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As Filed Pursuant to Rule 424(b)(2)
Registration No. 333-37315
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 15, 1997)
J.P. MORGAN & CO. INCORPORATED
$45,000,000
Subordinated Notes Due 2012
Interest payable June 24 and December 24
ISSUE PRICE: 100%
Interest on the Notes is payable semiannually on June 24 and December 24 of each
year (each an "Interest Payment Date"), commencing December 24, 1997. The Notes
will mature on December 24, 2012 and are not redeemable prior to their stated
maturity.
The Notes are unsecured debt obligations of the Company and are subordinated in
right of payment to all Senior Indebtedness of the Company and, in certain
circumstances, to the Derivative Obligations of the Company to the extent set
forth herein. Payment of principal of the Notes may be accelerated only in the
case of the bankruptcy or reorganization of the Company. There is no right of
acceleration in the case of a default in the payment of interest on the Notes,
or the performance of any other covenant of the Company. See "Description of the
Notes".
The Notes 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 Notes 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,
Notes in definitive form will not be issued. Settlement for the Notes will be
made in immediately available funds. The Notes will trade in the Depository's
Same-Day Funds Settlement System and secondary market trading activity for the
Notes will therefore settle in immediately available funds. All payments of
principal and interest will be made by the Company in immediately available
funds or the equivalent. See "Description of the Notes -- Same-Day Settlement
and Payment".
THE NOTES 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.
J.P. Morgan Securities Inc. (the "Underwriter") proposes to offer the Notes from
time to time for sale in one or more negotiated transactions, or otherwise, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices, in each case plus accrued
interest, if any, from November 24, 1997. The Underwriter has agreed to purchase
the Notes at 100% of their principal amount ($45,000,000 aggregate proceeds to
the Company before deducting expenses payable by the Company), plus accrued
interest, if any, from November 24, 1997. The Company has agreed to indemnify
the Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".
The Notes are offered, subject to prior sale, when, as and if accepted by the
Underwriter and subject to the approval of certain legal matters by Cravath,
Swaine & Moore, counsel for the Underwriter. It is expected that delivery of the
Notes will be made through the facilities of The Depository Trust Company on or
about November 24, 1997 against payment therefore in immediately available
funds.
J.P. MORGAN & CO.
November 17, 1997
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE UNDERWRITER MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND
MAY BID FOR, AND PURCHASE THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE"UNDERWRITING".
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus Supplement or the Prospectus and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company or the Underwriter. This Prospectus Supplement and the Prospectus do not
constitute an offer to sell or the solicitation of an offer to buy any
securities other than the securities to which they relate or any offer to sell
or the solicitation of any offer to buy such securities in any circumstances in
which such offer or solicitation is unlawful. Neither the delivery of this
Prospectus Supplement or the Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information herein is
correct as of any time subsequent to its date.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
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Description of the Notes.............................................................. S-3
Underwriting.......................................................................... S-5
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PROSPECTUS
<TABLE>
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Available Information................................................................. 2
Incorporation of Certain Documents by Reference....................................... 2
J.P. Morgan & Co. Incorporated........................................................ 3
Consolidated Ratio of Earnings to Fixed Charges....................................... 6
Consolidated Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends....................................................... 6
Use of Proceeds....................................................................... 6
Description of J.P. Morgan Debt Securities............................................ 7
Description of Debt Warrants.......................................................... 14
Description of Series Preferred Stock................................................. 15
Depositary Shares..................................................................... 18
Description of Preferred Stock Warrants............................................... 20
Description of Currency Warrants...................................................... 21
Risk Factors Relating to Currency Warrants............................................ 23
Description of Capital Stock.......................................................... 23
Plan of Distribution.................................................................. 25
Experts............................................................................... 27
Legal Opinions........................................................................ 27
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DESCRIPTION OF THE NOTES
The Company's Subordinated Notes Due 2012 offered hereby (the "Notes") will
be limited to $45,000,000 aggregate principal amount and will mature on December
24, 2012. The Notes are not entitled to any sinking fund. The Notes may not be
redeemed prior to stated maturity. Interest on the Notes will be payable
semiannually on December 24 and June 24 of each year, commencing December 24,
1997, to the persons in whose names the Notes are registered at the close of
business on the fifteenth calendar day prior to each Interest Payment Date. For
the period from, and including, November 24, 1997 to, but excluding, December
24, 1997, the Notes shall bear interest at the rate of 6.3865% per annum. For
the period from, and including, December 24, 1997 to, but excluding, December
24, 2012 the interest rate will be determined by the Calculation Agent in
accordance with the following: if the 10-year Treasury rate is greater than or
equal to 5.838% on December 17, 1997, the interest rate will be 12.773%; if the
10-year Treasury rate is less than 5.838% on December 17, 1997, the interest
rate will be 0%. The reference for the 10-year Treasury rate will be Telerate
Screen Page 7690, under the 12 p.m. column heading on December 17, 1997. If the
10-year Treasury rate is not so set forth on Telerate Screen Page 7690, the
Calculation Agent, in its sole discretion, shall determine the applicable
10-year Treasury rate and this determination shall be binding on all parties
except in the case of manifest error. The Notes will be issued pursuant to an
Indenture (the "Indenture") dated March 1, 1993, between the Company and First
Trust of New York, National Association, successor to Citibank, N.A., as Trustee
(the "Trustee"). The Notes constitute a single series of Subordinated Debt
Securities under the Indenture. Interest on the Notes will be calculated on the
basis of a 360-day year consisting of twelve 30-day months.
"Telerate Screen Page 7690" means the display designated as page "7690" on
the Dow Jones Telerate Service (or such other page as may replace that page on
that service for the purpose of displaying the 10-year Treasury rate.
The Company has agreed that, so long as any of the Notes remain
outstanding, it will maintain under appointment an agent (the "Calculation
Agent"), initially the New York branch of Morgan Guaranty Trust Company of New
York, to determine the 10-year Treasury rate. If the Calculation Agent is unable
or unwilling to continue to act as such, or if the Calculation Agent fails to
establish the applicable 10-year Treasury rate, or if the Company removes the
Calculation Agent, the Company will appoint the office of another bank to act as
the Calculation Agent.
If interest or principal payments on the Notes become due on a day which is
not a Business Day (as defined below), such payments will be made on the next
succeeding Business Day with the same force and effect as if made on such date
and no interest on such payment will accrue from and after such date. A
"Business Day" means any day except a Saturday, Sunday or legal holiday or other
day on which commercial banks in New York City are authorized by law to close.
The Notes will be issued in fully registered form, in denominations of
$1,000,000 with $1,000 integral multiples thereafter. The Paying Agent and
Registrar for the Notes will be the Trustee.
The Notes are subordinate in right of payment to Senior Indebtedness (as
defined) and, in certain circumstances relating to the bankruptcy or insolvency
of the Company, the Derivative Obligations (as defined) of the Company. At
September 30, 1997, the amount of indebtedness constituting Senior Indebtedness
was approximately $9.5 billion and the amount of Derivative Obligations was
immaterial. See "Description of Subordinated Debt Securities -- Subordination"
in the Prospectus.
Reference should be made to the Prospectus for a description of other terms
of the Notes. See "Description of Subordinated Debt Securities". Defined terms
used in this Prospectus Supplement have the meanings ascribed to them in the
Prospectus.
BOOK-ENTRY SYSTEM
The Notes initially will be represented by one or more global securities
(the "Global Securities") deposited with The Depository Trust Company ("DTC")
and registered in the name of a nominee of DTC. Except as set forth below, the
Notes will be available for purchase in denominations of $1,000,000 with $1,000
integral multiples thereafter in book-entry form only. The term "Depository"
refers to DTC or any successor depository.
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DTC has advised the Company and the Underwriter as follows: 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 was
created to hold securities of persons who have accounts with DTC
("participants") and to facilitate the clearance and settlement of securities
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 securities certificates. DTC's participants include
securities brokers and dealers (including the Underwriter), banks, trust
companies, clearing corporations and certain other organizations, some of which
(and/or their representatives) own DTC. Access to DTC'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 by the Company of Notes represented by the Global
Securities, the Depository or its nominee will credit, on its book-entry
registration and transfer system, the respective principal amounts of the Notes
represented by such Global Securities to the accounts of participants. The
accounts to be credited shall be designated by the Underwriters. Ownership of
beneficial interests in Notes represented by the Global Securities will be
limited to participants or persons that hold interests through participants.
Ownership of such beneficial interests in Notes will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the Depository (with respect to interests of participants in the Depository), or
by participants in the Depository or persons that may hold interests through
such participants (with respect to persons other than participants in the
Depository). The laws of some states 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
Notes represented by Global Securities.
So long as the Depository for a Global Security, or its nominee, is the
registered owner of such Global Security, the Depository or its nominee, as the
case may be, will be considered the sole owner or holder of the Notes
represented by such Global Security for all purposes under the Indenture. Except
as provided below, owners of beneficial interest in Notes represented by Global
Securities will not be entitled to have the Notes represented by such Global
Securities registered in their names, will not receive or be entitled to receive
physical delivery of Notes in definitive form and will not be considered the
owners or holders thereof under the Indenture. Unless and until the Global
Securities are exchanged in whole or in part for individual certificates
evidencing the Notes represented thereby, such Global Securities may not be
transferred except as a whole by the Depository for such Global Securities to a
nominee of such Depository or by a nominee of such Depository to such Depository
or another nominee of such Depository or by the Depository or any nominee of
such Depository to a successor Depository or any nominee of such successor
Depository.
Payments of principal of and interest on the Notes represented by Global
Securities registered in the name of the Depository or its nominee will be made
by the Company through the Paying Agent to the Depository or its nominee, as the
case may be, as the registered owner of the Notes represented by such Global
Securities.
The Company has been advised that the Depository or its nominee, upon
receipt of any payment of principal or interest in respect of the Notes
represented by Global Securities, will credit immediately the accounts of the
related participants with payment in amounts proportionate to their respective
beneficial interest in the Notes represented by the Global Securities as shown
on the records of the Depository. The Company expects that payments by
participants to owners of beneficial interests in the Notes represented by the
Global Securities will be governed by standing customer 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." Such payments will be
the responsibility of such participants.
If the Depository is at any time unwilling or unable to continue as
Depository and a successor Depository is not appointed by the Company within 90
days, the Company will issue individual Notes in definitive form in exchange for
the Global Securities. In addition, the Company may at any time and in its sole
discretion determine not to have Global Securities, and, in such event, will
issue individual Notes in definitive form in
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exchange for the Global Securities. In either instance, the Company will issue
Notes in definitive form, equal in aggregate principal amount to the Global
Securities, in such names and in such principal amounts as the Depository shall
request. Notes so issued in definitive form will be issued in denominations of
$1,000,000 with $1,000 integral multiples thereafter and will be issued in
registered form only, without coupons.
Neither the Company, the Trustee, any Paying Agent nor the Registrar for
the Notes will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Notes represented by such Global Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriter in immediately
available funds. All payments of principal and interest will be made by the
Company in immediately available funds or the equivalent, so long as the
Depository continues to make its Same-Day Funds Settlement System available to
the Company.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, the Notes
will trade in the Depository's Same-Day Funds Settlement System, and secondary
market trading activity in the Notes will therefore be required by the
Depository to settle in immediately available funds. No assurance can be given
as to the effect, if any, of settlement in immediately available funds on
trading activity in the Notes.
UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof, the Underwriter has agreed to purchase, and the
Company has agreed to sell the principal amount of the Notes offered hereby.
The Company has been advised by the Underwriter that the Underwriter
proposes to offer the Notes to the public initially 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 .35% of the principal amount of
the Notes, that the Underwriter may allow, and such dealers may reallow, a
concession not in excess of .25% of such principal amount on sales to certain
other dealers; and that after the initial public offering the public offering
price and such concessions may be changed by the Underwriter.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriter that it may from time to time
purchase and sell Notes in the secondary market, but that it is not obligated to
do so. No assurance can be given that there will be a secondary market for the
Notes. The Notes will not be listed on any securities exchange.
In connection with the offering of the Notes, the Underwriter may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Underwriter may overallot in connection with the
offering of the Notes, creating a syndicate short position. In addition, the
Underwriter may bid for, and purchase, Notes in the open market to cover
syndicate shorts or to stabilize the price of the Notes. Finally, the
underwriting syndicate may reclaim selling concessions allowed for distributing
the Notes in the offering of the Notes, if the syndicate repurchases previously
distributed Notes in syndicate covering transactions, stabilization transactions
or otherwise. Any of these activities may stabilize or maintain the market price
of the Notes above independent market levels. The Underwriter are not required
to engage in any of these activities, and may end any of them at any time.
The Underwriter is an indirect wholly-owned subsidiary of the Company. The
participation of the Underwriter in the offer and sale of the Notes complies
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 and complies with any restrictions imposed on the
Underwriter by the Board of Governors of the Federal Reserve System. In
addition, each NASD member participating in offers and sales of the Notes will
not execute a transaction in the Notes in a discretionary account without the
prior written specific approval of the member's customer.
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PROSPECTUS
J.P. MORGAN & CO. INCORPORATED
Debt Securities, Warrants to Purchase Debt Securities
Series Preferred Stock, Depositary Shares,
Warrants to Purchase Series Preferred Stock or
Depositary Shares and Currency Warrants
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 "J.P. Morgan Debt Securities"),
warrants to purchase J.P. Morgan Debt Securities (the "Debt Warrants"), one or
more series of its series preferred stock (the "Series Preferred Stock"),
interests in which may be represented by depositary shares (the "Depositary
Shares"), warrants to purchase shares of Series Preferred Stock or Depositary
Shares (together the "Preferred Stock Warrants") and Currency Warrants (the
"Currency Warrants"), for issuance and sale, at an aggregate initial public
offering price not to exceed $1,200,000,000, on terms determined by market
conditions at the time of sale. J.P. Morgan Debt Securities and Debt Warrants
are collectively called the "Securities". As used herein, Securities shall
include Securities 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 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, the exercise price and terms
of any Debt Warrants and any other specific terms of the Securities are set
forth in the accompanying Prospectus Supplement ("Prospectus Supplement"). If
series preferred stock is offered, the Prospectus Supplement will set forth the
specific title, number of shares of series preferred stock and number of
Depositary Shares, if any, any dividend, liquidation, redemption, conversion,
voting or other rights, the initial public offering price and any other terms of
the offering. If Preferred Stock Warrants or Currency Warrants are offered, the
Prospectus Supplement will set forth the number offered, a description (if
applicable) of the Series of Preferred Stock for which each is exercisable, the
exercise price and duration. The Securities, the Series Preferred Stock, the
Depositary Shares, the Preferred Stock Warrants and the Currency Warrants are
hereinafter collectively known as the "Offered Securities".
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.
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.
October 15, 1997
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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; Northwestern Atrium 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 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, 1996
(included in its Annual Report to Stockholders), J.P. Morgan's Quarterly Reports
on Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997 and J.P.
Morgan's Reports on Form 8-K dated January 13, 1997, January 30, 1997, April 10,
1997, July 10, 1997, July 30, 1997, September 11, 1997 and October 13, 1997
heretofore filed pursuant to Section 13 of the 1934 Act.
In addition, all reports and definitive proxy or information statements
filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent
to the date of this Prospectus and prior to the termination of the offering of
the Securities shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein or in the accompanying Prospectus Supplement
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
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.
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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 service to institutions, corporations,
governments, and individuals. J.P. Morgan's activities are summarized below.
BUSINESS ENVIRONMENT
J.P. Morgan conducts its business in a global environment that is
inherently unpredictable. Numerous variables may have a material effect on the
firm's results or operations. These variables include, but are not limited to:
economic and market conditions, including the liquidity of secondary markets,
the volatility of market prices, rates and indices, the timing and volume of
market activity, the availability of capital, and inflation; political events,
including legislative, regulatory, and other developments, such as the
anticipated formation of the European Monetary Union; competitive forces,
including the ability to attract and retain highly skilled individuals, and the
ability to cost-effectively develop and support technology and information
systems critical to its businesses; and investor sentiment. As a result,
revenues and net income in any particular period may not be indicative of
full-year results; may vary from year to year; and may impact the firm's ability
to achieve its strategic objectives.
BUSINESS SECTORS
The activities of J.P. Morgan are described using five business sectors, as
discussed below. Three of these sectors -- Finance and Advisory, Market Making,
and Asset Management and Servicing -- focus on services J.P. Morgan provides for
clients, including positions taken to facilitate client transactions. Two
sectors comprise proprietary activities that J.P. Morgan conducts exclusively
for its own account; Equity Investments and Proprietary Investing and Trading.
While presenting results in sector format helps simplify the complexity of J.P.
Morgan's business, it is also important to understand the shared benefits of its
strategy: focus on building long-term client relationships; the synergy J.P.
Morgan creates by acting as one firm with singular dedication to clients, rather
than as a collection of separate businesses; the global diversification of
activities across a range of product and locations; and the integration of
global capabilities to capitalize on opportunities.
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 financial institutions, corporations,
governments, and municipalities. 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. J.P. Morgan's global network of senior client relationship
managers markets the full spectrum of its capabilities and provides the link
between a corporate client's need and J.P. Morgan's financing, advisory, asset
management, and risk management products and services. 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 capture opportunities. J.P. Morgan's debt and equities
underwriting and credit businesses provide clients with the capabilities to
raise the necessary capital and execute strategies. High-quality research is an
integral part of this business. J.P. Morgan's credit capabilities include
meeting clients' financing needs by underwriting, arranging and syndicating
loans and other credit facilities.
MARKET MAKING
Market Making provides clients with around-the-clock access to global
markets. J.P. Morgan makes markets in fixed income, equity, foreign exchange,
and commodity instruments in both developed and emerging markets; serves as a
counterparty to help clients manage risks; and provides research to help clients
assess opportunities and track performance. J.P. Morgan takes positions to
facilitate client transactions, to enable it to function effectively, and to
benefit from its role as a market maker. J.P. Morgan's clients include
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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 money market instruments, U.S.
government agency securities, corporate debt securities, and options; and
helping clients manage their exposure to fluctuating interest and foreign
exchange rates by structuring, executing, and making markets in risk management
products.
J.P. Morgan's equities activities include providing clients with liquidity
in the cash and derivatives secondary markets through its global sales and
trading network. J.P. Morgan utilizes its expertise in the equities markets to
structure equity derivatives for its clients.
J.P. Morgan's foreign exchange capabilities include making markets in spot,
options, and short-term interest rate products, including forwards and forward
rate agreements in multiple currencies, to help clients manage their foreign
currency exposures. In commodities, J.P. Morgan makes markets in metals and
energy products and advises clients on developing hedging, investment, and
commodity-linked financing strategies. J.P. Morgan also provides physical
commodity services such as settlement of physical trades in the various metal
and oil markets and metal borrowing and lending services.
J.P. Morgan's emerging markets activities, while principally related to
fixed income activities, cross all markets, and its worldwide network enables it
to fulfill its role as market maker and provide clients with a steady flow of
market information.
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, J.P. Morgan offers
a range of investment strategies and products worldwide to service the
investment management needs of private and public sector retirement plans,
governments, corporations, endowments, foundations, and trusts.
J.P. Morgan's private client 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, J.P. 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 futures and options brokerage group provides institutional
clients with worldwide access to major exchanges by acting as futures and
options brokers in executing and clearing contracts.
J.P. Morgan operates under contract the Euroclear System, the world's
largest clearance and settlement system for internationally traded securities
and provides credit and deposit services to Euroclear participants.
In addition, J.P. Morgan provides such operational services as the
administration of depositary receipt programs and global trust and agency
services, primarily in Europe.
EQUITY INVESTMENTS
J.P. Morgan invests globally in privately held growth companies, management
buyouts, privatizations, and recapitalizations. These investments are made and
managed with the objective of maximizing total return, which is a measure of
both long-term appreciation and net recognized gains. In addition, a number of
J.P. Morgan's Equity Investment companies become clients of the firm. J.P.
Morgan's broad global presence and expertise is an important advantage in
sourcing, evaluating and managing investments. These activities are managed by a
small group of professionals.
J.P. Morgan's equity investment portfolio is diversified by industry,
geographic area, and stage of investment. J.P. Morgan's goal is to maintain a
diversified portfolio capable of generating significant returns
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<PAGE> 10
over time. This is a high-risk, high-reward business, and J.P. Morgan 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. The process of assessing and managing the risks and rewards of
new opportunities and existing investments continues throughout market cycles.
PROPRIETARY INVESTING AND TRADING
J.P. Morgan actively takes market risk positions for its own account. These
activities are managed by a small group of experienced market professionals who
employ directional and relative value risk-taking strategies diversified across
markets and instruments.
Directional strategies anticipate changes in absolute rate and price
levels, while relative value strategies anticipate changes in relationships
between markets and classes of instruments. These strategies are conducted
across many currencies and types of instruments, both on- and off-balance-sheet,
where J.P. Morgan perceives opportunities exist to generate value for the firm.
Instruments typically used in these positioning activities include fixed income
securities, foreign exchange, equity securities, commodity products, and related
derivative instruments. Positions may be held for short or long periods of time,
depending on the strategy and actual market performance. Certain longer-term
strategies are considered to be investment activities, and primarily utilize
government and mortgage-backed fixed income securities and interest rate swaps.
The securities and interest rate swaps used in these investment activities are
classified as "available-for-sale" and "risk-adjusting" respectively. In
addition to these risk-taking activities are the firm's capital and liquidity
management activities. Liquidity management is the management of the firm's
liquidity risk profile to ensure that J.P. Morgan has access to funding at a
reasonable cost, even under adverse circumstances, to support all the business
activities of the firm. A strong capital position is therefore an integral part
of J.P. Morgan's liquidity management because it enables J.P. Morgan to raise
funds as inexpensively as possible in a variety of international markets.
REGULATION
J.P. Morgan is subject to regulation under the Bank Holding Company Act of
1956 (the "Act"). Under the Act, J.P. Morgan is required to file certain reports
with the Board of Governors of the Federal Reserve System (the "Board") and is
subject to examination by the Board. The Act generally precludes J.P. Morgan and
its subsidiaries from engaging in nonbanking activities, or from acquiring more
than 5% of any class of voting securities of any company engaging in such
activities, unless the Board has determined, by order or regulation, that such
proposed activities are closely related to banking. Federal law and Board
interpretations limit the extent to which J.P. Morgan and its subsidiaries can
engage in certain aspects of the securities business.
The Glass-Steagall Act prohibits affiliates of banks that are members of
the Federal Reserve System, including J.P. Morgan Securities Inc. ("JPMSI"), a
Section 20 subsidiary, from being "engaged principally" in bank-ineligible
underwriting and dealing activities (mainly corporate debt and equity
securities). As interpreted by the Board, this prohibition has restricted
JPMSI's gross revenues from such activities to a maximum of 10% of its total
gross revenues. Effective March 6, 1997, the restriction was changed from 10% to
25% of total gross revenue. J.P. Morgan continues to seek ways to expand the
limits on its securities activities, including the continued reform of the
Glass-Steagall Act, necessary to achieve its strategic objectives.
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 affiliates and on certain other types of
transactions with them or involving their securities.
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<PAGE> 11
Among other wholly owned subsidiaries:
JPMSI is a broker-dealer registered with the Securities and Exchange
commission and is a member of the National Association of Securities Dealers,
the New York Stock Exchange, and other exchanges.
J.P. Morgan Futures Inc. is subject to regulation by the Commodity Futures
Trading Commission, the National Futures Association, and the commodity
exchanges and clearinghouses of which it is a member.
J.P. Morgan Investment Management Inc. is registered with the Securities
and Exchange Commission as an investment adviser under the Investment Advisers
Act of 1940, as amended.
J.P. Morgan subsidiaries conducting business in other countries are also
subject to regulations and restrictions imposed by those jurisdictions,
including capital requirements.
The principal executive office of J.P. Morgan is located at 60 Wall Street,
New York, New York 10260-0060, and its telephone number is (212) 483-2323.
As used in this Prospectus, unless the context otherwise requires, the term
"J.P. Morgan" refers to J.P. Morgan & Co. Incorporated and its consolidated and
unconsolidated subsidiaries.
CONSOLIDATED RATIOS
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------
1997 1996 1995 1994 1993 1992
---------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Excluding Interest on Deposits...... 1.32 1.35 1.35 1.40 1.70(a) 1.53(b)
Including Interest on Deposits...... 1.24 1.26 1.24 1.28 1.46(a) 1.31(b)
</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.
CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------
1997 1996 1995 1994 1993 1992
---------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Excluding Interest on Deposits...... 1.31 1.34 1.34 1.39 1.69(a) 1.52(b)
Including Interest on Deposits...... 1.23 1.25 1.23 1.27 1.46(a) 1.31(b)
</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.
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
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<PAGE> 12
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 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.
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<PAGE> 13
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 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
8
<PAGE> 14
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 U.S. $400,000,000 aggregate
principal amount of Zero Coupon Subordinated Notes Due 1998 of J.P. Morgan; (ii)
the U.S. $250,000,000 aggregate principal amount of 7 5/8% Subordinated Notes
Due 1998 of J.P. Morgan; (iii) the U.S. 150,000,000 aggregate principal amount
of 8 1/2% Subordinated Notes Due 2003 of J.P. Morgan; (iv) the U.S. $500,000,000
aggregate principal amount of 7 5/8% Subordinated Notes Due 2004 of J.P. Morgan;
(v) the CAN. $250,000,000 aggregate principal amount of 6 7/8% Subordinated
Notes Due 2004 of J.P. Morgan; (vi) the U.S. $200,000,000 aggregate principal
amount of 7 1/4% Subordinated Notes Due 2002 f J.P. Morgan; (vii) the U.S.
$200,000,000 aggregate principal amount of Floating Rate Subordinated Notes Due
2002 of J.P. Morgan; (viii) the U.S. $250,000,000 aggregate principal amount of
Floating Rate Subordinated Notes Due 2002; (ix) the U.S. $200,000,000 aggregate
principal amount of Floating Rate Subordinated Constant Maturity Treasury Notes
Due 2000 of J.P. Morgan; (x) the U.S. $300,000,000 aggregate principal amount of
Floating Rate Subordinated Notes Due 2005; (xi) the U.S. $150,000,000 aggregate
principal amount of 5 3/4% Subordinated Notes Due 2008 of J.P. Morgan; (xii) the
U.S. $300,000,000 aggregate principal amount of 6 1/4% Subordinated Notes Due
2009 of J.P. Morgan; (xiii) the ITL. 150,000,000,000 aggregate principal amount
of 8% Subordinated Notes Due 2003 of J.P. Morgan; (xiv) the U.S. $100,000,000
aggregate principal amount of 8% Subordinated Notes due 2005 of J.P. Morgan;
(xv) the U.S. $100,000,000 aggregate principal amount of 7 1/4% Subordinated
Notes due 2010 of J.P. Morgan; (xvi) the U.S. $100,000,000 aggregate principal
amount of 6.61% Subordinated Notes due 2010 of J.P. Morgan; (xvii) the U.S.
$300,000,000 aggregate principal amount of 6 1/4% Subordinated Notes due 2005 of
J.P. Morgan; (xviii) the U.S. $75,000,000 aggregate principal amount of 7.15%
Subordinated Notes due 2011 of J.P. Morgan; (xix) the U.S. $75,000,000 aggregate
principal amount of 7.69% Subordinate Notes due 2011 of J.P. Morgan; (xx) the
U.S. $5,200,000 aggregate principal amount of Floating Rate Subordinate Notes
due 2026 of J.P. Morgan: (xxi) the U.S. $100,000,000 aggregate principal amount
of 6 1/4% Subordinated Notes due 2011 of J.P. Morgan; (xxii) the Japanese Yen
10,000,000,000 aggregate principal amount of 4.78% Subordinated Notes due 2005
of J.P. Morgan; (xxiii) the U.S. $300,000,000 aggregate principal amount of
6.875% Subordinated Notes due 2007 of J.P. Morgan; (xxiv) the U.S. $200,000,000
aggregate principal amount of Floating Rate Subordinated Notes due 2012 of J.P.
Morgan; (xxv) the U.S. $5,000,000 aggregate principal amount of Floating Rate
Subordinated Notes due 2026 of J.P. Morgan; (xxvi) the U.S. $78,000,000
aggregate principal amount of Zero-Coupon Subordinated Notes due 2027 of J.P.
Morgan; (xxvii) the U.S. $31,000,000 aggregate principal amount of Zero-Coupon
Subordinated Notes due 2027 of J.P. Morgan; (xxviii) the U.S. $9,000,000
aggregate principal amount of Zero-Coupon Subordinated Notes due 2027 of J.P.
Morgan; (xxix) the U.S. $23,000,000 aggregate principal amount of Zero-Coupon
Subordinated Notes due 2027 of J.P. Morgan; and (xxx) 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)(xxix), 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
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<PAGE> 15
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
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
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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 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
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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 (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 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.
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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 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 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
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unless such beneficial interest is an amount equal to an authorized denomination
for the J.P. Morgan Debt Securities.
DESCRIPTION OF DEBT WARRANTS
J.P. Morgan may issue Debt Warrants for the purchase of J.P. Morgan Debt
Securities. The Debt Warrants are to be issued under warrant agreements (each a
"Debt Warrant Agreement") to be entered into between J.P. Morgan and Morgan
Guaranty, as warrant agent (the "Debt Warrant Agent"), all as set forth in the
Prospectus Supplement relating to the particular issue of Debt Warrants (the
"Offered Debt Warrants"). A copy of the Debt Warrant Agreement, including the
form of warrant certificate (the "Debt Warrant Certificate") representing the
Debt Warrants, substantially in the form in which it will be executed, is filed
as an exhibit to the Registration Statement. Brief summaries of the principal
provisions of the Debt Warrant Agreement and the Debt Warrant Certificates do
not purport to be complete.
GENERAL
If Debt Warrants are offered, the Prospectus Supplement will describe the
terms of the Offered Debt Warrants, the Debt Warrant Agreement relating to the
Offered Debt Warrants and the Debt Warrant Certificates representing the Offered
Debt Warrants, including the following: (1) the designation, aggregate principal
amount and terms of the J.P. Morgan Debt Securities purchasable upon exercise of
the Offered Debt Warrants; (2) if applicable, the designation and terms of any
related J.P. Morgan Debt Securities with which the Offered Debt Warrants are
issued and the number of Offered Debt Warrants issued with each such J.P. Morgan
Debt Security; (3) if the J.P. Morgan Debt Securities purchasable upon exercise
of Offered Debt Warrants are denominated in a currency other than U.S. dollars
or in any currency unit, the denomination of such J.P. Morgan Debt Securities
and the coin or currency or units based on or relating to currencies (including
ECU) in which the principal, premium, if any, and interest 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; (4) if applicable, the date on and after which the
Offered Debt Warrants and the related J.P. Morgan Debt Securities will be
separately transferable; (5) the principal amount of J.P. Morgan Debt Securities
purchasable upon exercise of the Offered Debt Warrants and the price at which
and coin or currency or units based on or relating to currencies (including ECU)
in which such principal amount of J.P. Morgan Debt Securities may be purchased
upon such exercise; (6) the date on which the right to exercise the Offered Debt
Warrants shall commence and the date (the "Expiration Date") on which such right
shall expire; (7) if the J.P. Morgan Debt Securities purchasable upon exercise
of Offered Debt Warrants are original issue discount J.P. Morgan Debt
Securities, a discussion of the specific Federal income tax, accounting and
other special considerations applicable thereto; and (8) whether the Debt
Warrants represented by the Debt Warrant Certificates will be issued in
registered or bearer form.
Debt Warrant Certificates will be exchangeable for new Debt Warrant
Certificates of different denominations, may, if in registered form, be
presented for registration and transfer, and may be exercised at the corporate
trust office of the Debt Warrant Agent or any other office indicated in the
Prospectus Supplement. Prior to the exercise of their Debt Warrants, holders of
Debt Warrants will not have any of the rights of holders of the J.P. Morgan Debt
Securities purchasable upon such exercise and will not be entitled to payments
of principal of, premium, if any, or interest, if any, on the J.P. Morgan Debt
Securities purchasable upon such exercise.
EXERCISE OF DEBT WARRANTS
Each Offered Debt Warrant will entitle the holder to purchase for cash such
principal amount of J.P. Morgan Debt Securities at such exercise price as shall
in each case be set forth in, or be determinable as set forth in, the Prospectus
Supplement relating to the Offered Debt Warrants. Offered Debt Warrants may be
exercised at any time up to the close of business on the Expiration Date set
forth in the Prospectus Supplement relating to the Offered Debt Warrants. After
the close of business on the Expiration Date (or
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such later date to which such Expiration Date may be extended by J.P. Morgan),
unexercised Debt Warrants will become void.
Subject to any restrictions and additional requirements that may be set
forth in the Prospectus Supplement relating thereto, Debt Warrants may be
exercised by delivery to the Debt Warrant Agent of the Debt Warrant Certificate
evidencing such Debt Warrants properly completed and duly executed and of
payment as provided in the Prospectus Supplement of the amount required to
purchase the J.P. Morgan Debt Securities purchasable upon such exercise. The
exercise price will be that price applicable on the date of receipt of payment
in full of the requisite amount of funds, determined as set forth in the
Prospectus Supplement relating to the Offered Debt Warrants. Upon receipt of
such payment and such Debt Warrant Certificate at the corporate trust office of
the Debt Warrant Agent or any other office indicated in the Prospectus
Supplement, J.P. Morgan will, as soon as practicable, forward the J.P. Morgan
Debt Securities purchasable upon such exercise. If less than all of the Debt
Warrants represented by such Debt Warrant Certificate are exercised, a new Debt
Warrant Certificate will be issued for the remaining Debt Warrants.
DESCRIPTION OF SERIES PREFERRED STOCK
J.P. Morgan is authorized to issue up to 10,400,000 shares of preferred
stock without par value (the "Preferred Stock"), which may be issued from time
to time in one or more series with such terms as are determined by resolution of
the Board of Directors. All shares of Series Preferred Stock, irrespective of
series, constitute one and the same class. See "Description of Capital Stock."
The following description of the terms of the Series Preferred Stock sets forth
certain general terms and provisions of the Series Preferred Stock to which any
Prospectus Supplement may relate. Certain terms of any series of Series
Preferred Stock offered by any Prospectus Supplement will be described in the
Prospectus Supplement relating to such series of Series Preferred Stock. If so
indicated in the Prospectus Supplement, the terms of any such series may differ
from the terms set forth below.
The Board of Directors is authorized to establish and designate series and
to fix the number of shares and the relative rights, preferences and limitations
of the respective series of the Series Preferred Stock. The terms of a
particular series of Series Preferred Stock may differ, among other things, in
(1) the number of shares to constitute such series, (2) the dividend rate (or
the method of calculation) on the shares of such series, and whether such
dividends are cumulative, (3) whether or not the shares of the series shall be
redeemable and the terms thereof, (4) the terms and amount of any sinking fund
provided for the purchase or redemption of the series, (5) whether or not the
shares of the series shall be convertible into, or exchangeable for, cash or
shares of any other series of Series Preferred Stock or other securities of J.P.
Morgan and the terms thereof, (6) the amount per share payable on the shares of
the series in case of liquidation, dissolution or winding up of J.P. Morgan, (7)
the terms of voting rights, if any, of shares of the series, (8) whether there
are restrictions or conditions upon the issue or reissue of any additional
preferred stock ranking on a parity with or prior to such series as to dividends
or upon liquidation, dissolution or winding up, and (9) the other rights and
privileges and any qualifications, limitations or restrictions of such rights or
privileges of such series. Unless otherwise specifically set forth in the
Prospectus Supplement relating to a series of Series Preferred Stock, all series
of Series Preferred Stock shall be of equal rank, preference and priority as to
dividends and upon liquidation, dissolution or winding up of J.P. Morgan; when
the stated dividends are not paid in full, the shares of all series of the
Series Preferred Stock shall share ratably in any payment thereof, and upon
liquidation, dissolution or winding up of J.P. Morgan, if assets are
insufficient to pay in full all shares of all series of Series Preferred Stock,
then such assets shall be distributed among the holders ratably.
As described under "Depositary Shares" below, J.P. Morgan may, at its
option, elect to offer depositary shares evidenced by depositary receipts, each
representing a fraction (to be specified in the Prospectus Supplement relating
to the particular series of Series Preferred Stock) of a share of the particular
series of Series Preferred Stock issued and deposited with a depositary, in lieu
of offering full shares of such series of the Series Preferred Stock.
Since J.P. Morgan is a holding company, the right of J.P. Morgan, and hence
the right of creditors and stockholders of J.P. Morgan, to participate in any
distribution of assets of any subsidiary, upon its liquidation
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or reorganization or otherwise is necessarily subject to the prior claims of
creditors of the subsidiary, except to the extent that claims of J.P. Morgan
itself as a creditor of the subsidiary may be recognized.
The brief description of the principal provisions of the Series Preferred
Stock set forth below does not purport to be complete.
DIVIDEND RIGHTS
The holders of the Series Preferred Stock shall be entitled to receive, but
only when and as declared by the Board of Directors out of funds legally
available for that purpose, cash dividends at the rates and on the dates set
forth in the Prospectus Supplement relating to a particular series of Series
Preferred Stock, and no more, payable quarterly (each, a "Dividend Payment
Date"), unless otherwise specified in the Prospectus Supplement relating to a
series of Series Preferred Stock. Such rate may be fixed or variable. Each such
dividend will be payable to the holders of record as they appear on the stock
books of J.P. Morgan (or, if applicable, the records of the Depositary referred
to below under "Depositary Shares") on such record dates as will be fixed by the
Board of Directors of J.P. Morgan or a duly authorized committee thereof.
Dividends payable on the Series Preferred Stock for any period less than a full
quarter will be computed on the basis of the actual number of days elapsed over
a 360 day year and for a period of a full calendar quarter, will be computed on
the basis of a 360 day year consisting of twelve 30 day months. Unless otherwise
specified in the Prospectus Supplement relating to a series of Series Preferred
Stock, such dividends shall be payable from, and shall be cumulative from, the
date of original issue of each share, so that if in any quarterly dividend
period (being the period between such dividend payment dates) dividends at the
rate or rates as described in the Prospectus Supplement relating to such series
of Series Preferred Stock shall not have been declared and paid or set apart for
payment on all outstanding shares of Series Preferred Stock for such quarterly
dividend period and all preceding quarterly dividend periods from and after the
first day from which dividends are cumulative then the aggregate deficiency
shall be declared and fully paid or set apart for payment, but without interest,
before any dividends shall be declared or paid or set apart for payment on the
Common Stock by J.P. Morgan. The cutting-off of dividends on Common Stock until
the arrearages have been paid or provided for, as outlined above, and such
rights, if any, to vote for the election of directors as may be set forth in the
Prospectus Supplement relating to a series of Series Preferred Stock, shall be
the only consequences of the failure to declare or pay dividends on the Series
Preferred Stock. After payment in full of all dividend arrearages on the Series
Preferred Stock, dividends on the Common Stock may be declared and paid out of
funds legally available for that purpose as the Board of Directors may
determine.
Each series of the Series Preferred Stock will be entitled to dividends as
described in the Prospectus Supplement relating to such series. Different series
of the Series Preferred Stock may be entitled to dividends at different dividend
rates or based upon different methods of determination.
OPTIONAL REDEMPTION
J.P. Morgan may, at its option, at any time or from time to time on not
less than 30 and not more than 60 days' notice, redeem one or more series of the
Series Preferred Stock, in whole or in part, at the redemption prices and on the
dates set forth in the Prospectus Supplement for the related series of Series
Preferred Stock.
Any optional redemption by J.P. Morgan shall be with the approval of the
appropriate bank regulatory authorities unless at the time such approval is not
required. At the date of this Prospectus approval by the Federal Reserve Board
is required.
If less than all the outstanding shares of a series of the Series Preferred
Stock are to be redeemed, the selection of the shares to be redeemed shall be
determined by lot or pro rata as may be determined by the Board of Directors of
J.P. Morgan or by any other method which may be determined by the Board of
Directors to be equitable. From and after the redemption date (unless default
shall be made by J.P. Morgan in providing for the payment of the redemption
price), dividends shall cease to accrue on the shares of such Series Preferred
Stock called for redemption and all rights of the holders thereof (except the
right to receive the redemption price) shall cease.
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At the option of J.P. Morgan, shares of Series Preferred Stock redeemed or
otherwise acquired may be restored to the status of authorized but unissued
shares of Series Preferred Stock.
CONVERSION OR EXCHANGE
The holders of the Series Preferred Stock will have such rights, if any, to
convert such shares into or to exchange such shares for, cash or shares of any
other series of Series Preferred Stock of J.P. Morgan, as may be set forth in
the Prospectus Supplement relating to a series of Series Preferred Stock.
VOTING RIGHTS
Except as indicated below or in the Prospectus Supplement relating to a
particular series of Series Preferred Stock, or except as expressly required by
applicable law, the holders of the Series Preferred Stock will not be entitled
to vote. In the event that J.P. Morgan issues full shares of any series of
Series Preferred Stock, each such share will be generally entitled to one vote
on matters on which holders of such series of the Series Preferred Stock are
entitled to vote, irrespective of such series' aggregate stated value,
liquidation preference or initial offering price. However, as more fully
described under "Depositary Shares" below, if J.P. Morgan elects to issue
Depositary Shares representing a fraction of a share of a series of Series
Preferred Stock, each such Depositary Share will, in effect, be entitled to such
fraction of a vote as shall be set forth in the Prospectus Supplement relating
to such series rather than one vote, per Depositary Share.
If at the time of any annual meeting of stockholders for the election of
directors, the equivalent of six quarterly dividends (whether or not
consecutive) payable by J.P. Morgan on any other series of Series Preferred
Stock are in default, the number of directors of J.P. Morgan will be increased
by two and the holders of record of all outstanding series of Series Preferred
Stock upon which like voting rights have been conferred, voting as a single
class without regard to series, will be entitled to vote for the election of
such additional two directors until all dividends in default have been paid or
declared and set apart for payment.
So long as any shares of Series Preferred Stock remain outstanding (except
as may be otherwise specified in the Certificate of Designation creating such
Series Preferred Stock), J.P. Morgan shall not, without the affirmative vote or
consent of the holders of at least two-thirds of the votes of the Series
Preferred Stock at the time outstanding and, entitled to vote, given in person
or by proxy, either in writing or by resolution adopted at a meeting at which
the holders of any series of Series Preferred Stock (alone or together with the
holders of one or more other series of Series Preferred Stock at the time
outstanding and entitled to vote) voting separately as a class, alter the
provisions of the Series Preferred Stock so as to materially adversely affect
its rights; provided; however, that in the event any such materially adverse
alteration affects the rights of only a single series of Series Preferred Stock,
then the alteration may be effected only with the vote or consent of at least
two-thirds of the votes of such series of Series Preferred Stock; provided,
further, that no such vote of any series of Series Preferred Stock will be
required to authorize an increase in the amount of the authorized Series
Preferred Stock and/or the creation and issuance of other series of Series
Preferred Stock in accordance with J.P. Morgan's Restated Certificate of
Incorporation, as amended. In connection with the exercise of the voting rights
contained in the preceding sentence, holders of all series of Series Preferred
Stock which are granted such voting rights shall vote as a class (except as
specifically provided otherwise).
The foregoing voting provisions will not apply if, in connection with the
matters specified, provision is made for the redemption or retirement of all
outstanding Series Preferred Stock.
Under regulations adopted by the Federal Reserve Board, if the holders of
any series of Series Preferred Stock become entitled to vote for the election of
directors because dividends on such series are in arrears, such series may then
be deemed a "class of voting securities" and a holder of 25% or more of such
series (or a holder of 5% or more if it otherwise exercises a "controlling
influence" over J.P. Morgan) may then be subject to regulation as a bank holding
company in accordance with the Bank Holding Company Act of 1956, as amended. In
addition, at such time (i) any bank holding company may be required to obtain
the approval of the Federal Reserve Board under the Bank Holding Company Act of
1956, as amended, to acquire or retain 5% or more of any series of Series
Preferred Stock and (ii) any person other than a bank holding company
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may be required to obtain the approval of the Federal Reserve Board under the
Bank Change in Control Act to acquire 10% or more of such series of Series
Preferred Stock.
LIQUIDATION RIGHTS
Upon any liquidation, dissolution or winding up of J.P. Morgan, whether
voluntary or involuntary, the holders of each series of Series Preferred Stock
shall have preference and priority over the Common Stock for payment out of the
assets of J.P. Morgan or proceeds thereof, whether from capital or surplus, of
such amounts as are set forth in the Prospectus Supplement relating to such
series of Series Preferred Stock and, after such payment, the holders of such
series of Series Preferred Stock shall be entitled to no other payments. If, in
such case, the assets of J.P. Morgan or proceeds thereof shall be insufficient
to make the full liquidating payment on such series of Series Preferred Stock
and liquidating payments on any other outstanding series of Series Preferred
Stock (including accrued and unpaid dividends, if any), then such assets and
proceeds shall be distributed among the holders of such series of Series
Preferred Stock and any other outstanding series of Series Preferred Stock,
ratably in accordance with the respective amounts which would be payable on all
Series Preferred Stock (including accrued and unpaid dividends, if any) if all
such liquidating amounts payable were paid in full. A consolidation or merger of
J.P. Morgan with or into any other corporation or corporations or a sale,
whether for cash, shares of stock, securities or properties, of all or
substantially all or any part of the assets of J.P. Morgan shall not be deemed
or construed to be a liquidation, dissolution or winding up of J.P. Morgan.
MISCELLANEOUS
Unless otherwise specified in the applicable Prospectus Supplement, First
Chicago Trust Company will serve as transfer agent, dividend disbursing agent
and registrar for any series of Series Preferred Stock. The holders of any
series of Series Preferred Stock will not have any preemptive rights to purchase
or subscribe for any shares of any class or other securities of any type of J.P.
Morgan. When issued, each series of the Series Preferred Stock will be fully
paid and nonassessable. The Certificate of Designation setting forth the
provisions of any series of Series Preferred Stock will become effective after
the date of the Prospectus Supplement relating to such series of Series
Preferred Stock, but on or before issuance of such series of Series Preferred
Stock.
DEPOSITARY SHARES
GENERAL
J.P. Morgan may, at its option, elect to offer fractional shares of a
particular series of Series Preferred Stock, rather than full shares of such
series of Series Preferred Stock. In the event such option is exercised, J.P.
Morgan will issue to the public receipts for Depositary Shares, each of which
will represent a fraction (to be set forth in the Prospectus Supplement relating
to a particular series of Series Preferred Stock) of a share of a particular
series of Series Preferred Stock as described below. The shares of any series of
Series Preferred Stock represented by Depositary shares will be deposited under
a Deposit Agreement (the "Deposit Agreement") between J.P. Morgan and a bank or
trust company selected by J.P. Morgan having its principal office in the United
States and having a combined capital and surplus of at least $50,000,000 (the
"Depositary"). Subject to the terms of the Deposit Agreement, each owner of a
Depositary Share will be entitled, in proportion to the applicable fraction of a
share of Series Preferred Stock represented by such Depositary Share, to all the
rights and preferences of the Series Preferred Stock represented thereby
(including dividend, voting, redemption and liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of the
particular series of Series Preferred Stock in accordance with the terms of the
offering described in the related Prospectus Supplement. Copies of the forms of
the Deposit Agreement and
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Depositary Receipt are filed as exhibits to the Registration Statement, and the
following summary is qualified in its entirety by reference to such exhibits.
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary may, upon the written order of J.P. Morgan, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts but
not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will be
exchangeable for definitive Depositary Receipts at J.P. Morgan's expense.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the particular series of Series Preferred
Stock to the record holders of Depositary Shares relating to such Series
Preferred Stock in proportion to the number of such Depositary Shares owned by
such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
J.P. Morgan sell such property and distribute the net proceeds from such sale to
such holders.
WITHDRAWAL OF STOCK
Upon surrender of Depositary Receipts at the corporate trust office of the
Depositary (unless the related Depositary Shares have previously been called for
redemption), the holder of the Depositary Shares evidenced thereby is entitled
to delivery at such office to or upon his order, of the number of whole shares
of the related series of Series Preferred Stock and any money or other property
represented by such Depositary Shares. Holders of Depositary Shares will be
entitled to receive whole shares of the related series of Series Preferred Stock
on the basis set forth in the related Prospectus Supplement for such series of
Series Preferred Stock, but holders of such whole shares of Series Preferred
Stock will not thereafter be entitled to receive Depositary Shares therefor. If
the Depositary Receipts delivered by the holder evidence a number of Depositary
Shares in excess of the number of Depositary Shares representing the number of
whole shares of the related series of Series Preferred Stock to be withdrawn,
the Depositary will deliver to such holder at the same time a new Depositary
Receipt evidencing such excess number of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
If a series of Series Preferred Stock represented by Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the proceeds
received by the Depositary resulting from the redemption, in whole or in part,
of such series of Series Preferred Stock held by the Depositary. The redemption
price per Depositary Share will be equal to the applicable fraction of the
redemption price per share payable with respect to such series of the Series
Preferred Stock. Whenever J.P. Morgan redeems shares of Series Preferred Stock
held by the Depositary, the Depositary will redeem as of the same redemption
date the number of Depositary Shares representing shares of the related series
of Series Preferred Stock so redeemed. If less than all the Depositary Shares
are to be redeemed, the Depositary Shares to be redeemed will be selected by lot
or pro rata as may be determined by the Depositary.
VOTING THE SERIES PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Series
Preferred Stock are entitled to vote, the Depositary will mail the information
contained in such notice of meeting to the record holders of the Depositary
Shares relating to such Series Preferred Stock. Each record holder of such
Depositary Shares on the record date (which will be the same date as the record
date for the Series Preferred Stock) will be entitled to instruct the Depositary
as to the exercise of the voting rights pertaining to the amount of the Series
referred Stock represented by such holder's Depositary Shares. The Depositary
will endeavor, insofar as practicable, to vote the amount of the Series
Preferred Stock represented by such Depositary Shares in accordance with such
instructions, and J.P. Morgan will agree to take all action which may be deemed
necessary by the Depositary
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in order to enable the Depositary to do so. The Depositary will abstain from
voting shares of the Series Preferred Stock to the extent it does not receive
specific instructions from the holders of Depositary Shares representing such
Series Preferred Stock.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between J.P. Morgan and the Depositary. However, any amendment which materially
and adversely alters the rights of the holders of Depositary Shares will not be
effective unless such amendment has been approved by the holders of at least a
majority of the Depositary Shares then outstanding. The Deposit Agreement may be
terminated by J.P. Morgan or the Depositary only if (i) all outstanding
Depositary Shares have been redeemed or (ii) there has been a final distribution
in respect of the related series of Series Preferred Stock in connection with
any liquidation, dissolution or winding up of J.P. Morgan and such distribution
has been distributed to the holders of Depositary Receipts.
CHARGES OF DEPOSITARY
J.P. Morgan will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. J.P. Morgan
will pay charges of the Depositary in connection with the initial deposit of the
related series of Series Preferred Stock and any redemption of such Series
Preferred Stock. Holders of Depositary Receipts will pay transfer and other
taxes and governmental charges and such other charges as are expressly provided
in the Deposit Agreement to be for their accounts.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to J.P. Morgan notice
of its election to do so, and J.P. Morgan may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $50,000,000.
MISCELLANEOUS
The Depositary will forward all reports and communications from J.P. Morgan
which are delivered to the Depositary and which J.P. Morgan is required to
furnish to the holders of the related series of Series Preferred Stock.
Neither the Depositary nor J.P. Morgan will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of J.P. Morgan and the
Depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder and they will not be obligated to prosecute or
defend any legal proceeding in respect of any Depositary Shares or Series
Preferred Stock unless satisfactory indemnity is furnished. They may rely on
written advice of counsel or accountants, or information provided by persons
presenting Series Preferred Stock for deposit, holders of Depositary Receipts or
other persons believed to be competent and on documents believed to be genuine.
DESCRIPTION OF PREFERRED STOCK WARRANTS
J.P. Morgan may issue Preferred Stock Warrants for the purchase of a
particular series of Series Preferred Stock or Depositary Shares. The Preferred
Stock Warrants are to be issued under warrant agreements (each a "Preferred
Stock Warrant Agreement") to be entered into between J.P. Morgan and Morgan
Guaranty, as warrant agent (the "Preferred Stock Warrant Agent"), all as set
forth in the Prospectus Supplement relating to the particular issue of Preferred
Stock Warrants (the "Offered Preferred Stock Warrants"). A copy of the Preferred
Stock Warrant Agreement, including the form of preferred stock warrant
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certificate (the "Preferred Stock Warrant Certificate") representing the
Preferred Stock Warrants, substantially in the form in which it will be
executed, is filed as an exhibit to the Registration Statement. Brief summaries
of the principal provisions of the Preferred Stock Warrant Agreement and
Preferred Stock Warrant Certificates do not purport to be complete.
GENERAL
If Preferred Stock Warrants are offered, the Prospectus Supplement will
describe the terms of the Offered Preferred Stock Warrants, and the Preferred
Stock Warrant Agreement relating to the Offered Preferred Stock Warrants and the
Preferred Stock Warrant Certificates representing the Offered Preferred Stock
Warrants including the following:
(i) the designation, number of shares, stated value and terms
(including, without limitation, liquidation, dividend, conversion and
voting rights) of the series of Series Preferred Stock or Depositary Shares
purchasable upon exercise of Preferred Stock Warrants and the price at
which such number of shares of Series Preferred Stock or Depositary Shares
may be purchased upon such exercise;
(ii) the date on which the right to exercise such Preferred Stock
Warrants shall commence and the date (the "Expiration Date") on which such
right shall expire;
(iii) United States Federal income tax consequences applicable to such
Preferred Stock Warrants; and
(iv) any other terms of such Preferred Stock Warrants.
Preferred Stock Warrants for the purchase of Series Preferred Stock or
Depositary Shares will be offered and exercisable for U.S. dollars only.
Preferred Stock Warrants will be issued in registered form only. The exercise
price for Preferred Stock Warrants will be subject to adjustment in accordance
with the applicable Prospectus Supplement.
EXERCISE OF PREFERRED STOCK WARRANTS
Each Preferred Stock Warrant will entitle the holder to purchase for cash
such number of shares (as applicable) of Series Preferred Stock or Depositary
Shares, at such exercise price as shall in each case be set forth in, or
calculable from, the Prospectus Supplement relating to the Offered Preferred
Stock Warrants, which exercise price may be subject to adjustment upon the
occurrence of certain events as set forth in such Prospectus Supplement. Offered
Preferred Stock Warrants may be exercised at any time up to the close of
business on the Expiration Date set forth in the Prospectus Supplement relating
to the Offered Preferred Stock Warrants. After the close of business on the
Expiration Date (or such later date to which such Expiration Date may be
extended by J.P. Morgan), unexercised Preferred Stock Warrants will become void.
The place or places where, and the manner in which, Preferred Stock Warrants may
be exercised shall be specified in the Prospectus Supplement relating to such
Preferred Stock Warrants.
Prior to the exercise of any Preferred Stock Warrants to purchase Series
Preferred Stock or Depositary Shares, holders of such Preferred Stock Warrants
will not have any rights of holders of the Series Preferred Stock or Depositary
Shares purchasable upon such exercise, including the right to receive payments
of dividends, if any, on the Series Preferred Stock or Depositary Shares
purchasable upon such exercise or to exercise any applicable right to vote.
DESCRIPTION OF CURRENCY WARRANTS
The following description of the terms of the Currency Warrants sets forth
certain general terms and provisions of the Currency Warrants to which any
Prospectus Supplement may relate. The particular terms of the Currency Warrants
offered by any Prospectus Supplement and the extent, if any, to which such
general provisions do not apply to the Currency Warrants so offered will be
described in the Prospectus Supplement relating to such Currency Warrants.
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Each issue of Currency Warrants will be issued under a warrant agreement
(each, a "Currency Warrant Agreement") to be entered into between J.P. Morgan
and Morgan Guaranty, as warrant agent (the "Currency Warrant Agent"), all as
described in the Prospectus Supplement relating to such Currency Warrants. A
copy of the form of Currency Warrant Agreement, including the form of currency
warrant certificate (the "Currency Warrant Certificate") representing the
Currency Warrants, substantially in the form in which it will be executed, is
filed as an exhibit to the Registration Statement. Brief summaries of the
principal provisions of the Currency Warrants and the Currency Warrant Agreement
do not purport to be complete.
GENERAL
J.P. Morgan may issue Currency Warrants either in the form of Currency Put
Warrants entitling the holders thereof to receive from J.P. Morgan the cash
settlement value in U.S. dollars or other specified currency (together the
"Payment Currency") of the right to sell a specified amount of a specified
foreign currency or composite currency (the "Designated Currency") for a
specified amount of the Payment Currency, or in the form of Currency Call
Warrants entitling the holders thereof to receive from J.P. Morgan the cash
settlement value in the Payment Currency of the right to purchase a specified
amount of a Designated Currency for a specified amount of the Payment Currency.
Unless otherwise provided in the applicable Prospectus Supplement, the cash
settlement value of an exercised Currency Warrant will be an amount stated in
U.S. dollars which, in the case of a Currency Put Warrant, is the greater of (i)
zero and (ii) the amount computed by subtracting from a nominal amount of U.S.
dollars specified in the Prospectus Supplement (the "U.S. Dollar Constant") an
amount equal to the U.S. Dollar Constant times a fraction, the numerator of
which is the strike price set forth in the applicable Prospectus Supplement and
the denominator of which is the spot exchange rate on the exercise date and, in
the case of a Currency Call Warrant, is the greater of (i) zero and (ii) the
amount computed by subtracting the U.S. Dollar Constant from an amount equal to
the U.S. Dollar Constant times a fraction, the numerator of which is the strike
price set forth in the applicable Prospectus Supplement and the denominator of
which is the spot exchange rate on the exercise date. If the cash settlement
value is zero at the time of expiration of an unexercised Currency Warrant, the
Currency Warrant will expire worthless.
Reference is hereby made to the Prospectus Supplement relating to the
particular issue of Currency Warrants offered thereby for the terms of such
Currency Warrants, including, where applicable: (i) whether such Currency
Warrants shall be Currency Put Warrants, Currency Call Warrants, or both; (ii)
the aggregate amount of such Currency Warrants; (iii) the offering price of such
Currency Warrants; (iv) the Designated Currency, which currency may be a foreign
currency or a composite currency, including ECU, and information regarding such
currency or composite currency; (v) the date on which the right to exercise such
Currency Warrants shall commence and the date on which such right shall expire
(the "Expiration Date"); (vi) the manner in which such Currency Warrants may be
exercised; (vii) the circumstances which will cause the Currency Warrants to be
deemed automatically exercised; (viii) the minimum number, if any, of such
Currency Warrants exercisable at any one time and any other restrictions on
exercise; (ix) the method of determining the amount payable in connection with
the exercise of such Currency Warrants, including the strike price or range of
strike prices of such Currency Warrants, the method of determining the spot
exchange rate and the U.S. Dollar Constant for such Currency Warrants; (x) the
national securities exchange on which such Currency Warrants will be listed;
(xi) whether such Currency Warrants will, from the perspective of holders, be
represented by certificates or issued in book-entry form; (xii) the place or
places at which payment of the cash settlement value of such Currency Warrants
is to be made by J.P. Morgan, if applicable; (xiii) information with respect to
book-entry procedures, if any; (xiv) the plan of distribution of the Currency
Warrants; and (xv) any other terms of such Currency Warrants.
Prospective purchasers of Currency Warrants should be aware of special
United States Federal income tax considerations applicable to instruments such
as the Currency Warrants. The Prospectus Supplement relating to each issue of
Currency Warrants will describe such tax considerations.
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BOOK-ENTRY PROCEDURES AND SETTLEMENT
Except as may otherwise be provided in the applicable Prospectus
Supplement, the Currency Warrants will be issued in the form of a single global
Currency Warrant Certificate, registered in the name of a depository or its
nominee. Holders will not be entitled to receive definitive certificates
representing Currency Warrants. A holder's ownership of a Currency Warrant will
be recorded on or through the records of the brokerage firm or other entity that
maintains such holder's account. In turn, the total number of Currency Warrants
held by an individual brokerage firm for its clients will be maintained on the
records of the depository in the name of such brokerage firm or its agent.
Transfer of ownership of any Currency Warrant will be affected only through the
selling holder's brokerage firm.
EXERCISE OF CURRENCY WARRANTS
Unless otherwise specified in the applicable Prospectus Supplement, each
Currency Warrant will entitle the holder to the cash settlement value of such
Currency Warrant on the applicable Exercise Date, in each case as such terms
will be defined in the applicable Prospectus Supplement.
LISTING
Each issue of Currency Warrants will be listed on a national securities
exchange, subject only to official notice of issuance, as a condition of sale of
any such Currency Warrants. There can be no assurance that such approval will be
granted. In the event that the Currency Warrants are delisted from, or
permanently suspended from trading on, such exchange, the Expiration Date for
such Currency Warrants will be the date such delisting or trading suspension
becomes effective and Currency Warrants not previously exercised will be deemed
automatically exercised on such Expiration Date. The applicable Currency Warrant
Agreement will contain a covenant of J.P. Morgan not to seek delisting of the
Currency Warrants, or suspension of their trading, on such exchange unless J.P.
Morgan has, at the same time, arranged for listing on another national
securities exchange.
RISK FACTORS RELATING TO CURRENCY WARRANTS
Currency Warrants involve a high degree of risk, including foreign exchange
risks and the risk of expiring worthless. Purchasers should be prepared to
sustain a loss of some or all of the purchase price of their Currency Warrants.
Prospective purchasers of the Currency Warrants should be experienced with
respect to options and option transactions and should reach an investment
decision only after careful consideration with their advisers of the suitability
of the Currency Warrants in light of their particular financial circumstances,
the information set forth under "Description of Currency Warrants" herein and
the risk factors and information regarding the Currency Warrants and the
Designated Currency set forth in the Prospectus Supplement relating to such
Currency Warrants.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of J.P. Morgan consists of 500,000,000 shares
of Common Stock, $2.50 par value, and 10,400,000 shares of Preferred Stock, no
par value. At June 30, 1997, there were 200,689,973 shares outstanding of Common
Stock and 2,444,300 shares of Series A Adjustable Rate Cumulative Preferred
Stock, 50,000 shares each of Series B, C, D, E and F Variable Cumulative
Preferred Stock and 400,000 shares of Series H Fixed Cumulative Preferred Stock.
The brief summary of the principal provisions contained in J.P. Morgan's
Restated Certificate of Incorporation does not purport to be complete.
COMMON STOCK
Subject to the prior rights of the Preferred Stock, holders of J.P. Morgan
Common Stock are entitled to receive dividends when, as and if declared by the
Board of Directors out of any fund legally available therefor
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and upon liquidation, dissolution or winding up to receive pro rata all of J.P.
Morgan remaining after provision has been made for the payments of creditors.
Under the Federal Reserve Act, there are legal restrictions that limit the
amount of dividends that Morgan Guaranty Trust Company of New York ("Morgan
Guaranty"), a subsidiary of J.P. Morgan and a state member bank, can declare.
The most restrictive test requires approval of the Board of Governors of the
Federal Reserve System if dividends declared exceed the net profits for that
year as defined, combined with the net profits for the preceding two years. The
calculation of the amount available for payment of dividends is based on net
profits determined in accordance with bank regulatory accounting principles
reduced by the amount of dividends declared. At December 31, 1996, the
cumulative retained net profits for the years 1996 and 1995 available for
distribution as dividends by Morgan Guaranty in 1997 without approval of the
Federal Reserve Board amounted to approximately $1,859 million.
The Federal Reserve Board may prohibit the payment of dividends if it
determines that circumstances relating to the financial condition of a bank are
such that the payment of dividends would be an unsafe and unsound practice.
VOTING RIGHTS
Subject to the voting rights of the Preferred Stock, all voting rights are
vested in the holders of shares of J.P. Morgan Common Stock, each share being
entitled to one vote.
PREEMPTIVE RIGHTS
Holders of J.P. Morgan Common Stock do not have any preemptive rights to
subscribe to any additional securities that J.P. Morgan may issue.
NON-ASSESSABILITY
Under Delaware law J.P. Morgan Common Stock is validly issued, fully paid
and non-assessable.
PREFERRED STOCK
General. The Preferred Stock, of which 10,400,000 shares have been
authorized, upon issuance has preference over the Common Stock with respect to
the payment of dividends and the distribution of assets in the event of
liquidation, dissolution or winding up of J.P. Morgan and such other rights,
preferences and limitations as may be fixed by the Board of Directors. Dividend
provisions, liquidation preferences, voting rights, if any, sinking fund and
redemption provisions, if any, and conversion and exchange provisions, if any,
also will be fixed by the Board of Directors. The shares of Series Preferred
Stock referred to in this Prospectus, when issued and paid for, will be validly
issued, fully paid and non-assessable.
SERIES A PREFERRED STOCK
Adjustable Rate Cumulative Preferred Stock, Series A. In March 1983, the
Corporation issued 2,500,000 shares of the Adjustable Rate Cumulative Preferred
Stock, Series A (the "Series A Preferred Stock") of which 2,444,300 shares are
currently outstanding. Dividends on the Series A Preferred Stock are cumulative.
If the equivalent of six quarterly dividends payable on the Series A Preferred
Stock are in arrears in an amount equivalent to dividends for six full dividend
periods (whether or not consecutive), the number of directors of J.P. Morgan
will be increased by two and the holders of the outstanding Series A Preferred
Stock, voting together as a single class with holders of shares of any other
series preferred stock then outstanding upon which like voting rights have been
conferred and are then exercisable, will be entitled to elect two additional
directors (the holders of record of Series A Preferred Stock being entitled to
cast 1/10 of one vote) until all dividends in arrears have been declared and
paid or set apart for payment in full. In the event of liquidation or
dissolution, the holders of shares of Series A Preferred Stock are entitled to
receive a distribution of $100 per share, plus, in each case, accrued and unpaid
dividends to the date of final distribution.
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Except under certain circumstances, shares of Series A Preferred Stock were
not redeemable prior to March 1, 1986. On or after such date and prior to
February 29, 1988, shares of Series A Preferred Stock were redeemable at the
option of J.P. Morgan, as a whole or in part, at a redemption price per share of
$103.00 and thereafter at $100 per share. The redemption price set forth above
with respect to Series A Preferred Stock will be increased, in each case, by the
amount of accrued and unpaid dividends thereon to the date fixed for redemption.
Dividends on the Series A Preferred Stock are established quarterly by a
formula based on the interest rates of certain actively traded U.S. Treasury
obligations. In no event will the quarterly dividends payable on the Series A
Preferred Stock be less than 5.00% or greater than 11.50% per annum.
SERIES B, C, D, E AND F PREFERRED STOCK
Variable Cumulative Preferred Stock, Series B, C, D, E and F. In January
1990, as another series of series preferred stock, J.P. Morgan issued $250
million, or 250,000 shares, of Variable Cumulative Preferred Stock, Series B, C,
D, E and F (the "Variable Cumulative Preferred Stock") in five series of 50,000
shares each Series B, Series C, Series D, Series E and Series F. These issues,
priced at $1,000 per share, have contingent voting rights and a liquidation
preference of $1,000 per share, plus accrued and unpaid dividends. Each of the
five series is identical except that the dividend rates and dividend payment
dates vary and separate auctions on different auction dates are held by each
series.
The shares of each of these series of Variable Cumulative Preferred Stock
are redeemable as a whole or in part (in units of 100 shares), except under
certain conditions, at the option of J.P. Morgan, at a redemption price of
$1,000 per share plus an amount equal to accrued and unpaid dividends.
Dividends on each series of Variable Cumulative Preferred Stock are
cumulative and are payable generally every 49 days, subject to certain
conditions. The dividend rates are set at a rate per annum that is determined
either by an auction conducted on each such series of Variable Cumulative
Preferred Stock on the business day preceding the commencement of a subsequent
dividend period or by a remarketing. The rate for any dividend period is subject
to a maximum rate based upon the "AA" Composite Commercial Paper Rate and the
credit ratings of the Variable Cumulative Preferred Stock in effect on a
particular auction date.
SERIES H PREFERRED STOCK
Fixed Cumulative Preferred Stock, Series H. In February 1996, as another
series of preferred stock, J.P. Morgan issued $200 million, or 400,000 shares,
of 6 5/8% Cumulative Preferred Stock, Series H (the "Series H Preferred Stock").
Shares of the Series H Preferred Stock have a stated value of $500 per share.
The shares of this Series H Preferred Stock are not redeemable prior to
March 31, 2006. On or after March 31, 2006, J.P. Morgan, at its option, with
prior approval of the appropriate bank regulators, if so required, may redeem
the Series H Preferred stock, as a whole or in part, at any time or from time to
time out of funds legally available therefor, at a redemption price of $500 per
share plus an amount equal to accrued and unpaid dividends thereon to the date
fixed for redemption.
Dividends on this Series H Preferred Stock shall be declared by the Board
of Directors of J.P. Morgan at a rate of 6 5/8% per annum on the stated value
thereof. Such dividends shall be cumulative and payable generally on March 31,
June 30, September 30 and December 31 of each year.
PLAN OF DISTRIBUTION
J.P. Morgan may sell the Securities being offered hereby (i) through
agents, (ii) through underwriters, (iii) through dealers and (iv) directly to
purchasers. J.P. Morgan may sell the Series Preferred Stock, including any
associated Depositary Shares, the Preferred Stock Warrants or the Currency
Warrants being offered hereby through underwriters. Any such persons may be
customers of, engage in transactions with, or perform services for, J.P. Morgan
in the ordinary course of business.
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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 Securities in respect of which
this Prospectus is delivered, J.P. Morgan will sell such Securities to the
dealer, as principal. The dealer may then resell such Securities to the public
at varying prices to be determined by such dealer at the time of resale. Any
such dealer may be deemed to be an underwriter, as such term is defined in the
Securities Act of 1933, as amended, of the 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 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
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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 National Association of
Securities Dealers, Inc. (the "NASD") Conduct Rules regarding underwriting of
securities of an affiliate and complies with any restrictions imposed on the
Underwriter by the Board of Governors of the Federal Reserve System.
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, Series
Preferred Stock or Depositary Shares 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,
including without limitation Debt Warrants, Preferred Stock Warrants and
Currency Warrants, 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 the NASD.
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 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, 1996, (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.
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