<PAGE> 1
As filed with the Securities and Exchange Commission on November 19, 1996
Registration Nos. 333-15079
15079-1
15079-2
15079-3
15079-4
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
<TABLE>
<S> <C> <C>
J.P.MORGAN & CO. INCORPORATED DELAWARE 13-2625764
JPM CAPITAL TRUST I DELAWARE To be applied for
JPM CAPITAL TRUST II DELAWARE To be applied for
JPM CAPITAL TRUST III DELAWARE To be applied for
JPM CAPITAL TRUST IV DELAWARE To be applied for
(Exact name of registrant as (State or other jurisdiction of (I.R.S. Employer
specified in its charter) incorporation or organization) Identification No.)
</TABLE>
60 Wall Street
New York, New York 10260-0060
(212) 483-2323
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Rachel F. Robbins, Esq.
General Counsel and Secretary
J.P. Morgan & Co. Incorporated
60 Wall Street
New York, New York 10260-0060
(212) 483-2323
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
Gene A. Capello, Esq. B. Robbins Kiessling, Esq.
Vice President and Assistant General Counsel Cravath, Swaine & Moore
J.P. Morgan & Co. Incorporated 825 Eighth Avenue
60 Wall Street New York, New York 10019
New York, New York 10260-0060 (212) 474-1767
(212) 483-2323
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2
Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 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. /X/
Calculation of Registration Fee
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3
<TABLE>
<CAPTION>
Title of each class of securities Proposed maximum Amount of registration fee (2)
to be registered aggregate offering price(1)
<S> <C> <C>
Senior debt securities, subordinated debt $1,000,000,000 (3)(4)(5) $303,031
securities and junior subordinated debt
securities (collectively, "Debt
Securities") of J.P. Morgan & Co.
Incorporated
Preferred Securities of JPM Capital
Trusts I, II, III, and IV severally
("Preferred Securities")
Guarantees (the "Guarantees") of
Preferred Securities of JPM Capital
Trusts I, II, III and IV by J.P. Morgan
& Co. Incorporated (6)
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee,
exclusive of accrued interest and dividends, if any.
(2) Calculated pursuant to Rule 457(o) and previously submitted.
(3) Such indeterminable number or amount of (i) Debt Securities of J.P.
Morgan & Co. Incorporated as may from time to time be issued at
indeterminate prices or upon conversion or exchange of securities so
issued and (ii) Preferred Securities of JPM Capital Trusts I, II, III
and IV, severally, as may from time to time be issued at indeterminate
prices. Junior Subordinated Debt Securities may be issued and sold to
JPM Capital Trusts I, II, III and IV, severally, in which event such
Junior Subordinated Debt Securities may later be distributed to the
holders of Preferred Securities upon a dissolution of JPM Capital Trust
I, II, III or IV and the distribution of the assets thereof.
(4) Such amount in U.S. dollars or the equivalent in foreign denominated
currency units, or if any Debt Securities are issued at original issue
discount, such greater amount as shall result in an aggregate initial
offering price of $1,000,000,000. The Prospectuses herein cover
$1,000,000,000 of securities.
(5) This Registration Statement also relates to offers and sales of Debt
Securities, Preferred Securities and Guarantees in connection with
market-making transactions by and through affiliates of the
registrants, including J.P. Morgan Securities Inc.
(6) J.P. Morgan & Co. Incorporated is also registering under this
registration statement all other obligations that it may have with
respect to Preferred Securities issued by JPM Capital Trusts I, II, III
and IV. No separate consideration will be received for any Guarantee or
any other obligations.
The registrants hereby amend this registration statement on such date
or dates as may be necessary to delay its effective date until the registrants
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the securities act of 1933, or until the registration statement shall become
effective on such date as the commission, acting pursuant to said section 8(a),
may determine.
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4
EXPLANATORY NOTE
This Registration Statement contains one form of Prospectus Supplement
and two forms of Prospectuses to be used in connection with offerings of the
following securities: (1) preferred securities of JPM Capital Trusts I, II, III
and IV, severally, junior subordinated debt securities of J.P. Morgan & Co.
Incorporated and guarantees by J.P. Morgan & Co. Incorporated of preferred
securities issued severally by JPM Capital Trusts I, II, III and IV, and (2)
debt securities (both senior and subordinated) of J.P. Morgan & Co.
Incorporated. Each offering of securities made under this Registration Statement
will be made pursuant to one of these Prospectuses, with the specifications of
the securities offered thereby set forth in an accompanying Prospectus
Supplement.
The complete Prospectus Supplement and Prospectus for the offering of
the preferred securities of J.P. Morgan & Co. Incorporated Capital Trusts I, II,
III and IV, severally, the junior subordinated debt securities of J.P. Morgan &
Co. Incorporated and the guarantees by J.P. Morgan & Co. Incorporated of the
preferred securities issued severally by JPM Capital Trusts I, II, III and IV
follow immediately after this Explanatory Note, which is then immediately
followed by the complete Prospectus for the offering of debt securities (both
senior and subordinated) of J.P. Morgan & Co. Incorporated.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 19, 1996
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1996)
[ ] Cumulative Preferred Securities
JPM Capital Trust I
[ ] % Cumulative Preferred Trust Securities
(Liquidation Amount $ per Preferred Security)
Guaranteed to the Extent Set Forth Herein by
J.P. Morgan & Co. Incorporated
The % Preferred Trust Securities (the "Preferred 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 % Junior Subordinated Debentures due of the Company
("Junior Subordinated Debentures"). (continued on next page)
Application will be made to list the Preferred Securities on the New
York Stock Exchange, Inc. (the "NYSE"). See "Underwriting."
SEE "RISK FACTORS" BEGINNING ON PAGE S-[ ] FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES.
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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>
<CAPTION>
Price to Underwriting Proceeds to
Public (1) Discounts JPM Capital
and Trust I
Commissions (2) (1)(3)(4)
<S> <C> <C> <C>
Per Preferred
Security $ (3) $
Total (5) (3)
</TABLE>
(1) Plus accrued distributions, if any, from , 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 $ per Preferred Security (or
$ in the aggregate). See "Underwriting".
(4) Before deducting expenses payable by the Company estimated to
be $ .
(5) The Trust and the Company have granted to the Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to
[ ] additional Preferred Securities at the Price to
Public for the purpose of covering over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to JPM Capital Trust I would
be $ , $ and $ , respectively.
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 , 1996,
against payment therefor in immediately available funds.
This Prospectus Supplement and the accompanying Prospectus may be used
by the Company or certain affiliates of the Company in connection with offers
and sales related to secondary market transactions in the Preferred Securities
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at negotiated prices related to prevailing market prices at the time of sale or
otherwise. Such Company affiliates may act as principal or agent in such
transactions.
The date of this Prospectus Supplement is , 1996.
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(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 % of the stated
liquidation amount of $ per Preferred Security, accruing from the
date of original issuance of the Preferred Securities and payable quarterly,
in arrears, on the last day of March, June, September and December of each
year, commencing on , 1997 ("distributions"). Cash
distributions in arrears for more than one quarter will bear interest thereon
at the annual rate of % (to the extent permitted by applicable law),
compounded quarterly. 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 20 consecutive quarterly 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,
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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 quarterly ("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 20 consecutive quarters 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 (the "Preferred Securities Guarantee").
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See "Description of the Preferred Securities Guarantees" in the accompanying
Prospectus. 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 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 [ ], 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 $ per Trust Security
plus accrued and unpaid
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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 [ ,] which
date may be (i) shortened to a date not earlier than , 2001, if
the Company has received the prior approval of the Federal Reserve to do so if
then required under applicable capital guidelines or policies, or (ii) extended
to a date not later than [ ,] if certain conditions are met. 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 $ 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."
If the Junior Subordinated Debentures are distributed to the holders of
the Preferred Securities, the Company will use its best efforts to have the
Junior Subordinated Debentures listed on the NYSE or on such other exchange as
the Preferred Securities are then listed. See "Description of the Preferred
Securities--Special Event Redemption or
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Distribution" and "Description of the Junior Subordinated Debentures."
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 TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE, IN ANY OVER-THE-COUNTER MARKET OR OTHERWISE AND, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
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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.
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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 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. 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, the Property Trustee will have no 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 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
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to pay such debts, obligations, costs and expenses on behalf of the Trust.
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 20
consecutive quarterly interest periods, during which no interest shall be due
and payable. Quarterly 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 % per annum, compounded quarterly). 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 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.
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<PAGE> 16
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 20
consecutive quarterly 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 20
consecutive quarters 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".
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
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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
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 or 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. 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. 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."
The Clinton Administration proposals contained in the Revenue
Reconciliation Bill of 1996 would prevent the Company from deducting interest
on the Junior Subordinated Debentures. The Bill as proposed 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,
S-13
<PAGE> 18
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."
SHORTENING OF STATED MATURITY OF JUNIOR SUBORDINATED DEBENTURES
The Company will have the right at any time to shorten the maturity of
the Junior Subordinated Debentures to a date not earlier than , 2001.
The Preferred Securities will be subject to mandatory redemption at the revised
maturity of the Junior Subordinated Debentures. The exercise of such right is
subject to the receipt of prior approval of the Federal Reserve if then required
under applicable capital guidelines or policies of the Federal Reserve.
EXTENSION OF STATED MATURITY OF JUNIOR SUBORDINATED DEBENTURES
The Company will also have the right to extend the maturity of the
Junior Subordinated Debentures, whether or not the Trust is terminated and the
Junior Subordinated Debentures are distributed to holders of the Preferred
Securities, to a date no later than the 49th anniversary of the initial issuance
of the Preferred Securities, provided that the Company can extend the maturity
only if at the time such election is made and at the time of such extension (i)
the Company is not in bankruptcy, otherwise insolvent or in liquidation, (ii)
the Company is not in default in the payment of any interest or principal on the
Junior Subordinated Debentures, (iii) the Trust is not in arrears on payments of
distributions on the Preferred Securities and no deferred distributions are
accumulated and (iv) at least one nationally recognized statistical rating
organization has rated the Junior Subordinated Debentures at a rating level of
BBB- or higher, in the case of Standard & Poor's Rating Services, Baa3 or
higher, in the case of Moody's Investors Services, Inc. or an equivalent rating
in the case
S-14
<PAGE> 19
of any other nationally recognized statistical rating organization.
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.
LISTING OF PREFERRED SECURITIES; TRADING PRICES
The Preferred Securities constitute a new issue of securities with no
established trading market. While application will be made to list the Preferred
Securities on the NYSE, there can be no assurance that an active market for the
Preferred Securities will develop or be sustained in the future on the NYSE.
Although J.P. Morgan Securities Inc. has indicated to the Company and the Trust
that it intends to make a market in the Preferred Securities as permitted by
applicable laws and regulations, it is 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 his 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 his adjusted tax basis in his 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."
S-15
<PAGE> 20
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 20 consecutive quarterly 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 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.
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.
S-16
<PAGE> 21
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>
- ---------------
(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.
S-17
<PAGE> 22
(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.
S-18
<PAGE> 23
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 in Grantor Trusts
Holding 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
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
</TABLE>
S-19
<PAGE> 24
<TABLE>
<CAPTION>
(US$ IN MILLIONS)
-----------------
(UNAUDITED)
OUTSTANDING AS ADJUSTED
----------- -----------
<S> <C> <C>
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 in Grantor Trusts Holding
Junior Subordinated Debentures of the Company ................. --
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 and stockholders'
equity ............................................. $22,994
======== ========
</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.
(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
S-20
<PAGE> 25
the ordinary course of business, including federal funds purchased,
securities sold under repurchase agreements and commercial paper.
Events subsequent to September 30, 1996:
New Issues:
$2 billion Floating-rate notes due 1997,
$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 consolidation
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.
S-21
<PAGE> 26
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 in Grantor Trusts
Holding Junior Subordinated Debentures of the Company".
USE OF PROCEEDS
The Trust will use the proceeds from the sale of the Preferred
Securities to purchase the 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.
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
S-22
<PAGE> 27
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 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 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.
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per
annum of % of the stated liquidation amount of $ per Preferred
Security. Distributions in arrears for more than one quarter will bear interest
thereon at the rate per annum of % (to the extent permitted by law),
compounded quarterly. The term "distributions" as used herein includes any such
interest payable unless otherwise stated. The amount of distributions payable
for any period will be
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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 quarterly in arrears on the last day of March, June,
September and December of each year, commencing on
, 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 20 consecutive
quarterly interest periods and, as a consequence, the Trust would defer
quarterly distributions on the Preferred Securities (though such distributions
would continue to accrue with interest thereon at the rate of % per annum,
compounded quarterly) 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
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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 20 consecutive quarterly 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 20 consecutive quarters 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 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
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subordinated basis as and to the extent set forth under "Description of the
Preferred Securities Guarantees" in the accompanying Prospectus. 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.
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
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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 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.
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 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, 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
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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. The
Company may also elect, in its sole discretion, to shorten the maturity of the
Junior Subordinated Debentures as described under "Description of the Junior
Subordinated Debentures--General" in lieu of dissolving the Trust, if doing so
would eliminate the Tax Event. 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 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
or 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 foregoing provisions shall not require the Company to
shorten the
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maturity of the Junior Subordinated Debentures and 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.
"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 (assuming in each case that the Stated Maturity will not
be shortened) (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
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Act"), that as a result of the occurrence of 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. If the Junior
Subordinated Debentures are distributed to the holders of Preferred
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Securities upon the dissolution of the Trust, the Company will use its best
efforts to list the Junior Subordinated Debentures on the NYSE or on such other
exchange on which the Preferred Securities are then listed.
MANDATORY REDEMPTION
Upon the repayment of the Junior Subordinated Debentures, whether at
maturity, upon redemption or otherwise, the proceeds from such repayment or
payment 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 quarterly 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
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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 date of such
deposit, 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 as described below
under "BookEntry Only Issuance--The Depository Trust Company."
If a partial redemption of the Preferred Securities would result in the
delisting of the Preferred Securities by any national securities exchange or
other organization on which the Preferred Securities are then listed, the
Company pursuant to the Indenture will only redeem Junior
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Subordinated Debentures in whole and, as a result, the Trust may only redeem the
Preferred Securities in whole.
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
[ ]; (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 $ 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 be paid on a
Pro Rata Basis. The holders of the Common Securities will be entitled to receive
dis-
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tributions 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
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payable. In addition, the Property Trustee will have the power to exercise all
rights, powers and privileges under the Indenture. 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 [ ] 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.
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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.
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 of holders of Junior Subordinated Debentures repre-
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senting a specified percentage greater than a majority in principal amount of
the Junior Subordinated Debentures, the Property Trustee may only give such
consent at the direction of the holders of Trust Securities representing such
specified percentage of the aggregate liquidation amount of the 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
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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.
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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. 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.
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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
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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.
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
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on redemption of any Preferred Security will be made only upon surrender of such
Preferred Security to the Property Trustee.
[ ] or one of its affiliates will act as registrar and
transfer agent for the Preferred Securities. [ ] 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.
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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.
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 , 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 , 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
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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 [ , ] (such date, as it may be shortened or extended
as hereinafter described, the "Stated Maturity"). Such date may be shortened
at any time by the Company to any date not earlier than , 2001,
subject to receipt of prior approval of the Federal Reserve if then required
under applicable capital guidelines or policies of the Federal Reserve.
Such date may also be extended at any time at the
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election of the Company for one or more periods, but in no event to a date later
than [ , ], provided that at the time such election is made
and at the time of extension (i) the Company is not in bankruptcy, otherwise
insolvent or in liquidation, (ii) the Company is not in default in the payment
of any interest or principal on the Junior Subordinated Debentures, (iii) the
Trust is not in arrears on payments of distributions on the Preferred Securities
and no deferred distributions are accumulated, (iv) at least one nationally
recognized statistical rating organization has rated the Junior Subordinated
Debentures at a rating level of BBB- or higher, in the case of Standard & Poor's
Ratings Services, Baa3 or higher, in the case of Moody's Investors Services,
Inc. or an equivalent rating, in the case of other nationally recognized
statistical rating organization and (v) the extended Stated Maturity is not
later than the 49th anniversary of the initial issuance of the Preferred
Securities; provided, however, that, if the Company exercises its right to
liquidate the Trust and distribute the Junior Subordinated Debentures, effective
upon such exercise the Stated Maturity of the Junior Subordinated Debentures may
be changed to any date elected by the Company that is (i) no earlier than the
date five years after the initial issuance of the Preferred Securities and (ii)
no later than the date 30 years (plus an extended term of up to an additional 19
years if the above-referenced conditions are satisfied) after the date of the
initial issuance of the Preferred Securities. 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 ,
1996, the amount of Senior Indebtedness, Subordinated Indebtedness and
Derivative Obligations was approximately $ 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
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Debentures are issued in certificated form, such Junior Subordinated Debentures
will be in denominations of $ 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.
If the Junior Subordinated Debentures are distributed to the holders of
Preferred Securities upon dissolution of the Trust, the Company will use its
best efforts to list the Junior Subordinated Debentures on the NYSE or on such
other exchange on which the Preferred Securities are then listed.
OPTIONAL REDEMPTION
Except as provided below, the Junior Subordinated Debentures may not be
redeemed prior to [ ]. 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 [ ], upon not less than 30 nor more
than 60 days notice, at a redemption price equal to 100% of the principal amount
to be redeemed, plus any accrued and unpaid interest to the redemption date,
including interest accrued during a Deferral Period. 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
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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 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
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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 [ ])
INTEREST
The Junior Subordinated Debentures will bear interest at the rate of %
per annum from the original date of issuance. Interest will be payable quarterly
in arrears on the last day of March, June, September and December of each year
(each, an "Interest Payment Date"), commencing on , 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 fifteenth day of the month prior to 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 and for any period shorter than
a full quarterly period for which interest is computed, the amount of
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interest payable will be computed on the basis of the actual number of days
elapsed per 30-day month. 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 20 consecutive quarters. 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.
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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 20
consecutive quarters and may not extend beyond the maturity of the Junior
Subordinated Debentures. On the Interest Payment Date occurring at 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 the rate specified
for the Junior Subordinated Debentures to the extent permitted by applicable
law, compounded quarterly ("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 60 consecutive quarters 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 date the distributions on the Preferred Securities are payable or (ii)
the date the Trust is required to give notice to the NYSE (if the Preferred
Securities are then listed thereon) or other applicable self-regulatory
organization or to holders of the Preferred Securities of the record date or the
date such distribution is payable. 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
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or (ii) the date the Company is required to give notice to the NYSE (if the
Junior Subordinated Debentures are then listed thereon) or other applicable
self-regulatory organization or to holders of the Junior Subordinated Debentures
of the record or payment date of such related interest payment.
COMPOUNDED INTEREST
Payments of Compounded Interest on the Junior Subordinated Debentures
held by the Trust will make funds 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".
Notwithstanding the foregoing, if a Declaration 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 Debt Securities
on the date such interest or principal is otherwise payable, a holder of
Preferred Securities may institute an action for payment on or after the
respective due date specified in the Junior Subordinated Debt Securities
directly against the Company. The Company may not amend the Indenture to remove
the foregoing right without the prior written consent of all of the holders of
Preferred Securities. Notwithstanding any payment made to such holder of the
Preferred Securities by
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the Company in connection with such an action, the Company will remain obligated
to pay the principal of or interest on the Junior Subordinated Debt Securities
held by the Trust or the Property Trustee, and the Company will be subrogated to
the rights of the holder of such Preferred Securities with respect to payments
on the Preferred Securities to the extent of any payments made by the Company to
such holder in any such action. The holders of Preferred Securities will not be
able to exercise directly any other remedy available to the holders of the
Junior Subordinated Debt Securities.
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
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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
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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 Preferred Securities and the proceeds received by the
Trust upon issuance of the Common Securities to the Company; (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
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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, to the extent permitted by
applicable law, any holder of Preferred Securities may, 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
such rights. 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.
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.
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TAXATION
In the opinion of Cravath, Swaine & Moore, counsel to the Company and
the Trust, 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 connection with the issuance of the Preferred Securities, Cravath,
Swaine & Moore will render its opinion to the effect that, under then 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 connection with the issuance of the Junior Subordinated Debentures,
Cravath, Swaine & Moore will render its opinion generally to the effect that,
under then current law and assuming full compliance with the Indenture, the
Junior Subordinated Notes will be classified for United
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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. However, there is no authority directly on point,
counsel is not providing any opinion on this question, 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
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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
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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 and interest 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
corporation, individual, 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'
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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
Certain recent legislative proposals may limit the Company from
deducting interest on the Junior Subordinated Debentures, and there can be no
assurance that future legis-
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lation would not have this effect. 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."
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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 [ ] 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>
Total.......................................
</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 $ per Preferred Security. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ 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 $ per Preferred Security or $ in
the aggregate ($ in the aggregate if the Underwriters' overallotment
option is
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exercised in full) for the accounts of the several Underwriters.
Pursuant to the Underwriting Agreement, the Trust has granted to the
Underwriters an option, exercisable for 30 days from the date hereof, to
purchase up to additional Preferred Securities at the price to
public set forth on the cover page hereof. The Underwriters may exercise such
option to purchase solely for the purpose of covering over-allotments, if any,
made in connection with the offering. The Company will pay Underwriters'
Compensation in the amount per Preferred Security set forth above with respect
to such additional Preferred Securities. To the extent such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional Preferred
Securities as the number set forth next to such Underwriter's name in the
preceding table bears to the total number of Preferred Securities offered by the
Underwriters hereby.
During a period of days from the date of this Prospectus Supplement,
neither the Trust nor the Company will, without the prior written consent of the
Representative, directly or indirectly, sell, offer to sell, grant any option
for the sale of, or otherwise dispose of, any Preferred Securities, any security
convertible into or exchangeable into or exercisable for Preferred Securities or
Junior Subordinated Debentures or any debt securities substantially similar to
the Junior Subordinated Debentures or equity securities substantially similar to
the Preferred Securities (except for the Junior Subordinated Debentures and the
Preferred Securities offered hereby).
Application will be made to list the Preferred Securities on the NYSE.
[ ] has advised the Trust that it intends to make a market in the Preferred
Securities. [ ] will have no obligation to make a market in the Preferred
Securities, however, and may cease market making activities, if commenced, at
any time.
Prior to this offering, there has been no public market for the
Preferred Securities. In order to meet one of the requirements for listing the
Preferred Securities on the NYSE, the Underwriters will undertake to sell lots
of 100 or more Preferred Securities to a minimum of 400 beneficial holders.
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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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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL, PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER , 1996
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 Guaranteed
to the Extent 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
<PAGE> 71
2
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 as and to the extent described
herein (each such guarantee, a "Preferred Securities Guarantee"). See
"Description of the Preferred Securities Guarantees." The Company's obligation
under each Preferred Securities Guarantee is 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. 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
<PAGE> 72
3
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.
<PAGE> 73
4
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.
--------------------
The date of this Prospectus is , 1996.
<PAGE> 74
5
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.
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,
<PAGE> 75
6
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 apart 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.
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:
<PAGE> 76
7
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
<PAGE> 77
8
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 risk
management 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.
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
<PAGE> 78
9
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
<PAGE> 79
10
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 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
<PAGE> 80
11
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
<PAGE> 81
12
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.
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.
<PAGE> 82
13
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.
THE JPM TRUSTS
Each of JPM Capital Trust I, JPM Capital Trust II, JPM Capital Trust
III and JPM Capital Trust IV is a statutory 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
<PAGE> 83
14
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.
<PAGE> 84
15
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
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
<PAGE> 85
16
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
<PAGE> 86
17
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 provided under the Business Trust Act, the applicable
Declaration and the Trust Indenture Act, holders of Preferred Securities will
have no voting rights.
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
<PAGE> 87
18
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 is a full and unconditional
guarantee from the time of issuance of the Preferred Securities of a JPM Trust,
but such Preferred Securities Guarantee 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
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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
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
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20
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
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21
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).
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,
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22
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 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 guaranteed by the Company as and to
the extent set forth below under "Description of the Preferred Securities
Guarantees." Certain United States Federal income tax considerations applicable
to any offering of Preferred
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23
Securities will be described in the Prospectus Supplement relating thereto.
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.
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 Statement of which this Prospectus forms a part, and
the Trust Indenture Act. Section references
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24
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, 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 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 (ii) 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, or (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 Preferred Securities Guarantee is a full and unconditional
guarantee from the time of issuance of the applicable Preferred Securities, but
the Preferred
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25
Securities Guarantee 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 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.
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.
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 Declaration
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 by way of issuance
of shares of its capital
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26
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, 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 6.1)
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 9.2) 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 9.1)
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27
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 7.1)
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 6.2) Because the Company is a holding company,
the Company's obligations 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.
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28
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.
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 2.4)
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
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29
Securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby. (Section 3.2)
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 (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 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
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30
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
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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)
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
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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
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33
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 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
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34
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
<PAGE> 104
35
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 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. 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
<PAGE> 105
36
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;
<PAGE> 106
37
(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 [ ])
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 [ ]) 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 [ ] and [ ])
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
<PAGE> 107
38
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 [ ]) 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 [ ])
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
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39
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)
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.
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40
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)
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.
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.
<PAGE> 110
41
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.
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
<PAGE> 111
42
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 f 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
<PAGE> 112
43
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.
The offer and sale of the Offered Securities by an affiliate of J. P.
Morgan will comply with the requirements
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44
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. Gene A. Capello owns or has the right to
acquire a number of shares of Common Stock of J. P. Morgan equal to or less than
0.01% of the outstanding Common Stock of J. P. Morgan.
<PAGE> 114
45
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.
<PAGE> 115
PROSPECTUS
J.P. Morgan & Co. Incorporated
Debt Securities
J.P. Morgan & Co. Incorporated ("J.P. Morgan") may from time to time offer
its senior debt securities (the "Debt Securities") and subordinated debt
securities (the "Subordinated Debt Securities") (the Debt Securities and the
Subordinated Debt Securities are collectively known as the "Securities") for
issuance and sale, at an aggregate initial public offering price not to exceed
$1,000,000,000, on terms determined by market conditions at the time of sale.
Securities may be denominated in U.S. dollars or, at the option of J.P. Morgan
if so specified in the applicable Prospectus Supplement, in any other freely
transferable currency or units based on or relating to currencies, including
European Currency Units (ECU). With respect to the J.P. Morgan Debt Securities
as to which this Prospectus is being delivered (the "Offered Securities"), the
specific designation, aggregate principal amount, maturity, rate and time of
payment of any interest, coin or currency or currency units in which principal
and interest will be paid, purchase price and any terms for mandatory or
optional redemption (including any sinking fund) of any J.P. Morgan Debt
Securities and any other specific terms of the Securities are set forth in the
accompanying Prospectus Supplement ("Prospectus Supplement").
[/R]
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------
<PAGE> 116
The Offered Securities may be offered directly, through agents designated
from time to time, through dealers or through one or more managing underwriters,
acting alone or with other underwriters. See "Plan of Distribution". Any such
agents or dealers, and any underwriters, are set forth in the Prospectus
Supplement. If an agent of J.P. Morgan or a dealer or underwriter is involved in
the offering of the Offered Securities in connection with which this Prospectus
is being delivered, the agent's commission, dealer's purchase price or
underwriter's discount is set forth in, or may be calculated from, the
Prospectus Supplement and the net proceeds to J.P. Morgan from such sale will be
the purchase price of such Offered Securities less such commission in the case
of an agent, the purchase price of such Offered Securities in the case of a
dealer, and the public offering price less such discount in the case of an
underwriter and less, in each case, the other expenses of J.P. Morgan associated
with such issuance and distribution.
The aggregate proceeds to J.P. Morgan from all the Offered Securities sold
will be the purchase price of such Offered Securities excluding any agents'
commissions, any underwriters' discounts and the other expenses of issuance and
distribution. See "Plan of Distribution" for possible indemnification
arrangements for agents, dealers and underwriters.
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 sale.
November __, 1996
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 informational 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 homepage 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.
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
<PAGE> 117
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.
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
<PAGE> 118
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 risk
management 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.
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.
<PAGE> 119
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
<PAGE> 120
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 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
<PAGE> 121
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.
<PAGE> 122
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.
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.
<PAGE> 123
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the net
proceeds from the sale of the Offered Securities will be used for general
corporate purposes, including investment in equity and debt securities and
interest-bearing deposits of subsidiaries. Pending such use, J.P. Morgan may
temporarily invest the net proceeds or may use them to reduce short-term
indebtedness.
DESCRIPTION OF J.P. MORGAN DEBT SECURITIES
The Debt Securities offered hereby will be issuable in one or more series under
an Indenture dated as of August 15, 1982 and all indentures supplemental
thereto, including the First Supplemental Indenture dated as of May 5, 1986
(collectively referred to as the "Debt Indenture"), between J.P. Morgan and
First Trust of New York, National Association, successor to Chemical Bank
(formerly Manufacturers Hanover Trust Company), as Trustee (the "Debt Trustee").
The Subordinated Debt Securities offered hereby will be issuable in one or more
series under an Indenture dated as of March 1, 1993, and any indentures
supplemental thereto, (the "Subordinated Indenture"), between J.P. Morgan and
First Trust of New York, National Association, successor to Citibank, N.A., as
Trustee (the "Subordinated Trustee"). The Debt Indenture and the Subordinated
Indenture are sometimes referred to collectively as the "Indentures" and the
Debt Trustee and the Subordinated Trustee are sometimes referred to collectively
as the "Trustees." The following statements are subject to the detailed
provisions of the Indentures, copies of which are filed as exhibits to the
Registration Statement, and to the provisions of the Trust Indenture Act of
1939, as amended. Wherever references are made to particular provisions of the
Indentures, such provisions are incorporated by reference as a part of the
statements made and such statements are qualified in their entirety by such
reference. Certain capitalized terms used herein are defined in the Indentures.
References in italics are to sections or articles of the Indentures.
General
Each Indenture does not limit the amount of J.P. Morgan Debt Securities that
may be issued thereunder and provides that J.P. Morgan Debt Securities may be
issued in series thereunder up to the aggregate principal amount that may be
authorized from time to time by J.P. Morgan. Reference is made to the Prospectus
Supplement for the following terms of each series of J.P. Morgan Debt Securities
in respect of which this Prospectus is being delivered: (1) whether the J.P.
Morgan Debt Securities are Debt Securities or Subordinated Debt Securities; (2)
the designation, aggregate principal amount and authorized denominations of such
J.P. Morgan Debt Securities; (3) the purchase price of such J.P. Morgan Debt
Securities (expressed as a percentage of the principal amount thereof); (4) the
date on which such J.P. Morgan Debt Securities will mature; (5) the rate or
rates per annum at which such J.P. Morgan Debt Securities will bear interest, if
any, or the method by which such interest will be determined; (6) the coin or
currency or units based on or relating to currency units (including ECU) for
which J.P. Morgan Debt Securities may be purchased and in which payment of
principal and interest will be made; (7) the dates on which such interest, if
any, will be payable; (8) the terms of any mandatory or optional redemption
(including any sinking fund); (9) whether the J.P. Morgan Debt Securities will
be issued in fully registered form without coupons attached or in bearer form
with coupons; (10) the restrictions, if any, applicable to the exchange of J.P.
Morgan Debt Securities of one form for another and to the offer, sale and
delivery of the J.P. Morgan Debt Securities; (11) whether and under what
circumstances J.P. Morgan will pay additional amounts on J.P. Morgan Debt
Securities in the event of certain developments with respect to United States
withholding tax or information reporting laws; (12) whether J.P. Morgan may
redeem the J.P. Morgan Debt
<PAGE> 124
Securities in the event of such developments; and (13) any other specific terms.
If a Prospectus Supplement specifies that J.P. Morgan Debt Securities are
denominated in a currency other than U.S. dollars or in a currency unit, such
Prospectus Supplement shall also specify the coin or currency or currency unit
in which the principal, premium, if any, and interest, if any, on such J.P.
Morgan Debt Securities will be payable, which may be U.S. dollars based upon the
exchange rate for such other currency or currency unit existing on or about the
time a payment is due. Unless otherwise specified, principal and interest, and
additional amounts, if any, will be payable at the office of First Trust of New
York, National Association in New York City, provided that payment of interest
on any J.P. Morgan Debt Securities in registered form may be made at the option
of J.P. Morgan by check mailed to the registered holders.
Some of the J.P. Morgan Debt Securities may be issued as original issue
discount J.P. Morgan Debt Securities (bearing no interest or interest at a rate
which at the time of issuance is below market rates), to be sold at a
substantial discount below their stated principal amount. Federal income tax,
accounting and other special considerations applicable to any such original
issue discount J.P. Morgan Debt Securities will be described in the Prospectus
Supplement relating thereto.
J.P. Morgan Debt Securities may be presented for exchange, and registered J.P.
Morgan Debt Securities may be presented for transfer, in the manner, at the
places and subject to the restrictions set forth in the applicable Indenture,
the J.P. Morgan Debt Securities and the Prospectus Supplement. J.P. Morgan Debt
Securities in bearer form and the coupons, if any, appertaining thereto will be
transferable by delivery. No service charge will be made for any exchange of the
J.P. Morgan Debt Securities or transfer of J.P. Morgan Debt Securities in
registered form, but J.P. Morgan may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
(Sections 2.8 of the Indentures)
The Indentures and Debt Securities will not contain any provision that would
require J.P. Morgan to repurchase or redeem or otherwise modify the terms of the
Debt Securities upon a change in control or other events involving J.P. Morgan
that may adversely affect the credit quality of J.P. Morgan.
Subordinated Debt Securities
Subordination
The Subordinated Debt Securities will be unsecured and will be subordinate in
right of payment to all Senior Indebtedness (as defined below) of J.P. Morgan
and, in certain circumstances relating to the bankruptcy or insolvency of J.P.
Morgan, the Derivative Obligations (as defined below), 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 Subordinated Debt
Securities to benefit as creditors of J.P. Morgan from such distribution) is
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 agreements, 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 Subordinated Debt Securities will be subordinate in right of payment as
provided in the Indenture to all Senior Indebtedness of J.P. Morgan. In certain
events of bankruptcy or
<PAGE> 125
insolvency of J.P. Morgan, the Subordinated Debt Securities will also be
subordinate in right of payment to the extent set forth in the Subordinated
Indenture to the prior payment in full of Derivative Obligations (as defined
below). No payment pursuant to the Subordinated Debt Securities may be made and
no holder of the 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
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 of J.P. Morgan any event of
default permitting the holders thereof to accelerate the maturity thereof or any
event which, with notice or lapse of time, or both, will become such an event of
default. (Section 10.2. of the Subordinated Indenture)
Upon any distribution of the assets of J.P. Morgan upon dissolution, winding
up, liquidation or reorganization, (i) the holders of Senior Indebtedness 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 Subordinated Debt
Securities and (ii) if, after giving effect to the operation of clause (i)
above, amounts remain available for payment or distribution in respect of the
Subordinated Debt Securities (any such remaining amount being defined as the
"Excess Proceeds") and creditors in respect of Derivative Obligations have not
received payment in full of amounts due or to become due thereon, then such
Excess Proceeds shall first be applied to pay or provide for the payment in full
of all such Derivative Obligations before any payment may be made on the
Subordinated Debt Securities. (Sections 10.3 and 10.12 of the Subordinated
Indenture.) By reason of such subordination, in the event of a bankruptcy or
insolvency of J.P. Morgan, holders of Senior Indebtedness and Derivative
Obligations of J.P. Morgan may receive more, ratably, and holders of the
Subordinated Debt Securities or coupons appertaining thereto may receive less,
ratably, than the other creditors of J.P. Morgan. No series of subordinated debt
is subordinated to any other series of subordinated debt. However, by reason of
the obligation of the holders of the Subordinated Debt Securities to pay over
any Excess Proceeds to creditors in respect of Derivative Obligations, in the
event of a bankruptcy or insolvency of J.P. Morgan, the holders of the
Subordinated Debt Securities may receive less, ratably, than holders of
Antecedent Subordinated Indebtedness (as defined below). Such subordination will
not prevent the occurrence of any Event of Default in respect of the
Subordinated Debt Securities. The Subordinated Indenture does not limit the
amount of Senior Indebtedness 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 indebtedness of J.P. Morgan for money borrowed,
whether outstanding on the date of execution of the Indenture or thereafter
created, assumed or incurred, except (i) the DM400,000,000 aggregate principal
amount of Floating Rate Subordinated Notes of 1985/1995 of J.P. Morgan; (ii) the
U.S. $400,000,000 aggregate principal amount of Zero Coupon Subordinated Notes
Due 1998 of J.P. Morgan; (iii) the U.S. $250,000,000 aggregate principal amount
of 7% Subordinated Notes Due 1998 of J.P. Morgan; (iv) the U.S. $150,000,000
aggregate principal amount of 8 1/2% Subordinated Notes Due 2003 of J.P. Morgan;
(v) the U.S. $500,000,000 aggregate principal amount of 7 5/8% Subordinated
Notes Due 2004 of J.P. Morgan; (vi) the CAN. $250,000,000 aggregate principal
amount of 6 7/8% Subordinated Notes Due 2004 of J.P. Morgan; (vii) the U.S.
$200,000,000 aggregate principal amount of 7 1/4% Subordinated Notes Due 2002 of
J.P. Morgan; (viii) the U.S. $200,000,000 aggregate principal amount of Floating
Rate Subordinated Notes Due 2002 of J.P. Morgan; (ix) the U.S. $250,000,000
aggregate principal amount of Floating Rate Subordinated Notes Due 2002; (x) the
U.S.
<PAGE> 126
$200,000,000 aggregate principal amount of Floating Rate Subordinated Constant
Maturity Treasury Notes Due 2000 of J.P. Morgan; (xi) the U.S. $300,000,000
aggregate principal amount of Floating Rate Subordinated Notes Due 2005; (xii)
the U.S. $150,000,000 aggregate principal amount of 5% Subordinated Notes Due
2008 of J.P. Morgan; (xiii) the U.S. $300,000,000 aggregate principal amount of
6 1/4% Subordinated Notes Due 2009 of J.P. Morgan; (xiv) the ITL.
150,000,000,000 aggregate principal amount of 8% Subordinated Notes Due 2003 of
J.P. Morgan; (xv) the U.S.$100,000,000 aggregate principal amount of 8%
Subordinated Notes due 2005 of J.P. Morgan; (xvi) the U.S.$100,000,000 aggregate
principal amount of 7 1/4% Subordinated Notes due 2010 of J.P. Morgan; and
(xvii) such indebtedness as is by its terms expressly stated to be not superior
in right of payment to the Subordinated Debt Securities or to rank pari passu
with the Subordinated Debt Securities and (b) any deferrals, renewals or
extensions of any such Senior Indebtedness. The term "Indebtedness of J.P.
Morgan for money borrowed" as used in the foregoing sentence 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. The Subordinated Debt Securities shall rank pari
passu with the Subordinated Notes referred to in (a)(i) through (a)(xv),
although, as noted above, the Subordinated Debt Securities, as opposed to the
Antecedent Subordinated Indebtedness, will be subordinated in the event of a
bankruptcy or insolvency of J.P. Morgan to Derivative Obligations. 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. of the Subordinated
Indenture)
Derivative Obligations of J.P. Morgan are defined in the Subordinated 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 or
obligations which, by their terms, are expressly stated not to be superior in
right of payment to the Subordinated Debt Securities or to rank pari passu with
the 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 Subordinated
Indenture. (Section 1.1. of the Subordinated Indenture)
Antecedent Subordinated Indebtedness of J.P. Morgan is defined in the
Subordinated Indenture as all indebtedness and other obligations outstanding on
the date of the Subordinated Indenture and enumerated in clauses (a)(i) through
(a)(ix) of the definition of "Senior Indebtedness" (Section 1.1. of the
Subordinated Indenture)
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 subordinated debt and any limitation on
the issuance of such additional senior indebtedness.
Limited Right of Acceleration. Unless otherwise specified in the Prospectus
Supplement relating to any series of Subordinated Debt Securities, payment of
principal of the Subordinated Debt Securities may be accelerated only in the
case of the bankruptcy or reorganization of J.P. Morgan. There is no right of
acceleration in the case of a default in the payment of principal of, premium,
if any, or interest on the Subordinated Debt Securities or the performance of
any other covenant of J.P. Morgan contained in the Indenture. In the event of a
default in the payment of principal of, premium, if any, or interest, or the
<PAGE> 127
performance of any other covenant in the Subordinated Debt Securities or the
Indenture, the Trustee may, subject to certain limitations and conditions, seek
to enforce payment of such principal, premium, or interest or the performance of
such covenant. (Sections 5.2 and 5.4 of the Subordinated Indenture.)
Senior Debt Securities
The Debt Securities will be unsecured and will rank on a parity with all other
unsecured and unsubordinated indebtedness of J.P. Morgan. Since J.P. Morgan is a
holding company, however, 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 Debt
Securities to benefit as creditors of J.P. Morgan from such distribution) is
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 agreements, 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.
Events of Default, Waiver, Notice, J.P. Morgan Debt Securities in Foreign
Currencies
As to any series of J.P. Morgan Debt Securities, an Event of Default is defined
in the Indentures as (a) default for 30 days in payment of any interest on the
J.P. Morgan Debt Securities of such series; (b) default in payment of principal
of or premium, if any, on the J.P. Morgan Debt Securities of such series when
due either at maturity, upon redemption, by declaration or otherwise; (c)
default in the payment of a sinking fund installment, if any, on the J.P. Morgan
Debt Securities of such series; (d) default by J.P. Morgan in the performance of
any other covenant or warranty contained in the respective Indenture for the
benefit of such series which shall not have been remedied for a period of 90
days after notice given as specified in the Indenture; and (e) certain events of
bankruptcy or reorganization of J.P. Morgan. (Sections 5.1. of the Indentures)
An Event of Default with respect to a particular series of J.P. Morgan Debt
Securities issued under the respective Indenture does not necessarily constitute
an Event of Default with respect to any other series of J.P. Morgan Debt
Securities issued thereunder. Each Indenture provides that the Trustee may
withhold notice to the holders of the respective J.P. Morgan Debt Securities of
any series of any default (except in payment of principal of or interest or
premium, if any, on such J.P. Morgan Debt Securities or in the making of any
sinking fund payment with respect to such J.P. Morgan Debt Securities) if the
Trustee considers it in the interest of the holders of J.P. Morgan Debt
Securities of such series to do so. (Sections 5.11. of the Indentures)
The Subordinated Indenture provides that if an Event of Default described in
clause (e) above shall have occurred and be continuing, either the Subordinated
Trustee or the holders of at least 25% in principal amount of all Subordinated
Debt Securities then outstanding (voting as one class) may declare the principal
(or, in the case of original issue discount Subordinated Debt Securities, the
portion thereof specified in the terms thereof) of all Subordinated Debt
Securities then outstanding and the interest accrued thereon, if any, to be due
and payable immediately, but upon certain conditions such declarations may be
annulled and past defaults (except for defaults in the payment of principal of
or premium, or interest, if any, on such Subordinated Debt Securities) may be
waived by the holders of a majority in principal amount of the Subordinated Debt
Securities of all series then outstanding. (Sections 5.1 and 5.10. of the
<PAGE> 128
Subordinated Indenture)
The Debt Indenture provides that (1) if an Event of Default described in clause
(a), (b), (c) or (d) above (if the Event of Default under clause (d) is with
respect to less than all series of Debt Securities then outstanding) shall have
occurred and be continuing with respect to one or more series, either the
Trustee or the holders of at least 25% in principal amount of the Debt
Securities of such series then outstanding (each such series voting as a
separate class in the case of an Event of Default under clause (a), (b) or (c)
and all such series voting as one class in the case of an Event of Default under
clause (d)) may declare the principal (or, in the case of original issue
discount Debt Securities, the portion thereof specified in the terms thereof) of
all outstanding Debt Securities of such series and the interest accrued thereon,
if any, to be due and payable immediately and (2) if an Event of Default
described in clause (d) or (e) above (if the Event of Default under clause (d)
is with respect to all series of Debt Securities then outstanding) shall have
occurred and be continuing, either the Debt Trustee or the holders of at least
25% in principal amount of all Debt Securities then outstanding (voting as one
class) may declare the principal (or, in the case of original issue discount
Debt Securities, the portion thereof specified in the terms thereof) of all Debt
Securities then outstanding and the interest accrued thereon, if any, to be due
and payable immediately, but upon certain conditions such declarations may be
annulled and past defaults (except for defaults in the payment of principal of,
or premium or interest, if any, on such Debt Securities) may be waived by the
holders of a majority in principal amount of the Debt Securities of such series
(or of all series as the case may be) then outstanding. (Sections 5.1 and 5.10.
of the Debt Indenture)
The holders of a majority in principal amount of the outstanding J.P. Morgan
Debt Securities of each series affected (with each series voting as a separate
class) shall have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee under the applicable
Indenture, subject to certain limitations specified in the applicable Indenture,
provided that the holders of J.P. Morgan Debt Securities shall have offered to
the Trustee reasonable indemnity against expenses and liabilities. (Sections 5.9
and 6.2(d) of the Indentures.) The Indentures require the annual delivery by
J.P. Morgan to the Trustee of a written statement as to the absence of certain
defaults under the applicable Indenture. (Sections 3.5 of the Indentures.)
Whenever either Indenture provides for an action by, or the determination of any
of the rights of, or any distribution to, holders of J.P. Morgan Debt
Securities, in the absence of any provision to the contrary in the form of J.P.
Morgan Debt Security, any amount in respect of any J.P. Morgan Debt Security
denominated in a currency other than U.S. dollars or in any currency unit shall
be treated as that amount of U.S. dollars that could be obtained for such amount
on such reasonable basis of exchange and as of such date as J.P. Morgan
specifies to the Trustee or in the absence of such notice, as the Trustee may
determine. (Section 12.11 of the Subordinated Indenture and Section 11.11 of the
Debt Indenture.)
Modification of the Indentures; Waiver of Compliance
Each 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 J.P. Morgan 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 J.P. Morgan Debt Securities, or waive compliance by J.P. Morgan with
any of its obligations thereunder, provided that no such modification or waiver
shall
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(i) extend the final maturity of any respective J.P. Morgan 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 J.P. Morgan 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 J.P. Morgan Debt Security, or impair or affect the right of a holder to
institute suit for the payment thereof or, if the J.P. Morgan Debt Securities
provide therefor, any right of repayment at the option of the holder of a J.P.
Morgan Debt Security, without the consent of the holder of each respective J.P.
Morgan Debt Security so affected or (ii) reduce the aforesaid percentage of J.P.
Morgan 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
J.P. Morgan Debt Security so affected. (Sections 8.2 and 8.6. of the Indentures)
The Indentures also permit J.P. Morgan and the Trustee to amend such Indenture
in certain circumstances without the consent of the holders of J.P. Morgan 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 J.P. Morgan
Debt Security already outstanding, and for certain other purposes. (Sections
8.1. of the Indentures)
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
J.P. Morgan 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. (Articles Nine of the Indentures.)
Concerning the Trustee, Paying Agent, Registrar and Transfer Agent
J.P. Morgan and its subsidiaries have normal banking relationships with the
Trustee, First Trust of New York, National Association. First Trust of New York,
National Association, 100 Wall Street, Suite 1600, New York, New York 10005,
will also be the paying agent, registrar and transfer agent for any series of
J.P. Morgan Debt Securities.
Global J.P. Morgan Debt Securities
Any series of J.P. Morgan Debt Securities may be issued in the form of one or
more global certificates (the "Global Debt Security") registered in the name of
a depository or a nominee of a depository (the "Depository"). Unless otherwise
specified in an applicable Prospectus Supplement, the Depository will be the
Depository Trust Company ("DTC"). The Corporation has been informed by DTC that
its nominee will be CEDE & CO. ("CEDE"). Accordingly, CEDE is expected to be the
initial registered holder of any series of J.P. Morgan Debt Securities. No
person acquiring an interest in such series of J.P. Morgan Debt Securities (a
"Holder") will be entitled to receive a certificate representing such person's
interest in the J.P. Morgan Debt Securities except as set forth herein. Unless
and until definitive J.P. Morgan Debt Securities are issued under the
<PAGE> 130
limited circumstances described herein, all references to actions by Holders
shall refer to actions taken by DTC upon instructions from its Participants (as
defined below), and all references herein to payments and notices to Holders
shall refer to payments and notices to DTC or CEDE, as the registered holder of
the J.P. Morgan Debt Securities, as the case may be, for distribution to Holders
in accordance with the DTC procedures.
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 Section 17A of the 1934 Act. DTC was created to hold
securities for its participating organizations ("Participants") and to
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations, and may include
certain other organizations. Indirect access to the DTC system also is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Holders that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in, J.P.
Morgan Debt Securities may do so only through Participants and Indirect
Participants. Under a book-entry format, Holders may experience some delay in
their receipt of payments, since such payments will be forwarded by the agent
designated by J.P. Morgan to CEDE, as nominee for DTC. DTC will forward such
payments to its Participants, which thereafter will forward them to Indirect
Participants or Holders. It is anticipated that CEDE, as nominee of DTC, will be
the registered holder of all of the J.P. Morgan Debt Securities. Holders will
not be recognized by either of the Trustees as registered holders of the J.P.
Morgan Debt Securities entitled to the benefits of the relevant Indenture.
Holders that are not Participants will be permitted to exercise their rights as
such only indirectly through Participants.
Under the rules, regulations and procedures creating and affecting DTC and its
operations (the "Rules"), DTC will be required to make book-entry transfers of
J.P. Morgan Debt Securities among Participants and to receive and transmit
payments to Participants. Participants and Indirect Participants with which
Holders have accounts with respect to the J.P. Morgan Debt Securities similarly
are required to make book-entry transfers and receive and transmit such payments
on behalf of their respective Holders.
Because DTC can only act on behalf of Participants, who in turn act on behalf
of Indirect Participants, and on behalf of certain banks, trust companies and
other persons approved by it, the ability of a Holder to pledge J.P. Morgan Debt
Securities to persons or entities that do not participate in the DTC system, or
to otherwise act with respect to such J.P. Morgan Debt Securities, may be
limited due to the absence of physical certificates for such J.P. Morgan Debt
Securities.
DTC has advised J.P. Morgan that it will take any action permitted to be taken
by a Holder under the relevant Indenture only at the direction of one or more
Participants to whose accounts with DTC the J.P. Morgan Debt Securities are
credited.
The Global Debt Security shall be exchangeable for J.P. Morgan Debt Securities
registered in the names of persons other than DTC or its nominee only if (i) DTC
notifies J.P. Morgan that it is unwilling or unable to continue as depository
for such
<PAGE> 131
Global Debt Security or if at any time DTC ceases to be a clearing agency
registered under the 1934 Act at a time when DTC is required to be so registered
to act as such depository or (ii) J.P. Morgan executes and delivers to the
Trustee a Company Order that such Global Debt Security shall be so exchangeable.
Any Global Debt Security that is exchangeable pursuant to the preceding sentence
shall be exchangeable for J.P. Morgan Debt Securities registered in such names
as DTC shall direct.
Upon the occurrence of any event described in the immediately preceding
paragraph, DTC is generally required to notify all Participants of the
availability through DTC of definitive J.P. Morgan Debt Securities. Upon
surrender by DTC of the Global Debt Security representing the J.P. Morgan Debt
Securities and instructions for registration, the Trustee will reissue the J.P.
Morgan Debt Securities as definitive J.P. Morgan Debt Securities, and thereafter
the Trustee will recognize the holders of such definitive J.P. Morgan Debt
Securities as registered holders of J.P. Morgan Debt Securities entitled to the
benefits of the applicable Indenture.
The Global Debt Security may not be transferred except as a whole by DTC with
respect to such Global Debt Security to a nominee of DTC or by a nominee of DTC
to DTC or another nominee of DTC or to a successor Depository appointed by the
Corporation. DTC may not sell, assign, transfer or otherwise convey any
beneficial interest in a Global Debt Security evidencing all or part of the J.P.
Morgan Debt Securities unless such beneficial interest is an amount equal to an
authorized denomination for the J.P. Morgan Debt Securities.
<PAGE> 132
PLAN OF DISTRIBUTION
J.P. Morgan may sell the Offered 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.
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 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.
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
Offered 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
<PAGE> 133
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 not 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.
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 J.P. Morgan Debt Securities if the offering is of a class of securities
rated investment grade by a nationally recognized statistical rating
organization or the yield at which such 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 compliance with the provisions of Rule 2720 of the Conduct Rules.
Each NASD member participating in offers and sales of the
<PAGE> 134
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 underwriters 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.
EXPERTS
The audited financial statements contained in J.P. Morgan'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 on the report of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
LEGAL OPINIONS
The validity of the Securities offered hereby will be passed upon by Gene A.
Capello, Vice President and Assistant General Counsel of J.P. Morgan, and by
Cravath, Swaine & Moore, New York, New York, counsel for any underwriters,
selling agents and certain other purchasers. Gene A. Capello owns or has the
right to acquire a number of shares of Common Stock of J.P. Morgan equal to or
less than 0.01% of the outstanding Common Stock of J.P. Morgan.
<PAGE> 135
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 $303,031
Legal Fees and Expenses.............................................
NASD Fees ..........................................................
Accounting Fees and Expenses .......................................
Trustee's Fees and Expenses (including counsel fees)
Blue Sky Fees and Expenses .........................................
Rating Agency Fees .................................................
Printing and Engraving Fees ........................................
Miscellaneous ......................................................
--------
Total ................................... $
========
</TABLE>
- ----------------------------
* Estimated
Item 15. Indemnification of Officers and Directors.
Article Seventh of the Restated Certificate of Incorporation of J.P.
Morgan & Co. Incorporated (the "Registrant") provides, in effect, that, to the
extent and under the circumstances permitted by Section 145 of the General
Corporation Law of Delaware, the Registrant shall indemnify directors, officers,
employees and agents of the Registrant, or persons serving at the written
request of the Registrant as directors, officers, employees or agents of another
corporation or enterprise, including Morgan Guaranty, against loss and expenses.
Subsection (a) of Section 145 of the General Corporation Law of
Delaware empowers a corporation to 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 an action by or
<PAGE> 136
2
in the right of the corporation) by reason of the fact that he 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 expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine that despite the adjudication of liability such person is fairly
and reasonably entitled to indemnity for such expenses which the court shall
deem proper.
Section 145 further provides that to the extent a director, officer,
employee or agent of a corporation has been successful in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) or in the
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees)
<PAGE> 137
3
actually and reasonably incurred by him in connection therewith. It also
provides that indemnification provided for by Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled
under any by-law, agreement, vote of shareholders or disinterested directors or
otherwise, and it empowers the corporation to purchase and maintain insurance in
such amounts as the Board of Directors deems appropriate on behalf of a
director, officer, employee or agent of the corporation against any liability
asserted against him or incurred by him in any such capacity or arising out of
his status as such whether or not the corporation would have the power to
indemnify him against such liabilities under Section 145.
The indemnification permitted by Article Seventh of the Restated
Certificate of Incorporation of the Registrant has been extended to all officers
and directors of the Registrant's wholly owned direct and indirect subsidiaries,
and to such officers and directors in their respective capacities as directors
and officers of other corporations 25% or more of the voting securities of which
is owned, directly or indirectly, by the Registrant. The Registrant has purchase
liability insurance of the type referred to in Section 145. Subject to a
$250,000 deductible for each loss, the policy covers the Registrant with respect
to its obligation to indemnify directors and officers of the Registrant and its
wholly owned direct and indirect subsidiaries. In addition, the policy covers
directors and officers of the Registrant and its wholly owned direct and
indirect subsidiaries with respect to certain liabilities which are not
reimbursable by the Registrant. Subject to certain exclusions from the coverage,
the insurance provides for payment of loss in excess of the applicable
deductible to an aggregate limit of $90,000,000 for each policy year. Insurance
coverage does not extend to certain claims, including claims based upon or
attributable to the insured's gaining personal profit or advantage in which he
is not legally entitled, claims brought about or contributed to by the
dishonesty of the insured, and claims under Section 16(b) of the Securities
Exchange Act of 1934 for an accounting of profits resulting from the purchase or
sale by the insured of the Registrant's securities.
Item 16. Exhibits.
1(a)(l)* Form of Underwriting Agreement (including form of Delayed Delivery
Contract) for Subordinated Debt.
<PAGE> 138
4
l(a)(2)** Form of Underwriting Agreement (including form of Delayed
Delivery Contract) for Debt.
1(a)(3)+ Form of Underwriting Agreement for Series Preferred Stock,
Depositary Shares and Preferred Stock Warrants.
3(a)+++ Restated Certificate of Incorporation of J.P. Morgan & Co.
Incorporated, as amended.
3(b)+ By-Laws of J.P. Morgan & Co. Incorporated as amended through
December 11, 1991.
4(a)(1)+ Form of Junior Subordinated Debt Indenture dated as of [ ]
between J.P. Morgan & Co. Incorporated and [ ], as Trustee.
4(a)(2)* Indenture dated as of March 1, 1993, between J.P. Morgan & Co.
Incorporated and Citibank, N.A., as Trustee (now First Trust of
New York, National Association, as Successor Trustee).
4(a)(3) Indenture dated as of August 15, 1982, between J.P. Morgan & Co.
Incorporated and Chemical Bank (formerly Manufacturers Hanover
Trust Company), as Trustee (now First Trust of New York, National
Association, as Successor Trustee), (incorporated herein by
reference to J.P. Morgan's Current Report on Form 8-K, dated
February 7, 1986, filed pursuant to Section 13 of the Securities
and Exchange Act of 1934 (the "Act")).
4(a)(4) Form of First Supplemental Indenture dated as of May 5, 1986
between J.P. Morgan & Co. Incorporated and Chemical Bank
(formerly Manufacturers Hanover Trust Company), as Trustee, (now
First Trust of New York, National Association, as Successor
Trustee) (incorporated herein by reference to J.P. Morgan's
Current Report on Form 8-K, dated August 13, 1986, filed pursuant
to Section 13 of the Act).
4(a)(5) Form of Second Supplemental Indenture dated as of February 27,
1996 between J.P. Morgan & Co. Incorporated and First Trust of
New York, National Association, as Trustee (incorporated herein
by reference to J.P. Morgan's Current Report on Form 8-K, dated
February 23, 1996, filed pursuant to Section 13 of the Act).
4(b)(1)* Form of Security (Subordinated Note).
4(b)(2)** Form of Security (Note).
4(c)(1)* Form of Security (Subordinated Debenture).
4(c)(2)** Form of Security (Debenture).
4(d)(1)* Form of Security (Discount Subordinated Security).
4(d)(2)** Form of Security (Discount Security).
<PAGE> 139
5
4(e)(1)* Form of Security (Zero Coupon Subordinated Security).
4(e)(2)** Form of Security (Zero Coupon Security).
4(f)(1)* Form of Security (Extendible Subordinated Note).
4(f)(2)** Form of Security (Extendible Note).
4(g)(1)# Declaration of Trust of JPM Capital Trust I.
4(g)(2)# Certificate of Trust of JPM Capital Trust I.
4(g)(3)# Declaration of Trust of JPM Capital Trust II.
4(g)(4)# Certificate of Trust of JPM Capital Trust II.
4(g)(5)# Declaration of Trust of JPM Capital Trust III.
4(g)(6)# Certificate of Trust of JPM Capital Trust III.
4(g)(7)# Declaration of Trust of JPM Capital Trust IV.
4(g)(8)# Certificate of Trust of JPM Capital Trust IV.
4(h)# Form of Amended and Restated Declaration of Trust for each of JPM
Capital Trust I, II, III and IV.
4(i)# Form of Preferred Security (included in Exhibit 4(h)).
4(j)# Form of Supplemental Indenture to be used in connection with
issuance of Junior Subordinated Debt Securities and Preferred
Securities.
4(k)# Form of Junior Subordinated Debt Security (included in Exhibit
4(j)).
4(l)# Form of Guarantee with respect to Preferred Securities.
5.1# Opinion of Gene A. Capello.
5.2# Opinion of Morris, Nichols, Arsht & Tunnell, Delaware counsel.
5.3# Opinion of Cravath, Swaine & Moore.
12.3 Computation of Consolidated Ratio of Earnings to Fixed Charges
and Consolidated Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends. (Incorporated by reference to J. P.
Morgan's Annual Report on Form 10-K for the year ended December
31, 1995 and J. P. Morgan's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996.)
23(a) Consent of Price Waterhouse LLP.
(b)# Consent of Gene A. Capello (included in Exhibit 5.1).
(c)# Consent of Morris, Nichols, Arsht & Tunnell (included in Exhibit
5.2).
23(d) Consent of Cravath, Swaine & Moore (included in Exhibit 5.3).
24## Powers of Attorney.
25.1# Statement of Eligibility of Debt Trustee on Form T-1.
25.2# Statement of Eligibility of Subordinated Trustee on Form T-1.
25.3# Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of [ ], as Trustee, under the Junior Subordinated
Indenture.
25.4# Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of [ ], as Trustee, with respect to the Amended and
Restated Declaration of Trust of JPM Capital Trust I.
<PAGE> 140
6
25.5# Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of [ ], as Trustee, with respect to the Amended and
Restated Declaration of Trust of JPM Capital Trust II.
25.6# Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of [ ], as Trustee, with respect to the Amended and
Restated Declaration of Trust of JPM Capital Trust III.
25.7# Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of [ ], as Trustee, with respect to the Amended and
Restated Declaration of Trust of JPM Capital Trust IV.
25.8# Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of [ ], as Trustee, under the Preferred Securities
Guarantee of the Company with respect to the Preferred Securities
of JPM Capital Trust I.
25.9# Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of [ ], as Trustee, under the Preferred Securities
Guarantee of the Company with respect to the Preferred Securities
of JPM Capital Trust II.
25.10# Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of [ ], as Trustee, under the Preferred Securities
Guarantee of the Company with respect to the Preferred Securities
of JPM Capital Trust III.
25.11# Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of [ ], as Trustee, under the Preferred Securities
Guarantee of the Company with respect to the Preferred Securities
of JPM Capital Trust IV.
* Previously filed as an exhibit to Registration Statement No. 33-45651
and incorporated by reference herein.
** Previously filed as an exhibit to Registration Statement No. 33-49049
and incorporated by reference herein.
+ Previously filed as an exhibit to Registration Statement No. 33-49775
and incorporated by reference herein.
++ Previously filed as an exhibit to Registration Statement No. 33-64193
and incorporated by reference herein.
+++ Previously filed as an exhibit to Registration Statement No. 33-55851
and incorporated by reference herein.
<PAGE> 141
7
# To be filed.
## Previously filed as an exhibit to Registration Statement No. 333-01121
and incorporated by reference herein.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in the
Registration Statement.
provided, however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new registration statement relating to the Securities offered
herein, and the offering of such Securities at that time shall be deemed to be
the initial bona fide offering thereof.
<PAGE> 142
8
(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.
The undersigned Registrant hereby further undertakes that, for purposes
of determining any liability under the Securities Act of 1933, as amended, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities and Exchange Act of 1934 that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the Securities offered herein, and the
offering of such Securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 15 of
this Registration Statement, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person, in connection with the Securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in such Act and
will be governed by the final adjudication of such issue.
<PAGE> 143
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 19th
day of November, 1996.
J.P. MORGAN & CO. INCORPORATED
By: /s/ Michael E. Patterson
--------------------------
Michael E. Patterson
Vice Chairman of the
Board and Director
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
DOUGLAS A. WARNER III* Chairman of the Board, November 19, 1996
- ------------------------- President and Director
(Douglas A. Warner III) (Principal Executive Officer)
RILEY P. BECHTEL* Director November 19, 1996
- -------------------------
(Riley P. Bechtel)
MARTIN FELDSTEIN* Director November 19, 1996
- -------------------------
(Martin Feldstein)
HANNA H. GRAY* Director November 19, 1996
- -------------------------
(Hanna H. Gray)
JAMES R. HOUGHTON* Director November 19, 1996
- -------------------------
(James R. Houghton)
JAMES L. KETELSEN* Director November 19, 1996
- -------------------------
(James L. Ketelsen)
WILLIAM S. LEE* Director November 19, 1996
- -------------------------
(William S. Lee)
ROBERTO G. MENDOZA* Vice Chairman of the Board November 19, 1996
- ------------------------- and Director
(Roberto G. Mendoza)
MICHAEL E. PATTERSON Vice Chairman of the Board November 19, 1996
- ------------------------- and Director
(Michael E. Patterson)
LEE R. RAYMOND* Director November 19, 1996
- -------------------------
(Lee R. Raymond)
RICHARD D. SIMMONS Director November 19, 1996
- -------------------------
(Richard D. Simmons)
KURT F. VIERMETZ* Vice Chairman of the Board November 19, 1996
- ------------------------- and Director
(Kurt F. Viermetz)
DENNIS WEATHERSTONE* Director November 19, 1996
- -------------------------
(Dennis Weatherstone)
DOUGLAS C. YEARLEY* Director November 19, 1996
- -------------------------
(Douglas C. Yearley)
JOHN A. MAYER, JR.* Chief Financial Officer November 19, 1996
- ------------------------- (Principal Financial Officer)
(John A. Mayer, Jr.)
DAVID H. SIDWELL* Managing Director and Controller November 19, 1996
- ------------------------- (Principal Accounting Officer)
(David H. Sidwell)
*By: /s/ Michael E. Patterson
--------------------------
Michael E. Patterson
Vice Chairman of the Board
and Director
<PAGE> 144
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
JPM Capital Trust I, JPM Capital Trust II, JPM Capital Trust III and JPM Capital
Trust IV each 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, State of New York on November 19,
1996.
JPM CAPITAL TRUST I,
by J.P. Morgan & Co. Incorporated,
as Sponsor
by /s/ Gene A. Capello
--------------------------------
Name: Gene A. Capello
Title: Vice President and
Assistant General Counsel
JPM CAPITAL TRUST II,
by J.P. Morgan & Co. Incorporated,
as Sponsor
by /s/ Gene A. Capello
--------------------------------
Name: Gene A. Capello
Title: Vice President and
Assistant General Counsel
JPM CAPITAL TRUST III,
by J.P. Morgan & Co. Incorporated,
as Sponsor
by /s/ Gene A. Capello
--------------------------------
Name: Gene A. Capello
Title: Vice President and
Assistant General Counsel
JPM CAPITAL TRUST IV,
by J.P. Morgan & Co. Incorporated,
as Sponsor
by /s/ Gene A. Capello
--------------------------------
Name: Gene A. Capello
Title: Vice President and
Assistant General Counsel
<PAGE> 145
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
23.A CONSENT OF PRICE WATERHOUSE LLP
<PAGE> 1
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
January 10, 1996, which appears on page 40 of J.P. Morgan & Co. Incorporated's
1995 Annual Report on Form 10-K for the year ended December 31, 1995 (included
in J.P. Morgan & Co. Incorporated's Annual Report to Stockholders). We also
consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
- -----------------------------
Price Waterhouse LLP
New York, New York
November 19, 1996
