Prospectus Supplement
(To Prospectus Dated January 31, 1996)
715,100 MEDSSM
(Mandatorily Exchangeable Debt SecuritiesSM)
J.P. Morgan & Co. Incorporated
5.00% Exchangeable Notes Due January 22, 1999
(Subject to Exchange into Shares of Common Stock, Par Value
$.01 Per Share, of Autozone, Inc.)
The initial principal amount of each of the 5.00% Exchangeable Notes Due
January 22, 1999 (each, a "MEDS"), of J.P. Morgan & Co. Incorporated ("J.P.
Morgan") being offered hereby will be $22.375 (the "Initial Price"). The
Initial Price is the last sale price of the Common Stock, par value $.01 per
share (the "Autozone Common Stock"), of Autozone, Inc. ("Autozone"), on
January 23, 1997, as reported on the New York Stock Exchange (the "NYSE"). The
MEDS will mature on January 22, 1999. Interest on the MEDS, at the rate of
5.00% of the Initial Price per annum, is payable quarterly on each January 22,
April 22, July 22 and October 22, beginning April 22, 1997. MEDS are not
subject to redemption or any sinking fund prior to maturity.
At maturity (including as a result of acceleration), the principal amount of
each MEDS will be mandatorily exchanged by J.P. Morgan into a number of shares
of Autozone Common Stock (or, at J.P. Morgan's option, cash with an equal
value) at the Exchange Rate. The Exchange Rate is equal to, subject to certain
adjustments, (a) if the Maturity Price per share of Autozone Common Stock is
less than or equal to $32.45 (the "Capped Participation Price"), one share of
Autozone Common Stock per MEDS, and (b) if the Maturity Price is greater than
the Capped Participation Price, a fractional share of Autozone Common Stock
per MEDS so that the value of such fractional share at the Maturity Price
equals the Capped Participation Price. The "Maturity Price" means the average
Closing Price (as defined herein) per share of Autozone Common Stock on the 3
Trading Days (as defined herein) ending on the third Trading Day immediately
prior to (but not including) the date of maturity. Accordingly, holders of the
MEDS will not necessarily receive an amount equal to the Initial Price
thereof. The MEDS will be an unsecured obligation of J.P. Morgan ranking pari
passu with all of its other unsecured and unsubordinated indebtedness. See
"Description of the MEDS."
The MEDS will be represented by Global Securities registered in the name of
the nominee of The Depository Trust Company, which will act as the Depository.
Interests in the MEDS represented by Global Securities will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depository and its direct and indirect participants. Except as described
herein, MEDS in definitive form will not be issued. Settlement for the MEDS
will be made in immediately available funds. The MEDS will trade in the
Depository's Same-Day Funds Settlement System and secondary market trading
activity for the MEDS will therefore settle in immediately available funds.
All payments of principal and interest will be made by J.P. Morgan in
immediately available funds or the equivalent.
For a discussion of certain United States federal income tax consequences for
holders of MEDS, see "Certain United States Federal Income Tax
Considerations."
Autozone is not affiliated with J.P. Morgan and has no obligations with
respect to the MEDS. See "Risk Factors--No Affiliation Between J.P. Morgan and
Autozone."
"MEDS" and "Mandatorily Exchangeable Debt Securities" are service marks of
J.P. Morgan.
Autozone Common Stock is traded on the NYSE under the symbol "AZO". The MEDS
will not be listed or traded on any securities exchange or trading market.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSIDER CAREFULLY THE INFORMATION
CONTAINED UNDER "RISK FACTORS".
THESE SECURITIES ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF A
BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER FEDERAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
J.P. Morgan Securities Inc. (the "Underwriter") proposes to offer the MEDS
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 January 3, 1997. The Underwriter has agreed to
purchase the MEDS at 99.6875% of their principal amount ($15,950,363 aggregate
proceeds to the Company before deducting expenses payable by the Company),
plus accrued interest, if any, from January 3, 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 MEDS are offered subject to receipt and acceptance by J.P. Morgan
Securities Inc. (the "Underwriter"), to prior sales and to the Underwriter's
right to reject any order in whole or in part and to withdraw, cancel or
modify the offer without notice. It is expected that delivery of the MEDS will
be made at the office of J.P. Morgan & Co. Incorporated, 60 Wall Street, New
York, New York, or through the facilities of The Depository Trust Company, on
or about January 30, 1997.
J.P. Morgan & Co.
The date of this Prospectus Supplement is January 24, 1997
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER- ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF
THE MEDS AND THE AUTOZONE COMMON STOCK AT LEVELS ABOVE THOSE WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE NYSE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Incorporation of Certain Documents by Reference
[J.P. Morgan hereby incorporates by reference in this Prospectus
Supplement J.P. Morgan's Annual Report on Form 10-K for the year ended
December 31, 1995 (included in its Annual Report to Stockholders),
J.P. Morgan's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996, and J.P.
Morgan's Reports on Form 8-K dated January 11, 1996, February 6, 1996,
February 20, 1996, February 23, 1996, April 11, 1996, May 13, 1996,
July 11, 1996, August 13, 1996, October 10, 1996, December 11, 1996
and January 13, 1997, heretofore filed pursuant to Section 13 of the
1934 Act.
In addition, all reports and definitive proxy or information
statements filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the
1934 Act subsequent to the date of this Prospectus Supplement and
prior to the termination of the offering of the MEDS shall be deemed
to be incorporated by reference into this Prospectus Supplement and to
be a part hereof from the date of filing of such documents. Any
statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus Supplement to the extent
that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus Supplement.
J.P. Morgan will provide without charge to each person, including any
beneficial owner, to whom this Prospectus Supplement is delivered, on
the written or oral request of any such person, a copy of any or all
of the foregoing documents incorporated herein by reference (other
than exhibits to such documents). Written requests should be directed
to the Office of the Secretary, J.P. Morgan & Co. Incorporated, 60
Wall Street, New York, New York 10260-0060. Telephone requests may be
directed to (212) 648-2069.
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Risk Factors
As described in more detail below, the trading price of the MEDS may
vary considerably prior to maturity (including by acceleration or
otherwise, "Maturity") due to, among other things, fluctuations in the
price of Autozone Common Stock and other events that are difficult to
predict and beyond J.P. Morgan's control.
Comparison to Other Debt Securities
The terms of the MEDS differ from those of ordinary debt securities in
that the amount that a holder of the MEDS will receive upon mandatory
exchange of the principal amount thereof at Maturity is not fixed, but
is based on the price of the Autozone Common Stock as specified in the
Exchange Rate (as defined under "Description of the MEDS"). There can
be no assurance that such amount receivable by such holder upon
exchange at Maturity will be equal to or greater than the Initial
Price of the MEDS. For example, if the Maturity Price of the Autozone
Common Stock is less than the Initial Price, such amount receivable
upon exchange will be less than the Initial Price paid for the MEDS,
in which case an investment in MEDS would result in a loss.
In addition, the opportunity for equity appreciation afforded by an
investment in the MEDS is less than the opportunity for equity
appreciation afforded by an investment in the Autozone Common Stock
because the amount receivable by holders of the MEDS upon exchange at
Maturity will in no event exceed the Capped Appreciation Price (as
defined under "Description of the MEDS") of $32.45, regardless of the
Maturity Price of the Autozone Common Stock, which represents an
appreciation of 45.00% over the Initial Price. Because the price of
the Autozone Common Stock is subject to market fluctuations, the value
of the Autozone Common Stock (or, at the option of J.P. Morgan, the
amount of cash) receivable by a holder of MEDS upon exchange at
Maturity, determined as described herein, may be more or less than the
Initial Price of the MEDS.
Relationship of MEDS and Autozone Common Stock
The market price of MEDS at any time will be affected primarily by
changes in the price of Autozone Common Stock. As indicated in "Price
Range and Dividend History of Autozone Common Stock" herein, the price
of Autozone Common Stock has been volatile during certain recent
periods.
It is impossible to predict whether the price of Autozone Common Stock
will rise or fall. Trading prices of Autozone Common Stock will be
influenced by Autozone's operational results and by complex and
interrelated political, economic, financial and other factors that can
affect the capital markets generally, the stock exchanges or quotation
systems on which Autozone Common Stock is traded and the market
segment of which Autozone is a part. Trading prices of Autozone Common
Stock may also be influenced if J.P. Morgan or other persons hereafter
issue securities with terms similar to those of the MEDS or if J.P.
Morgan otherwise transfers shares of Autozone Common Stock owned by
J.P. Morgan. As of January 24, 1997, a wholly owned subsidiary of J.P.
Morgan held or had the right to acquire
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approximately 439,900 shares of Autozone Common Stock; with sale
voting and investment power over all such shares. See "Autozone, Inc."
However, the Indenture does not contain any restriction on the
disposition of such stock by J.P. Morgan, and no such shares of
Autozone Common Stock will be pledged or otherwise held in escrow for
use at Maturity of the MEDS. See "Description of the MEDS--General".
Dilution of Autozone Common Stock
The amount that holders of the MEDS are entitled to receive upon the
mandatory exchange at Maturity is subject to adjustment for certain
events arising from stock splits and combinations, stock dividends and
certain other actions of Autozone that modify its capital structure,
such as certain issuances of rights or warrants. See "Description of
the MEDS--Dilution Adjustments." Such amount to be received by such
holders upon exchange at Maturity may not be adjusted for other
events, such as offerings of Autozone Common Stock for cash or in
connection with acquisitions, that may adversely affect the price of
Autozone Common Stock and, because of the relationship of such amount
to be received upon exchange to the price of Autozone Common Stock,
such other events may adversely affect the trading price of the MEDS.
See "Autozone, Inc." There can be no assurance that Autozone will not
make offerings of Autozone Common Stock or take such other action in
the future or as to the amount of such offerings, if any. In addition,
until such time, if any, as J.P. Morgan shall deliver shares of
Autozone Common Stock to holders of the MEDS at Maturity thereof,
holders of the MEDS will not be entitled to any rights with respect to
Autozone Common Stock (including, without limitation, the exercise of
voting rights and the right to receive any dividends or other
distributions in respect thereof).
No Affiliation Between J.P. Morgan and Autozone
As of January 24, 1997, a wholly owned subsidiary of J.P. Morgan held
or had the right to acquire approximately 439,900 shares of Autozone
Common Stock, with sole voting and investment power over all such
shares. However, J.P. Morgan may at any time to the extent legally
permitted purchase, sell or enter into any other transactions related
to Autozone Common Stock without restriction.
J.P. Morgan is not affiliated with Autozone and, although J.P. Morgan
has no knowledge that any of the events described in the preceding
subsection not heretofore publicly disclosed by Autozone are currently
being contemplated by Autozone or of any event that would have a
material adverse effect on Autozone or on the price of Autozone Common
Stock, such events are beyond J.P. Morgan's ability to control and are
difficult to predict.
Autozone has no obligations with respect to the MEDS, including any
obligation to take the needs of J.P. Morgan or of holders of the MEDS
into consideration for any reason. Autozone will not receive any of
the proceeds of the offering of the MEDS made hereby and is not
responsible for, and has not participated in, the determination or
calculation of the amount receivable by holders of the MEDS at
Maturity. Autozone is not involved with the administration or trading
of the MEDS and has no obligations with respect to the amount
receivable by holders of the MEDS at Maturity.
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Possible Illiquidity of the Secondary Market
It is not possible to predict how the MEDS will trade in the secondary
market or whether such market will be liquid or illiquid. MEDS are
novel and innovative securities and there is currently no secondary
market for the MEDS. The Underwriter currently intends, but is not
obligated, to make a market in the MEDS. There can be no assurance
that a secondary market will develop or, if a secondary market does
develop, that it will provide the holders of the MEDS with liquidity
of investment or that it will continue for the life of the MEDS.
The MEDS will not be listed or traded on any securities exchange or
trading market. Thus, pricing information for the MEDS may be more
difficult to obtain than if the MEDS were listed or traded on a
securities exchange or trading market.
[Uncertain United States Federal Income Tax Characterization of MEDS
As discussed below, although J.P. Morgan initially intends to treat
each MEDS as a debt instrument with contingent interest, in light of
the absence of direct authority on the proper characterization of the
MEDS, the Internal Revenue Service (the "IRS") may apply, and may
require J.P. Morgan and/or holders of MEDS to apply, a different
characterization. Such alternate characterization may be materially
less favorable for holders of MEDS for United States federal income
tax purposes than the characterization to be applied initially by J.P.
Morgan. See "Certain United States Federal Income Tax Considerations"
below. ]
J.P. Morgan & Co. Incorporated
J.P. Morgan, whose origins date to a merchant banking firm founded in
London in 1838, is the holding company for a group of global
subsidiaries that provide a wide range of financial services to
corporations, governments, financial institutions, institutional
investors, professional firms, privately held companies, nonprofit
organizations, and financially sophisticated individuals. J.P.
Morgan's activities are summarized in the accompanying Prospectus.
As used in this Prospectus Supplement, unless the context otherwise
requires, the term "J.P. Morgan" refers to J.P. Morgan & Co.
Incorporated and its consolidated and unconsolidated subsidiaries.
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Use of Proceeds
The net proceeds (after use of proceeds for hedging purposes described
below) to be received by J.P. Morgan from the sale of the MEDS will be
used for general corporate purposes, including investment in equity
and debt securities and interest-bearing deposits of subsidiaries.
Pending such use, J.P. Morgan may temporarily invest the net proceeds
or may use them to reduce short-term indebtedness.
From time to time after the initial offering and prior to the Maturity
of the MEDS, depending on market conditions (including the market
price of Autozone Common Stock), subsidiaries of J.P. Morgan may use
the remainder of the proceeds to be received by J.P. Morgan from the
sale of MEDS to engage in dynamic hedging techniques and may take long
or short positions in Autozone Common Stock, in listed or
over-the-counter options contracts in, or other derivative or
synthetic instruments related to, the Autozone Common Stock.
Autozone, Inc.
According to publicly available documents, Autozone, Inc., a Nevada
corporation ("Autozone"), is a leading specialty retailer of
automotive parts and accessories, primarily focusing on
"do-it-yourself" customers. Autozone is subject to the informational
requirements of the Securities Exchange Act of 1934 (the "Exchange
Act"). Accordingly, Autozone files reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). Copies of Autozone's registration statements, reports,
proxy statements and other information may be inspected and copied at
certain offices of the Commission.
This Prospectus Supplement relates only to the MEDS offered hereby and
does not relate to the Autozone Common Stock. All disclosures
contained in this Prospectus Supplement regarding Autozone are derived
from the publicly available documents described in the preceding
paragraph. J.P. Morgan has not participated in the preparation of such
documents and has not made any due diligence inquiry with respect to
the information provided therein. There can be no assurance that all
events occurring prior to the date hereof (including events that would
affect the accuracy or completeness of the publicly available
documents described in the preceding paragraph) that would affect the
trading price of Autozone Common Stock have been publicly disclosed.
Because the principal amount of the MEDS payable at maturity is
related to the trading price of Autozone Common Stock, such events, if
any, would also affect the trading price of the MEDS. J.P. Morgan or
one or more affiliates may presently be engaged or may from time to
time engage in business with Autozone, including extending loans to or
making equity investments in Autozone or providing advisory services
(such as merger and acquisition advisory services) to Autozone. In the
course of such actions, J.P. Morgan or such affiliates may acquire
non-public information with respect to Autozone. Additionally, J.P.
Morgan or its affiliates may publish research reports with respect to
Autozone. However, J.P. Morgan does not make any representation to any
purchaser of MEDS with respect to any matters whatsoever relating to
Autozone. Any prospective purchaser of MEDS should undertake an
independent investigation of Autozone to make an informed decision
with respect to a potential investment in Autozone Common Stock.
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Price Range and Dividend History of Autozone Common Stock
Autozone is listed and traded on the New York Stock Exchange (the
"NYSE") under the symbol "AZO". The following table sets forth, for
the periods indicated, the high and low closing prices of the Autozone
Common Stock on the composite and cash dividends per share of Autozone
Common Stock.
High Low Dividends
1995
First Quarter $26.000 $24.750 0%
Second Quarter 26.000 24.750 0%
Third Quarter 27.625 24.750 0%
Fourth Quarter 30.125 24.750 0%
1996
First Quarter $34.000 $24.125 0%
Second Quarter 37.500 32.375 0%
Third Quarter 34.500 27.000 0%
Fourth Quarter 30.625 22.875 0%
1997
First quarter $25.750 $20.125 0%
(through January 23)
J.P. Morgan makes no representation as to the amount of dividends, if
any, that Autozone will pay in the future. In any event, holders of
MEDS will not be entitled to receive any dividends that may be payable
on Autozone Common Stock until such time as J.P. Morgan, if it so
elects, delivers Autozone Common Stock at Maturity of the MEDS, and
then only with respect to dividends having a record date on or after
the date of delivery of such Autozone Common Stock. See "Description
of the MEDS."
Although historical data with respect to Autozone Common Stock is
included in these offering materials, investors should understand that
historical performance should not be taken as an indication of future
performance, and no assurance can be given, and none is intended to be
given, that the future performance of Autozone Common Stock will
reflect past performance.
Description of the MEDS
The following description of the particular terms of the MEDS
supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of Debt Securities set
forth in the Prospectus, to which description reference is hereby
made.
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General
The MEDS are a single series of Debt Securities (as defined in the
Prospectus), to be issued under an indenture dated as of August 15,
1982, and all indentures supplemental thereto, including the First
Supplemental Indenture dated as of May 5, 1986, and the Second
Supplemental Indenture dated as of February 27, 1996 (collectively
referred to as the "Indenture"), between J.P. Morgan and First Trust
of New York, National Association, successor to Chemical Bank
(formerly Manufacturers Hanover Trust Company), as trustee (the
"Trustee").
The MEDS will be unsecured and will rank on a parity with all other
unsecured and unsubordinated indebtedness of J.P. Morgan. The
aggregate number of MEDS to be issued will be 715,100. The MEDS will
mature on January 22, 1999. In the future J.P. Morgan may issue
additional Debt Securities or other securities with terms similar to
those of the MEDS.
Each MEDS, which will be issued with a principal amount of $22.375,
will bear interest at the annual rate of 5.00% of the Initial Price
per annum (or $1.12 per annum) from January 30, 1997, or from the most
recent Interest Payment Date to which interest has been paid or
provided for until the principal amount thereof is exchanged at
Maturity pursuant to the terms of the MEDS. Interest on the MEDS will
be payable quarterly in arrears on each January 22, April 22, July 22
and October 22, commencing April 22, 1997 (each, an "Interest Payment
Date"), to the persons in whose names the MEDS are registered at the
close of business on the last day of the calendar month immediately
preceding such Interest Payment Date, provided that interest payable
at Maturity shall be payable to the person to whom the principal is
payable. Interest on the MEDS will be computed on the basis of a
360-day year of twelve 30-day months. If an Interest Payment Date
falls on a day that is not a Business Day (as defined below), the
interest payment to be made on such Interest Payment Date will be made
on the next succeeding Business Day with the same force and effect as
if made on such Interest Payment Date, and no additional interest will
accrue as a result of such delayed payment.
At Maturity (including as a result of acceleration or otherwise), the
principal amount of each MEDS will be mandatorily exchanged by J.P.
Morgan into a number of shares of Autozone Common Stock at the
Exchange Rate (as defined below), and, accordingly, holders of the
MEDS will not necessarily receive an amount equal to the Initial Price
thereof. The "Exchange Rate" is equal to, subject to adjustment as a
result of certain dilution events (see "--Dilution Adjustments"
below), (a) if the Maturity Price (as defined below) per share of
Autozone Common Stock is less than or equal to $32.45 per share of
Autozone Common Stock (the "Capped Participation Price"), one share of
Autozone Common Stock per MEDS and (b) if the Maturity Price is
greater than the Capped Participation Price, a fractional share of
Autozone Common Stock per MEDS so that the value of such fractional
share (determined at the Maturity Price) is equal to the Capped
Participation Price. No fractional shares of Autozone Common Stock
will be issued at Maturity, as provided under "--Fractional Shares"
below. Notwithstanding the foregoing, J.P. Morgan may, at its option
in lieu of delivering shares of Autozone Common Stock, deliver cash in
an amount equal to the value at the Maturity Price of such number of
shares of Autozone Common Stock. On or prior to the seventh Business
Day prior to January 22, 1999, J.P. Morgan will notify The Depository
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Trust Company and the Trustee stating whether the principal amount of
each MEDS will be exchanged for shares of Autozone Common Stock or
cash. If J.P. Morgan elects to deliver shares of Autozone Common
Stock, the shares which are delivered to the holders of the MEDS which
are not affiliated with Autozone shall be free of any transfer
restrictions, and the holders of the MEDS will be responsible for the
payment of any and all brokerage costs upon the subsequent sale of
such shares.
The "Maturity Price" is defined as the average Closing Price per share
of Autozone Common Stock on the 3 Trading Days ending on the third
Trading Day immediately prior to (but not including) the Maturity
date. The "Closing Price" of any security on any date of determination
means the closing sale price (or, if no closing price is reported, the
last reported sale price) of such security on the NYSE on such date
or, if such security is not listed for trading on the NYSE on any such
date, as reported in the composite transactions for the principal
United States securities exchange on which such security is so listed,
or if such security is not so listed on a United States national or
regional securities exchange, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System, or, if such
security is not so reported, the last quoted bid price for such
security in the over- the-counter market as reported by the National
Quotation Bureau or similar organization, or, if such bid price is not
available, the market value of such security on such date as
determined by a nationally recognized independent investment banking
firm retained for such purpose by J.P. Morgan. A "Trading Day" is
defined as a day on which the security the Closing Price of which is
being determined (A) is not suspended from trading on any national or
regional securities exchange or association or over-the-counter market
at the close of business and (B) has traded at least once on the
national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of
such security. "Business Day" means any day, other than a Saturday or
Sunday, on which banking institutions in The City of New York are open
for business.
For illustrative purposes only, the following chart shows the number
of shares of Autozone Common Stock or the amount of cash that a holder
of MEDS would receive for each MEDS at various Maturity Prices. The
table assumes that there will be no adjustments to the Exchange Rate
described under "--Dilution Adjustments" below. There can be no
assurance that the Maturity Price will be within the range set forth
below. Given the Initial Price of $22.375 per MEDS and the Capped
Participation Price of $32.45, a MEDS holder would
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receive at Maturity the following number of shares of Autozone Common
Stock or amount of cash (if J.P. Morgan elects to pay the MEDS in
cash):
Maturity Price Number of
of Autozone Shares of Autozone
Common Stock Common Stock Amount of Cash
$15.000 1.0000 $15.000
$22.375 1.0000 22.375
$30.000 1.0000 30.000
$32.450 1.0000 32.450
$40.000 0.8113 32.450
$50.000 0.6490 32.450
Interest on the MEDS will be payable, and delivery of Autozone Common
Stock (or, at the option of J.P. Morgan, its cash equivalent) in
exchange for the MEDS at Maturity will be made upon surrender of such
MEDS, at the office or agency of J.P. Morgan maintained for such
purposes; provided that payment of interest may be made at the option
of J.P. Morgan by check mailed to the persons in whose names the MEDS
are registered at the close of business on the last day of the
calendar month immediately preceding the applicable Interest Payment
Date. See "--Book-Entry System." Initially such office will be at the
principal corporate trust office of the Trustee.
The MEDS will be transferable at any time or from time to time at the
aforementioned office. No service charge will be made to the holder
for any such transfer except for any tax or governmental charge
incidental thereto.
The Indenture does not contain any restriction on the ability of J.P.
Morgan to sell, pledge or otherwise convey all or any portion of the
Autozone Common Stock held by it, and no such shares of Autozone
Common Stock will be pledged or otherwise held in escrow for use at
Maturity of the MEDS. Consequently, in the event of a bankruptcy,
insolvency or liquidation of J.P. Morgan, the Autozone Common Stock,
if any, owned by J.P. Morgan will be subject to the claims of the
creditors of J.P. Morgan. In addition, as described herein, J.P.
Morgan will have the option, exercisable in its sole discretion, to
satisfy its obligations pursuant to the mandatory exchange for the
principal amount of each MEDS at Maturity by delivering to holders of
the MEDS either the specified number of shares of Autozone Common
Stock or cash in an amount equal to the value of such number of shares
at the Maturity Price. In the event of such a sale, pledge or
conveyance, a holder of the MEDS may be more likely to receive cash in
lieu of Autozone Common Stock. As a result, there can be no assurance
that J.P. Morgan will elect at Maturity to deliver Autozone Common
Stock or, if it so elects, that it will use all or any portion of its
current holdings of Autozone Common Stock to make such delivery.
Consequently, holders of the MEDS will not be entitled to any rights
with respect to Autozone Common Stock (including, without limitation,
the exercise of voting rights and any right to receive any dividends
or other distributions in respect thereof) until such time, if
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any, as J.P. Morgan shall have delivered shares of Autozone Common
Stock to holders of the MEDS at Maturity thereof.
Dilution Adjustments
The Exchange Rate is subject to adjustment if Autozone shall (i) pay a
stock dividend or make a distribution with respect to Autozone Common
Stock in shares of such stock, (ii) subdivide or split its outstanding
shares of Autozone Common Stock, (iii) combine its outstanding shares
of Autozone Common Stock into a smaller number of shares, (iv) issue
by reclassification of its shares of Autozone Common Stock any shares
of common stock of Autozone, (v) issue rights or warrants to all
holders of Autozone Common Stock entitling them to subscribe for or
purchase shares of Autozone Common Stock at a price per share less
than the market price at such time of the Autozone Common Stock (other
than rights to purchase Autozone Common Stock pursuant to a plan for
the reinvestment of dividends or interest) or (vi) pay a dividend or
make a distribution to all holders of Autozone Common Stock of
evidences of its indebtedness or other assets (excluding any dividends
or distributions referred to in clause (i) above and any cash
dividends other than any Extraordinary Cash Dividends) or issue to all
holders of Autozone Common Stock rights or warrants to subscribe for
or purchase any of its securities (other than those referred to in
clause (v) above). In the case of the events referred to in clauses
(i), (ii), (iii) and (iv) above, the Exchange Rate in effect
immediately prior to such event shall each be adjusted so that the
holder of any MEDS shall thereafter be entitled to receive, upon
mandatory exchange of the principal amount of such MEDS at Maturity,
the number of shares of Autozone Common Stock (or cash in lieu
thereof) which such holder would have been entitled to receive
immediately following any such event had such MEDS been exchanged
immediately prior to such event or any record date with respect
thereto. In the case of the event referred to in clause (v) above, the
Exchange Rate shall be adjusted by multiplying the Exchange Rate in
effect immediately prior to the date of issuance of the rights or
warrants referred to in clause (v) above by a fraction, the numerator
of which shall be the sum of the number of shares of Autozone Common
Stock outstanding on the date of issuance of such rights or warrants
immediately prior to such issuance plus the number of additional
shares of Autozone Common Stock offered for subscription or purchase
pursuant to such rights or warrants, and the denominator of which
shall be the sum of the number of shares of Autozone Common Stock
outstanding on the date of issuance of such rights or warrants
immediately prior to such issuance plus the number of additional
shares of Autozone Common Stock which the aggregate offering price of
the total number of shares of Autozone Common Stock so offered for
subscription or purchase pursuant to such rights or warrants would
purchase at the market price (determined as the average Closing Price
per share of Autozone Common Stock on the 3 Trading Days ending on the
third Trading Day immediately prior to the date such rights or
warrants are issued), which shall be determined by multiplying such
total number of shares by the exercise price of each such right or
warrant and dividing the product so obtained by such market price. To
the extent that shares of Autozone Common Stock are not delivered
after the expiration of such rights or warrants, the Exchange Rate
shall be readjusted to the Exchange Rate which would then be in effect
had such adjustments for the issuance of such rights or warrants been
made upon the basis of delivery of only the number of shares of
Autozone Common Stock actually delivered. In the case of the event
referred to in clause (vi) above, the Exchange Rate shall be adjusted
by multiplying the Exchange Rate in effect on the record date, by a
fraction, the numerator of which shall be the
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market price per share of the Autozone Common Stock on the record date
for the determination of stockholders entitled to receive the dividend
or distribution referred to in clause (vi) above (such market price
being the average Closing Price per share of Autozone Common Stock on
the 3 Trading Days ending on the third Trading Day immediately prior
to such record date) and the denominator of which shall be such market
price per share of Autozone Common Stock less the fair market value
(as determined by a nationally recognized independent investment
banking firm retained for such purpose by J. P. Morgan) as of such
record date of the portion of the assets or evidences of indebtedness
so distributed or of such subscription rights or warrants applicable
to one share or Autozone Common Stock. As used herein, an
"Extraordinary Cash Dividend" means, with respect to any one-year
period, all cash dividends on the Autozone Common Stock during such
period to the extent such dividends exceed on a per share basis 10% of
the average price of the Autozone Common Stock over such period (less
any such dividends for which a prior adjustment to the Exchange Rate
was previously made). All adjustments to the Exchange Rate will be
calculated to the nearest 1/10,000th of a share of Autozone Common
Stock (or if there is not a nearest 1/10,000th of a share, to the next
lower 1/10,000th of a share). No adjustment in the Exchange Rate shall
be required unless such adjustment would require an increase or
decrease of at least one percent therein; provided, however, that any
adjustments which by reason of the foregoing are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment.
In the event of (A) any consolidation or merger of Autozone, or any
surviving entity or subsequent surviving entity of Autozone (an
"Autozone Successor"), with or into another entity (other than a
merger or consolidation in which Autozone is the continuing
corporation and in which the Autozone Common Stock outstanding
immediately prior to the merger or consolidation is not exchanged for
cash, securities or other property of Autozone or another
corporation), (B) any sale, transfer, lease or conveyance to another
corporation of the property of Autozone or any Autozone Successor as
an entirety or substantially as an entirety, (C) any statutory
exchange of securities of Autozone or any Autozone Successor with
another corporation (other than in connection with a merger or
acquisition) or (D) any liquidation, dissolution or winding up of
Autozone or any Autozone Successor (any such event, a "Reorganization
Event"), the Exchange Rate used to determine the amount payable upon
exchange at Maturity for each MEDS will be adjusted to provide that
each holder of MEDS will receive at Maturity cash in an amount equal
to (a) if the Transaction Value (as defined below) is less than or
equal to the Capped Participation Price, the Transaction Value, and
(b) if the Transaction Value is greater than the Capped Participation
Price, the Capped Participation Price. As used herein, "Transaction
Value" means (i) for any cash received in any such Reorganization
Event, the amount of cash received per share of Autozone Common Stock,
(ii) for any property other than cash or securities received in any
such Reorganization Event, an amount equal to the market value at
Maturity of such property received per share of Autozone Common Stock
as determined by a nationally recognized independent investment
banking firm retained for such purpose by J.P. Morgan and (iii) for
any securities received in any such Reorganization Event, an amount
equal to the average Closing Price per share of such securities on the
3 Trading Days ending on the third Trading Day immediately prior to
Maturity multiplied by the number of such securities received for each
share of Autozone Common Stock. Notwithstanding the foregoing, in lieu
of delivering cash as provided above, J.P. Morgan may at its option
deliver an equivalent value of securities or other property received
in such Reorganization Event, determined in accordance with clause
(ii) or (iii)
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above, as applicable. If J.P. Morgan elects to deliver securities or
other property, holders of the MEDS will be responsible for the
payment of any and all brokerage and other transaction costs upon the
sale of such securities or other property. The kind and amount of
securities into which the MEDS shall be exchangeable after
consummation of such transaction shall be subject to adjustment as
described in the immediately preceding paragraph following the date of
consummation of such transaction.
J.P. Morgan is required, within ten Business Days following the
occurrence of an event that requires an adjustment to the Exchange
Rate (or if J.P. Morgan is not aware of such occurrence, as soon as
practicable after becoming so aware), to provide written notice to the
Trustee of the occurrence of such event and a statement in reasonable
detail setting forth the method by which the adjustment to the
Exchange Rate was determined and setting forth the revised Exchange
Rate.
Nothwithstanding the foregoing, the principal amount of each MEDS
payable at maturity will not, under any circustances, exceed 145% of
the Initial Price of the MEDS.
Fractional Shares
No fractional shares of Autozone Common Stock will be issued if J.P.
Morgan exchanges the MEDS for shares of Autozone Common Stock. In lieu
of any fractional share otherwise issuable in respect of all MEDS of
any holder which are exchanged at Maturity, such holder shall be
entitled to receive an amount in cash equal to the value of such
fractional share at the Maturity Price.
Redemption
The MEDS are not subject to redemption prior to Maturity.
Merger and Consolidation
J.P. Morgan may consolidate or merge with or into any other
corporation or association, and J.P. Morgan may sell or transfer all
or substantially all of its property or assets to any corporation or
association, provided that (i) the corporation (if other than J.P.
Morgan) or association formed by or resulting from any such
consolidation or merger or which shall have received such property or
assets shall assume the payment at maturity to holders of MEDS and
interest on the MEDS and the performance and observance of all the
terms, covenants and conditions of the MEDS to be performed or
observed by J.P. Morgan and (ii) J.P. Morgan or such successor
corporation shall not immediately thereafter be in default under the
terms of the MEDS.
Modification and Waiver
Modification and amendment of certain provisions of the MEDS may be
effected by J.P. Morgan without the consent of any of the holders of
the outstanding MEDS affected thereby to: (i) evidence succession of
another corporation or association to J.P. Morgan and the assumption
by such a party of the obligations of J.P. Morgan under the MEDS in
the event of
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a merger, consolidation or sale of assets in accordance with the terms
of the MEDS; (ii) add further covenants, restrictions or conditions
for the protection of holders of the MEDS; or (iii) cure ambiguities
or correct the MEDS in case of defects or inconsistencies in the
provisions thereof or to supplement with such other provisions, so
long as any such cure, correction or supplement does not adversely
affect the interest of the holders of the MEDS in any material
respect. In no event may J.P. Morgan, without the consent of the
holder of each outstanding MEDS affected thereby, extend the maturity
of any MEDS, or reduce the rate or extend the time of payment of
interest thereon, or reduce the payment due at maturity thereof, or
make the payment due at maturity or interest thereon payable in any
coin, currency or property other than as provided in the MEDS.
Events of Default
An Event of Default (as defined in the Indenture) with respect to the
MEDS will be: (a) default for 30 days in payment of any interest on
the MEDS; (b) default in the payment of the amount due at maturity;
(c) default by J.P. Morgan in the performance of any other covenant or
warranty contained in the MEDS, which continues for 90 days after
receipt of written notice given by either the Trustee or the holders
of at least 25% in principal amount of the MEDS outstanding; or (d)
certain events of bankruptcy or reorganization of J.P. Morgan. If an
Event of Default described in clause (a), (b) or (c) above shall have
occurred and be continuing, either the Trustee or the holders of at
least 25% in principal amount of the MEDS outstanding may declare the
principal of all outstanding MEDS and the interest accrued thereon, if
any, to be due and payable immediately. If an Event of Default
described in clause (d) above shall have occurred and be continuing,
either the Trustee or the holders of MEDS that, together with holders
of all other Debt Securities under the Indenture, hold at least 25% in
principal amount (in the case of MEDS, as determined at the time
thereof) of all Debt Securities then outstanding (voting as one class)
may declare the principal of all Debt Securities then outstanding
(including the MEDS) and the interest accrued thereon, if any, to be
due and payable immediately. Upon certain conditions, such
declarations may be annulled and past defaults (except for defaults in
the payment of principal of, or interest on, the MEDS) may be waived
by the holders of a majority in principal amount of the MEDS then
outstanding.
The holders of a majority in principal amount of the MEDS shall have
the right to direct the time, method and place of conducting any
proceeding for any remedy with respect to the MEDS available to the
Trustee under the Indenture, subject to certain limitations specified
therein, provided that the holders of MEDS shall have offered to the
Trustee reasonable indemnity against expenses and liabilities.
Book-Entry System
It is expected that the MEDS will be issued in the form of one or more
global securities (the "Global Securities") deposited with The
Depository Trust Company (the "Depositary") and registered in the name
of a nominee of the Depositary.
The Depositary has advised J.P. Morgan and the Underwriter as follows:
The Depositary is a limited-purpose trust company organized under the
laws of the State of New York, a member
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of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to Section 17A of the Exchange Act. The
Depositary was created to hold securities of persons who have accounts
with the Depositary ("participants") and to facilitate the clearance
and settlement of securities transactions among its participants in
such securities through electronic book-entry changes in accounts of
the participants, thereby eliminating the need for physical movement
of certificates. Such participants include securities brokers and
dealers, banks, trust companies and clearing corporations. Indirect
access to the Depositary's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant,
either directly or indirectly.
Upon the issuance of a Global Security, the Depositary or its nominee
will credit the respective MEDS represented by such Global Security to
the accounts of participants. The accounts to be credited shall be
designated by the Underwriter. Ownership of beneficial interests in
such Global Securities will be shown on, and the transfer of those
ownership interests will be effected only through, records maintained
by the Depositary or its nominee for such Global Securities. Ownership
of beneficial interests in such Global Securities by persons that hold
through participants will be shown on, and the transfer of that
ownership interest within such participant will be effected only
through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits
and such laws may impair the ability to transfer beneficial interests
in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is
the registered owner of such Global Security, such depositary or such
nominee, as the case may be, will be considered the sole owner or
holder of the MEDS for all purposes under the Indenture. Except as set
forth below, owners of beneficial interests in such Global Securities
will not be entitled to have the MEDS registered in their names, will
not receive or be entitled to receive physical delivery of the MEDS in
definitive form and will not be considered the owners or holders
thereof under the Indenture.
Payment of principal of and any interest on the MEDS registered in the
name of or held by the Depositary or its nominee will be made to the
Depositary or its nominee, as the case may be, as the registered owner
or the holder of the Global Security. None of J.P. Morgan, the
Trustee, any Paying Agent or any securities registrar for the MEDS
will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial
ownership interests in a Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial
ownership interests.
J.P. Morgan expects that the Depositary, upon receipt of any payment
of principal or interest in respect of a permanent Global Security,
will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the
principal amount of such Global Security as shown on the records of
the Depositary. J.P. Morgan also expects that payments by participants
to owners of beneficial interests in such Global Security held through
such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the
accounts of customers in bearer form or registered in "street name,"
and will be the responsibility of such participants.
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A Global Security may not be transferred except as a whole by the
Depositary to a nominee or a successor of the Depositary. If the
Depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by J.P. Morgan
within ninety days, J.P. Morgan will issue MEDS in definitive
registered form in exchange for the Global Security representing such
MEDS.
Notwithstanding the foregoing, J.P. Morgan may at any time (including
at the time of original issuance of the MEDS) and in its sole
discretion determine not to have any MEDS represented by one or more
Global Securities and, in such event, will issue MEDS in definitive
form in exchange for all of the Global Securities representing the
MEDS. Further, if J.P. Morgan so specifies with respect to the MEDS,
an owner of a beneficial interest in a Global Security representing
MEDS may, on terms acceptable to J.P. Morgan and the Depositary for
such Global Security, receive MEDS in definitive form. In any such
instance, an owner of a beneficial interest in a Global Security will
be entitled to physical delivery in definitive form of MEDS
represented by such Global Security equal in number to that
represented by such beneficial interest and to have such MEDS
registered in its name.
Regarding the Trustee
The Trustee, First Trust of New York, National Association, has its
principal corporate trust office at 100 Wall Street, Suite 1600, New
York, New York, 10005.
[Certain United States Federal Income Tax Considerations
The following is a summary of certain U.S. federal income tax
consequences that may be relevant to a citizen or resident of the
United States, a corporation, partnership or other entity created or
organized under the laws of the United States, or an estate or trust
the income of which is subject to U.S. federal income taxation
regardless of its source (any of the foregoing, a "U.S. person") who
is the beneficial owner of a MEDS (a "U.S. Holder"). All references to
"holders" (including U.S. Holders) are to beneficial owners of the
MEDS. This summary is based on current U.S. federal income tax law and
on the advice of Cravath, Swaine & Moore, special tax counsel to J.P.
Morgan. However, in the absence of clear authority (as discussed
below), neither J.P. Morgan nor Cravath, Swaine & Moore makes any
representation as to the U.S. federal income tax consequences to any
holder or purchaser of MEDS.
This summary deals only with holders who are initial holders of the
MEDS and who will hold the MEDS as capital assets. It does not address
tax considerations applicable to investors that may be subject to
special U.S. federal income tax treatment, such as dealers in
securities or persons holding the MEDS as a position in a "straddle"
(within the meaning in Section 1092 of the Internal Revenue Code of
1986, as amended (the "Code")), as part of a "conversion transaction"
(within the meaning of Section 1258 of the Code) or as part of a
"synthetic security" or other integrated investment, and does not
address the consequences under state, local or foreign law.
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No statutory, judicial or administrative authority directly addresses
the characterization of the MEDS or instruments similar to the MEDS
for U.S. federal income tax purposes. As a result, significant aspects
of the U.S. federal income tax consequences of an investment in the
MEDS are not certain. No ruling is being requested from the Internal
Revenue Service (the "IRS") with respect to the MEDS and no assurance
can be given that the IRS will agree with the conclusions expressed
herein. ACCORDINGLY, A PROSPECTIVE INVESTOR (INCLUDING A TAX-EXEMPT
INVESTOR) IN THE MEDS SHOULD CONSULT ITS TAX ADVISOR IN DETERMINING
THE TAX CONSEQUENCES OF AN INVESTMENT IN THE MEDS, INCLUDING THE
APPLICATION OF STATE, LOCAL OR OTHER TAX LAWS.
In the absence of clear authority, J.P. Morgan will treat the MEDS as
contingent debt instruments with interest accruing (and currently
taxable to holders) at the stated coupon rate. Holders of MEDS may be
required to take the same position on their tax returns unless
appropriate disclosures are made that a different position is being
taken. Under this approach:
(1) a U.S. Holder would be required to include such interest
in income as it is paid or accrued, in accordance with the U.S.
Holder's method of accounting; and
(2) at the Maturity of the MEDS, a U.S. Holder would have
income or loss equal to the difference between (i) the fair market
value of Autozone Common Stock or amount of cash received by such
Holder and (ii) such Holder's cost of the MEDS; it is expected that
any such income would be ordinary interest income rather than capital
gain, and that any such loss would be a capital loss;
(3) upon the sale or other disposition of the MEDS, a U.S.
Holder would have gain or loss equal to the difference between the
amount realized and such Holder's cost of the MEDS; any such gain is
expected to be capital gain but may be ordinary income, and any such
loss would be a capital loss; and
(4) any capital gain or loss realized by a U.S. Holder
(whether at Maturity or upon disposition of the MEDS) will be
long-term capital gain or loss if the MEDS were held for more than one
year at the time of disposition or Maturity.
However, in the absence of authority concerning the proper tax
treatment of the MEDS, no assurance can be provided that the above tax
characterization would be accepted by the IRS or upheld by a court. As
a result, different tax consequences may apply. For example, (i) as
indicated above, gain on disposition of the MEDS may be ordinary
income rather than capital gain, (ii) a U.S. Holder might be required
to accrue interest income at a rate greater than the stated rate on
the MEDS, and have less income or gain (or a greater loss) upon
disposition or Maturity of the MEDS, or (iii) all or part of the
stated interest on the MEDS might be treated as a nontaxable return of
capital, increasing the amount of income or gain (or decreasing the
loss) upon disposition or Maturity of the MEDS. If clause (ii) or
(iii) is applicable, a U.S. Holder's tax basis for the MEDS wold be
their original cost, increased by accruals of income and decreased by
payments of interest.
In connection with clause (ii) of the preceding paragraph, recently
proposed Treasury Regulations would require the accrual of interest
income on the MEDS based on the projected
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yield to maturity of the MEDS. The projected yield would take into
account a projected payment at Maturity (based upon forward pricing
for Autozone Common Stock). This method might result in an annual
inclusion of income at a rate in excess of the stated rate of interest
on the MEDS. An adjustment would be made at Maturity to reflect the
actual payment on the MEDS as compared to the projected payment.
Moreover, any gain on the sale of the MEDS would be ordinary income.
These proposed regulations by their terms only apply to debt issued at
least 60 days after publication of final regulations, and therefore
would not apply to the MEDS. However, no assurance can be given that
the IRS or the courts would not apply the principles of the
regulations to the MEDS.
Non-United States Persons
In the case of a holder of MEDS that is not a U.S. person, payments
made with respect to the MEDS should not be subject to U.S.
withholding tax, provided that such holder complies with applicable
certification requirements. Any capital gain realized upon the sale or
other disposition of the MEDS by a holder that is not a U.S. person
will generally not be subject to U.S. federal income tax if (i) such
gain is not effectively connected with a U.S. trade or business of
such holder and (ii) in the case of an individual, such individual is
not present in the United States for 183 days or more in the taxable
year of the sale or other disposition.
Backup Withholding and Information Reporting
A holder of MEDS may be subject to information reporting and to backup
withholding at a rate of 31 percent of certain amounts paid to the
holder unless such holder provides proof of an applicable exemption or
correct taxpayer identification number, and otherwise complies with
applicable requirements of the backup withholding rules.]
Underwriting
J.P. Morgan Securities Inc. (the "Underwriter") has agreed, subject to
the terms and conditions set forth in the Underwriting Agreement, to
purchase all the MEDS from J.P. Morgan.
The Underwriter proposes to offer the MEDS from time to time for sale
in one or more negotiated transactions, or otherwise, at market proces
prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. In connection with the sale of
any MEDS, the Underwriter may be deemed to have received an
underwriting discount equal to the difference between the amount
received by the Underwriter upon the sale of such MEDS and the price
at which the Underwriter purchased such MEDS from the Company.
J.P. Morgan has agreed in the Underwriting Agreement to indemnify the
Underwriter against certain liabilities, including liabilities under
the Securities Act, or contribute to payments the Underwriter may be
required to make in respect thereof.
J.P. Morgan has been advised by the Underwriter that it may make a
market in the MEDS; however, J.P. Morgan cannot provide any assurance
that a secondary market for the MEDS will develop.
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This Prospectus Supplement and the Prospectus may be used by direct or
indirect wholly- owned subsidiaries of J.P. Morgan in connection with
offers and sales related to secondary market transactions in the MEDS.
Such subsidiaries may act as principal or agent in such transactions.
Such sales will be made at prices related to prevailing market prices
at the time of a sale.
The Underwriter is an indirect wholly-owned subsidiary of J.P. Morgan.
The offer and sale of the MEDS by the Underwriter will comply with the
requirements of Section 2720 of the Bylaws of the National Association
of Securities Dealers, Inc. regarding underwriting of securities of an
affiliate.
Legal Opinions
The validity of the MEDS will be passed upon for J.P. Morgan by Gene
A. Capello, Assistant General Counsel and Assistant Secretary of J.P.
Morgan, and for the Underwriter by Cravath, Swaine & Moore. Certain
tax matters with respect to the MEDS will also be passed upon by
Cravath, Swaine & Moore. Cravath, Swaine & Moore has represented and
continues to represent J.P. Morgan from time to time in other matters.
Mr. Capello owns or has the right to acquire a number of shares of
common stock of J.P. Morgan equal to or less than 0.01% of the
outstanding common stock of J.P. Morgan.
Experts
The financial statements incorporated by reference in the Annual
Report on Form 10-K of J.P. Morgan for the year ended December 31,
1995 (included in J.P. Morgan's Annual Report to Stockholders), are
incorporated by reference in this Prospectus Supplement in reliance on
the report of Price Waterhouse LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
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