Prospectus Supplement
(To Prospectus Dated January 31, 1996)
200,000 MEDS sm
(Mandatorily Exchangeable Debt Securities sm)
J.P. Morgan & Co. Incorporated
4.50% Exchangeable Notes Due February 27, 1998
(Subject to Exchange into Shares of Common Stock, Par Value $1.00 Per Share,
of Gannett Co., Inc.)
The initial principal amount of each of the 4.50% Exchangeable Notes Due
February 27, 1998 (each, a "MEDS"), of J.P. Morgan & Co. Incorporated ("J.P.
Morgan") being offered hereby will be $66.125 (the "Initial Price"). The
Initial Price is the last sale price of the Common Stock, par value $1.00 per
share (the "Gannett Common Stock"), of Gannett Co., Inc. ("Gannett"), on
February 20, 1996, as reported on the New York Stock Exchange (the "NYSE").
The MEDS will mature on February 27, 1998. Interest on the MEDS, at the rate
of 4.50% of the Initial Price per annum, is payable quarterly on each February
27, May 27, August 27 and November 27, beginning May 27, 1996. MEDS are not
subject to redemption or any sinking fund prior to maturity.
At maturity (including as a result of acceleration), the principal amount
of each MEDS will be mandatorily exchanged by J.P. Morgan into a number of
shares of Gannett Common Stock (or, at J.P. Morgan's option, cash with an
equal value) at the Exchange Rate. The Exchange Rate is equal to, subject
to certain adjustments, (a) if the Maturity Price per share of Gannett
Common Stock is greater than or equal to $74.89 (the "Threshold
Appreciation Price"), 0.8830 shares of Gannett Common Stock per MEDS, (b)
if the Maturity Price is less than $74.89 but is greater than the Initial
Price, a fractional share of Gannett Common Stock per MEDS so that the
value of such fractional share at the Maturity Price equals the Initial
Price and (c) if the Maturity Price is less than or equal to the Initial
Price, one share of Gannett Common Stock per MEDS. The "Maturity Price"
means the average Closing Price (as defined herein) per share of Gannett
Common Stock on the 3 Trading Days (as defined herein) immediately prior
to (but not including) the date of maturity. Accordingly, holders of the
MEDS will not necessarily receive an amount equal to the Initial Price
thereof. The MEDS will be an unsecured obligation of J.P. Morgan ranking
pari passu with all of its other unsecured and unsubordinated indebtedness.
See "Description of the MEDS."
The MEDS will be represented by Global Securities registered in the name of
the nominee of The Depository Trust Company, which will act as the Depository.
Interests in the MEDS represented by Global Securities will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depository and its direct and indirect participants. Except as described
herein, MEDS in definitive form will not be issued. Settlement for the MEDS
will be made in immediately available funds. The MEDS will trade in the
Depository's Same-Day Funds Settlement System and secondary market trading
activity for the MEDS will therefore settle in immediately available funds.
All payments of principal and interest will be made by J.P. Morgan in
immediately available funds or the equivalent.
For a discussion of certain United States federal income tax consequences for
holders of MEDS, see "Certain United States Federal Income Tax
Considerations."
Gannett is not affiliated with J.P. Morgan and has no obligations with respect
to the MEDS. See "Risk Factors + No Affiliation Between J.P. Morgan and
Gannett."
"MEDS" and "Mandatorily Exchangeable Debt Securities" are service marks of
J.P. Morgan & Co.
Gannett Common Stock is traded on the NYSE under the symbol "GCI". The MEDS
will not be listed or traded on any securities exchange or trading market.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSIDER CAREFULLY THE INFORMATION
CONTAINED UNDER "RISK FACTORS".
THESE SECURITIES ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF A
BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER FEDERAL AGENCY.
<PAGE>
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. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Price to Underwriting Proceeds to
Public (1) Discount J.P. Morgan (1)(2)
Per MEDS..... 100% .0038% 99.62%
Total ....... $13,225,000 $50,000.00 $13,175,000.00
(1) Plus accrued interest, if any, from February 27, 1996 to the date of
delivery.
The MEDS are offered subject to receipt and acceptance by J.P. Morgan & Co.
(the "Underwriter"), to prior sales and to the Underwriter's right to reject
any order in whole or in part and to withdraw, cancel or modify the offer
without notice. It is expected that delivery of the MEDS will be made at the
office of J.P. Morgan & Co. Incorporated, 60 Wall Street, New York, New York,
or through the facilities of The Depository Trust Company, on or about
February 27, 1996.
J.P. Morgan & Co.
The date of this Prospectus Supplement is February 21, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE MEDS AND THE
GANNETT COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NYSE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING 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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
J.P. Morgan hereby incorporates by reference in this Prospectus Supplement
J.P. Morgan's Annual Report on Form 10-K for the year ended December 31,
1994 (included in its Annual Report to Stockholders), J.P. Morgan's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995, June
30, 1995 and September 30, 1995, and J.P. Morgan's Reports on Form 8-K
dated January 12, 1995, February 14, 1995, February 27, 1995, April 13,
1995, May 23, 1995, June 21, 1995, July 13, 1995, July 18, 1995, October
12, 1995, December 13, 1995, December 14, 1995, January 11, 1996, and
February 6, 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 Supplement and prior to the
termination of the offering of the MEDS shall be deemed to be incorporated
by reference into this Prospectus Supplement 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 Supplement 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 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 Supplement.
J.P. Morgan will provide without charge to each person, including any
beneficial owner, to whom this Prospectus Supplement 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) 648-1440.
<PAGE>
RISK FACTORS
As described in more detail below, the trading price of the MEDS may vary
considerably prior to maturity (including by acceleration or otherwise,
"Maturity") due to, among other things, fluctuations in the price of
Gannett Common Stock and other events that are difficult to predict and
beyond J.P. Morgan's control.
Comparison to Other Debt Securities
The terms of the MEDS differ from those of ordinary debt securities in that
the amount that a holder of the MEDS will receive upon mandatory exchange
of the principal amount thereof at Maturity is not fixed, but is based on
the price of the Gannett Common Stock as specified in the Exchange Rate (as
defined under "Description of the MEDS"). There can be no assurance that
such amount receivable by such holder upon exchange at Maturity will be
equal to or greater than the Initial Price of the MEDS. For example, if the
Maturity Price of the Gannett Common Stock is less than the Initial Price,
such amount receivable upon exchange will be less than the Initial Price
paid for the MEDS, in which case an investment in MEDS would result in a
loss.
In addition, the opportunity for equity appreciation afforded by an
investment in the MEDS is less than the opportunity for equity appreciation
afforded by an investment in the Gannett Common Stock because the amount
receivable by holders of the MEDS upon exchange at Maturity will only
exceed the Initial Price of such MEDS if the Maturity Price exceeds the
Threshold Appreciation Price of $74.89 (as defined under "Description of
the MEDS"), which represents an appreciation of 13.25% of the Initial
Price. Moreover, holders of the MEDS will only be entitled to receive upon
exchange at Maturity 88.30% of any appreciation of the value of Gannett
Common Stock in excess of the Threshold Appreciation Price. Because the
price of the Gannett Common Stock is subject to market fluctuations, the
value of the Gannett Common Stock (or, at the option of J.P. Morgan, the
amount of cash) received by a holder of MEDS upon exchange at Maturity,
determined as described herein, may be more or less than the Initial Price
of the MEDS.
Relationship of MEDS and Gannett Common Stock
The market price of MEDS at any time is affected primarily by changes in
the price of Gannett Common Stock. As indicated in "Price Range and
Dividend History of Gannett Common Stock" herein, the price of Gannett
Common Stock has been volatile during certain recent periods.
It is impossible to predict whether the price of Gannett Common Stock will
rise or fall. Trading prices of Gannett Common Stock will be influenced by
Gannett's operational results and by complex and interrelated political,
economic, financial and other factors that can affect the capital markets
generally, the stock exchanges or quotation systems on which Gannett Common
Stock is traded and the market segment of which Gannett is a part. Trading
prices of Gannett Common Stock may also be influenced if J.P. Morgan or other
persons hereafter issue securities with terms similar to those of the MEDS or
if J.P. Morgan otherwise transfers
<PAGE>
shares of Gannett Common Stock owned by J.P. Morgan. As of February 21, 1996,
a wholly owned subsidiary of J.P. Morgan held approximately 150,000 shares
of Gannett Common Stock. See "Gannett Co., Inc." However, the Indenture does
not contain any restriction on the disposition of such stock by J.P. Morgan,
and no such shares of Gannett Common Stock will be pledged or otherwise held
in escrow for use at Maturity of the MEDS. See "Description of the
MEDS--General".
Dilution of Gannett Common Stock
The amount that holders of the MEDS are entitled to receive upon the mandatory
exchange at Maturity is subject to adjustment for certain events arising from
stock splits and combinations, stock dividends and certain other actions of
Gannett that modify its capital structure, such as certain issuances of rights
or warrants. See "Description of the MEDS--Dilution Adjustments." Such amount
to be received by such holders upon exchange at Maturity may not be adjusted
for other events, such as offerings of Gannett Common Stock for cash or in
connection with acquisitions, that may adversely affect the price of Gannett
Common Stock and, because of the relationship of such amount to be received
upon exchange to the price of Gannett Common Stock, such other events may
adversely affect the trading price of the MEDS. See "Gannett Co., Inc." There
can be no assurance that Gannett will not make offerings of Gannett Common
Stock or take such other action in the future or as to the amount of such
offerings, if any. In addition, until such time, if any, as J.P. Morgan shall
deliver shares of Gannett Common Stock to holders of the MEDS at Maturity
thereof, holders of the MEDS will not be entitled to any rights with respect
to Gannett Common Stock (including, without limitation, the exercise of voting
rights and the right to receive any dividends or other distributions in
respect thereof).
No Affiliation Between J.P. Morgan and Gannett
As of February 21, 1996, a wholly owned subsidiary of J.P. Morgan held
approximately 150,000 shares of Gannett Common Stock, with sole voting and
investment power over all such shares. However, J.P. Morgan may at any time to
the extent legally permitted purchase, sell or enter into any other
transactions related to Gannett Common Stock without restriction.
J.P. Morgan is not affiliated with Gannett and, although J.P. Morgan has no
knowledge that any of the events described in the preceding subsection not
heretofore publicly disclosed by Gannett are currently being contemplated by
Gannett or of any event that would have a material adverse effect on Gannett
or on the price of Gannett Common Stock, such events are beyond J.P. Morgan's
ability to control and are difficult to predict.
Gannett has no obligations with respect to the MEDS, including any obligation
to take the needs of J.P. Morgan or of holders of the MEDS into consideration
for any reason. Gannett will not receive any of the proceeds of the offering
of the MEDS made hereby and is not responsible for, and has not participated
in, the determination or calculation of the amount receivable by holders of
the MEDS at Maturity. Gannett is not involved with the administration or
trading of the MEDS and has no obligations with respect to the amount
receivable by holders of the MEDS at Maturity.
<PAGE>
Possible Illiquidity of the Secondary Market
It is not possible to predict how the MEDS will trade in the secondary market
or whether such market will be liquid or illiquid. MEDS are novel and
innovative securities and there is currently no secondary market for the MEDS.
The Underwriter currently intends, but is not obligated, to make a market in
the MEDS. There can be no assurance that a secondary market will develop or,
if a secondary market does develop, that it will provide the holders of the
MEDS with liquidity of investment or that it will continue for the life of the
MEDS.
The MEDS will not be listed or traded on any securities exchange or trading
market. Thus, pricing information for the MEDS may be more difficult to obtain
than if the MEDS were listed or traded on a securities exchange or trading
market.
Uncertain United States Federal Income Tax Characterization of MEDS
As discussed below, although J.P. Morgan initially intends to treat each of
the MEDS as a debt instrument with contingent interest, in light of the
absence of direct authority on the proper characterization of the MEDS, the
Internal Revenue Service (the "IRS") may apply, and may require J.P. Morgan
and/or holders of MEDS to apply, a different characterization. Such
alternate characterization may be materially less favorable for holders of
MEDS for United States federal income tax purposes than the
characterization to be applied initially by J.P. Morgan. See "Certain
United States Federal Income Tax Considerations" below.
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 a group of global subsidiaries that
provide 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 in the accompanying
Prospectus.
As used in this Prospectus Supplement, unless the context otherwise requires,
the term "J. P. Morgan" refers to J.P. Morgan & Co. Incorporated and its
consolidated and unconsolidated subsidiaries.
<PAGE>
USE OF PROCEEDS
The net proceeds (after use of proceeds for hedging purposes described below)
to be received by J.P. Morgan from the sale of the MEDS 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.
From time to time after the initial offering and prior to the Maturity of the
MEDS, depending on market conditions (including the market price of Gannett
Common Stock), subsidiaries of J.P. Morgan may use the remainder of the
proceeds to be received by J.P. Morgan from the sale of MEDS to engage in
dynamic hedging techniques and may take long or short positions in Gannett
Common Stock, in listed or over-the-counter options contracts in, or other
derivative or synthetic instruments related to, the Gannett Common Stock.
GANNETT CO., INC.
According to publicly available documents, Gannett Co., Inc., a Delaware
corporation ("Gannett"), is a diversified information company whose primary
business segments are newspaper publishing (including ownership of USA TODAY),
broadcasting and outdoor advertising. Gannett is subject to the informational
requirements of the Exchange Act. Accordingly, Gannett files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Copies of Gannett's registration statements, reports,
proxy statements and other information may be inspected and copied at certain
offices of the Commission.
This Prospectus Supplement relates only to the MEDS offered hereby and does
not relate to the Gannett Common Stock. All disclosures contained in this
Prospectus Supplement regarding Gannett are derived from the publicly
available documents described in the preceding paragraph. J.P. Morgan has not
participated in the preparation of such documents and has not made any due
diligence inquiry with respect to the information provided therein. There can
be no assurance that all events occurring prior to the date hereof (including
events that would affect the accuracy or completeness of the publicly
available documents described in the preceding paragraph) that would affect
the trading price of Gannett Common Stock have been publicly disclosed.
Because the principal amount of the MEDS payable at maturity is related to the
trading price of Gannett Common Stock, such events, if any, would also affect
the trading price of the MEDS.
J.P. Morgan or one or more affiliates may presently be engaged or may from
time to time engage in business with Gannett, including extending loans to or
making equity investments in Gannett or providing advisory services (such as
merger and acquisition advisory services) to Gannett. In the course of such
actions, J.P. Morgan or such affiliates may acquire non-public information
with respect to Gannett. Additionally, J.P. Morgan or its affiliates may
publish research reports with respect to Gannett. However, J.P. Morgan does
not make any representation to any purchaser of MEDS with respect to any
matters whatsoever relating to Gannett. Any prospective purchaser of MEDS
should undertake an independent investigation of Gannett to make an informed
decision with respect to a potential investment in Gannett Common Stock.
<PAGE>
PRICE RANGE AND DIVIDEND HISTORY
OF GANNETT COMMON STOCK
Gannett is listed and traded on the New York Stock Exchange (the "NYSE") under
the symbol "GCI". The following table sets forth, for the periods indicated,
the high and low sales prices of the Gannett Common Stock as reported on the
NYSE Composite Tape and cash dividends per share of Gannett Common Stock.
HIGH LOW Dividends
1994
First Quarter $59.000 $50.375 $0.33
Second Quarter 54.500 49.125 0.33
Third Quarter 51.750 47.375 0.34
Fourth Quarter 54.000 46.125 0.34
1995
First Quarter $55.000 $49.500 $0.34
Second Quarter 56.735 51.125 0.34
Third Quarter 56.735 52.500 0.35
Fourth Quarter 64.875 52.625 0.35
1996
First quarter $68.000 $59.000 ++
(through February
20)
J.P. Morgan makes no representation as to the amount of dividends, if any,
that Gannett will pay in the future. In any event, holders of MEDS will not be
entitled to receive any dividends that may be payable on Gannett Common Stock
until such time as J.P. Morgan, if it so elects, delivers Gannett Common Stock
at Maturity of the MEDS, and then only with respect to dividends having a
record date on or after the date of delivery of such Gannett Common Stock. See
"Description of the MEDS."
Although historical data with respect to Gannett Common Stock is included in
these offering materials, investors should understand that historical
performance should not be taken as an indication of future performance, and no
assurance can be given, and none is intended to be given, that the future
performance of Gannett Common Stock will reflect past performance.
DESCRIPTION OF THE MEDS
The following description of the particular terms of the MEDS supplements, and
to the extent inconsistent therewith replaces, the description of the general
terms and provisions of Debt Securities set forth in the Prospectus, to which
description reference is hereby made.
<PAGE>
General
The MEDS are a single series of Debt Securities (as defined in the
Prospectus), to be issued 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, and the Second Supplemental Indenture dated
as of February 27, 1996 (collectively referred to as the "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
"Trustee").
The MEDS will be unsecured and will rank on a parity with all other unsecured
and unsubordinated indebtedness of J.P. Morgan. The aggregate number of MEDS
to be issued will be 150,000. The MEDS will mature on February 27, 1998. In
the future J.P. Morgan may issue additional Debt Securities or other
securities with terms similar to those of the MEDS.
Each MEDS, which will be issued with a principal amount of $66.125, will bear
interest at the annual rate of 4.50% of the Initial Price per annum (or $2.98
per annum) from February 21, 1996, or from the most recent Interest Payment
Date to which interest has been paid or provided for until the principal
amount thereof is exchanged at Maturity pursuant to the terms of the MEDS.
Interest on the MEDS will be payable quarterly in arrears on each February 27,
May 27, August 27 and November 27, commencing May 27, 1996 (each, an "Interest
Payment Date"), to the persons in whose names the MEDS are registered at the
close of business on the last day of the calendar month immediately preceding
such Interest Payment Date, provided that interest payable at Maturity shall
be payable to the person to whom the principal is payable. Interest on the
MEDS will be computed on the basis of a 360-day year of twelve 30-day months.
If an Interest Payment Date falls on a day that is not a Business Day (as
defined below), the interest payment to be made on such Interest Payment Date
will be made on the next succeeding Business Day with the same force and
effect as if made on such Interest Payment Date, and no additional interest
will accrue as a result of such delayed payment.
At Maturity (including as a result of acceleration or otherwise), the
principal amount of each MEDS will be mandatorily exchanged by J.P. Morgan
into a number of shares of Gannett Common Stock at the Exchange Rate (as
defined below), and, accordingly, holders of the MEDS will not necessarily
receive an amount equal to the Initial Price thereof. The "Exchange Rate" is
equal to, subject to adjustment as a result of certain dilution events (see
"Dilution Adjustments" below), (a) if the Maturity Price (as defined below)
per share of Gannett Common Stock is greater than or equal to $74.89 per share
of Gannett Common Stock (the "Threshold Appreciation Price"), 0.8830 shares of
Gannett Common Stock per MEDS, (b) if the Maturity Price is less than the
Threshold Appreciation Price but is greater than the Initial Price, a
fractional share of Gannett Common Stock per MEDS so that the value of such
fractional share (determined at the Maturity Price) is equal to the Initial
Price and (c) if the Maturity Price is less than or equal to the Initial
Price, one share of Gannett Common Stock per MEDS. No fractional shares of
Gannett Common Stock will be issued at Maturity, as provided under
"+Fractional Shares" below. Notwithstanding the foregoing, J.P. Morgan may,
at its option in lieu of delivering shares of Gannett Common Stock, deliver
cash in an amount equal to the value at the Maturity Price of such number of
<PAGE>
shares of Gannett Common Stock. On or prior to the seventh Business Day prior
to February 27, 1998, J.P. Morgan will notify The Depository Trust Company and
the Trustee stating whether the principal amount of each MEDS will be
exchanged for shares of Gannett Common Stock or cash. If J.P. Morgan elects to
deliver shares of Gannett Common Stock, the shares which are delivered to the
holders of the MEDS which are not affiliated with Gannett shall be free of any
transfer restrictions, and the holders of the MEDS will be responsible for the
payment of any and all brokerage costs upon the subsequent sale of such
shares.
The "Maturity Price" is defined as the average Closing Price per share of
Gannett Common Stock on the 3 Trading Days immediately prior to (but not
including) the Maturity date. The "Closing Price" of any security on any date
of determination means the closing sale price (or, if no closing price is
reported, the last reported sale price) of such security on the NYSE on such
date or, if such security is not listed for trading on the NYSE on any such
date, as reported in the composite transactions for the principal United
States securities exchange on which such security is so listed, or if such
security is not so listed on a United States national or regional securities
exchange, as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System, or, if such security is not so reported, the last
quoted bid price for such security in the over-the-counter market as reported
by the National Quotation Bureau or similar organization, or, if such bid
price is not available, the market value of such security on such date as
determined by a nationally recognized independent investment banking firm
retained for such purpose by J.P. Morgan. A "Trading Day" is defined as a day
on which the security the Closing Price of which is being determined (A) is
not suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of such security. "Business Day" means any day, other than a Saturday
or Sunday, on which banking institutions in The City of New York are open for
business.
For illustrative purposes only, the following chart shows the number of shares
of Gannett Common Stock or the amount of cash that a holder of MEDS would
receive for each MEDS at various Maturity Prices. The table assumes that there
will be no adjustments to the Exchange Rate described under "+Dilution
Adjustments" below. There can be no assurance that the Maturity Price will be
within the range set forth below. Given the Initial Price of $66.125 per MEDS
and the Threshold Appreciation Price of $74.89, a MEDS holder would
<PAGE>
receive at Maturity the following number of shares of Gannett Common Stock or
amount of cash (if J.P. Morgan elects to pay the MEDS in cash):
Maturity Price Number of
of Gannett Shares of Gannett
Common Stock Common Stock Amount of Cash
$50.000 1.0000 $50.000
$66.125 1.0000 66.125
$70.000 1.0000 66.125
$74.890 0.8830 66.125
$85.000 0.8830 75.060
Interest on the MEDS will be payable, and delivery of Gannett Common Stock
(or, at the option of J.P. Morgan, its cash equivalent) in exchange for the
MEDS at Maturity will be made upon surrender of such MEDS, at the office or
agency of J.P. Morgan maintained for such purposes; provided that payment of
interest may be made at the option of J.P. Morgan by check mailed to the
persons in whose names the MEDS are registered at the close of business on the
last day of the calendar month immediately preceding the applicable Interest
Payment Date. See "Book-Entry System." Initially such office will be at the
principal corporate trust office of the Trustee.
The MEDS will be transferable at any time or from time to time at the
aforementioned office. No service charge will be made to the holder for any
such transfer except for any tax or governmental charge incidental thereto.
The Indenture does not contain any restriction on the ability of J.P. Morgan
to sell, pledge or otherwise convey all or any portion of the Gannett Common
Stock held by it, and no such shares of Gannett Common Stock will be pledged
or otherwise held in escrow for use at Maturity of the MEDS. Consequently, in
the event of a bankruptcy, insolvency or liquidation of J.P. Morgan, the
Gannett Common Stock, if any, owned by J.P. Morgan will be subject to the
claims of the creditors of J.P. Morgan. In addition, as described herein, J.P.
Morgan will have the option, exercisable in its sole discretion, to satisfy
its obligations pursuant to the mandatory exchange for the principal amount of
each MEDS at Maturity by delivering to holders of the MEDS either the
specified number of shares of Gannett Common Stock or cash in an amount equal
to the value of such number of shares at the Maturity Price. In the event of
such a sale, pledge or conveyance, a holder of the MEDS may be more likely to
receive cash in lieu of Gannett Common Stock. As a result, there can be no
assurance that J.P. Morgan will elect at Maturity to deliver Gannett Common
Stock or, if it so elects, that it will use all or any portion of its current
holdings of Gannett Common Stock to make such delivery. Consequently, holders
of the MEDS will not be entitled to any rights with respect to Gannett Common
Stock (including, without limitation, the exercise of voting rights and any
right to receive any dividends or other distributions in respect thereof)
until such time, if any, as J.P. Morgan shall have delivered shares of Gannett
Common Stock to holders of the MEDS at Maturity thereof.
<PAGE>
Dilution Adjustments
The Exchange Rate is subject to adjustment if Gannett shall (i) pay a stock
dividend or make a distribution with respect to Gannett Common Stock in
shares of such stock, (ii) subdivide or split its outstanding shares of
Gannett Common Stock, (iii) combine its outstanding shares of Gannett Common
Stock into a smaller number of shares, (iv) issue by reclassification of its
shares of Gannett Common Stock any shares of common stock of Gannett, (v)
issue rights or warrants to all holders of Gannett Common Stock entitling
them to subscribe for or purchase shares of Gannett Common Stock at a price
per share less than the market price at such time of the Gannett Common Stock
(other than rights to purchase Gannett Common Stock pursuant to a plan for
the reinvestment of dividends or interest) or (vi) pay a dividend or make a
distribution to all holders of Gannett Common Stock of evidences of its
indebtedness or other assets (excluding any dividends or distributions
referred to in clause (i) above and any cash dividends other than any
Extraordinary Cash Dividends) or issue to all holders of Gannett Common Stock
rights or warrants to subscribe for or purchase any of its securities (other
than those referred to in clause (v) above). In the case of the events
referred to in clauses (i), (ii), (iii) and (iv) above, the Exchange Rate in
effect immediately prior to such event shall each be adjusted so that the
holder of any MEDS shall thereafter be entitled to receive, upon mandatory
exchange of the principal amount of such MEDS at Maturity, the number of
shares of Gannett Common Stock which such holder would have been entitled to
receive immediately following any such event had such MEDS been exchanged
immediately prior to such event or any record date with respect thereto. In
the case of the event referred to in clause (v) above, the Exchange Rate
shall be adjusted by multiplying the Exchange Rate in effect immediately
prior to the date of issuance of the rights or warrants referred to in clause
(v) above by a fraction, the numerator of which shall be the sum of the
number of shares of Gannett Common Stock outstanding on the date of issuance
of such rights or warrants immediately prior to such issuance plus the number
of additional shares of Gannett Common Stock offered for subscription or
purchase pursuant to such rights or warrants, and the denominator of which
shall be the sum of the number of shares of Gannett Common Stock outstanding
on the date of issuance of such rights or warrants immediately prior to such
issuance plus the number of additional shares of Gannett Common Stock which
the aggregate offering price of the total number of shares of Gannett Common
Stock so offered for subscription or purchase pursuant to such rights or
warrants would purchase at the market price (determined as the average
Closing Price per share of Gannett Common Stock on the 3 Trading Days
immediately prior to the date such rights or warrants are issued), which
shall be determined by multiplying such total number of shares by the
exercise price of each such right or warrant and dividing the product so
obtained by such market price. To the extent that shares of Gannett Common
Stock are not delivered after the expiration of such rights or warrants, the
Exchange Rate shall be readjusted to the Exchange Rate which would then be in
effect had such adjustments for the issuance of such rights or warrants been
made upon the basis of delivery of only the number of shares of Gannett
Common Stock actually delivered. In the case of the event referred to in
clause (vi) above, the Exchange Rate shall be adjusted by multiplying the
Exchange Rate in effect on the record date, by a fraction, the numerator of
which shall be the market price per share of the Gannett Common Stock on the
record date for the determination of stockholders entitled to receive the
dividend or distribution referred to in clause (vi) above (such market price
being the average Closing Price per share of Gannett Common Stock on the 20
Trading Days immediately prior to such record date) and the denominator of
which
<PAGE>
shall be such market price per share of Gannett Common Stock less the fair
market value (as determined by a nationally recognized independent investment
banking firm retained for such purpose by J. P. Morgan) as of such record
date of the portion of the assets or evidences of indebtedness so distributed
or of such subscription rights or warrants applicable to one share or Gannett
Common Stock. As used herein, an "Extraordinary Cash Dividend" means, with
respect to any one-year period, all cash dividends on the Gannett Common
Stock during such period to the extent such dividends exceed on a per share
basis 10% of the average price of the Gannett Common Stock over such period
(less any such dividends for which a prior adjustment to the Exchange Rate
was previously made). All adjustments to the Exchange Rate will be calculated
to the nearest 1/10,000th of a share of Gannett Common Stock (or if there is
not a nearest 1/10,000th of a share, to the next lower 1/10,000th of a
share). No adjustment in the Exchange Rate shall be required unless such
adjustment would require an increase or decrease of at least one percent
therein; provided, however, that any adjustments which by reason of the
foregoing are not required to be made shall be carried forward and taken into
account in any subsequent adjustment.
In the event of (A) any consolidation or merger of Gannett, or any surviving
entity or subsequent surviving entity of Gannett (a "Gannett Successor"),
with or into another entity (other than a merger or consolidation in which
Gannett is the continuing corporation and in which the Gannett Common Stock
outstanding immediately prior to the merger or consolidation is not exchanged
for cash, securities or other property of Gannett or another corporation),
(B) any sale, transfer, lease or conveyance to another corporation of the
property of Gannett or any Gannett Successor as an entirety or substantially
as an entirety, (C) any statutory exchange of securities of Gannett or any
Gannett Successor with another corporation (other than in connection with a
merger or acquisition) or (D) any liquidation, dissolution or winding up of
Gannett or any Gannett Successor (any such event, a "Reorganization Event"),
the Exchange Rate used to determine the amount payable upon exchange at
Maturity for each MEDS will be adjusted to provide that each holder of MEDS
will receive at Maturity cash in an amount equal to (a) if the Transaction
Value (as defined below) is greater than or equal to the Threshold
Appreciation Price, 0.8830 multiplied by the Transaction Value, (b) if the
Transaction Value is less than the Threshold Appreciation Price but greater
than the Initial Price, the Initial Price and (c) if the Transaction Value is
less than or equal to the Initial Price, the Transaction Value. As used
herein, "Transaction Value" means (i) for any cash received in any such
Reorganization Event, the amount of cash received per share of Gannett Common
Stock, (ii) for any property other than cash or securities received in any
such Reorganization Event, an amount equal to the market value at Maturity of
such property received per share of Gannett Common Stock as determined by a
nationally recognized independent investment banking firm retained for such
purpose by J.P. Morgan and (iii) for any securities received in any such
Reorganization Event, an amount equal to the average Closing Price per share
of such securities on the 3 Trading Days immediately prior to Maturity
multiplied by the number of such securities received for each share of
Gannett Common Stock. Notwithstanding the foregoing, in lieu of delivering
cash as provided above, J.P. Morgan may at its option deliver an equivalent
value of securities or other property received in such Reorganization Event,
determined in accordance with clause (ii) or (iii) above, as applicable. If
J.P. Morgan elects to deliver securities or other property, holders of the
MEDS will be responsible for the payment of any and all brokerage and other
transaction costs upon the sale of such securities or other property. The
kind and amount of securities into which the MEDS shall be exchangeable after
consummation of such
<PAGE>
transaction shall be subject to adjustment as described in the immediately
preceding paragraph following the date of consummation of such transaction.
J.P. Morgan is required, within ten Business Days following the occurrence of
an event that requires an adjustment to the Exchange Rate (or if J.P. Morgan
is not aware of such occurrence, as soon as practicable after becoming so
aware), to provide written notice to the Trustee of the occurrence of such
event and a statement in reasonable detail setting forth the method by which
the adjustment to the Exchange Rate was determined and setting forth the
revised Exchange Rate.
Fractional Shares
No fractional shares of Gannett Common Stock will be issued if J.P. Morgan
exchanges the MEDS for shares of Gannett Common Stock. In lieu of any
fractional share otherwise issuable in respect of all MEDS of any holder
which are exchanged at Maturity, such holder shall be entitled to receive an
amount in cash equal to the value of such fractional share at the Maturity
Price.
Redemption
The MEDS are not subject to redemption prior to Maturity.
Merger and Consolidation
J.P. Morgan may consolidate or merge with or into any other corporation or
association, and J.P. Morgan may sell or transfer all or substantially all of
its property or assets to any corporation or association, provided that (i)
the corporation (if other than J.P. Morgan) or association formed by or
resulting from any such consolidation or merger or which shall have received
such property or assets shall assume the payment at maturity to holders of
MEDS and interest on the MEDS and the performance and observance of all the
terms, covenants and conditions of the MEDS to be performed or observed by
J.P. Morgan and (ii) J.P. Morgan or such successor corporation shall not
immediately thereafter be in default under the terms of the MEDS.
Modification and Waiver
Modification and amendment of certain provisions of the MEDS may be effected
by J.P. Morgan without the consent of any of the holders of the outstanding
MEDS affected thereby to: (i) evidence succession of another corporation or
association to J.P. Morgan and the assumption by such a party of the
obligations of J.P. Morgan under the MEDS in the event of a merger,
consolidation or sale of assets in accordance with the terms of the MEDS;
(ii) add further covenants, restrictions or conditions for the protection of
holders of the MEDS; or (iii) cure ambiguities or correct the MEDS in case of
defects or inconsistencies in the provisions thereof or to supplement with
such other provisions, so long as any such cure, correction or
<PAGE>
supplement does not adversely affect the interest of the holders of the MEDS
in any material respect. In no event may J.P. Morgan, without the consent of
the holder of each outstanding MEDS affected thereby, extend the maturity of
any MEDS, or reduce the rate or extend the time of payment of interest
thereon, or reduce the payment due at maturity thereof, or make the payment
due at maturity or interest thereon payable in any coin, currency or property
other than as provided in the MEDS.
Events of Default
An Event of Default (as defined in the Indenture) with respect to the MEDS
will be: (a) default for 30 days in payment of any interest on the MEDS; (b)
default in the payment of the amount due at maturity; (c) default by J.P.
Morgan in the performance of any other covenant or warranty contained in the
MEDS, which continues for 90 days after receipt of written notice given by
either the Trustee or the holders of at least 25% in principal amount of the
MEDS outstanding; or (d) certain events of bankruptcy or reorganization of
J.P. Morgan. If an Event of Default described in clause (a), (b) or (c) above
shall have occurred and be continuing, either the Trustee or the holders of
at least 25% in principal amount of the MEDS outstanding may declare the
principal of all outstanding MEDS and the interest accrued thereon, if any,
to be due and payable immediately. If an Event of Default described in clause
(d) above shall have occurred and be continuing, either the Trustee or the
holders of MEDS that, together with holders of all other Debt Securities
under the Indenture, hold at least 25% in principal amount (in the case of
MEDS, as determined at the time thereof) of all Debt Securities then
outstanding (voting as one class) may declare the principal of all Debt
Securities then outstanding (including the MEDS) and the interest accrued
thereon, if any, to be due and payable immediately. Upon certain conditions,
such declarations may be annulled and past defaults (except for defaults in
the payment of principal of, or interest on, the MEDS) may be waived by the
holders of a majority in principal amount of the MEDS then outstanding.
The holders of a majority in principal amount of the MEDS shall have the
right to direct the time, method and place of conducting any proceeding for
any remedy with respect to the MEDS available to the Trustee under the
Indenture, subject to certain limitations specified therein, provided that
the holders of MEDS shall have offered to the Trustee reasonable indemnity
against expenses and liabilities.
Book-Entry System
It is expected that the MEDS will be issued in the form of one or more global
securities (the "Global Securities") deposited with The Depository Trust
Company (the "Depositary") and registered in the name of a nominee of the
Depositary.
The Depositary has advised J.P. Morgan and the Underwriter as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, 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 Exchange Act. The
Depositary was created to hold securities of persons who have accounts with
the Depositary ("participants") and to facilitate the clearance and
settlement of securities
<PAGE>
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the
need for physical movement of certificates. Such participants include
securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the Depositary's book-entry system is also
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.
Upon the issuance of a Global Security, the Depositary or its nominee will
credit the respective MEDS represented by such Global Security to the
accounts of participants. The accounts to be credited shall be designated by
the Underwriter. Ownership of beneficial interests in such Global Securities
will be shown on, and the transfer of those ownership interests will be
effected only through, records maintained by the Depositary or its nominee
for such Global Securities. Ownership of beneficial interests in such Global
Securities by persons that hold through participants will be shown on, and
the transfer of that ownership interest within such participant will be
effected only through, records maintained by such participant. The laws of
some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair the ability to transfer beneficial interests in a Global
Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the MEDS for
all purposes under the Indenture. Except as set forth below, owners of
beneficial interests in such Global Securities will not be entitled to have
the MEDS registered in their names, will not receive or be entitled to
receive physical delivery of the MEDS in definitive form and will not be
considered the owners or holders thereof under the Indenture.
Payment of principal of and any interest on the MEDS registered in the name
of or held by the Depositary or its nominee will be made to the Depositary or
its nominee, as the case may be, as the registered owner or the holder of the
Global Security. None of J.P. Morgan, the Trustee, any Paying Agent or any
securities registrar for the MEDS 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 or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
J.P. Morgan expects that the Depositary, upon receipt of any payment of
principal or interest in respect of a permanent Global Security, will credit
immediately participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of such Global
Security as shown on the records of the Depositary. J.P. Morgan also expects
that payments by participants to owners of beneficial interests in such
Global Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name,"
and will be the responsibility of such participants.
A Global Security may not be transferred except as a whole by the Depositary
to a nominee or a successor of the Depositary. If the Depositary is at any
time unwilling or unable to continue as depositary and a successor depositary
is not appointed by J.P. Morgan within
<PAGE>
ninety days, J.P. Morgan will issue MEDS in definitive registered form in
exchange for the Global Security representing such MEDS.
Notwithstanding the foregoing, J.P. Morgan may at any time (including at the
time of original issuance of the MEDS) and in its sole discretion determine
not to have any MEDS represented by one or more Global Securities and, in
such event, will issue MEDS in definitive form in exchange for all of the
Global Securities representing the MEDS. Further, if J.P. Morgan so specifies
with respect to the MEDS, an owner of a beneficial interest in a Global
Security representing MEDS may, on terms acceptable to J.P. Morgan and the
Depositary for such Global Security, receive MEDS in definitive form. In any
such instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery in definitive form of MEDS represented by such
Global Security equal in number to that represented by such beneficial
interest and to have such MEDS registered in its name.
Regarding the Trustee
The Trustee, First Trust of New York, National Association, has its principal
corporate trust office at 100 Wall Street, Suite 1600, New York, New York,
10005.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax consequences
that may be relevant to a citizen or resident of the United States, a
corporation, partnership or other entity created or organized under the
laws of the United States, or an estate or trust the income of which is
subject to U.S. federal income taxation regardless of its source (any of
the foregoing, a "U.S. person") who is the beneficial owner of a MEDS (a
"U.S. Holder"). All references to "holders" (including U.S. Holders) are to
beneficial owners of the MEDS. This summary is based on current U.S.
federal income tax law and on the advice of Cravath, Swaine & Moore,
special tax counsel to J.P. Morgan. However, in the absence of clear
authority (as discussed below), neither J.P. Morgan nor Cravath, Swaine &
Moore makes any representation as to the U.S. federal income tax
consequences to any purchaser or holder of MEDS.
This summary deals only with holders who are initial holders of the MEDS and
who will hold the MEDS as capital assets. It does not address tax
considerations applicable to investors that may be subject to special U.S.
federal income tax treatment, such as dealers in securities or persons
holding the MEDS as a position in a "straddle" (within the meaning in Section
1092 of the Internal Revenue Code of 1986, as amended (the "Code")), as part
of a "conversion transaction" (within the meaning of Section 1258 of the
Code) or as part of a "synthetic security" or other integrated investment,
and does not address the consequences under state, local or foreign law.
No statutory, judicial or administrative authority directly addresses the
characterization of the MEDS or instruments similar to the MEDS for U.S.
federal income tax purposes. As a result, significant aspects of the U.S.
federal income tax consequences of an investment in the MEDS are not certain.
No ruling is being requested from the Internal Revenue Service (the "IRS")
with respect to the MEDS and no assurance can be given that the IRS will
agree with the conclusions expressed herein. ACCORDINGLY, A PROSPECTIVE
INVESTOR
<PAGE>
(INCLUDING A TAX-EXEMPT INVESTOR) IN THE MEDS SHOULD CONSULT ITS TAX ADVISOR
IN DETERMINING THE TAX CONSEQUENCES OF AN INVESTMENT IN THE MEDS, INCLUDING
THE APPLICATION OF STATE, LOCAL OR OTHER TAX LAWS.
In the absence of clear authority, J.P. Morgan will treat the MEDS as
contingent debt instruments with interest accruing (and currently taxable to
holders) at the stated coupon rate. Holders of MEDS may be required to take
the same position on their tax returns unless appropriate disclosures are
made that a different position is being taken. Under this approach:
(1) a U.S. Holder would be required to include such interest in
income as it is paid or accrued, in accordance with the U.S. Holder's method
of accounting; and
(2) at the Maturity of the MEDS, a U.S. Holder would have income or
loss equal to the difference between (i) the fair market value of Gannett
Common Stock or amount of cash received by such Holder and (ii) such Holder's
cost of the MEDS; it is expected that any such income would be ordinary
interest income rather than capital gain, and that any such loss would be a
capital loss;
(3) upon the sale or other disposition of the MEDS, a U.S. Holder
would have gain or loss equal to the difference between the amount realized
and such Holder's cost of the MEDS; any such gain is expected to be capital
gain but may be ordinary income, and any such loss would be a capital loss;
and
(4) any capital gain or loss realized by a U.S. Holder (whether at
Maturity or upon disposition of the MEDS) will be long-term capital gain or
loss if the MEDS were held for more than one year at the time of disposition
or Maturity.
However, in the absence of authority concerning the proper tax treatment of
the MEDS, no assurance can be provided that the above tax characterization
would be accepted by the IRS or upheld by a court. As a result, different tax
consequences may apply. For example, (i) as indicated above, gain on
disposition of the MEDS may be ordinary income rather than capital gain, (ii)
a U.S. Holder might be required to accrue interest income at a rate greater
than the stated rate on the MEDS, and have less income or gain (or a greater
loss) upon disposition or Maturity of the MEDS, or (iii) all or part of the
stated interest on the MEDS might be treated as a nontaxable return of
capital, increasing the amount of income or gain (or decreasing the loss)
upon disposition or Maturity of the MEDS. If clause (ii) or (iii) is
applicable, a U.S. Holder's tax basis for the MEDS wold be their original
cost, increased by accruals of income and decreased by payments of interest.
In connection with clause (ii) of the preceding paragraph, recently proposed
Treasury Regulations would require the accrual of interest income on the MEDS
based on the projected yield to maturity of the MEDS. The projected yield
would take into account a projected payment at Maturity (based upon forward
pricing for Gannett Common Stock). This method might result in an annual
inclusion of income at a rate in excess of the stated rate of interest on the
MEDS. An adjustment would be made at Maturity to reflect the actual payment
on the MEDS as compared to the projected payment. Moreover, any gain on the
sale of the MEDS would be ordinary income. These proposed regulations by
their terms only apply to debt
<PAGE>
issued at least 60 days after publication of final regulations, and therefore
would not apply to the MEDS. However, no assurance can be given that the IRS
or the courts would not apply the principles of the regulations to the MEDS.
Non-United States Persons
In the case of a holder of MEDS that is not a U.S. person, payments made with
respect to the MEDS should not be subject to U.S. withholding tax, provided
that such holder complies with applicable certification requirements. Any
capital gain realized upon the sale or other disposition of the MEDS by a
holder that is not a U.S. person will generally not be subject to U.S.
federal income tax if (i) such gain is not effectively connected with a U.S.
trade or business of such holder and (ii) in the case of an individual, such
individual is not present in the United States for 183 days or more in the
taxable year of the sale or other disposition.
Backup Withholding and Information Reporting
A holder of MEDS may be subject to information reporting and to backup
withholding at a rate of 31 percent of certain amounts paid to the holder
unless such holder provides proof of an applicable exemption or correct
taxpayer identification number, and otherwise complies with applicable
requirements of the backup withholding rules.
UNDERWRITING
J.P. Morgan & Co. (the "Underwriter") has agreed, subject to the terms and
conditions set forth in the Underwriting Agreement, to purchase all the MEDS
from J.P. Morgan.
J.P. Morgan has been advised that the Underwriter proposes to offer the MEDS
to the public initially at the offering price set forth on the cover of this
Prospectus Supplement and to certain dealers at such price less a selling
concession of $[ ] per MEDS; that the Underwriter may allow, and each such
dealer may reallow, to other dealers a concession not exceeding $[ ] per
MEDS; and that, after the initial public offering, such public offering price
and such concession and reallowance may be changed.
J.P. Morgan has agreed in the Underwriting Agreement to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act, or contribute to payments the Underwriter may be required to
make in respect thereof.
J.P. Morgan has been advised by the Underwriter that it may make a market in
the MEDS; however, J.P. Morgan cannot provide any assurance that a secondary
market for the MEDS will develop.
This Prospectus Supplement and the Prospectus 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 MEDS. Such
subsidiaries may act as principal or agent in such
<PAGE>
transactions. Such sales will be made at prices related to prevailing market
prices at the time of a sale.
The Underwriter is an indirect wholly-owned subsidiary of J.P. Morgan. The
offer and sale of the MEDS by the Underwriter will comply with the
requirements of Schedule E ("Schedule E") of the Bylaws of the National
Association of Securities Dealers, Inc. (the "NASD") regarding underwriting
of securities of an affiliate.
LEGAL OPINIONS
The validity of the MEDS will be passed upon for J.P. Morgan by Margaret M.
Foran, Vice President, Assistant General Counsel and Assistant Secretary of
J.P. Morgan, and for the Underwriter by Cravath, Swaine & Moore. Certain tax
matters with respect to the MEDS will also be passed upon by Cravath, Swaine
& Moore. Cravath, Swaine & Moore has represented and continues to represent
J.P. Morgan from time to time in other matters. Ms. Foran 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.
EXPERTS
The financial statements incorporated by reference in the Annual Report on
Form 10-K of J.P. Morgan for the year ended December 31, 1994 (included in
J.P. Morgan's Annual Report to Stockholders), are incorporated by reference
in this Prospectus Supplement in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts
in auditing and accounting.
