not in part, at any time within 90 days following the occurrence of
the Tax Event or Capital Treatment Event at a redemption price equal to 100% of
the principal amount thereof plus accrued and unpaid interest thereon to the
redemption date.
REDEMPTION PROCEDURES
If the Company gives a notice of redemption in respect of Junior
Subordinated Debentures (which notice will be irrevocable) then, by 12:00 noon,
New York City time, on the redemption date, the Company will deposit irrevocably
with the Indenture Trustee funds sufficient to pay the applicable redemption
price and will give irrevocable instructions and authority to pay such
redemption price to the holders of the Junior Subordinated Debentures. If notice
of redemption shall have been given and funds deposited as required, then, upon
the date of such deposit, interest will cease to accrue on the Junior
Subordinated Debentures called for redemption, such Junior Subordinated
Debentures will no longer be deemed to be outstanding and all rights of holders
of such Junior Subordinated Debentures so called for redemption will cease,
except the right of the holders of such Junior Subordinated Debentures to
receive the applicable redemption price, but without interest on such redemption
price. If any date fixed for redemption of Junior Subordinated Debentures is not
a Business Day, then payment of the redemption price payable on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay) except that, if such
Business Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date fixed for redemption. If payment of the redemption price
in respect of Junior Subordinated Debentures is improperly withheld or refused
and not paid by the Company, interest on such Junior Subordinated Debentures
will continue to accrue, from the original redemption date to the date of
payment, in which case the actual payment date will be considered the date fixed
for redemption for purposes of calculating the applicable redemption price. If
fewer than all the Junior Subordinated Debentures are to be redeemed, the Junior
Subordinated Debentures to be redeemed shall be selected by lot or pro rata or
in some other equitable manner determined by the Indenture Trustee.
In the event of any redemption in part, the Company shall not be required
to (i) issue, register the transfer of or exchange any Junior Subordinated
Debentures during a period beginning at the opening of business 15 days before
any selection for redemption of Junior Subordinated Debentures and ending at the
close of business on the earliest date on which the relevant notice of
redemption is deemed to have been given to all holders of Junior Subordinated
Debentures to be redeemed and (ii) register the transfer of or exchange any
Junior Subordinated Debentures so selected for redemption, in whole or in part,
except the unredeemed portion of any Junior Subordinated Debentures being
redeemed in part. (Section 3.02)
INTEREST
The Junior Subordinated Debentures will bear interest at the rate of 7.95%
per annum from the original date of issuance. Interest will be payable
semi-annually in arrears on February 1 and August 1 of each year (each, an
"Interest Payment Date"), commencing on August 1, 1997, to the person in whose
name such Junior Subordinated Debenture is registered, subject to certain
exceptions, at the close of business on the Business Day next preceding such
Interest Payment Date. In the event (i) the Preferred Securities shall not
continue to remain in book-entry only form or (ii) if, following distribution of
the Junior Subordinated Debentures to holders of Trust Securities upon
dissolution of the Trust as described under "Description of the Preferred
Securities," the Junior Subordinated Debentures shall not continue to remain in
book-entry only form, the relevant record date will be the January 15th or the
July 15th immediately preceding the relevant Interest Payment Date. Interest
payable on any Junior Subordinated Debenture that is not punctually paid or duly
provided for on any interest payment date will forthwith cease to be payable to
the person in whose name such Junior Subordinated Debenture is registered on the
relevant record date, and such defaulted interest will instead be payable to the
person in whose name such Junior Subordinated Debenture is registered on the
special record date or other specified date determined in accordance with the
Indenture; provided, however, that interest, shall not be considered payable by
the Company on any Interest Payment Date falling within a
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Deferral Period unless the Company has elected to make a full or partial payment
of interest accrued on the Junior Subordinated Debentures on such Interest
Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. If any date on which interest is
payable on the Junior Subordinated Debentures is not a Business Day, then
payment of the interest payable on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as the Company shall not be in default in the payment of interest
on the Junior Subordinated Debentures, the Company shall have the right to
extend the interest payment period from time to time for a period not exceeding
10 consecutive semi-annual interest periods. The Company has no current
intention of exercising its right to extend an interest payment period. No
interest shall be due and payable during a Deferral Period, except at the end
thereof. During any Deferral Period, the Company shall not declare or pay any
dividends on, or redeem, purchase, acquire or make a distribution or liquidation
payment with respect to, any of its common stock or preferred stock or make any
guarantee payments with respect thereto; provided, however, that the foregoing
restrictions shall not apply to (i) dividends, redemptions, purchases,
acquisitions, distributions or payments made by the Company by way of issuance
of shares of its capital stock, (ii) payments of accrued dividends by the
Company upon the redemption, exchange or conversion of any preferred stock of
the Company as may be outstanding from time to time in accordance with the terms
of such preferred stock, (iii) cash payments made by the Company in lieu of
delivering fractional shares upon the redemption, exchange or conversion of any
preferred stock of the Company as may be outstanding from time to time in
accordance with the terms of such preferred stock, (iv) repurchases, redemptions
or other acquisitions of shares of capital stock of the Company in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of employees, officers, directors or consultants, or (v) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of such rights pursuant thereto.
Prior to the termination of any such Deferral Period, the Company may
further extend the interest payment period; provided that such Deferral Period
together with all such previous and further extensions thereof may not exceed 10
consecutive semi-annual interest periods and may not extend beyond the maturity
of the Junior Subordinated Debentures. On the first Interest Payment Date
occurring on or after the end of each Deferral Period, the Company shall pay to
the holders of Junior Subordinated Debentures of record on the record date for
such Interest Payment Date (regardless of who the holders of record may have
been on other dates during the Deferral Period) all accrued and unpaid interest
on the Junior Subordinated Debentures, together with interest thereon at a rate
of 7.95% to the extent permitted by applicable law, compounded semi-annually
("Compounded Interest"). Upon the termination of any Deferral Period and the
payment of all amounts then due, the Company may commence a new Deferral Period,
subject to the above requirements. The Company may also prepay at any time all
or any portion of the interest accrued during a Deferral Period. Consequently,
there could be multiple Deferral Periods of varying lengths throughout the term
of the Junior Subordinated Debentures, each not to exceed 10 consecutive
semi-annual interest periods or to cause any extension beyond maturity of the
Junior Subordinated Debentures. The failure by the Company to make interest
payments during a Deferral Period would not constitute a Default or an Event of
Default under the Indenture or the Company's currently outstanding indebtedness.
If the Property Trustee shall be the sole holder of the Junior Subordinated
Debentures, the Company shall give the Property Trustee notice of its selection
of such Deferral Period one Business Day prior to the earlier of (i) the next
succeeding date on which the distributions on the Preferred Securities are
payable or (ii) the date the Trust is required to give notice to any
self-regulatory organization or to holders of the Preferred Securities of the
record date or the payment date for such distribution. The Trust shall give
notice of the Company's selection of such Deferral Period to the holders of the
Preferred Securities.
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If Junior Subordinated Debentures have been distributed to holders of Trust
Securities, the Company shall give the holders of the Junior Subordinated
Debentures notice of its selection of such Deferral Period ten Business Days
prior to the earlier of (i) the next succeeding Interest Payment Date or (ii)
the date the Company is required to give notice to any self-regulatory
organization or to holders of the Junior Subordinated Debentures of the record
or payment date for such related interest payment.
COMPOUNDED INTEREST
Payments of Compounded Interest on the Junior Subordinated Debentures held
by the Trust will be available to pay any interest on distributions in arrears
in respect of the Preferred Securities pursuant to the terms thereof.
INDENTURE EVENTS OF DEFAULT
If any Indenture Event of Default shall occur and be continuing, the
Property Trustee, as the holder of the Junior Subordinated Debt Securities, will
have the right to declare the principal of and the interest on the Junior
Subordinated Debt Securities (including any Compound Interest) and any other
amounts payable under the Indenture to be forthwith due and payable and to
enforce its other rights as a creditor with respect to the Junior Subordinated
Debt Securities. See "Description of Junior Subordinated Debt Securities--Events
of Default" in the accompanying Prospectus for a description of the Indenture
Events of Default. An Indenture Event of Default also constitutes a Declaration
Event of Default. The holders of Preferred Securities in certain circumstances
have the right to direct the Property Trustee to exercise its rights as the
holder of the Junior Subordinated Debt Securities. See "Description of Preferred
Securities -- Declaration Events of Default" and "-- Voting Rights".
BOOK-ENTRY AND SETTLEMENT
If any Junior Subordinated Debentures are distributed to holders of
Preferred Securities (see "Description of the Preferred Securities"), such
Junior Subordinated Debentures will be issued in the form of one or more global
certificates (each a "Global Security") registered in the name of the depositary
or its nominee. Except under the limited circumstances described below, Junior
Subordinated Debentures represented by the Global Security will not be
exchangeable for, and will not otherwise be issuable as, Junior Subordinated
Debentures in definitive form. The Global Securities described above may not be
transferred except by the depositary to a nominee of the depositary or by a
nominee of the depositary to the depositary or another nominee of the depositary
or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
Subordinated Debentures in definitive form and will not be considered the
holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Junior Subordinated Debentures
shall be exchangeable, except for another Global Security of like denomination
and tenor to be registered in the name of the depositary or its nominee or to a
successor depositary or its nominee. Accordingly, each Beneficial owner must
rely on the procedures of the depositary or if such person is not a Participant,
on the procedures of the Participant through which such person owns its interest
to exercise any rights of a holder under the Indenture. If Junior Subordinated
Debentures are distributed to holders of Preferred Securities, DTC will act as
securities depositary for the Junior Subordinated Debentures.
For a description of DTC and DTC's book-entry system, see "Description of
Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust
Company." As of the date of this Prospectus Supplement, the description herein
of DTC's book-entry system and DTC's practices as they relate to purchases,
transfers, notices and payments with respect to the Preferred Securities apply
in all material respects to any debt obligations represented by one or more
Global Securities held by DTC. The Company may appoint a
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successor to DTC or any successor depositary in the event DTC or such successor
depositary is unable or unwilling to continue as a depositary for the Global
Securities.
None of the Company, the Indenture Trustee, any paying agent and any other
agent of the Company or the Indenture Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in a Global Security for such Junior
Subordinated Debentures or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
A Global Security shall be exchangeable for Junior Subordinated Debentures
registered in the names of persons other than the depositary or its nominee only
if (i) the depositary notifies the Company that it is unwilling or unable to
continue as a depositary for such Global Security and no successor depositary
shall have been appointed; (ii) the depositary, at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the depositary
is required to be so registered to act as such depositary and no successor
depositary shall have been appointed; (iii) the Company, in its sole discretion,
determines that such Global Security shall be so exchangeable; or (iv) there
shall have occurred an Indenture Event of Default with respect to such Junior
Subordinated Debentures. Any Global Security that is exchangeable pursuant to
the preceding sentence shall be exchangeable for Junior Subordinated Debentures
registered in such names as the depositary shall direct. It is expected that
such instructions will be based upon directions received by the depositary from
its Participants with respect to ownership of beneficial interests in such
Global Security.
RELATIONSHIP BETWEEN THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND
THE PREFERRED SECURITIES GUARANTEE
As set forth in the Declaration, the Trust exists for the sole purpose of
(a) issuing and selling the Trust Securities evidencing undivided beneficial
interests in the assets of the Trust and investing the proceeds from such
issuance and sale in the Junior Subordinated Debentures and (b) engaging in such
other activities as are necessary, convenient or incidental thereto.
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
distributions and other payments due on the Preferred Securities primarily
because (i) the aggregate principal amount of Junior Subordinated Debentures
held as trust assets will be equal to the sum of the aggregate stated
liquidation amount of the Trust Securities; (ii) the interest rate and interest
and other payment dates on the Junior Subordinated Debentures will match the
distribution rate and distribution and other payment dates for the Preferred
Securities; (iii) the Declaration provides that the Company shall pay for all
debts and obligations (other than with respect to the Trust Securities) and all
costs and expenses of the Trust, including any taxes and all costs and expenses
with respect thereto, to which the Trust may become subject, except for United
States withholding taxes; and (iv) the Declaration further provides that the
Trustees shall not cause or permit the Trust, among other things, to engage in
any activity that is not consistent with the limited purposes of the Trust. With
respect to clause (iii) above, however, no assurance can be given that the
Company will have sufficient resources to enable it to pay such debts,
obligations, costs and expenses on behalf of the Trust.
Payments of distributions and other payments due on the Preferred
Securities are guaranteed by the Company on a subordinated basis as and to the
extent set forth under "Description of the Preferred Securities Guarantees", in
the accompanying Prospectus. If the Company does not make interest or other
payments on the Junior Subordinated Debentures, the Trust will not make
distributions or other payments on the Preferred Securities. Under the
Declaration, if and to the extent the Company does make interest or other
payments on the Junior Subordinated Debentures, the Property Trustee is
obligated to make distributions or other payments on the Preferred Securities.
The Preferred Securities Guarantee is a full and unconditional guarantee from
the time of issuance of the Preferred Securities, but the Preferred Securities
Guarantee covers distributions and other payments on the Preferred Securities
only if and to the extent that the Company has made a payment to the Property
Trustee of interest or principal on the Junior Subordinated Debentures deposited
in the Trust as trust assets.
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The Property Trustee will have the Power to exercise all rights, powers and
privileges under the Indenture with respect to the Junior Subordinated
Debentures, including its rights as the holder of the Junior Subordinated
Debentures to enforce the Company's obligations under the Junior Subordinated
Debentures upon the occurrence of an Indenture Event of Default, and will also
have the right to enforce the Preferred Securities Guarantee on behalf of the
holders of the Preferred Securities. In addition, the holders of at least a
majority in liquidation amount of the Preferred Securities will have the right
to direct the Property Trustee with respect to certain matters under the
Declaration and the Preferred Securities Guarantee. If the Property Trustee
fails to enforce its rights under the Indenture, any holder of Preferred
Securities may, to the extent permitted by applicable law, after a period of 30
days has elapsed from such holder's written request to the Property Trustee to
enforce such rights, institute a legal proceeding against the Company to enforce
the Property Trustee's rights under the Junior Subordinated Debentures without
first instituting any legal proceeding against the Property Trustee or any other
person or entity. Notwithstanding the foregoing, if an Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Company to pay interest or principal on the Junior Subordinated Debentures on
the date such interest or principal is otherwise payable (or in the case of
redemption, the redemption date), then a holder of Preferred Securities may
directly institute suit against the Company for enforcement of payment to such
holder of the principal of or interest on Junior Subordinated Debentures having
a principal amount equal to the aggregate liquidation amount of the Preferred
Securities held by such holder on or after the respective due date specified in
the Junior Subordinated Debentures. The holders of Preferred Securities will not
be able to exercise directly against the Company any other remedy available to
the holders of the Junior Subordinated Debentures unless the Property Trustee
first fails to do so. If the Property Trustee fails to enforce the Preferred
Securities Guarantee, to the extent permitted by applicable law, any holder of
Preferred Securities may institute a legal proceeding directly against the
Company to enforce the Property Trustee's rights under the Preferred Securities
Guarantee without first instituting a legal proceeding against the Trust, the
Property Trustee or any other person or entity. Notwithstanding the foregoing,
if the Company has failed to make a Guarantee Payment, a holder of Preferred
Securities may directly institute a proceeding against the Company for
enforcement of such holder's right to receive payment under the Guarantee. The
Company waives any right or remedy to require that any action be brought first
against the Trust or any other person or entity before proceeding directly
against the Company. See "Description of the Preferred Securities" and
"Description of the Preferred Securities Guarantees" in the accompanying
Prospectus.
The above mechanisms and obligations, taken together, provide a full and
unconditional guarantee by the Company of payments due on the Preferred
Securities.
TAXATION
In the opinion of Cravath, Swaine & Moore, counsel to the Company and the
Trust ("Tax Counsel"), the following are the material United States Federal
income tax consequences of the ownership and disposition of Preferred
Securities. Unless otherwise stated, this summary deals only with Preferred
Securities held as capital assets by holders who acquire the Preferred
Securities upon original issuance ("Initial Holders"). It does not deal with
special classes of holders, such as dealers in securities or currencies, life
insurance companies, persons holding Preferred Securities as part of a straddle
or as part of a hedging or conversion transaction, or persons whose functional
currency is not the United States dollar. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations thereunder
and administrative and judicial interpretations thereof are of the date hereof,
all of which are subject to change (possibly on a retroactive basis).
INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF PREFERRED
SECURITIES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF
ANY STATE, LOCAL OR OTHER TAX LAWS.
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CLASSIFICATION OF THE TRUST
In the opinion of Tax Counsel, under current law and assuming full
compliance with the terms of the Declaration, the Trust will be classified for
United States Federal income tax purposes as a grantor trust and not as a
partnership or an association taxable as a corporation. Accordingly, each holder
of Preferred Securities (a "Securityholder") will be considered the owner of a
pro rata portion of the Junior Subordinated Debentures held by the Trust and
will be required to include in gross income the pro rata share of income accrued
on the Junior Subordinated Debentures.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In the opinion of Tax Counsel, under current law and assuming full
compliance with the Indenture, the Junior Subordinated Notes will be classified
for United States Federal income tax purposes as indebtedness of the Company.
INTEREST AND ORIGINAL ISSUE DISCOUNT
If a Deferral Period occurs, the Junior Subordinated Debentures would be
considered to have original issue discount at all times after the beginning of
the first Deferral Period, including after the termination of the Deferral
Period. In addition, the Company's option to defer the payment of interest on
the Junior Subordinated Debentures during a Deferral Period might cause the
Junior Subordinated Debentures to be considered initially to be issued with
original issue discount. The Company believes, and will take the position, that
this latter result will not arise because of an exception in the Treasury
Regulations that applies when there is only a "remote" likelihood that a
Deferral Period will occur. Assuming that the likelihood of a Deferral Period is
in fact remote, Tax Counsel believes that this position is correct although
there is no authority directly on point and the Internal Revenue Service could
take a contrary position.
If the original issue discount rules apply to the Junior Subordinated
Debentures (either following the occurrence of a Deferral Period or initially),
each Securityholder, whether on the cash or accrual method of accounting, will
be required to accrue its pro rata share of original issue discount into income
in accordance with a constant yield method based on the compounding of interest.
As a result, income will be required to be reported by Securityholders before
the receipt of cash attributable to such income, and, in particular, income will
be reported during a Deferral Period even though no cash distributions are being
made. If the original issue discount rules apply for a period during which cash
distributions are currently being made, the sum of the daily accruals of income
for a quarterly period for a Securityholder that purchased the Preferred
Securities for their liquidation value will equal the cash distribution received
by the Securityholder for such quarter, assuming no disposition prior to the
record date for such distribution.
If the original issue discount rules apply, actual distributions of stated
interest will not be separately reported as income. A Securityholder's tax basis
for the Junior Subordinated Debentures will be increased by original issue
discount accrued into income, and decreased by cash distributions of interest.
If the original issue discount rules do not apply, stated interest will be
includable in a holder's gross income as ordinary interest income in accordance
with such holder's regular method of tax accounting.
Whether or not the original issue discount rules apply, no portion of the
amounts received on the Preferred Securities will be eligible for the corporate
dividends received deduction.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF PREFERRED
SECURITIES
Under current law, a distribution by the Trust of the Junior Subordinated
Debentures as described under the caption "Description of the Preferred
Securities -- Special Event Redemption or Distribution" will be non-taxable and
will result in the Securityholder receiving directly such Securityholder's pro
rata share of the Junior Subordinated Debentures previously held indirectly
through the Trust, with a holding period and tax basis equal to the holding
period and adjusted tax basis such Securityholder was considered to have had in
such Securityholder's pro rata share of the underlying Junior Subordinated
Debentures immediately prior to such distribution. If, however, the special
event giving rise to the distribution is a Tax Event which results in
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the Trust being treated as an association taxable as a corporation, the
distribution would constitute a taxable event to holders of the Preferred
Securities.
MARKET DISCOUNT AND BOND PREMIUM
Securityholders other than Initial Holders may be considered to have
acquired their pro rata interest in the Junior Subordinated Debentures with
market discount, acquisition premium or amortizable bond premium. Such holders
are advised to consult their tax advisors as to the income tax consequences of
the acquisition, ownership and disposition of the Preferred Securities.
DISPOSITION OF THE PREFERRED SECURITIES
Upon a sale, exchange or other disposition of the Preferred Securities
(including a distribution of cash in redemption of a Securityholder's Preferred
Securities upon redemption or repayment of the underlying Junior Subordinated
Debentures, but excluding the distribution of Junior Subordinated Debentures), a
Securityholder will be considered to have disposed of all or part of such
Securityholder's pro rata share of the Junior Subordinated Debentures, and will
recognize gain or loss equal to the difference between the amount realized
(other than amounts attributable to accrued but unpaid stated interest that is
not treated as original issue discount) and the Securityholder's adjusted tax
basis in such Securityholder's pro rata share of the underlying Junior
Subordinated Debentures deemed disposed of. A holder's adjusted tax basis in the
Preferred Securities generally will be its initial purchase price increased by
original issue discount previously includable in such holder's gross income to
the date of disposition and decreased by payments (other than payments of stated
interest that are not treated as original issue discount) received on the
Preferred Securities. Gain or loss will be capital gain or loss (except to the
extent of any accrued interest or market discount not previously included in
income). See "Market Discount and Bond Premium" above. Such gain or loss will be
long-term capital gain or loss if the Preferred Securities have been held for
more than one year.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
individual, corporation, partnership, estate or trust that is, as to the United
States, a non-resident alien individual or a foreign corporation, partnership,
estate or trust.
Under present United States Federal income tax law:
(i) payments by the Trust or any of its paying agents to any holder of
a Preferred Security who or which is a United States Alien Holder will not
be subject to United States Federal income or withholding tax, provided
that (a) the beneficial owner of the Preferred Security does not actually
or constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote; (b) the beneficial owner
of the Preferred Security is not a controlled foreign corporation that is
related to the Company through stock ownership; (c) either (A) the
beneficial owner of the Preferred Security certifies to the Trust or its
agent, under penalties of perjury, generally on IRS Form W-8, that it is
not a United States holder and provides its name and address or (B) a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business
(a "Financial Institution") and holds the Preferred Security certifies to
the Trust or its agent under penalties of perjury that such statement has
been received from the beneficial owner by it or by a Financial Institution
between it and the beneficial owner and furnishes the Trust or its agent
with a copy thereof; and (d) the payment is not effectively connected with
the conduct by the United States Alien Holder of a trade or business in the
United States; and
(ii) A United States Alien Holder of a Preferred Security will not be
subject to United States Federal income or withholding tax on any gain
realized upon the sale or other disposition of a Preferred Security unless
(a) the United States Alien Holder is an individual who is present in the
United States for 183 days or more in the taxable year of disposition, and
certain other conditions apply or (b) the gain is effectively connected
with the conduct by the United States Alien Holder of a trade or business
in the United States.
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INFORMATION REPORTING TO HOLDERS
The Trust will report the interest paid or the original issue discount that
accrued during the year with respect to the Junior Subordinated Debentures, and
any gross proceeds received by the Trust from the retirement or redemption of
the Junior Subordinated Debentures, annually to the holders of record of the
Preferred Securities and the Internal Revenue Service. The Trust currently
intends to deliver such reports to holders of record prior to January 31
following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, Preferred Securities may
be subject to a "backup" withholding tax of 31% unless the holder complies with
certain identification requirements. Any withheld amounts will generally be
allowed as a credit against the holder's Federal income tax, provided the
required information is timely filed with the Internal Revenue Service.
POSSIBLE TAX LAW CHANGES
On March 19, 1996, the Clinton Administration proposed legislation (the
"Proposed Legislation") which would, among other things, generally deny
corporate issuers a deduction for interest in respect of certain debt
obligations, such as the Junior Subordinated Debentures, issued on or after
December 7, 1995 if such debt obligations have a maximum term in excess of 20
years and are not shown as indebtedness on the issuer's applicable consolidated
balance sheet. On March 29, 1996, Senate Finance Committee Chairman William V.
Roth, Jr. and House Ways and Means Committee Chairman Bill Archer issued a joint
statement (the "Joint Statement") indicating their intent that the Proposed
Legislation, if adopted by either of the tax-writing committees of Congress,
would have an effective date that is no earlier than the date of "appropriate
Congressional action." In addition, subsequent to the publication of the Joint
Statement, Senator Daniel Patrick Moynihan and Representatives Sam M. Gibbons
and Charles B. Rangel wrote letters to the Treasury Department (the "Democrat
Letters"), which concurred with the view expressed in the Joint Statement. No
such Congressional action has yet occurred, although similar legislation is
expected again to be proposed by the Clinton Administration in early February of
1997. If the principles contained in the Joint Statement and the Democrat
Letters were followed and if the Proposed Legislation were enacted, such
legislation would not apply to the Junior Subordinated Debentures. There can be
no assurance, however, that the effective date guidance contained in the Joint
Statement and the Democrat Letters will be incorporated into the Proposed
Legislation, if enacted, or that other legislation enacted after the date hereof
will not otherwise adversely affect the ability of the Company to deduct the
interest payable on the Junior Subordinated Debentures. Such a change could give
rise to a Tax Event. See "Description of the Preferred Securities -- Special
Event Redemption or Distribution."
ERISA MATTERS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Internal Revenue Code of 1986, as amended (the "Code") set forth certain
restrictions on (a) employee benefit plans (as defined in section 3(3) of ERISA,
(b) plans described in Section 4975(e) (1) of the Code, including individual
retirement accounts and Keogh plans, (c) any entity whose underlying assets
include plan assets by reason of a plans' investment in such entity (each of
(a), (b) and (c) hereinafter referred to as a "Plan") and (d) persons who have
certain specified relationships to such Plans ("parties in interest" under ERISA
and "disqualified persons" under the Code).
ERISA imposes specific requirements on fiduciaries of Plans subject to
ERISA, namely, that they make prudent investments, that they diversify
investments, and they make investments in accordance with the Plan documents and
in the best interests of participants and their beneficiaries. In accordance
with these general fiduciary standards, a Plan fiduciary should determine
whether an investment in the Preferred Securities is permitted under the
governing Plan instruments and is appropriate for the Plan in view of its
overall investment policy and the composition and diversification of its
portfolio.
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Section 406 of ERISA and Section 4975 of the Code prohibit a Plan from
engaging in certain transactions involving "plan assets" with "parties in
interest" or "disqualified persons". ERISA and the Code do not define "plan
assets". However, the U.S. Department of Labor has issued a final regulation
(the "Plan Assets Regulation") concerning the definition of what constitutes
plan assets of a Plan. That regulation generally provides in relevant part that
the underlying assets of an entity in which a Plan makes an equity investment
will be deemed, for purposes of ERISA, to be assets of the investing Plan,
unless (i) equity participation by "benefit plan investors" is not
"significant", (ii) the entity qualifies as an "operating company" as defined in
the Plan Assets Regulation or (iii) certain other requirements are met.
The Company and certain affiliates of the Company may each be considered a
"party in interest" (within the meaning of ERISA) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to many Plans that
are subject to ERISA or Section 4975 of the Code (including individual
retirement accounts and Keogh plans). The purchase of Preferred Securities by a
Plan that is subject to the fiduciary responsibility provisions of ERISA or the
prohibited transaction provisions of Section 4975 of the Code (including
individual retirement arrangements and other plans described in Section 4975(e)
(1) of the Code) and with respect to which the Company, or any affiliate of the
Company is a service provider (or otherwise is a party in interest or a
disqualified person) may constitute or result in a prohibited transaction under
ERISA or Section 4975 of the Code, unless such Preferred Securities are acquired
pursuant to and in accordance with an applicable exemption. Any pension or other
employee benefit plan proposing to acquire any Preferred Securities should
consult with its counsel.
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UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
dated the date hereof (the "Underwriting Agreement"), the Company and the Trust
have agreed that the Trust will sell to each of the Underwriters named below,
and each of the Underwriters, for whom J.P. Morgan Securities Inc. is acting as
representative (the "Representative"), has severally agreed to purchase from the
Trust, the number of Preferred Securities set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
J.P. Morgan Securities Inc.................................. 100,000
Bear, Stearns & Co. Inc..................................... 100,000
Goldman, Sachs & Co......................................... 100,000
Lehman Brothers Inc......................................... 100,000
-------
Total........................................ 400,000
=======
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all the
Preferred Securities offered hereby if any Preferred Securities are purchased by
the Underwriters. In the event of default by an Underwriter, the Underwriting
Agreement provides that, in certain circumstances, the purchase commitment of
the nondefaulting Underwriters may be increased or the Underwriting Agreement
may be terminated.
The Company has been advised by the Representative that the Underwriters
propose initially to offer the Preferred Securities to the public at the public
offering price set forth on the cover page of this Prospectus Supplement, and to
certain dealers at such price less a concession not in excess of $6.00 per
Preferred Security. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $2.50 per Preferred Security to certain brokers and
dealers. After the initial public offering, the public offering price and such
concessions may be changed.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures of the
Company, the Underwriting Agreement provides that the Company will pay as
compensation ("Underwriters' Compensation") for the Underwriters' arranging the
investment therein of such proceeds $10 per Preferred Security or $4,000,000 in
the aggregate.
Because the National Association of Securities Dealers, Inc. ("NASD") is
expected to view the Preferred Securities offered hereby as interests in a
direct participation program, the offering is being made in compliance with Rule
2810 of the NASD's Conduct Rules. Offers and sales of Preferred Securities will
be made only to (i) "qualified institutional buyers", as defined in Rule 144A
under the Securities Act of 1933, as amended (the "Act"); (ii) institutional
"accredited investors", as defined in Rule 501(a)(1)-(3) of Regulation D under
the Act or (iii) individual investors for whom an investment in non-convertible
investment grade preferred securities is appropriate. The Underwriters may not
confirm sales to any accounts over which they exercise discretionary authority
without the prior written approval of the transaction by the customer.
Each underwriter has agreed that (a) it has not offered or sold and prior
to the date six months after the date of issue of the Preferred Securities will
not offer or sell any Preferred Securities to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995, (b) it has complied, and will
comply with, all applicable provisions of the Financial Services Act of 1986 of
Great Britain with respect to anything done by it in relation to the Preferred
Securities in, from or otherwise involving the United Kingdom, and (c) it has
only issued or passed on and will only issue or pass on in the United Kingdom
any document received by it in connection with the issuance of the Preferred
Securities to a person who is of a kind described
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in Article 11(3) of the Financial Services Act of 1986 (Investment
Advertisements) (Exemptions) Order 1995 of Great Britain or is a person to whom
the document may otherwise lawfully be issued or passed on.
A portion of the Preferred Securities will be offered by the Underwriters
specified herein directly or through their representative selling agents outside
the United States. Investors may elect to hold beneficial interests in the
Preferred Securities through either DTC (in the United States), Cedel or
Euroclear (outside the United States), if they are participants of such systems,
or indirectly through organizations which are participants in such systems.
The Underwriters have advised the Trust that they intend to make a market
in the Preferred Securities. The Underwriters will have no obligation to make a
market in the Preferred Securities, however, and may cease market making
activities, if commenced, at any time.
The Representative is a wholly-owned subsidiary of the Company. The
underwriting of the Preferred Securities offered hereby is being conducted in
accordance with Rule 2720 of the NASD Conduct Rules.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or
contribute to payments which the Underwriters may be required to make in respect
thereof.
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PROSPECTUS
J.P. MORGAN & CO. INCORPORATED
JUNIOR SUBORDINATED DEBT SECURITIES
JPM CAPITAL TRUST II
JPM CAPITAL TRUST III
JPM CAPITAL TRUST IV
Preferred Securities Fully and Unconditionally guaranteed as
Set Forth Herein by J.P. Morgan & Co. Incorporated
J.P. Morgan & Co. Incorporated ("J.P. Morgan" or the "Company") may offer, from
time to time, junior subordinated debt securities (the "Junior Subordinated Debt
Securities") consisting of debentures, notes or other evidences of indebtedness
in one or more series and in amounts, at prices and on terms to be determined at
or prior to the time of any such offering. The Junior Subordinated Debt
Securities when issued will be unsecured obligations of the Company. The
Company's obligations under the Junior Subordinated Debt Securities will be
subordinate and junior in right of payment to all Senior Indebtedness,
Subordinated Indebtedness and Derivative Obligations of the Company (as such
terms are defined herein) of the Company.
JPM Capital Trust II, JPM Capital Trust III and JPM Capital Trust IV (the "JPM
Trusts"), each a statutory business trust formed under the laws of the State of
Delaware, may offer and sell, from time to time, preferred securities
("Preferred Securities") representing undivided beneficial interests in the
assets of the respective JPM Trust. The payment of periodic cash distributions
("distributions") with respect to Preferred Securities of a JPM Trust out of
moneys held by the Property Trustee (as defined herein) and payments on
liquidation of such JPM Trust and on redemption of Preferred Securities of such
JPM Trust will be guaranteed by the Company on a subordinated basis to the
extent described herein (each such guarantee, a "Preferred Securities
Guarantee"). See "Description of the Preferred Securities Guarantees". The
Preferred Securities Guarantee covers payments of distributions and other
payments on the Preferred Securities only if and to the extent that the
applicable JPM Trust has funds available therefor which will not be the case
unless the Company has made a payment of interest or principal or other payments
on the Junior Subordinated Debt Securities held by such JPM Trust as its sole
asset. The Preferred Securities Guarantees, when taken together with the
Company's obligations under the Junior Subordinated Debt Securities held by a
JPM Trust and the Indenture (as defined herein) and its obligations under the
Amended and Restated Declaration of such JPM Trust, including its obligation to
pay all costs, expenses, debts and other obligations of such JPM Trust (other
than with respect to the Trust Securities (as defined herein)), will provide a
full and unconditional guarantee of amounts due on the Preferred Securities of
such JPM Trust. Junior Subordinated Debt Securities may be issued and sold, from
time to time, in one or more series by the Company to a JPM Trust, or a trustee
of such JPM Trust, in connection with the investment of the proceeds from the
offering of Preferred Securities and Common Securities (as defined herein) of
such JPM Trust. The Junior Subordinated Debt Securities purchased by a JPM Trust
may be subsequently distributed pro rata to holders of Preferred Securities and
Common Securities of such JPM Trust in connection with the dissolution of such
JPM Trust upon the occurrence of certain events as may be described in an
accompanying Prospectus Supplement.
Specific terms of the Junior Subordinated Debt Securities of any series or the
Preferred Securities of any JPM Trust in respect of which this Prospectus is
being delivered (the "Offered Securities") will be set forth in a Prospectus
Supplement with respect to such Offered Securities, which will describe, without
limitation and where applicable, the following: (i) in the case of Junior
Subordinated Debt Securities, the specific designation, aggregate principal
amount, authorized denomination, maturity, premium, if any, redemption or
sinking fund provisions, if any, interest rate (which may be fixed or variable),
if any, time and method of calculating interest payments, if any, dates on which
premium, if any, and interest, if any, will be payable, right of the Company, if
any, to defer payment of interest on the Junior Subordinated Debt Securities and
the maximum length of such deferral period, the initial public offering price,
and any listing on a securities exchange and other specific terms of the
offering; and (ii) in the case of Preferred Securities, the specific
designation, number of securities, liquidation amount per security, initial
public offering price, and any listing on a securities exchange, distribution
rate (or method of calculation thereof), dates on which distributions shall be
payable and dates from which distributions shall accrue, voting rights (if any),
terms for any conversion or exchange into other securities, any redemption or
sinking fund provisions, any other rights, preferences, privileges, limitations
or restrictions relating to the Preferred Securities and the terms upon which
the proceeds of the sale of the Preferred Securities shall be used to purchase a
specific series of Junior Subordinated Debt Securities of the Company. Unless
otherwise indicated in an accompanying Prospectus Supplement, the Company does
not intend to list any of the Offered Securities on a national securities
exchange.
The Offered Securities may be offered in amounts, at prices and on terms to be
determined at the time of offering. Any Prospectus Supplement relating to any
series of Offered Securities will contain information concerning certain United
States Federal income tax considerations, if applicable, to the Offered
Securities. By separate prospectus, the form of which is included in the
Registration Statement of which this Prospectus is a part, the Company may offer
from time to time senior debt securities and/or subordinated debt securities
each of which will be direct, unsecured obligations of the Company. The
aggregate initial public offering price of the securities to be offered by this
Prospectus and such other prospectus shall not exceed $750,000,000.
The Offered Securities may be sold (i) directly to purchasers, (ii) through
agents designated from time to time, (iii) to dealers or (iv) through
underwriters or a group of underwriters. If agents of the Company and/or any JPM
Trust or underwriters are involved in the sale of the Offered Securities, their
names will be set forth in the applicable Prospectus Supplement. If agents of
the Company and/or any JPM Trust, or underwriters or dealers are involved in the
sale of the Offered Securities, descriptions of their compensation and
indemnification arrangements and the net proceeds to the Company and/or any JPM
Trust will be set forth in the applicable Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF OFFERED SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
This Prospectus and the related Prospectus Supplement may be used by direct or
indirect wholly-owned subsidiaries of the Company in connection with offers and
sales related to secondary market transactions in the Offered Securities. Such
subsidiaries may act as principal or agent in such transactions. Such sales will
be made at prices related to prevailing market prices at the time of sale.
January 28, 1997.
<PAGE> 113
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus and the Prospectus Supplement in connection with the offering made
hereby, and if given or made such information or representation must not be
relied upon as having been authorized by J.P. Morgan or by another person.
AVAILABLE INFORMATION
J.P. Morgan is subject to the information requirements of the Securities
Exchange Act of 1934 (the "1934 Act") and in accordance therewith files reports
and other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549; Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven World Trade
Center, 13th floor, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Such material may also
be accessed electronically by means of the Commission's home page on the
Internet at http://www.sec.gov. Such reports, proxy statements and other
information concerning J.P. Morgan may also be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. This
Prospectus does not contain all information set forth in the Registration
Statement and exhibits thereto which J.P. Morgan has filed with the Commission
under the Securities Act of 1933 and to which reference is hereby made.
No separate financial statements of any of the JPM Trusts have been
included or incorporated by reference herein. The Company and the JPM Trusts do
not consider that such financial statements would be material to holders of the
Preferred Securities because (i) all the voting securities of each JPM Trust
will be owned, directly or indirectly, by the Company, a reporting company under
the 1934 Act, (ii) each JPM Trust is a newly formed special purpose entity, has
no operating history, has no independent operations and is not engaged in, and
does not propose to engage in, any activity other than issuing Trust Securities
(as defined herein) representing undivided beneficial interests in the assets of
such JPM Trust and investing the proceeds thereof in Junior Subordinated Debt
Securities issued by the Company and (iii) the obligations of each JPM Trust
under the Preferred Securities of such JPM Trust will be fully and
unconditionally guaranteed by the Company as described herein. See "The JPM
Trusts", "Description of the Preferred Securities", "Description of the
Preferred Securities Guarantees" and "Description of the Junior Subordinated
Debt Securities". The JPM Trusts are business trusts formed under the laws of
the State of Delaware. The Company, as of the date of this Prospectus,
beneficially owns all the beneficial interests in each JPM Trust.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
J.P. Morgan hereby incorporates by reference in this Prospectus J.P.
Morgan's Annual Report on Form 10-K for the year ended December 31, 1995
(included in its Annual Report to Stockholders), J.P. Morgan's Quarterly Reports
on Form 10-Q for the quarters ended March 31, 1996, June 30, 1996 and September
30, 1996 and J.P. Morgan's Reports on Form 8-K dated January 11, 1996, February
6, 1996, February 20, 1996, February 23, 1996, April 11, 1996, May 13, 1996,
July 11, 1996, August 13, 1996, October 10, 1996, December 11, 1996 and January
13, 1997 heretofore filed pursuant to Section 13 of the 1934 Act.
In addition, all reports and definitive proxy or information statements
filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent
to the date of this Prospectus and prior to the termination of the offering of
the Securities shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein or in the accompanying Prospectus Supplement
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
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J.P. Morgan will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the foregoing documents
incorporated herein by reference (other than exhibits to such documents).
Written requests should be directed to the Office of the Secretary, J.P. Morgan
& Co. Incorporated, 60 Wall Street, New York, New York 10260-0060. Telephone
requests may be directed to (212) 648-3380.
J.P. MORGAN & CO. INCORPORATED
J.P. Morgan, whose origins date to a merchant banking firm founded in
London in 1838, is the holding company for subsidiaries engaged globally in
providing a wide range of financial services to corporations, governments,
financial institutions, institutional investors, professional firms, privately
held companies, nonprofit organizations, and financially sophisticated
individuals. J.P. Morgan's activities are summarized as follows:
FINANCE AND ADVISORY
Finance and Advisory encompasses the sophisticated advisory, capital
raising, and financing work that J.P. Morgan does for its broad base of clients
around the world. These clients include corporations, governments,
municipalities, and financial institutions, and the expertise J.P. Morgan offers
them is based on in-depth knowledge of their needs and the industries and
financial markets in which they operate. Linking clients to the full range of
J.P. Morgan's financial capabilities is a global network of senior client
managers.
In partnership with clients, J.P. Morgan's advisory professionals explore
the risks and rewards of such strategic alternatives as mergers and
acquisitions, divestitures, privatizations, and recapitalizations. J.P. Morgan
also advises clients on their capital structures, looking for ways to unlock
value and seize opportunities.
J.P. Morgan's debt underwriting, equities, and credit businesses provide
the capabilities to raise the necessary capital and execute the appropriate
strategies.
In J.P. Morgan's equities business, underwriting is complemented by its
ability to provide clients with liquidity in the secondary markets through its
global sales and trading network. J.P. Morgan also applies its expertise in the
equities markets to structuring equity derivatives as a means of helping clients
manage market volatility. High-quality equity research is integral to all
aspects of its business.
J.P. Morgan's credit capabilities include meeting clients' financing needs
by issuing and syndicating loans and other credit facilities.
SALES AND TRADING
Sales and Trading provides clients with around-the-clock access to global
markets. J.P. Morgan makes markets in fixed income, foreign exchange, and
commodity instruments; it serves as a counterparty to help clients manage risks;
and it provides financial and economic research to help clients assess
opportunities and track performance. To function effectively in its role as a
market-maker, it also takes positions. J.P. Morgan's clients include
corporations, central banks, governments and their agencies, financial
institutions, pension funds, mutual funds, and leveraged funds.
J.P. Morgan's fixed income activities encompass acting as a primary dealer
in U.S. and foreign government securities; making markets in options, money
market instruments, U.S. government agency securities, and corporate debt
securities; and helping clients manage their exposure to fluctuating interest
and foreign exchange rates by structuring, executing, and making markets in
riskmanagement instruments.
J.P. Morgan's foreign exchange capabilities include executing spot
transactions and structuring transactions to help clients manage their foreign
currency exposures. In commodities, J.P. Morgan makes markets in precious
metals, base metals, and energy products and develops hedging and financial
strategies for clients.
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<PAGE> 115
J.P. Morgan's emerging markets activities, while principally related to
fixed income activities, cross all markets, and J.P. Morgan's worldwide network
enables it to fulfill its role as a market-maker and provide clients with a
steady flow of market information.
In addition to J.P. Morgan's client-focused businesses, it has a separate
proprietary unit that engages in transactions for its own account across all
markets.
ASSET MANAGEMENT AND SERVICING
Asset Management and Servicing activities encompass designing and executing
investment strategies and providing administrative and brokerage services. J.P.
Morgan's clients include corporations, financial and governmental institutions,
and high net worth individuals.
J.P. Morgan tailors its asset management capabilities for both
institutional and private clients. For institutional clients, it offers such
services as the management of employee-benefit-plan assets, executing investment
strategies across the spectrum of asset classes in all major markets.
J.P. Morgan's private banking group helps high net worth individuals plan
and execute their investment strategies with a broad range of capabilities,
which include managed investment and trust portfolios, Morgan-advised mutual
funds, and a full-service brokerage unit. Credit, deposit, trust, and estate
services are also provided to private clients.
J.P. Morgan's exchange traded products professionals provide institutional
clients with worldwide access to major exchanges by acting as futures and
options brokers in executing and clearing contracts.
J.P. Morgan provides such operational services as the administration of
depositary receipt programs and global trust and agency services. It operates
the Euroclear System, the world's largest clearance and settlement system for
internationally traded securities, and offers credit and deposit services to
Euroclear participants.
EQUITY INVESTMENTS
J.P. Morgan invests its capital in the private equity of rapidly growing
companies, management buyouts, privatizations, and recapitalizations. These
investments are made and managed with the objective of maximizing total
return -- both long-term appreciation and net realized gains. While each
opportunity for investment is evaluated to achieve the firm's desired balance
between risk and return, many of these opportunities arise from its client
relationships.
J.P. Morgan's equity investment portfolio consists of approximately 95
investments diversified by industry, geography, and year of investment. J.P.
Morgan's goal is to maintain a diversified portfolio capable of generating
significant returns over time. This is a high-risk, high-reward business, and
the firm operates under a variety of legal and regulatory restrictions in
managing the portfolio.
Investments are generally held for three to seven years, depending on J.P.
Morgan's view of when a sale will produce optimal returns. Typically,
investments are harvested through a public offering of securities or the sale of
the investment. While realization of gains in the portfolio accelerates during
periods of strong equity and merger markets, the process of assessing and
managing the risks and rewards of new opportunities and existing investments
continues throughout market cycles.
ASSET AND LIABILITY MANAGEMENT
Asset and Liability Management activities include managing the firm's
interest rate risk as it relates to nontrading-related assets, liabilities, and
off-balance-sheet activities and managing the firm's overall liquidity risk.
J.P. Morgan's objective when it comes to interest rate risk management is
to create longer-term value, which is realized over time primarily as net
interest revenue and net investment securities gains. J.P. Morgan's primary
focus is on achieving a desired overall interest rate profile, which may change
over time, based on
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<PAGE> 116
management's longer-term view of global interest rate trends and economic
conditions. A variety of instruments -- in numerous currencies both on- and
off-balance-sheet -- are used in an integrated manner to achieve this objective.
J.P. Morgan manages the maturity and repricing imbalances between its
assets and liabilities through the use of investments in the more liquid fixed
income markets worldwide and derivatives. Asset and liability management swaps
are used to hedge exposures; to modify the interest rate characteristics of
specified assets or liabilities; and, in the case of risk-adjusting swaps, to
adjust Morgan's overall interest rate risk profile.
The firm's liquidity risk profile is managed to ensure that even under
adverse conditions, it has the ability to access funds at a reasonable cost. A
strong capital position is therefore an integral part of our liquidity
management because it enables us to raise funds as inexpensively as possible in
a variety of international markets.
REGULATION
J.P. Morgan is subject to regulation under the Bank Holding Company Act of
1956 (the "Act"). Under the Act, J.P. Morgan is required to file certain reports
with the Board of Governors of the Federal Reserve System (the "Board") and is
subject to examination by the Board. The Act generally precludes J.P. Morgan and
its subsidiaries from engaging in nonbanking activities, or from acquiring more
than 5% of any class of voting securities of any company engaging in such
activities, unless the Board has determined, by order or regulation, that such
proposed activities are closely related to banking. Federal law and Board
interpretations limit the extent to which J.P. Morgan and its subsidiaries can
engage in certain aspects of the securities business. Under Board policy, J.P.
Morgan is expected to act as a source of financial strength to each subsidiary
bank and to commit resources to support such subsidiary bank, even in
circumstances where J.P. Morgan might not be in a financial position to do so.
The Glass-Steagall Act prohibits affiliates of banks that are members of
the Federal Reserve System, including J.P. Morgan Securities Inc. ("JPMSI"),
from being "engaged principally" in bank-ineligible underwriting and dealing
activities (mainly corporate debt and equity securities). As interpreted by the
Board, this prohibition currently restricts JPMSI's gross revenues from such
activities to a maximum of 10% of its total gross revenues. Effective March 6,
1997, the restriction was increased from 10% to 25% of total gross revenues.
J.P. Morgan will continue to seek ways to expand the limits on such activities
and to achieve the reform of the Glass-Steagall Act necessary to achieve its
long-term objectives.
Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), J.P.
Morgan's largest subsidiary, is a member of the Federal Reserve System and a
member of the Federal Deposit Insurance Corporation ("FDIC"). Its business is
subject to both U.S. federal and state law and to examination and regulation by
U.S. federal and state banking authorities. J.P. Morgan and its nonbank
subsidiaries are affiliates of Morgan Guaranty within the meaning of the
applicable federal statutes. Morgan Guaranty is subject to restrictions on loans
and extensions of credit to J.P. Morgan and certain other affiliates and on
certain other types of transactions with them or involving their securities.
Among other wholly owned subsidiaries:
JPMSI is a broker-dealer registered with the Securities and Exchange
Commission and is a member of the National Association of Securities
Dealers, the New York Stock Exchange, and other exchanges.
J.P. Morgan Futures Inc. is subject to regulation by the Commodity Futures
Trading Commission, the National Futures Association, and the commodity
exchanges and clearinghouses of which it is a member.
J.P. Morgan Investment Management Inc. is registered with the Securities
and Exchange Commission as an investment adviser under the Investment
Advisers Act of 1940, as amended.
J.P. Morgan subsidiaries conducting business in other countries are also
subject to regulations and restrictions imposed by those jurisdictions,
including capital requirements.
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The principal executive office of J.P. Morgan is located at 60 Wall Street,
New York, New York 10260-0060, and its telephone number of (212) 483-2323.
J.P. MORGAN CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ---------------------------------------------------
1996 1995 1994 1993 1992 1991
------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Excluding Interest on Deposits.............. 1.36 1.35 1.40 1.70(a) 1.53(b) 1.42(c)
Including Interest on Deposits.............. 1.26 1.24 1.28 1.46(a) 1.31(b) 1.23(c)
</TABLE>
---------------
(a) For the year ended December 31, 1993, the ratio of earnings to fixed
charges, including the cumulative effect of a change in the method of
accounting for postretirement benefits other than pensions, was 1.64
excluding interest on deposits and 1.43 including interest on deposits.
(b) For the year ended December 31, 1992, the ratio of earnings to fixed
charges, including the cumulative effect of a change in the method of
accounting for income taxes, was 1.67 excluding interest on deposits and
1.39 including interest on deposits.
(c) For the year ended December 31, 1991, the ratio of earnings to fixed
charges, including the extraordinary gain on early retirement of debt, was
1.43 excluding interest on deposits and 1.24 including interest on deposits.
J.P. MORGAN CONSOLIDATED RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ---------------------------------------------------
1996 1995 1994 1993 1992 1991
------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Excluding Interest on Deposits.............. 1.35 1.34 1.39 1.69(a) 1.52(b) 1.40(c)
Including Interest on Deposits.............. 1.25 1.23 1.27 1.46(a) 1.31(b) 1.22(c)
</TABLE>
---------------
(a) For the year ended December 31, 1993, the ratio of earnings to combined
fixed charges and preferred stock dividends, including the cumulative effect
of a change in the method of accounting for postretirement benefits other
than pensions, was 1.63 excluding interest on deposits and 1.42 including
interest on deposits.
(b) For the year ended December 31, 1992, the ratio of earnings to combined
fixed charges and preferred stock dividends, including the cumulative effect
of a change in the method of accounting for income taxes, was 1.65 excluding
interest on deposits and 1.39 including interest on deposits.
(c) For the year ended December 31, 1991, the ratio of earnings to combined
fixed charges and preferred stock dividends, including the extraordinary
gain on early retirement of debt, was 1.41 excluding interest on deposits
and 1.23 including interest on deposits.
USE OF PROCEEDS
Each JPM Trust will use the proceeds from the sale of the Preferred
Securities to purchase Junior Subordinated Debt Securities from J.P. Morgan.
Unless otherwise indicated in the applicable Prospectus Supplement, the net
proceeds from the sale of the Junior Subordinated Debt Securities will be used
by J.P. Morgan for general corporate purposes, including investment in equity
and debt securities and interest-bearing deposits of subsidiaries, the
repurchase of issued and outstanding preferred and/or common shares of J.P.
Morgan and other general corporate purposes as may be determined by management.
Pending such use, J.P. Morgan may temporarily invest the net proceeds or may use
them to reduce short-term indebtedness.
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THE JPM TRUSTS
Each of JPM Capital Trust II, JPM Capital Trust III and JPM Capital Trust
IV is a business trust formed on October 29, 1996 under the Delaware Business
Trust Act (the "Business Trust Act") pursuant to a separate declaration of trust
among the Trustees (as defined herein) of such JPM Trust and the Company and the
filing of a certificate of trust with the Secretary of State of the State of
Delaware. Such declaration will be amended and restated in its entirety (as so
amended and restated, the "Declaration") substantially in the form filed as an
exhibit to the Registration Statement of which this Prospectus forms a part, as
of the date the Preferred Securities of such JPM Trust are initially issued.
Each Declaration will be qualified under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
This description summarizes the material terms of the Declarations and is
qualified in its entirety by reference to the form of Declaration, which has
been filed as an exhibit to the Registration Statement of which this Prospectus
is a part, and the Trust Indenture Act.
TRUST SECURITIES
Upon issuance of any Preferred Securities by a JPM Trust, the holders
thereof will own all the issued and outstanding Preferred Securities of such JPM
Trust. The Company will acquire securities representing common undivided
beneficial interests in the assets of each JPM Trust (the "Common Securities"
and, together with the Preferred Securities, the "Trust Securities") in an
amount equal to at least 3% of the total capital of such JPM Trust and will own,
directly or indirectly, all the issued and outstanding Common Securities of each
JPM Trust. The Preferred Securities and the Common Securities will rank pari
passu with each other and will have equivalent terms; provided that (i) if a
Declaration Event of Default (as defined herein) under the Declaration of a JPM
Trust occurs and is continuing, the holders of Preferred Securities of such JPM
Trust will have a priority over holders of the Common Securities of such JPM
Trust with respect to payments in respect of distributions and payments upon
liquidation, redemption and maturity and (ii) holders of Common Securities have
the exclusive right (subject to the terms of the Declaration) to appoint, remove
or replace the Trustees and to increase or decrease the number of Trustees. Each
JPM Trust exists for the purpose of (a) issuing its Preferred Securities, (b)
issuing its Common Securities to the Company, (c) investing the gross proceeds
from the sale of the Trust Securities in Junior Subordinated Debt Securities of
the Company and (d) engaging in only such other activities as are necessary,
convenient or incidental thereto. The rights of the holders of the Preferred
Securities, including economic rights, rights to information and voting rights,
are set forth in the applicable Declaration, the Business Trust Act and the
Trust Indenture Act.
POWERS AND DUTIES OF TRUSTEES
The number of trustees (the "Trustees") of each JPM Trust shall initially
be five. Three of such Trustees (the "Regular Trustees") are individuals who are
employees or officers of the Company. The fourth such trustee will be First
Trust of New York, National Association, which is unaffiliated with the Company
and which will serve as the property trustee (the "Property Trustee") and act as
the indenture trustee for purposes of the Trust Indenture Act. The fifth such
trustee is Wilmington Trust Company, which has its principal place of business
in the State of Delaware (the "Delaware Trustee"). Pursuant to each Declaration,
legal title to the Junior Subordinated Debt Securities purchased by a JPM Trust
will be held by the Property Trustee for the benefit of the holders of the Trust
Securities of such JPM Trust, and the Property Trustee will have the power to
exercise all rights, powers and privileges under the Indenture (as defined under
"Description of the Junior Subordinated Debt Securities") with respect to such
Junior Subordinated Debt Securities. In addition, the Property Trustee will
maintain exclusive control of a segregated non-interest-bearing bank account
(the "Property Account") to hold all payments in respect of the Junior
Subordinated Debt Securities purchased by a JPM Trust for the benefit of the
holders of Trust Securities. The Property Trustee will promptly make
distributions to the holders of the Trust Securities of a JPM Trust out of funds
from the Property Account of such JPM Trust. The Preferred Securities Guarantees
are separately qualified under the Trust Indenture Act and will be held by First
Trust of New York, National Association, acting in its capacity as indenture
trustee with respect thereto, for the benefit of the holders of the applicable
Preferred Securities. As used in this
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<PAGE> 119
Prospectus and any accompanying Prospectus Supplement, the term "Property
Trustee" with respect to a JPM Trust refers to First Trust of New York, National
Association acting either in its capacity as a Trustee under the relevant
Declaration and the holder of legal title to the Junior Subordinated Debt
Securities purchased by such Trust or in its capacity as indenture trustee
under, and the holder of, the applicable Preferred Securities Guarantee, as the
context may require. The Company, as the direct or indirect owner of all the
Common Securities of each JPM Trust, will have the exclusive right (subject to
the terms of the related Declaration) to appoint, remove or replace Trustees and
to increase or decrease the number of Trustees, provided that the number of
Trustees shall be at least five and the majority of Trustees shall be Regular
Trustees. The term of a JPM Trust will be set forth in the applicable Prospectus
Supplement, but may terminate earlier as provided in the Declaration of such JPM
Trust.
The duties and obligations of the Trustees of a JPM Trust shall be governed
by the Declaration of such JPM Trust. Under its Declaration, each JPM Trust
shall not, and the Trustees of such JPM Trust shall not cause such JPM Trust to,
engage in any activity other than in connection with the purposes of such JPM
Trust or other than as required or authorized by such Declaration. In
particular, each JPM Trust shall not, and the Trustees of such JPM Trust shall
cause such JPM Trust not to, (a) invest any proceeds received by such JPM Trust
from holding the Junior Subordinated Debt Securities purchased by such JPM
Trust, but shall promptly distribute from the Property Account of such JPM Trust
all such proceeds to holders of its Trust Securities pursuant to the terms of
the Declaration of such JPM Trust and of such Trust Securities; (b) acquire any
assets other than as expressly provided in such Declaration; (c) possess Trust
property for other than a Trust purpose; (d) make any loans, other than loans
represented by such Junior Subordinated Debt Securities; (e) possess any power
or otherwise act in such a way as to vary the assets of such JPM Trust or the
terms of its Trust Securities in any way whatsoever; (f) issue any securities or
other evidences of beneficial ownership of, or beneficial interests in, such JPM
Trust other than its Trust Securities; (g) incur any indebtedness for borrowed
money or (h)(i) direct the time, method and place of exercising any trust or
power conferred upon the Indenture Trustee (as defined under "Description of the
Junior Subordinated Debt Securities") with respect to the Junior Subordinated
Debt Securities deposited in such JPM Trust as trust assets or upon the Property
Trustee of such JPM Trust with respect to its Preferred Securities, (ii) waive
any past default that is waivable under the applicable Indenture or such
Declaration, (iii) exercise any right to rescind or annul any declaration that
the principal of all of the Junior Subordinated Debt Securities deposited in
such JPM Trust as trust assets shall be due and payable or (iv) consent to any
amendment, modification or termination of such Indenture or such Junior
Subordinated Debt Securities or such Declaration, in each case where such
consent shall be required, unless in the case of this clause (h) the Property
Trustee shall have received an unqualified opinion of nationally recognized
independent tax counsel recognized as expert in such matters to the effect that
such action will not cause such JPM Trust to be classified for United States
Federal income tax purposes as an association taxable as a corporation or a
partnership and that such JPM Trust will continue to be classified as a grantor
trust for United States Federal income tax purposes.
BOOKS AND RECORDS
The books and records of each JPM Trust will be maintained at the principal
office of such JPM Trust and will be open for inspection by a holder of
Preferred Securities of such JPM Trust or such holder's representative for any
purpose reasonably related to such holder's interest in such JPM Trust during
normal business hours. Each holder of Preferred Securities will be furnished
annually with unaudited financial statements of the applicable JPM Trust as soon
as available after the end of such JPM Trust's fiscal year.
VOTING
Except as set forth below or as provided under the Business Trust Act, the
applicable Declaration and the Trust Indenture Act, holders of Preferred
Securities will have no voting rights.
If any proposed amendment to the Declaration of a JPM Trust provides for,
or the Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to such Declaration or otherwise, or
(ii) the dissolution, winding-up or termination of the Trust, other than in
connection with the distribution of Junior
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Subordinated Debentures held by the Property Trustee, upon the occurrence of a
Special Event or in connection with the redemption of Preferred Securities as a
consequence of a redemption of such Junior Subordinated Debentures, then the
holders of outstanding Trust Securities will be entitled to vote on such
amendment or proposal as a class and such amendment or proposal shall not be
effective except with the approval of the holders of Trust Securities
representing 66-2/3% in liquidation amount of such Trust Securities; provided,
however, that if any amendment or proposal referred to in clause (i) above would
adversely affect only the Preferred Trust Securities or the Common Securities,
then only the affected class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of 66-2/3% in liquidation amount of such class of Trust Securities.
THE PROPERTY TRUSTEE
The Property Trustee, for the benefit of the holders of the Trust
Securities of a JPM Trust, is authorized under each Declaration to exercise all
rights under the Indenture with respect to the Junior Subordinated Debt
Securities deposited in such JPM Trust as trust assets, including its rights as
the holder of such Junior Subordinated Debt Securities to enforce the Company's
obligations under such Junior Subordinated Debt Securities upon the occurrence
of an Indenture Event of Default. The Property Trustee is also authorized to
enforce the rights of holders of Preferred Securities of a JPM Trust under the
related Preferred Securities Guarantee. If any JPM Trust's failure to make
distributions on the Preferred Securities of such JPM Trust is a consequence of
the Company's exercise of any right under the terms of the Junior Subordinated
Debt Securities deposited in such JPM Trust as trust assets to extend the
interest payment period for such Junior Subordinated Debt Securities, the
Property Trustee will have no right to enforce the payment of distributions on
such Preferred Securities until a Declaration Event of Default shall have
occurred. Holders of at least a majority in liquidation amount of the Preferred
Securities of a JPM Trust will have the right to direct the Property Trustee for
such JPM Trust with respect to certain matters under the Declaration for such
JPM Trust and the related Preferred Securities Guarantee. If the Property
Trustee fails to enforce its rights under the Indenture or fails to enforce the
applicable Preferred Securities Guarantee, to the extent permitted by applicable
law, any holder of Preferred Securities of a JPM Trust may institute a legal
proceeding against the Company to enforce such rights or such Preferred
Securities Guarantee, as the case may be.
DISTRIBUTIONS
Pursuant to each Declaration, distributions on the Preferred Securities of
a JPM Trust must be paid on the dates payable to the extent that the Property
Trustee has cash on hand in the Property Account of such JPM Trust to permit
such payment. The funds available for distribution to the holders of the
Preferred Securities of a JPM Trust will be limited to payments received by the
Property Trustee in respect of the Junior Subordinated Debt Securities that are
deposited in such JPM Trust as trust assets. If the Company does not make
interest payments on the Junior Subordinated Debt Securities deposited in a JPM
Trust as trust assets, the Property Trustee will not make distributions on the
Preferred Securities of such JPM Trust. Under the Declaration, if and to the
extent the Company does make interest payments on the Junior Subordinated Debt
Securities deposited in a JPM Trust as trust assets, the Property Trustee is
obligated to make distributions on the Trust Securities of such JPM Trust on a
Pro Rata Basis (as defined below). The payment of distributions on the Preferred
Securities of a JPM Trust is guaranteed by the Company on a subordinated basis
as and to the extent set forth under "Description of the Preferred Securities
Guarantees." A Preferred Securities Guarantee, when taken together with the
Company's obligations under the Junior Subordinated Debentures and the Indenture
and its obligations under the Declaration, provides a full and unconditional
guarantee from the time of issuance of the Preferred Securities of a JPM Trust
of amounts due on such Preferred Securities. Such Preferred Securities Guarantee
itself, however, covers distributions and other payments on such Preferred
Securities only if and to the extent that the Company has made a payment to the
Property Trustee of interest or principal on the Junior Subordinated Debt
Securities deposited in such JPM Trust as trust assets. As used in this
Prospectus, the term "Pro Rata Basis" shall mean pro rata to each holder of
Trust Securities of a JPM Trust according to the aggregate liquidation amount of
the Trust Securities of such JPM Trust held by the relevant holder in relation
to the aggregate liquidation amount of all Trust Securities of such JPM Trust
outstanding unless, in relation to a payment, a Declaration Event of Default
under the Declaration
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has occurred and is continuing, in which case any funds available to make such
payment shall be paid first to each holder of the Preferred Securities of such
JPM Trust pro rata according to the aggregate liquidation amount of the
Preferred Securities held by the relevant holder in relation to the aggregate
liquidation amount of all the Preferred Securities of such JPM Trust
outstanding, and only after satisfaction of all amounts owed to the holders of
such Preferred Securities, to each holder of Common Securities of such JPM Trust
pro rata according to the aggregate liquidation amount of such Common Securities
held by the relevant holder in relation to the aggregate liquidation amount of
all Common Securities of such JPM Trust outstanding.
EVENTS OF DEFAULT
If an Indenture Event of Default occurs and is continuing with respect to
Junior Subordinated Debt Securities deposited in a JPM Trust as trust assets, an
Event of Default under the Declaration (a "Declaration Event of Default") of
such JPM Trust will occur and be continuing with respect to any outstanding
Trust Securities of such JPM Trust. In such event, each Declaration provides
that the holders of Common Securities of the applicable JPM Trust will be deemed
to have waived any such Declaration Event of Default with respect to such Common
Securities until all Declaration Events of Default with respect to the Preferred
Securities of such JPM Trust have been cured or waived. Until all such
Declaration Events of Default with respect to the Preferred Securities of such
JPM Trust have been so cured or waived, the Property Trustee will be deemed to
be acting solely on behalf of the holders of the Preferred Securities of such
JPM Trust and only the holders of such Preferred Securities will have the right
to direct the Property Trustee with respect to certain matters under such
Declaration and consequently under the Indenture. In the event that any
Declaration Event of Default with respect to the Preferred Securities of a JPM
Trust is waived by the holders of the Preferred Securities of such JPM Trust as
provided in the Declaration of such JPM Trust, the holders of Common Securities
of such JPM Trust pursuant to such Declaration have agreed that such waiver also
constitutes a waiver of such Declaration Event of Default with respect to such
Common Securities for all purposes under such Declaration without any further
act, vote or consent of the holders of such Common Securities.
RECORD HOLDERS
Each Declaration provides that the Trustees of the applicable JPM Trust may
treat the person in whose name a certificate representing Preferred Securities
of such JPM Trust is registered on the books and records of such JPM Trust as
the sole holder thereof and of the Preferred Securities represented thereby for
purposes of receiving distributions and for all other purposes and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such certificate or in the Preferred Securities represented thereby on the part
of any person, whether or not such JPM Trust shall have actual or other notice
thereof. Preferred Securities will be issued in fully registered form. Unless
otherwise specified in a Prospectus Supplement, Preferred Securities will be
represented by a global certificate registered on the books and records of such
JPM Trust in the name of a depositary (the "Depositary") named in an
accompanying Prospectus Supplement or its nominee. Under each Declaration:
(i) the applicable JPM Trust and the Trustees thereof shall be
entitled to deal with the Depositary (or any successor depositary) for all
purposes, including the payment of distributions and receiving approvals,
votes or consents under such Declaration and, except as set forth in such
Declaration with respect to the Property Trustee, shall have no obligation
to persons owning a beneficial interest in Preferred Securities of such JPM
Trust ("Preferred Security Beneficial Owners") registered in the name of
and held by the Depositary or its nominee; and
(ii) the rights of Preferred Security Beneficial Owners shall be
exercised only through the Depositary (or any successor depositary) and
shall be limited to those established by law and agreements between such
Preferred Security Beneficial Owners and the Depositary and/or its
participants. With respect to Preferred Securities registered in the name
of and held by the Depositary or its nominee, all notices and other
communications required under such Declaration shall be given to, and all
distributions on such Preferred Securities shall be given or made to, the
Depositary (or its successor).
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The specific terms of the depositary arrangement with respect to the Preferred
Securities of a JPM Trust will be disclosed in the applicable Prospectus
Supplement.
DEBTS AND OBLIGATIONS
In each Declaration, the Company has agreed to pay for all debts and
obligations (other than with respect to the Trust Securities of the applicable
JPM Trust) and all costs and expenses of such JPM Trust, including the fees and
expenses of its Trustees and any taxes and all costs and expenses with respect
thereto, to which such JPM Trust may become subject, except for United States
withholding taxes. The foregoing obligations of the Company under each
Declaration are for the benefit of, and shall be enforceable by, any person to
whom any such debts, obligations, costs, expenses and taxes are owed (a
"Creditor") whether or not such Creditor has received notice thereof. Any such
Creditor may enforce such obligations of the Company directly against the
Company and the Company has irrevocably waived any right or remedy to require
that any such Creditor take any action against any JPM Trust or any other person
before proceeding against the Company. The Company has agreed in each
Declaration to execute such additional agreements as may be necessary or
desirable in order to give full effect to the foregoing.
The business address of each JPM Trust is c/o J.P. Morgan & Co.
Incorporated, 60 Wall Street, New York, NY 10260-0060, telephone number (212)
483-2323.
DESCRIPTION OF THE PREFERRED SECURITIES
Each JPM Trust may issue, from time to time, only one series of Preferred
Securities having terms described in the Prospectus Supplement relating thereto.
The Declaration of each JPM Trust authorizes the Regular Trustees of such JPM
Trust to issue on behalf of such JPM Trust one series of Preferred Securities.
Each Declaration will be qualified as an indenture under the Trust Indenture
Act. The Preferred Securities will have such terms, including distributions,
redemption, voting, liquidation rights and such other preferred, deferred or
other special rights or such restrictions as shall be set forth in the related
Declaration or made part of such Declaration by the Trust Indenture Act.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a JPM Trust for specific terms, including (i) the specific
designation of such Preferred Securities, (ii) the number of Preferred
Securities issued by such JPM Trust, (iii) the annual distribution rate (or
method of calculation thereof) for Preferred Securities issued by such JPM
Trust, the date or dates upon which such distributions shall be payable and the
record date or dates for the payment of such distributions, (iv) whether
distributions on Preferred Securities issued by such JPM Trust shall be
cumulative, and, in the case of Preferred Securities having such cumulative
distribution rights, the date or dates or method of determining the date or
dates from which distributions on Preferred Securities issued by such JPM Trust
shall be cumulative, (v) the amount or amounts which shall be paid out of the
assets of such JPM Trust to the holders of Preferred Securities of such JPM
Trust upon voluntary or involuntary liquidation, dissolution, winding-up or
termination of such JPM Trust, (vi) the obligation or right, if any, of such JPM
Trust to purchase or redeem Preferred Securities issued by such JPM Trust
(including with the proceeds of any redemption of Subordinated Debt Securities
held by such JPM Trust) and the price or prices at which, the period or periods
within which and the terms and conditions upon which Preferred Securities issued
by such JPM Trust shall or may be purchased or redeemed, in whole or in part,
pursuant to such obligation or right, (vii) the voting rights, if any, of
Preferred Securities issued by such JPM Trust in addition to those required by
law, including the number of votes per Preferred Security and any requirement
for the approval by the holders of Preferred Securities, or of Preferred
Securities issued by one or more JPM Trusts, or of both, as a condition to
specified actions or amendments to the Declaration of such JPM Trust, (viii)
terms for any conversion or exchange into other securities and (ix) any other
relevant rights, preferences, privileges, limitations or restrictions of
Preferred Securities issued by such JPM Trust consistent with the Declaration of
such JPM Trust or with applicable law. All Preferred Securities offered hereby
will be fully and unconditionally guaranteed by the Company as set forth below
under "Description of the Preferred Securities Guarantees." Certain United
States Federal income tax considerations applicable to any offering of Preferred
Securities will be described in the Prospectus Supplement relating thereto.
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In connection with the issuance of Preferred Securities, each JPM Trust
will issue one series of Common Securities. The Declaration of each JPM Trust
authorizes the Regular Trustees of such JPM Trust to issue on behalf of such JPM
Trust one series of Common Securities having such terms including distributions,
redemption, voting, liquidation rights or such restrictions as shall be set
forth therein. The terms of the Common Securities issued by a JPM Trust will be
substantially identical to the terms of the Preferred Securities issued by such
JPM Trust and the Common Securities will rank pari passu and payments will be
made thereon on a Pro Rata Basis with the Preferred Securities except that, if a
Declaration Event of Default occurs and is continuing, the rights of the holders
of such Common Securities to payment in respect of distributions and payments
upon liquidation, redemption and maturity will be subordinated to the rights of
the holders of such Preferred Securities. Except in certain limited
circumstances, the Common Securities issued by a JPM Trust will also carry the
right to vote and to appoint, remove or replace any of the Trustees of such JPM
Trust. All the Common Securities of a JPM Trust will be directly or indirectly
owned by the Company.
If an Event of Default with respect to the Declaration of any JPM Trust
occurs and is continuing, then the holders of Preferred Securities of such JPM
Trust would rely on the enforcement by the Property Trustee of its rights as a
holder of the Junior Subordinated Debt Securities deposited in such JPM Trust
against the Company. In addition, the holders of a majority in liquidation
amount of such Preferred Securities will have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Property Trustee or to direct the exercise of any trust or power conferred upon
the Property Trustee under such Declaration, including the right to direct the
Property Trustee to exercise the remedies available to it as a holder of such
Junior Subordinated Debt Securities. If the Property Trustee fails to enforce
its rights under such Junior Subordinated Debt Securities deposited in such JPM
Trust, any holder of such Preferred Securities may, to the extent permitted by
applicable law, after a period of 30 days has elapsed from such holder's written
request, institute a legal proceeding against the Company to enforce the
Property Trustee's rights under such Junior Subordinated Debt Securities without
first instituting any legal proceeding against the Property Trustee or any other
person or entity. If an Event of Default with respect to the Declaration of any
JPM Trust occurs and is continuing and such event is attributable to the failure
of the Company to pay interest or principal on the Junior Subordinated Debt
Securities on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), then a holder of Preferred
Securities of such JPM Trust may also directly institute a proceeding for
enforcement of payment to such holder of the principal of or interest on such
Junior Subordinated Debt Securities having a principal amount equal to the
aggregate liquidation amount of such Preferred Securities held by such holder (a
"Direct Action") on or after the respective due date specified in such Junior
Subordinated Debt Securities without first (i) directing the Property Trustee to
enforce the terms of such Junior Subordinated Debt Securities or (ii)
instituting a legal proceeding against the Company to enforce the Property
Trustee's rights under such Junior Subordinated Debt Securities. In connection
with such Direct Action, the Company will be subrogated to the rights of such
holder of such Preferred Securities under such Declaration to the extent of any
payment made by the Company to such holder of such Preferred Securities in such
Direct Action. The Holders of Preferred Securities of a JPM Trust will not be
able to exercise directly any other remedy available to the holders of the
Junior Subordinated Debt Securities unless the Property Trustee first fails to
do so.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Preferred
Securities Guarantees that will be executed and delivered by the Company for the
benefit of the holders from time to time of Preferred Securities of a JPM Trust.
Each Preferred Security Guarantee will be separately qualified under the Trust
Indenture Act and will be held by First Trust of New York, National Association,
acting in its capacity as indenture trustee with respect thereto, for the
benefit of holders of the Preferred Securities of the applicable JPM Trust. The
terms of each Preferred Securities Guarantee will be those set forth in such
Preferred Securities Guarantee and those made part of such Preferred Securities
Guarantee by the Trust Indenture Act. This description summarizes the material
terms of the Preferred Securities Guarantees and is qualified in its entirety by
reference to the form of Preferred Securities Guarantee, which is filed as an
exhibit to the Registration
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Statement of which this Prospectus forms a part, and the Trust Indenture Act.
Section references used herein are references to the provisions of the form of
Preferred Securities Guarantee.
GENERAL
Pursuant to each Preferred Securities Guarantee, the Company will
irrevocably and unconditionally agree, to the extent set forth therein, to pay
in full, to the holders of the Preferred Securities issued by the applicable JPM
Trust, the Guarantee Payments (as defined herein), to the extent not paid by
such JPM Trust, regardless of any defense, right of set-off or counterclaim that
such JPM Trust may have or assert. The following payments or distributions with
respect to Preferred Securities issued by a JPM Trust to the extent not paid or
made by such JPM Trust (the "Guarantee Payments"), will be subject to the
Preferred Securities Guarantee (without duplication): (i) any accrued and unpaid
distributions on such Preferred Securities, but only if and to the extent that
in each case the Company has made a payment to the Property Trustee of interest
on the Junior Subordinated Debt Securities, (ii) the redemption price, including
all accrued and unpaid distributions to the date of redemption, with respect to
any Preferred Securities called for redemption by such JPM Trust, but if and
only to the extent that in each case the Company has made a payment to the
Property Trustee of interest or principal on the Junior Subordinated Debt
Securities deposited in such JPM Trust as trust assets, and (iii) upon a
voluntary or involuntary liquidation, dissolution, winding-up or termination of
such JPM Trust (other than in connection with the distribution of such Junior
Subordinated Debt Securities to the holders of such Preferred Securities or the
redemption of all such Preferred Securities upon the maturity or redemption of
such Junior Subordinated Debt Securities) the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid distributions on such Preferred
Securities to the date of payment, to the extent such JPM Trust has funds
available therefor, and (b) the amount of assets of such JPM Trust remaining
available for distribution to holders of such Preferred Securities upon
liquidation of such JPM Trust. The Company's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Company to the holders of the applicable Preferred Securities or by causing the
applicable JPM Trust to pay such amounts to such holders.
The Company's obligations under the Declaration for each JPM Trust, the
Preferred Securities Guarantee issued with respect to Preferred Securities
issued by such JPM Trust, the Junior Subordinated Debt Securities purchased by
such JPM Trust and the Indenture in the aggregate will provide a full and
unconditional guarantee on a subordinated basis by the Company of payments due
on the Preferred Securities issued by such JPM Trust. However, the Preferred
Securities Guarantees cover distributions and other payments on such Preferred
Securities only if and to the extent that the Company has made a payment to the
Property Trustee of interest or principal on the Junior Subordinated Debt
Securities deposited in the applicable JPM Trust as trust assets. If the Company
does not make interest or principal payments on the Junior Subordinated Debt
Securities deposited in the applicable JPM Trust as trust assets, the Property
Trust will not make distributions on the Preferred Securities of such JPM Trust
and the JPM Trust will not have funds available therefor.
CERTAIN COVENANTS OF THE COMPANY
In each Preferred Securities Guarantee, the Company will covenant that, so
long as any Preferred Securities issued by the applicable JPM Trust remain
outstanding, the Company will not declare or pay any dividends on, or redeem,
purchase, acquire or make a distribution or liquidation payment with respect to,
any of its common stock or preferred stock or make any guarantee payment with
respect thereto, if at such time (i) the Company shall be in default with
respect to its Guarantee Payments or other payment obligations under such
Preferred Securities Guarantee, (ii) there shall have occurred any Event of
Default under the related Declaration or (iii) in the event that Junior
Subordinated Debt Securities are issued to the applicable JPM Trust in
connection with the issuance of Trust Securities by such JPM Trust, the Company
shall have given notice of its election to defer payments of interest on such
Junior Subordinated Debt Securities by extending the interest payment period as
provided in the terms of the Junior Subordinated Debt Securities and such
period, or any extension thereof, is continuing; provided, however, that the
foregoing restrictions shall not apply to (i) dividends, redemptions, purchases,
acquisitions, distributions or payments made by the Company
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by way of issuance of shares of its capital stock, (ii) payments of accrued
dividends by the Company upon the redemption, exchange or conversion of any
preferred stock of the Company as may be outstanding from time to time in
accordance with the terms of such preferred stock, (iii) cash payments made by
the Company in lieu of delivering fractional shares upon the redemption,
exchange or conversion of any preferred stock of the Company as may be
outstanding from time to time in accordance with the terms of such preferred
stock, (iv) repurchases, redemptions or other acquisitions of shares of capital
stock of the Company in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of employees, officers,
directors or consultants, or (v) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of such
rights pursuant thereto. In addition, so long as any Preferred Securities of a
JPM Trust remain outstanding, the Company has agreed (i) to remain the sole
direct or indirect owner of all the outstanding Common Securities issued by such
JPM Trust and not to cause or permit such Common Securities to be transferred
except to the extent permitted by the Declaration of such JPM Trust, provided
that any permitted successor of the Company under the Indenture may succeed to
the Company's ownership of such Common Securities, and (ii) to use reasonable
efforts to cause such JPM Trust to continue to be treated as a grantor trust for
United States Federal income tax purposes, except in connection with a
distribution of Junior Subordinated Debt Securities. (Section 6.01)
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of the applicable Preferred Securities (in which case no consent will
be required), each Preferred Securities Guarantee may be amended only with the
prior approval of the holders of not less than 66-2/3% in liquidation amount of
the outstanding Preferred Securities issued by the applicable JPM Trust. The
manner of obtaining any such approval of holders of such Preferred Securities
will be set forth in an accompanying Prospectus Supplement. (Section 9.02) All
guarantees and agreements contained in a Preferred Securities Guarantee shall
bind the successors, assignees, receivers, trustees and representatives of the
Company and shall inure to the benefit of the holders of the Preferred
Securities of the applicable JPM Trust then outstanding. Except in connection
with a consolidation, merger or sale involving the Company that is permitted
under the Indenture, the Company may not assign its obligations under any
Preferred Securities Guarantee. (Section 9.01)
TERMINATION OF THE PREFERRED SECURITIES GUARANTEES
Each Preferred Securities Guarantee will terminate and be of no further
force and effect as to the Preferred Securities issued by the applicable JPM
Trust upon full payment of the redemption price of all Preferred Securities of
such JPM Trust, or upon distribution of the Junior Subordinated Debt Securities
to the holders of the Preferred Securities of such JPM Trust in exchange for all
the Preferred Securities issued by such JPM Trust, or upon full payment of the
amounts payable upon liquidation of such JPM Trust. Notwithstanding the
foregoing, each Preferred Securities Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of Preferred
Securities issued by the applicable JPM Trust must restore payment of any sums
paid under such Preferred Securities or such Preferred Securities Guarantee.
(Section 7.01)
STATUS OF THE PREFERRED SECURITIES GUARANTEES
The Company's obligations under each Preferred Securities Guarantee to make
the Guarantee Payments will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
indebtedness, liabilities and obligations of the Company and any guarantees,
endorsements or other contingent obligations of the Company in respect of such
indebtedness, liabilities or obligations, including the Junior Subordinated Debt
Securities, except those made pari passu or subordinate by their terms, and (ii)
senior to all capital stock now or hereafter issued by the Company and to any
guarantee now or hereafter entered into by the Company in respect of any of its
capital stock. The Company's obligations under each Preferred Securities
Guarantee will rank pari passu with each other Preferred Securities Guarantee.
(Section 6.02) Because the Company is a holding company, the Company's
obligations
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under each Preferred Securities Guarantee are also effectively subordinated to
all existing and future liabilities of the Company's subsidiaries, except to the
extent that the Company is a creditor of the subsidiaries recognized as such.
Each Declaration provides that each holder of Preferred Securities issued by the
applicable JPM Trust, by acceptance thereof, agrees to the subordination
provisions and other terms of the related Preferred Securities Guarantee.
Each Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the Company to enforce its rights under such
Preferred Securities Guarantee without first instituting a legal proceeding
against any other person or entity). Each Preferred Securities Guarantee will be
deposited with First Trust of New York, National Association, as indenture
trustee, to be held for the benefit of the holders of the Preferred Securities
issued by the applicable JPM Trust. First Trust of New York, National
Association shall enforce such Preferred Securities Guarantee on behalf of the
holders of such Preferred Securities. The holders of not less than a majority in
aggregate liquidation amount of the Preferred Securities issued by the
applicable JPM Trust have the right to direct the time, method and place of
conducting any proceeding for any remedy available in respect of the related
Preferred Securities Guarantee, including the giving of directions to First
Trust of New York, National Association. If First Trust of New York, National
Association fails to enforce a Preferred Securities Guarantee as above provided,
any holder of Preferred Securities issued by the applicable JPM Trust may
institute a legal proceeding directly against the Company to enforce its rights
under such Preferred Securities Guarantee, without first instituting a legal
proceeding against the applicable JPM Trust or any other person or entity.
Notwithstanding the foregoing, if the Company has failed to make a Guarantee
Payment, a holder of Preferred Securities may directly institute a proceeding
against the Company for enforcement of such holder's right to receive payment
under the Preferred Securities Guarantee. The Company waives any right or remedy
to require that any action be brought first against a JPM Trust or any other
person or entity before proceeding directly against the Company.
MISCELLANEOUS
The Company will be required to provide annually to First Trust of New
York, National Association a statement as to the performance by the Company of
certain of its obligations under each Preferred Securities Guarantee and as to
any default in such performance. The Company is required to file annually with
First Trust of New York, National Association an officer's certificate as to the
Company's compliance with all conditions to be complied with by it under each
Preferred Securities Guarantee. (Section 2.04)
First Trust of New York, National Association, prior to the occurrence of a
default, undertakes to perform only such duties as are specifically set forth in
the applicable Preferred Securities Guarantee and, after default with respect to
a Preferred Securities Guarantee, shall exercise the same degree of care as a
prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provision, First Trust of New York, National Association is
under no obligation to exercise any of the powers vested in it by a Preferred
Securities Guarantee at the request of any holder of Preferred Securities unless
it is offered reasonable indemnity against the costs, expenses and liabilities
that might be incurred thereby. (Section 3.02)
GOVERNING LAW
The Preferred Securities Guarantees will be governed by, and construed in
accordance with, the laws of the State of New York.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
Junior Subordinated Debt Securities may be issued from time to time in one
or more series under an Indenture, which term includes all supplements thereto,
(the "Indenture") between the Company and First Trust of New York, National
Association, as trustee (the "Indenture Trustee"). The Indenture has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part. The following description summarizes the material terms of the Indenture,
and is qualified in its entirety by reference to the Indenture and the Trust
Indenture Act. Whenever particular provisions or defined terms in the Indenture
are referred to
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herein, such provisions or defined terms are incorporated by reference herein.
Section references used herein are references to provisions of the Indenture.
GENERAL
The Junior Subordinated Debt Securities will be unsecured, junior
subordinated obligations of the Company. The Indenture does not limit the amount
of additional indebtedness the Company or any of its subsidiaries may incur.
Since the Company is a holding company, the Company's rights and the rights of
its creditors, including the holders of Junior Subordinated Debt Securities, to
participate in the assets of any subsidiary upon the latter's liquidation or
recapitalization will be subject to the prior claims of the subsidiary's
creditors, except to the extent that the Company may itself be a creditor with
recognized claims against the subsidiary.
The Indenture does not limit the aggregate principal amount of indebtedness
which may be issued thereunder and provides that Junior Subordinated Debt
Securities may be issued thereunder from time to time in one or more series. The
Junior Subordinated Debt Securities are issuable in one or more series pursuant
to an indenture supplemental to the Indenture.
In the event Junior Subordinated Debt Securities are issued to a JPM Trust
or a Trustee of such JPM Trust in connection with the issuance of Trust
Securities by such JPM Trust, such Junior Subordinated Debt Securities
subsequently may be distributed pro rata to the holders of such Trust Securities
in connection with the dissolution of such JPM Trust upon the occurrence of
certain events described in the applicable Prospectus Supplement. Only one
series of Junior Subordinated Debt Securities will be issued to a JPM Trust or a
Trustee of such JPM Trust in connection with the issuance of Trust Securities by
such JPM Trust.
Reference is made to the Prospectus Supplement which will accompany this
Prospectus for the following terms of the series of Junior Subordinated Debt
Securities being offered thereby (to the extent such terms are applicable to the
Junior Subordinated Debt Securities): (i) the specific designation of such
Junior Subordinated Debt Securities, aggregate principal amount and purchase
price; (ii) any limit on the aggregate principal amount of such Junior
Subordinated Debt Securities; (iii) the date or dates on which the principal of
such Junior Subordinated Debt Securities is payable and the right, if any, to
extend such date or dates; (iv) the rate or rates at which such Junior
Subordinated Debt Securities will bear interest or the method of calculating
such rate or rates, if any; (v) the date or dates from which such interest shall
accrue, the interest payment dates on which such interest will be payable or the
manner of determination of such interest payment dates and the record dates for
the determination of holders to whom interest is payable on any such interest
payment dates; (vi) the right, if any, to extend the interest payment periods
and the duration of such extension; (vii) the period or periods within which,
the price or prices at which, and the terms and conditions upon which, such
Junior Subordinated Debt Securities may be redeemed, in whole or in part, at the
option of the Company; (viii) the obligation, if any, of the Company to redeem
or purchase such Junior Subordinated Debt Securities pursuant to any sinking
fund or analogous provisions or at the option of the holder thereof and the
period or periods for which, the price or prices at which, and the terms and
conditions upon which, such Junior Subordinated Debt Securities shall be
redeemed or purchased, in whole or part, pursuant to such obligation; (ix) any
applicable United States Federal income tax consequences, including whether and
under what circumstances the Company will pay additional amounts on the Junior
Subordinated Debt Securities held by a person who is not a U.S. person in
respect of any tax, assessment or governmental charge withheld or deducted and,
if so, whether the Company will have the option to redeem such Junior
Subordinated Debt Securities rather than pay such additional amounts; (x) the
form of such Junior Subordinated Debt Securities; (xi) if other than
denominations of $25 or any integral multiple thereof, the denominations in
which such Junior Subordinated Debt Securities shall be issuable; (xii) any and
all other terms with respect to such series, including any modification of or
additions to the events of default or covenants provided for with respect to the
Junior Subordinated Debt Securities, and any terms which may be required by or
advisable under applicable laws or regulations not inconsistent with the
Indenture; and (xiii) whether such Junior Subordinated Debt Securities are
issuable as a global security, and in such case, the identity of the depositary.
(Section 2.3)
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Unless otherwise indicated in the applicable Prospectus Supplement, the
Junior Subordinated Debentures will be issued in United States dollars in fully
registered form without coupons in denominations of $25 or integral multiples
thereof. Junior Subordinated Debt Securities may be presented for exchange and
transfer in the manner, at the places and subject to the restrictions set forth
in the Indenture. Such services will be provided without charge, other than any
tax or other governmental charge payable in connection therewith, but subject to
the limitations provided in the Indenture. (Section 2.8)
Junior Subordinated Debt Securities may bear interest at a fixed rate or a
floating rate. Junior Subordinated Debt Securities bearing no interest or
interest at a rate that at the time of issuance is below the prevailing market
rate will be sold at a discount below their stated principal amount. Special
United States Federal income tax considerations applicable to any such
discounted Junior Subordinated Debt Securities or to certain Junior Subordinated
Debt Securities issued at par which are treated as having been issued at a
discount for United States Federal income tax purposes will be described in the
applicable Prospectus Supplement.
CERTAIN COVENANTS OF THE COMPANY APPLICABLE TO THE JUNIOR SUBORDINATED DEBT
SECURITIES
If Junior Subordinated Debt Securities are issued to a JPM Trust in
connection with the issuance of Trust Securities by such JPM Trust, the Company
will covenant in the Indenture that, so long as the Preferred Securities of such
JPM Trust remain outstanding, the Company will not declare or pay any dividends
on, or redeem, purchase, acquire or make a distribution or liquidation payment
with respect to, any of its common stock or preferred stock or make any
guarantee payments with respect thereto if at such time (i) the Company shall be
in default with respect to its Guarantee Payments or other payment obligations
under the related Preferred Securities Guarantee, (ii) there shall have occurred
any Indenture Event of Default with respect to such Junior Subordinated Debt
Securities or (iii) in the event that Junior Subordinated Debt Securities are
issued to a JPM Trust in connection with the issuance of Trust Securities by
such JPM Trust, the Company shall have given notice of its election to defer
payments of interest on such Junior Subordinated Debt Securities by extending
the interest payment period as provided in the terms of such Junior Subordinated
Debt Securities and such period, or any extension thereof, is continuing;
provided, however, that the foregoing restrictions shall not apply to (i)
dividends, redemptions, purchases, acquisitions, distributions or payments made
by the Company by way of issuance of shares of its capital stock, (ii) payments
of accrued dividends by the Company upon the redemption, exchange or conversion
of any preferred stock of the Company as may be outstanding from time to time in
accordance with the terms of such preferred stock or (iii) cash payments made by
the Company in lieu of delivering fractional shares upon the redemption,
exchange or conversion of any preferred stock of the Company as may be
outstanding from time to time in accordance with the terms of such preferred
stock. In addition, if Junior Subordinated Debt Securities are issued to a JPM
Trust in connection with the issuance of Trust Securities by such JPM Trust, for
so long as the Preferred Securities of such JPM Trust remain outstanding, the
Company has agreed (i) to remain the sole direct or indirect owner of all the
outstanding Common Securities issued by such JPM Trust and not to cause or
permit such Common Securities to be transferred except to the extent permitted
by the Declaration of such JPM Trust; provided that any permitted successor of
the Company under the Indenture may succeed to the Company's ownership of such
Common Securities, (ii) to comply fully with all its obligations and agreements
contained in such Declaration and (iii) not to take any action which would cause
such JPM Trust to cease to be treated as a grantor trust for United States
Federal income tax purposes, except in connection with a distribution of Junior
Subordinated Debt Securities.
SUBORDINATION
The Junior Subordinated Debt Securities will be unsecured and will be
subordinate in right of payment to all Senior Indebtedness, Subordinated
Indebtedness and to Derivative Obligations (as such terms are defined below) of
J.P. Morgan, whether outstanding as of this date or hereafter incurred. In
addition, since J.P. Morgan is a holding company, the right of J.P. Morgan to
participate as a shareholder in any distribution of assets of any subsidiary
upon its liquidation or reorganization or otherwise (and thus the ability of
holders of the Junior Subordinated Debt Securities to benefit as creditors of
J.P. Morgan from such distribution) is
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subject to the prior claims of creditors of any such subsidiary. J.P. Morgan and
its subsidiaries are subject to claims by creditors for long-term and short-term
debt obligations, including substantial obligations for federal funds purchased
and securities sold under repurchase agreement, as well as deposit liabilities.
There are also various legal limitations on the extent to which subsidiaries of
J.P. Morgan may pay dividends or otherwise supply funds to J.P. Morgan.
The Junior Subordinated Debt Securities will be subordinate in right of
payment as provided in the Indenture to all Senior Indebtedness, Subordinated
Indebtedness and Derivative Obligations of J.P. Morgan. No payment pursuant to
the Junior Subordinated Debt Securities may be made and no holder of the Junior
Subordinated Debt Securities or any coupon appertaining thereto shall be
entitled to demand or receive any such payment (i) unless all amounts of
principal, premium, if any, and interest then due on all Senior Indebtedness,
Subordinated Indebtedness and Derivative Obligations of J.P. Morgan shall have
been paid in full or duly provided for or (ii) if, at the time of such payment
or immediately after giving effect thereto, there shall exist with respect to
any given Senior Indebtedness, Subordinated Indebtedness or Derivative
Obligations of J.P. Morgan any event of default permitting the holders thereof
to accelerate the maturity or payment thereof or any event which, with notice or
lapse of time, or both, will become such an event of default. (Section 10.2)
In the event of the acceleration of the maturity of any Junior Subordinated
Debt Securities, the holders of all Senior Indebtedness, Subordinated
Indebtedness and Derivative Obligations outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon acceleration) before the holders of
Junior Subordinated Debt Securities will be entitled to receive or retain any
payment on the Junior Subordinated Debt Securities; provided, however, that
holders of Subordinated Debt shall not be entitled to receive payment of any
such amounts in preference to the Junior Subordinated Debt Securities to the
extent that such Subordinated Debt is by its terms subordinated to trade
creditors.
Upon any distribution of the assets of J.P. Morgan upon dissolution,
winding up, liquidation or reorganization, the holders of Senior Indebtedness,
Subordinated Indebtedness and Derivative Obligations of J.P. Morgan will be
entitled to receive payment in full of principal, premium, if any, and interest
before any payment may be made on the Junior Subordinated Debt Securities. By
reason of such subordination, in the event of a bankruptcy or insolvency of J.P.
Morgan, holders of Senior Indebtedness, Subordinated Indebtedness and Derivative
Obligations of J.P. Morgan may receive more, ratably, and holders of the Junior
Subordinated Debt Securities may receive less, ratably, than the other creditors
of J.P. Morgan. Such subordination will not prevent the occurrence of any Event
of Default in respect of the Junior Subordinated Debt Securities. The Indenture
does not limit the amount of Senior Indebtedness, Subordinated Indebtedness or
Derivative Obligations J.P. Morgan may incur.
Senior Indebtedness of J.P. Morgan is defined as the principal of, premium,
if any, and interest on (a) all Debt of J.P. Morgan, whether outstanding on the
date of execution of the Indenture or thereafter created, assumed or incurred,
except such Debt as is by its terms expressly stated to be not superior in right
of payment to the Junior Subordinated Debt Securities or to rank pari passu with
the Junior Subordinated Debt Securities and (b) any deferrals, renewals or
extensions of any such Senior Indebtedness; provided, however, that Senior
Indebtedness shall not be deemed to include (i) Debt which by its terms is
subordinated to trade accounts payable or accrued liabilities arising in the
ordinary course of business to the extent that payments made to the holders of
such Debt by the holders of the Junior Subordinated Debt Securities as a result
of the subordination provisions of the Indenture would be greater than they
otherwise would have been as a result of any obligation of such holders to pay
amounts over to the obligees on such trade accounts payable or accrued
liabilities arising in the ordinary course of business as a result of
subordination provisions to which such Debt is subject; (ii) Debt which
constitutes Subordinated Indebtedness and (iii) any other debt securities issued
pursuant to the Indenture.
"Subordinated Indebtedness" is defined as the principal of, premium, if
any, and interest, on Debt, whether outstanding on the date of the execution of
the Indenture or thereafter incurred, which is by its terms
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expressly provided to be junior and subordinate to other Debt of J.P. Morgan
(other than the Junior Subordinated Debt Securities).
The term "Debt" as used in the foregoing definitions shall mean any
obligation of, or any obligation guaranteed by, J.P. Morgan for the repayment of
borrowed money, whether or not evidenced by bonds, debentures, notes or other
written instruments, and any deferred obligation for the payment of the purchase
price of property or assets (but shall not include trade accounts payable or
accrued liabilities arising in the ordinary course of business). The term "pari
passu" as used herein shall mean ranking equally in right of payment in the
event of J.P. Morgan's bankruptcy. (Section 1.1)
"Derivative Obligations" of J.P. Morgan are defined in the Indenture as
obligations of J.P. Morgan to make payments on claims in respect of derivative
products such as interest and foreign exchange rate contracts, commodity
contracts and similar arrangements; provided, however, that Derivative
Obligations do not include claims in respect of Senior Indebtedness,
Subordinated Indebtedness or obligations which, by their terms, are expressly
stated not to be superior in right of payment to the Junior Subordinated Debt
Securities or to rank pari passu with the Junior Subordinated Debt Securities.
For purposes of this definition, "claim" has the meaning assigned thereto in
Section 101(4) of the United States Bankruptcy code of 1978, as amended and in
effect on the date of the Indenture. (Section 1.1)
The Prospectus Supplement will set forth the aggregate amount of
outstanding indebtedness as of the most recent practicable date that by the
terms of such debt securities would be senior to the Junior Subordinated Debt
Securities and any limitation on the issuance of such additional senior
indebtedness.
Notwithstanding anything to the contrary in the Indenture or the Junior
Subordinated Debt Securities, Senior Indebtedness and Subordinated Indebtedness
shall not include (i) any indebtedness of the Company which, by its terms or the
terms of the instrument creating or evidencing it, is subordinate in right of
payment to, or pari passu with, the Junior Subordinated Debt Securities, as the
case may be, and in particular, the Junior Subordinated Debt Securities shall
rank pari passu with respect to all other debt securities and guarantees in
respect thereof issued to any other trusts, partnerships or other entity
affiliated with the Company which is a financing vehicle of the Company in
connection with the issuance of preferred securities by such financing vehicle,
or (ii) any indebtedness of the Company to a subsidiary of the Company.
EVENTS OF DEFAULT, WAIVER, NOTICE
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Indenture Event of
Default" with respect to each series of Junior Subordinated Debt Securities:
(a) failure for 30 days to pay interest on the Junior Subordinated
Debt Securities of such series when due; provided that a valid extension of
the interest payment period by the Company shall not constitute a default
in the payment of interest for this purpose;
(b) failure to pay principal of or premium, if any, on the Junior
Subordinated Debt Securities of such series when due whether at maturity,
upon redemption, by declaration or otherwise;
(c) failure to observe or perform any other covenant contained in the
Indenture with respect to such series for 90 days after written notice to
the Company from the Indenture Trustee or the holders of at least 25% in
principal amount of the outstanding Junior Subordinated Debt Securities of
such series; or
(d) certain events in bankruptcy, insolvency or reorganization of the
Company.
In each and every such case, unless the principal of all the Junior Subordinated
Debt Securities of such series shall have already become due and payable, either
the Indenture Trustee or the holders of not less than 25% in aggregate principal
amount of the Junior Subordinated Debt Securities of such series then
outstanding, by notice in writing to the Company (and to the Indenture Trustee
if given by such holders), may declare the principal of all the Junior
Subordinated Debt Securities of such series to be due and payable immediately,
and upon any such declaration the same shall become and shall be immediately due
and payable. (Section 6.01(b))
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The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities of the applicable series have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee. (Section 6.06) The Indenture Trustee or the
holders of not less than 25% in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities of such series may declare the principal due
and payable immediately upon an Indenture Event of Default with respect to such
series, but the holders of a majority in aggregate outstanding principal amount
of Junior Subordinated Debt Securities of such series may annul such declaration
and waive the default if the default has been cured and a sum sufficient to pay
all matured installments of interest and principal otherwise than by
acceleration and any premium has been deposited with the Indenture Trustee.
(Sections 6.01(b) and 6.01(c))
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities of a series may, on behalf of the holders of
all the Junior Subordinated Debt Securities of such series, waive any past
default, except a default in the payment of principal, premium, if any, or
interest on Junior Subordinated Securities of such series (unless such default
has been cured and a sum sufficient to pay all matured installments of interest
and principal otherwise than by acceleration and any premium has been deposited
with the Indenture Trustee) or a call for redemption of Junior Subordinated Debt
Securities of such series. (Section 6.06) The Company is required to file
annually with the Indenture Trustee a certificate as to whether or not the
Company is in compliance with all the conditions and covenants under the
Indenture. (Section 5.03(d))
If a series of Junior Subordinated Debt Securities is issued to a JPM Trust
in connection with the issuance of Trust Securities of such JPM Trust, then,
under the applicable Declaration, an Indenture Event of Default with respect to
such series of Junior Subordinated Debt Securities will constitute a Declaration
Event of Default.
MODIFICATION OF THE INDENTURES; WAIVER OF COMPLIANCE
The Indenture contains provisions permitting J.P. Morgan and the Trustee,
with the consent of the holders of not less than a majority in principal amount
of the respective Junior Subordinated Debt Securities of all series affected by
such modification or waiver at the time outstanding (voting as one class), to
modify the Indenture or any supplemental indenture or the rights of the holders
of the respective Junior Subordinated Debt Securities, or waive compliance by
J.P. Morgan with any of its obligations thereunder, provided that no such
modification or waiver shall (i) extend the final maturity of any respective
Junior Subordinated Debt Security, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, or change the
currency or currency unit of payment thereof, or change the method in which
amounts of payments of principal or interest thereon are determined, or reduce
the portion of the principal amount of an original issue discount Junior
Subordinated Debt Security due and payable upon acceleration of the maturity
thereof or the portion of the principal amount thereof provable in bankruptcy,
or reduce any amount payable upon redemption of any Junior Subordinated Debt
Security, or impair or affect the right of a holder to institute suit for the
payment thereof or, if the Junior Subordinated Debt Securities provide therefor,
any right of repayment at the option of the holder of a Junior Subordinated Debt
Security, without the consent of the holder of each respective Junior
Subordinated Debt Security so affected or (ii) reduce the aforesaid percentage
of Junior Subordinated Debt Securities of any series, the consent of the holders
of which is required for any such modification, without the consent of the
holder of each Junior Subordinated Debt Security so affected. (Sections 8.2 and
8.6)
In the event the consent of the Property Trustee as the holder of the
Junior Subordinated Debentures is required under the Indenture with respect to
any amendment, modification or termination of the Indenture or the Junior
Subordinated Debentures, the Property Trustee shall request the direction of the
holders of the Trust Securities with respect to such amendment, modification or
termination and shall vote with respect to such amendment, modification or
termination as directed by a majority in liquidation amount of the Trust
Securities voting together as a single class; provided, however, that where any
such amendment, modification or termination under the Indenture would require
the consent or vote of (1) holders of Junior Subordinated Debentures
representing a specified percentage greater than a majority in principal amount
of the Junior
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Subordinated Debentures or (2) each holder of Junior Subordinated Debentures,
the Property Trustee may only give such consent or vote, in the case of clause
(1), at the direction of the holders of Trust Securities representing such
specified percentage of the aggregate liquidation amount of the Trust Securities
or, in the case of clause (2), as directed by each holder of Trust Securities;
and, provided further, however, that the Property Trustee shall be under no
obligation to take any such action in accordance with the directions of the
holders of the Trust Securities unless the Property Trustee has obtained an
opinion of nationally recognized independent tax counsel recognized as expert in
such matters to the effect that the Trust will not be classified for United
States Federal income tax purposes as an association taxable as a corporation or
a partnership on account of such action and will be treated as a grantor trust
for United States Federal income tax purposes following such action.
The Indenture also permits J.P. Morgan and the Trustee to amend such
Indenture in certain circumstances without the consent of the holders of Junior
Subordinated Debt Securities to evidence the merger of J.P. Morgan, the
replacement of the Trustee, to effect modifications which do not affect any
series of Junior Subordinated Debt Security already outstanding, and for certain
other purposes. (Section 8.1)
CONSOLIDATIONS, MERGERS AND SALES OF ASSETS
J.P. Morgan may not merge or consolidate with any other corporation or sell
or convey all or substantially all of its assets to any Person, unless either
J.P. Morgan shall be the continuing corporation or the successor corporation
shall be a corporation organized under the laws of the United States or any
state thereof and shall expressly assume the payment of the principal of and
interest on the Junior Subordinated Debt Securities and the performance and
observance of all the covenants and conditions of the Indenture binding upon
J.P. Morgan, and J.P. Morgan or such successor corporation shall not,
immediately after such merger or consolidation, or such sale or conveyance, be
in default in the performance of any such covenant or condition. (Article Nine)
BOOK ENTRY AND SETTLEMENT
If any Junior Subordinated Debt Securities of a series are represented by
one or more global securities (each, a "Global Security"), the applicable
Prospectus Supplement will describe the circumstances, if any, under which
beneficial owners of interests in any such Global Security may exchange such
interests for Junior Subordinated Debt Securities of such series and of like
tenor and principal amount in any authorized form and denomination. Principal
of, and any premium and interest on, a Global Security will be payable in the
manner described in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any
portion of a series of Junior Subordinated Debt Securities to be represented by
a Global Security will be described in the applicable Prospectus Supplement.
GOVERNING LAW
The Indenture and the Junior Subordinated Debt Securities will be governed
by, and construed in accordance with, the laws of the State of New York.
(Section 12.8)
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. (Section 7.01) Subject to such provision, the
Indenture Trustee is under no obligation to exercise any of the powers vested in
it by the Indenture at the request of any holder of Junior Subordinated Debt
Securities, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities that might be incurred thereby. (Section 7.02)
The Indenture Trustee is not required to expend or risk its own funds or
otherwise incur personal financial liability in the performance of its duties if
the Indenture Trustee reasonably believes that repayment or adequate indemnity
is not reasonably assured to it. (Section 7.01)
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First Trust of New York, National Association is a depositary for funds and
performs other services for, and transacts other banking business with, the
Company in the normal course of business.
POSSIBLE TAX LAW CHANGES
On March 19, 1996, the Clinton Administration proposed legislation (the
"Proposed Legislation") which would, among other things, generally deny
corporate issuers a deduction for interest in respect of certain debt
obligations, such as the Junior Subordinated Debentures, issued on or after
December 7, 1995 if such debt obligations have a maximum term in excess of 20
years and are not shown as indebtedness on the issuer's applicable consolidated
balance sheet. On March 29, 1996, Senate Finance Committee Chairman William V.
Roth, Jr. and House Ways and Means Committee Chairman Bill Archer issued a joint
statement (the "Joint Statement") indicating their intent that the Proposed
Legislation, if adopted by either of the tax-writing committees of Congress,
would have an effective date that is no earlier than the date of "appropriate
Congressional action." In addition, subsequent to the publication of the Joint
Statement, Senator Daniel Patrick Moynihan and Representatives Sam M. Gibbons
and Charles B. Rangel wrote letters to the Treasury Department (the "Democrat
Letters"), which concurred with the view expressed in the Joint Statement. No
such Congressional action has yet occurred. If the principles contained in the
Joint Statement and the Democrat Letters were followed and if the Proposed
Legislation were enacted, such legislation would not apply to the Junior
Subordinated Debentures. There can be no assurance, however, that the effective
date guidance contained in the Joint Statement and the Democrat Letters will be
incorporated into the Proposed Legislation, if enacted, or that other
legislation enacted after the date hereof will not otherwise adversely affect
the ability of the Company to deduct the interest payable on the Junior
Subordinated Debentures. Such a change could give the Company the right to cause
an early redemption.
ERISA MATTERS
The Company and certain affiliates of the Company may each be considered a
"party in interest" (within the meaning of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) or a "disqualified person" (within
the meaning of Section 4975 of the Internal Revenue Code of 1986, as amended
(the "Code")) with respect to many employee benefit plans ("Plans") that are
subject to ERISA. The purchase of Offered Securities by a Plan that is subject
to the fiduciary responsibility provisions of ERISA or the prohibited
transaction provisions of Section 4975 of the Code (including individual
retirement arrangements and other plans described in Section 4975(e)(1) of the
Code) and with respect to which the Company, or any affiliate of the Company is
a service provider (or otherwise is a party in interest or a disqualified
person) may constitute or result in a prohibited transaction under ERISA or
Section 4975 of the Code, unless such Offered Securities are acquired pursuant
to and in accordance with an applicable exemption. Any pension or other employee
benefit plan proposing to acquire any Offered Securities should consult with its
counsel.
PLAN OF DISTRIBUTION
The Company may sell any series of Junior Subordinated Debt Securities and
the JPM Trusts may sell the Preferred Securities being offered hereby (i)
through agents, (ii) through underwriters, (iii) through dealers and (iv)
directly to purchasers. Any such persons may be customers of, engage in
transactions with, or perform services for, J.P. Morgan in the ordinary course
of business.
Offered Securities may be offered and sold through agents designated by
J.P. Morgan from time to time. Any such agent involved in the offer or sale of
the Securities in respect of which this Prospectus is delivered will be named,
and any commissions payable by J.P. Morgan to such agent will be set forth, in
the Prospectus Supplement. Unless otherwise indicated in the Prospectus
Supplement, any such agent will be acting on a best efforts basis for the period
of its appointment (ordinarily five business days or less). Any such agent may
be deemed to be an underwriter, as that term is defined in the Securities Act of
1933, as amended, of the Offered Securities so offered and sold. Agents may be
entitled under agreements which may be entered into with J.P. Morgan to
indemnification by J.P. Morgan against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
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If an underwriter or underwriters are utilized in the sale of the Offered
Securities, J.P. Morgan will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is reached,
and the names of the specific managing underwriter or underwriters, as well as
any other underwriters, and the terms of the transaction, including compensation
of the underwriters and dealers, if any, will be set forth in the Prospectus
Supplement which will be used by the underwriters to make resales of the Offered
Securities in respect of which this Prospectus is delivered to the public.
Underwriters will acquire Offered Securities for their own account and may
resell such Offered Securities from time to time in one or more transactions,
including negotiated transactions, at fixed public offering prices or at varying
prices determined at the time of sale. Offered Securities may be offered to the
public either through underwriting syndicates represented by managing
underwriters, or directly by the managing underwriters. The underwriters may be
entitled, under the relevant underwriting agreement, to indemnification by J.P.
Morgan against certain liabilities, including liabilities under the Securities
Act of 1933, as amended. Only underwriters named in the Prospectus Supplement
are deemed to be underwriters in connection with the Offered Securities offered
thereby. If any underwriter or underwriters are utilized in the sale of the
Offered Securities, the underwriting agreement provides that the obligations of
the underwriters are subject to certain conditions precedent and that the
underwriters with respect to a sale of Offered Securities will be obligated to
purchase all such Offered Securities if any are purchased.
If a dealer is utilized in the sale of the Offered Securities in respect of
which this Prospectus is delivered, J.P. Morgan will sell such Offered
Securities to the dealer, as principal. The dealer may then resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale. Any such dealer may be deemed to be an underwriter, as such
term is defined in the Securities Act of 1933, as amended, of the Offered
Securities so offered and sold. Dealers may be entitled, under agreements which
may be entered into with J.P. Morgan, to indemnification by J.P. Morgan against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended. The name of the dealer and the terms of the transaction will be set
forth in the Prospectus Supplement relating thereto.
Offers to purchase Offered Securities may be solicited directly by J.P.
Morgan and sales thereof may be made by J.P. Morgan directly to institutional
investors or others, who may be deemed to be underwriters within the meaning of
the Securities Act of 1933, as amended, with respect to any sale thereof. The
terms of any such sales will be described in the Prospectus Supplement relating
thereto.
If so indicated in the Prospectus Supplement, J.P. Morgan will authorize
agents and underwriters to solicit offers by certain institutions to purchase
Offered Securities from J.P. Morgan at the public offering price set forth in
the Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on the date stated in the Prospectus
Supplement. Each Contract will be for an amount no less than, and, unless J.P.
Morgan otherwise agrees, the aggregate principal amount of Securities sold
pursuant to Contracts shall be not less nor more than, the respective amounts
stated in the Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and other institutions but shall in all cases be subject to the
approval of J.P. Morgan.
Contracts will not be subject to any conditions except that any related
sale of Offered Securities to underwriters shall have occurred and the purchase
by an institution of the Offered Securities covered by its Contract shall not at
the time of delivery be prohibited under the laws of any jurisdiction in the
United States to which such institution is subject. A commission indicated in
the Prospectus Supplement will be paid to underwriters and agents soliciting
purchases of Offered Securities pursuant to Contracts accepted by J.P. Morgan.
The place and time of delivery of the Offered Securities in respect of
which this Prospectus is delivered are set forth in the accompanying Prospectus
Supplement.
This Prospectus and related Prospectus Supplement may be used by direct or
indirect wholly-owned subsidiaries of J.P. Morgan in connection with offers and
sales related to secondary market transactions in the Offered Securities. Such
subsidiaries may act as principal or agent in such transactions. Such sales will
be made at prices related to prevailing market prices at the time of a sale.
23
<PAGE> 135
The offer and sale of the Offered Securities by an affiliate of J.P. Morgan
will comply with the requirements of Rule 2720 of the Conduct Rules of the
National Association of Securities Dealers, Inc. (the "NASD") regarding
underwriting of securities of an affiliate. Accordingly, an affiliate of J.P.
Morgan that is a member of the NASD may participate in a public offering and
sale of Offered Securities if the offering is of a class of securities rated
investment grade by a nationally recognized statistical rating organization. In
addition, an affiliate of J.P. Morgan that is a member of the NASD may
participate in any public offering and sale of the Offered Securities if the
price at which an equity issue is distributed to the public is no higher or the
yield at which a debt issue is distributed to the public is no lower than that
recommended by a "qualified independent underwriter" (determined to be so
qualified by the NASD prior to commencement of such offering), in each case in
compliance with the provisions of Rule 2720 of the Conduct Rules.
Each NASD member participating in offers and sales of the Offered
Securities will not execute a transaction in the Offered Securities in a
discretionary account without the prior written specific approval of the
member's customer.
Certain of the underwrites or agents and their associates may be customers
of, engage in transactions with, and perform services for, J.P. Morgan in the
ordinary course of business. Agents and underwriters may be customers of, engage
in transactions with, or perform services for, the Company in the ordinary
course of business.
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, certain
matters of Delaware law relating to the validity of the Preferred Securities
will be passed upon by Morris, Nichols, Arsht & Tunnell, Wilmington, Delaware.
The validity of the Preferred Securities Guarantees and the Junior Subordinated
Debt Securities and certain other matters will be passed upon for the Company by
Gene A. Capello, Vice President and Assistant General Counsel of J.P. Morgan,
and for the agents or underwriters, if any, by Cravath, Swaine & Moore, New
York, New York.
EXPERTS
The audited financial statements contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1995 (included in J.P. Morgan's
Annual Report to Stockholders) are incorporated by reference in this Prospectus
in reliance upon the report of Price Waterhouse LLP, independent accountants,
given upon the authority of said firm as experts in auditing and accounting.
24
<PAGE> 136
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of securities
being registered, other than underwriting compensation and related hedging
costs, are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 0
Legal Fees and Expenses..................................... 35,000*
Accounting Fees and Expenses................................ 10,000
Trustee's Fees and Expenses (including counsel fees)........ 5,000*
Rating Agency Fees.......................................... 2,500
Printing and Engraving Fees................................. 20,000*
Miscellaneous............................................... 2,500*
--------
Total....................................................... $ 75,000*
========
</TABLE>
---------------
* Estimated
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Pursuant to the Delaware General Corporation Law ("DGCL"), a corporation
may indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than a
derivative action by or in the right of such corporation) who is or was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with such action,
suit or proceeding, if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of such
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
The DGCL also permits indemnification by a corporation under similar
circumstances for expenses (including attorneys' fees) actually and reasonably
incurred by such persons in connection with the defense or settlement of a
derivative action, except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to such corporation unless the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
The DGCL provides that the indemnification described above shall not be
deemed exclusive of any other indemnification to which those seeking
indemnification or advancement of expenses may be entitled pursuant to its
By-Laws, disinterested directors' vote, stockholders' vote, agreement or
otherwise.
The DGCL also provides corporations with the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted against
him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability as described above.
The Restated Certificate of Incorporation of The Chase Manhattan
Corporation (the "Registrant") provides that, to the fullest extent that the
DGCL as from time to time in effect permits the limitation or
II-1
<PAGE> 137
elimination of the liability of directors, no director of the Registrant shall
be personally liable to the Registrant or its stockholders for monetary damages
for breach of fiduciary duty as a director.
The Registrant's Restated Certificate of Incorporation empowers the
Registrant to indemnify any director, officer, employee or agent of the
Registrant or any other person who is serving at the Registrant's request in any
such capacity with another corporation, partnership, joint venture, trust or
other enterprise (including, without limitation, an employee benefit plan) to
the fullest extent permitted under the DGCL as from time to time in effect, and
any such indemnification may continue as to any person who has ceased to be a
director, officer, employee or agent and may inure to the benefit of the heirs,
executors and administrators of such a person.
The Registrant's Restated Certificate of Incorporation also empowers the
Registrant by action of its Board of Directors, notwithstanding any interest of
the directors in the action, to purchase and maintain insurance in such amounts
as the Board of Directors deems appropriate to protect any director, officer,
employee or agent of the Registrant or any other person who is serving at the
Registrant's request in any such capacity with another corporation, partnership,
joint venture, trust or other enterprise (including, without limitation, an
employee benefit plan) against any liability asserted against him or her or
incurred by him or her in any such capacity arising out of his or her status as
such (including, without limitation, expenses, judgments, fines (including any
excise taxes assessed on a person with respect to any employee benefit plan) and
amounts paid in settlement) to the fullest extent permitted under the DGCL as
from time to time in effect, whether or not the Registrant would have the power
or be required to indemnify any such individual under the terms of any agreement
or by-law or the DGCL.
In addition, the Registrant's By-laws require indemnification to the
fullest extent permitted under applicable law, as from time to time in effect.
The By-laws provide a clear and unconditional right to indemnification for
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by any person in connection with any
threatened, pending or completed investigation, claim, action, suit or
proceeding, whether civil, administrative or investigative (including, to the
extent permitted by law, any derivative action) by reason of the fact that such
person is or was serving as a director, officer, employee or agent of the
Registrant or, at the request of the Registrant, of another corporation,
partnership, joint venture, trust or other enterprise (including, without
limitation, an employee benefit plan). The By-laws specify that the right to
indemnification so provided is a contract right, set forth certain procedural
and evidentiary standards applicable to the enforcement of a claim under the
By-laws and entitle the persons to be indemnified to have all expenses incurred
in advance of the final disposition of a proceeding paid by the Registrant. Such
provisions, however, are intended to be in furtherance and not in limitation of
the general right to indemnification provided in the By-laws, which right of
indemnification and of advancement of expenses is not exclusive.
The Registrant's By-laws also provide that the Registrant may enter into
contracts with any director, officer, employee or agent of the Registrant in
furtherance of the indemnification provisions in the By-laws, as well as create
a trust fund, grant a security interest or use other means (including, without
limitation, a letter of credit) to ensure payment of amounts indemnified.
II-2
<PAGE> 138
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
3.1 -- Restated Certificate of Incorporation of The Chase Manhattan
Corporation (incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-8 (File No. 333-07941) of
The Chase Manhattan Corporation).+
3.2 -- Certificate of Amendment of Restated Certificate of
Incorporation of The Chase Manhattan Corporation
(incorporated by reference to Exhibit 3.2 to Registration
Statement on Form S-3 (File No. 333-56573) of The Chase
Manhattan Corporation).+
3.3 -- Certificate of Amendment of Restated Certificate of
Incorporation of The Chase Manhattan Corporation
(incorporated by reference to Exhibit 4.3 of the
Registration Statement on Form S-4 (File No. 333-47350) of
The Chase Manhattan Corporation).+
3.4 -- Certificate of Designations for the Fixed/Adjustable Rate
Noncumulative Preferred Stock of The Chase Manhattan
Corporation (incorporated by reference to Exhibit 3.3 to the
Registration Statement on Form S-3 (File No. 333-56573) of
The Chase Manhattan Corporation).+
3.5 -- By-Laws of The Chase Manhattan Corporation, as amended
(incorporated by reference to Exhibit 4.4 of the
Registration Statement on Form S-8 (File No. 333-92217) of
The Chase Manhattan Corporation).+
4.1 -- Form of Junior Subordinated Debt Indenture.
4.2 -- Declaration of Trust of JPM Capital Trust I.
4.3 -- Certificate of Trust of JPM Capital Trust I.
4.4 -- Declaration of Trust of JPM Capital Trust II.
4.5 -- Certificate of Trust of JPM Capital Trust II.
4.6 -- Form of Amended and Restated Declaration of Trust.
4.7 -- Form of Preferred Security (included in Exhibit 4.6).
4.8 -- Form of Supplemental Indenture for use in connection with
issuances of Junior Subordinated Debt Securities and
Preferred Securities.
4.9 -- Form of Junior Subordinated Debt Security (included in
Exhibit 4.8).
4.10 -- Form of Guarantee with respect to Preferred Securities of
JPM Capital Trust I.
4.11 -- Form of Guarantee with respect to Preferred Securities of
JPM Capital Trust II.
5.1 -- Opinion of Neila B. Radin.
5.2 -- Opinion of Morris, Nichols, Arsht & Tunnell, Delaware
counsel.
12.1 -- Computation of Ratios of Earnings to Fixed Charges for
Period Ended December 31, 1999 (incorporated by reference to
Exhibit 12(a) to Annual Report on Form 10-K for the Year
Ended December 31, 1999 of The Chase Manhattan Corporation
(File No. 1-5805)).+
12.2 -- Computation of Ratios of Earnings to Fixed Charges for
Period Ended September 30, 2000 (incorporated by reference
to Exhibit 12(a) to the Quarterly Report on Form 10-Q for
the Quarter Ended September 30, 2000 of The Chase Manhattan
Corporation (File No. 1-5805)).+
12.3 -- Computation of Ratios of Earnings to Fixed Charges and
Preferred Stock Dividend Requirements for Period Ended
December 31, 1999 (incorporated by reference to Exhibit
12(b) to Annual Report on Form 10-K for the Year Ended
December 31, 1999 of The Chase Manhattan Corporation (File
No. 1-5805)).+
12.4 -- Computation of Ratios of Earnings to Fixed Charges and
Preferred Stock Dividend Requirements for Period Ended
September 30, 2000 (incorporated by reference to Exhibit
12(b) to the Quarterly Report on Form 10-Q for the Quarter
Ended September 30, 2000 of The Chase Manhattan Corporation
(File No. 1-5805)).+
23.1 -- Consent of PricewaterhouseCoopers LLP.
23.2 -- Consent of Neila B. Radin (included in Exhibit 5.1).
23.3 -- Consent of Morris, Nichols, Arsht & Tunnell (included in
Exhibit 5.2).
</TABLE>
II-3
<PAGE> 139
<TABLE>
<S> <C> <C>
24.1 -- Powers of Attorney.
25.1 -- Statement of Eligibility of Property Trustee on Form T-1.
</TABLE>
---------------
+ Incorporated by Reference.
ITEM 17. UNDERTAKING.
The Registrants hereby undertake that, for purposes of determining any
liability under the Securities Act of 1933, as amended (the "Securities Act"),
each filing of The Chase Manhattan Corporation's Annual Report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (and where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that
is incorporated by reference in the Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) that, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) to include any material information with respect to the Plan
of Distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that the undertakings set forth in paragraphs (i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by J.P. Morgan pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE> 140
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK, ON THIS 29TH DAY OF
DECEMBER, 2000.
THE CHASE MANHATTAN CORPORATION
By /s/ ANTHONY J. HORAN
------------------------------------
Anthony J. Horan, Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Chairman of the Board,
-------------------------------------------------------- Chief Executive Officer
(William B. Harrison, Jr.) and Director
(Principal Executive Officer)
* Director
--------------------------------------------------------
(Hans W. Becherer)
* Director
--------------------------------------------------------
(Frank A. Bennack, Jr.)
* Director
--------------------------------------------------------
(Susan V. Berresford)
* Director
--------------------------------------------------------
(M. Anthony Burns)
* Director
--------------------------------------------------------
(H. Laurance Fuller)
* Director
--------------------------------------------------------
(Melvin R. Goodes)
* Director
--------------------------------------------------------
(William H. Gray III)
* Director
--------------------------------------------------------
(Harold S. Hook)
* Director
--------------------------------------------------------
(Helene L. Kaplan)
* Director
--------------------------------------------------------
(Henry B. Schacht)
* Director
--------------------------------------------------------
(Andrew C. Sigler)
</TABLE>
II-5
<PAGE> 141
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Director
--------------------------------------------------------
(John R. Stafford)
* Director
--------------------------------------------------------
(Marina V. N. Whitman)
* Vice Chairman, Finance, Risk Management
-------------------------------------------------------- and Administration (Principal Financial
(Marc J. Shapiro) Officer)
* Executive Vice President and Controller
-------------------------------------------------------- (Principal Accounting Officer)
(Joseph L. Sclafani)
</TABLE>
---------------
* Anthony J. Horan hereby signs this Registration Statement on behalf of each of
the indicated persons for whom he is attorney-in-fact on December 29, 2000,
pursuant to a power of attorney filed herewith.
By /s/ ANTHONY J. HORAN
------------------------------------
Anthony J. Horan
Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, JPM
CAPITAL TRUST I CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK, ON THIS 29TH DAY
OF DECEMBER, 2000.
J.P. MORGAN CAPITAL TRUST I
By J.P. Morgan & Co. Incorporated, as
Sponsor
By /s/ JAMES C.P. BERRY
------------------------------------
JAMES C.P. BERRY
Vice President and Assistant
Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, JPM
CAPITAL TRUST II CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK, ON THIS 29TH DAY
OF DECEMBER, 2000.
J.P. MORGAN CAPITAL TRUST II
By J.P. Morgan & Co. Incorporated, as
Sponsor
By /s/ JAMES C.P. BERRY
------------------------------------
JAMES C.P. BERRY
Vice President and Assistant
Secretary
II-6
<PAGE> 142
EXHIBIT INDEX.
<TABLE>
<S> <C> <C>
3.1 -- Restated Certificate of Incorporation of The Chase Manhattan
Corporation (incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-8 (File No. 333-07941) of
The Chase Manhattan Corporation).+
3.2 -- Certificate of Amendment of Restated Certificate of
Incorporation of The Chase Manhattan Corporation
(incorporated by reference to Exhibit 3.2 to Registration
Statement on Form S-3 (File No. 333-56573) of The Chase
Manhattan Corporation).+
3.3 -- Certificate of Amendment of Restated Certificate of
Incorporation of The Chase Manhattan Corporation
(incorporated by reference to Exhibit 4.3 of the
Registration Statement on Form S-4 (File No. 333-47350) of
The Chase Manhattan Corporation).+
3.4 -- Certificate of Designations for the Fixed/Adjustable Rate
Noncumulative Preferred Stock of The Chase Manhattan
Corporation (incorporated by reference to Exhibit 3.3 to the
Registration Statement on Form S-3 (File No. 333-56573) of
The Chase Manhattan Corporation).+
3.5 -- By-Laws of The Chase Manhattan Corporation, as amended
(incorporated by reference to Exhibit 4.4 of the
Registration Statement on Form S-8 (File No. 333-92217) of
The Chase Manhattan Corporation).+
4.1 -- Form of Junior Subordinated Debt Indenture.
4.2 -- Declaration of Trust of JPM Capital Trust I.
4.3 -- Certificate of Trust of JPM Capital Trust I.
4.4 -- Declaration of Trust of JPM Capital Trust II.
4.5 -- Certificate of Trust of JPM Capital Trust II.
4.6 -- Form of Amended and Restated Declaration of Trust.
4.7 -- Form of Preferred Security (included in Exhibit 4.6).
4.8 -- Form of Supplemental Indenture for use in connection with
issuances of Junior Subordinated Debt Securities and
Preferred Securities.
4.9 -- Form of Junior Subordinated Debt Security (included in
Exhibit 4.8).
4.10 -- Form of Guarantee with respect to Preferred Securities of
JPM Capital Trust I.
4.11 -- Form of Guarantee with respect to Preferred Securities of
JPM Capital Trust II.
5.1 -- Opinion of Neila B. Radin.
5.2 -- Opinion of Morris, Nichols, Arsht & Tunnell, Delaware
counsel.
12.1 -- Computation of Ratios of Earnings to Fixed Charges for
Period Ended December 31, 1999 (incorporated by reference to
Exhibit 12(a) to Annual Report on Form 10-K for the Year
Ended December 31, 1999 of The Chase Manhattan Corporation
(File No. 1-5805)).+
12.2 -- Computation of Ratios of Earnings to Fixed Charges for
Period Ended September 30, 2000 (incorporated by reference
to Exhibit 12(a) to the Quarterly Report on Form 10-Q for
the Quarter Ended September 30, 2000 of The Chase Manhattan
Corporation (File No. 1-5805)).+
12.3 -- Computation of Ratios of Earnings to Fixed Charges and
Preferred Stock Dividend Requirements for Period Ended
December 31, 1999 (incorporated by reference to Exhibit
12(b) to Annual Report on Form 10-K for the Year Ended
December 31, 1999 of The Chase Manhattan Corporation (File
No. 1-5805)).+
12.4 -- Computation of Ratios of Earnings to Fixed Charges and
Preferred Stock Dividend Requirements for Period Ended
September 30, 2000 (incorporated by reference to Exhibit
12(b) to the Quarterly Report on Form 10-Q for the Quarter
Ended September 30, 2000 of The Chase Manhattan Corporation
(File No.1-5805)).+
23.1 -- Consent of PricewaterhouseCoopers LLP.
23.2 -- Consent of Neila B. Radin (included in Exhibit 5.1).
23.3 -- Consent of Morris, Nichols, Arsht & Tunnell (included in
Exhibit 5.2).
24.1 -- Powers of Attorney.
25.1 -- Statement of Eligibility of Property Trustee on Form T-1.
</TABLE>
---------------
+ Incorporated by Reference.
