<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 20, 1997
REGISTRATION NOS. 333-01121 AND 333-01121-01
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
J.P. MORGAN & CO. INCORPORATED
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-2625764
(State or other jurisdiction or incorporation of
organization) (I.R.S. Employer Identification No.)
</TABLE>
J.P. MORGAN INDEX FUNDING COMPANY I
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3964134
(State or other jurisdiction of incorporation or
organization) (I.R.S. Employer Identification No.)
</TABLE>
------------------------
60 WALL STREET
NEW YORK, NEW YORK 10260-0060
TEL. NO. (212) 483-2323
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
RACHEL F. ROBBINS, ESQ.
General Counsel and Secretary
J.P. MORGAN & CO. INCORPORATED
60 WALL STREET
NEW YORK, NEW YORK 10260-0060
TEL. NO.: (212) 648-3535
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
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<S> <C>
GENE A. CAPELLO, ESQ. B. ROBBINS KIESSLING, ESQ.
VICE PRESIDENT AND ASSISTANT GENERAL COUNSEL CRAVATH, SWAINE & MOORE
J.P. MORGAN & CO. INCORPORATED WORLDWIDE PLAZA
60 WALL STREET 825 EIGHTH AVENUE
NEW YORK, NEW YORK 10260-0060 NEW YORK, NEW YORK 10019-7475
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement as
determined by market conditions.
If any of the securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [X]
------------------------
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
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PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING PRICE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(1)(2)(3) (1)(2)(3) FEE(5)
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Preferred Securities of the Trust..................... $700,000,000 $241,379.31
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Guarantees of Preferred Securities of the Trust, the
Related Note Guarantee of the Related Note of Morgan
Guaranty by, and certain backup obligations under
the Declaration of, J.P. Morgan..................... (4)
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Total................................................. $700,000,000 $241,379.31
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</TABLE>
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(1) Such indeterminate number of Preferred Securities of the Trust as may from
time to time be issued at indeterminate prices.
(2) Estimated pursuant to Rule 457 under the Securities Act of 1933, as amended,
solely for the purpose of calculating the registration fee. The aggregate
public offering price of the Preferred Securities of the Trust registered
hereby will not exceed $700,000,000.
(3) Exclusive of accrued interest and distributions, if any.
(4) The back-up obligations of J.P. Morgan, in addition to the Guarantee and the
Related Note Guarantee, consist of the obligations of J.P. Morgan with
respect to the Preferred Securities that are set forth in the Declaration.
No separate consideration will be received for the Guarantee, the Related
Note Guarantee or such backup obligations. See "Effect of the Obligations
Under the Guarantee, the Related Note Guarantee and the Related Note" in the
applicable Prospectus Supplement.
(5) Previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A) MAY DETERMINE.
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<PAGE> 2
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.
SUBJECT TO COMPLETION, DATED [ ], 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER [ ], 1997)
COMMODITY-INDEXED PREFERRED SECURITIES (COMPS(SM)), SERIES [B]
J.P. MORGAN INDEX FUNDING COMPANY I
[2.5]% SERIES [B] PREFERRED SECURITIES
INDEXED TO THE JPMCI CRUDE OIL TOTAL RETURN INDEX
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
J.P. MORGAN & CO. INCORPORATED
------------------------
The [2.5]% Series [B] Preferred Securities (each, a "Series [B] Preferred
Security", and collectively, the "ComPS") offered hereby are being issued by
J.P. Morgan Index Funding Company I, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"). The ComPS represent undivided
beneficial preferred interests in certain assets of the Trust consisting of the
Related Note (as defined below) and the proceeds thereof. Each Series [B]
Preferred Security will have an initial principal amount of [$25] (the "Face
Amount"), and thereafter, the change in value of the principal amount per Series
[B] Preferred Security will be indexed to the change in value of the JPMCI Crude
Oil Total Return Index (the "Applicable Index"), which is calculated based on
the change in value of certain crude oil futures contracts included from time to
time in the JPM Indices (such contracts, from time to time, the "Benchmark Crude
Oil Contracts") plus a component of collateral yield computed on such
fluctuating index value at the most recent auction rate for 3-month U.S.
Treasury Bills or certain successor rates thereto (the "Collateral Yield
Component"), reduced by a factor designed to offset the costs of issuing and
hedging the indexation of the ComPS (the "Factor"). J.P. Morgan & Co.
Incorporated, a Delaware corporation ("J.P. Morgan"), will own all the common
securities (the "Series [B] Common Securities" and together with the ComPS, the
"Series [B] Securities") representing undivided beneficial interests in certain
assets of the Trust consisting of the Related Note and the proceeds thereof. The
Trust exists for the sole purpose of issuing the Series [B] Securities and
investing the proceeds thereof in a [2.5]% Related Note Due , [2000]
(the "Related Note") of Morgan Guaranty Trust Company of New York, a trust
company with full banking powers organized under the laws of the State of New
York and a wholly-owned subsidiary of J.P. Morgan ("Morgan Guaranty"), and
issuing similar preferred securities (the "Preferred Securities") and common
securities (the "Common Securities" and, together with the Preferred Securities,
the "Securities") of separate series and investing the proceeds thereof in
similar notes in the future.
SEE "RISK FACTORS" ON PAGE S-10 FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN THE COMPS. THE COMPS ARE NOT FUTURES CONTRACTS AND DO NOT
REPRESENT AN ACTUAL INVESTMENT IN FUTURES CONTRACTS. THE REDEMPTION VALUE (AS
DEFINED BELOW) OF THE COMPS IS DIRECTLY LINKED TO THE PERFORMANCE OF THE JPMCI
CRUDE OIL TOTAL RETURN INDEX, REDUCED BY THE FACTOR. AS A RESULT, THE REDEMPTION
VALUE PER SERIES [B] PREFERRED SECURITY MAY BE MORE OR LESS THAN THE FACE AMOUNT
AND MAY BE MORE OR LESS THAN THE RETURN FROM AN ACTUAL INVESTMENT IN THE
BENCHMARK CRUDE OIL CONTRACTS. SEE "DESCRIPTION OF THE COMPS".
"ComPS", "JPMCI" and the "J.P. Morgan Commodity Index" are service marks of J.P.
Morgan & Co. Incorporated.
The ComPS have been approved for listing on the American Stock Exchange (the
"Amex") under the symbol ["JPO"], subject to official notice of issuance.
Trading of the ComPS on the Amex is expected to commence within a 30-day period
after the date of this Prospectus Supplement. See "Underwriting".
THE SERIES [B] SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
FEDERAL AGENCY.
THESE SERIES [B] 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 TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price $[25] per Series [B] Preferred Security plus accrued dividends, if any.
<TABLE>
<CAPTION>
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INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSIONS(2) THE TRUST(3)(4)
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<S> <C> <C> <C>
Per Series [B] Preferred Security.......... $ (3) $
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Total...................................... $ (3) $
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</TABLE>
(1) Plus accrued dividends, if any, from the Issue Date (as defined herein).
(2) The Trust and J.P. Morgan have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. See "Underwriting".
(3) Because the proceeds of the sale of the ComPS will be invested in the
Related Note, Morgan Guaranty has agreed to pay to the Underwriters a
commission of $ per Series [B] Preferred Security (or $ in
the aggregate). See "Underwriting".
(4) Expenses of the offering which are payable by the Trust and J.P. Morgan are
estimated to be $ .
------------------------
The ComPS offered hereby are offered by the Underwriters, as specified herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that delivery of the ComPS will be
made on or about , 1997, through the book-entry facilities of The
Depository Trust Company, against payment therefor in same-day funds.
J.P. MORGAN & CO.
[ ], 1997.
<PAGE> 3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES [B]
SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK
EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING
TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE> 4
STRUCTURAL OVERVIEW
[DIAGRAM]
1. THE TRUST. The issuer of the ComPS is a Delaware statutory business trust
formed by J.P. Morgan for the sole purpose of issuing the Series [B] Securities
and other securities of separate series and lending the proceeds thereof to
Morgan Guaranty. J.P. Morgan will own 100% of the Series [B] Common Securities
representing 100% of the undivided beneficial common interests in the assets of
the Trust consisting of the Related Note and the proceeds thereof. The Trust
will be disregarded for United States Federal income tax purposes. J.P. Morgan
Index Funding Company, LLC (the "Company"), a Delaware limited liability
company, has been merged into the Trust. As a result of such merger, the Trust
has succeeded to all rights and obligations of the Company, including any rights
and obligations in respect of any securities that were issued by the Company
prior to the merger (including the 2.5% Series A Securities (the "Series A
Securities")) and any related notes and related note guarantees executed and
delivered in connection therewith.
2. THE COMPS. The ComPS issued by the Trust represent undivided beneficial
preferred interests in the assets of the Trust consisting of the Related Note
and the proceeds thereof. For tax purposes, holders of ComPS are deemed to
receive interest income in excess of interest accrued and paid on the Related
Note, and dividends on ComPS are not eligible for the dividends received
deduction for United States Federal income tax purposes. The ComPS Redemption
Price and the ComPS Early Redemption Price are indexed to the JPMCI Crude Oil
Total Return Index, reduced by the Factor. The ComPS Early Redemption Price or
the ComPS Redemption Price may be more or less than the Face Amount of the
ComPS. The Trust intends to issue more than one series of Securities. No holder
of Securities of any series shall have any claim on, or any right to, any assets
allocated to, or associated with, Securities of any other series (except if, and
to the extent that, such holder is also a holder of Securities of such other
series).
3. COMPS PROCEEDS LOANED TO MORGAN GUARANTY. Proceeds of ComPS and related
Series [B] Common Securities will be used by the Trust on behalf of holders of
the Series [B] Securities to purchase from Morgan Guaranty the Related Note with
a maturity of [, 2000] and having the same economic terms as the
ComPS.
4. REPAYMENT OF RELATED NOTE. Morgan Guaranty will repay the Related Note in
whole or part to the extent required to repay Series [B] Securities upon any
Early Redemption Date and in whole at the Stated Maturity (subject to extension
in case of a Market Disruption Event).
5. RELATED NOTE GUARANTEE. J.P. Morgan will guarantee to the Trust, on a
subordinated basis, the payment of any distributions on and principal of the
Related Note as provided pursuant to the terms of the Related Note, at such
times and in such amounts as provided therein.
6. GUARANTEE. J.P. Morgan will guarantee to the holders of ComPS, on a
subordinated basis, the payment of (i) the ComPS Early Redemption Price or the
ComPS Redemption Price, as applicable, but if and only if and to the extent
that, in each case, Morgan Guaranty has made payment of interest or principal on
the Related Note, as the case may be, and (ii) upon liquidation, the lesser of
(a) the sum of the Early Redemption Value and the amount of accrued and unpaid
dividends on the ComPS and (b) the amount of assets of the Trust consisting of
the Related Note and the proceeds thereof available for distribution to holders
of ComPS.
7. MORGAN GUARANTY. Morgan Guaranty, a trust company with full banking powers
organized under the laws of the State of New York, is a wholly-owned subsidiary
of J.P. Morgan.
S-3
<PAGE> 5
SUMMARY OF THE OFFERING
SECURITIES OFFERED......[2.5]% Series [B] Preferred Securities ("ComPS") indexed
to the JPMCI Crude Oil Total Return Index.
ISSUER..................J.P. Morgan Index Funding Company I (the "Trust"), a
Delaware statutory business trust and a subsidiary of
J.P. Morgan & Co. Incorporated ("J.P. Morgan").
GUARANTOR...............J.P. Morgan, on a subordinated basis, (i) of payments to
holders of ComPS of amounts received on the Related Note
by the Trust on behalf of holders of Series [B]
Securities and (ii) of payments to the Trust on behalf
of holders of Series [B] Securities on the Related Note
by Morgan Guaranty, a wholly-owned subsidiary of J.P.
Morgan.
INITIAL OFFERING PRICE
PER SERIES [B] PREFERRED
SECURITY ("FACE
AMOUNT")................[$25].
AGGREGATE FACE
AMOUNT..................$
COMPS REDEMPTION
PRICE...................Redemption Value at Stated Maturity plus accrued and
unpaid dividends.
STATED MATURITY......... , [2000], subject to extension in the case of a
Market Disruption Event.
REDEMPTION VALUE PER
SERIES [B] PREFERRED
SECURITY................Face Amount X ( Applicable Index Settlement
Value - Factor)
Applicable Index Commencement Value
APPLICABLE INDEX........JPMCI Crude Oil Total Return Index.
APPLICABLE INDEX
COMMENCEMENT VALUE......[Set on date of pricing].
APPLICABLE INDEX
SETTLEMENT VALUE........The average (rounded to four digits following the
decimal point) of the Applicable Index over the 10
consecutive Trading Days meeting certain conditions
immediately following the 20th Business Day prior to
redemption (as described herein), unless such value has
been permanently fixed prior to such time as described
under "Description of ComPS -- Early Determination of
Applicable Index Settlement Value and Redemption Value."
CALCULATION AGENT.......Morgan Guaranty.
DIVIDENDS...............Cumulative cash dividends of [2.5]% per annum on the
Face Amount (calculated on the basis of a 360 day year
of twelve 30-day months) accruing from ,
199[ ] (the "Issue Date"), and payable quarterly in
arrears on the last calendar day of each March, June,
September and December.
CASH REDEMPTION PRIOR TO
STATED MATURITY
OPTIONAL
REDEMPTION............At the holders' option, on each prior to the Stated
Maturity, for the ComPS Early Redemption Price.
SPECIAL EVENT
REDEMPTION............Under certain circumstances, upon the occurrence of a
Tax Event or an Investment Company Event, for the ComPS
Early Redemption Price.
EARLY DETERMINATION OF
APPLICABLE INDEX
SETTLEMENT VALUE........Upon the occurrence of certain events affecting the
liquidity or increasing the cost of holding or trading
the Benchmark Crude Oil Contracts and the inability to
find a suitable replacement Benchmark Crude Oil
Contract, the Applicable Index Settlement Value may be
fixed, and such fixed value will be used upon any
subsequent Early Redemption and at Stated Maturity.
COMPS EARLY REDEMPTION
PRICE...................The Early Redemption Value (as defined in the
Prospectus), which represents the payment of the
discounted present value of dividends and Principal
Amount on the applicable Early Redemption Date. See
"Description of the ComPS -- Optional Redemption" and
"-- Special Event Redemption".
VOTING RIGHTS...........Holders of ComPS will have limited voting rights but
will not be entitled to vote to appoint, remove or
replace the Trustees of the Trust or to increase or
decrease the number of Trustees (as defined in the
Declaration). See "Description of the ComPS--Voting
Rights".
USE OF PROCEEDS.........The proceeds to the Trust from the sale of ComPS and
related Series [B] Common Securities will be used to
purchase a note of Morgan Guaranty (the "Related Note"),
and Morgan Guaranty will use such proceeds for general
corporate purposes and for hedging its obligations under
the Related Note. See "Use of Proceeds".
FACTOR..................[0.15 (15 percent)] [set on date of pricing], which is
designed to offset the costs of issuing and hedging the
indexation of the ComPS.
ORIGINAL ISSUE
DISCOUNT................The ComPS will be issued with original issue discount
for Federal income tax purposes. During each taxable
period, holders of ComPS will be required to include
amounts in income in excess of current cash dividends.
Such excess amounts will increase the holders' tax basis
in the ComPS.
S-4
<PAGE> 6
THE OFFERING
The information in this Prospectus Supplement concerning J.P. Morgan, Morgan
Guaranty, the Trust, the ComPS, the Guarantee, the Related Note Guarantee and
the Related Note supplements, and should be read in conjunction with, the
information contained in the accompanying Prospectus. THE FOLLOWING SUMMARY OF
PROVISIONS RELATING TO THE COMPS IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION CONTAINED ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT (THIS "PROSPECTUS SUPPLEMENT") AND THE PROSPECTUS OF WHICH
THIS PROSPECTUS SUPPLEMENT CONSTITUTES A PART (THE "PROSPECTUS"). Prospective
purchasers of ComPS should carefully review such information. Certain
capitalized terms used in this Prospectus Supplement have the meanings ascribed
to them under the "Glossary of Terms" in Annex I hereto.
GENERAL
Subject to the more specific discussion of each item elsewhere in this
Prospectus Supplement or in the Prospectus (including the effect of a Market
Disruption Event, as defined herein), following is a general summary of the
ComPS:
The ComPS pay a fixed dividend rate on the Face Amount (which equals the initial
price) and are principal-at-risk securities linked directly to the performance
of the JPMCI Crude Oil Total Return Index (the "Applicable Index"), reduced by
the Factor. As described herein, the Applicable Index will change based on the
daily percentage change in value of the Benchmark Crude Oil Contracts plus a
component of collateral yield computed on such fluctuating index value at the
most recent auction rate for 3-month U.S. Treasury Bills or certain successor
rates thereto (the "Collateral Yield Component"). At maturity, an investor will
receive a principal amount determined by the following formula: Face Amount x
(the 10-day average of the Applicable Index/the Applicable Index set on the day
of pricing, minus the Factor). In no circumstances will the Redemption Value of
the ComPS be less than zero, but the Redemption Value could be more or less than
the Face Amount. Thus, the Redemption Value is linked directly to the
performance of the Applicable Index, reduced by the Factor (e.g., if the average
ending value of the Applicable Index is twice the beginning value, the
Redemption Value will be twice the Face Amount, reduced by the Factor). If the
Applicable Index decreases over the life of the ComPS, or if the percentage
increase in the Applicable Index is less than the amount of the Factor, the
Redemption Value will be less than the Face Amount. If the percentage increase
in the Applicable Index over the life of the ComPS is greater than the amount of
the Factor, the Redemption Value will be greater than the Face Amount.
The Applicable Index (the JPMCI Crude Oil Total Return Index) is a Total Return
Index. A Total Return Index, which is described more fully in the attached
Prospectus under "The JPM Indices -- Total Return Methodology", represents the
cumulative return of holding an unlevered position in the designated nearby
commodity futures contracts underlying such Applicable Index, plus the
Collateral Yield Component. Generally, since the Total Return Index is linked
directly (i.e., on a one-to-one basis) to the underlying futures contracts, a 1%
change on any day in the value of the specific underlying designated futures
contract will create a 1% change in the value of the Applicable Index for such
day (not including any change in value resulting from the Collateral Yield
Component). Because the designated futures contracts underlying the Total Return
Indices have maturities (generally less than three months) which are shorter
than the maturity of the ComPS, the index calculation methodology replaces the
underlying contract used to determine the daily change in the value of the
Applicable Index with the next designated contract of the same commodity on a
periodic basis. This process of replacement is called "rolling", and the 5-day
period during which the replacement occurs is called the "Rollover Period". For
any month during which a roll occurs, the daily change in value of a Total
Return Index solely as a result of the change in value of the designated future
contracts ("Change(t)") for all days prior to the Rollover Period is calculated
as 100% of the daily change of the existing ("old") underlying designated
contract. Beginning with the first day after the beginning of the Rollover
Period, the daily Change(t) in a Total Return Index is calculated based 80% on
the percentage change of the old contract and 20% on the percentage change in
the replacement ("new") designated contract. Similar 20% adjustments are made in
the weights attributable to each contract's change for each of the next four
days of the Rollover Period such that, by the day after the Rollover Period ends
and for all subsequent days until the next Rollover Period, 100% of the daily
S-5
<PAGE> 7
Change(t) is attributable to the percentage change of the new designated
contract. Because the change in the Applicable Index is linked directly to the
percentage change in the designated contracts underlying such index, plus the
Collateral Yield Component, any events which affect the designated contracts
underlying the Applicable Index may affect the Early Redemption Value and
Redemption Value of the ComPS.
The Principal Amount of each of the ComPS, which is initially equal to the Face
Amount, will vary over the life of the ComPS in relation to the Applicable
Index, reduced by the Factor. The Principal Amount repayable on any Early
Redemption Date, upon the occurrence of any Special Event Redemption or at
Stated Maturity will be determined, pursuant to the terms described herein
(including, without limitation, the averaging of the Applicable Index over the
Early Determination Period or Determination Period, as applicable, and the
present-valuing of the dividends and Principal Amount in connection with early
redemptions), by comparing the level of the Applicable Index set on the date of
issuance of the ComPS with the level determined pursuant to the terms hereof for
any such date of redemption, reduced by the Factor.
The ComPS represent undivided beneficial preferred interests in certain assets
of the Trust consisting of the Related Note and the proceeds thereof. The
Related Note, in which the proceeds of the ComPS and the related Series [B]
Common Securities will be invested, matures on , [2000] (which is the
"Stated Maturity"), subject to extension in the case of a Market Disruption
Event, and is redeemable at certain times, from time to time, at the option of
the Trust upon an optional redemption by one or more holders of ComPS in an
amount sufficient to fund such redemption and the redemption of the related
Series [B] Common Securities and at any time by Morgan Guaranty in whole or in
part upon the occurrence of a Special Event. The ComPS will be redeemed at
Stated Maturity at the ComPS Redemption Price, which is equal to the sum of (a)
the Redemption Value (as defined below) per Series [B] Preferred Security plus
(b) accrued and unpaid dividends thereon to but excluding the date of
redemption. In addition, if, as a result of a Special Event, Morgan Guaranty
redeems the Related Note in whole or in part prior to Stated Maturity, the Trust
must redeem ComPS and related Series [B] Common Securities having an aggregate
Principal Amount equal to the Principal Amount of the Related Note so redeemed
at the ComPS Early Redemption Price. See "Description of the ComPS -- Redemption
at Stated Maturity"; -- Special Event Redemption". For purposes of this
Prospectus Supplement, "Principal Amount" means (i) in the case of any Series
[B] Preferred Security, the Early Redemption Value thereof or the Redemption
Value thereof (as if determined as of such time), as applicable, and (ii) in the
case of the Related Note, the principal amount thereof at such time determined
pursuant to the terms thereof.
DIVIDENDS
The holders of ComPS are entitled to receive cumulative cash dividends at the
rate of [2.5]% per annum on the Face Amount per Series [B] Preferred Security,
accruing from the Issue Date, and payable quarterly in arrears on the last
calendar day of each March, June, September and December, commencing ,
199 , or, if any such date is not a Business Day (as defined herein), the next
succeeding Business Day when, as and if available for payment by the Trust (as
described herein), except as otherwise described herein. The first dividend
payment will be for the period from and including the Issue Date to but
excluding , 199 . Dividends (or amounts equal to accrued and unpaid
dividends) payable on the ComPS for any period shorter than a quarterly dividend
period will be computed on the basis of a 360-day year of twelve 30-day months
and on the basis of the actual number of days elapsed (but never greater than
30) in any period shorter than a month. See "Description of the
ComPS -- Dividends".
REDEMPTION AT STATED MATURITY
Unless previously redeemed pursuant to the optional or special redemption
provisions described below, each of the outstanding ComPS will be redeemed by
the Trust, in cash, on , [2000] which is the Stated Maturity of the
Related Note, subject to extension in the case of a Market Disruption Event (as
defined herein), at the ComPS Redemption Price, which is equal to (a) the
Redemption Value per Series [B] Preferred Security plus (b) accrued and unpaid
dividends thereon to but excluding the date of
S-6
<PAGE> 8
redemption. See "Description of the ComPS -- Redemption at Stated Maturity";
"Risk Factors -- Extension of Settlement Date or Stated Maturity".
CALCULATION OF REDEMPTION VALUE
The Principal Amount of each Series [B] Preferred Security is indexed to the
difference of (i) the Applicable Index, which is calculated based on the change
in value of certain crude oil futures contracts included from time to time in
the JPM Indices (such contracts, from time to time, the "Benchmark Crude Oil
Contracts") plus the Collateral Yield Component, and (ii) the Factor. On the
date of this Prospectus Supplement, the Benchmark Crude Oil Contract is the
Light "Sweet" Crude Oil contract traded on the New York Mercantile Exchange (the
"NYMEX"). Any contracts for forward delivery on the NYMEX shall be referred to
herein as "futures contracts" or "contracts." In summary, and subject to the
complete definitions and formulae contained herein and in the Prospectus, the
Principal Amount of each Series [B] Preferred Security at Stated Maturity,
subject to extension in the case of a Market Disruption Event (the "Redemption
Value"), shall be determined by multiplying the Face Amount of each Series [B]
Preferred Security by the difference between (a) a fraction, the numerator of
which is the Applicable Index Settlement Value and the denominator of which is
the Applicable Index Commencement Value, and (b) the Factor. However, the
Redemption Value may not be less than zero. Subject to the more complete
definitions contained herein and in the accompanying Prospectus, "Applicable
Index Settlement Value" means the arithmetic average of the values of the
Applicable Index during the Determination Period (as defined below), and
"Applicable Index Commencement Value" means [value set on date of issuance]. See
"Description of ComPS--Calculation of Redemption Value" herein and "Description
of ComPS-- Determination Period and Settlement Date" in the Prospectus.
EARLY DETERMINATION OF APPLICABLE INDEX SETTLEMENT VALUE AND REDEMPTION VALUE
Upon the occurrence of certain events affecting the liquidity or increasing the
cost of holding or trading the Benchmark Crude Oil Contracts and the inability
to find a suitable replacement Benchmark Crude Oil Contract, Morgan Guaranty has
the right to cause the Applicable Index Settlement Value to be fixed. Following
such an event, the Applicable Index Settlement Value will remain fixed and will
be used in calculating the Applicable Index Early Settlement Value for the
computation of any Early Redemption Value and as the Applicable Index Settlement
Value at Stated Maturity. See "Description of the ComPS-- Early Determination of
Applicable Index Settlement Value and Redemption Value".
OPTIONAL REDEMPTION
Each holder of ComPS may, by giving notice as specified herein before
[anniversary of Stated Maturity] of each year prior to Stated Maturity (each, an
"Optional Redemption Date"), cause the Trust to redeem some or all of such
holder's ComPS at the ComPS Early Redemption Price, which is equal to (a) the
Early Redemption Value (as defined in the Prospectus) per Series [B] Preferred
Security as determined at such time plus (b) accrued and unpaid dividends
thereon to but excluding the date of redemption. See "Description of the
ComPS--Optional Redemption".
SPECIAL EVENT REDEMPTION
Upon the occurrence and during the continuation of a Tax Event or an Investment
Company Event (each as defined herein and each a "Special Event"), Morgan
Guaranty will have the right to redeem the Related Note in whole or, if
redemption of less than all the ComPS will result in the discontinuance of such
Special Event, in part in an amount sufficient to cause such discontinuance, in
each case for cash, with the result that the Trust will redeem a Principal
Amount of ComPS and related Series [B] Common Securities equal to the Principal
Amount of the Related Note so redeemed for cash at the ComPS Early Redemption
Price. However, in the case of a Tax Event, Morgan Guaranty may allow the
Related Note and the Trust may allow the ComPS and related Series [B] Common
Securities to remain outstanding upon the receipt of indemnification by J.P.
Morgan of the Trust for all taxes payable by it as a result of such Tax Event.
See "Description of the ComPS--Special Event Redemption".
S-7
<PAGE> 9
UNCONDITIONAL GUARANTEE BY J.P. MORGAN
J.P. Morgan, through its obligations under the Guarantee, the Related Note
Guarantee and the Declaration, taken together, will provide a full and
unconditional guarantee, on a subordinated basis, of payments due on the ComPS.
See "Risk Factors--Limitation on Rights Under the Guarantee, the Related Note
Guarantee and the Related Note", "Description of the Related Note Guarantee" and
"Effect of Obligations Under the Guarantee, the Related Note Guarantee and the
Related Note".
THE GUARANTEE
The Guarantee by J.P. Morgan guarantees to the holders of the ComPS the payment
of (i) the ComPS Early Redemption Price or the ComPS Redemption Price, as
applicable, but if and only if and to the extent that, in each case, Morgan
Guaranty has made payment of interest or principal on the Related Note, as the
case may be, and (ii) upon a Liquidation Event (as defined herein) (other than
in connection with the redemption of all the ComPS upon maturity or redemption
in whole of the Related Note), the lesser of (A) the sum of (I) the Early
Redemption Value of such ComPS and (II) the amount of accrued and unpaid
dividends on such ComPS to but excluding the date of payment (the "Liquidation
Distribution"), to the extent the Trust has funds available therefor, and (B)
the amount of assets of the Trust consisting of the Related Note and the
proceeds thereof remaining available for distribution to holders of the ComPS
upon such Liquidation Event. J.P. Morgan's obligations under the Guarantee will
be subordinated and junior in right of payment to all liabilities of J.P.
Morgan, pari passu with the most senior preferred stock outstanding as of the
date hereof of J.P. Morgan and senior to the common stock of J.P. Morgan.
THE RELATED NOTE GUARANTEE
The Related Note Guarantee by J.P. Morgan guarantees to the Property Trustee on
behalf of holders of Series [B] Securities the payment of any dividends on and
principal of the Related Note as provided pursuant to the terms of the Related
Note, at such times and in such amounts as provided therein. J.P. Morgan's
obligations under the Related Note Guarantee will be subordinated and junior in
right of payment to all liabilities of J.P. Morgan, pari passu with the most
senior preferred stock outstanding as of the date hereof of J.P. Morgan and
senior to the common stock of J.P. Morgan.
RELATED NOTE
The Related Note will be issued as an unsecured obligation of Morgan Guaranty,
limited in initial Principal Amount to approximately $ , such amount being the
aggregate Face Amount of the ComPS and the related Series [B] Common Securities.
The Related Note will mature on the Stated Maturity (subject to extension in the
case of a Market Disruption Event), and will bear interest at an annual rate of
[2.5]% on such aggregate Face Amount (which is equivalent to the annual dividend
rate with respect to the ComPS), payable quarterly in arrears on the last day of
each calendar quarter, commencing on , 199 . The Principal Amount of the
Related Note at any time will be the aggregate Principal Amount of the
outstanding ComPS and related Series [B] Common Securities at such time. The
amount payable upon maturity of the Related Note will be the Related Note
Redemption Price. The timing and amount of payments on the Related Note mirror
the aggregate financial terms of the ComPS.
The obligations of Morgan Guaranty under the Related Note will be pari passu
with all present and future Senior Indebtedness of Morgan Guaranty. Morgan
Guaranty's obligations under the Related Note are effectively subordinated to
all liabilities (including indebtedness) of its consolidated and unconsolidated
subsidiaries.
VOTING RIGHTS
Holders of ComPS will have certain voting rights but will not be entitled to
vote to appoint, remove or replace the Trustees (as defined below) of the Trust
or to increase or decrease the number of Trustees. See "Description of the
ComPS--Voting Rights".
S-8
<PAGE> 10
USE OF PROCEEDS
The Trust, on behalf of holders of Series [B] Securities, will invest the
proceeds from the sale of the ComPS offered hereby and the related Series [B]
Common Securities in the Related Note, the proceeds of which will be used by
Morgan Guaranty for general corporate purposes and for hedging its obligations
under the Related Note. See "Use of Proceeds".
LISTING
The ComPS have been approved for listing on the Amex under the symbol ["JPO"],
subject to official notice of issuance. Trading of the ComPS on the Amex is
expected to commence within a 30-day period after the date of this Prospectus
Supplement. Prior to this offering, there has been no market for the ComPS.
S-9
<PAGE> 11
RISK FACTORS
INDEXATION OF PRINCIPAL AMOUNT
The Principal Amount of each of the ComPS, which is initially equal to the Face
Amount, will vary until Stated Maturity of the ComPS in relation to the
Applicable Index (the JPMCI Crude Oil Total Return Index), reduced by the
Factor. The Principal Amount repayable on any Optional Redemption Date, upon the
occurrence of any Special Event Redemption or in connection with any Liquidation
Distribution (each such redemption date, an "Early Redemption Date") or at
Stated Maturity will be determined, pursuant to the terms described herein
(including, without limitation, the averaging of the Applicable Index over the
Early Determination Period or Determination Period, as applicable, and the
present-valuing of the dividends and Principal Amount in connection with early
redemptions), by comparing the level of the Applicable Index at the date of
issuance of the ComPS with the level determined pursuant to the terms hereof for
any such date of redemption, reduced by the Factor. Accordingly, the Principal
Amount to be received upon any date of redemption will fluctuate based on the
Applicable Index (reduced by the Factor) and may be lower than the Face Amount.
If the Applicable Index decreases over the life of the ComPS, or if the
percentage increase in the Applicable Index is less than the amount of the
Factor, the Redemption Value will be less than the Face Amount. If the
percentage increase in the Applicable Index is greater than the amount of the
Factor, the Redemption Value will be greater than the Face Amount.
LIMITATION ON RIGHTS UNDER THE GUARANTEE, THE RELATED NOTE GUARANTEE AND THE
RELATED NOTE
The Guarantee will be effective with respect to the ComPS from the time of
issuance of the ComPS but will not apply to any payment of dividends or other
amounts due in respect of the ComPS to the extent Morgan Guaranty has failed to
make a payment of principal of or interest on the Related Note. To the extent
Morgan Guaranty were to default on its obligation to pay amounts payable on the
Related Note, the Trust, on behalf of holders of the Series [B] Securities,
would lack available funds for the payment of distributions on or amounts
payable on redemption of the ComPS and, in such event, holders of the ComPS
would not be able to rely on the Guarantee for payment of such amounts. Instead,
holders of the ComPS would rely on the enforcement by the Trust, on behalf of
holders of the Series [B] Securities, of its rights as holder of the Related
Note against Morgan Guaranty and of its rights as holder of the Related Note
Guarantee against J.P. Morgan. J.P. Morgan, through its obligations under the
Guarantee, the Related Note Guarantee and the Declaration, taken together, will
provide a full and unconditional guarantee, on a subordinated basis, of payments
due on the ComPS. See "Description of the Guarantee" and "Description of the
Related Note Guarantee".
SPECIAL EVENT REDEMPTION
Upon the occurrence of a Special Event, unless waived by Morgan Guaranty or
subject to cure as specified herein, Morgan Guaranty shall have the right to
redeem the Related Note, in whole or in part, in which event the Trust will
redeem the ComPS and related Series [B] Common Securities on a pro rata basis to
the same extent as the Principal Amount of the Related Note is redeemed by
Morgan Guaranty.
As described in more detail below, a Special Event is either (i) a Tax Event or
(ii) an Investment Company Event. A Special Event may occur at any time. See
"Description of the ComPS--Special Event Redemption".
It is possible that the occurrence of a Special Event could cause the market
price of the ComPS in any existing secondary market to decline.
LIMITED VOTING RIGHTS
Holders of ComPS will have certain voting rights relating to a payment default
on or an adverse change to the ComPS, but will not be entitled to vote to
appoint, remove or replace the Trustees of the Trust or to increase or decrease
the number of Trustees, which voting rights are vested exclusively in the
holders of
S-10
<PAGE> 12
the Series [B] Common Securities and other Common Securities. See "Description
of the ComPS--Voting Rights".
TRADING PRICE MAY NOT REFLECT ACTUAL ECONOMIC VALUE
The ComPS have been approved for listing on the Amex under the symbol ["JPO"],
subject to official notice of issuance. Trading of the ComPS on the Amex is
expected to commence within a 30-day period after the date of this Prospectus
Supplement. Prior to this offering there has been no market for the ComPS. It is
not possible to predict whether the necessary number of holders will purchase
and, for the remaining term of the ComPS, continue to hold ComPS in order that
any secondary market which does develop will continue to exist. The Underwriters
(as defined in "Underwriting") are not obligated to make a market for the ComPS,
and although J.P. Morgan Securities Inc. ("JPMSI") as lead Underwriter, intends
to use its reasonable efforts to do so, it is possible that no active secondary
market for the ComPS will develop and remain in existence.
There can be no assurance as to the market prices for the ComPS in any secondary
market which does develop. Accordingly, the ComPS that an investor may purchase,
whether pursuant to the offer made hereby or in the secondary market, may trade
at a discount to the price that the investor paid to purchase such ComPS.
VALUE OF THE COMPS
The value of the ComPS at any time will depend upon the interaction of at least
two key factors: (i) the level of the Applicable Index and (ii) the credit
quality of Morgan Guaranty and J.P. Morgan. As discussed under "Description of
the ComPS", adverse changes in the Applicable Index will directly correlate to
adverse changes in the value of the ComPS. Also, a decline in the credit quality
of Morgan Guaranty and J.P. Morgan could cause the trading price of the ComPS in
any secondary market then existing to decline.
RIGHT TO INTEREST ON RELATED NOTE
Because holders of ComPS are essentially investing in a pro rata share of the
Related Note, prospective purchasers of ComPS are also making an investment
decision with regard to the Related Note and should carefully review all the
information regarding the Related Note contained herein and in the accompanying
Prospectus. Investors in ComPS have a direct right to interest distributions on
the Related Note. See "Description of the Related Note".
IMPOSITION OF BANK REGULATORY RESTRICTIONS
The Trust's ability to make distributions and other payments on the ComPS is
dependent upon Morgan Guaranty's making interest and other payments on the
Related Note as and when required or collection by the Trust, on behalf of
holders of Series [B] Securities, under the Related Note Guarantee. As noted in
the accompanying Prospectus under "J.P. Morgan & Co. Incorporated--Regulation",
Morgan Guaranty is subject to examination and regulation by U.S. federal and
state banking authorities, and although there is no current restriction on
Morgan Guaranty's ability to make payments under the Related Note, certain
transactions with affiliates, including the Trust, are or may in the future
become subject to restrictions imposed by bank regulatory authorities.
EFFECT OF TRADING IN THE BENCHMARK CRUDE OIL CONTRACTS AND RELATED COMMODITIES
AND INSTRUMENTS
Morgan Guaranty and other affiliates of J.P. Morgan are and will be actively
involved in the trading of the Benchmark Crude Oil Contracts, U.S. Treasury
Bills and other instruments and derivative products based thereon. Morgan
Guaranty, in particular, is an active participant in various commodity markets
including the physical petroleum, precious and base metals and related
derivatives markets. JPMSI and other affiliates may also issue or underwrite, or
authorize unaffiliated entities to issue or underwrite, other securities or
financial instruments with returns indexed to the Applicable Index, the
Benchmark Crude Oil
S-11
<PAGE> 13
Contracts, U.S. Treasury Bills, one or more of the JPM Indices or to another
commodity. Morgan Guaranty has licensed, and may in the future license, the
Applicable Index, the JPM Indices, and related indices and sub-indices for use
by affiliated and unaffiliated parties, for publication in newspapers and
periodicals, for distribution by information and data dissemination services and
for other purposes. Morgan Guaranty currently intends to publish individual
commodity sub-indices for each of the commodities included in the JPMCI using
the same calculation methodology as that described below. The Applicable Index
on the date hereof is identical to the sub-index having the same underlying
commodity.
Trading in the foregoing contracts, U.S. Treasury Bills and commodities by
Morgan Guaranty, its affiliates (including JPMSI) and unaffiliated third parties
could adversely affect the value of the Applicable Index, which would in turn
adversely affect the return on and the value of the ComPS. See "Description of
the ComPS". Furthermore, additional issuances of securities linked or referenced
to the Benchmark Crude Oil Contracts, similar crude oil futures contracts or
crude oil could adversely affect the value of the ComPS.
POTENTIAL FOR ADVERSE INTERESTS
As noted above, Morgan Guaranty, JPMSI and their affiliates expect to engage in
trading activities related to the Benchmark Crude Oil Contracts and U.S.
Treasury Bills and other instruments or derivative products based on or related
to the Applicable Index, for their accounts where permitted or for other
accounts under their management. Morgan Guaranty, JPMSI and their affiliates, as
well as unaffiliated third parties, may also engage in other activities related
to the Applicable Index, as discussed above. Because Morgan Guaranty will issue
the Related Note issued to the Trust on behalf of holders of Series [B]
Securities, all such activities could create interests of Morgan Guaranty
adverse to those of the holders of ComPS. For example, the issuance of other
securities indexed to the Applicable Index, i.e., the introduction of competing
products into the marketplace, could adversely affect the value of the ComPS. To
the extent that J.P. Morgan or one of its affiliates serves as issuer, or JPMSI
or one of its affiliates serves as agent or underwriter, for such securities or
other instruments, their interests with respect to such products may be adverse
to those of the holders of the ComPS. Morgan Guaranty will serve as Calculation
Agent with respect to the ComPS and, accordingly, will in good faith calculate
the Applicable Index, which could also raise certain adverse interests (e.g., in
instances where Morgan Guaranty as the Calculation Agent is required to exercise
discretion).
RISK OF CARRYING AND ROLLING BENCHMARK CRUDE OIL CONTRACTS
As discussed below, the Early Redemption Value and the Redemption Value of the
ComPS will be calculated with reference to the Applicable Index, the value of
which is designed to replicate to the extent provided herein the cumulative
return of holding a continuous investment in the Benchmark Crude Oil Contracts,
plus the Collateral Return Component. At any given time, the Applicable Index
will be calculated based on the change in value of certain Benchmark Crude Oil
Contracts for delivery in the near term (the "shorter-dated contracts"), plus
the Collateral Return Component thereon. The Applicable Index will continue to
be calculated based on the change in value of such shorter-dated contracts until
they approach maturity, at which time the Applicable Index will, as described
below, cease to be calculated based on the change in value of such shorter-dated
contracts and begin to be calculated based on the change in value of the
subsequent Benchmark Crude Oil Contracts (the "longer-dated contracts") plus the
Collateral Return Component thereon on a regular periodic basis so as to be
continuously indexed to the change in value of Benchmark Crude Oil Contracts.
The period during which each such replacement of shorter-dated contracts with
longer-dated contracts as the basis for the calculation of the change in value
of the Applicable Index occurs is referred to herein as the "Rollover Period",
as further defined below. If the market for Benchmark Crude Oil Contracts is in
"contango" (i.e., the prices of longer-dated contracts are above the prices of
shorter-dated contracts), the return on the Applicable Index may be adversely
affected. The Applicable Index would decline if (i) the price of the
longer-dated Benchmark Crude Oil Contracts during the Rollover Period were more
than the price of the shorter-dated contracts which they will replace and (ii)
the price of the longer-dated contracts were to decline as such contracts
approach maturity (i.e., the price of the longer-dated contracts were to
converge toward the price of the replaced
S-12
<PAGE> 14
shorter-dated contracts), in each case in an amount greater than the Collateral
Return Component accruing during such period. While many of the commodities
included in the JPM Indices have historically exhibited periods of both
"backwardation" (i.e., the prices of longer-dated contracts are below the prices
of shorter-dated contracts) and contango, there can be no assurance that
backwardation will exist at any or all times. The absence of backwardation in
the market for Benchmark Crude Oil Contracts could adversely affect the
Applicable Index and, correspondingly, could adversely affect the value of the
ComPS. Additionally, the issuance and/or the trading of the ComPS could
adversely affect the market for Benchmark Crude Oil Contracts and the extent to
which such markets are in backwardation or contango and, correspondingly, could
adversely affect the value of the Applicable Index and the value of the ComPS.
See "Description of ComPS--Calculation of Redemption Value".
The following table sets forth the simulated month-end level of the JPMCI Crude
Oil Total Return Index (the Applicable Index) for the months from January, 1984
through January 1996, and the actual level of the JPMCI Crude Oil Total Return
Index thereafter. Because Morgan Guaranty did not commence actual calculation
and publication of the JPMCI Crude Oil Total Return Index using the rules
described herein until February 1, 1996, the levels prior to such date are
simulated levels only, derived by applying the rules of the JPMCI Crude Oil
Total Return Index as described herein to historical crude oil contract
settlement values and using as a given the level of the previous JPMCI Crude Oil
Total Return Index on January 31, 1996, as the basis for calculation:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Level of the Applicable Index as of the end of:
YEAR JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC.
- ---- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1984 79.29 82.08 83.95 83.37 85.61 83.13 77.26 81.97 83.30 80.27 78.06 75.98
1985 76.36 79.72 86.77 87.15 90.32 90.48 94.20 100.02 106.66 114.89 116.88 107.78
1986 81.61 57.79 44.72 57.82 64.67 58.48 52.22 75.54 70.33 71.89 70.25 83.78
1987 88.34 78.96 90.76 92.47 97.82 104.14 112.74 105.91 106.69 109.98 102.90 95.08
1988 97.84 93.22 100.27 106.88 103.98 90.07 96.43 89.28 79.60 83.47 95.16 110.04
1989 114.00 126.05 144.72 153.97 159.54 171.94 163.76 172.17 188.41 189.52 191.87 214.11
1990 233.52 226.28 212.36 189.27 174.17 165.93 193.53 260.41 387.69 360.46 306.23 310.38
1991 244.52 235.23 246.55 268.26 272.86 265.80 283.24 293.27 294.68 313.37 290.84 259.69
1992 256.22 252.37 260.99 280.26 296.53 291.02 296.13 292.61 298.70 285.36 274.74 268.70
1993 277.34 282.70 280.21 279.52 270.69 252.06 236.33 237.33 239.29 213.93 192.72 173.80
1994 183.62 174.09 177.04 203.64 227.06 248.49 269.93 237.06 247.30 244.23 245.03 241.70
1995 252.55 257.67 269.47 289.49 272.59 254.22 261.06 269.96 271.94 278.79 293.17 322.34
1996 300.79 341.25 393.40 428.43 419.19 464.22 471.34 528.85 598.67 585.03 600.80 672.44
1997 643.71 548.53 559.75 546.26 567.40 531.36 539.20 522.09 562.47
</TABLE>
Additionally, the level of the Applicable Index as of the close of business on
[the date of pricing] was [ ].
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<PAGE> 15
The following is a graph of such simulated and actual month-end values:
LEVELS OF JPMCI CRUDE OIL TOTAL RETURN INDEX, 1984-SEPTEMBER, 1997
[GRAPH]
Source: Morgan Guaranty
Using the year-end levels noted above as hypothetical ending values for the
Applicable Index Settlement Values and the three-year prior year-end levels as
hypothetical beginning values for the Applicable Index Commencement Values, the
hypothetical Redemption Value of a Series [B] Preferred Security as if maturing
at the end of each of the past ten years for a Series [B] Preferred Security
priced three years prior, with a hypothetical Face Amount of $25.00 and a
hypothetical Factor of 0.15 would be as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Hypothetical Applicable Index
Commencement Value Hypothetical Applicable Index ComPS Hypothetical
YEAR (3 years prior) Settlement Value Redemption Value
- ---------------- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C>
1987............ 75.98 95.08 $ 27.53
1988............ 107.78 110.04 $ 21.77
1989............ 83.78 214.11 $ 60.14
1990............ 95.08 310.38 $ 77.86
1991............ 110.04 259.69 $ 55.25
1992............ 214.11 268.70 $ 27.62
1993............ 310.38 173.80 $ 10.25
1994............ 259.69 241.70 $ 19.52
1995............ 268.70 322.34 $ 26.24
1996............ 173.80 672.44 $ 92.98
</TABLE>
WITH RESPECT TO THE FOREGOING MONTH-END VALUES AND HYPOTHETICAL REDEMPTION
VALUES, PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE AND VALUES.
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<PAGE> 16
VOLATILITY OF AND ADVERSE CHANGES TO CRUDE OIL AND CRUDE OIL FUTURES PRICES
Oil prices can fluctuate widely and they are affected by numerous factors other
than economic activity. They include weather, political events, labor activity,
direct government intervention such as embargos, and, especially, supply
disruptions in major producing or consuming regions such as the Middle East, the
United States, Latin America and Russia. Supply disruptions tend to affect oil
prices worldwide, regardless of the location of the disruption. Market
expectations about these events and speculative activity also cause prices to
fluctuate.
Oil demand and supply adjust to price changes, but mainly in the long term. That
is, the adjustment that eventually corrects the imbalance that caused the
initial price fluctuation takes time. In the short term, demand/supply
responsiveness to price changes is limited and, at times, in the opposite
direction. This characteristic tends to prolong and exacerbate price
fluctuations. For example, if prices rise, oil consumers will curtail their oil
demand over time; but often their immediate response has been a rise in demand
through increased stockpiling. In addition, the structure of oil supply is
different from that of most other commodities. Since the early 1970s, market
prices have been well above the average cost of production, while the marginal
producers have been the large, low-cost producers of the Middle East. Also,
political developments (especially in the Middle East) and the outcome of
meetings of the Organization of Petroleum Exporting Countries can particularly
affect world oil supply and oil prices.
The following table shows the year-end levels of the Benchmark Crude Oil
Contract from 1983:
<TABLE>
<CAPTION>
------------------------
NYMEX
1st Nearby Crude Oil
Futures Price at Year End
-------------------------
<S> <C>
12/31/83.............................................................. 29.60
12/31/84.............................................................. 26.41
12/31/85.............................................................. 26.30
12/31/86.............................................................. 17.94
12/31/87.............................................................. 16.70
12/31/88.............................................................. 17.24
12/31/89.............................................................. 21.82
12/31/90.............................................................. 28.44
12/31/91.............................................................. 19.12
12/31/92.............................................................. 19.50
12/31/93.............................................................. 14.17
12/31/94.............................................................. 17.76
12/31/95.............................................................. 19.55
12/31/96.............................................................. 25.92
</TABLE>
Furthermore, a significant proportion of world crude oil production capacity is
controlled by a small number of producers, and such producers have in the recent
past implemented curtailments of output and trade. Such efforts at supply
curtailment (or the cessation thereof) could affect the value of the Applicable
Index. Crude oil's major end-use as a refined product is as a transport fuel,
industrial fuel and in-home heating. Potential for substitution exists in most
areas, although considerations including relative cost often limit substitution
levels. However, the development of a substitute product or transport fuel could
adversely affect the value of the Applicable Index.
The supply of and demand for crude oil influence the crude oil price in the
medium-to-longer term. In the event of sudden disruptions in the supplies of
crude oil, such as those caused by war, accidents, weather or acts of terrorism,
prices of Benchmark Crude Oil Contracts and, consequently, the value of the
Applicable Index, could become extremely volatile and unpredictable. Also,
sudden and dramatic declines in Benchmark Crude Oil Contract prices as may
occur, for example, upon a cessation of hostilities that may exist in countries
producing crude oil or upon the discovery of significant additional sources or
reserves of
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<PAGE> 17
crude oil, the introduction of new or previously withheld supplies into the
market (e.g., crude oil from Iraq) or the introduction of substitute products or
commodities, could have a significant adverse effect on the value of the
Applicable Index and on the value of the ComPS. In addition, the price of crude
oil has on occasion been subject to very rapid and significant short-term
changes due to speculative activities which, if such activities result in a
price decrease, may cause the value of the ComPS to decrease. In any case, all
such volatility in the Benchmark Crude Oil Contracts will correlate directly to
volatility in the Applicable Index. Such volatility could lead some investors in
the Benchmark Crude Oil Contracts to withdraw from the applicable futures
markets, which could adversely affect the liquidity of such markets and could
adversely affect the value of the Applicable Index and, correspondingly, the
value of the ComPS.
See "Description of the ComPS--Calculation of Redemption Value".
CHANGE OF EXCHANGE METHODOLOGY
Any exchange on which any Benchmark Crude Oil Contract is traded or which
provides information relevant to the calculation of the Applicable Index may
from time to time change any rule or bylaw or take emergency action under its
rules, any of which could affect the settlement prices of the Benchmark Crude
Oil Contracts underlying an Applicable Index. Any such change which causes a
decrease in such settlement prices could adversely affect the value of the
Applicable Index.
SUSPENSION OR MATERIAL DISRUPTION OF FUTURES OR COMMODITIES TRADING; TEMPORARY
DISTORTIONS
The futures markets and the markets for crude oil are subject to temporary
distortions or other disruptions due to conditions of illiquidity in the
markets, the participation of speculators, government regulation and
intervention and the other factors. In addition, U.S. futures exchanges
(including the NYMEX) and certain foreign exchanges on which replacement
Benchmark Crude Oil Contracts, if any, may trade (which exchanges must have
information-sharing arrangements with the Securities and Exchange Commission and
be regulated exchanges located in the United States, Canada, the United Kingdom,
Japan, Singapore or a country that at such time is a member of the Organization
of Economic Cooperation and Development) have regulations which may limit the
amount of fluctuation of futures contract prices which may occur during a single
trading day. Such limits are generally referred to as "daily price fluctuation
limits" or, more commonly, "daily limits", and the maximum or minimum price of a
contract on any given day, as a result of the effect of such limits, is referred
to as a "limit price", as discussed below. In a particular futures contract,
once the limit price has been reached in such a contract, no trades may be made
on that day at a price above or below the limit price, as the case may be. Limit
prices may have the effect of precluding trading in a particular contract for
all or a portion of a trading day or forcing the liquidation of contracts at
disadvantageous times or prices. Any such circumstances, particularly if they
occur during the Rollover Period for the Applicable Index or during an Early
Determination Period or the Determination Period for the Applicable Index, could
adversely affect the value of the Applicable Index and/or could constitute a
Market Disruption Event and, therefore, could adversely affect the value of the
ComPS.
Depending on the period of time over which a Market Disruption Event continues,
the correlation between changes in the value of the Applicable Index and changes
in the general level of prices of crude oil may be adversely affected. Under
such circumstances, the value of the Applicable Index, and the value of the
ComPS, may be adversely affected.
Additionally, because the ComPS will be listed and will trade on a stock
exchange, trading in the ComPS may be subject to interruption or delay due to
extreme volatility in the trading prices of equity securities generally on such
exchange (the so-called "circuit breaker" rules), notwithstanding the specific
price movements of the ComPS.
MARKET DISRUPTION EVENTS
In the event of a Market Disruption Event during any Early Determination Period
or the Determination Period, the Early Redemption Value or Redemption Value, as
applicable, payable in respect of the ComPS
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will be calculated using the Applicable Index on the day or days on which
open-outcry trading on either the NYMEX or the London Metals Exchange (the
"LME") is scheduled to occur or occurs (each, a "Trading Day") immediately
following the termination of such Market Disruption Event. However, if such
Market Disruption Event remains in effect for longer than 20 consecutive Trading
Days and, in the reasonable judgment of Morgan Guaranty, such Market Disruption
Event is likely to remain in effect, then the Applicable Index Early Settlement
Value or the Applicable Index Settlement Value, as applicable, for each Trading
Day subject to a Market Disruption Event may be determined in good faith by
Morgan Guaranty based on alternative pricing sources reasonably believed by it
to be indicative of then-prevailing prices for notional transactions in futures
contracts or commodities equal in size to the Applicable Index Early Settlement
Value or the Applicable Index Settlement Value, as applicable, although Morgan
Guaranty has no obligation to do so, and such value will be utilized in the
calculation of the Early Redemption Value or the Redemption Value, as
applicable, for such days. Because Morgan Guaranty's obligations under the
Related Note will also be based on the Applicable Index Early Settlement Value
or the Applicable Index Settlement Value, Morgan Guaranty may have an adverse
interest with respect to such determination.
HISTORICAL CORRELATIONS MAY NOT PREVAIL IN THE FUTURE
Although historically the JPMCI Crude Oil Total Return Index and the spot prices
of crude oil have shown some positive correlation with inflation and some
negative correlation with stock and bond returns (in each case in the United
States), there can be no assurance that such correlations will prevail in the
future. As a result, investors who invest in ComPS in reliance on these
correlations should individually assess the likelihood of such correlations
continuing.
CHANGES IN LAWS OR REGULATIONS OR INTERPRETATIONS THEREOF
Prices of commodities and commodity futures contracts may be adversely affected
by the promulgation of new laws or regulations or by the reinterpretation of
existing laws or regulations (including, without limitation, those relating to
taxes and duties on commodities or commodity components) by one or more
governments, governmental agencies or instrumentalities, courts or other
official bodies. Any such event could adversely affect the value of the
Applicable Index and, correspondingly, could adversely affect the value of the
ComPS. Additionally, the occurrence of certain events increasing the cost of
holding or trading the Benchmark Crude Oil Contracts and the inability to find a
suitable replacement Benchmark Crude Oil Contract could lead Morgan Guaranty to
cause the Applicable Index Settlement Value to be fixed, which Applicable Index
Settlement Value would be utilized to determine any Early Redemption Value and
in which event the Redemption Value of the ComPS would not vary through Stated
Maturity. Such an early determination of the Applicable Index Settlement Value
may result in the holders of the ComPS receiving an amount that is less than
what indicative commodity and futures prices prevailing on any Early Redemption
Date or at the Stated Maturity would otherwise imply.
EXTENSION OF SETTLEMENT DATE OR STATED MATURITY
If any Benchmark Crude Oil Contract were to be affected by a Market Disruption
Event during any Early Determination Period or the Determination Period, the
applicable Settlement Date would be postponed until the later of (i) the
applicable Early Redemption Date or the Stated Maturity and (ii) the fifth
Business Day after the last day of the applicable Early Determination Period or
the Determination Period. Such delay could be of indefinite duration, during
which time a holder of ComPS will not receive the Early Redemption Value or
Redemption Value thereof, as applicable. In the event that payment of the
Redemption Value is postponed beyond the Stated Maturity, no interest or
dividends will accrue or be payable on the Face Amount, as described under the
caption "Description of the ComPS--Calculation of Redemption Value". In the
event payment of the Early Redemption Value is postponed beyond the applicable
Early Redemption Date, no dividends will be payable, and no interest will accrue
and be payable, with respect to ComPS redeemed on such Early Redemption Date.
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DISCONTINUANCE OF PUBLISHING OF THE JPMCI CRUDE OIL TOTAL RETURN INDEX
In the event that Morgan Guaranty discontinues publication of the JPMCI Crude
Oil Total Return Index, the Calculation Agent will continue to calculate in good
faith the Applicable Index during the remaining term of the ComPS, based on the
methodology described in the Prospectus under "Description of the ComPS".
However, such good-faith calculation may result in a ComPS Redemption Price or
ComPS Early Redemption Price for the ComPS which is less than the ComPS
Redemption Price or ComPS Early Redemption Price, as applicable, for such ComPS
had it been calculated on the basis of the JPMCI Crude Oil Total Return Index.
POTENTIAL MODIFICATIONS TO THE JPM INDICES AND/OR THE APPLICABLE INDEX
Morgan Guaranty reserves the right at its discretion to make any modifications
to the JPM Indices based on the recommendations of the JPMCI Policy Committee.
As described under "Description of the ComPS--Early Determination of Applicable
Index Settlement Value and Redemption Value", if any Benchmark Crude Oil
Contract becomes less liquid or representative, the JPMCI Policy Committee could
recommend a replacement Benchmark Crude Oil Contract. Such a change from a less
liquid to a more liquid contract may result in a lower Early Redemption Value or
Redemption Value for the ComPS than would have been the case if the less liquid
contract had remained the benchmark.
If at any time no replacement contracts can be found to serve as a Benchmark
Crude Oil Contract, the Applicable Index Settlement Value of the ComPS will be
determined at such time, as described under the caption "Description of the
ComPS--Early Determination of Applicable Index Settlement Value and Redemption
Value". Such an early determination of the Applicable Index Settlement Value may
result in the holders of the ComPS receiving an amount that is less than what
indicative commodity and futures prices prevailing on any Early Redemption Date
or at the Stated Maturity would otherwise imply. Because Morgan Guaranty will be
the Calculation Agent, such early determination may raise adverse interests.
Additionally, if at any time any Benchmark Crude Oil Contract, or the trading
thereof, becomes subject to any increased cost or additional tax, Morgan
Guaranty reserves the right to designate a replacement Benchmark Crude Oil
Contract or, if no such contract is designated, to cause, at its option, the
Applicable Index Settlement Value of the ComPS to be determined at such time as
described under "Description of the ComPS--Early Determination of Applicable
Index Settlement Value and Redemption Value". Because Morgan Guaranty will, at
the time any Benchmark Crude Oil Contract becomes subject to such increased cost
or additional tax, in its discretion decide whether or not to cause an early
determination of the Applicable Index Settlement Value of the ComPS, exercise of
such option may raise an adverse interest. Such a change in contracts due to the
imposition of any increased cost or additional tax may result in a lower
Redemption Value for such ComPS than would have been the case if the contract on
which such increased cost or additional tax were imposed had remained a
Benchmark Crude Oil Contract.
Any early determination of the Applicable Index Settlement Value may cause the
market price of ComPS in any existing secondary market to decline.
EARLY REDEMPTION
The ComPS may be redeemed prior to their Stated Maturity upon the occurrence of
a Special Event or redeemed at the option of the holders thereof on each
Optional Redemption Date. In the case of a redemption upon the occurrence of a
Special Event, the Early Redemption Value paid by the Trust at such time may be
significantly less than the Redemption Value that would otherwise have been
payable had the ComPS not been redeemed prior to their Stated Maturity and the
occurrence of such Special Event may cause the market price of ComPS in any
existing secondary market to decline. In the case of an optional redemption by
holders, it is likely, under usually-prevailing market conditions, that the
Early Redemption Value paid by the Trust will be less than the amount such
holder could have realized by selling such ComPS in an existing secondary
market, if any, ratably during the Early Determination Period. Delay in payment
of the ComPS Early Redemption Price (as a result of a Market Disruption Event or
a delay in the provision by DTC to the Trust of the Applicable Notice (as
defined below)) will not entitle holders of
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ComPS to additional dividends on the ComPS or the accrual of any interest on
such ComPS Early Redemption Price.
CERTAIN CONSIDERATIONS REGARDING HEDGING
Prospective purchasers of the ComPS who intend to hedge against the risks
associated with the market for crude oil should recognize the complexities of
utilizing the ComPS in this manner. The formula under which the Principal Amount
is calculated is not guaranteed to produce distributions to holders having
readily definable relationships with other crude oil market instruments and
products. As described below, because the Applicable Index is a Total Return
Index, the value of the ComPS will reflect not only the price of the Benchmark
Crude Oil Contracts but also the state of the futures market for Benchmark Crude
Oil Contracts (i.e., whether such market is in "backwardation" or "contango"
over time, as discussed above) and the Collateral Return Component, reduced by
the Factor. Also, under certain circumstances, amounts payable on the ComPS may
be based on the good faith determination of Morgan Guaranty and not on the
Applicable Index. For these reasons, investors should be cautious in using the
ComPS in a hedging program. The risks associated with utilizing the ComPS in a
hedging program may be magnified in periods of substantial crude oil price
volatility, since properly correlating the ComPS either as a hedge of other
assets or correlating the ComPS to a hedge thereof may become more difficult.
Also, investing in ComPS should not be considered a complete investment program.
ORIGINAL ISSUE DISCOUNT
The ComPS will be issued with original issue discount for Federal income tax
purposes. During each taxable period, holders of ComPS will be required to
include amounts in income in excess of current cash dividends. Such excess
amount, which will increase the holders' tax basis in the ComPS, may not be
received by holders upon redemption or sale of the ComPS. In such case, holders
will be entitled to tax loss (which would be ordinary under the position taken
by the Trust) for Federal income tax purposes.
J.P. MORGAN & CO. INCORPORATED
J.P. Morgan, whose origins date to a merchant banking firm founded in London in
1838, is the holding company for subsidiaries engaged globally in providing a
wide range of financial services to institutions, corporations, governments and
individuals. J.P. Morgan's activities are summarized in the Prospectus.
J.P. MORGAN INDEX FUNDING COMPANY I
J.P. Morgan Index Funding Company I is a statutory business trust formed on
December 12, 1996 under the Delaware Business Trust Act (the "Business Trust
Act") pursuant to (i) a declaration of trust among the Trustees and J.P. Morgan
and (ii) the filing of a certificate of trust with the Secretary of State of the
State of Delaware on December 12, 1996, which was restated pursuant to the
filing of a restated certificate of trust with the Secretary of State of the
State of Delaware on September 30, 1997. On October 10, 1997, J.P. Morgan, as
sponsor, and the Trustees entered into an amended and restated declaration of
trust, dated as of October 10, 1997 (the "Declaration"), filed as an exhibit to
the Registration Statement relating to this Prospectus Supplement and the
Prospectus. J.P. Morgan will acquire all series of Common Securities, including
the Series [B] Common Securities, of the Trust. The Declaration will be
qualified under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). The Company has been merged into the Trust (the "Merger")
pursuant to (i) an Agreement and Plan of Merger between the Trust and the
Company and (ii) a Certificate of Merger merging the Company into the Trust
filed with the Secretary of State of the State of Delaware. By operation of law,
the Trust has become the owner of all assets of the Company, including any
outstanding related notes corresponding to any series of Securities, and has
succeeded to all the obligations of the Company, including any outstanding
Preferred Securities and Common Securities theretofore issued by the Company,
including the Series A Securities, and all the rights of the Company, including
in respect of any related note guarantee executed in connection with such Series
A Securities. Following the effectiveness of the Merger, the outstanding Series
A Securities
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represent an undivided beneficial interest in the related note executed in
connection with such Series [A] Securities.
This description summarizes the material terms of the Declaration and is
qualified in its entirety by reference to the form of Declaration, which has
been filed as an exhibit to the Registration Statement of which this Prospectus
is a part, and the Trust Indenture Act.
SERIES [B] SECURITIES
Upon issuance of the Series [B] Preferred Securities, the holders thereof will
own all of the issued and outstanding Series [B] Preferred Securities, and J.P.
Morgan will own all of the issued and outstanding Series [B] Common Securities.
The certificates for each Series [B] Security will represent a fractional
undivided beneficial interest in certain assets of the Trust consisting of the
Related Note and the proceeds thereof, all monies due and to become due under
the Related Note, and the right to receive a portion of the payments of
principal of and interest on the Related Note. J.P. Morgan will acquire the
Series [B] Common Securities in a principal amount equal to 0.001% of the total
principal amount of the Series [B] Securities and will own all the issued and
outstanding Common Securities of the Trust which will represent 0.001% of the
total capital of the Trust. The Series [B] Preferred Securities and the Series
[B] Common Securities will rank pari passu with each other and will have
equivalent payment terms; provided that (i) if a Note Event of Default (as
defined herein) under the Related Note occurs and is continuing, the holders of
Series [B] Preferred Securities will have a priority over holders of Series [B]
Common Securities with respect to payments in respect of distributions and
payments upon liquidation, redemption and maturity and (ii) holders of Series
[B] Common Securities have the exclusive right (subject to the terms of the
Declaration) to appoint, remove or replace the Trustees and to increase or
decrease the number of Trustees. A Note Event of Default under the Related Note
will not prohibit payments in respect of distributions and payments upon
liquidation, redemption and maturity under a related note corresponding to any
other series of Securities or under such Securities. No holder of Securities of
any series shall have any claim on, or right to, any assets allocated to, or
associated with, any other series (except if, and to the extent that, such
holder is also a holder of Securities of such other series). The Trust exists
for the exclusive purposes of (a) issuing ComPS and Series [B] Common
Securities, and from time to time issuing additional series of Securities, (b)
investing the gross proceeds from the sale of the ComPS and the Series [B]
Common Securities in the Related Note and investing the proceeds of such
additional issuances of Securities in other debt obligations of Morgan Guaranty
and (c) engaging in only such other activities as are necessary, convenient or
incidental thereto. The rights of the holders of the Series [B] Securities,
including economic rights, rights to information and voting rights, are set
forth in the Declaration (which term shall include any Declaration Supplement),
the Business Trust Act and the Trust Indenture Act.
POWERS OF DUTIES OF TRUSTEES
The number of trustees (the "Trustees") of the Trust shall initially be five.
Three of such Trustees (the "Regular Trustees") are individuals who are
employees or officers of J.P. Morgan. The fourth such trustee will be First
Trust of New York, National Association, which is unaffiliated with J.P. Morgan
and which will serve as the property trustee (the "Property Trustee") and act as
the indenture trustee for purposes of the Trust Indenture Act. The fifth such
trustee is Wilmington Trust Company, which has its principal place of business
in the State of Delaware (the "Delaware Trustee"). Pursuant to the Declaration,
legal title to the Related Note will be held by the Property Trustee for the
benefit of the holders of the Series [B] Securities, and the Property Trustee
will have the power to exercise all rights, powers and privileges with respect
to the Related Note. In addition, the Property Trustee will maintain exclusive
control of a separate segregated non-interest-bearing bank account for the
Series [B] Securities (the "Property Account") to hold all payments in respect
of the Related Note for the benefit of the holders of the Series [B] Securities.
The Property Trustee will promptly make distributions to the holders of the
Series [B] Securities out of funds from the Property Account. The Guarantee is
separately qualified under the Trust Indenture Act and will be held by First
Trust of New York, National Association, acting in its capacity as indenture
trustee with respect thereto, for the benefit of the holders of the Series [B]
Preferred Securities and other
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Preferred Securities. As used in this Prospectus Supplement, the term "Property
Trustee" with respect to the Trust refers to First Trust of New York, National
Association acting either in its capacity as a Trustee under the Declaration and
the holder of legal title to the Related Note or in its capacity as indenture
trustee under, and the holder of, the Guarantee, as the context may require.
J.P. Morgan, as the owner of all of the Common Securities, will have the
exclusive right (subject to the terms of the Declaration) to appoint, remove or
replace Trustees and to increase or decrease the number of Trustees, provided
that the number of Trustees shall be at least five and the majority of Trustees
shall be Regular Trustees. The Regular Trustees are authorized and directed to
take such action as they deem reasonable in order that the Trust will not be
deemed to be an "investment company" required to be registered under the 1940
Act or that the Trust will not be classified for United States Federal income
tax purposes as an association taxable as a corporation or a partnership and
will be treated as a grantor trust for United States Federal income tax
purposes. In this connection, the Regular Trustees are authorized to take any
action, not inconsistent with applicable law, the certificate of trust of the
Trust or the Declaration, that the Regular Trustees determine in their
discretion to be reasonable and necessary or desirable for such purposes, as
long as such action does not adversely affect the interests of holders of the
Securities. The term of the Trust will be until November 21, 2105, but the Trust
may terminate earlier as provided in the Declaration.
The duties and obligations of the Trustees of the Trust will be governed by the
Declaration. Under the Declaration, the Trust (on behalf of a series of
Securities or otherwise) shall not, and the Trustees of the Trust shall not
cause the Trust (on behalf of a series of Securities or otherwise) to, engage in
any activity other than in connection with the purposes of the Trust or other
than as required or authorized by the Declaration. In particular, the Trust (on
behalf of a series of Securities or otherwise) shall not, and the Trustees of
the Trust shall cause the Trust (on behalf of a series of Securities or
otherwise) not to, (a) invest any proceeds received by the Trust from holding
the Related Note, but shall promptly distribute from the Property Account all
such proceeds to holders of the Series [B] Securities pursuant to the terms of
the Declaration and of the Series [B] Securities; (b) acquire any assets other
than as expressly provided in the Declaration; (c) possess Trust Property for
other than a Trust purpose; (d) make any loans, other than loans represented by
the Related Note and other related notes corresponding to other series of
Securities; (e) exercise any power or otherwise act in such a way as to vary the
assets of the Trust or the terms of the Series [B] Securities or other series of
Securities in any way whatsoever; (f) issue any securities or other evidences of
beneficial ownership of, or beneficial interests in, the Trust other than the
Series [B] Securities or other series of Securities associated with other
related notes; (g) incur any indebtedness for borrowed money or (h) (i) direct
the time, method and place of exercising any trust or power conferred upon the
Property Trustee of the Trust with respect to the Series [B] Securities or other
series of Securities, (ii) waive any past default that is waivable under the
Related Note (or other related notes) or the Declaration, (iii) exercise any
right to rescind or annul any declaration that the principal of all the Related
Note (or other related notes) deposited in the Trust as trust assets shall be
due and payable or (iv) consent to any amendment, modification or termination of
the Related Note (or other related notes) or the Declaration, in each case where
such consent shall be required, unless in the case of this clause (h) the
Property Trustee shall have received (i) an unqualified opinion of nationally
recognized independent tax counsel recognized as expert in such matters to the
effect that such action will not cause the Trust to be classified for United
States Federal income tax purposes as an association taxable as a corporation or
a partnership and that the Trust will continue to be classified as a grantor
trust for United States Federal income tax purposes and (ii) if required, the
approval of the holders of the Series [B] Securities or other series of
Securities for the taking of any such action. See "J.P. Morgan Index Funding
Company I -- Voting" and "Description of the ComPS -- Voting Rights".
BOOKS AND RECORDS
The books and records of the Trust will be maintained at the principal office of
the Trust and will be open for inspection by a holder of Preferred Securities or
such holder's representative for any purpose reasonably related to such holder's
interest in the related note held by the Trust, on behalf of holders of
Securities of the applicable series, during normal business hours. Separate and
distinct books and records will be maintained by the Trust for each series of
Securities, and the assets associated with, or related to,
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any such series will be held and accounted for separately from the assets of the
Trust generally or from the assets associated with, or related to, any other
series of Securities.
VOTING
Except as set forth below and under "Events of Default" below and under
"Description of the ComPS -- Voting Rights" and as provided under the Business
Trust Act, the Declaration and the Trust Indenture Act, holders of Series [B]
Preferred Securities will have no voting rights.
If any proposed amendment to the Declaration provides for, or the Regular
Trustees otherwise propose to effect, (i) any action that would adversely affect
the powers, preferences or special rights of the Securities, whether by way of
amendment to the Declaration or otherwise, or (ii) the dissolution or bankruptcy
of the Trust, then the holders of outstanding Securities will be entitled to
vote on such amendment or proposal as a class and such amendment or proposal
shall not be effective except with the approval of the holders of Securities
representing a majority in principal amount of such Securities; provided,
however, that if any amendment or proposal referred to in clause (i) above would
adversely affect only certain series of the Preferred Securities or certain
series of the Common Securities, then only the affected series or class, as
applicable, will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of a
majority in principal amount of such series or class, as applicable, of
Securities.
THE PROPERTY TRUSTEE
The Property Trustee, for the benefit of holders of the Series [B] Securities,
is authorized under the Declaration to exercise all rights with respect to the
Related Note deposited with the Property Trustee as a trust asset, including its
rights as the holder of the Related Note to enforce the Trust's rights under the
Related Note upon the occurrence of a Note Event of Default. The Property
Trustee is also authorized to enforce the rights of the Trust under the Related
Note Guarantee. Holders of at least a majority in principal amount of the Series
[B] Preferred Securities will have the right to direct the Property Trustee for
the Trust with respect to certain matters under the Declaration and the Related
Note Guarantee; provided that (a) such direction would not conflict with any
applicable law or the Declaration and would not result in any personal liability
or expense to the Property Trustee, (b) such direction would not cause the Trust
not to be properly classified as a grantor trust for U.S. Federal income tax
purposes and (c) the Property Trustee may take any other action deemed proper by
the Property Trustee which is not inconsistent with such direction. The
Declaration will provide that the Sponsor will pay the Property Trustee's fees
and expenses and will indemnify the Property Trustee in respect of certain
matters.
The Property Trustee is a depository for funds and performs other services for,
and transacts other banking business with, J.P. Morgan in the normal course of
business.
DISTRIBUTIONS
Pursuant to the Declaration, distributions on the Series [B] Securities must be
paid on the dates payable to the extent that the Property Trustee has cash on
hand in the Property Account to permit such payment. The funds available for
distribution to the holders of the Series [B] Securities will be limited to
payments received by the Property Trustee in respect of the Related Note. If
Morgan Guaranty does not make interest payments on the Related Note, the
Property Trustee will not make distributions on the Series [B] Securities. Under
the Declaration, except as set forth below, if and to the extent Morgan Guaranty
does make interest payments on the Related Note, the Property Trustee is
obligated to make distributions on the Series [B] Securities on a Pro Rata Basis
(as defined below). The payment of distributions on the Series [B] Preferred
Securities is guaranteed by J.P. Morgan on a subordinated basis as and to the
extent set forth under "Description of the Guarantee." The Guarantee, when taken
together with J.P. Morgan's obligations under the Related Note Guarantee and its
obligations under the Declaration, provides a full and unconditional guarantee
from the time of issuance of the Series [B] Preferred Securities of amounts due
on the Series [B] Preferred Securities. Such Guarantee itself, however, covers
distributions and other payments
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on the Series [B] Preferred Securities only if and to the extent that Morgan
Guaranty has made a payment to the Property Trustee of interest or principal on
the Related Note. As used in this Prospectus Supplement, the term "Pro Rata
Basis" shall mean pro rata to each holder of Series [B] Securities according to
the aggregate principal amount of all Series [B] Securities held by the relevant
holder in relation to the aggregate principal amount of the Series [B]
Securities outstanding unless, in relation to a payment, a Note Event of Default
under the Related Note has occurred and is continuing, in which case any funds
available to make such payment shall be paid first to each holder of the Series
[B] Preferred Securities pro rata according to the aggregate principal amount of
the Series [B] Preferred Securities held by the relevant holder in relation to
the aggregate principal amount of all the Series [B] Preferred Securities
outstanding, and only after satisfaction of all amounts owed to the holders of
the Series [B] Preferred Securities to each holder of Series [B] Common
Securities pro rata according to the aggregate principal amount of the Series
[B] Common Securities held by the relevant holder in relation to the aggregate
principal amount of all Series [B] Common Securities outstanding.
EVENTS OF DEFAULT
In the event that the Trust fails to pay dividends or other distributions on the
Series [B] Securities for 30 days following the date on which such payment was
due in accordance with the terms of such Series [B] Securities or if a Note
Event of Default occurs and is continuing with respect to the Related Note (a
"Note Event of Default"), an Event of Default under the Declaration will occur
and be continuing with respect to any outstanding Series [B] Securities. In such
event, the Declaration provides that holders of a majority in principal amount
of Series [B] Preferred Securities, acting as a single class, may cause the
Trust, on behalf of holders of the Series [B] Securities, by written direction
to the Property Trustee, to waive any such Note Event of Default or to enforce
the Trust's rights under the Related Note against Morgan Guaranty or under the
Related Note Guarantee against J.P. Morgan or, in the case of any failure to pay
dividends or other distributions, to cause the Trust to declare and pay such
dividends or distributions; provided, that such payments shall be paid solely
from the proceeds of interest or other payments made on the Related Note and
received by the Trust on behalf of holders of the Series [B] Securities.
Notwithstanding the foregoing, the right of any holder of Series [B] Securities
to receive payments or distributions on such Series [B] Securities in accordance
with the terms of the Declaration or such Series [B] Securities on or after the
respective payment dates therefor, or to institute suit for the enforcement of
any such payment on or after such payment dates, shall not be impaired without
the consent of such holder.
RECORD HOLDERS
The Declaration provides that the Trustees of the Trust may treat the person in
whose name a certificate representing Series [B] Preferred Securities is
registered on the books and records of the Trust as the sole holder thereof and
of the Series [B] Preferred Securities represented thereby for purposes of
receiving distributions and for all other purposes and, accordingly, shall not
be bound to recognize any equitable or other claim to or interest in such
certificate or in the Series [B] Preferred Securities represented thereby on the
part of any person, whether or not the Trust shall have actual or other notice
thereof. Series [B] Preferred Securities will be issued in fully registered form
and will be represented by a global certificate registered on the books and
records of the Trust in the name of The Depositary Trust Company ("DTC") or its
nominee. Under the Declaration:
(i) the Trust and the Trustees shall be entitled to deal with DTC (or
any successor) for all purposes, including the payment of distributions and
receiving approvals, votes or consents under the Declaration and, except as
set forth in the Declaration with respect to the Property Trustee, shall
have no obligation to persons owning a beneficial interest in any Series
[B] Preferred Securities ("Series [B] Preferred Security Beneficial
Owners") registered in the name of and held by DTC or its nominee; and
(ii) the rights of Series [B] Preferred Security Beneficial Owners shall
be exercised only through DTC (or any successor) and shall be limited to
those established by law and agreements between such
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Series [B] Preferred Security Beneficial Owners and DTC and/or its
participants. With respect to any Series [B] Preferred Securities
registered in the name of and held by DTC or its nominee, all notices and
other communications required under the Declaration shall be given to, and
all distributions on such Series [B] Preferred Securities shall be given or
made to, DTC (or its successor).
DEBTS AND OBLIGATIONS
The Declaration provides that any person or entity extending credit to,
contracting with, or having any claim against, the Trust with respect to any
series of Securities may look only to the assets of the Trust associated with
such series to satisfy or enforce any debt, liability, obligation or expense
incurred, contracted for or otherwise existing with respect to such series. In
the Declaration, J.P. Morgan has agreed to pay for all debts and obligations
(other than with respect to the Securities) and all costs and expenses of the
Trust, including the fees and expenses of its Trustees and any taxes and all
costs and expenses with respect thereto, to which the Trust may become subject,
except for United States withholding taxes. The foregoing obligations of J.P.
Morgan under the Declaration are for the benefit of, and shall be enforceable
by, any person to whom any such debts, obligations, costs, expenses and taxes
are owed a (a "Creditor"), whether or not such Creditor has received notice
thereof. Any such Creditor may enforce such obligations of J.P. Morgan directly
against J.P. Morgan and J.P. Morgan has irrevocably waived any right or remedy
to require that any such Creditor take any action against the Trust or any other
person before proceeding against J.P. Morgan. J.P. Morgan has agreed in the
Declaration to execute such additional agreements as may be necessary or
desirable in order to give full effect to the foregoing.
The business address of the Trust is c/o J.P. Morgan & Co. Incorporated, 60 Wall
Street, New York, New York 10260-0060, telephone number (212) 648-2323.
USE OF PROCEEDS
The Trust will invest the proceeds from the sale of the ComPS offered hereby and
the related Series [B] Common Securities in the Related Note of Morgan Guaranty,
the proceeds of which will be used by Morgan Guaranty for general corporate
purposes and for hedging its obligations under the Related Note.
At the time of the pricing of the ComPS, Morgan Guaranty hedged its anticipated
exposure under the Related Note and, subject to market conditions, Morgan
Guaranty expects that it will continue to hedge its exposure under the Related
Note from time to time following this offering of ComPS by taking long or short
positions in the Benchmark Crude Oil Contracts or in listed or over-the-counter
options contracts in, or other derivative or synthetic instruments related to,
several or all of the Benchmark Crude Oil Contracts. There can be no assurance
that Morgan Guaranty's initial hedging did not, and that its continued hedging
will not, affect the price of the Benchmark Crude Oil Contracts (and, as a
result, the economic terms and the subsequent value of the ComPS). In addition,
J.P. Morgan and its affiliates may from time to time purchase or otherwise
acquire a long or short position in the ComPS and may, in their sole discretion,
hold or resell such ComPS. Morgan Guaranty may also take positions in 3-month
Treasury Bills and in other types of appropriate financial instruments that may
become available in the future. To the extent Morgan Guaranty has a long hedge
position in several or all of the Benchmark Crude Oil Contracts or options
contracts in, or other derivative or synthetic instruments related to, several
or all of the Benchmark Crude Oil Contracts, Morgan Guaranty may liquidate a
portion or all of its holdings, as applicable, at or about the time of any Early
Redemption Date or the Stated Maturity of the Related Note (which correspond to
the Early Redemption Dates and the Stated Maturity of the ComPS). Depending on,
among other things, future market conditions, the aggregate amount and the
composition of those positions are likely to vary over time. Profits or losses
from any such position cannot be ascertained until that position is closed out
and any offsetting position or positions are taken into account. However, none
of the contracts or securities acquired in connection with any hedging activity
will be held for the benefit of holders of ComPS.
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DESCRIPTION OF THE COMPS
The ComPS will be issued pursuant to the Declaration. The following summary of
the principal terms and provisions of the ComPS does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the Prospectus
and the Declaration, a copy of which is filed as an exhibit to the Registration
Statement relating to this Prospectus Supplement and the Prospectus.
GENERAL
The Principal Amount of each of the ComPS, which is initially equal to the Face
Amount, will vary over the life of the ComPS in relation to the Applicable Index
(the JPMCI Crude Oil Total Return Index), reduced by the Factor. As described
herein, the Applicable Index will change based on the daily percentage change in
value of the Benchmark Crude Oil Contracts plus the Collateral Return Component.
The Principal Amount repayable on any Early Redemption Date, upon the occurrence
of any Special Event Redemption or at Stated Maturity will be determined,
pursuant to the terms described herein (including, without limitation, the
averaging of the Applicable Index over the Early Determination Period or the
Determination Period, as applicable, and the present-valuing of the dividends
and Principal Amount in connection with redemptions prior to Stated Maturity),
by comparing the level of the JPMCI Crude Oil Total Return Index set on the date
of issuance of the ComPS with the level determined pursuant to the terms hereof
for any such date of redemption, reduced by the Factor.
The Declaration authorizes the Trust to issue Preferred Securities and Common
Securities. All of the Common Securities will be owned by J.P. Morgan. Payments
of dividends on and redemptions of principal of the ComPS and the related Series
[B] Common Securities will be made on a pro rata basis among the ComPS and the
related Series [B] Common Securities, except that upon the occurrence and during
the continuance of a Note Event of Default or upon the occurrence of a
liquidation of the Trust, the rights of the holders of the Series [B] Common
Securities to receive payment of periodic dividends and payments upon
liquidation, redemption or otherwise will be subordinated to the rights of the
holders of all Series [B] Preferred Securities. The Guarantee does not permit
the incurrence of any indebtedness by the Trust (other than any Preferred
Securities thereof) while any Preferred Securities are outstanding. The payment
of distributions out of money held by the Trust, and payments upon liquidation
of the Trust, are guaranteed by J.P. Morgan to the extent described under
"Description of the Guarantee". The Guarantee does not cover payment of
distributions on, or payments of principal in respect of, the ComPS when Morgan
Guaranty has not made payment of principal or interest, as applicable, on the
Related Note. In such event, the remedy of a holder of ComPS is to direct the
Trust to enforce its rights under the Related Note and the Related Note
Guarantee with respect to such Related Note. See "-- Voting Rights" and "Effect
of Obligations Under the Guarantee, the Related Note Guarantee and the Related
Note".
DIVIDENDS
Dividends on the ComPS will be fixed at a rate per annum of [2.5]% of the Face
Amount of $[25] per Series [B] Preferred Security. The amount of dividends
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months (and actual days elapsed (but never more than 30), in the case of
periods of less than a month) and will include the first day but exclude the
last day of such period.
Dividends on the ComPS will be cumulative, will accrue from and including the
Issue Date and will be payable quarterly in arrears on the last calendar day of
each March, June, September and December, commencing , 199[ ], when,
as and if available for payment.
Dividends on the ComPS will be payable to the holders thereof as they appear on
the books and records of the Trust on the relevant record dates, which, as long
as the ComPS remain in book-entry only form, will be one Business Day prior to
the relevant payment dates. Subject to any applicable laws and regulations and
the provisions of the Declaration, each such payment will be made as described
under "-- Book-Entry Only Issuance -- The Depository Trust Company".
In the event that the ComPS do not continue to remain in book-entry only form,
the Regular Trustees shall have the right to select relevant record dates, which
shall be at least one Business Day prior to the relevant
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payment dates. In the event that any date on which dividends are to be made on
the ComPS is not a Business Day, then payment of the dividends payable on such
date will be made on the next succeeding Business Day (and without any interest
or other payment in respect of any such delay) except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date. A "Business Day" shall mean any day other than
Saturday, Sunday or any other day on which banking institutions in The City of
New York, New York are permitted or required by any applicable law to close.
The payment of dividends on the ComPS out of moneys held by the Trust, on behalf
of holders of the Series [B] Securities, is guaranteed by J.P. Morgan on a
subordinated basis as and to the extent set forth under "Description of the
Guarantee". The Guarantee is effective from the time of issuance of the ComPS,
but the Guarantee covers dividends and other payments on the ComPS only if and
to the extent that Morgan Guaranty has made a payment to the Trust, on behalf of
holders of the Series [B] Securities, of interest or principal on the Related
Note, as the case may be.
REDEMPTION AT STATED MATURITY
Unless previously redeemed pursuant to the optional or special redemption
provisions and subject to extension in the case of a Market Disruption Event (as
defined below), each of the outstanding ComPS will be redeemed by the Trust, in
cash, on the Stated Maturity, at the ComPS Redemption Price. The ComPS
Redemption Price is the sum of (a) the Redemption Value per Series [B] Preferred
Security plus (b) accrued but unpaid dividends on such ComPS to but excluding
the date of redemption.
CALCULATION OF REDEMPTION VALUE
The Principal Amount of each Series [B] Preferred Security is indexed to the
difference of (i) the Applicable Index, which is calculated based on the change
in value of certain crude oil futures contracts included from time to time in
the JPM Indices (such contracts, from time to time, the "Benchmark Crude Oil
Contracts") plus the Collateral Yield Component, and (ii) the Factor. On the
date of this Prospectus Supplement, the Benchmark Crude Oil Contract is the
NYMEX Light "Sweet" Crude Oil contract. Subject to the more complete definitions
and formulae contained in the accompanying Prospectus, the Principal Amount of
each Series [B] Preferred Security payable at Stated Maturity, subject to
extension in the case of a Market Disruption Event (the "Redemption Value"),
shall be determined by multiplying the Face Amount of each Series [B] Preferred
Security by the difference between (a) a fraction, the numerator of which is the
Applicable Index Settlement Value and the denominator of which is the Applicable
Index Commencement Value, and (b) the Factor. For purposes of this Prospectus
Supplement, the "Applicable Index Settlement Value" means the arithmetic average
(rounded to four digits following the decimal point) of the daily values of the
Applicable Index for each day of the Determination Period (the period of ten
consecutive Trading Days on which no Market Disruption Event occurs commencing
immediately following the twentieth scheduled Business Day prior to Stated
Maturity), and the "Applicable Index Commencement Value" means [ ]. The
ComPS Redemption Price will first be payable on the later of the Stated Maturity
and the fifth Business Day after the completion of the Determination Period.
For a complete description and definition of a Total Return Index, see
"Description of ComPS -- Calculation of Redemption Value" and "The JPM
Indices -- Total Return Methodology" in the Prospectus. As defined in the
accompanying Prospectus under "Description of ComPS -- Market Disruption
Events", a Market Disruption Event, as determined by Morgan Guaranty, is the
occurrence of one or more of the following on any Trading Day with respect to
any Benchmark Crude Oil Contract underlying the Applicable Index, or an exchange
on which any Benchmark Crude Oil Contract is traded (a "Relevant Exchange"): (a)
a day on which the fluctuation of the price of any Benchmark Crude Oil Contract
underlying the Applicable Index is materially limited by the rules of a Relevant
Exchange setting the maximum or minimum price for such day (a "Limit Price");
(b) a day on which the official settlement price (the "Settlement Price") on the
Relevant Exchange of a Benchmark Crude Oil Contract underlying the Applicable
Index is the Limit Price; (c) the failure of a Relevant Exchange to determine,
announce or publish the Settlement Price with respect to a Benchmark Crude Oil
Contract underlying the Applicable
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Index; (d) the material suspension of trading in any Benchmark Crude Oil
Contract underlying the Applicable Index on a Relevant Exchange; (e) the failure
of trading to commence, or the permanent discontinuation of trading, in any
Benchmark Crude Oil Contract underlying the Applicable Index on any Relevant
Exchange and (f) the imposition of any material limitation on trading in any
Benchmark Crude Oil Contract underlying the Applicable Index on any Relevant
Exchange.
EARLY DETERMINATION OF APPLICABLE INDEX SETTLEMENT VALUE AND REDEMPTION VALUE
Morgan Guaranty reserves the right at its discretion to make any modifications
to the JPM Indices based on the recommendations of the JPMCI Policy Committee.
As discussed in the accompanying Prospectus, the JPMCI Policy Committee advises
Morgan Guaranty with respect to, among other things, the composition of the JPM
Indices, the price sources upon which the JPM Indices are based (i.e., the
underlying futures contracts, including the Benchmark Crude Oil Contracts), and
the weightings and calculation methodology of the JPM Indices, with a view
toward maintaining the JPM Indices as appropriate commodity investment
benchmarks that serve as a measure of performance of the commodity markets. The
inclusion requirements for the futures contracts underlying the JPM Indices
require that such futures contracts be sufficiently liquid and representative
price sources. It is possible, however, that any such underlying contract could
become less liquid or representative and, as a result, the JPMCI Policy
Committee may recommend a modification in the calculation methodology or the
contracts underlying the JPM Indices and, therefore, the Applicable Index. Any
such replacement contract (i) will be required to satisfy the JPMCI Inclusion
Criteria, as described in the Prospectus under the caption "The JPMCI Policy
Committee", (ii) must be traded in a market or with a self-regulator which has
established either (a) a comprehensive information sharing agreement with the
exchange, if any, on which the ComPS are then traded or (b) suitable alternative
arrangements with the Commission and (iii) will be with respect to the same
general commodity type as the contract being replaced (e.g., assuming the JPMCI
Policy Committee recommends a modification and assuming the requirements of
clauses (i) and (ii) are satisfied, a NYMEX crude oil futures contract could be
replaced by an International Petroleum Exchange crude oil futures contract).
Under no circumstances will the general commodity type underlying the futures
contract be changed (e.g., a crude oil futures contract could not be replaced by
a gold futures contract).
If at any time no contract satisfying both clauses (i) and (ii) of the previous
paragraph can be found to serve as a Benchmark Crude Oil Contract, the
Applicable Index Settlement Value of the ComPS will be determined at such time
(in accordance with the methodology for the Total Return ComPS set forth above
under the caption "Description of the ComPS--Early Redemption Upon the
Occurrence of a Special Event or at the Election of the Holders") as if the last
date of the inclusion of the final Benchmark Crude Oil Contract in the JPM
Indices were the Early Redemption Date. However, the ComPS will not be redeemed
at such time; rather, the ComPS will remain outstanding to Stated Maturity, will
continue to be entitled to dividends and will be redeemed at Stated Maturity for
a Redemption Value calculated using the Applicable Index Settlement Value
determined at such time as no contract satisfying clauses (i) and (ii) of the
previous paragraph was able to be found. Such ComPS will also be subject to
redemption upon the occurrence of a Special Event and optional redemption on
each Optional Redemption Date (treating the Applicable Index Settlement Value
determined pursuant to the terms of this paragraph as the Applicable Index Early
Settlement Value for any Early Redemption Date).
Additionally, if at any time any Benchmark Crude Oil Contract, or the trading
thereof, becomes subject to any increased cost or additional tax, whether
imposed by any exchange or otherwise, Morgan Guaranty reserves the right (x) to
designate a replacement Benchmark Crude Oil Contract, satisfying both clauses
(i) and (ii) of the second preceding paragraph, which contract is subject to an
amount of cost or tax less than or equal to such increased amount, or (y) if no
contract satisfying clause (x) of this paragraph is designated by Morgan
Guaranty, to cause, at its option, the Applicable Index Settlement Value of the
ComPS to be determined at such time (in accordance with the methodology set
forth above) as if the date of such increase in cost or tax (or, in Morgan
Guaranty's discretion, the last calendar day of the month in which the
determination of the Applicable Index Settlement Value is completed) were the
applicable Early Redemption Date. However, the ComPS will not be redeemed at
such time; rather, the ComPS will remain
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outstanding to Stated Maturity, will continue to be entitled to dividends and
will be redeemed at Stated Maturity for a Redemption Value calculated using the
Applicable Index Settlement Value determined pursuant to the terms of this
paragraph. Such ComPS will also be subject to redemption upon the occurrence of
a Special Event and optional redemption on each Optional Redemption Date
(treating the Applicable Index Settlement Value determined pursuant to the terms
of this paragraph as the Applicable Index Early Settlement Value for any Early
Redemption Date). See "Risk Factors -- Potential Modification to the JPM Indices
and/or the Applicable Index".
OPTIONAL REDEMPTION
The ComPS will be subject to redemption prior to their Stated Maturity at the
election of the holders thereof on each [anniversary of Stated Maturity] prior
to the Stated Maturity, beginning [anniversary of Stated Maturity], 1998 (each,
an "Optional Redemption Date"). In order to effect an Optional Redemption, any
such redeeming holder will be required to provide notice of the number of ComPS
to be redeemed on such Optional Redemption Date to a Participant or Direct
Participant in DTC, and such Participant or Direct Participant must communicate
such notice to DTC no earlier than 32 scheduled Business Days prior to but no
later than 22 scheduled Business Days prior to the applicable Optional
Redemption Date. The DTC will then provide notice to the Trust (which will
promptly notify the Property Trustee) or its Transfer Agent of the total number
of ComPS to be redeemed on the Optional Redemption Date (the "Applicable
Notice"). Each Applicable Notice will be provided by DTC to the Trust by 12:30
p.m. New York time on the Business Day next succeeding the last day of the
applicable notice period. Each Applicable Notice will be irrevocable upon
receipt by the Trust or its Transfer Agent, and may not be withdrawn or modified
after such receipt. Additionally, the Early Determination Period will not
commence until the Trust has received the Applicable Notice and the applicable
Optional Redemption Date will be subject to extension in the case of a Market
Disruption Event. The redeeming holders will be entitled to the ComPS Early
Redemption Price for each Series [B] Preferred Security redeemed, which is equal
to (a) the Early Redemption Value for such ComPS plus (b) accrued and unpaid
dividends thereon to but excluding the scheduled Optional Redemption Date. The
Early Redemption Value of such ComPS shall be determined in accordance with the
formula specified in the Prospectus; provided that, for the purposes of this
Prospectus Supplement, "Unused Costs" shall equal [1.0% (one percent)]. See
"-- Book Entry Issuance -- The Depository Trust Company" herein and "Description
of ComPS -- Early Redemption Upon the Occurrence of a Special Event or at the
Election of the Holders of the ComPS" in the Prospectus.
SPECIAL EVENT REDEMPTION
The ComPS will be subject to redemption by the Trust prior to Stated Maturity,
at its option, upon the occurrence of a Tax Event or an Investment Company Event
(each, a "Special Event"), as discussed herein.
"Tax Event" means that the Trust shall have obtained an opinion of nationally
recognized independent tax counsel experienced in such matters (a "Tax Opinion")
to the effect that, as a result of (a) any amendment to, or change (including
any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision or taxing authority thereof or
therein, (b) any amendment to, or change in, an interpretation or application of
any such laws or regulations by any legislative body, court, governmental agency
or regulatory authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination), (c) any
interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the theretofore generally accepted
position or (d) any action taken by any governmental agency or regulatory
authority, which amendment or change is enacted, promulgated, issued or
announced or which interpretation or pronouncement is issued or announced or
which action is taken, in each case on or after the date of this Prospectus
Supplement, there is more than an insubstantial risk that at such time or within
90 days of the date thereof (i) the Trust is or would be subject to United
States Federal income tax with respect to income accrued or received on the
Related Note, (ii) the interest payable on the Related Note is not, or would not
be, deductible by Morgan Guaranty for United States Federal income tax purposes,
(iii) the
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contingent principal in excess of the Face Amount, if any, payable on the
Related Note is not, or would not be, deductible by Morgan Guaranty for United
States Federal income tax purposes or (iv) the Trust is or would be subject to
more than a de minimis amount of other taxes, duties, assessments or other
governmental charges.
"Investment Company Event" means that the Trust shall have received an opinion
of a nationally recognized independent counsel experienced in such matters to
the effect that, as a result of the occurrence of a change in law or regulation,
a written change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority or the
expiration or revocation of any exemption from any provisions of the Investment
Company Act of 1940, as amended (the "1940 Act"), obtained by the Trust (a
"Change in 1940 Act Law"), there is more than an insubstantial risk that the
Trust is or will be considered an "investment company" that is required to be
registered as such under the 1940 Act, which Change in 1940 Act Law becomes
effective on or after the date of this Prospectus Supplement.
If at any time a Tax Event or an Investment Company Event shall occur and be
continuing, J.P. Morgan shall elect to either:
(a) direct, within 90 days following the occurrence of such Special
Event, Morgan Guaranty to redeem the Related Note in whole or in part, upon
not less than 22 scheduled Business Days' notice to DTC, in which case the
Trust shall redeem in cash on a pro rata basis ComPS and related Series [B]
Common Securities having an aggregate Principal Amount equal to the
Principal Amount of the Related Note so redeemed, at a price per Series [B]
Preferred Security of the Early Redemption Value, plus an amount equal to
all accrued and unpaid dividends on such ComPS to but excluding such Early
Redemption Date; provided, that Morgan Guaranty shall only be entitled to
redeem the Related Note in part if such partial redemption is sufficient to
cause such Special Event to cease; or
(b) in the case of a Tax Event, allow the Related Note and the ComPS to
remain outstanding and indemnify the Trust for all taxes payable by it as a
result of such Tax Event (if any);
provided that, if at the time there is available to the Trust the opportunity to
eliminate, within such 90-day period, the Special Event by taking some
ministerial action, such as filing a form or making an election, or pursuing
some other similar reasonable measure, that has no adverse effect on the Trust,
J.P. Morgan, Morgan Guaranty or the holders of ComPS, the Trust will pursue such
measure in lieu of redemption; provided further, that Morgan Guaranty shall have
no right to redeem the Related Note while the Trust is pursuing any such
ministerial action or reasonable measure unless the Special Event shall not have
been so eliminated by the 85th day following the occurrence thereof, in which
case J.P. Morgan shall be permitted to direct Morgan Guaranty to provide notice
to the Trust of the redemption of the Related Note.
Under current United States Federal income tax law, a redemption of ComPS upon
the occurrence of a Special Event, whether or not upon dissolution of the Trust,
would be a taxable event to such holders. See "United States Federal Income
Taxation".
REDEMPTION PROCEDURES
In the case of a redemption by a holder of ComPS on an Optional Redemption Date,
any such redeeming holder will be required to provide notice of the number of
ComPS to be redeemed on such Optional Redemption Date to a Participant in DTC,
and such Participant must communicate such notice to DTC no earlier than 32
scheduled Business Days prior to but no later than 22 scheduled Business Days
prior to the applicable Optional Redemption Date.
In the case of a redemption of ComPS upon the occurrence of a Special Event, the
Trust will provide notice of such redemption to the Transfer Agent and to DTC on
a date not less than 22 scheduled Business Days prior to such Early Redemption
Date stating, among other things, the date of such redemption.
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The related Series [B] Common Securities will be redeemed on a pro rata basis
with the ComPS except that, in the case of any dissolution or liquidation in
which the assets of the Trust consisting of the Related Note and the proceeds
thereof are insufficient to repay in full the Principal Amount of all Series [B]
Preferred Securities then outstanding, all Series [B] Preferred Securities will
be redeemed prior to the redemption of any Series [B] Common Securities. ComPS
registered in the name of and held by DTC (as defined herein) or its nominee
will be redeemed in accordance with DTC's standard procedures. See "--Book-Entry
Only Issuance--The Depository Trust Company".
Payment of the ComPS Redemption Price or the ComPS Early Redemption Price, as
applicable, of the ComPS is conditioned upon delivery or book-entry transfer of
such ComPS (together with necessary endorsements) to the Trust at any time
(whether prior to, on or after the relevant Redemption Date) after the required
notice is given (to the extent such notice is required). See "--Book-Entry Only
Issuance--The Depository Trust Company". Payment of the ComPS Redemption Price
or the ComPS Early Redemption Price, as applicable, for such ComPS will be made
by the delivery of cash no later than the applicable Settlement Date with
respect to such ComPS (subject to delay in the case of a Market Disruption
Event) or, if later, the time of delivery or book-entry transfer of such ComPS.
If the Trust, on behalf of holders of Series [B] Securities holds money
sufficient to pay the ComPS Redemption Price or the ComPS Early Redemption
Price, as applicable, of the ComPS on the applicable Settlement Date, then
immediately at the close of business on such Settlement Date, such ComPS will
cease to be outstanding and dividends with respect to such ComPS will cease to
accrue, whether or not such ComPS are delivered to the Trust, and all rights of
the holder of such ComPS shall terminate and lapse, other than the right to
receive the ComPS Redemption Price or the ComPS Early Redemption Price, as
applicable, upon delivery of the ComPS.
Provided that Morgan Guaranty has paid to the Trust, on behalf of holders of
Series [B] Securities the required amount of cash due upon any redemption or at
the maturity of the Related Note, the Trust, on behalf of holders of Series [B]
Securities will irrevocably deposit with DTC no later than the close of business
on the applicable Settlement Date funds sufficient to pay the ComPS Redemption
Price or the ComPS Early Redemption Price, as applicable, payable with respect
to ComPS on such date and will give the Depositary irrevocable instructions and
authority to pay such amount to the holders of ComPS entitled thereto. See
"--Book-Entry Only Issuance--The Depository Trust Company". In the event that
any Settlement Date is not a Business Day, then payment of the ComPS Redemption
Price or the ComPS Early Redemption Price, as applicable, payable on such date
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 distributions will accrue from
and after such date, except that, if such Business Day falls in the next
calendar year such payment will be made on the immediately preceding Business
Day. In the event that payment of the ComPS Redemption Price or the ComPS Early
Redemption Price, as applicable, is improperly withheld or refused and not paid
by the Trust or by J.P. Morgan pursuant to the Guarantee, dividends on such
ComPS will continue to accrue from the original Redemption Date to the actual
date of payment by theTrust to DTC.
If a partial redemption as a result of a Special Event Redemption by Morgan
Guaranty of a part or all of the Related Note would result in the delisting of
the ComPS by any national securities exchange (or automated inter-dealer
quotation system, including The Nasdaq Stock Market ("Nasdaq")) on which the
ComPS are then listed, Morgan Guaranty may only redeem the Related Note in whole
and, as a result, the Trust may only redeem the ComPS in whole.
Subject to the foregoing and to applicable law (including, without limitation,
United States Federal securities laws), J.P. Morgan or its affiliates may, at
any time and from time to time, purchase outstanding ComPS by tender, in the
open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any dissolution of the Trust (a "Liquidation Event"), whether
voluntary or involuntary, the holders of ComPS on the date of such Liquidation
Event will be entitled to be paid out of the assets of the Trust consisting of
the Related Note and the proceeds thereof, and after satisfaction of liabilities
to creditors of the Trust with respect to Series [B] Securities, the Liquidation
Distribution. The "Liquidation
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Distribution" will be equal to (a) the Early Redemption Value with respect to
such ComPS (treating the date of such distribution as the Early Redemption Date)
plus (b) the amount of accrued and unpaid dividends on such ComPS to but
excluding the date of payment. To the extent such assets of the Trust are
insufficient to repay all amounts due to holders of all the ComPS, holders of
the ComPS then outstanding will be entitled to a pro rata share of such assets
of the Trust, based upon the relative Principal Amounts of all ComPS
outstanding. In addition, in the event that such assets of the Trust exceed the
amount necessary to pay to all holders of ComPS the full amount of the
Liquidation Distribution, such excess will be paid to the holders of the Series
[B] Common Securities, in an amount sufficient to cover the Liquidation
Distribution in respect of all Series [B] Common Securities, and thereafter pro
rata to the holders of the ComPS and the Series [B] Common Securities.
Pursuant to the Declaration, the legal existence of the Trust shall terminate on
November 21, 2105.
VOTING RIGHTS
Except as described herein and under "--Modification of the Declaration" and
under "J.P. Morgan Index Funding Company I -- Voting", and as otherwise required
by law and the Declaration, the holders of the ComPS will have no voting rights.
Pursuant to the provisions of the Guarantee, certain amendments to or
modifications of the Guarantee may only be effected with the approval of a
majority in aggregate Principal Amount at such time of the ComPS and all other
affected Preferred Securities. See "Description of the Guarantee--Modification
of the Guarantee".
Pursuant to the provisions of the Related Note, the Related Note Guarantee and
the Declaration, certain amendments to or modifications of the Related Note or
the Related Note Guarantee may only be effected with the approval of a majority
in aggregate Principal Amount at such time of the ComPS. See "Description of the
Related Note--Modification of the Related Note".
Notwithstanding that holders of ComPS are entitled to vote or consent under any
of the circumstances described above, any of the ComPS that are owned at such
time by J.P. Morgan or any entity directly or indirectly controlling or
controlled by, or under direct or indirect common control with, J.P. Morgan,
shall not be entitled to vote or consent and shall, for purposes of such vote or
consent, be treated as if such ComPS were not outstanding.
The procedures by which holders of ComPS may exercise their voting rights are
described below under "--Book-Entry Only Issuance--The Depository Trust Company"
and in the Declaration.
MODIFICATION OF THE DECLARATION
The Declaration may be amended or modified if approved by a written instrument
executed by a majority in interest of the holders of Common Securities; provided
that, if any proposed amendment provides for (i) any action that would adversely
affect the powers, preferences or special rights of the ComPS or (ii) the
dissolution of the Trust other than pursuant to the terms of the Declaration,
then the holders of all affected outstanding Preferred Securities (or, in the
case of an event described in clause (ii), all Preferred Securities, including
the ComPS) of the Trust voting together as a single class will be entitled to
vote on such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of holders of not less than a majority in
aggregate Principal Amount of all affected outstanding Preferred Securities (or,
in the case of an event described in clause (ii), all Preferred Securities) of
the Trust affected thereby.
The Declaration further provides that it may be amended without the consent of
the holders of the ComPS to (i) cure any ambiguity, (ii) correct or supplement
any provision in the Declaration that may be defective or inconsistent with any
other provision of the Declaration, (iii) add to the covenants, restrictions or
obligations of J.P. Morgan, (iv) conform to changes in, or a change in
interpretation or application of, certain requirements of the 1940 Act by the
Commission and (v) conform to certain requirements of the Code with respect to
the characterization of the Trust for U.S. Federal income tax purposes, so long
as
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such amendment does not adversely affect the rights, preferences or privileges
of the holders of the ComPS.
LISTING
The ComPS have been approved for listing on the Amex under the symbol ["JPO"],
subject to official notice of issuance. Trading of the ComPS on the Amex is
expected to commence within a 30-day period after the date of this Prospectus
Supplement. Prior to this offering, there has been no market for the ComPS.
ACCOUNTING TREATMENT
The financial statements of the Trust will be included in the consolidated
financial statements of J.P. Morgan, with the ComPS included on the balance
sheet as "Long-term debt not qualifying as risk-based capital", with a footnote
disclosing that (1) the Trust is a wholly-owned subsidiary of J.P. Morgan, (2)
the sole assets of the Trust are the Related Note and other similar notes,
specifying the principal amount, interest rate and maturity of each, and (3)
considered together, the Guarantee and the Related Note Guarantee and J.P.
Morgan's obligations under the Declaration constitute a full and unconditional
guarantee by J.P. Morgan with respect to the ComPS.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into or be replaced by,
or convey, transfer or lease its properties and assets substantially as an
entirety to, any corporation or other entity.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
DTC will act as securities depositary for the ComPS. The ComPS will be issued
only as fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global ComPS certificates, representing
the total aggregate number of ComPS, will be issued and will be deposited with
DTC.
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, as amended (the "Exchange Act"). DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations ("Direct Participants"). DTC is owned by a number of its
Direct Participants and by the New York Stock Exchange, the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others, such as securities brokers and
dealers, banks and trust companies that clear transactions through or maintain a
direct or indirect custodial relationship with a Direct Participant either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Commission.
Purchases of ComPS within the DTC system must be made by or through Direct
Participants, which will receive a credit for the ComPS on DTC's records. The
ownership interest of each actual purchaser of each Series [B] Preferred
Security ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchases, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct or Indirect Participants
through which the Beneficial Owners purchased ComPS. Transfers of ownership
interests in the ComPS are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial
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Owners will not receive certificates representing their ownership interests in
the ComPS, except in the event that use of the book-entry system for the ComPS
is discontinued.
To facilitate subsequent transfers, all ComPS deposited by Participants with DTC
are registered in the name of DTC's nominee, Cede & Co. The deposit of ComPS
with DTC and their registration in the name of Cede & Co. effect no change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of
the ComPS. DTC's records reflect only the identity of the Direct Participants to
whose accounts such ComPS are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants and by Direct and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements that may be in effect from
time to time.
In the case of a Special Event Redemption, redemption notices shall be sent to
Cede & Co. If less than all of the ComPS are being redeemed, DTC will reduce the
amount of the interest of each Direct Participant in such ComPS in accordance
with its procedures. In the case of an Optional Redemption, redemption notices
shall be provided by Beneficial Owners and Participants to DTC in accordance
with its procedures. DTC will then provide the Applicable Notice to the Trust or
its Transfer Agent of the number of ComPS to be redeemed on the applicable
Optional Redemption Date. The Applicable Notice will be irrevocable upon receipt
by the Trust or its Transfer Agent, and may not be withdrawn or modified after
such receipt.
Although voting with respect to the ComPS is limited, in those cases where a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to ComPS. Under its usual procedures, DTC would mail an Omnibus Proxy to
the Trust as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co. consenting or voting rights to those Direct Participants to whose
accounts the ComPS are credited on the record date (identified in a listing
attached to the Omnibus Proxy). J.P. Morgan and the Trust believe that the
arrangements among DTC, Direct and Indirect Participants and Beneficial Owners
will enable the Beneficial Owners to exercise rights equivalent in substance to
the rights that can be directly exercised by a holder of an interest in the
assets of the Trust consisting of the Related Note and the proceeds thereof.
Dividend payments on the ComPS will be made to DTC. DTC's practice is to credit
Direct Participants' accounts on the relevant payment date in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in "street name", and such payments will
be the responsibility of such Participant and not of DTC, the Trust or J.P.
Morgan, subject to any statutory or regulatory requirements to the contrary that
may be in effect from time to time. Payment of dividends to DTC is the
responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary with respect
to the ComPS at any time by giving reasonable notice to the Trust. Under such
circumstances, in the event that a successor securities depositary is not
obtained, ComPS certificates are required to be printed and delivered.
Additionally, the Trust may decide to discontinue use of the system of
book-entry transfers through DTC (or any successor depositary) with respect to
the ComPS. In that event, certificates for the ComPS will be printed and
delivered.
The information in this section concerning DTC and DTC's book-entry system has
been obtained from sources that J.P. Morgan believes to be reliable, but neither
J.P. Morgan nor the Trust takes responsibility for the accuracy thereof.
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REGISTRAR, TRANSFER AGENT AND PAYING AGENT
In the event the ComPS do not remain in book-entry only form, the following
provisions will apply:
Payment of distributions and payments on redemption of the ComPS will be
payable, the transfer of the ComPS will be registrable and ComPS will be
exchangeable for ComPS of other denominations of a like aggregate principal
amount at the principal corporate trust office of the Property Trustee in The
City of New York; provided that payment of distributions may be made at the
option of the Regular Trustees on behalf of the Trust by check mailed to the
address of the persons entitled thereto and that the payment on redemption of
ComPS will be made only upon surrender of such ComPS to the Property Trustee.
First Trust of New York, National Association or one of its affiliates will act
as registrar and transfer agent for the ComPS. First Trust of New York, National
Association will also act as paying agent and, with the consent of the Regular
Trustees, may designate additional paying agents.
Registration of transfers of ComPS will be effected without charge by or on
behalf of the Trust, but upon payment (with the giving of such indemnity as the
Trust may require) in respect of any tax or other governmental charges that may
be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of ComPS after such ComPS have been called for redemption.
GOVERNING LAW
The Declaration and the ComPS will be governed by and interpreted in accordance
with the laws of the State of Delaware.
DESCRIPTION OF THE RELATED NOTE
Set forth below is a summary of the terms of the Related Note in which the Trust
will invest the proceeds from the issuance and sale of the ComPS and the related
Series [B] Common Securities. The following description does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Prospectus and the Related Note, the form of which is filed as an exhibit to
the Registration Statement relating to this Prospectus Supplement and the
Prospectus. Certain capitalized terms are used herein as defined in the Related
Note.
GENERAL
The Related Note will be issued as an unsecured, unsubordinated obligation of
Morgan Guaranty, limited in initial principal amount to approximately $ ,
such amount being the sum of the aggregate Initial Public Offering Price shown
on the cover page hereof for the ComPS and the related Series [B] Common
Securities issued in connection therewith.
The Related Note is not subject to a sinking fund provision. The entire
Principal Amount of the Related Note will mature and become due and payable,
together with any accrued and unpaid interest thereon, if any, on the Stated
Maturity (subject to extension in the case of a Market Disruption Event),
subject to the prior redemption of the Related Note in whole or in part at the
option of the holders of ComPS or in certain circumstances upon the occurrence
of a Special Event. If Morgan Guaranty redeems the Related Note in whole or in
part, the Trust must redeem on a pro rata basis ComPS and related Series [B]
Common Securities having an aggregate Principal Amount equal to the Principal
Amount of the Related Note so redeemed at the ComPS Early Redemption Price. See
"Description of the ComPS--Redemption at Stated Maturity; --Special Event
Redemption".
RELATED NOTE REDEMPTION PRICE
The amount payable under the Related Note by Morgan Guaranty to the Property
Trustee, on behalf of holders of Series [B] Securities, at any time shall equal
(a) the Principal Amount of the Related Note at
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such time plus (b) any accrued but unpaid distributions due to the Property
Trustee (the "Related Note Redemption Price"). The Principal Amount of the
Related Note at any time shall equal the aggregate Principal Amount of
outstanding ComPS and the related Series [B] Common Securities at such time. The
timing and amount of payments on the Related Note mirror the aggregate financial
terms of the ComPS.
SUBORDINATION
Morgan Guaranty's obligations under the Related Note are effectively
subordinated to all liabilities (including indebtedness) of its consolidated and
unconsolidated subsidiaries. Moreover, Morgan Guaranty's subsidiaries may incur
indebtedness and other liabilities and have obligations to third parties.
Generally, the claims of such third parties to the assets of Morgan Guaranty's
subsidiaries will be superior to those of Morgan Guaranty as a stockholder, and,
therefore, the Related Note may be deemed to be effectively subordinated to the
claims of such third parties.
Upon any payment or distribution of all or substantially all of the assets of
Morgan Guaranty or in the event of any insolvency, bankruptcy, receivership,
liquidation, dissolution, reorganization or other similar proceeding, whether
voluntary or involuntary, relative to Morgan Guaranty or its creditors, the
holders of all Senior Indebtedness of Morgan Guaranty will be entitled to
receive payment pari passu and pro rata with the Trust. However, depositors in
Morgan Guaranty will have a preference over holders of Senior Indebtedness of
Morgan Guaranty upon any such event.
As used in the Related Note, the term "Senior Indebtedness" means the principal
of, premium, if any, and interest on (a) all indebtedness of Morgan Guaranty for
money borrowed, whether outstanding as of the date hereof or hereafter created,
issued or incurred (other than Morgan Guaranty's obligations to its depositors),
except any indebtedness expressly subordinated to such Senior Indebtedness, and
(b) any deferrals, renewals or extensions of any such Senior Indebtedness. The
Related Note does not limit the amount of Senior Indebtedness which Morgan
Guaranty may incur.
INTEREST
The Related Note shall bear interest at the rate of [2.5]% per annum on the Face
Amount from the original date of issuance, payable quarterly in arrears on the
last calendar day of each March, June, September and December (each, an
"Interest Payment Date"), commencing , 199[ ], to the Trust, subject to
certain exceptions, at the close of business on the Business Day next preceding
the relevant Interest Payment Date.
The amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months. The amount of interest payable for any
period shorter than a full monthly period for which interest is computed will be
computed on the basis of the actual number of days elapsed (but never more than
30) per 30-day month. In the event that any date on which interest is payable on
the Related Note is not a Business Day, payment of the interest payable on such
date 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 distributions will accrue
from and after such date, except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
OPTIONAL REDEMPTION
The Trust shall have the right to call for redemption prior to each Optional
Redemption Date a Principal Amount of the Related Note sufficient to allow it to
pay the ComPS Early Redemption Price to any holders of ComPS who exercise their
right to redeem any or all of such holders' ComPS and in respect of a pro rata
portion of the related Series [B] Common Securities. See "Description of the
ComPS--Optional Redemption".
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SPECIAL EVENT REDEMPTION
Upon the occurrence of a Special Event, Morgan Guaranty will have the right to
elect to, under certain circumstances, (a) redeem the Related Note at the
Related Note Redemption Price or (b) in the case of a Tax Event, allow the
Related Note to remain outstanding and indemnify the Trust for any taxes payable
by it as a result of such Tax Event. See "Description of the ComPS--Special
Event Redemption".
EVENTS OF DEFAULT
The Note Events of Default are described in "Description of the Related Notes--
Note Events of Default" in the Prospectus of which this Prospectus Supplement
constitutes a part. A default or event of default under any Senior Indebtedness
would not constitute a default or event of default under the Related Note. A
default or event of default under the Related Note would not constitute a
default or event of default under any related note pertaining to any other
series of Securities.
MODIFICATION OF THE RELATED NOTE
The Related Note contains provisions permitting Morgan Guaranty and the Property
Trustee, with the consent of the holders of not less than a majority in
Principal Amount of the outstanding ComPS, to modify the Related Note, subject
to certain exceptions. See "Description of the Related Notes--Modification of
the Related Notes" in the Prospectus of which this Prospectus Supplement
constitutes a part.
CONSOLIDATION, MERGER AND SALE
The Related Note provides that Morgan Guaranty may, without the consent of the
Trust or the holders of the ComPS, consolidate or merge with or into, or 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 Morgan
Guaranty) or association formed by or resulting from any such consolidation or
merger or which shall have received such property or assets shall have assumed
Morgan Guaranty's obligations under the Related Note and (ii) immediately after
giving effect to such transaction, Morgan Guaranty or such successor corporation
shall not be in default under the terms of the Related Note.
GOVERNING LAW
The Related Note will be governed by, and construed in accordance with, the laws
of the State of New York.
MISCELLANEOUS
Morgan Guaranty will have the right at all times to assign any of its rights or
obligations under the Related Note to J.P. Morgan or to a direct or indirect
wholly-owned subsidiary of Morgan Guaranty; provided that, in the event of any
such assignment, Morgan Guaranty will remain jointly and severally liable for
all such obligations. Subject to the foregoing, the Related Note will be binding
upon and inure to the benefit of the parties thereto and their respective
successors and assigns. The Related Note is not a deposit or other obligation of
a bank and is not insured by the Federal Deposit Insurance Corporation or any
other federal agency. The obligations of Morgan Guaranty under the Related Note
are pari passu with all present and future Senior Indebtedness of Morgan
Guaranty (as defined herein) and are junior to Morgan Guaranty's obligations to
its depositors in the event of a receivership. In addition, J.P. Morgan's
obligations under the Guarantee and the Related Note Guarantee and Morgan
Guaranty's obligations under the Related Note are effectively subordinated to
all liabilities (including indebtedness) of the respective consolidated and
unconsolidated subsidiaries of each.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that will
be delivered by J.P. Morgan for the benefit of the holders of ComPS and other
Preferred Securities. The terms of the Guarantee
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will be those set forth in the Guarantee Agreement. The following summary does
not purport to be complete and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the Prospectus and the form of
Guarantee Agreement, which is filed as an exhibit to the Registration Statement
relating to this Prospectus Supplement and the Prospectus. The Guarantee will be
separately qualified under the Trust Indenture Act and will be held by the
Property Trustee, acting in its capacity as indenture trustee with respect
thereto.
GENERAL
Pursuant to the Guarantee, J.P. Morgan irrevocably and unconditionally agrees,
on a subordinated basis, to pay in full to the holders of the ComPS the
Guarantee Payments (as defined herein) (except to the extent paid by the Trust),
as and when due, regardless of any defense, right of set-off or counterclaim
that the Trust may have or assert. The following payments with respect to ComPS
issued by the Trust (the "Guarantee Payments"), to the extent not paid by the
Trust, will be subject to the Guarantee (without duplication): (i)(A) any
accrued and unpaid dividends that are required to be paid on the ComPS and (B)
the ComPS Early Redemption Price or the ComPS Redemption Price, as applicable,
but if and only if to the extent that, in each case, Morgan Guaranty has made
payment of interest or principal on the Related Note, as the case may be, and
(ii) upon a Liquidation Event (other than in connection with the redemption of
all of the ComPS at Stated Maturity or redemption in whole of the Related Note)
the lesser of (A) the Liquidation Distribution to the extent the Trust has funds
available therefor and (B) the amount of assets of the Trust consisting of the
Related Note and the proceeds thereof remaining available for distribution to
holders of the ComPS upon such Liquidation Event. J.P. Morgan's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by J.P. Morgan to the holders of ComPS or by causing the Trust to pay
such amounts to such holders. The Guarantee will be effective with respect to
the ComPS from the time of issuance of the ComPS to the extent Morgan Guaranty
has made payments under the Related Note. If Morgan Guaranty does not make
payments on the Related Note, the Trust may not pay distributions on the ComPS
issued and may not have funds available therefor. See "Description of the
Related Note".
So long as any ComPS or other Preferred Securities remain outstanding, J.P.
Morgan will not declare or pay dividends on, or redeem, purchase, acquire or
make a distribution or liquidation payment with respect to, any of its common
stock or preferred stock or make any Guarantee Payment with respect thereto if
at such time (i) J.P. Morgan shall be in default with respect to its Guarantee
Payments or other payment obligations under the Guarantee or (ii) there shall
have occurred any event of default under the Declaration; provided, however,
that the foregoing restrictions shall not apply to (a) dividends, redemptions,
purchases, acquisitions, distributions or payments made by J.P. Morgan by way of
issuance of shares of its capital stock, (b) payments of accrued dividends by
J.P. Morgan upon the redemption, exchange or conversion of any preferred stock
of J.P. Morgan as may be outstanding from time to time in accordance with the
terms of such preferred stock, (c) cash payments made by J.P. Morgan in lieu of
delivering fractional shares upon the redemption, exchange or conversion of any
preferred stock of J.P. Morgan as may be outstanding from time to time in
accordance with the terms of such preferred stock, (d) repurchases, redemptions
or other acquisitions of shares of capital stock of J.P. Morgan in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of employees, officers, directors of consultants, or (e) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of such rights pursuant thereto.
MODIFICATION OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights of
holders of Preferred Securities (in which case no consent will be required), the
Guarantee may be amended by J.P. Morgan and the Property Trustee only with the
prior approval of the holders of not less than a majority in aggregate Principal
Amount at such time of the holders of each series of affected Preferred
Securities, voting as a single class. All guarantees and agreements contained in
the Guarantee shall bind the successors, assignees,
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receivers, trustees and representatives of J.P. Morgan and shall inure to the
benefit of the holders of the ComPS.
REMEDIES OF HOLDERS
The Guarantee will be deposited with First Trust of New York, National
Association, as indenture trustee, to be held for the benefit of holders of the
ComPS and Preferred Securities of other series. First Trust of New York,
National Association shall enforce such Guarantee on behalf of holders of the
ComPS and Preferred Securities of other series. The holders of not less than a
majority in aggregate principal amount of the ComPS and Preferred Securities of
each affected series have the right to direct the time, method and place of
conducing any proceeding for any remedy available in respect of the Guarantee,
including the giving of directions to First Trust of New York, National
Association. If First Trust of New York, National Association fails to enforce
the Guarantee as above provided, any holder of ComPS and Preferred Securities of
other series may institute a legal proceeding directly against J.P. Morgan to
enforce its right under such Guarantee, without first instituting a legal
proceeding against the Trust or any other person or entity. Subject to the award
by a court of competent jurisdiction of legal fees in connection with any such
legal proceeding, each holder will be required to bear its own costs in
connection with instituting a legal proceeding directly against J.P. Morgan,
which cost may be significant.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate with respect to the ComPS upon full payment of the
aggregate ComPS Early Redemption Price or ComPS Redemption Price, as applicable,
or upon full payment of the amounts payable in accordance with the Declaration
upon liquidation of the Trust. The Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of ComPS must
restore payment of any sums paid under such ComPS or the Guarantee (e.g., upon a
subsequent bankruptcy of Morgan Guaranty or J.P. Morgan).
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of J.P. Morgan and will
rank (i) subordinate and junior in right of payment to all other liabilities of
J.P. Morgan, (ii) pari passu with the most senior preferred or preference stock
outstanding as of the date hereof of J.P. Morgan and with respect to obligations
under other guarantee agreements which J.P. Morgan may enter into from time to
time to the extent that such agreements provide for comparable guarantees by
J.P. Morgan of payment on other preferred securities issued by the predecessor
of the Trust or by other trusts sponsored by J.P. Morgan and (iii) senior to
J.P. Morgan's common stock. The terms of the ComPS provide that each holder of
ComPS by acceptance thereof agrees to the subordination provisions and other
terms of the Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection (that
is, the guaranteed party may institute a legal proceeding directly against the
guarantor to enforce its rights under the Guarantee without instituting a legal
proceeding against any other person or entity).
GOVERNING LAW
The Guarantee will be governed by and construed and interpreted in accordance
with the laws of the State of New York.
DESCRIPTION OF THE RELATED NOTE GUARANTEE
Set forth below is a summary of information concerning the Related Note
Guarantee that will be delivered by J.P. Morgan for the benefit of the Property
Trustee for the benefit of holders of Securities of various series. The terms of
the Related Note Guarantee will be those set forth in the Related Note Guarantee
Agreement. The following summary does not purport to be complete and is subject
in all respects to the provisions of, and is qualified in its entirety by
reference to, the Prospectus and the form of Related Note
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Guarantee Agreement, which is filed as an exhibit to the Registration Statement
relating to this Prospectus Supplement and the Prospectus. The Related Note
Guarantee will be held by the Property Trustee (for the benefit of holders of
Series [B] Securities), as the holder of the Related Note.
GENERAL
Pursuant to the Related Note Guarantee, J.P. Morgan irrevocably and
unconditionally agrees, on a subordinated basis, to pay in full to the Property
Trustee for the benefit of holders of Series [B] Securities the Related Note
Guarantee Payments (as defined herein), as and when due, regardless of any
defense, right of set-off or counterclaim that Morgan Guaranty may have or
assert with respect to its obligation to make such Related Note Guarantee
Payments. The following payments with respect to the Related Note issued by
Morgan Guaranty (the "Related Note Guarantee Payments") will be subject to the
Related Note Guarantee (without duplication): (i) any accrued and unpaid
distributions that are required to be paid by Morgan Guaranty on the Related
Note and (ii) any principal payable by Morgan Guaranty under the Related Note,
as and when payable by Morgan Guaranty. J.P. Morgan's obligation to make a
Related Note Guarantee Payment may be satisfied by direct payment of the
required amounts by J.P. Morgan to the Property Trustee for the benefit of
holders of Series [B] Securities or by causing Morgan Guaranty to pay such
amounts to the Property Trustee for the benefit of holders of Series [B]
Securities. The Related Note Guarantee will be a full and unconditional
guarantee with respect to the Related Note from the time of issuance of the
Related Note.
MODIFICATION OF THE RELATED NOTE GUARANTEE; ASSIGNMENT
The Related Note Guarantee may be amended only with the prior approval of the
Property Trustee; provided that no such amendment shall adversely affect the
holders of the Preferred Securities without the consent of a majority in
aggregate Principal Amount at such time of the holders of Preferred Securities
of each affected series, voting as a single class. All guarantees and agreements
contained in the Related Note Guarantee shall bind the successors, assignees,
receivers, trustees and representatives of J.P. Morgan and shall inure to the
benefit of the Property Trustee (for the benefit of holders of Series [B]
Securities) as the holder of the Related Note.
REMEDIES OF THE TRUST AND HOLDERS OF THE COMPS
The Trust has the sole right to direct the time, method and place of conducting
any proceeding for any remedy available to it in respect of the Related Note
Guarantee. Pursuant to the Declaration, the holders of a majority in Principal
Amount of the ComPS in certain circumstances (including a payment default under
the Related Note Guarantee by J.P. Morgan) have the right to direct the Trust,
through the Property Trustee, to exercise certain of its rights as the holder of
the Related Note Guarantee.
TERMINATION OF THE RELATED NOTE GUARANTEE
The Related Note Guarantee will terminate with respect to the Related Note upon
full payment of the Related Note Redemption Price (as defined below) of the
Related Note. The Related Note Guarantee will continue to be effective or will
be reinstated with respect to the Related Note, as the case may be, if at any
time the Property Trustee, on behalf of holders of Series [B] Securities, must
restore payment of any sums paid under the Related Note or the Related Note
Guarantee (e.g., upon a subsequent bankruptcy of J.P. Morgan).
STATUS OF THE RELATED NOTE GUARANTEE
The Related Note Guarantee will constitute an unsecured obligation of J.P.
Morgan and will rank (i) subordinate and junior in right of payment to all other
liabilities of J.P. Morgan, (ii) pari passu with the most senior preferred or
preference stock outstanding as of the date hereof of J.P. Morgan and (iii)
senior to J.P. Morgan's common stock. The terms of the ComPS provide that each
holder of ComPS by acceptance thereof agrees to the subordination provisions and
other terms of the Related Note Guarantee.
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The Related Note Guarantee will constitute a guarantee of payment and not of
collection (that is, the Property Trustee may institute a legal proceeding
directly against J.P. Morgan to enforce its rights under the Related Note
Guarantee without instituting a legal proceeding against Morgan Guaranty).
GOVERNING LAW
The Related Note Guarantee will be governed by and construed and interpreted in
accordance with the laws of the State of New York.
EFFECT OF OBLIGATIONS UNDER THE GUARANTEE,
THE RELATED NOTE GUARANTEE AND THE RELATED NOTE
As set forth in the Declaration, the sole purpose of the Trust is to issue the
Series [B] Securities and other Securities of separate series, and to invest the
proceeds from such issuances in the Related Note and other debt obligations of
Morgan Guaranty.
As long as payments of interest and other payments are made when due on the
Related Note, such payments will be sufficient to cover dividends and payments
due on the ComPS because of the following factors: (i) the Principal Amount of
the Related Note will be equal to the sum of the aggregate Principal Amount of
the ComPS and the related Series [B] Common Securities outstanding at any time;
(ii) the interest rate and the interest and other payment dates on the Related
Note will match the dividend rate and dividend and other payment dates for the
ComPS and the related Series [B] Common Securities; (iii) J.P. Morgan shall pay
all, and the Trust shall not be obligated to pay, directly or indirectly, any,
costs and expenses of the Trust other than principal of and dividends on the
ComPS and the related Series [B] Common Securities; and (iv) the Declaration
further provides that the J.P. Morgan shall not cause the Trust (on behalf of a
series of Securities or otherwise) to, among other things, engage in any
activity that is not consistent with the purposes of the Trust.
Payments of dividends (to the extent Morgan Guaranty has made payments of
interest on the Related Note) and other payments due on the ComPS (to the extent
Morgan Guaranty has made payment of principal and other amounts on the Related
Note) are guaranteed by J.P. Morgan as and to the extent set forth under
"Description of the Guarantee" herein and in the Prospectus. If Morgan Guaranty
does not make interest payments on the Related Note, it is expected that the
Trust will not have sufficient funds to pay dividends on the ComPS. The
Guarantee is a full and unconditional guarantee from the time of its issuance
but does not apply to any dividends or other payments unless and until Morgan
Guaranty has made payment of interest or other payments on the Related Note.
If Morgan Guaranty fails to make interest or other payments on the Related Note
when due, the Declaration provides a mechanism whereby the holders of the ComPS,
using the procedures described in the Declaration, may direct the Property
Trustee, on behalf of holders of the Series [B] Securities, to enforce its
rights under the Related Note and the Related Note Guarantee. If J.P. Morgan
fails to perform any of its payment or other obligations with respect to the
ComPS under the Guarantee, any holder of ComPS may institute a legal proceeding
directly against J.P. Morgan to enforce such holder's rights under the Guarantee
without first instituting a legal proceeding against the Trust or any other
person or entity.
The Related Note Guarantee by J.P. Morgan guarantees to the Property Trustee the
payment of any distributions on and principal of the Related Note as provided
pursuant to the terms of the Related Note, at such times and in such amounts as
provided therein. J.P. Morgan's obligations under the Related Note Guarantee
will be subordinated and junior in right of payment to all liabilities of J.P.
Morgan, pari passu with the most senior preferred stock outstanding as of the
date hereof of J.P. Morgan and senior to the common stock of J.P. Morgan.
The Declaration provides that J.P. Morgan will pay, or cause to be paid, all
debts and obligations (other than with respect to the ComPS and other Preferred
Securities to the extent set forth herein and in the Prospectus) and all costs
and expenses of the Trust, including any taxes and all costs and expenses with
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respect thereto, to which the Trust may become subject. The Declaration provides
that any person to whom such debts, obligations, costs and expenses are owed
will have the right to enforce J.P. Morgan's obligations in respect of such
debts, obligations, costs and expenses directly against J.P. Morgan without
first proceeding against the Trust.
J.P. Morgan, through its obligations under the Guarantee, the Related Note
Guarantee and the Declaration, taken together, will provide a full and
unconditional guarantee, on a subordinated basis, of payments due on the ComPS.
See "Description of the Guarantee -- General" and "Description of the Related
Note Guarantee -- General" herein and in the accompanying Prospectus.
Upon any voluntary or involuntary dissolution of the Trust, the holders of
Series [B] Securities will be entitled to receive, after satisfaction of
liabilities to creditors of the Trust with respect to Series [B] Securities, the
Liquidation Distribution. Holders of ComPS will be entitled to the benefits of
the Guarantee with respect to the Liquidation Distribution. See "Description of
the ComPS -- Liquidation Distribution Upon Dissolution". Upon any voluntary or
involuntary liquidation or bankruptcy of Morgan Guaranty, the Property Trustee
as holder of the Related Note on behalf of the Trust would rank equally in right
of payment with creditors of Morgan Guaranty (other than any depositors
therein), including all Senior Indebtedness, and would be entitled to receive
payment in full of principal, premium, if any, and interest, before any
stockholders of Morgan Guaranty receive payments of distributions.
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of the material United States Federal income tax
consequences of the purchase, ownership and disposition of ComPS by U.S. Holders
(as defined herein). Unless otherwise stated, this summary deals only with ComPS
held as capital assets by holders who purchase the ComPS upon original issuance
("Initial Holders").
This summary 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 that will hold the ComPS as a position in a "straddle"
(within the meaning of Section 1092 of the Internal Revenue Code of 1986, as
amended (the "Code")), or as part of a "conversion transaction" (within the
meaning of Section 1258 of the Code) or "synthetic security" or other integrated
investment comprised of ComPS and one or more other investments. This summary
also does not address the tax consequences to persons that have a functional
currency other than the U.S. Dollar or the tax consequences to shareholders,
partners or beneficiaries of a holder of ComPS. Further, it does not include any
description of any alternative minimum tax consequences or the tax laws of any
state or local government or of any foreign government that may be applicable to
the ComPS.
This summary is based on the Code, Treasury regulations thereunder and
administrative and judicial interpretations thereof, as of the date hereof, all
of which are subject to change, possibly on a retroactive basis. In the opinion
of Cravath, Swaine & Moore, special tax counsel to J.P. Morgan and the Trust
("Tax Counsel"), the statements contained in the following summary, to the
extent they constitute matters of law, accurately described the material U.S.
Federal income tax consequences to Initial Holders of the acquisition, ownership
and disposition of ComPS. For purposes of this summary, a "U.S. Holder" shall
mean a holder who is (i) a citizen or a resident of the United States (or any
state thereof), (ii) a corporation, or other entity taxable as a corporation,
created or organized in or under the laws of the United States or any political
subdivision thereof, (iii) an estate or trust, the income of which is subject to
U.S. Federal income tax regardless of its source, and (iv) any other person
subject to U.S. Federal income tax on net income.
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CLASSIFICATION OF THE TRUST
The Trust will be classified as "grantor trust" for Federal income tax purposes.
As a result, a holder of ComPS will be treated as owning an undivided beneficial
interest in the Related Note. Accordingly, for U.S. Federal income tax purposes,
each holder will be required to report income, gain or loss as if the holder
directly held its pro rata share of the Related Note. No portion of the income
accrued by holders will be eligible for the corporate dividends received
deduction.
CLASSIFICATION OF THE RELATED NOTE
It is believed that the Related Note is properly treated as a contingent payment
debt instrument subject to the Treasury regulations promulgated in June 1996
governing such instruments (the "Contingent Payment Regulations"). The Trust
intends to treat the Related Note accordingly. However, no ruling is being
requested from the Internal Revenue Service (the "IRS") and there is no direct
authority addressing the characterization of the Related Note. Other
characterizations might result in consequences different than those discussed
below.
U.S. HOLDERS OF COMPS
The following discussion of the tax consequences to U.S. Holders assumes both
that the Trust will be treated as a grantor trust for U.S. Federal income tax
purposes and that the Related Note will be treated as a contingent payment debt
instrument. If these assumptions are not correct, holders could be subject to
different consequences than those discussed below. The following discussion also
assumes that the Initial Holders purchased ComPS at the Face Amount.
INTEREST INCOME
Under the Contingent Payment Regulations, the original issue discount ("OID")
rules of the Code apply to a contingent payment debt instrument. OID must be
accrued each year at a rate equal to the "comparable yield" for fixed debt
issued by the issuer of the instrument (or, if a hedge is available to the
issuer, the fixed yield on the combination of the contingent debt instrument and
the hedge). The comparable yield is determined at the time of issuance of the
obligations and cannot be less than the applicable federal rate ("AFR") on the
issue date, which is the rate on United States Treasury obligations of
comparable maturities. After the "comparable yield" is determined, a projected
payment schedule for the instrument must be determined as of the issue date,
which schedule remains fixed through the term of the debt instrument. Such
schedule includes all noncontingent payments and projected contingent payments,
and must result in a yield to investors equal to the comparable yield. If the
actual amount of a contingent payment differs from the projected amount,
adjustments to income accruals to holders are made at that time to account for
the difference.
In the case of ComPS, all payments except the final payment are fixed. The
"comparable yield" for the ComPS will be the AFR applicable for the Issue Date,
which is [ %]. For tax purposes, the projected payment at Stated Maturity is
[ ]. Moreover, the rate of stated dividends will be less than the AFR. As
a result, for each period prior to the Stated Maturity, an Initial Holder will
be required to accrue a greater amount of OID into income than the actual cash
payments received during that period. Actual cash payments of interest are not
separately includible in income.
In the case of U.S. Holder of ComPS that is a tax exempt organization, the
interest would not be subject to the tax on unrelated business taxable income
unless borrowing or activities of the organization itself caused the interest to
be subject to such tax.
SALE OR OTHER DISPOSITION OF COMPS
Assuming that an Initial Holder purchased ComPS for their Face Amount, the
Initial Holder's tax basis in ComPS will initially be their Face Amount. The
Initial Holder's adjusted tax basis in ComPS will be the
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initial basis increased by the amount of OID accrued as income and reduced by
the amount of cash payments received. For an Initial Holder who holds ComPS
until the Stated Maturity, the adjusted tax basis at maturity would be
approximately $[ ].
On the sale, exchange, early redemption or retirement of ComPS (a
"Disposition"), the Initial Holder generally will recognize gain or loss in an
amount equal to the difference between the proceeds of the Disposition and the
adjusted tax basis of the ComPS. Any gain will be ordinary income. In the case
of a U.S. Holder of ComPS that is a tax exempt organization, such gain would not
be subject to the tax on unrelated business taxable income unless borrowing or
activities of the organization itself caused the gain to be subject to such tax.
Any loss will be an ordinary loss to the extent of the aggregate OID previously
accrued by the Initial Holder on the ComPS, and any additional loss generally
will be a capital loss (long term capital loss if at the time of the Disposition
the ComPS had been held for more than one year).
SECONDARY MARKET PURCHASERS
If a secondary market purchaser purchases ComPS at a premium or discount as
compared to the adjusted tax basis of an Initial Holder (as described under
"Sale or Other Disposition of ComPS"), then, to the extent such premium or
discount reflects an increase or decrease in the value of the stated dividend
payments over the remaining life of the ComPS (due to changes in market interest
rates or otherwise), an adjustment must be made to the amount of OID to be
included in the income of the secondary market purchaser over the remaining life
of the ComPS. Any premium or discount so allocated to the ComPS dividend
payments will result in a decrease or increase, respectively, in the periodic
amount of OID to be included in the holder's income prior to Stated Maturity.
To the extent any such premium or discount reflects an increase or decrease in
the expected payment at Stated Maturity, such premium or discount would not
change the amount of OID the holder would include in income over the remaining
life of the ComPS. Rather, such premium or discount would be reflected in the
holder's tax basis in the ComPS and would decrease or increase, respectively,
the holder's gain or loss on sale or at maturity of the ComPS.
Notwithstanding the foregoing, under a safe harbor for exchange traded
instruments, a secondary market purchaser can elect to allocate all the premium
or discount (no matter how arising) on a pro-rata basis to daily accruals of OID
over the remaining term of the ComPS, but only to the extent that the resulting
yield to maturity on the ComPS is no less than the AFR determined on the
holder's purchase date for the ComPS. (The applicable AFR can be determined from
the weekly IRS Internal Revenue Bulletin.) For secondary market purchasers who
purchase ComPS at a premium or discount, respectively, the election might
decrease or increase, respectively, the OID income reportable over the life of
the ComPS as compared to that which would be reported under the general rule.
Any adjustment to OID accruals is limited to the premium or discount at which
the ComPS are acquired as compared to the adjusted tax basis of an Initial
Holder at the time of such acquisition (as described under "Sale or Other
Disposition of ComPS"). As a result, for example, if market interest rates have
decreased since the initial issuance of the ComPS, but the size of the purchase
premium also reflects a decrease in the expected payment at Stated Maturity,
then the reduction of OID accruals due to the acquisition of ComPS at a premium
may not fully reflect the decrease in market interest rates.
In all cases the tax basis to a secondary market purchaser will be the purchase
price, increased by the amount of OID accrued as income (taking into account the
adjustment for premium or discount), and reduced by the amount of cash payments
received. Secondary market purchasers should consult their individual tax
advisors regarding the consequences of purchasing and holding ComPS.
NON-UNITED STATES HOLDERS
In the case of a holder of ComPS that is not a U.S. Holder, it is believed that
payments made with respect to ComPS will not be subject to U.S. withholding tax;
provided that such holder complies with applicable certification requirements
(and does not directly or indirectly own 10% or more of the voting stock of J.P.
Morgan). Any gain realized upon the redemption, sale or other disposition of
ComPS by a holder that is
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not a U.S. Holder 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 redemption,
sale or other disposition or the gain is not attributable to a fixed place of
business maintained by such individual in the United States.
INFORMATION REPORTING TO HOLDERS
Holders of ComPS that are not exempt from information reporting requirements
will receive annually, on IRS Form 1099, information concerning OID determined
for an Initial Holder and attributable to such holder's ComPS. For the reasons
noted above, the information reported on such form may not be accurate for
secondary market purchasers.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the ComPS may be subject to a
"backup" withholding tax of 31% unless the holder complies with certain
identification requirements. Any withheld amounts will be allowed as a credit
against the holder's U.S. Federal income tax, provided that the required
information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE MAY NOT BE
APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE COMPS, INCLUDING THE TAX CONSEQUENCES
UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF
CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan (a
"Plan") subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an investment
in the ComPS. Accordingly, among other factors, the fiduciary should consider
whether the investment would satisfy the prudence and diversification
requirements of ERISA and would be consistent with the documents and instruments
governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibits Plans, as well as
individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or "disqualified
persons" under the Code ("Parties in Interest") with respect to such Plan. A
violation of these "prohibited transaction" rules may result in an excise tax or
other liabilities under ERISA and/or Section 4975 of the Code for such persons,
unless exemptive relief is available under an applicable statutory or
administrative exemption. Employee benefit plans that are governmental plans (as
defined in Section 3(32) of ERISA), certain church plans (as defined in Section
3(33) of ERISA) and foreign plans (as described in Section 4(b)(5) of ERISA) are
not subject to the requirements of ERISA or Section 4975 of the Code.
Under a regulation (the "Plan Assets Regulation") issued by the U.S. Department
of Labor (the "DOL"), the assets of the Trust would be deemed to be "plan
assets" of a Plan for purposes of ERISA and Section 4975 of the Code if "plan
assets" of the Plan were used to acquire an equity interest in the Trust and no
exception were applicable under the Plan Assets Regulation. An "equity interest"
is defined under the Plan Assets Regulation as any interest in an entity other
than an instrument which is treated as indebtedness under applicable local law
and which has no substantial equity features.
Pursuant to an exception contained in the Plan Assets Regulation, the assets of
the Trust would not be deemed to be "plan assets" of investing Plans if the
ComPS are (i) freely transferable, (ii) part of a class of securities that is
owned by 100 or more investors independent of the issuer and of one another at
the conclusion of the offering and (iii) either (a) part of a class of
securities registered under Section 12(b) or
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12(g) of the Exchange Act, or (b) sold to a Plan as part of an offering of
securities to the public pursuant to an effective registration statement under
the Securities Act and the class of securities of which such security is a part
is registered under the Exchange Act within 120 days (or such later time as may
be allowed by the Commission) after the end of the fiscal year of the issuer
during which the offering of such securities to the public occurred. There are
no restrictions imposed on the transfer of ComPS and the ComPS will be sold as
part of an offering registered under Section 12(b) of the Exchange Act. The
Representative (as defined in "Underwriting") will notify the Trust as to
whether or not the ComPS will be held by at least 100 separately named persons
at the conclusion of the offering. The Trust will not determine whether the
100-investor requirement of the exception for publicly offered securities is
satisfied as to the ComPS. Prospective purchasers may obtain a copy of the
notification described in the second preceding sentence from the Trust at 60
Wall Street, New York, NY 10260-0060.
In the event assets of the Trust were determined to constitute "plan assets",
certain transactions involving the Trust could be deemed to constitute direct or
indirect prohibited transactions under ERISA and Section 4975 of the Code with
respect to a Plan. For example, if J.P. Morgan, Morgan Guaranty and/or any
affiliates of either is a Party in Interest with respect to an investing Plan
(either directly or by reason of its status as the sponsor of the Trust or of
any of J.P. Morgan's or Morgan Guaranty's other subsidiaries), the extension of
credit between the J.P. Morgan or Morgan Guaranty and/or any affiliates of
either and the Trust (as represented by the Related Note, the Related Note
Guarantee and the Guarantee) would likely be prohibited by Section 406(a)(1)(B)
of ERISA and Section 4975(c)(1)(B) of the Code, unless exemptive relief were
available under an applicable administrative exemption (see below).
The DOL has issued five prohibited transaction class exemptions ("PTCEs") that
may provide exemptive relief for direct or indirect prohibited transactions
resulting from the purchase or holding of the ComPS. Those class exemptions are
PTCE 96-23 (for certain transactions determined by in-house asset managers),
PTCE 95-60 (for certain transactions involving insurance company general
accounts), PTCE 91-38 (for certain transactions involving bank collective
investment funds), PTCE 90-1 (for certain transactions involving insurance
company pooled separate accounts) and PTCE 84-14 (for certain transactions
determined by independent qualified professional asset managers).
If the Representative does not notify the Trust, as described above, that the
ComPS will be expected to be held by at least 100 separately named persons, the
ComPS may not be purchased or held by any Plan, any entity whose underlying
assets include "plan assets" by reason of any Plan's investment in the entity (a
"Plan Asset Entity") or any person investing "plan assets" of any Plan, unless
such purchaser or holder is eligible for the exemptive relief available under
PTCE 96-23, 95-60, 91-38, 90-1 or 84-14. In such event, any purchaser,
transferee or holder of the ComPS or any interest therein will be deemed to have
represented by its purchase, acquisition or holding thereof that (a) it is not a
Plan or a Plan Asset Entity and is not purchasing such securities on behalf of
or with "plan assets" of any Plan, (b) it is eligible for the exemptive relief
available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 with respect to such
purchase or holding or (c) such purchase, aquisition or holding will not
otherwise give rise to a prohibited transaction under ERISA or the Code for
which a prohibited transaction is unavailable. See "Notice to Investors."
In any case, J.P. Morgan, Morgan Guaranty and/or any affiliates of either may be
considered a "party in interest" (within the meaning of ERISA) or a
"disqualified person" (within the meaning of Section 4975 of the Code) with
respect to certain Plans. The acquisition and ownership of ComPS by a Plan (or
by an individual retirement arrangement or other plans described in Section
4975(e)(i) of the Code) with respect to which J.P. Morgan, Morgan Guaranty or
any of its affiliates of either is considered a party in interest or a
disqualified person may constitute or result in a prohibited transaction under
ERISA or Section 4975 of the Code, unless such ComPS are acquired pursuant to
and in accordance with an applicable exemption. As a result, Plans with respect
to which J.P. Morgan, Morgan Guaranty or any affiliates of either is a party in
interest or a disqualified person should not acquire ComPS unless a statutory or
administrative exemption from the prohibited transaction provisions of ERISA or
the Code applies.
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Due to the complexity of these rules and the penalties that may be imposed upon
persons involved in nonexempt prohibited transactions, it is particularly
important that fiduciaries or other persons considering purchasing the ComPS on
behalf of or with "plan assets" of any Plan consult with their counsel regarding
the potential consequences if the assets of the Trust were deemed to be "plan
assets" and the availability of exemptive relief from the prohibited transaction
provisions of ERISA and the Code.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement dated
the date hereof (the "Underwriting Agreement"), the Trust has agreed to sell to
the underwriters named below (the "Underwriters") and the Underwriters have
agreed to purchase, the respective number of ComPS set forth opposite their
names below. In the Underwriting Agreement, the Underwriter has agreed, subject
to the terms and conditions set forth therein, to purchase all the ComPS offered
hereby if any of the ComPS are purchased. Under certain circumstances, the
commitments of nondefaulting Underwriters may be increased as set forth in the
Underwriting Agreement.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF COMPS
<S> <C>
J.P. Morgan Securities Inc. .............................. [ ]
[ ]............................. [ ]
[ ]............................. [ ]
[ ]............................. [ ]
[ ]............................. [ ]
---------------
Total........................................... [ ]
</TABLE>
The Underwriters initially propose to offer the ComPS, in part, directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus Supplement, and, in part, to certain securities dealers at such price
less a concession of $ per Series [B] Preferred Security. [The Underwriters
may allow, and such dealers may reallow, a concession not in excess of $ per
Series [B] Preferred Security to certain brokers and dealers.] After the initial
offering, the public offering price and such concessions may be changed.
In view of the fact that the proceeds of the sale of the ComPS will ultimately
be used to purchase the Related Note of Morgan Guaranty, the Underwriting
Agreement provides that Morgan Guaranty will pay as compensation ("Underwriters'
Compensation") to the Underwriters $ per Series [B] Preferred Security (or
$ in the aggregate) for the account of the Underwriters.
The ComPS have been approved for listing on the Amex under the symbol ["JPO"],
subject to official notice of issuance. Trading of the ComPS on the Amex is
expected to commence within a 30-day period after the date of this Prospectus
Supplement. Prior to this offering, there has been no market for the ComPS.
The Trust and J.P. Morgan have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
This Prospectus Supplement and related 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 ComPS. 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 Underwriters, certain 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.
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The Representative is an indirect, wholly-owned subsidiary of J.P. Morgan. The
participation of the Representative in the offer and sale of the ComPS complies
with the requirements of Rule 2720 of the Rules of Conduct of the National
Association of Securities Dealers, Inc. (the "NASD") regarding underwriting of
securities of an affiliate and complies with any restrictions imposed on such
Representative by the Board of Governors of the Federal Reserve System.
Because the NASD is expected to view the Preferred Securities offered hereby as
interests in a direct participation program, the offering is being made in
compliance with Rule 2810 of the NASD's Rules of Conduct. Offers and sales of
Preferred Securities will be made only to (i) "qualified institutional buyers",
as defined in Rule 144A under the Act; (ii) institutional "accredited
investors", as defined in Rule 501(a)(1)-(3) of Regulation D under the Act or
(iii) investors for whom an investment in non-convertible investment grade
commodity-indexed preferred securities is appropriate. The Underwriters may not
confirm sales to any accounts over which they exercise discretionary authority
without the prior written approval of the transaction by the customer.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Series [B]
Securities will be passed upon by Morris, Nichols, Arsht & Tunnell, Wilmington,
Delaware, special Delaware counsel to the Trust. The validity of the Series [B]
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 the Representative.
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
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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ANNEX I
GLOSSARY OF TERMS
The following are abbreviated definitions of certain capitalized terms used in
the Prospectus Supplement. The Declaration, the Guarantee, the Related Note
Guarantee and the Related Note may contain more complete definitions of certain
of the terms defined herein, as well as definitions of certain other terms not
defined herein, and reference should be made to the Declaration, the Guarantee,
the Related Note Guarantee and the Related Note, as applicable, for complete
definitions of such terms.
AMEX....................the American Stock Exchange.
APPLICABLE INDEX........the JPMCI Crude Oil Total Return Index.
APPLICABLE INDEX
COMMENCEMENT
VALUE...................
APPLICABLE INDEX
SETTLEMENT VALUE........the arithmetic average of the values of the Applicable
Index during the Determination Period; provided,
however, that if the Applicable Index Settlement Value
has been permanently determined prior to such time, the
Applicable Index Settlement Value shall equal the value
so determined.
APPLICABLE INDEX EARLY
SETTLEMENT VALUE........for each day of the Early Determination Period, the
value of the Applicable Index for such day of the Early
Determination Period; provided, however, that if the
Applicable Index Settlement Value has been permanently
determined prior to such time, the Applicable Index
Early Settlement Value shall equal the value so
determined.
BENCHMARK CRUDE OIL
CONTRACTS...............the crude oil futures contracts included from time to
time in the JPM Indices, which shall initially be the
NYMEX Light "Sweet" Crude Oil contract.
BUSINESS DAY............any day other than a Saturday, Sunday or any other day
on which banking institutions in The City of New York,
New York, are permitted or required by any applicable
law to close.
CODE....................the Internal Revenue Code of 1986, as amended.
COLLATERAL YIELD
COMPONENT...............a component of the value of the Applicable Index,
computed on the fluctuating index value of the
Applicable Index at the most recent auction rate for
3-month U.S. Treasury Bills or any successor rate
thereto with a maturity of 3 months or less or, if no
such rate has been determined in the 13 days prior to
the date of determination, as Morgan Guaranty may
determine in its reasonable discretion.
COMMISSION..............the Securities and Exchange Commission.
COMMON SECURITIES.......the Series [B] Common Securities and any other common
securities issued by the Trust (or its predecessor).
COMPS EARLY REDEMPTION
PRICE...................On any Early Redemption Date, an amount equal to (i) the
Early Redemption Value per Series [B] Preferred Security
plus (ii) accrued and unpaid dividends to but excluding
the date of redemption.
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COMPS REDEMPTION
PRICE...................at Stated Maturity, an amount equal to (i) the
Redemption Value per Series [B] Preferred Security plus
(ii) accrued and unpaid dividends to but excluding
Stated Maturity.
DECLARATION.............the amended and restated declaration of trust among J.P.
Morgan & Co. Incorporated, as sponsor, and the trustees
named therein dated as of October 10, 1997.
DETERMINATION PERIOD....the 10 consecutive Trading Days on which no Market
Disruption Event occurs immediately following the 20th
Business Day prior to Stated Maturity.
DIVIDENDS...............cumulative cash dividends of [2.5]% per annum on the
Face Amount (calculated on the basis of a 360 day year
of twelve 30-day months) accruing from the Issue Date
and payable quarterly in arrears.
DTC.....................the Depository Trust Company.
EARLY DETERMINATION
PERIOD..................the 10 consecutive Trading Days which are Business Days
on which U.S. Treasury Bond markets are open and on
which no Market Disruption Event occurs immediately
following the 20th Business Day prior to the applicable
Early Redemption Date.
EARLY REDEMPTION
VALUE...................the average for the 10 days of the Early Determination
Period of the discounted present value of the future
dividends and the indexed Principal Amount of the ComPS,
as set forth in the accompanying Prospectus under
"Description of ComPS--Early Redemption Upon the
Occurrence of a Special Event or at the Election of the
Holders of the ComPS".
EARLY REDEMPTION
DATE....................each Optional Redemption Date and the date of any
Special Event Redemption or Liquidation Distribution.
ERISA...................the Employee Retirement Income Security Act of 1974, as
amended.
EXCHANGE ACT............the Securities Exchange Act of 1934, as amended.
FACE AMOUNT.............[$25].
FACTOR..................[0.15 (15 percent)], which is designed to offset the
costs of issuing and hedging the indexation of the
ComPS.
GUARANTEE...............the Guarantee Agreement executed by J.P. Morgan on
behalf of the holders of each series of Preferred
Securities.
GUARANTEE PAYMENTS......without duplication, (i)(A) any accrued and unpaid
dividends that are required to be paid on the ComPS and
(B) the ComPS Early Redemption Price or the ComPS
Redemption Price, as applicable, but if and only to the
extent that, in each of case, Morgan Guaranty has made a
payment of interest or principal, as the case may be, on
the Related Note and (ii) upon a Liquidation Event
(other than in connection with the redemption of all the
ComPS upon the maturity or redemption of the Related
Note), the lesser of (A) the Liquidation Distribution to
the extent the Trust, on behalf of holders of Series [B]
Securities, has funds available therefor, and (B) the
amount of assets of the Trust consisting of the Related
Note and the proceeds
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thereof remaining available for distribution to holders
of all Series [B] Preferred Securities upon such
Liquidation Event.
INITIAL HOLDERS.........holders who purchase any ComPS upon original issuance.
INTEREST PAYMENT DATE...with respect to the Related Note, the last calendar day
of each March, June, September and December, beginning
, 199[ ].
INVESTMENT COMPANY
EVENT...................the receipt by the Trust of an opinion of a nationally
recognized independent counsel experienced in such
matters to the effect that, as a result of the
occurrence of a change in law or regulation, a written
change in interpretation or application of law or
regulation by any legislative body, court, governmental
agency or regulatory authority or the expiration or
revocation of any applicable exemption obtained by the
Trust (a "Change in 1940 Act Law"), there is more than
an insubstantial risk that the Trust is or will be
considered an "investment company" that is required to
be registered under the 1940 Act, which Change in 1940
Act Law becomes effective on or after the date of this
Prospectus.
IRS.....................Internal Revenue Service.
ISSUE DATE.............. , 199[ ].
JPMCI...................The J.P. Morgan Commodity Index.
LIQUIDATION
DISTRIBUTION............in respect of any Liquidation Event, the sum of (a) the
Early Redemption Value (treating the date of such
distribution as the Early Redemption Date), plus (b) the
amount of accrued and unpaid dividends on such Series
[B] Preferred Security to but excluding the date of
payment.
LIQUIDATION EVENT.......any dissolution of the Trust, whether voluntary or
involuntary.
LME.....................the London Metals Exchange.
MARKET DISRUPTION
EVENT...................the occurrence of one or more of the following on any
Trading Day with respect to any Benchmark Crude Oil
Contract underlying the Applicable Index, or an exchange
on which any Benchmark Crude Oil Contract is traded (a
"Relevant Exchange"): (a) a day on which the fluctuation
of the price of any Benchmark Crude Oil Contract
underlying the Applicable Index is materially limited by
the rules of a Relevant Exchange setting the maximum or
minimum price for such day (a "Limit Price"); (b) a day
on which the official settlement price (the "Settlement
Price") on the Relevant Exchange of a Benchmark Crude
Oil Contract underlying the Applicable Index is the
Limit Price; (c) the failure of a Relevant Exchange to
determine, announce or publish the Settlement Price with
respect to a Benchmark Crude Oil Contract underlying the
Applicable Index; (d) the material suspension of trading
in any Benchmark Crude Oil Contract underlying the
Applicable Index on a Relevant Exchange; (e) the failure
of trading to commence, or the permanent discontinuation
of trading, in any Benchmark Crude Oil Contract
underlying the Applicable Index on any Relevant
Exchange; and (f) the imposition of any material
limitation on trading in any Benchmark Crude Oil
Contract underlying the Applicable Index on any Relevant
Exchange.
NASDAQ..................The Nasdaq Stock Market.
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1940 ACT................the Investment Company Act of 1940, as amended.
NOTE EVENT OF DEFAULT...(i) default for 30 days in the payment of interest on
the Related Note; (ii) default in payment of principal
amount at the Stated Maturity or any amount payable upon
any redemption of the Related Note; (iii) failure by
Morgan Guaranty for 90 days after receipt of notice to
it to comply with any of its covenants or agreements
contained in the Related Note; and (iv) certain events
of bankruptcy, insolvency, receivership or
reorganization involving Morgan Guaranty or certain
affiliates.
NYMEX...................the New York Mercantile Exchange.
OPTIONAL REDEMPTION.....the redemption of ComPS by the holders thereof on any
Optional Redemption Date for the ComPS Early Redemption
Price.
OPTIONAL REDEMPTION
DATE....................each prior to Stated Maturity, subject to
extension in the case of (i) delay in the provision by
DTC of the Applicable Notice or (ii) the occurrence and
continuance of a Market Disruption Event.
PREFERRED SECURITIES....the ComPS and any other preferred securities issued by
the Trust.
PRINCIPAL AMOUNT........at any time, (i) in the case of ComPS, the Redemption
Value or Early Redemption Value, as applicable, as if
determined as of such time, and (ii) in the case of the
Related Note, the principal amount thereof at such time
determined pursuant to the terms thereof.
REDEMPTION DATE.........either the Stated Maturity or an Early Redemption Date,
as applicable.
REDEMPTION VALUE........at Stated Maturity, the Face Amount per Series [B]
Preferred Security multiplied by a fraction, the
numerator of which is the Applicable Index Settlement
Value and the denominator of which is the Applicable
Index Commencement Value.
RELATED NOTE............the [2.5]% unsecured, unsubordinated debt obligation of
Morgan Guaranty due .
ROLLOVER PERIOD.........the period during which each replacement of
shorter-dated Benchmark Crude Oil Contracts with
longer-dated Benchmark Crude Oil Contracts as the basis
for the change in value of the Applicable Index occurs.
SECURITIES..............the Series [B] Securities and any other securities
issued by the Trust.
SECURITIES ACT..........the Securities Act of 1933, as amended.
SENIOR INDEBTEDNESS.....with respect to Morgan Guaranty, the principal of,
premium, if any, and interest on (a) all indebtedness of
Morgan Guaranty for money borrowed, whether outstanding
as of the date hereof or hereafter created, issued or
incurred (other than Morgan Guaranty's obligations to
its depositors), except any indebtedness expressly
subordinated to such Senior Indebtedness, and (b) any
deferrals, renewals or extensions of any such Senior
Indebtedness.
SERIES [B] COMMON
SECURITIES..............the common securities of the Trust representing an
undivided beneficial interest in the Related Note (and
the proceeds thereof), to be owned by J.P. Morgan.
SERIES [B] SECURITIES...the ComPS and the Series [B] Common Securities.
SPECIAL EVENT...........either a Tax Event or an Investment Company Event.
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SPECIAL REDEMPTION......upon the occurrence and during the continuation of a
Special Event, Morgan Guaranty will have the right to
redeem the Related Note in whole or in part for cash at
the Related Note Redemption Price, with the result that
the Trust will redeem on a pro rata basis ComPS and
related Series [B] Common Securities in an equal
Principal Amount for cash at the ComPS Early Redemption
Price.
SPECIAL REDEMPTION
DATE....................any date in respect of which upon the occurrence and
continuation of a Tax Event or an Investment Company
Event Morgan Guaranty shall have called for redemption
in whole or in part the Related Note, and the Trust
shall have called for redemption on a pro rata basis an
equal Principal Amount of the ComPS and related Series
[B] Common Securities.
STATED MATURITY......... , [2000].
TAX COUNSEL.............Cravath, Swaine & Moore, special tax counsel to J.P.
Morgan and the Trust.
TAX EVENT...............the receipt by the Trust of an opinion of nationally
recognized independent tax counsel experienced in such
matters (a "Tax Opinion") to the effect that, as a
result of (a) any amendment to, or change (including any
announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or
therein, (b) any amendment to, or change in, an
interpretation or application of such laws or
regulations by any legislative body, court, governmental
agency or regulatory authority (including the enactment
of any legislation and the publication of any judicial
decision or regulatory determination), (c) any
interpretation or pronouncement that provides for a
position with respect to such laws or regulations that
differs from the theretofore generally accepted position
or (d) any action taken by any governmental agency or
regulatory authority, which amendment or change is
enacted, promulgated, issued or announced or which
interpretation or pronouncement is issued or announced
or which action is taken, in each case on or after the
date of this Prospectus Supplement, that there is more
than an insubstantial risk that at such time or within
90 days of the date thereof (i) the Trust is or would be
subject to United States Federal income tax with respect
to income accrued or received on any Related Note, (ii)
the interest payable on any Related Note is not or would
not be deductible by Morgan Guaranty for United States
Federal income tax purposes, (iii) the contingent
principal in excess of the Face Amount of any series of
Preferred Securities (if any) payable on any Related
Note is not or would not be deductible by Morgan
Guaranty for United States Federal income tax purposes
or (iv) the Trust is or would be subject to more than a
de minimis amount of other taxes, duties or other
governmental charges.
TRADING DAY.............any day on which open-outcry trading on either the NYMEX
or the LME is scheduled to occur or occurs.
TRUST INDENTURE ACT.....the Trust Indenture Act of 1939, as amended.
UNUSED COSTS............[1.0]% ([one] percent).
A-5
<PAGE> 54
PROSPECTUS
$700,000,000
J.P. MORGAN INDEX FUNDING COMPANY I
Preferred Securities guaranteed to the extent set forth herein by
J.P. MORGAN & CO. INCORPORATED
------------------------
J.P. Morgan Index Funding Company I (the "Trust"), a Delaware statutory business
trust, may offer, from time to time, preferred securities of separate series
representing undivided beneficial interests in certain assets of the Trust
("Preferred Securities"). The payment of periodic cash distributions
("distributions") with respect to Preferred Securities out of moneys held by the
Trust and payments on liquidation, redemption or otherwise with respect to such
Preferred Securities will be guaranteed on a subordinated basis by J.P. Morgan &
Co. Incorporated, a Delaware corporation ("J.P. Morgan"), to the extent
described herein (the "Guarantee"). See "Description of the Guarantee". The
Trust, on behalf of holders of Securities (as defined below) of each series,
will invest the proceeds from the issuance of Preferred Securities and related
common securities (the "Common Securities" and, together with the Preferred
Securities, the "Securities") in unsecured notes associated with each such
series (each, a "Related Note") of Morgan Guaranty Trust Company of New York
("Morgan Guaranty"), a trust company with full banking powers organized under
the laws of the State of New York, and payments to the Trust on liquidation,
redemption or otherwise with respect to the Related Notes will be guaranteed on
a subordinated basis by J.P. Morgan to the extent described herein (the "Related
Note Guarantee"). See "Description of the Related Note Guarantee". J.P. Morgan's
obligations under the Guarantee and Related Note Guarantee are subordinate and
junior in right of payment to all other liabilities of J.P. Morgan and rank pari
passu with the most senior preferred stock outstanding as of the date hereof of
J.P. Morgan. Related Notes associated with a series of Securities may be issued
and sold from time to time by Morgan Guaranty to the Trust in connection with
the investment of the proceeds from the offering of Preferred Securities and
Common Securities of such series of the Trust. J.P. Morgan, through its
obligations under the Guarantee, the Related Note Guarantee and the Amended and
Restated Declaration of Trust, taken together, will provide a full and
unconditional guarantee, on a subordinated basis, of payments due on the
Preferred Securities.
Specific terms of the Preferred Securities in respect of which this Prospectus
is being delivered (the "Offered Securities") will be set forth in an
accompanying Prospectus Supplement (the "Prospectus Supplement") with respect to
such Offered Securities, which will describe, without limitation and where
applicable, the following: (i) in the case of Preferred Securities, the
designation, number of securities, liquidation preference per security
(including, without limitation, a description of any indexation thereof),
initial public offering price, any listing on a securities exchange,
distribution rate (or method of calculation thereof), dates on which
distributions shall be payable and dates from which distributions shall accrue,
any voting rights, terms for any conversion or exchange into other securities,
any redemption, exchange or sinking fund provisions, any other rights,
preferences, privileges, limitations or restrictions relating to the Preferred
Securities and the terms upon which the proceeds of the sale of the Preferred
Securities shall be used to purchase a specific Related Note of Morgan Guaranty;
(ii) in the case of the applicable Related Note, the specific designation,
aggregate principal amount (including, without limitation, a description of any
indexation thereof), denomination, maturity, premium, if any, any exchange,
conversion, redemption or sinking fund provisions, if any, interest rate (which
may be fixed or variable), if any, the time and method of calculating interest
payments, if any, dates on which premium, if any, and interest, if any, will be
payable, the right of Morgan Guaranty, if any, to defer payment of interest on
the Related Note and the maximum length of such deferral period, and (iii) the
initial public offering price, subordination terms, and other specific terms of
the offering.
The Offered Securities may be offered in amounts, at prices and on terms to be
determined at the time of offering; provided, however, that the aggregate
initial public offering price of all Offered Securities shall not exceed
$700,000,000. Any Prospectus Supplement relating to any series of Offered
Securities will contain information concerning certain United States Federal
income tax considerations, if applicable, for purchasers and holders of the
Offered Securities.
SEE "RISK FACTORS WITH RESPECT TO ALL PREFERRED SECURITIES" ON PAGE 23 AND "RISK
FACTORS WITH RESPECT TO COMPS" ON PAGE 24 FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN ANY PREFERRED SECURITIES OR COMPS, AS APPLICABLE. AN INVESTOR IN
COMPS COULD LOSE ITS ENTIRE INVESTMENT.
The Trust may sell the Offered Securities directly, through agents designated
from time to time or through underwriters or dealers. See "Plan of
Distribution". If any agents of the Trust or any underwriters or dealers are
involved in the sale of the Offered Securities, the names of such agents,
underwriters or dealers and any applicable commissions and discounts will be set
forth in any related Prospectus Supplement.
No dealer, salesperson or any other individual has been authorized by the Trust
or J.P. Morgan to give any information or to make any representation other than
those contained or incorporated by reference in this Prospectus or any
accompanying Prospectus Supplement and, if given or made, such information or
representation must not be relied upon as having been authorized. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby in any jurisdiction to any person to
whom it is unlawful to make such offer or solicitation in such jurisdiction.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of J.P. Morgan, Morgan Guaranty or the Trust since the date hereof.
THE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF
SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
October [ ], 1997.
<PAGE> 55
AVAILABLE INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by J.P. Morgan and J.P. Morgan Index Funding Company, LLC (the
"Company") with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Offered Securities. The Trust, as successor by merger with the Company,
hereby expressly adopts the Registration Statement as its own for all purposes
of the Securities Act and the Exchange Act (as defined below). This Prospectus
does not contain all of the information set forth in such Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Reference is made to such Registration Statement
and to the exhibits relating thereto for further information with respect to
J.P. Morgan, the Trust and the Offered Securities. Any statements contained
herein concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission or incorporated by
reference herein are not necessarily complete, and, in each instance, reference
is made to the copy of such document so filed for a more complete description of
the matter involved. Each such statement is qualified in its entirety by such
reference.
J.P. Morgan is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Reports, proxy statements and other information concerning J.P.
Morgan can be inspected and copied at prescribed rates at the Commission's
Public Reference Room, Judiciary Plaza, 450 Fifth Street, Northwest, Washington,
D.C. 20549, as well as the following Regional Offices of the Commission: Seven
World Trade Center, New York, New York 10048; and Northwestern Atrium Center,
500 West Madison Street, Chicago, Illinois 60661-2511. Such reports, proxy
statements and other information may also be inspected at the offices of the New
York Stock Exchange, on which J.P. Morgan common stock is traded, at 20 Broad
Street, New York, New York 10005.
No separate financial statements of the Trust have been included herein. J.P.
Morgan does not consider that such financial statements would be material to
holders of the Preferred Securities because (i) all of the voting securities of
the Trust will be owned by J.P. Morgan, a reporting company under the Exchange
Act, (ii) the Trust has no independent operations and exists for the sole
purpose of issuing securities and investing the proceeds thereof in Related
Notes to be issued by Morgan Guaranty, and (iii) the obligations of the Trust
under the Preferred Securities that may be issued from time to time are fully
and unconditionally guaranteed, on a subordinated basis, by J.P. Morgan to the
extent that the Trust has funds available to meet such obligations. See
"Description of the Related Notes", "Description of the Guarantee" and
"Description of the Related Note Guarantee".
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), the Quarterly Reports of J.P. Morgan 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 Exchange 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 Exchange 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
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<PAGE> 56
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
J.P. MORGAN WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL
OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF
ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED
HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO SUCH DOCUMENTS). WRITTEN REQUESTS
SHOULD BE DIRECTED TO THE OFFICE OF THE SECRETARY, J.P. MORGAN & CO.
INCORPORATED, 60 WALL STREET, NEW YORK, NEW YORK 10260-0060. TELEPHONE REQUESTS
MAY BE DIRECTED TO (212) 648-3380.
J.P. MORGAN & CO. INCORPORATED
J.P. Morgan, whose origins date to a merchant banking firm founded in London in
1838, is the holding company for subsidiaries engaged globally in providing a
wide range of financial services to 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 products 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.
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<PAGE> 57
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
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 a 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.
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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 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
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<PAGE> 59
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 types of transactions with them or involving
their securities.
Among other wholly owned subsidiaries:
JPMSI is a broker-dealer registered with the Securities and Exchange
Commission and is a member of the National Association of Securities
Dealers, the New York Stock Exchange, and other exchanges.
J.P. Morgan Futures Inc. is subject to regulation by the Commodity
Futures Trading Commission, the National Futures Association, and the
commodity exchanges and clearinghouses of which it is a member.
J.P. Morgan Investment Management Inc. is registered with the Securities
and Exchange Commission as an investment adviser under the Investment
Advisers Act of 1940, as amended.
J.P. Morgan subsidiaries conducting business in other countries are also
subject to regulations and restrictions imposed by those jurisdictions,
including capital requirements.
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.
J.P. MORGAN INDEX FUNDING COMPANY I
J.P. Morgan Index Funding Company I, is a statutory business trust formed on
December 12, 1996 under the Delaware Business Trust Act (the "Business Trust
Act") pursuant to (i) a declaration of trust among the Trustees and J.P. Morgan
and (ii) the filing of a certificate of trust with the Secretary of State of the
State of Delaware on December 12, 1996, which was restated pursuant to the
filing of a restated certificate of trust with the Secretary of State of the
State of Delaware on September 30, 1997. On October 10, 1997, J.P. Morgan, as
sponsor, and the Trustees entered into an amended and restated declaration of
trust, dated October 10, 1997 (the "Declaration"), filed as an exhibit to the
Registration Statement of which this Prospectus form a part. The Declaration
will be qualified under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). The Company has been merged into the Trust (the "Merger")
pursuant to (i) an Agreement and Plan of Merger between the Trust and the
Company and (ii) a Certificate of Merger merging the Company into the Trust
filed with the Secretary of State of the State of Delaware. By operation of law,
the Trust has become the owner of all assets of the
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Company, including any outstanding Related Notes, and has succeeded to all the
obligations of the Company, including any outstanding Preferred Securities, and
Common Securities theretofore issued by the Company, including the 2.5% Series A
Securities, and all the rights of the Company, including in respect of any
related note guarantee executed in connection with such Securities. Following
the effectiveness of the Merger, any such outstanding Preferred Securities and
Common Securities represent an undivided beneficial interest in the
corresponding Related Note.
This description summarizes the material terms of the Declaration and is
qualified in its entirety by reference to the form of Declaration, which has
been filed as an exhibit to the Registration Statement of which this Prospectus
is a part, and the Trust Indenture Act.
SECURITIES
Upon issuance of any Preferred Securities of any series, the holders thereof
will own all of the issued and outstanding Preferred Securities of such series,
and J.P. Morgan will own all of the issued and outstanding Common Securities of
such series. The certificates for each series will represent a fractional
undivided beneficial interest in certain assets of the Trust consisting of the
corresponding Related Note of Morgan Guaranty and the proceeds thereof, all
monies due and to become due under such Related Note, and the right to receive a
portion of the payments of principal of and interest on such Related Note. J.P.
Morgan will acquire the Common Securities of each series in a principal amount
equal to 0.001% of the total principal amount of such series and will own all
the issued and outstanding Common Securities of the Trust which will represent
0.001% of the total capital of the Trust. The Preferred Securities of any series
and the Common Securities of such series will rank pari passu with each other
and will have equivalent payment terms; provided that (i) if a Note Event of
Default (as defined herein) under the Related Note of such series occurs and is
continuing, the holders of Preferred Securities of such series will have a
priority over holders of Common Securities of such series with respect to
payments in respect of distributions and payments upon liquidation, redemption
and maturity and (ii) holders of Common Securities have the exclusive right
(subject to the terms of the Declaration) to appoint, remove or replace the
Trustees and to increase or decrease the number of Trustees. A Note Event of
Default under a Related Note of one series will not prohibit payments in respect
of distributions and payments upon liquidation, redemption and maturity under a
Related Note corresponding to any other series of Securities or under such
Securities. No holder of Securities of any series shall have any claim on, or
right to, any assets allocated to, or associated with, any other series (except
if, and to the extent that, such holder is also a holder of Securities of such
other series). The Trust exists for the exclusive purposes of (a) issuing its
series of Securities, (b) investing the gross proceeds from the sale of the
Securities in Related Notes of Morgan Guaranty and (c) engaging in only such
other activities as are necessary, convenient or incidental thereto. The rights
of the holders of any series of the Securities, including economic rights,
rights to information and voting rights, are set forth in the Declaration (which
term shall include any Declaration Supplement), the Business Trust Act and the
Trust Indenture Act.
POWERS OF DUTIES OF TRUSTEES
The number of trustees (the "Trustees") of the Trust shall initially be five.
Three of such Trustees (the "Regular Trustees") are individuals who are
employees or officers of J.P. Morgan. The fourth such trustee will be First
Trust of New York, National Association, which is unaffiliated with J.P. Morgan
and which will serve as the property trustee (the "Property Trustee") and act as
the indenture trustee for purposes of the Trust Indenture Act. The fifth such
trustee is Wilmington Trust Company, which has its principal place of business
in the State of Delaware (the "Delaware Trustee"). Pursuant to the Declaration,
legal title to each Related Note will be held by the Property Trustee for the
benefit of the holders of the corresponding series of the Securities, and the
Property Trustee will have the power to exercise all rights, powers and
privileges with respect to such Related Notes. In addition, the Property Trustee
will maintain exclusive control of a separate segregated non-interest-bearing
bank account for each series of Securities (the "Property Account") to hold all
payments in respect of the corresponding Related Note for the benefit of the
holders of each such series of Securities. The Property Trustee will promptly
make distributions to the holders of a series of Securities of the Trust out of
funds from the corresponding Property Account.
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The Guarantee is separately qualified under the Trust Indenture Act and will be
held by First Trust of New York, National Association, acting in its capacity as
indenture trustee with respect thereto, for the benefit of the holders of the
Preferred Securities. As used in this Prospectus and any accompanying Prospectus
Supplement, the term "Property Trustee" with respect to the Trust refers to
First Trust of New York, National Association acting either in its capacity as a
Trustee under the Declaration and the holder of legal title to the Related Notes
or in its capacity as indenture trustee under, and the holder of, the Guarantee,
as the context may require. J.P. Morgan, as the owner of all the series of
Common Securities, will have the exclusive right (subject to the terms of the
Declaration) to appoint, remove or replace Trustees and to increase or decrease
the number of Trustees, provided that the number of Trustees shall be at least
five and the majority of Trustees shall be Regular Trustees. The Regular
Trustees are authorized and directed to take such action as they deem reasonable
in order that the Trust will not be deemed to be an "investment company"
required to be registered under the 1940 Act or that the Trust will not be
classified for United States Federal income tax purposes as an association
taxable as a corporation or a partnership and will be treated as a grantor trust
for United States Federal income tax purposes. In this connection, the Regular
Trustees are authorized to take any action, not inconsistent with applicable
law, the certificate of trust of the Trust or the Declaration, that the Regular
Trustees determine in their discretion to be reasonable and necessary or
desirable for such purposes, as long as such action does not adversely affect
the interests of holders of the Securities. The term of the Trust will be until
November 21, 2105, but the Trust may terminate earlier as provided in the
Declaration.
The duties and obligations of the Trustees of the Trust will be governed by the
Declaration. Under the Declaration, the Trust (on behalf of a series of
Securities or otherwise) shall not, and the Trustees of the Trust shall not
cause the Trust (on behalf of a series of Securities or otherwise) to, engage in
any activity other than in connection with the purposes of the Trust or other
than as required or authorized by the Declaration. In particular, the Trust (on
behalf of a series of Securities or otherwise) shall not, and the Trustees of
the Trust shall cause the Trust (on behalf of a series of Securities or
otherwise) not to, (a) invest any proceeds received by the Trust from holding
the Related Notes, but shall promptly distribute from the applicable Property
Account all such proceeds to holders of the corresponding series of its
Securities pursuant to the terms of the Declaration and of such series of
Securities; (b) acquire any assets other than as expressly provided in the
Declaration; (c) possess Trust Property for other than a Trust purpose; (d) make
any loans, other than loans represented by such Related Notes; (e) exercise any
power or otherwise act in such a way as to vary the assets of the Trust or the
terms of its Securities in any way whatsoever; (f) issue any securities or other
evidences of beneficial ownership of, or beneficial interests in, the Trust
other than its Securities; (g) incur any indebtedness for borrowed money or (h)
(i) direct the time, method and place of exercising any trust or power conferred
upon the Property Trustee of the Trust with respect to any series of its
Securities, (ii) waive any past default that is waivable under the applicable
Related Note or the Declaration, (iii) exercise any right to rescind or annul
any declaration that the principal of all the Related Note associated with any
series deposited in the Trust as trust assets shall be due and payable or (iv)
consent to any amendment, modification or termination of any such Related Note
or the Declaration, in each case where such consent shall be required, unless in
the case of this clause (h) the Property Trustee shall have received (i) an
unqualified opinion of nationally recognized independent tax counsel recognized
as expert in such matters to the effect that such action will not cause the
Trust to be classified for United States Federal income tax purposes as an
association taxable as a corporation or a partnership and that the Trust will
continue to be classified as a grantor trust for United States Federal income
tax purposes and (ii) if required, the approval of the holders of the Securities
for the taking of any action. See "J.P. Morgan Index Funding Company
I -- Voting" and "Description of the ComPS -- Voting Rights".
BOOKS AND RECORDS
The books and records of the Trust will be maintained at the principal office of
the Trust and will be open for inspection by a holder of Preferred Securities or
such holder's representative for any purpose reasonably related to such holder's
interest in the applicable Related Note held by the Trust during normal business
hours. Separate and distinct books and records will be maintained by the Trust
for each series of
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Securities, and the assets associated with, or related to, any such series will
be held and accounted for separately from the assets of the Trust generally or
from the assets associated with, or related to, any other series of Securities.
VOTING
Except as set forth below and under "Description of the ComPS -- Voting Rights"
and under "Events of Default" below and as provided under the Business Trust
Act, the Declaration and the Trust Indenture Act, holders of Preferred
Securities will have no voting rights.
If any proposed amendment to the Declaration provides for, or the Regular
Trustees otherwise propose to effect, (i) any action that would adversely affect
the powers, preferences or special rights of the Securities, whether by way of
amendment to the Declaration or otherwise, or (ii) the dissolution or bankruptcy
of the Trust, then the holders of outstanding Securities will be entitled to
vote on such amendment or proposal as a class and such amendment or proposal
shall not be effective except with the approval of the holders of Securities
representing a majority in principal amount of such Securities; provided,
however, that if any amendment or proposal referred to in clause (i) above would
adversely affect only certain series of the Preferred Securities or certain
series of the Common Securities, then only the affected series or class, as
applicable, will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of a
majority in principal amount of such series or class, as applicable, of
Securities.
THE PROPERTY TRUSTEE
The Property Trustee, for the benefit of the holders of the Securities, is
authorized under the Declaration to exercise all rights with respect to each
Related Note deposited in the Trust as trust assets, including its rights as the
holder of any such Related Note to enforce the Trust's rights under such Related
Note upon the occurrence of a Note Event of Default. The Property Trustee is
also authorized to enforce the rights of the Trust under the Related Note
Guarantee. Holders of at least a majority in principal amount of the Preferred
Securities of all series or of the affected series, as applicable, of the Trust
will have the right to direct the Property Trustee for the Trust with respect to
certain matters under the Declaration and the Related Note Guarantee; provided
that (a) such direction would not conflict with any applicable law or the
Declaration and would not result in any personal liability or expense to the
Property Trustee, (b) such direction would not cause the Trust not to be
properly classified as a grantor trust for U.S. Federal income tax purposes and
(c) the Property Trustee may take any other action deemed proper by the Property
Trustee which is not inconsistent with such direction. The Declaration will
provide that the Sponsor will pay the Property Trustee's fees and expenses and
will indemnify the Property Trustee in respect of certain matters.
The Property Trustee is a depository for funds and performs other services for,
and transacts other banking business with, J.P. Morgan in the normal course of
business.
DISTRIBUTIONS
Pursuant to the Declaration, distributions on any series of Securities must be
paid on the dates payable to the extent that the Property Trustee has cash on
hand in the Property Account relating to such series to permit such payment. The
funds available for distribution to the holders of any series of Securities will
be limited to payments received by the Property Trustee in respect of the
Related Note of such series. If Morgan Guaranty does not make interest payments
on the Related Note of any series, the Property Trustee will not make
distributions on the corresponding series of Securities. Under the Declaration,
except as set forth below, if and to the extent Morgan Guaranty does make
interest payments on the Related Note of any series, the Property Trustee is
obligated to make distributions on the corresponding series of Securities on a
Pro Rata Basis (as defined below). The payment of distributions on each series
of the Preferred Securities is guaranteed by J.P. Morgan on a subordinated basis
as and to the extent set forth under "Description of the Guarantee." The
Guarantee, when taken together with J.P. Morgan's obligations under
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the Related Note Guarantee and its obligations under the Declaration, provides a
full and unconditional guarantee from the time of issuance of each series of the
Preferred Securities of amounts due on such Preferred Securities. Such Guarantee
itself, however, covers distributions and other payments on such series of
Preferred Securities only if and to the extent that Morgan Guaranty has made a
payment to the Property Trustee of interest or principal on the Related Note of
such series. As used in this Prospectus, the term "Pro Rata Basis" shall mean
pro rata to each holder of any series of Securities according to the aggregate
principal amount of all Securities of such series held by the relevant holder in
relation to the aggregate principal amount of the Securities of such series
outstanding unless, in relation to a payment, a Note Event of Default under the
Related Note of such series has occurred and is continuing, in which case any
funds available to make such payment shall be paid first to each holder of the
Preferred Securities of such series pro rata according to the aggregate
principal amount of the Preferred Securities of such series held by the relevant
holder in relation to the aggregate principal amount of all the Preferred
Securities of such series outstanding, and only after satisfaction of all
amounts owed to the holders of such Preferred Securities of such series to each
holder of Common Securities of such series pro rata according to the aggregate
principal amount of such Common Securities of such series held by the relevant
holder in relation to the aggregate principal amount of all Common Securities of
such series outstanding.
EVENTS OF DEFAULT
In the event that the Trust fails to pay dividends or other distributions on the
Securities of any series for 30 days following the date on which such payment
was due in accordance with the terms of such Securities or if a Note Event of
Default occurs and is continuing with respect to the Related Note of any series
(a "Note Event of Default"), an Event of Default under the Declaration will
occur and be continuing with respect to any outstanding Securities of such
series. In such event, the Declaration provides that holders of a majority in
principal amount of Preferred Securities of such series, acting as a single
class, may cause the Trust, on behalf of holders of Securities of such series,
by written direction to the Property Trustee, to waive any such Note Event of
Default or to enforce the Trust's rights, on behalf of holders of Securities of
such series, under the applicable Related Note against Morgan Guaranty or under
the Related Note Guarantee against J.P. Morgan or, in the case of any failure to
pay dividends or other distributions, to cause the Trust to declare and pay such
dividends or distributions; provided, that such payments shall be paid solely
from the proceeds of interest or other payments made on the applicable Related
Note and received by the Trust on behalf of such holders. Notwithstanding the
foregoing, the right of any holder of Securities of any series to receive
payments or distributions on such series of Securities in accordance with the
terms of the Declaration or such Securities on or after the respective payment
dates therefor, or to institute suit for the enforcement of any such payment on
or after such payment dates, shall not be impaired without the consent of such
holder.
RECORD HOLDERS
The Declaration provides that the Trustees of the Trust may treat the person in
whose name a certificate representing Preferred Securities is registered on the
books and records of the Trust as the sole holder thereof and of the Preferred
Securities represented thereby for purposes of receiving distributions and for
all other purposes and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such certificate or in the Preferred
Securities represented thereby on the part of any person, whether or not the
Trust shall have actual or other notice thereof. Preferred Securities will be
issued in fully registered form and will be represented by a global certificate
registered on the books and records of the Trust in the name of The Depositary
Trust Company ("DTC") or its nominee. Under the Declaration:
(i) the Trust and the Trustees shall be entitled to deal with DTC (or
any successor) for all purposes, including the payment of distributions and
receiving approvals, votes or consents under the Declaration and, except as
set forth in the Declaration with respect to the Property Trustee, shall
have no obligation to persons owning a beneficial interest in any Preferred
Securities ("Preferred Security Beneficial Owners") registered in the name
of and held by DTC or its nominee; and
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(ii) the rights of Preferred Security Beneficial Owners shall be
exercised only through DTC (or any successor) and shall be limited to those
established by law and agreements between such Preferred Security
Beneficial Owners and DTC and/or its participants. With respect to any
Preferred Securities registered in the name of and held by DTC or its
nominee, all notices and other communications required under the
Declaration shall be given to, and all distributions on such Preferred
Securities shall be given or made to, DTC (or its successor).
The specific terms of the depositary arrangement with respect to the Preferred
Securities of the Trust will be disclosed in the applicable Prospectus
Supplement.
DEBTS AND OBLIGATIONS
The Declaration provides that any person or entity extending credit to,
contracting with, or having any claim against, the Trust with respect to any
series of Securities may look only to the assets of the Trust associated with
such series to satisfy or enforce any debt, liability, obligation or expense
incurred, contracted for or otherwise existing with respect to such series. In
the Declaration, J.P. Morgan has agreed to pay for all debts and obligations
(other than with respect to the Securities) and all costs and expenses of the
Trust, including the fees and expenses of its Trustees and any taxes and all
costs and expenses with respect thereto, to which the Trust may become subject,
except for United States withholding taxes. The foregoing obligations of J.P.
Morgan under the Declaration are for the benefit of, and shall be enforceable
by, any person to whom any such debts, obligations, costs, expenses and taxes
are owed a (a "Creditor"), whether or not such Creditor has received notice
thereof. Any such Creditor may enforce such obligations of J.P. Morgan directly
against J.P. Morgan and J.P. Morgan has irrevocably waived any right or remedy
to require that any such Creditor take any action against the Trust or any other
person before proceeding against J.P. Morgan. J.P. Morgan has agreed in the
Declaration to execute such additional agreements as may be necessary or
desirable in order to give full effect to the foregoing.
The business address of the Trust is c/o J.P. Morgan & Co. Incorporated, 60 Wall
Street, New York, New York 10260-0060, telephone number (212) 648-2323.
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USE OF PROCEEDS
The proceeds to the Trust from the sale of the Preferred Securities offered from
time to time hereby and related Common Securities will be invested in one or
more Related Notes of Morgan Guaranty, the proceeds of which will be used by
Morgan Guaranty for general corporate purposes and for hedging its obligation
under the relevant Related Note, except as may otherwise be set forth in the
applicable Prospectus Supplement.
CONSOLIDATED RATIOS OF J.P. MORGAN
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
-------------------------------------------------------------------
Nine months
ended Year ended December 31,
September 30, -------------------------------------------------
1997 1996 1995 1994 1993(a) 1992(b)
------------- ---- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Excluding Interest on Deposits..... 1.31 1.35 1.35 1.40 1.70(a) 1.53(b)
Including Interest on Deposits..... 1.23 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>
-------------------------------------------------------------------
Nine months
ended Year ended December 31,
September 30, -------------------------------------------------
1997 1996 1995 1994 1993(a) 1992(b)
------------- ---- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Excluding Interest on Deposits..... 1.30 1.34 1.34 1.39 1.69(a) 1.52(b)
Including Interest on Deposits..... 1.22 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.
DESCRIPTION OF ALL SECURITIES
The Trust is authorized by the Declaration to issue, from time to time, one or
more series of Securities having terms described in the Prospectus Supplement
relating to each. Each series of Securities will have such terms, including
distributions, redemption, voting, liquidation rights and such other preferred
or other special rights or such restrictions, as shall be set forth in the
Prospectus Supplement relating to such Securities, including (i) the distinctive
designation of such Securities, (ii) the number of Securities issued in such
series, (iii) the annual distribution rate (or method of determining such rate)
for such Securities and
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the date or dates upon which such distributions shall be payable, (iv) whether
distributions on such Securities shall be cumulative, and, in the case of
Securities having such cumulative distribution rights, the date or dates or
method of determining the date or dates from which distributions on such
Securities shall be cumulative, (v) the amount or amounts (or the method for
determining such amount or amounts) which shall be paid out of the assets of the
Trust associated with such series of Securities to the holders of such
Securities upon voluntary or involuntary dissolution of the Trust, (vi) the
obligation, if any, of the Trust to purchase or redeem, and the option of the
holders of Securities, if any, to redeem Securities issued by the Trust and the
price or prices at which, the period or periods within which and the terms and
conditions upon which such Securities shall be purchased or redeemed, in whole
or in part, pursuant to such obligation, (vii) the voting rights, if any, of
such Securities in addition to those required by law, including the number of
votes per Security and any requirement for the approval by the holders of
Securities as a condition to specified action or amendments to the Declaration,
and (viii) any other relevant rights, preferences, privileges, limitations or
restrictions of Securities consistent with the Declaration and with applicable
law.
All Preferred Securities offered hereby will be guaranteed, on a subordinated
basis, by J.P. Morgan to the extent set forth below under "Description of the
Guarantee".
Certain United States federal income tax considerations applicable to any
offering of Preferred Securities will be described in the Prospectus Supplement
relating thereto.
In connection with the issuance from time to time of Preferred Securities of any
series, the Trust will issue related Common Securities. Upon an event of
liquidation of the Trust, the rights of the holders of the Common Securities of
such series to payments in respect of distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of the
holders of the Preferred Securities of such series. All of the Common Securities
will be owned by J.P. Morgan, the sponsor of the Trust.
Each series of Securities will be subject to redemption prior to the Stated
Maturity thereof upon the occurrence of a Tax Event or an Investment Company
Event (each, a "Special Event") upon the terms set forth in the applicable
Prospectus Supplement.
DESCRIPTION OF THE COMPS
Among the types of Preferred Securities currently contemplated for issuance by
the Trust are one or more series of Preferred Securities sharing the
characteristics described below (each such series, "ComPS"). The following
description is a general description of all series of ComPS, and prospective
purchasers of any series of ComPS should consult the applicable Prospectus
Supplement for such series and other documents referred to or incorporated by
reference therein (including, without limitation, any public documents filed
after the date hereof and any amendments to any document referred to herein).
GENERAL
The Principal Amount of each series of ComPS to be paid upon any amortization of
principal and at the Stated Maturity of such series (the "Redemption Value")
will be determined with reference to, and will fluctuate based on, the level of
a commodity index (referred to herein as the "Applicable Index" or collectively
as the "Applicable Indices"), as specified in the applicable Prospectus
Supplement.
The Applicable Index will be one of the following types: (i) an "excess return"
index, the change in value of which will be calculated with reference to the
changes in value of certain futures contracts on the relevant commodity (the
"Benchmark Contracts"), which contracts are replaced regularly as the
determinant of change in value of the Applicable Index according to the
methodology used in calculating the JPM Indices as described herein (such index
referred to herein as an "Excess Return Index"), (ii) a "total return" index,
calculated in the same manner as an Excess Return Index but including an
additional component of return (the "Collateral Return") arising from interest
accrued on the fluctuating value of the Applicable Index (such index referred to
herein as a "Total Return Index") or (iii) the price of the relevant commodity
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<PAGE> 67
as reported in the pricing source identified in the Prospectus Supplement, which
may be the settlement prices for futures contracts on the underlying commodity
or prices of the underlying commodity determined by the relevant market
participants, reporting services or associations at the official price
determination, in each case during the applicable distribution period, Early
Determination Period or Determination Period (such index referred to herein as a
"Price Reference Index"). ComPS for which the Applicable Index is a Price
Reference Index in which all distributions and the Principal Amount are indexed
to the value at any time in U.S. dollars (the "Dollar Equivalent Value") of
bullion (i.e., gold, silver, platinum or palladium) will be referred to as
"Bullion ComPS". For the purposes of this Prospectus, "Principal Amount" shall
mean (a) in the case of Bullion ComPS, the applicable portion of the applicable
fixing price of the applicable amount of the applicable bullion commodity at any
time (the "Bullion ComPS Principal Amount"), (b) in the case of all other
Preferred Securities, the Redemption Value, Early Redemption Value or stated
liquidation preference thereof, as applicable, as if determined as of such time,
and (c) in the case of any Related Note, the principal amount thereof at such
time determined pursuant to the terms thereof.
Each commodity underlying the Applicable Index will be one of the commodities
included in the J.P. Morgan Commodity Index (the "JPMCI") (i.e., aluminum,
copper, nickel, zinc, heating oil, natural gas, unleaded gasoline, crude oil,
gold, silver and platinum), one of the JPMCI sub-indices, palladium or such
other commodity as may be specified in the applicable Prospectus Supplement. As
described herein, the JPMCI is computed on an excess return and a total return
basis. The variations of the JPMCI, including the permutations of the JPMCI in
the form of sub-indices, which may be based on one or more commodities (whether
computed on an excess return or total return basis) and which have been or may
be originated and calculated by Morgan Guaranty, are collectively referred to
herein as the "JPM Indices". JPM Indices which are based upon only one
underlying commodity (whether computed on an excess return or total return
basis) are referred to as "JPM Individual Indices".
ComPS are principal-at-risk securities linked directly to the performance of an
Applicable Index. For Bullion ComPS, if the index rises from the starting value
(which is set on the day of pricing), the Redemption Value of such ComPS will be
greater than the original issue price. If the Applicable Index declines from the
starting value, the Redemption Value of such ComPS will be less than the
original issue price. For Excess Return or Total Return ComPS, if the Applicable
Index decreases over the life of the ComPS, or if the percentage increase in the
Applicable Index is less than the amount of the Factor, the Redemption Value of
such ComPS will be less than the Issue Price. If the percentage increase in the
Applicable Index is greater than the amount of the Factor, the Redemption Value
will be greater than the Issue Price. In no circumstances will the Redemption
Value of the ComPS be less than zero, but the Redemption Value could be more or
less than the issue price. Because an investor's principal redemption is linked
to the performance of an Applicable Index calculation, it is important to
understand on what the Applicable Index calculation is based. Subject to the
more specific discussion of each item elsewhere in this Prospectus and in the
relevant Prospectus Supplement, following is a general summary of Bullion ComPS,
Excess Return ComPS and Total Return ComPS:
BULLION COMPS
Bullion ComPS, which are linked to the cash price of bullion (i.e., gold,
silver, platinum or palladium), pay both dividends and principal based on the
price of the applicable bullion. The Principal Amount of a Bullion ComPS is the
Dollar Equivalent Value of a certain number or fraction of ounces of the
applicable bullion. Each dividend is calculated as a percentage rate of the
Principal Amount (which will fluctuate) Each full dividend will be equal to the
applicable fraction of the annual dividend rate times the Dollar Equivalent
Value of the spot price of the applicable bullion at such time in the London
bullion market multiplied by the fractional number of ounces to which each
Bullion ComPS is linked. Thus, the amount of each dividend will vary. Upon
redemption, the Redemption Value will be equal to the Dollar Equivalent Value of
the 10-day average of the spot price of the applicable bullion in the London
bullion market multiplied by the number or fraction of ounces of the applicable
bullion to which each Bullion ComPS is linked. Therefore, both the dividend
payments and the Redemption Value will fluctuate based on the spot price of the
applicable bullion determined in the London bullion markets. Any events which
adversely
14
<PAGE> 68
affect the spot price of the applicable bullion will adversely affect both the
dividend payments on and the Redemption Value of such Bullion ComPS.
EXCESS RETURN COMPS
ComPS which are linked to an Excess Return Index pay a fixed or floating
dividend rate on the Face Amount of such ComPS (which will equal the initial
price) and the Redemption Value of such ComPS is linked to the performance of
the applicable Excess Return Index, reduced by the applicable Factor. At
maturity, an investor will receive a principal amount determined by the
following formula: Face Amount X (the 10-day average of the Applicable Index/the
Applicable Index set on the day of pricing, minus the Factor). Thus, the
Redemption Value is linked directly to the performance of the applicable Excess
Return Index, reduced by the applicable Factor (e.g., if the ending average
ending value of the Applicable Index is twice the beginning value, the
Redemption Value will be twice the initial price, reduced by the applicable
Factor). The Factor is a percentage which reduces the principal amount to
account for the planned expenses to be incurred by the issuer in replicating the
Applicable Index and issuing the ComPS.
An Excess Return Index, which is described more fully herein under "The JPM
Indices--Excess Return Methodology", represents the cumulative return of holding
an unlevered position in the designated nearby commodity futures contracts
underlying such Applicable Index. Generally, since each Excess Return Index is
linked directly (i.e., on a one-to-one basis) to the underlying futures
contracts, a 1% change on any day in the value of the specific underlying
designated futures contract will create a 1% change in the value of the
Applicable Index for such day. Because the designated futures contracts
underlying the Excess Return indices have maturities (generally less than three
months) which are shorter than the maturity of the ComPS, the index calculation
methodology replaces the underlying contract used to determined the daily change
in the value of the Applicable Index with the next designated contract of the
same commodity on a periodic basis. This process of replacement is called
"rolling", and the 5-day period during which the replacement occurs is called
the "Rollover Period". For any month during which a roll occurs, the daily
change in value of an Excess Return Index for all days prior to the Rollover
Period is calculated as 100% of the daily change of the existing ("old")
underlying designated contract. Beginning with the first day after the beginning
of the Rollover Period, the daily change in an Excess Return Index is calculated
based 80% on the percentage change of the old contract and 20% on the percentage
change in the replacement ("new") designated contract. Similar 20% adjustments
are made in the weights attributable to each contract's change such that, by the
day after the Rollover Period ends and for all subsequent days until the next
Rollover Period, 100% of the daily index change is attributable to the
percentage change of the newly-designated contract.
Therefore, ComPS linked to an Excess Return Index pay dividends which are a
fixed or floating percentage of the Face Amount, and pay a principal amount upon
redemption or at maturity which varies directly with the performance of an
Excess Return Index, reduced by the applicable Factor. The change in an Excess
Return Index is linked directly to the percentage change in the designated
contracts underlying such index. Thus, any events which affect the designated
contracts underlying such Excess Return Index may affect the Redemption Value of
such ComPS.
TOTAL RETURN COMPS
ComPS which are linked to a Total Return Index will pay a fixed or floating
dividend based on the Face Amount (i.e., the initial price) of such ComPS and
the principal receivable upon redemption or at maturity is directly linked to
the performance of a Total Return Index, reduced by the applicable Factor. At
maturity, an investor in Total Return ComPS will receive a principal amount
determined by the following formula: Face Amount X (the 10-day average of the
Applicable Index/the Applicable Index set on the day of pricing, minus the
Factor). The Factor is a percentage which reduces the principal amount to
account for the planned expenses to be incurred by the issuer in replicating the
Applicable Index and issuing the ComPS. Thus, the Redemption Value is linked
directly to the performance of the applicable Total Return Index (e.g., if the
average ending value of the Applicable Index is twice the beginning value, the
Redemp-
15
<PAGE> 69
tion Value will be twice the initial price reduced by the Factor). However, the
Redemption Value may never be less than zero.
A Total Return Index, which is described more fully herein under "The JPM
Indices--Total Return Methodology", represents the cumulative return of holding
an unlevered position in the designated nearby commodity futures contracts
underlying such Total Return Index, plus a collateral yield on such fluctuating
index value using the most recently auctioned 3-month rate for U.S. Treasury
bills. Generally, since a Total Return Index is linked directly to the
underlying futures contracts, a 1% change on any day in the specific underlying
designated futures contract will result in a 1% change in the applicable Total
Return Index for such day (not including any change in value resulting from the
Collateral Yield). The designated futures contracts underlying Total Return
Indices must also be "rolled" as described above under "Excess Return ComPS".
Therefore, ComPS linked to a Total Return Index will bear dividends which are a
fixed or floating percentage of the Face Amount, and the principal payable upon
redemption or at maturity is linked directly to the performance of a Total
Return Index (less the Factor). The change in each Total Return Index is linked
directly to the percentage change in the designated contracts underlying such
index, plus the collateral yield on the most recently auctioned 3-month U.S.
Treasury bill rate. Thus, any events which affect the designated contracts
underlying any Total Return Index may affect the Redemption Value of such ComPS.
CALCULATION OF REDEMPTION VALUE
The Redemption Value of any particular series of ComPS will be determined in
accordance with one of the following methodologies (however, such Redemption
Value will never be less than zero):
Excess Return Index. In the case of ComPS for which the Applicable
Index is an Excess Return Index, the Redemption Value payable in respect of
the ComPS on the Settlement Date will be determined by the Calculation
Agent based on the following formula:
<TABLE>
<C> <C> <C> <S> <C>
Applicable Index Settlement Value
Redemption Value = FA x ( -------------------------------------- - Factor )
Applicable Index Commencement Value
</TABLE>
where "FA" refers to the Face Amount of the ComPS, "Applicable Index
Settlement Value" refers to the arithmetic average of the values of the
Applicable Index for the 10 consecutive days on which open-outcry
trading on either the New York Mercantile Exchange ("NYMEX") or the
London Metal Exchange (the "LME") is scheduled to occur or occurs (each,
a "Trading Day") and on which no Market Disruption Event occurs
immediately following the 20th scheduled Business Day prior to Stated
Maturity (such 10 days, the "Determination Period") (calculated in
accordance with the methodology described below under the caption "The
JPM Indices--Excess Return Index"); provided, that if a Market
Disruption Event remains in effect for longer than 20 consecutive
Trading Days (or such period as may be specified in the applicable
Prospectus Supplement) falling within such Determination Period and in
the reasonable judgment of Morgan Guaranty such Market Disruption Event
is likely to remain in effect, then the Applicable Index Settlement
Value for such days may be determined by Morgan Guaranty in good faith
based on alternative pricing sources reasonably believed by it to be
indicative of then-prevailing prices for transactions with a notional
principal amount equal to the Principal Amount of the outstanding ComPS,
although it will have no obligation to do so, and such value will be
utilized in the calculation of the Redemption Value for such days;
"Applicable Index Commencement Value" means the value of the Applicable
Index determined on the date of issuance of such ComPS, as specified in
the applicable Prospectus Supplement; and Factor shall be the amount
provided in the Applicable Prospectus Supplement. In the case of any
Prospectus Supplement providing for an early determination of Applicable
Index Settlement Value, upon the occurrence of such an event, the
Applicable Index Settlement Value shall have the value so determined.
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<PAGE> 70
Total Return Index. In the case of ComPS for which the Applicable Index
is a Total Return Index, the Redemption Value payable in respect of such
ComPS on the Settlement Date will be determined by the Calculation Agent
based on the following formula:
<TABLE>
<C> <C> <C> <S> <C>
Applicable Index Settlement Value
Redemption Value = FA x ( -------------------------------------- - Factor )
Applicable Index Commencement Value
</TABLE>
where each of "FA", "Applicable Index Settlement Value" and "Applicable
Index Commencement Value" refer to the respective definitions set forth
above under Excess Return Index, except that in the case of the
Applicable Index Settlement Value, such value shall be determined in
accordance with the methodology described below under the caption "The
JPM Indices--Total Return Index", and "Factor" shall be the amount
provided in the applicable Prospectus Supplement. In the case of any
Prospectus Supplement providing for an early determination of Applicable
Index Settlement Value upon the occurrence of certain events, upon the
occurrence of such an event, the Applicable Index Settlement Value shall
have the value so determined.
Price Reference Index. In the case of ComPS for which the Applicable
Index is a Price Reference Index, the Redemption Value payable in respect
of such ComPS on the Settlement Date will be determined by the Calculation
Agent (i) in the case of Bullion ComPS, by taking the arithmetic average of
the Dollar Equivalent Value of the applicable portion of the applicable
fixing price for the applicable amount of the applicable bullion commodity
during the Determination Period, and (ii) in the case of all other Price
Reference Index ComPS, by multiplying (a) the Face Amount of such ComPS by
(b) the quotient of (I) the arithmetic average of the closing prices of the
underlying commodity as reported in the pricing source identified in the
applicable Prospectus Supplement for each day of the Determination Period
(i.e., the Applicable Index Settlement Value), divided by (II) the
Applicable Index Commencement Value (as defined above). The Redemption
Value calculations for Price Reference Index ComPS will also be subject to
Market Disruption Events similar to those described above, as specified in
the applicable Prospectus Supplements.
The Calculation Agent in its sole discretion will be responsible for determining
if a Market Disruption Event has occurred. In no event shall the Redemption
Value payable in respect of any series of ComPS be less than zero, although the
Redemption Value of any series of ComPS may be more or less than the Face Amount
of such series.
EARLY DETERMINATION OF APPLICABLE INDEX SETTLEMENT VALUE AND REDEMPTION VALUE
Morgan Guaranty reserves the right at its discretion to make any modifications
to the JPM Indices based on the recommendations of the JPMCI Policy Committee.
The JPMCI Policy Committee advises Morgan Guaranty with respect to, among other
things, the composition of the JPM Indices, the price sources upon which the JPM
Indices are based (i.e., the Benchmark Contracts), and the weightings and
calculation methodology of the JPM Indices, with a view toward maintaining the
JPM Indices as appropriate commodity investment benchmarks that serve as a
measure of performance of the commodity markets. Currently, the inclusion
requirements for the futures contracts underlying the JPM Indices require that
such contracts be sufficiently liquid and representative price sources. It is
possible, however, that any such underlying contract could become less liquid or
representative and, as a result, the JPMCI Policy Committee may recommend a
modification in the calculation methodology or the contracts underlying the JPM
Indices and, therefore, the Applicable Index. Any such replacement contract (i)
will be required to satisfy the JPMCI Inclusion Criteria, as described below and
under the caption "The JPMCI Policy Committee", (ii) must be traded in a market
or with a self-regulator which has established either (a) a comprehensive
information sharing agreement with the exchange, if any, on which the ComPS are
then traded or (b) suitable alternative arrangements with the Commission and
(iii) will be with respect to the same general commodity type as the contract
being replaced (e.g., assuming the JPMCI Policy Committee recommends a
modification and assuming the requirements of clauses (i) and (ii) are
satisfied, a NYMEX crude oil futures contract may be replaced by an
International Petroleum Exchange crude oil futures
17
<PAGE> 71
contract). Under no circumstances will the general commodity type underlying the
futures contract be changed (e.g., a crude oil futures contract may not be
replaced by a gold futures contract).
If at any time no contracts satisfying both clauses (i) and (ii) of the previous
paragraph can be found to serve as a Benchmark Contract for any series of ComPS
the Applicable Index for which is an Excess Return Index or a Total Return
Index, the Applicable Index Settlement Value of such ComPS will be determined at
such time (in accordance with the methodology set forth in the applicable
Prospectus Supplement) as if the last date of the inclusion of the final
Benchmark Contract with respect to such Applicable Index in the JPM Indices were
the Stated Maturity. However, such ComPS will not be redeemed on such date;
rather, such ComPS will remain outstanding to Stated Maturity thereof, will
continue to be entitled to dividends and will be redeemed at Stated Maturity for
a Redemption Value calculated using the Applicable Index Settlement Value
determined at such time as no contract satisfying clauses (i) and (ii) of the
previous paragraph was able to be found. Such ComPS will also be subject to
redemption upon the occurrence of a Special Event and optional redemption on
each Early Redemption Date if specified in the applicable Prospectus Supplement
(treating the Applicable Index Settlement Value determined pursuant to the terms
of this paragraph as the Applicable Index Early Settlement Value for any such
Early Redemption Date).
Additionally, if at any time the Benchmark Contracts then serving as the basis
for calculating the Applicable Index with respect to any series of ComPS the
Applicable Index for which is an Excess Return Index or a Total Return Index, or
the trading thereof, become subject to any increased cost or additional tax,
whether imposed by any exchange or otherwise, Morgan Guaranty reserves the right
to (x) designate a replacement Benchmark Contract, satisfying both clauses (i)
and (ii) of the second preceding paragraph, which contract is subject to an
amount of cost or tax less than or equal to such increased amount or (y) if no
contract satisfying clause (x) of this paragraph is designated by J.P. Morgan,
to cause, at its option, the Applicable Index Settlement Value of such ComPS to
be determined at such time (in accordance with the methodology set forth in the
applicable Prospectus Supplement) as if the date of such increase in cost or tax
(or, in Morgan Guaranty's discretion, the last calendar day of the month in
which the determination of the Applicable Index Settlement Value is completed)
were the Stated Maturity. However, such ComPS will not be redeemed on such date;
rather, such ComPS will remain outstanding to Stated Maturity thereof, will
continue to be entitled to dividends and will be redeemed at Stated Maturity for
a Redemption Value calculated using the Applicable Index Settlement Value
determined pursuant to the terms of this paragraph. Such ComPS will also be
subject to redemption upon the occurrence of a Special Event and optional
redemption on each Early Redemption Date if specified in the applicable
Prospectus Supplement (treating the Applicable Index Settlement Value determined
pursuant to the terms of this paragraph as the Applicable Index Early Settlement
Value for any such Early Redemption Date). See "Risk Factors With Respect to
ComPS--Potential Modifications to the JPM Indices and/or the Applicable Index."
As discussed below, in order to satisfy the JPMCI Inclusion Criteria, a futures
contract must (i) be priced in U.S. dollars, or if priced in a foreign currency,
the exchange on which the contract is traded must publish an official exchange
rate for conversion of the futures contract price into U.S. dollars and such
currency must be freely convertible into U.S. dollars; (ii) be traded on a
regulated futures exchange located in the United States, Canada, the United
Kingdom, Japan, Singapore or any country which at such time is a member of the
Organization of Economic Cooperation and Development (an "O.E.C.D. country") and
(iii) have a minimum annual trading volume of 300,000 contracts or $500,000,000
for all contract months.
EARLY REDEMPTION UPON THE OCCURRENCE OF A SPECIAL EVENT
OR AT THE ELECTION OF THE HOLDERS OF THE COMPS
The ComPS will be subject to redemption prior to their Stated Maturity upon the
occurrence of a Special Event (a "Special Event Redemption") or, if so indicated
in the applicable Prospectus Supplement, at the election of the holders of such
series of ComPS (an "Optional Redemption") on any one of the dates set forth in
the applicable Prospectus Supplement (each such date, an "Optional Redemption
Date"; each such date and each date on which a Special Event Redemption or a
Liquidation Distribution shall occur
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<PAGE> 72
being referred to herein as an "Early Redemption Date"). In order to effect an
Optional Redemption, the holder of such ComPS will be required to provide notice
to DTC (or, in the case of Preferred Securities which are not solely book-entry
securities, the Trust's transfer agent) as specified in the applicable
Prospectus Supplement. In the case of notice provided through DTC, the notice
provided by DTC to the Trust or its transfer agent (the "Applicable Notice")
shall be final and irrevocable upon receipt. The redemption value of ComPS
redeemed prior to their Stated Maturity (the "Early Redemption Value") shall be
determined during the 10 consecutive Trading Days which are Business Days on
which U.S. Treasury bond markets are open and on which no Market Disruption
Event occurs immediately following the 20th scheduled Business Day prior to the
applicable Early Redemption Date (such ten days, the "Early Determination
Period"), provided, however, that the Early Redemption Period will not begin
until the day after the Trust has received the Applicable Notice. The Early
Redemption Value shall be equal to the average for the 10 days of the Early
Determination Period of the sum for each such day of the results of the
following (to be calculated with respect to each portion of the Face Amount of
such ComPS which must be redeemed on the same date):
<TABLE>
<C> <C> <C> <S> <C> <C>
IESV )
FA x [(Dividend + Unused costs) x AF + ( ----- - Factor x PVF]
ICV
</TABLE>
Where "FA" means (i) in the case of Bullion ComPS, each portion of the
Bullion ComPS Principal Amount thereof which must be redeemed on the
same date and (ii) in the case of all other ComPS, each portion of the
Face Amount of the ComPS which must be redeemed on the same date.
In the case of ComPS for which the entire Face Amount matures on the same date,
the average for each day of the Early Determination Period of such equation
shall equal the Early Redemption Value. In the case of ComPS for which portions
of the Face Amount must be redeemed on different dates, the Early Redemption
Value shall equal the average over the Early Redemption Period of the sum of the
results for each day of such equation for each such portion of the Face Amount.
The Trust shall pay the Early Redemption Value, together with all accrued but
unpaid dividends from quarterly periods prior to the Early Redemption Date, on
the Early Redemption Date. The Early Redemption Value shall never be less than
zero. Other terms used in the formula above shall have the meanings set forth
below (with each Factor, yield, lease rate, rate and percentage rate expressed
in decimal form (e.g., 3% equals 0.03)):
For all ComPS
"Dividend" means the per annum rate of dividends on the Face Amount (or,
in the case of Bullion ComPS, the Principal Amount), as specified in the
applicable Prospectus Supplement.
"AF" means the Annuity Factor for the term remaining from the applicable
Early Redemption Date until the mandatory redemption of such portion of
the Face Amount (such remaining term being referred to herein as the
"Remaining Maturity"), which shall be determined in accordance with the
following formula:
(1-V(N))/y
where "V" is equal to (1/(1 + y/4)) and "y" is the yield which shall
be equal to the Base Yield (as defined below) plus the Applicable
Spread (as defined below), converted to an annualized quarterly
compounded rate calculated on the basis of a 360-day year of twelve
30-day months. The "Base Yield" will equal (i) in the case of Bullion
ComPS, the single lowest lease rate obtained by polling three dealers
in such loans for a loan to Morgan Guaranty (or, in the case of a
Liquidation Distribution, to a notional counterparty rated A or
higher) of such bullion in the same notional Bullion ComPS Principal
Amount, terms, amortization and maturity as such ComPS (which may be
the same rate for all days and/or for each Remaining Maturity) or, if
there is no such rate, as calculated by the Calculation Agent in good
faith, and (ii) in the case of any other ComPS, the Constant Maturity
Treasury Rate for the Remaining Maturity among the applicable
Constant Maturity Treasury Rates set
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<PAGE> 73
forth in Statistical Release H.15(519) as such appears on Telerate
Page 7051 under the heading "Daily Treasury Constant Maturities from
the Economic Bulletin Board" (or its successor or such other pricing
source as the Calculation Agent may reasonably select) for each date
of the Early Determination Period. If the applicable rate for the
Remaining Maturity is not published on such page, the applicable rate
will be determined by calendar month weighted linear interpolation
between one Constant Maturity Treasury rate with respect to a
maturity up to or equal to the Remaining Maturity and the other
Constant Maturity Treasury rate with respect to a maturity greater
than the Remaining Maturity. If such information ceases to be
provided or is not available for any day of the Early Determination
Period by the end of the Business Day next succeeding the last day of
the Early Determination Period, the Base Yield for such day will be
calculated by the Calculation Agent by calendar month weighted linear
interpolation among the rates it shall have obtained for such
applicable date by polling three dealers of such instruments in New
York, New York for the bid side yield to maturity of the most
recently issued on-the-run direct non-callable fixed rate obligations
of the United States Treasury ("U.S. Government Securities") with a
maturity equal to the Remaining Maturity or, if no such maturity
exists, by calendar month weighted linear interpolation among rates
so obtained with a maturity up to or equal to the Remaining Maturity
and a maturity greater than the Remaining Maturity.
The "Applicable Spread" will equal (i) for all ComPS other than
Bullion ComPS, (a) in the case of a Liquidation Distribution, the
offer side U.S. dollar swap spread for the maturity closest to the
Remaining Maturity as published by International Financing Review
("IFR") Corporate Eye on Telerate Page 42276 (or such successor as
the Calculation Agent may reasonably determine) for each day of the
Early Determination Period (except that, in the case of a
determination for which the Remaining Maturity is one year or less,
"Applicable Spread" will equal the difference between then-current
yields on U.S. dollar LIBOR-based deposits and yields on Treasury
Bills with maturities approximately equal to the Remaining Maturity
as determined by the Calculation Agent) (the "Swap Spread") or (b) in
the case of all other redemptions, the greater of the Swap Spread and
the yield spread between (I) the average of quotations from three
dealers in such instruments chosen in the discretion of the
Calculation Agent for notional issuances of debt securities of Morgan
Guaranty in a notional amount equal to the Face Amount of the ComPS
being redeemed at such time (or, if such notional amount is smaller
than commercially practicable, the smallest commercially practicable
amount) and having a similar maturity and similar subordination
provisions as those contained in the applicable Related Note and (II)
U.S. Government Securities of approximately similar maturities, as
such yield spread may be reasonably determined by the Calculation
Agent (such yield spread, the "Funding Spread") or (ii) for Bullion
ComPS, (x) in the case of a Liquidation Distribution, zero, and (y)
in all other cases, the difference between the Funding Spread and the
Swap Spread, but never less than zero. If the Telerate Page (or any
successor) referred to in clause (a) of the preceding sentence is
unavailable or ceases to report such swap spread, the Calculation
Agent shall calculate such spread based on (i) a source supplying the
equivalent information or (ii) if no such source is available, the
average quotations from three dealers in U.S. dollar swaps chosen by
the Calculation Agent in its reasonable discretion. As of the date of
this Prospectus, J.P. Morgan is among the six dealers of such
instruments currently polled for the purpose of calculating the swap
spread published by IFR on Telerate Page 42276.
"PVF" means the Present Value Factor for Remaining Maturity, which shall
be determined as follows:
(1/(1+y/4)(N))
where "y" has the meaning set forth above in the definition of
Annuity Factor.
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"ICV" means the Applicable Index Commencement Value, or the value of the
Applicable Index determined on the date of issuance of the applicable
series of ComPS, as specified in the applicable Prospectus Supplement.
"N" means the number of full quarterly periods in the Remaining Maturity
(e.g., one year = N = 4).
For ComPS calculated based on a Price Reference Index:
"Unused costs" means zero.
"IESV" means the Applicable Index Early Settlement Value, which shall be
equal to (i) in the case of Bullion ComPS, the ICV, and (ii) in the case
of all other Price Reference Index ComPS, the Applicable Index for such
day of the Early Determination Period.
For ComPS calculated based on an Excess Return Index:
"Unused costs" means the number specified as such in the applicable
Prospectus Supplement.
"IESV" means the Applicable Index Early Settlement Value, which shall be
equal to the Applicable Index for such day of the Early Determination
Period (which, if an Applicable Index Settlement Value has been
permanently determined for such ComPS prior to such time, shall equal
the value so determined).
"Factor" means the number specified in the applicable Prospectus
Supplement.
For ComPS calculated based on a Total Return Index:
"Unused costs" means the number specified as such in the applicable
Prospectus Supplement.
"IESV" means the product of Applicable Index for such day multiplied by
(ii) the Future Value Factor (which, if an Applicable Index Settlement
Value has been permanently determined for such ComPS prior to such time,
shall equal the value so determined).
"Future Value Factor" shall be determined with reference to the
following formula:
(1 + BY/4)(N)
where BY is the Base Yield (as determined for such day), computed on an
annualized, quarterly compounded basis, expressed in decimal form.
"Factor" means the number specified in the applicable Prospectus
Supplement.
DETERMINATION PERIOD AND SETTLEMENT DATE
Unless otherwise specified in the applicable Prospectus Supplement, the term
"Determination Period" with respect to Excess Return, Total Return and Price
Reference Indices shall mean the period of ten consecutive Trading Days on which
no Market Disruption Event occurs commencing immediately following the twentieth
scheduled Business Day prior to the Stated Maturity of such ComPS.
The date on which the Early Redemption Value or Redemption Value, as applicable,
will first be payable (the "Settlement Date") in respect of any series of ComPS
will be the later of the date on which such ComPS are eligible for redemption
(the "Redemption Date") or the fifth Business Day after the completion of the
Early Determination Period or the Determination Period, as applicable.
MARKET DISRUPTION EVENTS
As determined by Morgan Guaranty, the occurrence of one or more of the following
events on any Trading Day shall constitute a "Market Disruption Event" with
respect to a relevant commodity (a "Relevant Commodity"), any benchmark contract
underlying the Applicable Index (a "Relevant Contract"), the
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market participants or association responsible for determining the price of a
commodity (the "Fixing Association") which determines the price of a Relevant
Commodity (a "Relevant Fixing Association") or an exchange on which a Relevant
Contract is traded (a "Relevant Exchange"): (a) a day on which the fluctuation
of the price of the applicable commodity or commodity futures contract is
materially limited by the rules of the Relevant Exchange or Relevant Fixing
Association setting the maximum or minimum price for such day (a "Limit Price");
(b) a day on which the Settlement Price is the Limit Price; (c) the failure of
the Relevant Exchange or Relevant Fixing Association to determine, announce or
publish the Settlement or Fixing price with respect to the Relevant Contract or
commodity (as the case may be); (d) the material suspension of trading in the
Relevant Commodity by members of the Relevant Fixing Association or otherwise or
any Relevant Contract with respect to such commodity or in any other futures
contract affecting the Relevant Contract with respect to such commodity on the
Relevant Exchange; (e) the failure of trading to commence, or the permanent
discontinuation of trading, in the Relevant Commodity by the members of the
Relevant Fixing Association or otherwise or any Relevant Contract on the
Relevant Exchange and (f) the imposition of any material limitation on trading
in the Relevant Commodity by the members of the Relevant Fixing Association or
otherwise or any Relevant Contract on the Relevant Exchange.
If a Market Disruption Event occurs and is continuing during the Determination
Period or any Early Determination Period with respect to any series of ComPS,
the Determination Period or such Early Determination Period will be extended,
with the result that the calculation of the Applicable Index Settlement Value
and the settlement of such ComPS may be delayed for an indefinite period of time
including, in the case of an extension of the Determination Period, an
indefinite period of time after the Stated Maturity. With respect to ComPS for
which the Applicable Index is either a Price Reference Index or an Excess Return
Index, in the event that the payment of the Redemption Value is postponed beyond
the Stated Maturity, no distributions or dividends will accrue or be payable
with respect to such ComPS, but interest will accrue on the Face Amount from and
including the Stated Maturity to but excluding the last day of the Determination
Period at a rate equal to the day-weighted average of the Fed Effective Rate
until the end of the Determination Period, as reported on Telerate Page 118 (or
its successor or such other pricing source as the Calculation Agent may
reasonably select), less in each case 0.25%, calculated on the basis of a year
of 360 days and payable for the actual number of days elapsed. Payment of such
interest amount and the Redemption Value will be made on the fifth Business Day
following the last day of the Determination Period. With respect to ComPS for
which the Applicable Index is a Total Return Index, in the event that the
payment of the Redemption Value is postponed beyond the Stated Maturity, no
distributions will be payable, and no interest or dividend in respect of such
ComPS will accrue or be payable, after the Stated Maturity. With respect to all
ComPS, in the event that the payment of the Early Redemption Value is postponed
beyond the applicable Early Redemption Date, no distributions will be payable,
and no interest or dividends in respect of such ComPS will accrue or be payable,
after such Early Redemption Date.
CALCULATIONS
As discussed above, the Trust will appoint Morgan Guaranty as Calculation Agent
for the purpose of determining the Applicable Index Settlement Value, as
described herein, and calculating the Early Redemption Value and Redemption
Value and, if applicable, the dividends payable in respect of any ComPS. The
Calculation Agent will determine the Applicable Index Settlement Value and the
Early Redemption Value and Redemption Value of any ComPS and, if applicable,
dividends payable in good faith, which determination shall be final and binding
on the Trust and the holders of such ComPS. Morgan Guaranty as Calculation Agent
will also (i) determine when a Market Disruption Event on any Early
Determination Day or Determination Day is sufficiently material to not use such
day in the applicable calculation and (ii) be responsible for the choice of an
alternative price source (if any) upon a Market Disruption Event of sufficient
length, as described in the applicable Prospectus Supplement. Also, Morgan
Guaranty and its affiliates may from time to time engage in transactions with
and perform services for the Trust in the ordinary course of business.
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LICENSE OF APPLICABLE INDEX
Morgan Guaranty will enter into a license agreement (the "License Agreement")
granting the Trust a non-exclusive license to use the Applicable Index in
connection with each series of ComPS the Applicable Index for which is an Excess
Return Index or a Total Return Index. The License Agreement will provide that,
in the event that Morgan Guaranty fails to provide the Applicable Index to the
Trust on a regular basis with the result that the Trust is unable to determine
the Applicable Index Settlement Value and the Early Redemption Value and
Redemption Value payable in respect of such ComPS, the Trust, its Calculation
Agent or its authorized designee (which shall be a major accounting firm
appointed by the Trust) shall be authorized to calculate the Applicable Index.
In such event, Morgan Guaranty will provide the Trust, its Calculation Agent or
such accounting firm with any and all information which may be necessary in
order to enable the Trust, its Calculation Agent or such accounting firm to
perform such calculations pursuant to the same methodology to be applied by
Morgan Guaranty.
Morgan Guaranty may also enter into license agreements with any or all of the
exchanges on which any Benchmark Contract or commodity is traded with respect to
the information provided by such exchanges. However, no such license agreement
will contain any obligation or liability provisions with respect to provision of
such information by the relevant exchange. Furthermore, no exchange on which any
Benchmark Contract or commodity is traded is or will be an issuer, underwriter
or guarantor of any Preferred Security, nor has any such exchange approved the
Preferred Securities or any terms thereof, nor is any such exchange responsible
for the calculation of any Applicable Index. However, any such exchange may from
time to time change any rule or bylaw or take emergency action under its rules
which could affect settlement prices of the futures contracts or commodities
underlying an Applicable Index. Any such change which causes a decrease in such
settlement prices could adversely effect the value of such Applicable Index.
RISK FACTORS WITH RESPECT TO ALL PREFERRED SECURITIES
LIMITATIONS ON RIGHTS UNDER THE GUARANTEE, THE RELATED NOTE GUARANTEE AND THE
RELATED NOTE
The Guarantee will be effective with respect to each series of Preferred
Securities from the time of issuance of such Preferred Securities but will not
apply to any payment of distributions or other amounts due in respect of such
Preferred Securities to the extent Morgan Guaranty has failed to make a payment
of principal or interest on the applicable Related Note. To the extent Morgan
Guaranty were to default on its obligation to pay amounts payable on the
applicable Related Note, the Trust, on behalf of holders of the Securities of
the applicable series, would lack available funds for the payment of
distributions on or amounts payable on redemption of such Preferred Securities
and, in such event, holders of such Preferred Securities would not be able to
rely on the Guarantee for payment of such amounts. Instead, holders of such
Preferred Securities would rely on the enforcement by the Trust, on behalf of
holders of the Securities of the applicable series, of its rights as holder of
the applicable Related Note against Morgan Guaranty and of its rights under the
Related Note Guarantee against J.P. Morgan. J.P. Morgan, through its obligations
under the Guarantee, the Related Note Guarantee and the Declaration, taken
together, will provide a full and unconditional guarantee, on a subordinated
basis, of payments due on the Preferred Securities. See "Description of the
Guarantee" and "Description of the Related Note Guarantee".
SPECIAL EVENT REDEMPTION
Upon the occurrence of a Special Event, unless waived by Morgan Guaranty or
subject to cure as specified in the applicable Prospectus Supplement, Morgan
Guaranty shall have the right to redeem any or all Related Notes, in whole or in
part, in which event the Trust will redeem the related Preferred Securities and
Common Securities on a pro rata basis to the same extent as the Principal Amount
of the Related Notes is redeemed by Morgan Guaranty.
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A Special Event is either (i) a Tax Event or (ii) an Investment Company Event. A
Special Event may occur at any time.
In the case of any series of ComPS, upon the occurrence of a Special Event it is
possible that the market price of such ComPS in any existing secondary market
will decline.
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have certain voting rights relating to a
payment default on or adverse change to the Preferred Securities, but will not
be entitled to vote to appoint, remove or replace the Trustees of the Trust or
to increase or decrease the number of Trustees, which voting rights are vested
exclusively in the holders of the Common Securities.
TRADING PRICE MAY NOT REFLECT ACTUAL ECONOMIC VALUE
Preferred Securities are expected to trade at a price that takes into account
the value, if any, of accrued and unpaid distributions; thus, purchasers will
not pay and sellers will not receive any accrued and unpaid interest with
respect to their pro rata interests in the applicable Related Note owned through
the applicable Preferred Securities that is not already included in the trading
price of the applicable Preferred Securities.
POSSIBLE ILLIQUIDITY OF PREFERRED SECURITIES
It is possible that no secondary market will develop and continue to exist with
respect to any series of Preferred Securities. If no such market develops, the
liquidity of such Preferred Securities may be adversely affected. Furthermore,
there can be no assurance as to the market prices for any Preferred Securities
in any secondary market which does develop. Accordingly, any Preferred
Securities that an investor may purchase, whether pursuant to the offer made
hereby or in any such secondary market, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby.
RIGHT TO INTEREST ON RELATED NOTE
Because holders of Preferred Securities are essentially investing in a pro rata
share of a Related Note, prospective purchasers of Preferred Securities are also
making an investment decision with regard to such Related Note and should
carefully review all the information regarding the Related Note contained herein
and in the relevant Prospectus Supplement. Investors in Preferred Securities
have a direct right to direct interest distributions on the applicable Related
Note.
IMPOSITION OF BANK REGULATORY RESTRICTIONS
The Trust's ability on behalf of holders of Securities of any series to make
distributions and other payments on the Preferred Securities is dependent upon
Morgan Guaranty's making interest and other payments on each Related Note as and
when required or collection with respect to such Related Note under the Related
Note Guarantee. As noted herein, Morgan Guaranty is subject to examination and
regulation by U.S. federal and state banking authorities, and although there is
no current restriction on Morgan Guaranty's ability to make payments under any
Related Note, certain other transactions with affiliates, including the Trust,
are or may in the future become subject to restrictions imposed by bank
regulatory authorities.
RISK FACTORS WITH RESPECT TO COMPS
INDEXATION OF PRINCIPAL AMOUNT
The Principal Amount of each series of ComPS, which is initially equal to the
Face Amount of such series, will vary until Stated Maturity of such ComPS in
relation to an Applicable Index, reduced by the Factor. The Principal Amount
repayable on any Optional Redemption Date, upon the occurrence of any Special
Event Redemption or in connection with any Liquidation Distribution or at Stated
Maturity of such ComPS will be determined, pursuant to the terms described in
the applicable Prospectus Supplement, by
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comparing the level of the Applicable Index at the date of issuance of such
ComPS with the level determined pursuant to the terms thereof for any such date
of redemption, reduced by the Factor. Accordingly, the Principal Amount of a
series of ComPS to be received upon any date of redemption will fluctuate based
on the Applicable Index for such series (reduced by the Factor) and may be lower
than the Face Amount for such series. Thus, if the Applicable Index for a series
of ComPS decreases over the life of such ComPS, or if the percentage increase in
the Applicable Index for such series is less than the amount of the Factor for
such series, the Redemption Value for such series will be less than the Face
Amount for such series. If the percentage increase in the Applicable Index for
such series is greater than the amount of the Factor for such series, the
Redemption Value for such series will be greater than the Face Amount for such
series.
EFFECT OF TRADING IN THE FUTURES CONTRACTS AND RELATED COMMODITIES AND
INSTRUMENTS
Morgan Guaranty and other affiliates of J.P. Morgan are and will be actively
involved in the trading of the futures contracts or the commodities underlying
the Applicable Index and other instruments and derivative products based
thereon. Morgan Guaranty, in particular, is an active participant in various
commodity markets including the physical petroleum, precious and base metals and
related derivatives markets. JPMSI and other affiliates may also issue or
underwrite, or authorize unaffiliated entities to issue or underwrite, other
securities or financial instruments with returns indexed to the Applicable Index
or one or more of the JPM Indices. Morgan Guaranty has licensed, and may in the
future license, the Applicable Index, the JPM Indices, and related indices and
sub-indices for use by affiliated and unaffiliated parties, for publication in
newspapers and periodicals, for distribution by information and data
dissemination services and for other purposes. Morgan Guaranty currently intends
to publish individual commodity sub-indices for each of the commodities included
in the JPMCI using the same calculation methodology as that described below. The
Applicable Index may be similar or identical to the sub-index having the same
underlying commodity.
Trading in the foregoing contracts and commodities by Morgan Guaranty, its
affiliates (including JPMSI) and unaffiliated third parties could adversely
affect the value of the Applicable Index, which could in turn adversely affect
the return on and the value of the ComPS. See "The Applicable Index".
Furthermore, additional issuances of securities linked or referenced to similar
futures contracts or commodities could adversely affect the value of similar
outstanding ComPS.
POTENTIAL FOR ADVERSE INTERESTS
As noted above, Morgan Guaranty, JPMSI and their affiliates expect to engage in
trading activities related to the futures contracts or the commodities
underlying the Applicable Index and other instruments or derivatives products on
or related to the Applicable Index, for their accounts where permitted or for
other accounts under their management. Morgan Guaranty, JPMSI and their
affiliates, as well as unaffiliated third parties, may also engage in other
activities related to the Applicable Index, as discussed above. Because Morgan
Guaranty will issue the Related Notes to the Trust on behalf of holders of the
Securities, all such activities could create interests of Morgan Guaranty
adverse to those of the holders of ComPS. For example, the issuance of other
securities indexed to the Applicable Index, i.e., the introduction of competing
products into the marketplace, could adversely affect the value of the ComPS. To
the extent that J.P. Morgan or its affiliates serve as issuer, or JPMSI or one
of its affiliates serves as agent or underwriter, for such securities or other
instruments, their interests with respect to such products may be adverse to
those of the holders of the ComPS. Morgan Guaranty will serve as Calculation
Agent with respect to the ComPS and, accordingly, will in good faith calculate
the Applicable Index, which could present certain conflicts of interest (for
example, in instances where the Calculation Agent is required to exercise
discretion).
RISK OF CARRYING AND ROLLING COMMODITY FUTURES
As discussed above, if the Applicable Index is an Excess Return Index or a Total
Return Index, the Redemption Value of the ComPS will be calculated with
reference to the Applicable Index (less the
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applicable Factor), the value of which is designed to replicate to the extent
provided herein the cumulative return of holding a continuous investment in the
futures contracts on the relevant commodity underlying the Applicable Index. At
any given time, the Applicable Index will be calculated based on the change in
value of certain futures contracts on the relevant commodity for delivery in the
near term (the "shorter-dated contracts"). The Applicable Index will continue to
be calculated based on the change in value of such shorter-dated contracts until
they approach maturity, at which time the Applicable Index will, as described
below, cease to be calculated based on the change in value of such shorter-dated
contracts and begin to be calculated based on the change in value of the
subsequent futures contract (the "longer-dated contracts") on a regular periodic
basis so as to be continuously indexed to the change in value of the futures
contracts on the relevant commodity. The period during which each such
replacement of shorter-dated contracts with longer-dated contracts as the basis
for the calculation of the change in value of the Applicable Index occurs is
referred to herein as the "Rollover Period", as further defined below. If the
market for the commodity futures contract underlying the Applicable Index is in
"contango" (i.e., the prices of longer-dated contracts are above the prices of
shorter-dated contracts), the return on the Applicable Index may be adversely
affected. The Applicable Index would decline if (i) the price of the
longer-dated contracts underlying the Applicable Index during the Rollover
Period were more than the price of the shorter-dated contracts which they will
replace and (ii) the price of the longer-dated contracts were to decline as such
contracts approach maturity (i.e., the price of the longer-dated contracts were
to converge toward the price of the replaced shorter-dated contracts) (only, in
the case of a Total Return Index, if each declines by more than the amount of
the Collateral Return Component). While many of the commodities included in the
JPM Indices have historically exhibited periods of both "backwardation" (i.e.,
the prices of longer-dated contracts are below the prices of shorter-dated
contracts) and contango, there can be no assurance that backwardation will exist
at any or all times. If the Applicable Index is an Excess Return Index or a
Total Return Index, the absence of backwardation in the market for the commodity
underlying the Applicable Index could adversely affect the Applicable Index and,
correspondingly, could adversely affect the value of the ComPS. Additionally,
the issuance and/or the trading of the ComPS could adversely affect the market
for the benchmark contracts underlying such Applicable Index and, accordingly,
could adversely affect the value of such ComPS and could result in a substantial
loss to the holders thereof. See "Description of the ComPS--Calculation of
Redemption Value".
VOLATILITY OF COMMODITY AND COMMODITY FUTURES PRICES
Prices of commodities and commodity futures contracts are extremely volatile and
can be affected by a variety of factors, including weather, governmental
programs and policies, national and international political and economic events,
changes in interest and exchange rates and trading activity in such commodities
and commodity futures contracts. Volatility in the benchmark contracts
underlying any Applicable Index will correlate directly to volatility in such
Applicable Index. Such volatility could lead some investors in the futures
market to withdraw from the applicable futures markets, which could adversely
affect the liquidity of such markets and could adversely affect the value of
such Applicable Index and, correspondingly, the value of the ComPS.
EFFECT OF ADVERSE CHANGES IN COMMODITY PRICES
The Applicable Index is designed to replicate, to the extent provided herein,
the performance of investing in the markets for the underlying commodity or
futures contracts on the underlying commodity over time. In the event of sudden
disruptions in the supplies of the relevant constituent commodity for the
Applicable Index, such as those caused by war, accidents, weather, or acts of
terrorism, prices of the relevant constituent commodity, and, consequently, the
value of the Applicable Index, could become extremely volatile and
unpredictable. Also, sudden and dramatic declines in commodity and commodity
futures contract prices as may occur, for example, upon a cessation of
hostilities that may exist in countries producing the relevant commodity or upon
the discovery of significant additional sources or reserves of the relevant
commodity or the introduction of new or previously withheld supplies into the
market or the introduction of substitute products or commodities, could have a
significant adverse effect on the value of
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the Applicable Index and on the value of any ComPS. In addition, the prices of
certain commodities have on occasion been subject to very rapid short-term
changes due to speculative activities which, if such activities result in a
price decrease, may cause the value of ComPS referenced to such commodities or
the related futures contracts to decrease. See "Calculation of Redemption
Value".
CHANGE OF EXCHANGE METHODOLOGY
Any exchange on which any Benchmark Contract or commodity is traded or which
provides information relevant to the calculation of an Applicable Index may from
time to time change any rule or bylaw, or take emergency action under its rules,
which could affect the settlement prices of the futures contracts or commodities
underlying an Applicable Index. Any such change which causes a decrease in such
settlement prices could adversely affect the value of such Applicable Index.
SUSPENSION OR MATERIAL DISRUPTION OF COMPS, FUTURES OR
COMMODITIES TRADING; TEMPORARY DISTORTIONS
The futures markets and the markets for the commodities underlying the
Applicable Index are subject to temporary distortions or other disruptions due
to conditions of illiquidity in the markets, the participation of speculators,
government regulation and intervention and the other factors referred to in the
preceding paragraph. In addition, U.S. futures exchanges have regulations, and
the LME and certain foreign exchanges on which replacement Benchmark Contracts,
if any, may trade (which exchanges must have information-sharing arrangements
with the Securities and Exchange Commission and be regulated exchanges located
in the United States, Canada, the United Kingdom, Japan, Singapore or an
O.E.C.D. country) may have regulations, which limit the amount of fluctuation of
futures contracts prices which may occur during a single trading day or the
settlement spread between adjoining contracts. Such price limits are generally
referred to as "daily price fluctuation limits" or, more commonly, "daily
limits", and such limitations on settlement spreads are generally referred to as
"spread limits", and the maximum or minimum price of a contract on any given
day, as a result of the effect of such limits, is referred to as a "limit
price", as discussed below. In a particular futures contract, once the limit
price has been reached in such a contract, no trades may be made on that day at
a price above or below the limit price, as the case may be. Limit prices may
have the effect of precluding trading in a particular contract for all or a
portion of a trading day or forcing the liquidation of contracts at
disadvantageous times or prices. Such circumstances, particularly if they occur
during the Rollover Period for the Applicable Index (which is an Excess Return
Index or a Total Return Index) or during the Early Determination Period or the
Determination Period (as defined herein) for such ComPS, could adversely affect
the value of the Applicable Index and/or could constitute a Market Disruption
Event (as defined herein) and, therefore, could adversely affect the value of
such ComPS.
Additionally, because it is intended that each series of ComPS will be listed on
a stock exchange, and because ComPS will likely trade as equity securities in
any such secondary market, trading in ComPS may be subject to interruption or
delay due to extreme volatility in the trading prices of equity securities
generally in any such secondary market, notwithstanding the specific price
movements of the ComPS.
MARKET DISRUPTION EVENTS
Depending on the period of time over which a Market Disruption Event continues,
the correlation between changes in the value of the Applicable Index and changes
in the general level of prices of the relevant commodities may be adversely
affected. Under such circumstances, the value of the Applicable Index (if the
Applicable Index is an Excess Return Index, a Total Return Index or a Price
Reference Index the pricing source for which is one or more futures contract
Settlement Prices), and the value of the ComPS, may be adversely affected.
In the event of a Market Disruption Event during the Early Determination Period
or the Determination Period, the Early Redemption Value or Redemption Value, as
applicable, payable in respect of the ComPS will be calculated using the
Applicable Index on the Trading Day or Days immediately following the
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termination of such Market Disruption Event. However, if such Market Disruption
Event remains in effect for longer than 20 consecutive Trading Days and, in the
reasonable judgment of the Calculation Agent such Market Disruption Event is
likely to remain in effect, then the Applicable Index Settlement Value for each
day subject to a Market Disruption Event may be determined in good faith by the
Calculation Agent based on alternative pricing sources reasonably believed by it
to be indicative of then-prevailing prices for notional transactions in futures
contracts or commodities equal in size to the Applicable Index Settlement Value.
Because Morgan Guaranty's obligations under the related Related Note will also
be based on the Applicable Index Settlement Value, Morgan Guaranty may have an
adverse interest with respect to such determination.
HISTORICAL CORRELATIONS MAY NOT PREVAIL IN THE FUTURE
Although historically the JPMCI and many of the commodities underlying it have
shown a positive correlation with inflation, some positive correlation with
industrial growth and negative correlations with stock and bond returns (in each
case for the United States), there can be no assurance that such correlations
will prevail in the future. As a result, investors who invest in ComPS in
reliance on these correlations should individually assess the likelihood of such
correlations continuing.
CHANGES IN LAWS OR REGULATIONS OR INTERPRETATIONS THEREOF
Prices of commodities and commodity futures contracts may be adversely affected
by the promulgation of new laws or regulations or by the reinterpretation of
existing laws or regulations (including, without limitation, those relating to
taxes and duties on commodities or commodity components) by one or more
governments, governmental agencies or instrumentalities, courts or other
official bodies. Any such event could adversely affect the value of the
Applicable Index and, correspondingly, could adversely affect the value of the
ComPS.
EXTENSION OF SETTLEMENT DATE OR STATED MATURITY
If any futures contract or constituent commodity included in the Applicable
Index were to be affected by a Market Disruption Event during any Early
Determination Period or the Determination Period, the applicable Settlement Date
would be postponed until the fifth Business Day after the last day of the
applicable Early Determination Period or the Determination Period. Such delay
could be of indefinite duration, during which time a holder of ComPS will not
receive the Early Redemption Value or Redemption Value thereof, as applicable.
With respect to ComPS for which the Applicable Index is either a Price Reference
Index or an Excess Return Index, in the event that payment of the Redemption
Value is postponed beyond the Stated Maturity, interest will accrue on the Face
Amount in the manner described herein, but no distributions will be payable on
such ComPS after the Stated Maturity thereof. With respect to ComPS for which
the Applicable Index is a Total Return Index, in the event that the payment of
the Redemption Value is postponed beyond the Stated Maturity, no interest,
dividends or distributions in respect of such ComPS will accrue or be payable
after the Stated Maturity. With respect to all ComPS, no distributions will be
payable, and no interest will accrue or be payable, if payment of the ComPS
Early Redemption Price is postponed beyond any applicable Early Redemption Date.
See "Market Disruption Event" above.
DISCONTINUANCE OF PUBLISHING OF THE RELEVANT JPM INDEX
In the event that Morgan Guaranty discontinues publication of the JPM Indices or
the relevant sub-index, the Calculation Agent will continue to calculate in good
faith the Applicable Index for each series of ComPS during the remaining term of
such ComPS, based on the methodology described herein under "Description of the
ComPS". However, such change of calculation methodology may result in a ComPS
Redemption Price for such ComPS which is less than the ComPS Redemption Price
for such ComPS had it been calculated on the basis of the JPM Indices or the
relevant sub-index.
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<PAGE> 82
POTENTIAL MODIFICATIONS TO THE JPM INDICES AND/OR THE APPLICABLE INDEX
Morgan Guaranty reserves the right at its discretion to make any modifications
to the JPM Indices based on the recommendations of the JPMCI Policy Committee.
As described above under "Description of the ComPS--Early Determination of
Applicable Index Settlement Value and Redemption Value", if the Benchmark
Contract for any series of ComPS becomes less liquid or representative, the
JPMCI Policy Committee could recommend a replacement Benchmark Contract. Such a
change from a less liquid to a more liquid contract may result in a lower
Redemption Value for such ComPS than would have been the case if the less liquid
contract had remained the benchmark.
If at any time no replacement contracts can be found to serve as a Benchmark
Contract with respect to the Applicable Index for any series of ComPS the
Applicable Index for which is an Excess Return Index or a Total Return Index,
the Applicable Index Settlement Value of such ComPS will be determined at such
time as described above under "Description of the ComPS--Early Determination of
Applicable Index Settlement Value and Redemption Value". Such an early
determination of the Applicable Index Settlement Value with respect to any
series of ComPS may result in the holders of such ComPS receiving an amount that
is less than what indicative commodity and futures prices prevailing at any
Early Redemption Date or at the Stated Maturity thereof would otherwise imply.
Because Morgan Guaranty will be the Calculation Agent, such early determination
may raise adverse interests.
Additionally, if at any time the Benchmark Contracts then serving as the basis
for calculating the Applicable Index with respect to any series of ComPS, or the
trading thereof, become subject to any increased cost or additional tax, Morgan
Guaranty reserves the right to designate a replacement Benchmark Contract or, if
no such contract is designated, to cause, at its option, the Applicable Index
Settlement Value of such ComPS to be determined at such time as described above
under "Description of the ComPS-- Early Determination of Applicable Index
Settlement Value and Redemption Value". Because Morgan Guaranty will, at the
time any Benchmark Contract then serving as the basis for calculating any
Applicable Index becomes subject to such increased cost or tax, in its
discretion decide whether or not to cause an early determination of the
Applicable Settlement Value of any such ComPS, exercise of such option may raise
an adverse interest. Such a change in contracts due to the imposition of any
increased cost or additional tax may result in a lower Redemption Value for such
ComPS than would have been the case if the contract on which such increased cost
or additional tax were imposed had remained the benchmark.
Any early determination of the Applicable Index Settlement Value may cause the
trading price of ComPS in any secondary market which then exists to decline.
EARLY REDEMPTION
All ComPS may be redeemed by the Trust prior to their Stated Maturity upon the
occurrence of a Special Event or, if so specified in the applicable Prospectus
Supplement, redeemed at the option of the holders thereof at certain times. In
the case of a redemption upon the occurrence of a Special Event, the Early
Redemption Value paid by the Trust at such time may be significantly less than
the Redemption Value that would otherwise have been payable had such ComPS not
been redeemed prior to their Stated Maturity and the occurrence of such Special
Event may cause the market price of such ComPS in any existing secondary market
to decline. In the case of an optional redemption by holders of any ComPS
subject to such provisions, it is likely, under prevailing market conditions,
that the Early Redemption Value paid by the Trust will be less than the amount
such holder could have realized by selling such ComPS in an existing secondary
market, if any. Delay in payment of the ComPS Early Redemption Price due to the
occurrence of a Market Disruption Event will not entitle holders of such ComPS
to additional distributions on such ComPS or the accrual of any interest on such
ComPS Early Redemption Price.
SECONDARY TRADING IN THE COMPS; POSSIBLE ILLIQUIDITY OF THE COMPS
It is intended that each series of ComPS be listed on a stock exchange; however,
it is not possible to predict whether the necessary number of holders will
purchase and, for the remaining term of each series of ComPS, continue to hold
such ComPS in order that a secondary market for each series of ComPS will
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<PAGE> 83
develop and remain in existence, or how any ComPS will trade in any such market
which does develop. The Underwriters of any issuance of ComPS will not obligated
to make a market for such ComPS; therefore, it is possible that no active
secondary market for any ComPS will develop.
VALUE OF THE COMPS
The value of any series of ComPS at any time will depend upon the interaction of
at least two key factors: (i) the value of the Applicable Index and (ii) the
credit quality of Morgan Guaranty and J.P. Morgan. As discussed above under
"Description of the ComPS", adverse changes in the Applicable Index will
directly correlate to adverse changes in the value of the ComPS. A decline in
the credit quality of Morgan Guaranty and J.P. Morgan could cause the trading
price of any ComPS in any secondary market then existing to decline. Also, an
increase in the prevailing interest rates could cause the trading price of
Excess Return ComPS which pay a fixed rate dividend in any secondary market then
existing to decline.
CERTAIN CONSIDERATIONS REGARDING HEDGING
Prospective purchasers of ComPS who intend to hedge against the risks associated
with the market for commodity futures or commodities should recognize the
complexities of utilizing ComPS in this manner. The formula under which the
Principal Amount is calculated is not guaranteed to produce distributions to
holders having readily definable relationships with other commodity futures and
commodity instruments and products. As described above, in the case of ComPS for
which the Applicable Index is an Excess Return Index or a Total Return Index,
the value of such ComPS will reflect not only the price of the benchmark
contracts or the relevant commodity but also, in the case of an Applicable Index
based on futures contracts, the state of the market in which such futures
contracts are traded (i.e., whether such market is in "backwardation" or
"contango" over time), all reduced by the Factor. Also, under certain
circumstances, amounts payable on the ComPS may be based on the good faith
determination of Morgan Guaranty and not on the Applicable Index. For these
reasons, investors should be cautious in using ComPS in a hedging program. The
risks associated with utilizing the ComPS in a hedging program may be magnified
in periods of substantial futures or commodities price volatility, since
properly correlating such ComPS either as a hedge of other assets or correlating
such ComPS to the hedge thereof may become more difficult.
THE UNDERLYING MARKETS
FUTURES MARKETS
An exchange-traded futures contract is a bilateral agreement providing for the
purchase and sale of a specified type and quantity of a commodity or financial
instrument during a stated delivery month for a fixed price or, in the case of a
futures contract on an index, providing for the payment and receipt of a cash
settlement. By its terms, a futures contract provides for a specified settlement
month in which the commodity or financial instrument is to be delivered by the
seller (whose position is therefore described as "short") and acquired by the
purchaser (whose position is therefore described as "long") or in which the cash
settlement amount is required to be paid. Prior to the date on which delivery is
to be made under a futures contract, the exchange clearing house will require
the holders of short positions to state their intentions with respect to
delivery and, to the extent that such holders elect to make delivery (as opposed
to cash settlement), the clearing house will match them with holders of long
positions, who will then be required to accept delivery.
No purchase price is paid or received on the purchase or sale of a futures
contract. Instead, an amount of cash or cash equivalents, which varies based on
the requirements imposed by the exchange clearing houses, but which may be as
low as 5% or less of the value of the contract, must be deposited with a broker
as "initial margin". This margin deposit collateralizes the obligations of the
parties to the futures contract to perform their obligations under such
contract. Subsequent payments to and from the broker, referred to as "variation
margin", are then normally made on a daily basis as the price of the futures
contract fluctuates, thereby making existing positions in the futures contract
more or less valuable, a process known
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<PAGE> 84
as "marking to the market". By depositing and/or receiving margin in the most
advantageous form (which may vary depending on the exchange, clearing house or
broker involved), a market participant may be able to earn interest on its
margin funds, thereby increasing the potential total return which may be
realized from an investment in futures contracts.
Futures contracts are traded on organized exchanges, known as "contract markets"
in the U.S., through the facilities of a centralized clearing house and a
brokerage firm which is a member of the clearing house (a "clearing member").
The clearing house guarantees the performance of each clearing member which is a
party to a futures contract by, in effect, taking the opposite side of the
transaction. At any time prior to the expiration of a futures contract, subject
to the availability of a liquid secondary market, a trader may elect to close
out its position by taking an opposite position on the exchange on which the
position entered into, which operates to terminate the position and fix the
trader's profit or loss. U.S. contract markets, as well as brokers and market
participants, are subject to regulation by the Commodity Futures Trading
Commission. Futures markets outside the U.S. are generally subject to regulation
by comparable regulatory authorities.
The principal non-U.S. futures market on which the futures contracts which may
underlie the Applicable Index are traded is the London Metal Exchange (the
"LME"). The LME, which is subject to the regulation of the Securities and
Investments Board and the Securities and Futures Authority (a self-regulatory
organization), is a primary international exchange for futures contracts on
aluminum, copper, nickel and zinc (which are included in the JPMCI) and for lead
and tin. Unlike most other futures exchanges (including those in the U.S.), the
LME is a "principal's market". This means that when a clearing member of the LME
enters into a trade with a client or non-clearing member, there will not
necessarily be an offsetting contract on the exchange. Rather, such clearing
member remains liable on such trade, though it may then enter into an offsetting
contract with another member having substantially similar, if not necessarily
identical, terms. In addition, official LME trading is conducted by open outcry
during two daily trading sessions of short duration rather than by means of
continuous trading, as used on most exchanges. In addition to such open outcry
trading, trading takes place during the rest of the day directly between members
by means of a telephone trading system. Settlement prices for contracts with
specified settlement dates are determined by a committee selected by the
directors of the LME (the "Quotations Committee") promptly following the morning
trading session, based on the last bid and offer prices for the relevant
commodity at such trading session or, if the Quotations Committee determines
there were no such prices, at such other level as the Quotations Committee may
in its discretion determine at the end of each LME trading day. The Quotations
Committee is similarly responsible for determining LME closing prices. If the
Quotations Committee fails to determine such closing prices on any LME trading
day, such closing prices shall be determined by the London Clearing House, which
is the clearinghouse for the LME.
United States commodity futures exchanges typically have similar procedures for
determining end-of-day settlement prices, although each exchange or type of
commodity may have slightly different procedures. All exchanges have quotations
or settlement price committees which determine the settlement prices using
prescribed formulaic methodologies. However, such committees may, if they
believe the application of the formulaic methodology would yield a settlement
price which is inappropriate, in their own discretion determine a settlement
price which is appropriate.
For precious metals futures contracts, exchanges typically determine the
settlement price for the most active month contract as the average of the
highest and lowest prices of trades reported in the closing period. All other
contracts settlement prices are determined as a spread from this active contract
using spreads determined in the closing range. For energy contracts, exchanges
typically determine the settlement prices for the "more active contracts" (i.e.,
contracts which meet certain open interest percentage thresholds) as the average
price of all outright transactions during the closing range for such contract.
In all other contracts, the settlement prices are usually determined as spread
relationships to the more active contracts.
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<PAGE> 85
PRECIOUS METALS SPOT MARKETS
In the case of Bullion ComPS, it may be the case that the value of the Bullion
ComPS Principal Amount and the Applicable Index (and thus the Redemption Value
of and distributions on such ComPS) will be determined with reference to the
Fixing Price of the relevant Fixing Association. The relevant Fixing Association
for gold and silver is the London Bullion Market Association (the "LBMA"); in
the case of platinum and palladium, the relevant Fixing Association is the
London Platinum and Palladium Market (the "LPPM"). The Fixing Price represents
the spot price for the relevant underlying commodity as determined in accordance
with the procedures of the relevant Fixing Association. The fixing procedures
for the LBMA and the LPPM are similar. Fixings occur twice each trading day for
gold, platinum and palladium and once each trading day for silver. At the
commencement of the fixing, an opening price is announced by the presiding
official. This price is relayed to the dealing rooms of the members of the
relevant Fixing Association. The price is in turn relayed to the customers of
such members and on the basis of orders received, such members declare as a
buyer or a seller. Provided that both buying and selling interests are declared,
members are then asked to state the amount they wish to trade. If the amounts of
buying and selling do not balance, the same procedure is followed again at
higher or lower prices until a balance is achieved. The chairperson of the
relevant Fixing Association may exercise some discretion in determining the
final Fixing Price. Because members of the LBMA must submit fixed orders for
silver (i.e., no additional attempts at buying or selling occur as described in
the second preceding sentence), trade imbalances may arise from time to time in
the determination of the Fixing Price for silver.
The LBMA is regulated by the Bank of England in accordance with the provisions
of the London Code of Conduct. The London Code of Conduct is issued by the Bank
of England and sets out the standards that firms are expected to meet when
trading in the London wholesale bullion and money markets. In addition, all
market marking members of the LBMA, in common with all U.K.-based banks, are
subject to capital adequacy and liquidity requirements and regular supervisory
meetings to consider the adequacy of their management, systems and controls. The
Bank of England takes an active role in the LBMA gold market, including holding
certain gold for delivery in its vaults and holding gold in accounts.
INVESTING IN THE COMMODITIES AND COMMODITY FUTURES MARKETS
Investments in commodities and commodity futures markets offer potential returns
from several sources and strategies, two of which are as follows: (i) the change
in price of the underlying commodity or commodity futures contract ("Price
Return") and (ii) the cumulative return created by a continuous investment in
the same type of futures contract by buying, holding and then selling such
contracts as they approach expiration and reinvesting the notional proceeds of
such sale in the same type of contract with a more distant expiration date (such
cumulative return, "Excess Return", is the sum of the price returns for all such
contracts held during their holding period, and such Excess Return is often
described or accounted for as the sum of Spot Return plus Roll Return).
Price Return. Price Return is the return that arises from changes over
time in prices of futures contracts or in the prices of the commodities
themselves, as applicable. Thus, if on the first day of a given month the
price of the futures contract is $15.00, and on the 30th day of such month
the price of the futures contract is $15.50, the investor in such contract
has earned a price return of 3.33% on the initial notional amount of
$15.00.
Excess Return. Excess Return is the cumulative return of holding a
continuous investment in commodity futures contracts. Excess Return is just
the cumulative return of the individual Price Returns of the contracts held
during their holding period. Thus, Excess Return is calculated as the
return of holding a certain contract and, as it nears expiration, selling
such contract and reinvesting the notional proceeds of the sale into
another contract with a more distant expiration date. Commodity market
participants often describe Excess Return as the sum of Spot Return plus
Roll Return. Describing Excess Return as Spot Return plus Roll Return helps
describe the cumulative price returns of the contracts held in terms of (a)
overall trends in the spot or nearby futures prices (Spot
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Return) and (b) the average shape of the forward curve during the roll days
over the holding period (Roll Return).
"Spot Return" is defined as the change in the price of the nearest to expiration
contract underlying the Excess Return calculation from the beginning of the
calculation period to the end of the calculation period (without regard to the
actual underlying contract referenced).
"Roll Return" is the number that, when added to the Spot Return, gives the true
Excess Return. Roll Return represents the portion of return on a continuous
investment in nearby futures that one might attribute to the average shape over
the holding period of the forward curve during the roll days (i.e., whether the
forward contracts that were rolled into were so rolled at a premium or a
discount to the nearer to expiration contracts).
EXAMPLE
The following table illustrates the calculation of the Excess Return of a
continuous investment in nearby futures over a 2 period holding period and shows
how Spot Return plus Roll Return are defined and calculated so that the sum
thereof equals the actual Excess Return calculation.
<TABLE>
<CAPTION>
END OF END OF
DAY 1 PERIOD 1 PERIOD 2 TOTAL
------ -------- -------- -----
<S> <C> <C> <C> <C>
Futures #1......................................... $15.00 $ 15.00
Futures #2......................................... $14.75 $ 14.50 $ 15.00
Return on Futures #1............................... 0.00%
Return on Futures #2............................... NA 3.45%
Return on Excess Return............................ 0.00%(a) 3.45%(b) 3.45%
</TABLE>
- ---------------
(a) return on Futures #1 for first month holding period, rounded to two
decimal places
(b) return on Futures #2 for second month holding period, rounded to two
decimal places
In the preceding example, if the change in value of an index had been calculated
entirely based on Futures #1 beginning on day 1, had ceased to be based on such
contract at the end of Period 1 and had begun to be calculated entirely based on
Futures #2 on such day, and had continued to be based entirely on such contract
to expiration at the end of Period 2, the index would have appreciated by 3.45%,
despite the fact that the price of Futures #1 on day 1 and the price of Futures
#2 at the end of Period 2 were equal (i.e. Spot Return was 0.00%). Thus, while
Futures #1 yielded no price return, Futures #2 yielded a price return of 3.45%
during its holding period. Such a continuous investment in nearby futures
contracts produced a return of 3.45% over the two period holding period, which
can be accounted for as a Spot Return of 0.00% plus a Roll Return of 3.45%. Spot
Return is (($15.00/$15.00) -1) or 0.00%, since the beginning price of Futures #1
is $15.00 and the ending price of Futures #2 is $15.00 over the total holding
period. Because Roll Return is the number that, when added to the Spot Return
calculation, gives the true Excess Return, and because Excess Return is 3.45% in
the above example, Roll Return must be Excess Return minus Spot Return
(3.45%-0.00%), or 3.45%. However, this is only one example of a possible futures
market alignment; in any market, Excess Return, or the sum of Spot Return plus
Roll Return, could be positive or negative over any given holding period.
The price of the longer-dated position may be higher or lower than the price of
the shorter-dated position based on a variety of factors, including the cost of
borrowing, transportation, storage and insurance of commodities, the
expectations of market participants with respect to future price trends and
general inventory, supply and demand trends.
Investors may also calculate the "total return" from an unlevered, continuous
investment in nearby commodity futures contracts by adding to the futures return
a component of return calculated based on the notional amount of their
investment in commodity futures, as it changes from time to time, would earn if
invested as cash. Such return (the "Collateral Return Component") can be added
to (and thus reinvested in) the futures return component to calculate the "total
return" from such an unlevered, continuous investment.
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<PAGE> 87
The following table illustrates a simplified calculation of the total return of
a continuous investment in nearby commodity futures contracts over a 2 period
holding period. The example uses the futures return from the table above and
assumed Collateral Return Components:
Total Return Example
<TABLE>
<CAPTION>
PERIOD 1 PERIOD 2 TOTAL
-------- -------- -----
<S> <C> <C> <C>
Return attributable to change in value of futures contracts...... 0.00% 3.45%
Return attributable to Collateral Yield Component................ 0.50% 0.55%
Total Return..................................................... 0.50% 4.00% 4.52%*
</TABLE>
- ---------------
* 4.52% equals the total return from compounding: (1 + 0.005) x (1 + 0.04) - 1
In the above example, if the futures return had been as calculated in the Excess
Return Example and the Collateral Yield Component was as specified, the total
return over the two period holding period would be 4.52%.
THE JPM INDICES
The JPM Indices have been developed and are calculated by Morgan Guaranty as
indices proprietary to J.P. Morgan. The JPMCI, the primary commodities index
calculated by Morgan Guaranty, is the arithmetic weighted average of the
cumulative returns afforded by notional investments in exchange-traded futures
contracts on certain non-financial "hard" (i.e., industrial non-edible)
commodities (including base metals, energy products and precious metals). Each
of the JPM Indices is designed as a measure of the performance over time of the
markets for the applicable commodities.
Morgan Guaranty calculates two investable versions of the JPM Indices, the
Excess Return Indices and the Total Return Indices. Subject to the specific
terms of each methodology set forth below, each methodology represents a method
for determining the cumulative change in value of notional positions in certain
commodities or commodity futures contracts, and does not represent an actual
investment in commodities or commodity futures contracts. Calculations for the
JPM Indices are based on end-of-day futures settlement prices for energy and
precious metal indices and on LME end-of-day closing prices for third Wednesday
dates for base metal indices. JPM Indices which are based upon only one
underlying commodity (whether computed on an excess return or total return
basis) are referred to as "JPM Individual Indices".
As long as any series of ComPS is outstanding, Morgan Guaranty will cause the
Applicable Index relating to such series of ComPS to be published by one or more
public reporting entities as a JPM Individual Index. At the date of this
Prospectus, such information is available on both Reuters and Bloomberg.
EXCESS RETURN METHODOLOGY
The actual methodology applied by Morgan Guaranty in calculating Excess Return
JPM Individual Indices is set forth below. If the Applicable Index of any series
of ComPS is an Excess Return Index, the following methodology will be applied by
the Calculation Agent in calculating the Applicable Index:
The value of the relevant Excess Return Index on any Trading Day not subject to
a Market Disruption Event will be determined with reference to the following
formula:
I(t) = I(t-1) + Change(t)
Where "I(t)" is the value of the relevant Excess Return Index on the
date of determination (such date being referred to as "(t)"); "I(t-1)"
is the value of the relevant Excess Return Index on the Trading Day not
subject to a Market Disruption Event immediately preceding the date of
determination (such date being referred to as "(t-1)"); and "Change(t)"
is equal to the product of (i) I(t-1) and (ii) the sum of the weighted
percentage changes on the date of determination of the U.S. dollar
prices of the futures contracts underlying the Applicable Index. Each
such weighted percentage change shall be equal to the product of (a) the
U.S. dollar percentage gain or
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<PAGE> 88
loss on such underlying contracts to the date of determination from the
immediately preceding Trading Day that is not subject to a Market
Disruption Event multiplied by (b) the applicable futures contract's
weight in the Applicable Index for such date of determination. The
methodology behind the weighting of the futures contracts is set forth
under the caption "Rebalance of JPM Indices".
For example, to calculate the value of an Excess Return Index (I(t)) on a
Trading Day not subject to a Market Disruption Event for which I(t-1) equals 100
and on which the only Benchmark Contract moves in value from $14.50 to $15.00
(resulting in an Index change of 3.4482759%),
I(t) = 100 + (100 x 0.034482759)
I(t) = 100 + 3.4482759
I(t) = 103.4482759
TOTAL RETURN METHODOLOGY
The methodology applied by Morgan Guaranty in calculating Total Return JPM
Individual Indices is set forth below. If the Applicable Index of any series of
ComPS is a Total Return Index, the following methodology will be applied by the
Calculation Agent in calculating the Applicable Index:
The value of the relevant Total Return Index for any Trading Day not subject to
a Market Disruption Event will be determined with reference to the following
formula:
I(t) = I(t-1) + Change(t) + R(t)
Where "I(t)" is the value of the relevant Total Return Index on the date
of determination (such date being referred to as "(t)"); "I(t-1)" is the
value of the relevant Total Return Index on the Trading Day not subject
to a Market Disruption Event immediately preceding the date of
determination (such date being referred to as "(t-1)"); and "Change(t)"
is equal to the product of (i) I(t-1) and (ii) the sum of the weighted
percentage changes on the date of determination of the U.S. dollar
prices of the futures contracts underlying the Applicable Index. Each
such weighted percentage change shall be equal to the product of (a) the
U.S. dollar percentage gain or loss on such underlying contracts to the
date of determination from the immediately preceding Trading Day that is
not subject to a Market Disruption Event multiplied by (b) the
applicable futures contract's weight in the Applicable Index for such
date of determination. Also, "R(t)" is the return arising for the period
from (t-1) to (t) from interest payable on the nominal value of the
Applicable Index, which shall be based on the rate determined with
reference to the following formula:
R(t) = I(t-1) x Y(t)
Where "I(t-1)" has the meaning set forth in the preceding paragraph and
Y(t) = [1/(1-Q)](Days/91) - 1
Where "Q" equals the most recently available noncompetitive discount
rate on 13-week U.S. Treasury Bills (updated on weekly auction), as
found in the H.15(519) report published by the Board of Governors of the
Federal Reserve System (or, if unavailable, a successor rate with a
maturity equal to or less than three months, as Morgan Guaranty may
determine in its reasonable discretion), multiplied by the quotient of
91/360, and "Days" equals the number of calendar days from Trading Day
(t-1) to (t).
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<PAGE> 89
For example, to calculate the value of a Total Return Index for any Trading Day
not subject to a Market Disruption Event for which I(t-1) equals 100, on which
the only Benchmark Contract moves from $14.50 to $15.00, on which the Q (the
applicable discount rate (5.00%) multiplied by 91/360) equals 1.26388889% and
for which "Days" equals 1,
I(t) = 100 + (100 x 0.0344827586) + 100 x [(1/(1-0.0126388889)](1/91) - 1)
I(t) = 100 + 3.44827586 + (100 x 0.0001397838)
I(t) = 100 + 3.44827586 + .01397838
I(t) = 103.46225424
REBALANCE OF JPM INDICES
Because the JPM Indices are measures of a continuous investment in commodity
futures contracts, and because most futures contracts have maturities (generally
from one to three months) which are shorter than the life of any ComPS, the
futures contracts serving as bases from which to calculate the change in value
of the JPM Indices must be replaced on a periodic basis during the applicable
Rollover Period (as defined below) for each. If the Applicable Index for any
series of ComPS is an Excess Return Index or Total Return Index, the futures
contracts on the commodity underlying the Applicable Index will similarly be
replaced during the Rollover Period. The "Rollover Period" is the period of five
consecutive Trading Days commencing on the fifth Trading Day of the month in
which such replacement occurs. During each day of the Rollover Period, a portion
of change in value of the Applicable Index ceases as of the end of such day to
be based on the change in value of existing contracts (the "Old Contracts") and
begins as of the beginning of the next day to be based on the change in value of
the New Contracts. The "New Contracts" are those contracts which are the nearest
designated futures contract which (i) have a termination of trading at least ten
Trading Days into the month following the Rollover Period and (ii) have a first
"notice day" at least ten Trading Days into the month following the Rollover
Period. The "notice day" is the first day on which persons holding a short
position on such futures contract must inform the exchange on which such
contract is traded that they will deliver under such contract.
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<PAGE> 90
In the case of energy products for which there exist designated futures
contracts for delivery in each month of the year, the New Contracts will be
different from the Old Contracts. As indicated in the table below, which lists
each of the designated contracts, the rebalancing procedure will occur on a less
frequent basis for precious metals and base metals, and as a result the New
Contracts and Old Contracts for any Rollover Period may be the same.
- --------------------------------------------------------------------------------
Table: Benchmark Contracts Underlying Excess Return and Total Return Indices
<TABLE>
<CAPTION>
Applicable
No. Commodity Name/Units Delivery Exchange Units per Contract Designated Contract
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
1 Aluminum $/MT (Metric Tonne) LME Warehouses LME 25 tonnes Third Wednesday of every March,
(High Grade Primary Aluminum) Worldwide June, September, December(1)
2 Copper $/MT LME Warehouses LME 25 tonnes Third Wednesday of every March,
(Copper Grade A) Worldwide June, September, December
3 Nickel $/MT LME Warehouses LME 6 tonnes Third Wednesday of every March,
(Primary Nickel) Worldwide June, September, December
4 Zinc $/MT LME Warehouses LME 25 tonnes Third Wednesday of every March,
(Special High Grade Zinc) Worldwide June, September, December
5 Heating Oil #2, c/gal New York Harbor NYMEX 42,000 gallons Every month
6 Natural Gas $/MM BTU Henry Hub, NYMEX 10,000 MM BTU Every month
Louisiana
7 Unleaded Gasoline, c/gal New York Harbor NYMEX 42,000 gallons Every month
8 Light "Sweet" Crude Oil $/BBL Cushing, NYMEX 1,000 bbl Every month
Oklahoma
9 Gold $/troy oz COMEX- approved COMEX 100 troy oz February, April, June, August,
(.995 fineness) vaults December
10 Silver c/troy oz COMEX- approved COMEX 5,000 troy oz March, May, July, September,
(.999 fineness) vaults December
11 Platinum $/troy oz NYMEX-approved NYMEX 50 troy oz January, April, July, October
vaults
</TABLE>
Additional underlying futures contracts may from time to time be added to the
JPM Indices and may thereafter serve as Applicable Indices. Information
substantially similar to that disclosed in the preceding table will be disclosed
in any Prospectus Supplement relating to such additional Applicable Indices.
As discussed above, for JPM Individual Indices and for the Applicable Indices,
the replacement of the contracts serving as the basis for the calculation of
index change will be effected on a proportionate basis over the five day
Rollover Period in order to avoid the risks of effecting such replacement
entirely on a single day (e.g., a day on which the applicable market displays
unusual volatility).
As a result of such process of replacement, the weighting of contracts in the
Applicable Indices shall be such that for the Trading Days in any month up to
and including the first day of the Rollover Period for such month, the Change(t)
(as described above) will be calculated as 100% of the daily change of the
underlying Old Contracts. The Change(t) for the second Trading Day of the
Rollover Period (assuming no Market Disruption Event) shall be calculated based
80% on the change attributable to the Old Contracts plus 20% on the change for
the New Contacts, with similar adjustments made for each day of the Rollover
Period.
- ---------------
(1) The LME trades contracts on every business day for three months and monthly
contracts maturing on the third Wednesday of each of the next 12 or more
months. The most actively traded contracts are the 3-month forward, the
cash, and the contract maturing the third Wednesday of each month.
37
<PAGE> 91
Accordingly, the relative weights of the Old Contracts and the New Contacts
during any given day of a calendar month for calculation of the Change(t) on
such day will be as follows:
- --------------------------------------------------------------------------------
Standard Rollover Period
<TABLE>
<CAPTION>
Trading Day Old Contract New Contract
of Month Weight % Weight %
---------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Roll-over Period
1-4........................................................ 100 0
5.......................................................... 100 0
6.......................................................... 80 20
7.......................................................... 60 40
8.......................................................... 40 60
9.......................................................... 20 80
10........................................................... 0 100
11-month end................................................. 0 100
</TABLE>
The occurrence of a Rollover Period does not, by itself, create a change in the
value of the Applicable Index. The occurrence of a Rollover Period merely causes
the index change calculation, over the course of the Rollover Period, to be
calculated using a new underlying futures contract. For example, assuming a
constant Old Contract value of $15.00 and a constant New Contract value of
$14.00 throughout the Rollover Period (and thus a daily percentage change for
each day of 0%) and a starting Applicable Index value of 100, the following
indicates the change in the futures-related portion of the value of the
Applicable Index (I(t)) during such Rollover Period:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Old Contract New Contract
--------------------- --------------------- Index
Trading Day Weight % % Change Weight % % Change Change(t)*
- ----------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
5................................. 100 0 0 0 0
6................................. 80 0 20 0 0
7................................. 60 0 40 0 0
8................................. 40 0 60 0 0
9................................. 20 0 80 0 0
10................................. 0 0 100 0 0
</TABLE>
* Index change(t) is zero for each day because the percentage price change
of the underlying futures contracts is zero for each day
However, if a Market Disruption Event occurs during a Rollover Period (i.e., on
any day on which a replacement is otherwise scheduled to take place), such
replacement will be postponed until the next Trading Day of the Rollover Period
on which the Market Disruption Event ceases to be in effect. On the Trading Day
such Market Disruption Event ceases to be in effect, the replacement for that
day and for all preceding days during which such Market Disruption Event was
continuing will be effected. The Change(t) for all Trading Days from the day
first subject to a Market Disruption Event to the first Trading Day not subject
to a Market Disruption Event shall use the contract weights for the Trading Day
on which the Market Disruption Event began. If the Market Disruption Event
remains in effect for the remainder of the Rollover Period, the Old Contract
will be replaced by the New Contract to the full extent not previously replaced
at the end of the next succeeding Trading Day on which such Market Disruption
Event ceases to be in effect. The following chart illustrates the replacement
process for a Rollover Period including the occurrence of a Market Disruption
Event (indicated as an "MDE") on the seventh Trading Day of the month:
38
<PAGE> 92
- --------------------------------------------------------------------------------
Example of Rollover Period with Market Disruption Event
<TABLE>
<CAPTION>
Trading Day Old Contract New Contract
of Month Weight % Weight %
------------ ------------ ------------
<S> <C> <C>
1-4......................................................... 100 0
5........................................................... 100 0
6........................................................... 80 20
7 (MDE)..................................................... 60 40
8........................................................... 60 40
9........................................................... 20 80
10........................................................... 0 100
11-month end................................................. 0 100
</TABLE>
For an Applicable Index which is an Excess Return Index or a Total Return Index,
because of the occurrence of the Market Disruption Event on Trading Day 7, the
Index would not be officially calculated and no roll would occur. Since no
Market Disruption Event occurs on Trading Day 8, an index value is determined
for Trading Day 8, and the Change(t) is calculated using the relative contract
weights applicable to the Trading Day first subject to the Market Disruption
Event (in this example, Trading Day 7) using the index level on Trading Day 6
(the immediately preceding Trading Day not subject to a Market Disruption Event)
as I(t-1).
THE JPMCI POLICY COMMITTEE
Morgan Guaranty has established the JPMCI Policy Committee to advise and make
recommendations with respect to the determination of the JPM Indices and, to the
extent appropriate, the Applicable Indices. The JPMCI Policy Committee meets on
an ad hoc basis at the request of Morgan Guaranty in order to discuss policy
matters relating to the operation of the JPM Indices and, to the extent
appropriate, the Applicable Indices. The JPMCI Policy Committee will advise
Morgan Guaranty with respect to, among other things, the effectiveness of the
JPMCI as an appropriate commodity investment benchmark; the effectiveness of the
JPMCI as a measure of commodity market performance; the need for changes in the
weights, composition, price sources or calculation methodology of the JPMCI or
the Applicable Indices; the need for creation or elimination of sub-indices of
the JPMCI or other commodity indices, drawing either from the existing
components of the JPMCI or new commodity components and the treatment of issues
relating to market disruptions issues. Morgan Guaranty may at any time act at
its discretion to make any modifications to the JPMCI based on recommendations
of the JPMCI Policy Committee. Membership of the JPMCI Policy Committee will be
subject to change from time to time, and no member will be permitted to purchase
or hold any ComPS during his or her term on the Committee. At the time of this
Prospectus, the JPMCI Policy Committee consists of the following members:
39
<PAGE> 93
JPMCI POLICY COMMITTEE
<TABLE>
<CAPTION>
NAME TITLE FUNCTION
- ------------------------------ -------------------------- --------------------------
<S> <C> <C>
Stephen Sinacore (Chairman)... Managing Director, J.P. Head of Global Commodities
Morgan
Victor S. Filatov............. President, Smith Barney Chief Investment Officer
Global Capital Management
Inc.
Martin B. Greenberg........... Chairman of the Board and Former Chairman of the
President of Sterling Commodities Exchange, Inc
Commodities
Philip K. Verleger, Jr........ Vice President, Charles Economic Consultant and
River Associates former Visiting Fellow,
Institute of International
Economics
Jeanne Feldhusen.............. Managing Director, J.P. Head of Fixed Income
Morgan Research
</TABLE>
Each of the futures contracts included in the JPM Indices must satisfy each of
the following JPMCI Inclusion Criteria: the futures contracts must (i) be priced
in U.S. dollars, or if priced in a foreign currency, the exchange on which the
contract is traded must publish an official exchange rate for conversion of the
futures price into U.S. dollars and such currency must be freely convertible
into U.S. dollars; (ii) be traded on a regulated futures exchange located in the
United States, Canada, the United Kingdom, Japan, Singapore or an O.E.C.D.
country and (iii) have a minimum annual trading volume of 300,000 contracts or
$500,000,000 for all contract months. If a contract included in the JPM Indices
ceases to satisfy the JPMCI Inclusion Criteria, the JPMCI Policy Committee shall
meet to consider the substitution of a replacement futures contract for such
contract. If no appropriate replacement contract can be found, the JPMCI Policy
Committee may recommend the removal of such contract from the JPM Indices.
Morgan Guaranty reserves the right to act at its discretion to make any
modifications to the JPM Indices based on the recommendations of the JPMCI
Policy Committee.
CHANGES IN JPM INDICES DESIGNATED CONTRACTS
Before implementing a change in definition or price sources for a designated
contract in the JPM Indices, the JPMCI Policy Committee shall consider the
following: (i) the effectiveness of the JPMCI and JPM Indices as appropriate
commodity investment benchmarks, (ii) the effectiveness of the JPMCI and JPM
Indices as a measure of commodity market performance and (iii) the respective
contract volumes, U.S. dollar volumes, open interest, liquidity and transaction
costs of the proposed replacement and existing benchmark contracts.
The JPMCI Policy Committee may recommend a change in one or more of the
benchmark contracts underlying the JPM Indices if, in the majority opinion of
the committee members, the proposed replacement benchmark contract better meets
the objectives set forth in clauses (i) and (ii) above and has higher annual
contract volumes or U.S. dollar volumes. However, as noted above, Morgan
Guaranty may cause a change in one or more of such contracts if any increased
cost or tax is imposed on holding or trading such contracts if such contract
meets the applicable inclusion rules even though such contract does not have
higher annual contract volumes or U.S. dollar volumes.
After consideration of the above (and other) issues the JPMCI Policy Committee
may recommend to Morgan Guaranty a change in the composition of the JPM Indices.
Morgan Guaranty reserves the right to act at its discretion to make any
modifications to the JPMCI based on recommendations of the policy committee.
Such changes, including the implementation date and details, shall be published
and disseminated by Morgan Guaranty through its usual research distribution
network.
40
<PAGE> 94
THE APPLICABLE INDEX
The Prospectus Supplement for any series of ComPS will specify and provide
details with respect to the Applicable Index and the commodity underlying the
Applicable Index. As discussed above, the Applicable Index will be an Excess
Return Index calculated in the same manner as those of the Excess Return JPM
Indices, a Total Return Index calculated in the same manner as those of the
Total Return JPM Indices or a Price Reference Index. Each such Prospectus
Supplement will also contain information with regard to the historical
performance of the Applicable Index.
DESCRIPTION OF THE RELATED NOTES
The Related Notes may be issued from time to time in respect of one or more
series of Securities. The following description sets forth certain general terms
and provisions of each Related Note to which any series of Securities may
relate. The particular terms of the Related Note included in any Prospectus
Supplement and the extent, if any, to which such general provisions may apply to
such Related Note will be described in the Prospectus Supplement relating to the
Securities of such series. The following description does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
any Prospectus Supplement relating to any Related Note and the other documents
incorporated by reference herein. Certain capitalized terms are used herein as
defined in the relevant Related Note.
GENERAL
Each Related Note will be an unsecured, unsubordinated obligation of Morgan
Guaranty. No Related Note will limit the principal amount of Related Notes that
may be issued by Morgan Guaranty. The financial terms of the Related Notes,
including, among other things, the maturity and principal of and interest and
any premium on any Related Note (or the method of calculating any of the
foregoing), will be set forth in the Prospectus Supplement related thereto and
will mirror the aggregate financial terms of the related series of Securities,
including as to timing and amount of payments. References made herein to the
Related Note refer to each Related Note that may be issued from time to time.
No Related Note will contain any provisions that would limit the ability of
Morgan Guaranty to incur indebtedness. Reference is made to any Prospectus
Supplement relating to the Related Note offered thereby for information with
respect to any deletions from, modifications of or additions to the events of
default or covenants of Morgan Guaranty applicable to the Related Note that is
referred to therein.
Under terms of each Related Note, Morgan Guaranty will have the ability to issue
Related Notes with terms different from those of Related Notes previously issued
without the consent of the holders of previously issued Related Notes, in an
aggregate principal amount determined by Morgan Guaranty.
SUBORDINATION
The Related Notes will be subordinated and junior in right of payment to certain
other indebtedness of subsidiaries of Morgan Guaranty to the extent set forth in
each Prospectus Supplement that will accompany this Prospectus.
NOTE EVENTS OF DEFAULT
If any Note Event of Default shall occur with respect to any Related Note and be
continuing, the Property Trustee on behalf of holders of Securities of the
applicable series will have the right to declare the principal of and the
interest on such Related Note and any other amounts payable under the applicable
Related Note to be forthwith due and payable and to enforce its other rights as
a creditor with respect to such Related Note as applicable. A "Note Event of
Default" with respect to any Related Note is defined as: (i) default for 30 days
in the payment of interest on such Related Note; (ii) default in payment of the
principal amount at Stated Maturity or any amount payable upon any redemption of
such Related Note; (iii) failure by Morgan Guaranty for 90 days after receipt of
notice to it by the Trust to comply with any of its covenants or agreements
contained in the relevant Related Note; and (iv) certain events of bankruptcy,
41
<PAGE> 95
insolvency, receivership or reorganization involving Morgan Guaranty or certain
affiliates. If any Note Event of Default described in clause (i), (ii) or (iii)
above occurs and is continuing, the Property Trustee, on behalf of holders of
Securities of the applicable series, may declare the relevant Related Note to be
due and payable and, upon any such declaration, the relevant Related Note shall
become immediately due and payable along with any accrued and unpaid interest.
If any Note Event of Default described in clause (iv) above occurs and is
continuing, all Related Notes shall become immediately due and payable along
with any accrued and unpaid interest. Under certain conditions the Property
Trustee, on behalf of holders of Securities of the applicable series, may waive
certain past defaults and their consequences with respect to such Related Note.
Pursuant to the Declaration, the holders of Preferred Securities in certain
circumstances have the right to direct the Property Trustee to exercise on their
behalf certain of its rights as the holder of the relevant Related Note. A
default or event of default under a Related Note corresponding to one series of
Securities will not constitute a default or event of default under a Related
Note corresponding to any other series of Securities.
MODIFICATION OF ANY RELATED NOTE
Morgan Guaranty and the Property Trustee may, without the consent of the holders
of any Securities, enter into senior notes supplemental to any Related Note for,
among others, one or more of the following purposes: (i) to evidence the
succession of another person to, and the assumption by such successor of, Morgan
Guaranty's obligations under such Related Note; (ii) to add covenants of Morgan
Guaranty, or surrender any rights of Morgan Guaranty, for the benefit of the
Property Trustee; and (iii) to cure any ambiguity, or correct any inconsistency
in, such Related Note.
Each Related Note will contain provisions permitting Morgan Guaranty and the
Property Trustee, with the consent of the holders of the not less than a
majority in Principal Amount of the outstanding Preferred Securities relating to
such Related Note, to modify such Related Note; provided that no such
modification may, without the consent of the holders of all outstanding
Preferred Securities affected thereby, (i) reduce the amount of Preferred
Securities of such series the holders of which must consent to any amendment,
supplement or waiver of such Related Note; (ii) reduce the rate of or extend the
time for the payment of interest on the Related Note; (iii) alter the method of
calculation of, or reduce, the amount paid at Stated Maturity or extend the
Stated Maturity of such Related Note (other than pursuant to the terms of such
Related Note) or (iv) make any Related Note payable in money or property other
than that stated in the Related Note.
GOVERNING LAW
Each Related Note will be construed in accordance with the laws of the State of
New York.
MISCELLANEOUS
Related Notes will not be deposits or other obligations of a bank and will not
be insured by the Federal Deposit Insurance Corporation or any other federal
agency.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that will
be executed and delivered by J.P. Morgan for the benefit of the holders, from
time to time, of Preferred Securities. The terms of the Guarantee will be those
set forth in the Guarantee. The summary set forth herein does not purport to be
complete and is subject in all respects to the provisions of, and is qualified
in its entirety by reference to, the form of Guarantee, which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part. The
Guarantee will be separately qualified under the Trust Indenture Act and will be
held by First Trust of New York, National Association, acting in its capacity as
indenture trustee with respect thereto.
42
<PAGE> 96
GENERAL
Pursuant to the Guarantee, J.P. Morgan will irrevocably and unconditionally
agree, on a subordinated basis to the extent set forth therein, to pay in full
to the holders of the applicable Preferred Securities the Guarantee Payments (as
defined herein), without duplication of amounts paid by the Trust, as and when
due, regardless of any defense, right of set-off or counterclaim that the Trust
may have or assert. The following payments with respect to each series of
Preferred Securities (the "Guarantee Payments"), to the extent not paid by the
Trust, will be subject to the Guarantee (without duplication): (i)(A) any
accrued and unpaid distributions that are required to be paid on such Preferred
Securities and (B) in the case of ComPS, the ComPS Early Redemption Price or the
ComPS Redemption Price, as applicable, and in the case of all other Preferred
Securities, the Preferred Redemption Price, in each case including all accrued
and unpaid distributions, but if and only if to the extent that, in each case,
Morgan Guaranty has made payment to the Trust, on behalf of holders of
Securities of such series, of interest or principal on the Related Note
associated with such Preferred Securities, and (ii) upon a voluntary or
involuntary dissolution of the Trust (other than in connection with the
redemption of all of the Preferred Securities upon maturity or redemption of the
applicable Related Note) the lesser of (A) the Liquidation Distribution with
respect to such Preferred Securities to the extent the Trust has funds available
therefor and (B) the amount of assets of the Trust consisting of the Related
Note associated with such Preferred Securities and the proceeds thereof
remaining available for distribution to holders of such Preferred Securities
upon such dissolution of the Trust. J.P. Morgan's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by J.P.
Morgan to the holders of Preferred Securities or by causing the Trust to pay
such amounts to such holders.
The Guarantee will be a guarantee with respect to the Preferred Securities of
each series issued by the Trust from the time of issuance of such Preferred
Securities, but will not apply to any payment of distributions except to the
extent Morgan Guaranty has made the related payment on the Related Note
underlying such Preferred Securities. If Morgan Guaranty does not make interest
payments on the applicable Related Note, the Trust will not pay distributions on
the related Preferred Securities and will not have funds available therefor. See
"Description of the Related Notes".
So long as any Preferred Securities remain outstanding, J.P. Morgan will not
declare or pay dividends on, or redeem, purchase, acquire or make a distribution
or liquidation payment with respect to, any of its common stock or preferred
stock or make any Guarantee Payment with respect thereto if at such time (i)
J.P. Morgan shall be in default with respect to its Guarantee Payments or other
payment obligations under the Guarantee or (ii) there shall have occurred any
event of default under the Declaration; provided, however, that the foregoing
restrictions shall not apply to (a) dividends, redemptions, purchases,
acquisitions, distributions or payments made by J.P. Morgan by way of issuance
of shares of its capital stock, (b) payments of accrued dividends by J.P. Morgan
upon the redemption, exchange or conversion of any preferred stock of J.P.
Morgan as may be outstanding from time to time in accordance with the terms of
such preferred stock, (c) cash payments made by J.P. Morgan in lieu of
delivering fractional shares upon the redemption, exchange or conversion of any
preferred stock of J.P. Morgan as may be outstanding from time to time in
accordance with the terms of such preferred stock, (d) repurchases, redemptions
or other acquisitions of shares of capital stock of J.P. Morgan in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of employees, officers, directors of consultants, or (e) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of such rights pursuant thereto.
MODIFICATION OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights of
holders of Preferred Securities (in which case no consent will be required), the
Guarantee may be amended by J.P. Morgan and the Property Trustee only with the
prior approval of the holders of not less than a majority in aggregate Principal
Amount at such time of the holders of each series of affected Preferred
Securities, voting as a single class. The manner of obtaining any such approval
of holders of such Preferred Securities will be set
43
<PAGE> 97
forth in an accompanying Prospectus Supplement. All guarantees and agreements
contained in the Guarantee shall bind the successors, assignees, receivers,
trustees and representatives of J.P. Morgan and shall inure to the benefit of
the holders of the applicable Preferred Securities then outstanding.
REMEDIES OF HOLDERS
The Guarantee will be deposited with First Trust of New York, National
Association, as indenture trustee, to be held for the benefit of holders of the
Preferred Securities. First Trust of New York, National Association shall
enforce such Guarantee on behalf of the holders of the Preferred Securities. The
holders of not less than a majority in aggregate principal amount of the
Preferred Securities of each affected series have the right to direct the time,
method and place of conducting any proceeding for any remedy available in
respect of the Guarantee, including the giving of directions to First Trust of
New York, National Association. If First Trust of New York, National Association
fails to enforce the Guarantee as above provided, any holder of Preferred
Securities may institute a legal proceeding directly against J.P. Morgan to
enforce its rights under such Guarantee, without first instituting a legal
proceeding against the Trust or any other person or entity. Subject to the award
by a court of competent jurisdiction of legal fees in connection with any such
legal proceeding, each holder will be required to bear its own costs in
connection with instituting a legal proceeding directly against J.P. Morgan,
which cost may be significant.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate as to the applicable Preferred Securities upon full
payment of the ComPS Early Redemption Price, the ComPS Redemption Price, the
Preferred Redemption Price of all such Preferred Securities or upon full payment
of the amounts payable upon liquidation of the Trust, as applicable. The
Guarantee will continue to be effective or will be reinstated as to any
Preferred Securities, as the case may be, if at any time any holder of the
applicable Preferred Securities must restore payment of any sums paid under such
Preferred Securities or the Guarantee (e.g., upon a subsequent bankruptcy of
Morgan Guaranty or J.P. Morgan).
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of J.P. Morgan and will
rank (i) subordinate and junior in right of payment to all other liabilities of
J.P. Morgan, (ii) pari passu with the most senior preferred or preference stock
outstanding as of the date hereof of J.P. Morgan and with respect to obligations
under other guarantee agreements which J.P. Morgan may enter into from time to
time to the extent that such agreements provide for comparable guarantees by
J.P. Morgan of payment on other preferred securities issued by the predecessor
of the Trust or by other trusts sponsored by J.P. Morgan and (iii) senior to
J.P. Morgan's common stock. The terms of the Preferred Securities provide that
each holder of Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the applicable Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection (that
is, the guaranteed party may institute a legal proceeding directly against the
guarantor to enforce its rights under the Guarantee without instituting a legal
proceeding against any other person or entity).
GOVERNING LAW
The Guarantee will be governed by and construed and interpreted in accordance
with the laws of the State of New York.
DESCRIPTION OF THE RELATED NOTE GUARANTEE
Set forth below is a summary of information concerning the Related Note
Guarantee that will be executed and delivered by J.P. Morgan in respect of each
Related Note for the benefit of the Property Trustee, for the benefit of holders
of Securities of various series. The terms of the Related Note Guarantee will be
those set
44
<PAGE> 98
forth in the Related Note Guarantee. The summary set forth herein does not
purport to be complete and is subject in all respects to the provisions of, and
is qualified in its entirety by reference to, the form of the Related Note
Guarantee, which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. The Related Note Guarantee will be held by the
Property Trustee for the benefit of holders of the Securities.
GENERAL
Pursuant to the Related Note Guarantee, J.P. Morgan will irrevocably and
unconditionally agree, on a subordinated basis to the extent set forth therein,
to pay in full to the Property Trustee, for the benefit of holders of
Securities, as the holder of each Related Note, the Related Note Guarantee
Payments (as defined herein), without duplication of amounts paid by Morgan
Guaranty, as and when due, regardless of any defense, right of set-off or
counterclaim that Morgan Guaranty may have or assert with respect to the
obligation to make such Related Note Guarantee Payments. The following payments
with respect to the applicable Related Note (the "Related Note Guarantee
Payments"), to the extent not paid by Morgan Guaranty, will be subject to the
Related Note Guarantee (without duplication): (i) any accrued and unpaid
distributions that are required to be paid on such Related Note and (ii) any
principal payable by Morgan Guaranty, as and when payable by Morgan Guaranty.
J.P. Morgan's obligation to make a Related Note Guarantee Payment may be
satisfied by direct payment of the required amounts by J.P. Morgan to the
Property Trustee, for the benefit of holders of Securities, or by causing Morgan
Guaranty to pay such amounts to the Property Trustee, for the benefit of holders
of Securities.
The Related Note Guarantee will be a full and unconditional guarantee with
respect to each Related Note issued by Morgan Guaranty from the time of issuance
of such Related Note.
MODIFICATION OF THE RELATED NOTE GUARANTEE; ASSIGNMENT
The Related Note Guarantee may be amended only with the prior approval of the
Property Trustee; provided that no such amendment shall adversely affect the
holders of the Preferred Securities without the consent of a majority in
aggregate Principal Amount at such time of the holders of Preferred Securities
of each affected series, voting as a single class. All guarantees and agreements
contained in the Related Note Guarantee shall bind the successors, assignees,
receivers, trustees and representatives of J.P. Morgan and shall inure to the
benefit of the Property Trustee, for the benefit of holders of Securities of
each series, as the holder of each Related Note then outstanding.
REMEDIES OF THE TRUST AND HOLDERS OF COMPS
The Trust has the sole right to direct the time, method and place of conducting
any proceeding providing for any remedy available to it in respect of the
Related Note Guarantee. Pursuant to the Declaration, the holders of Preferred
Securities in certain circumstances (including a payment default under the
Related Note Guarantee by J.P. Morgan) have the right to direct the Trust,
through the Property Trustee, to exercise certain of its rights as the holder of
the Related Note Guarantee.
TERMINATION OF THE RELATED NOTE GUARANTEE
The Related Note Guarantee will terminate as to any Related Note upon full
payment of the Related Note Redemption Price (as defined below) of such Related
Note. The Related Note Guarantee will continue to be effective or will be
reinstated with respect to any Related Note, as the case may be, if at any time
the Property Trustee, on behalf of holders of Securities of each applicable
series, must restore payment of any sums paid under the Related Note or under
the Related Note Guarantee with respect to such Related Note (e.g., upon a
subsequent bankruptcy of J.P. Morgan).
STATUS OF THE RELATED NOTE GUARANTEE
The Related Note Guarantee will constitute an unsecured obligation of J.P.
Morgan and will rank (i) subordinate and junior in right of payment to all other
liabilities of J.P. Morgan, (ii) pari passu with the
45
<PAGE> 99
most senior preferred or preference stock outstanding as of the date hereof of
J.P. Morgan, and (iii) senior to J.P. Morgan's common stock. The terms of the
Preferred Securities provide that each holder of Preferred Securities by
acceptance thereof agrees to the subordination provisions and other terms of the
Related Note Guarantee.
The Related Note Guarantee will constitute a guarantee of payment and not of
collection (that is, the Property Trustee may institute a legal proceeding
directly against J.P. Morgan to enforce its rights under the Related Note
Guarantee without instituting a legal proceeding against Morgan Guaranty).
GOVERNING LAW
The Related Note Guarantee will be governed by and construed and interpreted in
accordance with the laws of the State of New York.
PLAN OF DISTRIBUTION
The Trust may sell the Preferred Securities in one or more of the following ways
from time to time: (i) to or through underwriters or dealers, (ii) directly to
purchasers or (iii) through agents. The Prospectus Supplement with respect to
any Offered Securities will set forth (a) the terms of the offering of the
Offered Securities, including the name or names of any underwriters, dealers or
agents, (b) the purchase price of the Offered Securities and the proceeds to the
Trust from such sale, (c) any underwriting discounts and commissions or agency
fees and other items constituting underwriters' or agents' compensation, (d) any
initial public offering prices, (e) any discounts or concessions allowed or paid
to dealers and (f) any securities exchange on which such Offered Securities may
be listed. Any initial public offering price, discounts or concessions allowed
or reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale, the Offered Securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The Offered
Securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering of Offered Securities will be named in the
Prospectus Supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth on
the cover of such Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement relating thereto, the obligations of the underwriters to
purchase the Offered Securities will be subject to certain conditions precedent,
and the underwriters will be obligated to purchase all the Offered Securities if
any are purchased.
If dealers are utilized in the sale of Offered Securities, the Trust will sell
such Offered Securities to the dealers as principals. The dealers may then
resell such Offered Securities to the public at varying prices to be determined
by such dealers at the time of resale. The names of the dealers and the terms of
the transaction will be set forth in the Prospectus Supplement relating thereto.
Any series of Preferred Securities may be sold from time to time either directly
by the Trust or by agents of the Trust designated by the Trust. Any agent
involved in the offer or sale of the Offered Securities with respect to which
this Prospectus is delivered will be named, and any commissions payable by the
Trust to such agent will be set forth, in the applicable Prospectus Supplement
relating thereto. Unless otherwise indicated in the applicable Prospectus
Supplement, any such agent will be acting on a best efforts basis for the period
of its appointment.
The Preferred Securities may be sold directly by the Trust to institutional
investors or others who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any resale thereof. The terms of any such
sales will be described in the Prospectus Supplement relating thereto.
If so indicated in the Prospectus Supplement, the Trust will authorize agents,
underwriters or dealers to solicit offers from certain types of institutions to
purchase Offered Securities from the Trust at the public
46
<PAGE> 100
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject only to those conditions set forth in the
Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
Agents, dealers and underwriters may be entitled under agreements with J.P.
Morgan or the Trust to indemnification by J.P. Morgan or the Trust against
certain civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that such agents, dealers or underwriters
may be required to make in respect thereof. Agents, dealers and underwriters may
be customers of, engage in transactions with, or perform services for J.P.
Morgan or the Trust in the ordinary course of business.
Each series of Offered Securities will be a new issue of securities and will
have no established trading market. Any underwriters to whom Offered Securities
are sold for public offering and sale may make a market in such Offered
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. The Offered Securities
may or may not be listed on a national securities exchange. No assurance can be
given that there will be a market for the Offered Securities.
This Prospectus and the 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 ComPS. 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.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Securities will
be passed upon by Morris, Nichols, Arsht & Tunnell, Wilmington, Delaware,
special Delaware counsel to the Trust. 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.
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.
47
<PAGE> 101
ANNEX I
GLOSSARY OF TERMS
The following are abbreviated definitions of certain capitalized terms used in
the Prospectus Supplement. The Declaration, the Guarantee, the Related Note
Guarantee and any Related Note may contain more complete definitions of certain
of the terms defined herein, as well as definitions of certain other terms not
defined herein, and reference should be made to the Declaration, the Guarantee,
the Related Note Guarantee and the relevant Related Note, as applicable, for
complete definitions of such terms.
BENCHMARK CONTRACTS.....with respect to any Applicable Index, the futures
contracts on the relevant commodity the change in value
of which serve as the basis for calculating the change
in value of such Applicable Index.
BULLION COMPS...........ComPS for which the Applicable Index is a Price
Reference Index in which all distributions and the
Bullion ComPS Principal Amount are indexed to the value
at such time in U.S. dollars (the "Dollar Equivalent
Value") of bullion (i.e., gold, silver, platinum or
palladium).
BULLION COMPS
PRINCIPAL AMOUNT........the Dollar Equivalent Value of the applicable portion of
the applicable fixing price for the applicable amount of
the applicable bullion commodity at such time.
BUSINESS DAY............any day other than a Saturday, Sunday or any other day
on which banking institutions in New York, New York, are
permitted or required by any applicable law to close.
CODE....................the Internal Revenue Code of 1986, as amended.
COLLATERAL RETURN
COMPONENT...............with respect to any Total Return ComPS, a component of
the value of the Applicable Index computed on the
fluctuating index value of the Applicable Index at the
most recent auction rate for 3-month U.S. Treasury Bills
or any successor rate thereto with a maturity of 3
months or less or, if no such rate has been determined
in the 13 days prior to the date of determination, as
Morgan Guaranty may determine in its reasonable
discretion.
COMMISSION..............
the Securities and Exchange Commission.
COMMON SECURITIES.......the common securities of any series of the Trust
representing an undivided beneficial interest in the
corresponding series Related Note, to be owned by J.P.
Morgan.
DECLARATION.............the Amended and Restated Declaration of Trust among J.P.
Morgan, as sponsor, and the trustees named therein dated
as of October 10, 1997.
DISTRIBUTIONS...........if any, as specified in the applicable Prospectus
Supplement.
DTC.....................the Depository Trust Company.
EARLY REDEMPTION
VALUE...................The average for the 10 days of the Early Determination
Period of the discounted present value of the indexed
Principal Amount of the ComPS, as set forth under
"Description of ComPS--Early Redemption Upon the
Occurrence of a Special Event or at the Election of the
Holders of the ComPS".
ERISA...................the Employee Retirement Income Security Act of 1974, as
amended.
A-1
<PAGE> 102
EXCHANGE ACT............the Securities Exchange Act of 1934, as amended.
FACE AMOUNT.............as set forth in the applicable Prospectus Supplement.
FACTOR..................as specified in the applicable Prospectus Supplement,
the amount by which the Redemption Value is reduced to
account for certain costs of issuing Excess Return or
Total Return ComPS.
GUARANTEE...............the Guarantee Agreement executed by J.P. Morgan on
behalf of the holders of each series of Preferred
Securities.
GUARANTEE PAYMENTS......without duplication, (i)(A) any accrued and unpaid
distributions that are required to be paid on the
Preferred Securities and (B) the Preferred Redemption
Price, but if and only to the extent that, in each of
case, Morgan Guaranty has made a payment of interest or
principal, as the case may be, on the Related Note and
(ii) upon a Liquidation Event (other than in connection
with the redemption of all the Preferred Securities upon
the maturity or redemption of the applicable Related
Note), the lesser of (A) the Liquidation Distribution to
the extent the Trust has funds available therefor, and
(B) the amount of assets of the Trust remaining
available for distribution to holders of the Preferred
Securities upon such Liquidation Event.
INITIAL HOLDERS.........holders who purchase any Preferred Securities upon
original issuance.
INTEREST PAYMENT DATE...with respect to any Related Note, as specified in the
applicable Prospectus Supplement.
INVESTMENT COMPANY
EVENT...................the receipt by the Trust of an opinion of a nationally
recognized independent counsel experienced in such
matters to the effect that, as a result of the
occurrence of a change in law or regulation, a written
change in interpretation or application of law or
regulation by any legislative body, court, governmental
agency or regulatory authority or the expiration or
revocation of any applicable exemption obtained by the
Trust (a "Change in 1940 Act Law"), there is more than
an insubstantial risk that the Trust is or will be
considered an "investment company" that is required to
be registered under the 1940 Act, which Change in 1940
Act Law becomes effective on or after the date of this
Prospectus.
IRS.....................Internal Revenue Service.
ISSUE DATE..............as set forth in the applicable Prospectus Supplement.
LIQUIDATION
DISTRIBUTION............in respect of any Liquidation Event, the sum of (a) the
Early Redemption Value or stated liquidation preference,
as applicable, plus (b) the amount of accrued and unpaid
distributions on such Preferred Security to but
excluding the date of payment.
LIQUIDATION EVENT.......any dissolution of the Trust, whether voluntary or
involuntary.
NASDAQ..................The Nasdaq Stock Market.
1940 ACT................the Investment Company Act of 1940, as amended.
NOTE EVENT OF
DEFAULT.................(i) default for 30 days in the payment of interest on
the applicable Related Note; (ii) default in payment of
principal amount at the Stated Maturity or any amount
payable upon any redemption of the applicable Related
Note;
A-2
<PAGE> 103
(iii) failure by Morgan Guaranty for 90 days after
receipt of notice to it to comply with any of its
covenants or agreements contained in the applicable
Related Note; and (iv) certain events of bankruptcy,
insolvency, receivership or reorganization involving
Morgan Guaranty or certain affiliates.
PREFERRED
REDEMPTION
PRICE...................On any date of redemption, an amount equal to (i) the
Principal Amount per Preferred Security plus (ii)
accrued and unpaid distributions to but excluding the
date of redemption.
PREFERRED SECURITIES....Preferred Securities of any series of the Trust,
representing an undivided beneficial interest in the
corresponding series Related Note.
PRINCIPAL AMOUNT........at any time, (i) in the case of any Preferred Security,
the Bullion ComPS Principal Amount, Redemption Value,
Early Redemption Value or stated liquidation preference
thereof, as applicable, as if determined as of such
time, and (ii) in the case of any Related Note, the
principal amount thereof at such time determined
pursuant to the terms thereof.
REDEMPTION DATE.........either the Stated Maturity or an Early Redemption Date,
as applicable.
REDEMPTION VALUE........with respect to any series of ComPS, the average for the
Determination Period of the Principal Amount thereof, as
described under "Description of ComPS--Calculation of
Redemption Value".
RELATED NOTE............an unsecured, unsubordinated debt obligation of Morgan
Guaranty, as described in the applicable Prospectus
Supplement.
SECURITIES..............the Common Securities and the Preferred Securities.
SECURITIES ACT..........the Securities Act of 1933, as amended.
SENIOR INDEBTEDNESS.....with respect to Morgan Guaranty, as specified in the
applicable Prospectus Supplement.
SPECIAL EVENT...........either a Tax Event or an Investment Company Event.
SPECIAL REDEMPTION......if specified in the applicable Prospectus Supplement,
upon the occurrence and during the continuation of a
Special Event, Morgan Guaranty will have the right to
redeem the applicable Related Note for cash at the
Related Note Redemption Price, with the result that the
Trust will redeem Preferred Securities and Common
Securities of the applicable series on a Pro Rata Basis
for cash at the Preferred Redemption Price.
SPECIAL REDEMPTION
DATE....................any date in respect of which upon the occurrence and
continuation of a Tax Event or an Investment Company
Event, Morgan Guaranty shall have called for redemption
in whole or in part the Related Notes, and the Trust
shall have called for redemption in whole or in part the
Preferred Securities and Common Securities of the
applicable series.
STATED MATURITY.........with respect to any series of Preferred Securities, as
set forth in the applicable Prospectus Supplement.
TAX COUNSEL.............Cravath, Swaine & Moore, special tax counsel to J.P.
Morgan and the Trust.
TAX EVENT...............the receipt by the Trust of an opinion of nationally
recognized independent tax counsel experienced in such
matters (a "Tax Opinion") to the effect
A-3
<PAGE> 104
that, as a result of (a) any amendment to, or change
(including any announced prospective change) in, the
laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority
thereof or therein, (b) any amendment to, or change in,
an interpretation or application of such laws or
regulations by any legislative body, court, governmental
agency or regulatory authority (including the enactment
of any legislation and the publication of any judicial
decision or regulatory determination), (c) any
interpretation or pronouncement that provides for a
position with respect to such laws or regulations that
differs from the theretofore generally accepted position
or (d) any action taken by any governmental agency or
regulatory authority, which amendment or change is
enacted, promulgated, issued or announced or which
interpretation or pronouncement is issued or announced
or which action is taken, in each case on or after the
date of this Prospectus Supplement, that there is more
than an insubstantial risk that at such time or within
90 days of the date thereof (i) the Trust is or would be
subject to United States Federal income tax with respect
to income accrued or received on any Related Note, (ii)
the interest payable on any Related Note is not or would
not be deductible by Morgan Guaranty for United States
Federal income tax purposes, (iii) the contingent
principal in excess of the Face Amount of any series of
Preferred Securities (if any) payable on any Related
Note is not or would not be deductible by Morgan
Guaranty for United States Federal income tax purposes
or (iv) the Trust is or would be subject to more than a
de minimis amount of other taxes, duties or other
governmental charges.
TRADING DAY.............any day on which open-outcry trading on either the NYMEX
or the LME is scheduled to occur or occurs.
TRUST...................J.P. Morgan Index Funding Company I.
TRUST INDENTURE ACT.....the Trust Indenture Act of 1939, as amended.
A-4
<PAGE> 105
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL 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 IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY J.P. MORGAN, THE TRUST OR THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF J.P. MORGAN, OR THE
TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary of the Offering........................ S-4
The Offering................................... S-5
Risk Factors................................... S-10
J.P. Morgan & Co. Incorporated................. S-19
J.P. Morgan Index Funding Company I............ S-19
Use of Proceeds................................ S-24
Description of the ComPS....................... S-25
Description of the Related Note................ S-34
Description of the Guarantee................... S-36
Description of the Related Note Guarantee...... S-38
Effect of Obligations Under the Guarantee, the
Related Note Guarantee and the Related
Note......................................... S-40
United States Federal Income Taxation.......... S-41
ERISA Considerations........................... S-44
Underwriting................................... S-46
Legal Matters.................................. S-47
Experts........................................ S-47
</TABLE>
ANNEX I
<TABLE>
<S> <C>
Glossary of Terms.............................. A-1
</TABLE>
PROSPECTUS
<TABLE>
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 2
J.P. Morgan & Co. Incorporated................. 3
J.P. Morgan Index Funding Company I............ 6
Use of Proceeds................................ 12
Consolidated Ratios of J.P. Morgan............. 12
Description of All Securities.................. 12
Description of the ComPS....................... 13
Risk Factors with Respect to All Preferred
Securities................................... 23
Risk Factors with Respect to ComPS............. 24
The Underlying Markets......................... 30
The JPM Indices................................ 34
Description of the Related Notes............... 41
Description of the Guarantee................... 42
Description of the Related Note Guarantee...... 44
Plan of Distribution........................... 46
Legal Matters.................................. 47
Experts........................................ 47
</TABLE>
ANNEX I
<TABLE>
<S> <C>
Glossary of Terms.............................. A-1
</TABLE>
======================================================
======================================================
SERIES [B]
COMMODITY-INDEXED
PREFERRED SECURITIES
INDEXED TO THE
JPMCI CRUDE OIL
TOTAL RETURN INDEX
J.P. MORGAN INDEX
FUNDING COMPANY I
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY
J.P. MORGAN & CO.
INCORPORATED
PROSPECTUS SUPPLEMENT
[ ]
, 1997
======================================================
<PAGE> 106
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.
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION, DATED OCTOBER [ ], 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER [ ], 1997)
COMMODITY-INDEXED PREFERRED SECURITIES (COMPS(SM)), SERIES [B]
J.P. MORGAN INDEX FUNDING COMPANY I
[2.5]% SERIES [B] PREFERRED SECURITIES
INDEXED TO THE JPMCI CRUDE OIL TOTAL RETURN INDEX
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
J.P. MORGAN & CO. INCORPORATED
------------------------
The [2.5]% Series [B] Preferred Securities (each, a "Series [B] Preferred
Security", and collectively, the "ComPS") offered hereby are being issued by
J.P. Morgan Index Funding Company I, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"). The ComPS represent undivided
beneficial preferred interests in certain assets of the Trust consisting of the
Related Note (as defined below) and the proceeds thereof. Each Series [B]
Preferred Security will have an initial principal amount of [$25] (the "Face
Amount"), and thereafter, the change in value of the principal amount per Series
[B] Preferred Security will be indexed to the change in value of the JPMCI Crude
Oil Total Return Index (the "Applicable Index"), which is calculated based on
the change in value of certain crude oil futures contracts included from time to
time in the JPM Indices (such contracts, from time to time, the "Benchmark Crude
Oil Contracts") plus a component of collateral yield computed on such
fluctuating index value at the most recent auction rate for 3-month U.S.
Treasury Bills or certain successor rates thereto (the "Collateral Yield
Component"), reduced by a factor designed to offset the costs of issuing and
hedging the indexation of the ComPS (the "Factor"). J.P. Morgan & Co.
Incorporated, a Delaware corporation ("J.P. Morgan"), will own all the common
securities (the "Series [B] Common Securities" and, together with the ComPS, the
Series [B] Securities) representing undivided beneficial interests in certain
assets of the Trust consisting of the Related Note and the proceeds thereof. The
Trust exists for the sole purpose of issuing the Series [B] Securities and
investing the proceeds thereof in a [2.5]% Related Note Due , [2000]
(the "Related Note") of Morgan Guaranty Trust Company of New York, a trust
company with full banking powers organized under the laws of the State of New
York and a wholly-owned subsidiary of J.P. Morgan ("Morgan Guaranty"), and
issuing similar preferred securities (the "Preferred Securities") and common
securities (the "Common Securities" and, together with the Preferred Securities,
the "Securities") of separate series and investing the proceeds thereof in
similar notes in the future.
SEE "RISK FACTORS" ON PAGE S-10 FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN THE COMPS. THE COMPS ARE NOT FUTURES CONTRACTS AND DO NOT
REPRESENT AN ACTUAL INVESTMENT IN FUTURES CONTRACTS. THE REDEMPTION VALUE (AS
DEFINED BELOW) OF THE COMPS IS DIRECTLY LINKED TO THE PERFORMANCE OF THE JPMCI
CRUDE OIL TOTAL RETURN INDEX, REDUCED BY THE FACTOR. AS A RESULT, THE REDEMPTION
VALUE PER SERIES [B] PREFERRED SECURITY MAY BE MORE OR LESS THAN THE FACE AMOUNT
AND MAY BE MORE OR LESS THAN THE RETURN FROM AN ACTUAL INVESTMENT IN THE
BENCHMARK CRUDE OIL CONTRACTS. SEE "DESCRIPTION OF THE COMPS".
"ComPS", "JPMCI" and the "J.P. Morgan Commodity Index" are service marks of J.P.
Morgan & Co. Incorporated.
The ComPS have been approved for listing on the American Stock Exchange (the
"Amex") under the symbol ["JPO"], subject to official notice of issuance.
Trading of the ComPS on the Amex is expected to commence within a 30-day period
after the date of this Prospectus Supplement. See "Underwriting".
THE SERIES [B] SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
FEDERAL AGENCY.
THESE SERIES [B] 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 TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price $[25] per Series [B] Preferred Security plus accrued dividends, if any.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSIONS(2) THE TRUST(3)(4)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Series [B] Preferred Security.......... $ (3) $
- ----------------------------------------------------------------------------------------------------------------
Total...................................... $ (3) $
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued dividends, if any, from the Issue Date (as defined herein).
(2) The Trust and J.P. Morgan have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. See "Underwriting".
(3) Because the proceeds of the sale of the ComPS will be invested in the
Related Note, Morgan Guaranty has agreed to pay to the Underwriters a
commission of $ per Series [B] Preferred Security (or $ in the
aggregate). See "Underwriting".
(4) Expenses of the offering which are payable by the Trust and J.P. Morgan are
estimated to be $ .
------------------------
The ComPS offered hereby are offered by the Underwriters, as specified herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that delivery of the ComPS will be
made on or about , 1997, through the book-entry facilities of The
Depository Trust Company, against payment therefor in same-day funds.
J.P. MORGAN SECURITIES LTD.
[ ], 1997.
<PAGE> 107
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
Due to the complexity of these rules and the penalties that may be imposed upon
persons involved in nonexempt prohibited transactions, it is particularly
important that fiduciaries or other persons considering purchasing the ComPS on
behalf of or with "plan assets" of any Plan consult with their counsel regarding
the potential consequences if the assets of the Trust were deemed to be "plan
assets" and the availability of exemptive relief from the prohibited transaction
provisions of ERISA and the Code.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement dated
the date hereof (the "Underwriting Agreement"), the Trust has agreed to sell to
the underwriters named below (the "Underwriters") and the Underwriters have
agreed to purchase, the respective number of ComPS set forth opposite their
names below. In the Underwriting Agreement, the Underwriter has agreed, subject
to the terms and conditions set forth therein, to purchase all the ComPS offered
hereby if any of the ComPS are purchased. Under certain circumstances, the
commitments of nondefaulting Underwriters may be increased as set forth in the
Underwriting Agreement. [J.P. Morgan Securities Ltd. is acting as a securities
dealer and will not purchase any ComPS directly from the Trust.]
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF COMPS
---------------
<S> <C>
J.P. Morgan Securities Inc. .............................. [ ]
[ ]............................. [ ]
[ ]............................. [ ]
[ ]............................. [ ]
[ ]............................. [ ]
---------------
Total........................................... [ ]
</TABLE>
The Underwriters initially propose to offer the ComPS, in part, directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus Supplement, and, in part, to certain securities dealers at such price
less a concession of $ per Series [B] Preferred Security. [The Underwriters
may allow, and such dealers may reallow, a concession not in excess of $ per
Series [B] Preferred Security to certain brokers and dealers.] After the initial
offering, the public offering price and such concessions may be changed.
In view of the fact that the proceeds of the sale of the ComPS will ultimately
be used to purchase the Related Note of Morgan Guaranty, the Underwriting
Agreement provides that Morgan Guaranty will pay as compensation ("Underwriters'
Compensation") to the Underwriters $ per Series [B] Preferred Security (or
$ in the aggregate) for the account of the Underwriters.
The ComPS have been approved for listing on the Amex under the symbol ["JPO"],
subject to official notice of issuance. Trading of the ComPS on the Amex is
expected to commence within a 30-day period after the date of this Prospectus
Supplement. Prior to this offering, there has been no market for the ComPS.
The Trust and J.P. Morgan have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
This Prospectus Supplement and related 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 ComPS. 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 Underwriters, certain 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.
S-46
<PAGE> 108
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of securities
being registered, other than underwriting compensation and related hedging
costs, are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............................. $ 241,379
Legal Fees and Expenses......................................................... 250,000*
American Stock Exchange Listing Fees............................................ 50,000*
Accounting Fees and Expenses.................................................... 25,000*
Trustee's Fees and Expenses (including counsel fees)............................ 31,500*
Rating Agency Fees.............................................................. 400,000*
Printing and Engraving Fees..................................................... 50,000*
Miscellaneous................................................................... 25,000
----------
Total................................................................. $1,072,879*
==========
</TABLE>
- ---------------
* Estimated
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Article Seventh of the Restated Certificate of Incorporation of J.P. Morgan &
Co. Incorporated (the "Registrant") provides, in effect, that, to the extent and
under the circumstances permitted by Section 145 of the General Corporation Law
of Delaware, the Registrant shall indemnify directors, officers, employees and
agents of the Registrant, or persons serving at the written request of the
Registrant as directors, officers, employees or agents of another corporation or
enterprise, including Morgan Guaranty, against loss and expenses.
Subsection (a) of Section 145 of the General Corporation Law of Delaware
empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person acted in any of the
capacities set forth above, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have
II-1
<PAGE> 109
been adjudged to be liable to the corporation unless and only to the extent that
the Delaware Court of Chancery or the court in which such action or suit was
brought shall determine that despite the adjudication of liability such person
is fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Section 145 further provides that to the extent a director, officer, employee or
agent of a corporation has been successful in the defense of any action, suit or
proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith. It also provides that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled under any by-law, agreement, vote of
shareholders or disinterested directors or otherwise, and it empowers the
corporation to purchase and maintain insurance in such amounts as the Board of
Directors deems appropriate on behalf of a director, officer, employee or agent
of the corporation against any liability asserted against him or incurred by him
in any such capacity or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such liabilities under
Section 145.
The indemnification permitted by Article Seventh of the Restated Certificate of
Incorporation of the Registrant has been extended to all officers and directors
of the Registrant's wholly owned direct and indirect subsidiaries, and to such
officers and directors in their respective capacities as directors and officers
of other corporations 25% or more of the voting securities of which is owned,
directly or indirectly, by the Registrant. The Registrant has purchased
liability insurance of the type referred to in Section 145. Subject to a
$250,000 deductible for each loss, the policy covers the Registrant with respect
to its obligation to indemnify directors and officers of the Registrant and its
wholly owned direct and indirect subsidiaries. In addition, the policy covers
directors and officers of the Registrant and its wholly owned direct and
indirect subsidiaries with respect to certain liabilities which are not
reimbursable by the Registrant. Subject to certain exclusions from the coverage,
the insurance provides for payment of loss in excess of the applicable
deductible to an aggregate limit of $90,000,000 for the three-year policy term.
Insurance coverage does not extend to certain claims, including claims based
upon or attributable to the insured's gaining personal profit or advantage in
which he is not legally entitled, claims brought about or contributed to by the
dishonesty of the insured, and claims under Section 16(b) of the Securities
Exchange Act of 1934 for an accounting of profits resulting from the purchase or
sale by the insured of the Registrant's securities. In addition, the Registrant
has purchased catastrophic loss insurance which provides, among other things,
excess insurance coverage over the $90,000,000 officer and director policy.
Subject to certain exclusions from the coverage, the insurance provides for
payment of loss, in the case of the officer and director excess coverage, to an
aggregate limit of $400,000,000 for the three-year policy term.
II-2
<PAGE> 110
ITEM 16. EXHIBITS.
<TABLE>
<C> <C> <S>
1(a)(1) -- Form of Underwriting Agreement for Preferred Securities
3(a)(1) -- Certificate of Trust of J.P. Morgan Index Funding Company I
3(a)(2) -- Restated Certificate of Trust of J.P. Morgan Index Funding Company I
3(b)(1) -- Declaration of Trust of J.P. Morgan Index Funding Company I
3(b)(2) -- Amended and Restated Declaration of Trust of J.P. Morgan Index Funding Company
I
3(c) -- Restated Certificate of Incorporation of J.P. Morgan & Co. Incorporated, as
amended*
3(d) -- By-Laws of J.P. Morgan & Co. Incorporated as amended through December 11,
1991*
4(a)(1) -- Form of Certificate for Securities for Preferred Securities (included in
Exhibit 3(b)(2))
4(b)(1) -- Form of Amended and Restated Guarantee Agreement with respect to Preferred
Securities issued by the Predecessor of J.P. Morgan Index Funding Company I
4(b)(2) -- Form of Guarantee Agreement with respect to Preferred Securities issued by
J.P. Morgan Index Funding Company I
4(c) -- Form of Related Note Guarantee Agreement
4(d) -- Form of Related Note
4(e)(1) -- Declaration of Trust of J.P. Morgan Index Funding Company I (included in
Exhibit 3(b)(1))
4(e)(2) -- Amended and Restated Declaration of Trust of J.P. Morgan Index Funding Company
I (included in Exhibit 3(b)(2))
4(f) -- Form of License Agreement between Morgan Guaranty and J.P. Morgan Index
Funding Company, LLC*
4(g) -- Form of Certificate for Securities for Preferred Securities (included in
Exhibit 3(b)(2))
5(a) -- Opinion of Gene A. Capello
5(b) -- Opinion of Morris, Nichols, Arsht & Tunnell, Delaware counsel
5(c) -- Opinion of Cravath, Swaine & Moore
12 -- Computation of Consolidated Ratio of Earnings to Fixed Charges and
Consolidated Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends (incorporated by reference to J.P. Morgan's Annual Report on Form
10-K for the year ended December 31, 1996 and J.P. Morgan's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997 and J.P. Morgan's Current
Report on Form 8-K dated October 13, 1997)
23(a) -- Consent of Price Waterhouse LLP
23(b) -- Consent of Gene A. Capello (included in Exhibit 5(a))
23(c) -- Consent of Morris, Nichols, Arsht & Tunnell (included in Exhibit 5(b))
23(d) -- Consent of Cravath, Swaine & Moore (included in Exhibit 5(c))
24 -- Powers of Attorney
25 -- Statement of Eligibility of Property Trustee on Form T-1
</TABLE>
- ---------------
* Previously filed.
ITEM 17. UNDERTAKING.
The Registrants hereby undertake that, for purposes of determining any liability
under the Securities Act of 1933, as amended (the "Securities Act"), each filing
of J.P. Morgan's Annual Report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (and where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
Registration Statement shall be deemed to be
II-3
<PAGE> 111
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) that, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) to include any material information with respect to the Plan of
Distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that the undertakings set forth in paragraphs (i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by J.P. Morgan pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE> 112
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT TO
ITS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK, ON
THIS 20TH DAY OF OCTOBER, 1997.
J.P. MORGAN & CO. INCORPORATED
By
------------------------------------------------------------------------------
(GENE A. CAPELLO, VICE PRESIDENT AND ASSISTANT GENERAL COUNSEL)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------- ---------------------
<C> <S> <C>
/s/ DOUGLAS A WARNER III* Chairman of the Board, October 20, 1997
- ------------------------------------------ President and Director,
(DOUGLAS A. WARNER III) (Principal Executive
Officer)
/s/ PAUL A. ALLAIRE* Director October 20, 1997
- ------------------------------------------
(PAUL A. ALLAIRE)
/s/ RILEY P. BECHTEL* Director October 20, 1997
- ------------------------------------------
(RILEY P. BECHTEL)
/s/ MARTIN FELDSTEIN* Director October 20, 1997
- ------------------------------------------
(MARTIN FELDSTEIN)
/s/ ELLEN V. FUTTER* Director October 20, 1997
- ------------------------------------------
(ELLEN V. FUTTER)
/s/ HANNA H. GRAY* Director October 20, 1997
- ------------------------------------------
(HANNA H. GRAY)
/s/ JAMES R. HOUGHTON* Director October 20, 1997
- ------------------------------------------
(JAMES R. HOUGHTON)
/s/ JAMES L. KETELSEN* Director October 20, 1997
- ------------------------------------------
(JAMES L. KETELSEN)
</TABLE>
<PAGE> 113
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------- ---------------------
<C> <S> <C>
/s/ JOHN A. KROL* Director October 20, 1997
- ------------------------------------------
(JOHN A. KROL)
/s/ ROBERTO G. MENDOZA* Vice Chairman of the Board October 20, 1997
- ------------------------------------------ and Director
(ROBERTO G. MENDOZA)
/s/ MICHAEL E. PATTERSON* Vice Chairman of the Board October 20, 1997
- ------------------------------------------ and Director
(MICHAEL E. PATTERSON)
/s/ LEE R. RAYMOND* Director October 20, 1997
- ------------------------------------------
(LEE R. RAYMOND)
/s/ RICHARD D. SIMMONS* Director October 20, 1997
- ------------------------------------------
(RICHARD D. SIMMONS)
/s/ KURT F. VIERMETZ* Vice Chairman of the Board October 20, 1997
- ------------------------------------------ and Director
(KURT F. VIERMETZ)
/s/ DENNIS WEATHERSTONE* Retired Chairman of the October 20, 1997
- ------------------------------------------ Board and Director
(DENNIS WEATHERSTONE)
/s/ DOUGLAS C. YEARLY* Director October 20, 1997
- ------------------------------------------
(DOUGLAS C. YEARLY)
/s/ JOHN A. MAYER* Chief Financial Officer October 20, 1997
- ------------------------------------------ (Principal Financial
(JOHN A. MAYER) Officer)
/s/ DAVID H. SIDWELL* Managing Director and October 20, 1997
- ------------------------------------------ Controller (Principal
(DAVID H. SIDWELL) Accounting Officer)
*By: /s/ GENE A. CAPELLO
- ------------------------------------------
(GENE A. CAPELLO, ATTORNEY-IN-FACT)
</TABLE>
<PAGE> 114
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, J.P.
MORGAN INDEX FUNDING COMPANY I CERTIFIES THAT IT HAS REASONABLE GROUNDS TO
BELIEVE THAT IT MEETS ALL THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY
CAUSED THIS AMENDMENT TO ITS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE
OF NEW YORK, ON THIS 20TH DAY OF OCTOBER, 1997.
J.P. MORGAN INDEX FUNDING COMPANY I,
By J.P. MORGAN & CO. INCORPORATED, as Sponsor
By
------------------------------------------------------------------------------
(GENE A. CAPELLO, VICE PRESIDENT AND ASSISTANT GENERAL COUNSEL)
<PAGE> 115
EXHIBIT INDEX.
<TABLE>
<C> <C> <S>
1(a)(1) -- Form of Underwriting Agreement for Preferred Securities
3(a)(1) -- Certificate of Trust of J.P. Morgan Index Funding Company I
3(a)(2) -- Restated Certificate of Trust of J.P. Morgan Index Funding Company I
3(b)(1) -- Declaration of Trust of J.P. Morgan Index Funding Company I
3(b)(2) -- Amended and Restated Declaration of Trust of J.P. Morgan Index Funding Company
I
3(c) -- Restated Certificate of Incorporation of J.P. Morgan & Co. Incorporated, as
amended*
3(d) -- By-Laws of J.P. Morgan & Co. Incorporated as amended through December 11,
1991*
4(a)(1) -- Form of Certificate for Securities for Preferred Securities (included in
Exhibit 3(b)(2))
4(b)(1) -- Form of Amended and Restated Guarantee Agreement with respect to Preferred
Securities issued by the Predecessor of J.P. Morgan Index Funding Company I
4(b)(2) -- Form of Guarantee Agreement with respect to Preferred Securities issued by
J.P. Morgan Index Funding Company I
4(c) -- Form of Related Note Guarantee Agreement
4(d) -- Form of Related Note
4(e)(1) -- Declaration of Trust of J.P. Morgan Index Funding Company I (included in
Exhibit 3(b)(1))
4(e)(2) -- Amended and Restated Declaration of Trust of J.P. Morgan Index Funding Company
I (included in Exhibit 3(b)(2))
4(f) -- Form of License Agreement between Morgan Guaranty and J.P. Morgan Index
Funding Company, LLC*
4(g) -- Form of Certificate for Securities for Preferred Securities (included in
Exhibit 3(b)(2))
5(a) -- Opinion of Gene A. Capello
5(b) -- Opinion of Morris, Nichols, Arsht & Tunnell, Delaware counsel
5(c) -- Opinion of Cravath, Swaine & Moore
12 -- Computation of Consolidated Ratio of Earnings to Fixed Charges and
Consolidated Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends (incorporated by reference to J.P. Morgan's Annual Report on Form
10-K for the year ended December 31, 1996 and J.P. Morgan's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997) and J.P. Morgan's Current
Report on Form 8-K dated October 13, 1997
23(a) -- Consent of Price Waterhouse LLP
23(b) -- Consent of Gene A. Capello (included in Exhibit 5(a))
23(c) -- Consent of Morris, Nichols, Arsht & Tunnell (included in Exhibit 5(b))
23(d) -- Consent of Cravath, Swaine & Moore (included in Exhibit 5(c))
24 -- Powers of Attorney
25 -- Statement of Eligibility of Property Trustee on Form T-1
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 1(a)(1)
J.P. MORGAN INDEX FUNDING COMPANY I
$[ ]
Commodity-Indexed Preferred Securities (ComPS), Series [ ] fully
and unconditionally guaranteed, as described herein,
by
J.P. MORGAN & CO. INCORPORATED
UNDERWRITING AGREEMENT
New York, New York
[ ], 199[ ]
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
J.P. Morgan Index Funding Company I, a Delaware statutory
business trust (the "Trust"), and J.P. Morgan & Co. Incorporated, a Delaware
corporation (the "Company"), as sponsor of the Trust and as guarantor, propose
to issue and sell to the underwriters named in Schedule I (the "Underwriters"),
for whom you (the "Representative") are acting as representative, [ ] of
its Commodity-Indexed Preferred Securities (ComPS), Series [ ] (the "Preferred
Securities" and, together with the Guarantee (as defined) and the Related Note
Guarantee (as defined), the "Securities"). The Preferred Securities will
represent undivided beneficial ownership interests in the assets of the Trust
consisting of the Related Note (as defined below) and the proceeds thereof, will
be guaranteed by the Company as to the payment of distributions, and as to
payments on liquidation or redemption, to the extent set forth in a guarantee
agreement (the "Guarantee") dated as of [ ], 199[ ] between the
Company and First Trust of New York, National Association, as trustee (the
"Guarantee Trustee"). The Securities are to be issued pursuant to the Amended
and Restated Declaration of Trust (the "Declaration") dated as of October 10,
1997. The proceeds of the sale by the Trust of the Securities and its related
Common Securities, Series [ ] (the "Common
<PAGE> 2
2
Securities"), are to be loaned to Morgan Guaranty Trust Company of New York
("Morgan Guaranty"), such loan to be evidenced by a note (the "Related Note") to
be issued by Morgan Guaranty to the Trust having an aggregate principal amount
equal to the aggregate initial public offering price of the Securities and the
Common Securities. Payments of accrued and unpaid distributions that are
required to be paid by Morgan Guaranty under the Related Note and principal
payable by Morgan Guaranty under the Related Note will be guaranteed by J.P.
Morgan to the extent set forth in a related note guarantee agreement (the
"Related Note Guarantee") dated as of [ ], 199[ ] by J.P. Morgan in
favor of the Trust, as holder of the Related Note.
1. Representations and Warranties. Each of the Trust and the
Company represents and warrants to the Underwriters as set forth below in this
Section 1.
(a) If the offering of the Securities is a Delayed Offering (as
specified in Schedule I hereto), paragraph (i) below is applicable and,
if the offering of the Securities is a Non-Delayed Offering (as so
specified), paragraph (ii) below is applicable.
(i) The Company and the Trust have complied with the
requirements for the use of Form S-3 under the Securities Act of
1933 (the "Act") and have filed with the Securities and Exchange
Commission (the "Commission") a registration statement (file
numbers 333-01121 and 333-01121-01) on such Form, including a
basic prospectus, for registration under the Act of the offering
and sale of the Securities. The Company and the Trust may have
filed one or more amendments thereto, and may have used a
Preliminary Final Prospectus, each of which has previously been
furnished to you. Such registration statement, as so amended, has
become effective. The offering of the Securities is a Delayed
Offering and, although the Basic Prospectus may not include all
the information with respect to the Securities and the offering
thereof required by the Act and the rules thereunder to be
included in the Final Prospectus, the Basic Prospectus includes
all such information required by the Act and the rules thereunder
to be included therein as of the Effective Date. The Company and
the Trust will next file with the Commission pursuant to Rules
415 and 424(b)(2) or
<PAGE> 3
3
(5) a final supplement to the form of prospectus included in such
registration statement relating to the Securities and the
offering thereof. As filed, such final prospectus supplement
shall include all required information with respect to the
Securities and the offering thereof and, except to the extent the
Representative shall agree in writing to a modification, shall be
in all substantive respects in the form furnished to you prior to
the Execution Time or, to the extent not completed at the
Execution Time, shall contain only such specific additional
information and other changes (beyond that contained in the Basic
Prospectus and any Preliminary Final Prospectus) as the Company
has advised you, prior to the Execution Time, will be included or
made therein.
(ii) The Company and the Trust have complied with the
requirements for the use of Form S-3 under the Act and have filed
with the Commission a registration statement (file number
333-01121 and 333-01121-01) on such Form, including a basic
prospectus, for registration under the Act of the offering and
sale of the Securities. The Company and the Trust may have filed
one or more amendments thereto, including a Preliminary Final
Prospectus, each of which has previously been furnished to you.
The Company and the Trust will next file with the Commission
either (x) a final prospectus supplement relating to the
Securities in accordance with Rules 430A and 424(b)(1) or (4), or
(y) prior to the effectiveness of such registration statement, an
amendment to such registration statement, including the form of
final prospectus supplement. In the case of clause (x), the
Company has included in such registration statement, as amended
at the Effective Date, all information (other than Rule 430A
Information) required by the Act and the rules thereunder to be
included in the Final Prospectus with respect to the Securities
and the offering thereof. As filed, such final prospectus supple-
ment or such amendment and form of final prospectus supplement
shall contain all Rule 430A Information, together with all other
such required information, with respect to the Securities and the
offering thereof.
<PAGE> 4
4
(b) On the Effective Date, the Registration Statement did or
will, and when the Final Prospectus is first filed (if required) in
accordance with Rule 424(b) and on the Closing Date, the Final Pro-
spectus (and any supplement thereto) will, comply in all material
respects with the applicable requirements of the Act, the Securities
Exchange Act of 1934 (the "Exchange Act") with respect to the documents
incorporated by reference and the Trust Indenture Act of 1939 (the
"Trust Indenture Act") and the respective rules thereunder; on the
Effective Date, the Registration Statement did not or will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading; on the Effective Date and on the
Closing Date the Indenture did or will comply in all material respects
with the requirements of the Trust Indenture Act and the rules
thereunder; and, on the Effective Date, the Final Prospectus, if not
filed pursuant to Rule 424(b), did not or will not, and on the date of
any filing pursuant to Rule 424(b) and on the Closing Date, the Final
Prospectus (together with any supplement thereto) will not, include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that neither the Company nor the Trust makes any
representations or warranties as to (i) that part of the Registration
Statement which shall constitute the Statement of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of the Trustee or
(ii) the information contained in or omitted from the Registration
Statement or the Final Prospectus (or any supplement thereto) in
reliance upon and in conformity with information furnished in writing to
the Company by or on behalf of any Underwriter through the Representa-
tive specifically for inclusion in the Registration Statement or the
Final Prospectus (or any supplement thereto).
(c) The terms which follow, when used in this Agreement, shall
have the meanings indicated. The term "the Effective Date" shall mean
each date that the Registration Statement and any post-effective
amendment or amendments thereto became or become effective and
<PAGE> 5
5
each date after the date hereof on which a document incorporated by
reference in the Registration Statement is filed. "Execution Time" shall
mean the date and time that this Agreement is executed and delivered by
the parties hereto. "Basic Prospectus" shall mean the prospectus
referred to in paragraph (a) above contained in the Registration
Statement at the Effective Date including, in the case of a Non-Delayed
Offering, any Preliminary Final Prospectus. "Preliminary Final
Prospectus" shall mean any preliminary prospectus supplement to the
Basic Prospectus which describes the Securities and the offering thereof
and is used prior to filing of the Final Prospectus. "Final Prospectus"
shall mean the prospectus supplement relating to the Securities that is
first filed pursuant to Rule 424(b) after the Execution Time, together
with the Basic Prospectus or, if, in the case of a Non-Delayed Offering,
no filing pursuant to Rule 424(b) is required, shall mean the form of
final prospectus relating to the Securities, including the Basic
Prospectus, included in the Registration Statement at the Effective
Date. "Registration Statement" shall mean the registration statement
referred to in paragraph (a) above, including incorporated documents,
exhibits and financial statements, as amended at the Execution Time (or,
if not effective at the Execution Time, in the form in which it shall
become effective) and, in the event any post-effective amendment thereto
becomes effective prior to the Closing Date (as hereinafter defined),
shall also mean such registration statement as so amended. Such term
shall include any Rule 430A Information deemed to be included therein at
the Effective Date as provided by Rule 430A. "Rule 415", "Rule 424",
"Rule 430A" and "Regulation S-K" refer to such rules or regulation under
the Act. "Rule 430A Information" means information with respect to the
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
Any reference herein to the Registration Statement, the Basic
Prospectus, any Preliminary Final Prospectus or the Final Prospectus
shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 which were filed under
the Exchange Act on or before the Effective Date of the Registration
Statement or the issue date of the Basic Prospectus, any Preliminary
Final Prospectus or the Final Prospectus, as the case may be; and any
reference
<PAGE> 6
6
herein to the terms "amend", "amendment" or "supplement" with respect to
the Registration Statement, the Basic Prospectus, any Preliminary Final
Prospectus or the Final Prospectus shall be deemed to refer to and
include the filing of any document under the Exchange Act after the
Effective Date of the Registration Statement or the issue date of the
Basic Prospectus, any Preliminary Final Prospectus or the Final
Prospectus, as the case may be, deemed to be incorporated therein by
reference. A "Non-Delayed Offering" shall mean an offering of securities
which is intended to commence promptly after the effective date of a
registration statement, with the result that, pursuant to Rules 415 and
430A, all information (other than Rule 430A Information) with respect to
the securities so offered must be included in such registration
statement at the effective date thereof. A "Delayed Offering" shall mean
an offering of securities pursuant to Rule 415 which does not commence
promptly after the effective date of a registration statement, with the
result that only information required pursuant to Rule 415 need be
included in such registration statement at the effective date thereof
with respect to the securities so offered. Whether the offering of the
Securities is a Non-Delayed Offering or a Delayed Offering shall be set
forth in Schedule I hereto.
2. Purchase and Sale. (a) Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, the Trust
and the Company agree that the Trust will sell to each Underwriter, and each
Underwriter agrees to purchase from the Trust, at a purchase price of $[ ]
per Security, plus accrued distributions, if any, from [ ], 199[ ] to
the Closing Date, the number of Securities set forth opposite such Underwriter's
name in Schedule I hereto.
As compensation for the commitments of the Underwriters contained
in this Section 2, Morgan Guaranty hereby agrees to pay to the Underwriters an
amount equal to $[ ] per Security times the total number of Securities
purchased by the Underwriters on the Closing Date as commissions for the sale of
such Securities under this Agreement. Such payment will be made on the Closing
Date with respect to the Securities.
3. Delivery and Payment. Delivery of and payment for the
Securities shall be made at [ ] AM, New York City
<PAGE> 7
7
time, on [ ], 199[ ], or such later date (not later than [ ],
199[ ]) as the Representative shall designate, which date and time may be
postponed by agreement among the Representative, the Trust and the Company (such
date and time of delivery and payment for the Securities being herein called the
"Closing Date"). Delivery of the Securities shall be made to the Representative
against payment by the Representative of the purchase price thereof to or upon
the order of the Trust by wire transfer drawn and payable in same day funds or
such other manner of payment as may be agreed by the Company, the Trust and the
Representative. Delivery of the Securities shall be made at such location as the
Representative shall reasonably designate at least one business day in advance
of the Closing Date and payment for the Securities shall be made at the office
of the Company, 60 Wall Street, New York, New York. Certificates for the
Securities shall be registered in such names and in such denominations as the
Representative may request not less than three full business days in advance of
the Closing Date.
The Company agrees to have the Securities available for
inspection, checking and packaging by the Representative in New York, New York,
not later than 1:00 PM on the business day prior to the Closing Date.
4. Agreements. Each of the Trust and the Company agrees with the
several Underwriters that:
<PAGE> 8
8
(a) The Company and the Trust will use their best efforts to
cause the Registration Statement, if not effective at the Execution
Time, and any amendment thereto, to become effective. Prior to the
termination of the offering of the Securities, neither the Company nor
the Trust will file any amendment of the Registration Statement or
supplement (including the Final Prospectus or any Preliminary Final
Prospectus) to the Basic Prospectus unless the Company has furnished you
a copy for your review and given a reasonable opportunity to comment on
any such proposed amendment or supplement. Subject to the foregoing
sentence, the Company and the Trust will cause the Final Prospectus,
properly completed, and any supplement thereto to be filed with the
Commission pursuant to the applicable paragraph of Rule 424(b) within
the time period prescribed and will provide evidence satisfactory to the
Representative of such timely filing. The Company will promptly advise
the Representative (i) when the Registration Statement, if not
effective at the Execution Time, and any amendment thereto, shall have
become effective, (ii) when the Final Prospectus, and any supplement
thereto, shall have been filed with the Commission pursuant to Rule
424(b), (iii) when, prior to termination of the offering of the
Securities, any amendment to the Registration Statement shall have been
filed or become effective, (iv) of any request by the Commission for any
amendment of the Registration Statement or supplement to the Final
Prospectus or for any additional information, (v) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any
proceeding for that purpose and (vi) of the receipt by the Company or
the Trust of any notification with respect to the suspension of the
qualification of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. The
Company or the Trust will use their best efforts to prevent the issuance
of any such stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b) If, at any time when a prospectus relating to the Securities
is required to be delivered under the Act, any event occurs as a result
of which the Final Prospectus as then supplemented would include any
untrue statement of a material fact or omit to state
<PAGE> 9
9
any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or if
it shall be necessary to amend the Registration Statement or supplement
the Final Prospectus to comply with the Act or the Exchange Act or the
respective rules thereunder, the Company and the Trust promptly will (i)
prepare and file with the Commission, subject to the second sentence of
paragraph (a) of this Section 4, an amendment or supplement which will
correct such statement or omission or effect such compliance and (ii)
supply any supplemented Prospectus to you in such quantities as you may
reasonably request.
(c) As soon as practicable, the Company will make generally
available to its security holders and to the Representative an earnings
statement or statements of the Company and its subsidiaries which will
satisfy the provisions of Section 11(a) of the Act and Rule 158 under
the Act.
(d) The Company will furnish to the Representative and counsel
for the Underwriters, without charge, copies of the Registration
Statement (including exhibits thereto) and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Act, as
many copies of any Preliminary Final Prospectus and the Final Prospectus
and any supplement thereto as the Representative may reasonably request.
The Company will pay the expenses of printing or other production of all
documents relating to the offering.
(e) The Company will arrange for the qualification of the
Securities for sale under the laws of such jurisdictions as the
Representative may designate, will maintain such qualifications in
effect so long as required for the distribution of the Securities
(provided that the Company shall not be required in connection therewith
to qualify as a foreign corporation or to execute a general consent to
service of process in any state) and will arrange for the determination
of the legality of the Securities for purchase by institutional
investors.
<PAGE> 10
10
5. Conditions to the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Underwriters' Securities shall
be subject to the accuracy of the representations and warranties on the part of
the Company and the Trust contained herein as of the Execution Time and the
Closing Date, to the accuracy of the statements of the Company and the Trust
made in any certificates pursuant to the provisions hereof, to the performance
by the Company and the Trust of their obligations hereunder and to the following
additional conditions:
(a) If the Registration Statement has not become effective prior
to the Execution Time, unless the Representative agree in writing to a
later time, the Registration Statement will become effective not later
than (i) 6:00 PM New York City time, on the date of determination of the
public offering price, if such determination occurred at or prior to
3:00 PM New York City time on such date or (ii) 12:00 Noon on the
business day following the day on which the public offering price was
determined, if such determination occurred after 3:00 PM New York City
time on such date; if filing of the Final Prospectus, or any supplement
thereto, is required pursuant to Rule 424(b), the Final Prospectus, and
any such supplement, shall have been filed in the manner and within the
time period required by Rule 424(b); and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceedings for that purpose shall have been instituted or
threatened.
(b) The Trust and the Company shall have furnished to the
Underwriters the opinion of Gene A. Capello, Esq., Vice President and
Assistant General Counsel of the Company, counsel to the Trust and the
Company, in form and scope satisfactory to the Representative.
(c) The Trust and the Company shall have furnished to the
Underwriters the opinion of Cravath, Swaine & Moore, special tax counsel
to the Trust and the Company, dated the Closing Date, to the effect that
the statements set forth under the heading "Certain United States
Federal Income Consequences" in the Prospectus, insofar as such
statements purport to summarize the United States federal income tax
consequences of the purchase, ownership and disposition
<PAGE> 11
11
of the Securities, provide a fair summary of such consequences.
(d) First Trust of New York, National Association shall have
furnished to the Underwriters the opinion of their counsel, dated the
Closing Date, to the effect that:
(i) First Trust of New York, National Association has been
duly incorporated and is validly existing as a National
Association;
(ii) each of the Declaration and the Guarantee has been
duly authorized, executed and delivered by the Property Trustee
and the Guarantee Trustee, respectively, and constitutes a legal,
valid and binding instrument enforceable against the Property
Trustee and the Guarantee Trustee in accordance with its
respective terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting creditors' rights generally from time to
time in effect);
(iii) no consent, approval, authorization or order of any
federal banking authority is required for the consummation of the
transactions contemplated by the Declaration or the Guarantee by
the Property Trustee or the Guarantee Trustee, respectively; and
(iv) neither the execution and delivery of the Declaration
or the Guarantee, the consummation of any other of the
transactions herein or therein contemplated nor the fulfillment
of the terms hereof or thereof will conflict with, result in a
breach or violation of, or constitute a default under any law or
the charter or by-laws of First Trust of New York, National
Association or the terms of any indenture or other agreement or
instrument known to such counsel and to which First Trust of New
York, National Association is a party or bound or any judgment,
order or decree known to such counsel to be applicable to First
Trust of New York, National Association of any court, regulatory
body, administrative agency, governmental body or arbitrator
having jurisdiction over First Trust of New York, National
Association.
<PAGE> 12
12
(e) Wilmington Trust Company shall have furnished to the
Underwriters the opinion of Morris, Nichols, Arsht & Tunnell, special
counsel to Wilmington Trust Company, dated the Closing Date, to the
effect that Wilmington Trust Company has been duly incorporated and is
validly existing as a banking corporation in good standing under the
laws of the State of Delaware; and has full corporate power and
authority to act as trustee of a statutory business trust under the laws
of the State of Delaware.
(f) The Underwriters shall have received from Cravath, Swaine &
Moore, special counsel to the Underwriters, such opinion or opinions,
dated the Closing Date, with respect to the issuance and sale of the
Securities, and other related matters as the Underwriters may reasonably
require, and the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon
such matters.
(g) Each of the Company and the Trust shall have furnished to the
Underwriters a certificate of the Company and the Trust, as applicable,
signed by an officer of the Company and the Trust, as applicable, dated
the Closing Date, to the effect that the signers of such certificate
have carefully examined the Prospectus, any amendment or supplement to
the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company and
the Trust, as applicable, in this Agreement are true and correct
in all material respects on and as of the Closing Date with the
same effect as if made on the Closing Date, and the Company and
the Trust, as applicable, has complied with all the agreements
and satisfied all the conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date; and
(ii) in the case of the certificate of the Company, since
the date of the most recent financial statements included in the
Prospectus, there has been no material adverse change in the
financial or business condition or earnings of the Company and
its subsidiaries, considered as a
<PAGE> 13
13
whole, whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated by
the Prospectus (exclusive of any amendment or supplement
thereto).
(h) At the Closing Date, Price Waterhouse LLP shall have
furnished to the Underwriters a letter or letters, dated as of the
Closing Date, in form and substance satisfactory to the Representative.
(i) Subsequent to the Execution Time or, if earlier, the dates as
of which information is given in the Prospectus, there shall not have
been any change, or any development involving a prospective change, in
or affecting the business or properties of the Company and its
subsidiaries the effect of which, is, in the judgment of the
Representative, so material and adverse as to make it impractical or
inadvisable to market the Securities as contemplated by the Prospectus.
(j) Prior to the Closing Date, the Trust and the Company shall
have furnished to the Underwriters such further information,
certificates and documents as the Underwriters may reasonably request.
If any of the conditions specified in this Section 5 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Representative and Cravath, Swaine &
Moore, counsel to the Underwriters, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time prior to, the Closing
Date by the Representative. Notice of such cancellation shall be given to the
Trust and the Company in writing or by telephone or telegraph confirmed in
writing.
The documents required to be delivered by this Section 5 will be
delivered at the offices of the Company, at 60 Wall Street, New York, New York,
on the Closing Date.
6. Reimbursement of Expenses. If the sale of the Securities
provided for herein is not consummated because any condition to the obligations
of the Underwriters set forth in Section 5 hereof is not satisfied, because of
any
<PAGE> 14
14
termination pursuant to Section 8 hereof or because of any refusal, inability or
failure on the part of the Company or the Trust to perform any agreement herein
or comply with any provision hereof other than by reason of a default by the
Underwriters in payment for the Securities on the Closing Date, the Company will
reimburse the Underwriters upon demand for all reasonable out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
incurred by it in connection with the proposed purchase and sale of the
Securities.
7. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls each Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including without limitation the legal
fees and other expenses incurred in connection with any suit, action or
proceeding or any claim asserted) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any amendment thereof or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any Underwriter
through the Representative expressly for use therein.
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company, its directors, its officers who sign the Registration
Statement and each person who controls the Company within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to each Underwriter, but only with
reference to information relating to each Underwriter furnished to the Company
in writing by such Underwriter expressly for use in the Registration Statement,
the Prospectus, any amendment or supplement thereto, or any preliminary
prospectus.
(c) If any suit, action, proceeding (including any governmental
or regulatory investigation), claim or demand shall be brought or asserted
against any person in
<PAGE> 15
15
respect of which indemnity may be sought pursuant to either of the two preceding
paragraphs, such person (the "Indemnified Person") shall promptly notify the
person against whom such indemnity may be sought (the "Indemnifying Person") in
writing, and the Indemnifying Person, upon request of the Indemnified Person,
shall retain counsel reasonably satisfactory to the Indemnified Person to
represent the Indemnified Person and any others the Indemnifying Person may
designate in such proceeding and shall pay the fees and expenses of such counsel
related to such proceeding. In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed to the
contrary, (ii) the Indemnifying Person has failed within a reasonable time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of more
than one separate firm (in addition to any local counsel) for all Indemnified
Persons. Any such separate firm for an Underwriter and such control persons of
an Underwriter shall be designated in writing by such Underwriter and any such
separate firm for the Company, its directors, its officers who sign the
Registration Statement and such control persons of the Company shall be
designated in writing by the Company. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment.
(d) If the indemnification provided for in paragraphs (a) or (b)
this Section 7 is unavailable to an Indemnified Person or insufficient in
respect of any losses, claims, damages or liabilities referred to herein, then
each Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the
<PAGE> 16
16
one hand and the Underwriters on the other from the offering of the Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Underwriters on the other in connection with
the statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
on the other in connection with the offering of such Securities shall be deemed
to be in the same respective proportion as the net proceeds from the offering of
such Securities (before deducting expenses) received by the Company and the
total discounts and commissions received by the Underwriters in respect thereof
bear to the aggregate offering price of such Securities. The relative fault of
the Company on the one hand and of the Underwriters on the other shall be
determined by reference to, among other things, whether the untrue or alleged
statement of a material fact or the omission or alleged untrue statement of a
material fact relates to information supplied by the Company on the one hand or
by the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this subsection (d) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to above in this subsection
(d). The amount paid or payable by an Indemnified Person as a result of the
losses, claims, damages and liabilities referred to above in this Section 7
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses incurred by such Indemnified Person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, in no event shall any Underwriter be required to
contribute any amount in excess of the amount by which the total price at which
the Securities referred to in Section 7(d) that were sold by or through such
Underwriter exceeds the amount of any damages that such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
<PAGE> 17
17
fraudulent misrepresentation. The obligation of each Underwriter to contribute
pursuant to this subsection 7(d) is several in proportion to the respective
principal amounts of the Securities purchased by each of the Underwriters and is
not joint.
8. Default by an Underwriter. If any one or more Underwriters
shall fail to purchase and pay for any of the Securities agreed to be purchased
by such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter or
the Company. In the event of a default by any Underwriter as set forth in this
Section 8, the Closing Date shall be postponed for such period, not exceeding
seven days, as the Representative shall determine in order that the required
changes in the Registration Statement and the Final Prospectus or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the
Company and any nondefaulting Underwriter for damages occasioned by its default
hereunder.
9. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Representative, by notice given to the Company,
prior to delivery of and payment for the Securities, if prior to such time (i)
trading in any of the Company's securities shall have been suspended by the
Commission or the New York Stock Exchange or trading in securities generally on
the New York Stock Exchange shall have been suspended or limited or minimum
prices shall have been established on the New York Stock Exchange, (ii) a
banking moratorium shall have been declared either by Federal or New York State
authorities or (iii) there shall have occurred any outbreak or escalation
<PAGE> 18
18
of hostilities involving the United States or the declaration by the United
States of a national emergency or war or crisis the effect of which on the
financial markets of the United States is such as to make it, in the reasonable
judgment of the Representative, impracticable to proceed with the offering or
delivery of the Securities, or in the reasonable judgment of the Company,
impracticable to issue such Securities as contemplated by the Prospectus.
10. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or the Trust or its officers or Trustees and of the Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or the Trust or any of the officers, directors, trustees or
controlling persons referred to in Section 7 hereof, and will survive delivery
of and payment for the Securities. The provisions of Sections 6 and 7 hereof
shall survive the termination or cancellation of this Agreement.
11. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representative, will be mailed,
delivered or telegraphed and confirmed to it, at 60 Wall Street, New York, New
York 10260; or, if sent to the Company or the Trust, will be mailed, delivered
or telegraphed and confirmed to them at 60 Wall Street, New York, New York
10260.
12. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and the
officers, directors, trustees and controlling persons referred to in Section 7
hereof, and no other person will have any right or obligation hereunder.
13. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
<PAGE> 19
19
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this Agreement and your acceptance shall represent a binding agreement between
the Trust, the Company and the Underwriters.
Very truly yours,
J.P. MORGAN INDEX FUNDING
COMPANY I, by the undersigned,
solely in [his/her] capacity
as Regular Trustee,
By:
---------------------------------
Name:
Title: Regular Trustee
By:
---------------------------------
Name:
Title: Regular Trustee
J.P. MORGAN & CO. INCORPORATED
By:
---------------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written:
By: J.P. Morgan Securities Inc.
By:
---------------------------------
Name:
Title:
For itself and the other several
Underwriters named in Schedule I
<PAGE> 20
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Securities
Underwriter to be Purchased
----------- ---------------
<S> <C>
J.P. Morgan Securities Inc. ........................ [ ]
----------------
Total ..................................... [ ]
</TABLE>
This is a Delayed Offering.
<PAGE> 1
EXHIBIT 3(a)(1)
CERTIFICATE OF TRUST OF
J.P. MORGAN INDEX FUNDING COMPANY I
This Certificate of Trust is being executed as of December 12,
1996 for the purpose of creating a business trust pursuant to the Delaware
Business Trust Act, 12 Del. C. Sections 3801 et seq. (the "Act").
The undersigned hereby certify as follows:
1. Name. The name of the business trust is "J.P. Morgan Index
Funding Company I" (the "Trust").
2. Delaware Trustee. The name and business address of the
Delaware resident trustee of the Trust meeting the requirements of Section 3807
of the Act are as follows:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
3. Effective Date. This Certificate of Trust shall be effective
immediately upon filing in the office of the Secretary of the State of the State
of Delaware.
4. Counterparts. This Certificate of Trust may be executed in one
or more counterparts.
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of
the Trust, have executed this Certificate of Trust as of the day and year first
above written.
WILMINGTON TRUST COMPANY, as
Delaware Trustee,
by
/s/ Emmet R. Harmon
----------------------------------
Name: Emmet R. Harmon
Title: Vice President
<PAGE> 2
/s/ H. Christian Raymond
----------------------------------
H. Christian Raymond
Trustee
/s/ Andrew G. Kerber
----------------------------------
Andrew G. Kerber
Trustee
/s/ Susan L. McCullin
----------------------------------
Susan L. McCullin
Trustee
<PAGE> 1
EXHIBIT 3(a)(2)
RESTATED CERTIFICATE OF TRUST
OF
J.P. MORGAN INDEX FUNDING COMPANY I
This Restated Certificate of Trust is being executed as of
September 25, 1997 for the purpose restating the certificate of trust of J.P.
Morgan Index Funding Company I (which certificate of trust was filed in the
office of the Secretary of State of the State of Delaware on December 12, 1996)
pursuant to Section 3810(c) of the Delaware Business Trust Act, 12 Del. Code
Section 3801 et seq.
(the "Act").
The undersigned hereby certify as follows:
1. Name. The name of the business trust is "J.P. Morgan Index
Funding Company I" (the "Trust").
2. Delaware Trustee. The name and business address of the
Delaware resident trustee of the Trust meeting the requirements of Section 3807
of the Act are as follows:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
3. Effective Date. This Restated Certificate of Trust shall be
effective as of its filing in the office of the Secretary of State of the State
of Delaware.
4. Notice of Limitation of Liabilities of Series. Notice is
hereby given that the Trust is a series trust. Pursuant to Section 3804(a) of
the Act, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to any particular series shall be
enforceable against the assets of, or associated with, such series only, and not
against the assets of the Trust generally or against the assets of, or
associated with, any other series.
<PAGE> 2
3
5. Counterparts. This Restated Certificate of Trust may be
executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned, being all the trustees of
the Trust, have executed this Restated Certificate of Trust as of the date first
above written.
WILMINGTON TRUST COMPANY, as
Delaware Trustee,
by /s/ Norma P. Close
-----------------------------------
Name: Norma P. Close
Title: Vice President
/s/ H. Christian Raymond
-----------------------------------
H. Christian Raymond
Trustee
/s/ Andrew G. Kerber
-----------------------------------
Andrew G. Kerber
Trustee
/s/ Susan L. McCullin
-----------------------------------
Susan L. McCullin
Trustee
<PAGE> 1
EXHIBIT 3(b)(1)
DECLARATION OF TRUST
DECLARATION OF TRUST, dated as of December 12, 1996, between J.P.
Morgan & Co. Incorporated, a Delaware corporation, as Sponsor, Wilmington Trust
Company, a Delaware banking corporation, as Delaware Trustee, and H. Christian
Raymond, Andrew G. Kerber and Susan L. McCullin, as Regular Trustees
(collectively with the Delaware Trustee, the "Trustees"). The Sponsor and the
Trustees hereby agree as follows:
1. The trust created hereby (the "Trust") shall be known as "J.P.
Morgan Index Funding Company I", in which name the Trustees, or the Sponsor to
the extent provided herein, may conduct the business of the Trust, make and
execute contracts, and sue and be sued.
2. The Sponsor hereby assigns, transfers, conveys and sets over to
the Trustees the sum of $10. The Trustees hereby acknowledge receipt of such
amount in trust from the Sponsor, which amount shall constitute the initial
trust estate. The Trustees hereby declare that they will hold the trust estate
in trust for the Sponsor. It is the intention of the parties hereto that the
Trust created hereby constitute a business trust under Chapter 38 of Title 12 of
the Delaware Code, 12 Del. C. Sections 3801 et seq. (the "Business Trust Act"),
and that this document constitute the governing instrument of the Trust. The
Trustees are hereby authorized and directed to execute and file a certificate of
trust in the office of the Secretary of State of the State of Delaware in the
form attached hereto. The Trust is hereby established by the Sponsor and the
Trustees for the purposes of (i) issuing preferred securities representing
undivided beneficial interests in the assets of the Trust ("Preferred
Securities") in exchange for cash and investing the proceeds thereof in debt
instruments of the Sponsor or a wholly-owned subsidiary thereof, (ii) issuing
and selling common securities representing undivided beneficial interests in the
assets of
- 1 -
<PAGE> 2
the Trust ("Common Securities" and, together with the Preferred Securities,
"Trust Securities") to the Sponsor in exchange for cash and investing the
proceeds thereof in such debt instruments, (iii) effectuating a merger of any
other entity with and into the Trust, with the Trust being the surviving
business trust, and (iv) engaging in such other activities as are necessary,
convenient or incidental thereto.
3. Concurrent with the first issuance of any Trust Securities by the
Trust, the Sponsor and the Trustees intend to enter into an amended and restated
Declaration of Trust, satisfactory to each such party and substantially in the
form included as an exhibit to the 1933 Act Registration Statement referred to
below at the time such registration statement becomes effective under the
Securities Act of 1933, as amended (the "Securities Act"), to provide for the
contemplated operation of the Trust created hereby and the issuance of the
Preferred Securities and the Common Securities referred to therein. Prior to the
execution and delivery of such amended and restated Declaration of Trust, the
Trustees shall not have any duty or obligation hereunder or with respect to the
trust estate, except as otherwise required by applicable law or as may be
necessary to obtain, prior to such execution and delivery, any licenses,
consents or approvals required by applicable law or otherwise.
4. The Sponsor and the Trustees hereby authorize and direct the
Sponsor, as the sponsor of the Trust, to (i) prepare and file with the
Securities and Exchange Commission (the "Commission") and execute, in each case
on behalf of the Trust, an application for an exemption from the provisions of
the Investment Company Act of 1940, (ii) negotiate, prepare, execute and, as
applicable, file all agreements, certificates, documents and applications
necessary to effectuate a merger of any other entity with and into the Trust,
with the Trust being the surviving business trust, and to effectuate any
amendment to the Declaration of Trust of the Trust in effect at such time or to
adopt a new Declaration of Trust at such time, in accordance with Section
3815(f) of the Business Trust Act, (iii) prepare and file with the Commission
and execute, in each case on behalf of the Trust, (a) a Registration Statement
on Form S-3 (the "1933 Act Registration Statement"), including by way of an
amendment of a Registration Statement of any other entity that has merged with
and into the Trust, and including any pre-effective or post-effective amendments
to such Registration Statement, relating to the registration of the Preferred
Securities under the Securities Act and (b) a Registration Statement on Form 8-A
(the "1934 Act Registration
- 2 -
<PAGE> 3
Statement") (including any pre-effective or post-effective amendments thereto)
relating to the registration of the Preferred Securities under Section 12(b) of
the Securities Exchange Act of 1934, as amended; (iv) prepare and file with the
New York Stock Exchange and execute, in each case on behalf of the Trust, a
listing application and all other applications, statements, certificates,
agreements and other instruments as shall be necessary or desirable to cause the
Preferred Securities to be listed on the New York Stock Exchange; (v) prepare
and file and execute, in each case on behalf of the Trust, such applications,
reports, surety bonds, irrevocable consents, appointments of attorney for
service of process and other papers and documents as shall be necessary or
desirable to register the Preferred Securities under the securities or "blue
sky" laws of such jurisdictions as the Sponsor, on behalf of the Trust, may deem
necessary or desirable; and (vi) negotiate the terms of, and execute on behalf
of the Trust, an underwriting agreement among the Trust, the Sponsor and any
underwriter, dealer or agent relating to the Preferred Securities, substantially
in the form included as an exhibit to the 1933 Act Registration Statement at the
time it becomes effective under the Securities Act. It is hereby acknowledged
and agreed that in connection with any execution, filing or document referred to
in clauses (i)-(vi) above, (A) any Regular Trustee (or his attorneys-in-fact and
agents or the Sponsor as permitted herein) is authorized on behalf of the Trust
to file and execute such document on behalf of the Trust and (B) the Delaware
Trustee shall not be required to join in any such filing or execute on behalf of
the Trust any such document unless required by the rules and regulations of the
Commission or the New York Stock Exchange or state securities or blue sky laws,
and in such case only to the extent so required. In connection with all of the
foregoing, the Sponsor and each Regular Trustee, solely in its capacity as
Trustee of the Trust, hereby constitutes and appoints Gene A. Capello and James
C.P. Berry, and each of them, his, her or its, as the case may be, true and
lawful attorneys-in-fact, and agents, with full power of substitution and
resubstitution, for the Sponsor or such Trustee and in the Sponsor's or such
Trustee's name, place and stead, in any and all capacities, to sign and file (i)
the 1933 Act Registration Statement and the 1934 Act Registration Statement and
any and all amendments (including post-effective amendments) thereto, with all
exhibits thereto, and other documents in connection therewith, and (ii) a
registration statement and any and all amendments thereto filed pursuant to Rule
462(b) under the Securities Act with the Commission, granting unto said
attorneys-in-fact and
- 3 -
<PAGE> 4
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as the Sponsor or such Trustee might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, shall do or cause
to be done by virtue hereof.
5. This Declaration of Trust may be executed in one or more
counterparts.
6. The number of Trustees initially shall be four (4) and thereafter
the number of Trustees shall be such number as shall be fixed from time to time
by a written instrument signed by the Sponsor which may increase or decrease the
number of Trustees; provided, however, that the number of Trustees shall in no
event be less than four (4); and provided, further, however, that to the extent
required by the Business Trust Act, one Trustee shall either be a natural person
who is a resident of the State of Delaware or, if not a natural person, an
entity that has its principal place of business in the State of Delaware and
meets any other requirements imposed by applicable law. Subject to the
foregoing, the Sponsor is entitled to appoint or remove without cause any
Trustee at any time. Any Trustee may resign upon thirty days prior notice to the
Sponsor; provided, however, that the Delaware Trustee may resign immediately
upon notice to the Sponsor if the Delaware Trustee is required to join in any
filing or execute on behalf of the Trust any document pursuant to the provisions
of paragraph 4 hereof and, upon giving such notice, the Delaware Trustee shall
not be required to join in any such filing or execute on behalf of the Trust any
such document; provided, further, however, that no resignation of the Delaware
Trustee shall be effective until a successor Delaware Trustee has been appointed
and has accepted such appointment by instrument executed by such successor
Delaware Trustee and delivered to the Trust, the Sponsor and the resigning
Delaware Trustee.
7. To the fullest extent permitted by applicable law, the Sponsor
agrees to indemnify (i) the Delaware Trustee, (ii) any affiliate of the Delaware
Trustee, and (iii) any officers, directors, shareholders, members, partners,
employees, representatives, nominees, custodians or agents of the Delaware
Trustee (each of the persons or entities in (i) through (iii) being referred to
as an "Indemnified Person") for, and to hold each Indemnified Person harmless
against, any
- 4 -
<PAGE> 5
loss, liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against, or
investigating, any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this paragraph 7 shall survive the termination of this
Declaration.
8. The Trust may terminate without issuing any Trust Securities at
the election of the Sponsor.
IN WITNESS WHEREOF, the parties hereto have caused this Declaration
of Trust to be duly executed as of the day and year first above written.
J.P. MORGAN & CO. INCORPORATED,
as Sponsor
By: /s/ James CP Berry
-------------------------------------
Name: James CP Berry
Title: Vice President, Assistant
General Counsel and
Assistant Secretary
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By: /s/ Emmett R. Harmon
-------------------------------------
Name: Emmett R. Harmon
Title: Vice President
/s/ H. Christian Raymond
----------------------------------
H. Christian Raymond, as
Trustee
/s/ Andrew G. Kerber
----------------------------------
Andrew G. Kerber, as Trustee
- 5 -
<PAGE> 6
/s/ Susan L. McCullin
----------------------------------
Susan L. McCullin, as Trustee
- 6 -
<PAGE> 1
EXHIBIT 3(b)(2)
AMENDED AND RESTATED DECLARATION OF TRUST
OF
J.P. MORGAN INDEX FUNDING COMPANY I
-----------------
DATED AS OF OCTOBER 10, 1997
<PAGE> 2
TABLE OF CONTENTS*
Page
PARTIES..................................................................... 1
RECITALS.................................................................... 1
ARTICLE I
Definitions
SECTION 1.01 Certain terms defined; other terms
defined in the Trust Indenture Act of
1939, as amended, or by reference
therein in the Securities Act of
1933, as amended, to have the
meanings assigned therein.................. 2
Affiliate....................................... 2
Book Entry Interest............................. 3
Business Day.................................... 3
Business Trust Act.............................. 3
Certificate..................................... 3
Certificate of Trust............................ 3
Clearing Agency................................. 3
Clearing Agency Participant..................... 3
Code............................................ 3
Commission...................................... 3
Common Securities............................... 3
Common Security Certificate..................... 4
Covered Person.................................. 4
Declaration Supplement.......................... 4
Definitive Preferred Security
Certificates............................... 4
Delaware Trustee................................ 4
Depositary Agreement............................ 4
- --------
* This Table of Contents does not constitute part of the Amended and
Restated Declaration of Trust and should not have any bearing upon the
interpretation of any of its terms or provisions.
<PAGE> 3
Distribution.................................... 4
DTC............................................. 4
Early Redemption Value.......................... 4
Event of Default................................ 4
Exchange Act.................................... 4
Face Amount..................................... 4
Fiscal Year..................................... 5
Global Certificate.............................. 5
Holder.......................................... 5
Indemnified Person.............................. 5
Indexed Security................................ 5
Investment Company.............................. 5
Investment Company Act.......................... 5
Legal Action.................................... 5
Liquidation Distribution........................ 5
Majority in Principal Amount.................... 5
Ministerial Action.............................. 6
Morgan Guaranty................................. 6
Note............................................ 6
Note Event of Default........................... 6
Note Guarantee.................................. 6
Option Closing Date............................. 6
Original Declaration............................ 6
Paying Agent.................................... 6
Person.......................................... 6
Preferred Guarantee............................. 6
Preferred Securities............................ 6
Preferred Security Beneficial Owner............. 7
Preferred Security Certificate.................. 7
Principal Amount................................ 7
Property Account................................ 7
Property Trustee................................ 7
Quorum.......................................... 7
Redemption Value................................ 7
Regular Trustee................................. 7
Resignation Request............................. 7
Responsible Officer............................. 7
Securities...................................... 8
Securities Act.................................. 8
Series of Securities............................ 8
Special Event................................... 8
Sponsor or JPM.................................. 8
Successor Delaware Trustee...................... 8
Successor Property Trustee...................... 8
10% in Principal Amount......................... 8
Treasury Regulations............................ 8
Trust Indenture Act............................. 9
Trustee or Trustees............................. 9
Underwriting Agreement.......................... 9
<PAGE> 4
ARTICLE II
Trust Indenture Act
SECTION 2.01 Trust Indenture Act; Application................ 9
SECTION 2.02 Lists of Holders of Preferred
Securities................................. 9
SECTION 2.03 Reports by the Property Trustee................. 10
SECTION 2.04 Periodic Reports to Property Trustee............ 10
SECTION 2.05 Evidence of Compliance with Conditions
Precedent.................................. 10
SECTION 2.06 Voting Rights of Holders........................ 10
SECTION 2.07 Disclosure of Information....................... 15
ARTICLE III
Organization
SECTION 3.01 Name............................................ 15
SECTION 3.02 Office.......................................... 15
SECTION 3.03 Issuance of the Trust Securities................ 16
SECTION 3.04 Purchase of Notes............................... 17
SECTION 3.05 Purpose......................................... 18
SECTION 3.06 Authority....................................... 18
SECTION 3.07 Title to Property of the Trust.................. 19
SECTION 3.08 Powers and Duties of the Regular
Trustees................................... 19
SECTION 3.09 Prohibition of Actions by Trust and
Trustees................................... 22
SECTION 3.10 Powers and Duties of the Property
Trustee.................................... 23
SECTION 3.11 Delaware Trustee................................ 26
SECTION 3.12 Certain Rights and Duties of the
Property Trustee........................... 26
SECTION 3.13 Registration Statement and Related
Matters.................................... 29
SECTION 3.14 Filing of Amendments to Certificate of
Trust...................................... 31
SECTION 3.15 Execution of Documents by Regular
Trustees................................... 31
SECTION 3.16 Trustees Not Responsible for Recitals
or Issuance of Securities................. 31
SECTION 3.17 Duration of Trust............................... 31
SECTION 3.18 Assets and Liabilities Associated with
Series of Securities; Recordkeeping 32
of Series of Securities....................
<PAGE> 5
ARTICLE IV
Sponsor
SECTION 4.01 Purchase of Common Securities by
Sponsor.................................... 33
SECTION 4.02 Expenses........................................ 33
ARTICLE V
Trustees
SECTION 5.01 Number of Trustees; Qualifications.............. 34
SECTION 5.02 Appointment, Removal and Resignation
of Trustees................................ 36
SECTION 5.03 Vacancies Among Trustees........................ 38
SECTION 5.04 Effect of Vacancies............................. 38
SECTION 5.05 Meetings........................................ 39
SECTION 5.06 Delegation of Power............................. 39
ARTICLE VI
Distributions
SECTION 6.01 Distributions................................... 40
ARTICLE VII
Issuance of Securities
SECTION 7.01 General Provisions Regarding
Securities................................. 40
ARTICLE VIII
Dissolution and Termination of Trust
SECTION 8.01 Dissolution and Termination of Trust............ 42
<PAGE> 6
ARTICLE IX
Transfer of Interests
SECTION 9.01 Transfer of Securities.......................... 43
SECTION 9.02 Transfer of Certificates........................ 43
SECTION 9.03 Deemed Security Holders......................... 44
SECTION 9.04 Book Entry Interests............................ 44
SECTION 9.05 Notices to Holders of Certificates.............. 45
SECTION 9.06 Appointment of Successor Clearing
Agency..................................... 45
SECTION 9.07 Definitive Preferred Securities
Certificates............................... 46
SECTION 9.08 Mutilated, Destroyed, Lost or Stolen
Certificates............................... 46
ARTICLE X
Limitation of Liability Indemnification
SECTION 10.01 Exculpation..................................... 47
SECTION 10.02 Indemnification and Compensation................ 47
SECTION 10.03 Outside Businesses.............................. 48
ARTICLE XI
Accounting
SECTION 11.01 Fiscal Year..................................... 49
SECTION 11.02 Certain Accounting Matters...................... 49
SECTION 11.03 Banking......................................... 50
SECTION 11.04 Withholding..................................... 50
ARTICLE XII
Amendments and Meetings
SECTION 12.01 Amendments...................................... 51
SECTION 12.02 Meetings of the Holders of Securities;
Action by Written Consent.................. 52
<PAGE> 7
ARTICLE XIII
Representations of Property Trustee
and Delaware Trustee
SECTION 13.01 Representations and Warranties of
Property Trustee........................... 54
ARTICLE XIV
Miscellaneous
SECTION 14.01 Notices......................................... 55
SECTION 14.02 Undertaking for Costs........................... 57
SECTION 14.03 Governing Law................................... 57
SECTION 14.04 Headings........................................ 58
SECTION 14.05 Partial Enforceability.......................... 58
SECTION 14.06 Counterparts.................................... 58
SECTION 14.07 Intention of the Parties........................ 58
SECTION 14.08 Successors and Assigns.......................... 58
SECTION 14.09 Effect of Declaration Supplements............... 59
SECTION 14.10 Merger.......................................... 59
SIGNATURES AND SEALS........................................................ 59
EXHIBIT A CERTIFICATE OF TRUST
EXHIBIT B FORM OF DECLARATION SUPPLEMENT -
TERMS OF SECURITIES
<PAGE> 8
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
J.P. MORGAN INDEX FUNDING COMPANY I
OCTOBER 10, 1997
AMENDED AND RESTATED DECLARATION OF TRUST
("Declaration"), dated and effective as of October
10, 1997, by the undersigned trustees (together with
all other Persons from time to time duly appointed
and serving as trustees in accordance with the
provisions of this Declaration, the "Trustees"), J.P.
Morgan & Co. Incorporated, a Delaware corporation, as
trust sponsor ("JPM" or the "Sponsor"), and the
holders, from time to time, of undivided beneficial
interests in the assets of the J.P. Morgan Index
Funding Company I to be issued pursuant to this
Declaration.
WHEREAS the Sponsor and the Trustees entered into a
Declaration of Trust dated as of December 12, 1996 (the "Original Declaration")
in order to establish J.P. Morgan Index Funding Company I, a statutory business
trust (the "Trust") under the Business Trust Act (as defined herein);
WHEREAS the Certificate of Trust (the "Certificate of Trust")
of the Trust was filed with the office of the Secretary of State of the State of
Delaware on December 12, 1996 and a Restated Certificate of Trust was filed with
the office of the Secretary of State of the State of Delaware on September 30,
1997;
<PAGE> 9
2
WHEREAS the Trustees and the Sponsor desire to continue the
Trust pursuant to the Business Trust Act for the purpose of, as described more
fully in Sections 3.03, 3.04 and 3.05 hereof, (i) issuing and selling for cash
Securities (as defined herein) of one or more Series of Securities (as defined
herein) representing preferred undivided beneficial interests in the assets of
the Trust associated with such Series of Securities (and the proceeds thereof)
and investing the proceeds of the Securities of each Series of Securities in a
Note issued by Morgan Guaranty (as defined herein) that, together with any
proceeds thereof, will constitute the assets of the Trust associated with such
series and will be held as an asset of the Trust for the benefit of the holders
of such Securities and (ii) engaging in such other activities as are necessary,
convenient or incidental thereto; and
NOW, THEREFORE, it being the intention of the parties hereto
that the Trust constitute a business trust under the Business Trust Act, that
the Original Declaration be amended and restated in its entirety as provided
herein and that this Declaration constitute the governing instrument of such
business trust, the Trustees declare that all assets referred to in clause (i)
of the previous Whereas clause purchased by the Trust will be held in trust for
the benefit of the Holders (as defined herein) from time to time of the
Certificates (as defined herein) issued hereunder representing undivided
beneficial interests in the related assets of the Trust, subject to the
provisions of this Declaration.
<PAGE> 10
3
ARTICLE I
Definitions
SECTION 1.01. Definitions. (a) Capitalized terms used in this
Declaration but not defined in the preamble above have the respective meanings
assigned to them in this Section 1.01; (b) a term defined anywhere in this
Declaration has the same meaning throughout; (c) all references to "the
Declaration" or "this Declaration" are to this Amended and Restated Declaration
of Trust (including Exhibits A and B hereto (the "Exhibits")) as modified,
supplemented or amended from time to time including pursuant to a Declaration
Supplement (as defined herein); (d) all references in this Declaration to
Articles and Sections and Exhibits are to Articles and Sections of and Exhibits
to this Declaration unless otherwise specified; (e) a term defined in the Trust
Indenture Act has the same meaning when used in this Declaration unless
otherwise defined in this Declaration or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice versa; (g) the
words "include", "including" and similar terms shall be construed as if followed
by the phrase "without limitation"; and (h) the words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Declaration as a
whole and not to any particular Article, Section or other subdivision.
"Affiliate" has the same meaning as given to that term in Rule
405 of the Securities Act or any successor rule thereunder.
"Book Entry Interest" means a beneficial interest in a Global
Certificate registered in the name of a Clearing Agency or a nominee thereof,
ownership and transfers of which shall be maintained and made through book
entries by such Clearing Agency as described in Section 9.04.
"Business Day" means any day other than a Saturday, Sunday or
any other day on which banking institutions in New York, New York are authorized
or required by law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time
to time.
"Certificate" means a Common Security Certificate
or a Preferred Security Certificate.
"Certificate of Trust" has the meaning set forth
in the second Whereas clause above.
<PAGE> 11
4
"Clearing Agency" means an organization registered as a
"Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as
depository for the Preferred Securities and in whose name, or in the name of a
nominee of that organization, shall be registered a Global Certificate and which
shall undertake to effect book entry transfers and pledges of the Preferred
Securities.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time the
Clearing Agency effects book entry transfers and pledges of securities deposited
with the Clearing Agency.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor legislation. A reference to a specific
section of the Code refers not only to such specific section but also to any
corresponding provision of any Federal tax statute enacted after the date of
this Declaration, as such specific section or corresponding provision is in
effect on the date of application of the provisions of this Declaration
containing such reference.
"Commission" means the Securities and Exchange Commission.
"Common Securities" has the meaning specified in Section
7.01(b).
"Common Security Certificate" means a definitive certificate
in fully registered form representing a Common Security of any Series of
Securities substantially in the form of Annex II to Exhibit B.
"Covered Person" means (i) any officer, director, shareholder,
partner, member, representative, employee or agent of the Trust or its
Affiliates, (ii) any officer, director, shareholder, employee, representative or
agent of JPM or any of its Affiliates and (iii) the Holders from time to time of
the Securities.
"Declaration Supplement" means a supplement to this
Declaration executed by the Sponsor and two Regular Trustees that provides for
the issuance of a particular Series of Securities and Certificates.
"Definitive Preferred Security Certificates" has the meaning
set forth in Section 9.04.
"Delaware Trustee" has the meaning set forth in Section
5.01(a)(3).
<PAGE> 12
5
"Depositary Agreement" means an agreement among the Trust, the
Property Trustee and DTC, as the same may be amended or supplemented from time
to time.
"Distribution" means a distribution payable to Holders of the
Securities of the applicable Series of Securities in accordance with Section
6.01.
"DTC" means The Depository Trust Company, the initial Clearing
Agency.
"Early Redemption Value", with respect to any Series of
Securities that are Indexed Securities, shall have the meaning, if any, set
forth in the Declaration Supplement establishing such Series of Securities.
"Event of Default" means, with respect to any Series of
Securities, a Note Event of Default has occurred and is continuing under the
Note associated with such Series of Securities.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation.
"Face Amount" means, with respect to any Security, the initial
stated principal amount thereof.
"Fiscal Year" has the meaning specified in Section 11.01.
"Global Certificate" has the meaning set forth in Section
9.04.
"Holder" means a Person in whose name a Certificate
representing a Security is registered, such Person being a beneficial owner
within the meaning of the Business Trust Act.
"Indemnified Person" means any Trustee, any Affiliate of any
Trustee, any officer, director, shareholder, member, partner, employee,
representative or agent of any Trustee, or any employee or agent of the Trust or
any of its Affiliates.
"Indexed Security" means any Security the stated liquidation
preference or redemption value, as applicable, which varies or may vary from the
Face Amount thereof.
"Investment Company" means an investment company as defined in
the Investment Company Act.
<PAGE> 13
6
"Investment Company Act" means the Investment Company Act of
1940, as amended from time to time, or any successor legislation.
"Legal Action" has the meaning specified in Section 3.08(g).
"Liquidation Distribution" has the meaning set forth in the
terms of the Securities as set forth in Exhibit B hereto.
"Majority in Principal Amount" means, except as otherwise
required by the Trust Indenture Act and except as provided in paragraph (d) of
paragraph 6 of Exhibit B hereto, with respect to any Series of Securities,
Holder(s) of outstanding Securities of such series voting together as a single
class or, as the context may require, Holder(s) of outstanding Preferred
Securities of such series or Common Securities of such series voting as separate
classes, who are the record owners of the relevant series or class of Securities
whose Principal Amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) represents more than
50% of the Principal Amount of all outstanding Securities of such series or
class.
"Ministerial Action" means filing a form or making an
election, or pursuing some other similar reasonable measure that has no adverse
effect on the Trust, JPM or any Holder of any Security.
"Morgan Guaranty" means Morgan Guaranty Trust Company of New
York, a trust company with full banking powers organized under the laws of the
State of New York and a wholly owned subsidiary of JPM.
"Note" means a Note associated with a particular Series of
Securities evidencing a loan from the Trust to Morgan Guaranty of the proceeds
of the issuances of the Securities of such series.
"Note Event of Default" means an event or condition defined as
an "Event of Default" with respect to a Note associated with a particular Series
of Securities has occurred and is continuing.
"Note Guarantee" means a Note Guarantee Agreement of JPM for
the benefit of the Property Trustee, for the benefit of the Holders of
Securities of a particular Series of Securities, with respect to a Note
associated with such Series of Securities.
<PAGE> 14
7
"Option Closing Date" means the Option Closing Date as
specified in any Underwriting Agreement.
"Original Declaration" has the meaning set forth in the first
Whereas clause above.
"Paying Agent" has the meaning specified in Section 3.10(i).
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Guarantee" means a Guarantee Agreement of JPM for
the benefit of the Holders of Preferred Securities of a Series of Securities
with respect to such Preferred Securities.
"Preferred Securities" has the meaning specified in Section
7.01(b).
"Preferred Security Beneficial Owner" means, with respect to a
Book Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in each case in accordance
with the rules of such Clearing Agency).
"Preferred Security Certificate" means a definitive
certificate in fully registered form representing a Preferred Security of any
Series of Securities substantially in the form of Annex I to Exhibit B.
"Principal Amount" means, at any time with respect to any
Indexed Security, the Redemption Value, the applicable Early Redemption Value or
the stated liquidation preference, as applicable, of such Indexed Security, as
if determined as of such time pursuant to the terms of such Indexed Security.
"Property Account" has the meaning specified in Section
3.10(c)(i).
"Property Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.01(c) and having the duties set forth for
the Property Trustee herein.
<PAGE> 15
8
"Quorum" means a majority of the Regular Trustees or, if there
are only two Regular Trustees, both such Regular Trustees.
"Redemption Value", with respect to any Series of Securities
that are Indexed Securities, has the meaning, if any, set forth in the
Declaration Supplement establishing such Series of Securities.
"Regular Trustee" means any Trustee other than the Property
Trustee or the Delaware Trustee.
"Resignation Request" has the meaning specified in Section
5.02(d).
"Responsible Officer" means, with respect to the Property
Trustee, any officer of the Property Trustee with responsibility for the
administration of this Declaration and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of, and familiarity with, the particular
subject.
"Securities" means the Common Securities and the Preferred
Securities.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, or any successor legislation.
"Series of Securities" mean any series of Preferred Securities
and related Common Securities issued hereunder or pursuant to a Declaration
Supplement.
"Special Event" has the meaning set forth in Section 5(b) of
the terms of the Securities as set forth in Exhibit B hereto.
"Sponsor" or "JPM" means J.P. Morgan & Co. Incorporated, a
Delaware corporation, or any successor entity in a merger, consolidation or
other business combination transaction in its capacity as sponsor of the Trust.
"Successor Delaware Trustee" has the meaning specified in
Section 5.02(b)(ii).
"Successor Property Trustee" means a successor Trustee
possessing the qualifications to act as Property Trustee under Section
5.02(b)(i).
"10% in Principal Amount" means, except as otherwise required
by the Trust Indenture Act and except as provided in paragraph (d) of paragraph
6 of Exhibit B
<PAGE> 16
9
hereto, with respect to any Series of Securities, Holder(s) of outstanding
Securities of such series voting together as a single class or, as the context
may require, Holder(s) of outstanding Preferred Securities of such series or
Common Securities of such series, voting as separate classes, who are the record
owners of the relevant series or class of Securities whose Principal Amount
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the
voting percentages are determined) represents 10% or more of the Principal
Amount of all outstanding Securities of such series or class.
"Treasury Regulations" means the income tax regulations,
including temporary and proposed regulations, promulgated under the Code by the
United States Treasury, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended from time to time, or any successor legislation.
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as a Trustee in accordance with
the provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"Underwriting Agreement" means any Underwriting Agreement
among the Trust, the Sponsor and J.P. Morgan Securities, Inc. or J.P. Morgan
Securities, Ltd., as representative of the several underwriters or managers, as
applicable, named therein, relating to the issuance of the Preferred Securities
of any Series of Securities.
<PAGE> 17
10
ARTICLE II
Trust Indenture Act
SECTION 2.01. Trust Indenture Act; Application. (a) This
Declaration is subject to the provisions of the Trust Indenture Act that are
required to be part of this Declaration and shall, to the extent applicable, be
governed by such provisions; (b) if and to the extent that any provision of this
Declaration limits, qualifies or conflicts with the duties imposed by Sections
310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control; (c) for purposes of this Declaration, the Property Trustee, to the
extent permitted by applicable law and/or the rules and regulations of the
Commission, shall be the only Trustee which is a trustee for the purposes of the
Trust Indenture Act; and (d) the application of the Trust Indenture Act to this
Declaration shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
SECTION 2.02. Lists of Holders of Preferred Securities. (a)
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide the Property Trustee with such information as is required under Section
312(a) of the Trust Indenture Act at the times and in the manner provided in
Section 312(a); and (b) the Property Trustee shall comply with its obligations
under Sections 310(b), 311 and 312(b) of the Trust Indenture Act.
SECTION 2.03. Reports by the Property Trustee. Within 60 days
after May 15 of each year, the Property Trustee shall provide to the Holders of
the Securities such reports as are required by Section 313 of the Trust
Indenture Act, if any, in the form, in the manner and at the times provided by
Section 313 of the Trust Indenture Act. The Property Trustee shall also comply
with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.04. Periodic Reports to Property Trustee. Each of
the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the
Property Trustee, the Commission and the Holders of the Securities, as
applicable, such documents, reports and information as required by Section
314(a)(1)-(3) (if any) of the Trust Indenture Act and the compliance
certificates required by Section 314(a)(4) and (c) of the Trust Indenture Act,
any such certificates to be provided in the form, in the manner and at the times
required by Section 314(a)(4) and (c) of the Trust Indenture Act (provided that
any certificate to be provided pursuant to Section 314(a)(4) of the Trust
Indenture Act shall be provided within 120 days of the end of each Fiscal Year).
<PAGE> 18
11
SECTION 2.05. Evidence of Compliance with Conditions
Precedent. Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Declaration which relate to
any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given pursuant to Section 314(c) shall
comply with Section 314(e) of the Trust Indenture Act.
SECTION 2.06. Voting Rights of Holders. (a) Except as shall be
otherwise established herein or in the Declaration Supplement(s) providing for
the issue of any Series of Securities and except as otherwise required by the
Business Trust Act, (i) Holders of Preferred Securities of any series shall
have, with respect to such Preferred Securities, no right or power to vote on
any question or matter or in any proceeding or to be represented at, or to
receive notice of, any meeting of Holders and (ii) all voting rights of the
Trust shall be vested exclusively in the Holder of Common Securities. The Holder
of the Common Securities shall determine the manner in which the Common
Securities are voted in all matters upon which the Holder of Common Securities
has the right to vote. The Holder of Common Securities shall have the right to
vote separately as a class on any matter on which the Holder of Common
Securities has the right to vote regardless of the voting rights of any other
Holder.
(b) Subject to Section 2.06(f), if (i) the Trust fails to pay
dividends or other distributions in full on the Preferred Securities of any
Series of Securities for 30 days following the date on which such payment was
due in accordance with the terms of such Preferred Securities; or (ii) an Event
of Default (as defined in any Note associated with any Series of Securities)
occurs and is continuing with respect to such Note, then the Holders holding a
Majority in Principal Amount of the outstanding Preferred Securities of such
series, acting as a single class, will be entitled to cause the Trust, by
written direction to the Property Trustee, (A) to waive any such Event of
Default and its consequences or to enforce the Trust's rights under the
applicable Note or Notes against Morgan Guaranty, (B) in the case of clause (i)
above, to declare and pay dividends or other distributions on the Preferred
Securities of such series; provided that any such payments or other
distributions shall be paid solely from the proceeds of interest or other
payments made on the applicable Note and received by the Trust on behalf of the
Holders of the Securities of such series and (C) in the case of clause (ii)
above, to waive any such Event of Default and its consequences or to enforce the
Trust's rights under the Note Guarantee with respect to the Preferred Securities
of such
<PAGE> 19
12
series. For purposes of determining whether the Trust has failed to pay
dividends in full within 30 days of the applicable payment date, dividends or
other distributions shall be deemed to remain in arrears, notwithstanding any
payments in respect thereof, until full cumulative dividends or other
distributions have been or contemporaneously are declared and paid with respect
to all dividend or other distribution periods terminating on or prior to the
date of payment of such full cumulative dividends or other distributions. Not
later than 30 days after the right to vote arises, the Property Trustee will
solicit such vote. If the Property Trustee fails to solicit such vote within
such 30-day period, the Holders holding 10% in Principal Amount of the
outstanding Preferred Securities of the series with respect to which dividends
or other distributions have not been paid, acting as a single class, will be
entitled to convene such meeting. Any such voting rights shall cease immediately
if, in the case of clause (i) above, the Trust shall have paid in full all
accumulated and unpaid dividends or other distributions on the Securities of
such Series of Securities with respect to which dividends or other distributions
have not been paid or if, in the case of clause (ii) above, such default of
Morgan Guaranty shall have been cured or waived. Subject to Section 2.06(f),
Holders of Preferred Securities of a Series of Securities may, by vote of at
least a Majority in Principal Amount of Preferred Securities of such series, in
accordance with the terms of such Preferred Securities, direct the time, method
and place of conducting any proceeding for any remedy available to the Property
Trustee, or exercising any trust or power conferred upon the Property Trustee.
(c) If any resolution is proposed to be adopted by the Holders
providing for, or the Regular Trustees propose to take, any action to effect:
(i) any variation or abrogation of the powers, preferences and
special rights of any Series of Securities by way of amendment of this
Declaration or otherwise, which variation or abrogation adversely
affects the Holders of the Securities of such series,
(ii) the dissolution of the Trust, or
(iii) the commencement of any bankruptcy, insolvency,
reorganization or other similar proceeding involving the Trust,
then, in the case of any resolution or action described in clause (i) above, the
Holders holding the outstanding Securities of such series the powers,
preferences or special rights of which are proposed to be amended and, in the
case of any resolution or action described in clause (ii) or
<PAGE> 20
13
(iii) above, the Holders holding any outstanding Securities will be entitled to
vote together as a class on such resolution or action of the Sponsor (but not
any other resolution or action) and such resolution or action shall not be
effective except with the approval of the Holders holding a Majority in
Principal Amount of such outstanding Securities or all Series of Securities, as
applicable; provided that no such resolution or action shall, without the
consent of each Holder of Securities of any Series of Securities affected
thereby, (1) change the terms of such Holder's Securities established pursuant
to Section 3.03(iii), (iv), (v), (vi), (vii), (viii) or (xi) in a manner adverse
to such Holder, (2) reduce the above-stated percentage of Principal Amount
necessary to approve such resolution or action, (3) amend the provisions of this
Section 2.06(c) or (4) cause the Trust to be treated as anything other than a
grantor trust for United States federal income tax purposes; provided further,
however, that no such approval shall be required under clauses (i) and (ii) if
the dissolution of the Trust is proposed or initiated upon the occurrence of any
of the events specified in Section 8.01. The powers, preferences or special
rights of any Series of Securities will be deemed not to be varied by the
creation or issuance of, and no vote will be required for the creation or
issuance of, any other Series of Securities.
(d) Notwithstanding any provision to the contrary herein, the
first sentence of Section 9.01(c) of this Declaration may only be amended with
the consent of each Holder of Securities.
(e) Notwithstanding that Holders of Preferred Securities of
any series are entitled to vote or consent under any circumstances described in
this Declaration, any Preferred Securities of any series that are owned by JPM
or by any entity directly or indirectly controlling or controlled by or under
direct or indirect common control with JPM shall not be entitled to vote or
consent and shall, for the purposes of such vote or consent, be treated as if
they were not outstanding.
(f) The right of any Holder of Securities of any Series of
Securities to receive payment of Distributions on such Securities in accordance
with this Declaration and the terms of such Securities set forth in the
applicable Declaration Supplement on or after the respective payment dates
therefor, or to institute suit for the enforcement of any such payment on or
after such payment dates, shall not be impaired without the consent of such
Holder.
(g) As provided in the terms of any Series of Securities set
forth in the applicable Declaration
<PAGE> 21
14
Supplement, a waiver of a Note Event of Default relating to a Note associated
with any Series of Securities by the Property Trustee at the written direction
of the Holders of the Preferred Securities of such series constitutes a waiver
of the corresponding Event of Default under this Declaration in respect of such
Series of Securities; provided that if the Note Event of Default is not waivable
under the applicable Note, the Event of Default under this Declaration shall
also be not waivable.
(h)(i) Morgan Guaranty and the Property Trustee may, without
the consent of the Holders of any Preferred Securities, enter into
senior notes supplemental to any Note relating to any Series of
Securities for, among others, one or more of the following purposes:
(x) to evidence the succession of another person to, and the assumption
by such successor of, Morgan Guaranty's obligations under such Note;
(y) to add covenants of Morgan Guaranty, or surrender any rights of
Morgan Guaranty, for the benefit of the Property Trustee; and (z) to
cure any ambiguity, or correct any inconsistency in, such Note. Morgan
Guaranty and the Property Trustee, with the consent of the Holders of
not less than a Majority in Principal Amount of the outstanding
Preferred Securities of any series may modify the Note relating to such
Series of Securities, provided that no such modification may, without
the consent of the Holders of all outstanding Preferred Securities
affected thereby, (w) reduce the amount of Preferred Securities of such
series the Holders of which must consent to any amendment, supplement
or waiver of such Note; (x) reduce the rate of or extend the time for
the payment of interest on the Note; (y) alter the method of
calculation of, or reduce, the amount paid at stated maturity or extend
the stated maturity of such Note (other than pursuant to the terms of
such Note) or (z) make such Note payable in money or property other
than that stated in such Note.
(ii) The Note Guarantee with respect to a Series of Securities
may be amended only with the prior approval of the Property Trustee
acting on behalf of the Holders of the Securities of such Series of
Securities; provided that no such amendment shall adversely affect the
Holders of the Preferred Securities of any Series of Securities without
the consent of a Majority in Principal Amount of the Preferred
Securities of such affected Series of Securities, with Holders of
Preferred Securities of each such affected series voting as a single
and separate class. All guarantees and agreements contained in the Note
Guarantee shall bind the
<PAGE> 22
15
successors, assignees, receivers, trustees and representatives of JPM
and shall inure to the benefit of the Property Trustee, for the benefit
of the Holders of the Securities of each Series of Securities, as the
holder of each Note then outstanding.
(iii) Except with respect of any changes that do not adversely
affect the rights of Holders of the Preferred Securities of any Series
of Securities (in which case no vote will be required), the Preferred
Guarantee may be amended only with the prior approval of the Holders of
not less than a Majority in Principal Amount of the outstanding
Preferred Securities of each affected series, with Holders of Preferred
Securities of each such affected series voting as a single and separate
class. All guarantees and agreements contained in any Preferred
Guarantee shall bind the successors, assignees, receivers, trustees and
representatives of JPM and shall inure to the benefit of the Holders of
the Preferred Securities of the applicable series then outstanding.
(iv) The procedures and mechanisms for implementing any such
modification to any Note, Note Guarantee or Preferred Guarantee shall
be identical to the procedures and mechanisms set forth in paragraph
(b) above or in Section 12.02.
(i) A Note Event of Default under a Note associated with any
particular Series of Securities or an Event of Default under this Declaration in
respect of such Series of Securities shall not constitute a Note Event of
Default under a Note associated with any other Series of Securities or an Event
of Default under this Declaration in respect of any other Series of Securities
and shall not prohibit payments in respect of such other Series of Securities.
Payments in respect of principal of or interest on a Note, the Note Guarantee or
the Preferred Guarantee, in each case associated with a particular Series of
Securities shall be for the sole benefit of the Holders of Securities of such
Series of Securities.
SECTION 2.07. Disclosure of Information. The disclosure of
information as to the names and addresses of the Holders of the Securities in
accordance with Section 312 of the Trust Indenture Act, regardless of the source
from which such information was derived, shall not be deemed to be a violation
of any existing law or any law hereafter enacted which does not specifically
refer to Section 312 of the Trust Indenture Act, nor shall the Property Trustee
be held accountable by reason of mailing any material pursuant to a request made
under Section 312(b) of the Trust Indenture Act.
<PAGE> 23
16
ARTICLE III
Organization
SECTION 3.01. Name. The Trust continued by this Declaration is
named "J.P. Morgan Index Funding Company I" as such name may be modified from
time to time by the Regular Trustees following written notice to the Holders of
Securities. The Trust's activities may be conducted under the name of the Trust
or any other name deemed advisable by the Regular Trustees.
SECTION 3.02. Office. The address of the principal office of
the Trust is c/o J.P. Morgan & Co. Incorporated, 60 Wall Street, New York, New
York 10260-0060. Upon ten days' written notice to the Holders (a copy of such
notice to be sent to the Property Trustee and the Delaware Trustee), the Regular
Trustees may change the location of the Trust's principal office. The name of
the registered agent and office of the Trust in the State of Delaware is
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890. At any time, the Regular Trustees may designate
another registered agent and/or registered office.
SECTION 3.03. Issuance of the Trust Securities. The Sponsor
and the Regular Trustees are hereby authorized, on behalf of the Trust from time
to time to authorize the issuance of Securities of one or more Series of
Securities, and with respect to the Securities of each such series to establish
by a Declaration Supplement or Declaration Supplements providing for the
issuance of such Securities:
(i) the maximum number of Preferred Securities and Common
Securities to constitute such series, the aggregate initial principal
amount, the Face Amount (if any) and the distinctive designation
thereof;
(ii) whether the Preferred Securities of such series shall
have voting rights in addition to those set forth in this Declaration
and, if so, the terms of such voting rights;
(iii) the periodic dividend or other distribution rate (or
method of calculation thereof), if any, on the Securities of such
series, the conditions and dates upon which such dividends or other
distributions shall be payable and the ability of the Trust, if any, to
extend the dividend or other distribution payment period for the
Securities of such series, the dates from which such dividends or other
distributions shall accrue, and whether such dividends or other
distributions shall be cumulative or noncumulative;
<PAGE> 24
17
(iv) whether the Securities of such series shall be subject to
redemption by the Holders thereof or the Trust, and, if made subject to
redemption, the times and other terms and conditions of such redemption
(including the amount and kind of consideration to be received upon
such redemption, or the method of calculation thereof);
(v) any rights in addition to those set forth in this
Declaration of the Holders of the Securities of such series upon the
dissolution of the Trust;
(vi) whether or not the Securities of such series shall be
subject to the operation of a retirement or sinking fund and, if so,
the extent to and manner in which any such retirement or sinking fund
shall be applied to the purchase or redemption of the Securities of
such series for retirement and the terms and provisions relative to the
operation thereof;
(vii) whether or not the Securities of such series shall be
convertible into, or exchangeable for, interests of any other class or
classes, or of any Securities of any other series, or securities of any
other kind, including those issued by the Sponsor or any of its
Affiliates, and if so convertible or exchangeable, the price or prices
or the rate or rates of conversion or exchange and the method, if any,
of adjusting the same;
(viii) any limitations and restrictions in addition to those
set forth in this Declaration to be effective while the Securities of
such series are outstanding upon the payment of periodic dividends or
other distributions on, and upon the purchase, redemption or other
acquisition by the Trust of, Securities of any other series;
(ix) any conditions or restrictions in addition to those set
forth in this Declaration upon the issue of any additional Securities
of such series or any other series ranking on a parity with or prior to
such Securities as to periodic dividends or distribution of assets on
dissolution;
(x) the times, prices and other terms and conditions for the
offering of the Securities of such series;
(xi) the Principal Amount (or the method of calculation
thereof) of the Securities of such series to be paid upon Stated
Maturity (if any) thereof; and
<PAGE> 25
18
(xii) any other relative rights, powers and duties as shall
not be inconsistent with this Section 3.03.
The Sponsor and the Regular Trustees are hereby authorized, on behalf of the
Trust, to execute and deliver any Declaration Supplement, any Underwriting
Agreement and any other agreement, document, instrument or certificate in
connection with any issuances of Securities of a Series of
Securities.
SECTION 3.04. Purchase of Notes. On any date, in connection
with the issuance of Securities of a Series of Securities, the Regular Trustees,
on behalf of the Trust, shall purchase from Morgan Guaranty with the proceeds
received by the Trust from the sale of such Securities on such date pursuant to
Section 3.03, at a purchase price of 100% of the principal amount thereof, a
Note relating to and associated with such series, registered in the name of the
Property Trustee and having an aggregate principal amount equal to the sum of
the aggregate initial Principal Amount of the Preferred Securities and Common
Securities of such Series of Securities, and, in satisfaction of the purchase
price for such Note, the Regular Trustee, on behalf of the Trust, shall deliver
or cause to be delivered to Morgan Guaranty such sum.
SECTION 3.05. Purpose. The exclusive purposes and functions of
the Trust are: (a)(i) to issue and sell Preferred Securities of one or more
Series of Securities for cash and to issue and sell related Common Securities of
such series to JPM for cash and use the proceeds of such sales to acquire a Note
of a corresponding series of Morgan Guaranty having an aggregate principal
amount equal to the sum of the aggregate Principal Amount of the Preferred
Securities and Common Securities of such corresponding series so issued and
sold; and (ii) to enter into such agreements and arrangements as may be
necessary in connection with the sale of Securities of any Series of Securities
to the initial purchasers thereof and to take all actions and exercise such
discretion as may be necessary or desirable in connection therewith and to file
such registration statements or make such other filings under the Securities
Act, the Exchange Act or state securities or "Blue Sky" laws as may be necessary
or desirable in connection therewith and the issuance of Securities of such
Series of Securities; and (b) except as otherwise limited herein, to engage in
such other activities as are necessary, convenient or incidental thereto. The
Trust, either on its own behalf or on behalf of the Holders of any Series of
Securities, shall not borrow money, issue debt or reinvest proceeds derived from
investments, pledge any of its assets or, at any time while any Securities are
outstanding, otherwise undertake (or
<PAGE> 26
19
permit to be undertaken) an activity that would result in or cause the Trust to
be treated as anything other than a grantor trust for United States federal
income tax purposes.
SECTION 3.06. Authority. Subject to the limitations provided
in this Declaration and to the specific duties of the Property Trustee, the
Regular Trustees shall have exclusive and complete authority to carry out the
purposes of the Trust. An action taken by the Regular Trustees in accordance
with their powers shall constitute the act of and serve to bind the Trust and
the Holders of Securities of any applicable Series of Securities and an action
taken by the Property Trustee in accordance with its powers shall constitute the
act of and serve to bind the Trust and the Holders of Securities of any
applicable Series of Securities. In dealing with the Trustees acting on behalf
of the Trust, no Person shall be required to inquire into the authority of the
Trustees to bind the Trust or the Holders of any Securities. Persons dealing
with the Trust are entitled to rely conclusively on the power and authority of
the Trustees as set forth in this Declaration.
SECTION 3.07. Title to Property of the Trust. Except as
provided in Section 3.10 with respect to the Notes and the Property Accounts or
unless otherwise provided in this Declaration, legal title to all assets of the
Trust shall be vested in the Trust. The Holders shall not have legal title to
any part of the assets of the Trust, but shall have an individual undivided
beneficial interest in the assets of the Trust consisting of the Note associated
with the Series of Securities corresponding to the Securities held by such
Holder and the proceeds thereof.
SECTION 3.08. Powers and Duties of the Regular Trustees. The
Regular Trustees shall have the exclusive power, authority and duty to cause the
Trust, and shall cause the Trust, to engage in the following activities:
(a) to issue Securities of one or more Series of Securities,
in accordance with this Declaration; provided, however, that there
shall be no interests in the Trust other than the interests in one or
more separate Series of Securities;
(b) in connection with the issuance of Securities of any
Series of Securities, at the direction of the Sponsor, to effect or
cause to be effected the filings, and to execute or cause to be
executed the documents, set forth in Section 3.13 and to execute,
deliver and perform on behalf of the Trust the Depositary Agreement;
<PAGE> 27
20
(c) to acquire as trust assets series of Notes with the
proceeds of the sale of the Securities of the associated Series of
Securities; provided, however, that the Regular Trustees shall cause
each Note to be held of record in the name of the Property Trustee for
the benefit of the Holders of the Securities of the associated Series
of Securities;
(d) to cause the Trust to enter into such agreements and
arrangements as may be necessary or desirable in connection with the
sale of Securities of any Series of Securities to the initial
purchasers thereof and the consummation thereof, and to take all
action, and exercise all discretion, as may be necessary or desirable
in connection with the consummation thereof;
(e) to give the Sponsor and the Property Trustee prompt
written notice of the occurrence of a Special Event; provided that the
Regular Trustees shall notify the Sponsor and the Property Trustee
before taking or refraining to take any Ministerial Action in relation
to a Special Event;
(f) to establish a record date with respect to all actions to
be taken hereunder that require a record date be established, including
for the purposes of Section 316(c) of the Trust Indenture Act and with
respect to Distributions, voting rights, redemptions and exchanges, and
to issue relevant notices to Holders of the applicable Securities as to
such actions and applicable record dates;
(g) to bring or defend, pay, collect, compromise, arbitrate,
resort to legal action or otherwise adjust claims or demands of or
against the Trust ("Legal Action"), unless, pursuant to Section
3.10(e), the Property Trustee has the exclusive power to bring such
Legal Action;
(h) to employ or otherwise engage employees and agents (who
may be designated as officers with titles) and managers, contractors,
advisors and consultants and pay reasonable compensation for such
services;
(i) to cause the Trust to comply with the Trust's obligations
under the Trust Indenture Act;
(j) to give the certificate to the Property Trustee required
by Section 314(a)(4) of the Trust Indenture Act, which certificate may
be executed by any Regular Trustee;
<PAGE> 28
21
(k) to incur expenses which are necessary or incidental to
carrying out any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar
and transfer agent for Securities of any Series of Securities, the
Regular Trustees hereby initially appointing the Property Trustee for
such purposes;
(m) to take all actions and perform such duties as may be
required of the Regular Trustees pursuant to the terms of the
Securities of the applicable Series of Securities set forth in the
Declaration Supplement relating to such Series of Securities;
(n) to execute all documents or instruments, perform all
duties and powers and do all things for and on behalf of the Trust in
all matters necessary, convenient or incidental to the foregoing;
(o) to take all action which may be necessary or appropriate
for the preservation and the continuation of the Trust's valid
existence, rights, franchises and privileges as a statutory business
trust under the laws of the State of Delaware and of each other
jurisdiction in which such existence is necessary to protect the
limited liability of the Holders of Securities of any Series of
Securities or to enable the Trust to effect the purposes for which the
Trust has been created;
(p) to take all action, not inconsistent with this Declaration
or with applicable law, which the Regular Trustees determine in their
discretion to be reasonable and necessary or desirable in carrying out
the activities of the Trust as set out in this Section 3.08, in order
that:
(i) the Trust will not be deemed to be an
Investment Company required to be registered under
the Investment Company Act;
(ii) the Trust will not be classified for United
States Federal income tax purposes as an association taxable
as a corporation or a partnership and will be treated as a
grantor trust for United States Federal income tax purposes;
and
(iii) the Trust will comply with any requirements
imposed by any taxing authority on Holders of instruments
treated as indebtedness for United States Federal income tax
purposes;
<PAGE> 29
22
provided that such action does not adversely affect the interests of
Holders of Securities of any series;
(q) to take all action necessary to cause all applicable tax
returns and tax information reports that are required to be filed with
respect to the Trust to be duly prepared and filed by the Regular
Trustees, on behalf of the Trust; and
(r) subject to the requirements of Section 317(b) of the Trust
Indenture Act, to appoint one or more Paying Agents in addition to the
Property Trustee.
The Regular Trustees must exercise the powers set forth in
this Section 3.08 in a manner which is consistent with the purposes and
functions of the Trust set out in Section 3.05 and the Regular Trustees shall
not take any action which is inconsistent with the purposes and functions of the
Trust set forth in Section 3.05.
Subject to this Section 3.08, the Regular Trustees shall have
none of the powers nor any of the authority of the Property Trustee set forth in
Section 3.10.
SECTION 3.09. Prohibition of Actions by Trust and Trustees.
The Trust shall not, and the Trustees (including the Property Trustee) shall not
cause the Trust to, engage in any activity other than as required or authorized
by this Declaration. In particular, the Trust shall not, and the Trustees
(including the Property Trustee) shall not cause the Trust to:
(a) invest any proceeds received by the Trust from holding any
Note associated with any Series of Securities, but shall promptly
distribute all such proceeds to Holders of the Securities of the
associated series pursuant to the terms of this Declaration and of such
Series of Securities;
(b) acquire any assets other than as expressly provided
herein;
(c) possess Trust property for other than a Trust purpose;
(d) make any loans, other than loans represented by the Notes;
(e) possess any power or otherwise act in such a way as to
vary the Trust assets or the terms of any Series of Securities in any
way whatsoever;
(f) issue any securities or other evidences of beneficial
ownership of, or beneficial interests in,
<PAGE> 30
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the Trust other than the Securities of the Series of Securities;
(g) incur any indebtedness for borrowed money; or
(h) (i) direct the time, method and place of exercising any
trust or power conferred upon the Holders with respect to any Note
associated with any Series of Securities or the Note Guarantee or the
Preferred Guarantee, (ii) waive any past default that is waivable under
any Note associated with any Series of Securities, (iii) exercise any
right to rescind or annul any declaration that the principal of the
Note associated with any Series of Securities shall be due and payable
or (iv) consent to any amendment, modification or termination of the
Note associated with any Series of Securities or the Note Guarantee or
the Preferred Guarantee, where such consent shall be required, unless
in the case of this clause (h) the Property Trustee shall have received
an unqualified opinion of nationally recognized independent tax counsel
recognized as expert in such matters to the effect that such action
will not cause the Trust to be classified for United States Federal
income tax purposes as an association taxable as a corporation or
partnership and that the Trust will continue to be classified as a
grantor trust for United States federal income tax purposes.
SECTION 3.10. Powers and Duties of the Property Trustee. (a)
The Note associated with any Series of Securities shall be held of record in the
name of the Property Trustee in trust for the benefit of the Holders of the
Securities of such series. The right, title and interest of the Property Trustee
to the Note associated with each Series of Securities shall vest automatically
in each Person who may hereafter be appointed as Property Trustee in accordance
with Article V. Such vesting and cessation of title shall be effective whether
or not conveyancing documents have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title
and interest in the Note associated with of any Series of Securities to the
Regular Trustees or, if the Property Trustee does not also act as the Delaware
Trustee, the Delaware Trustee.
(c) The Property Trustee shall:
<PAGE> 31
24
(i) establish and maintain separate segregated non-interest
bearing bank accounts (each a "Property Account") in the name of and
under the exclusive control of the Property Trustee on behalf of the
Holders of Securities of each Series of Securities and on the receipt
of payments of funds made in respect of a Note associated with any
series held by the Property Trustee or the Note Guarantee in respect of
such Note, deposit such funds into the Property Account maintained for
such Series of Securities and Note associated therewith and, without
any further acts of the Property Trustee or the Regular Trustees,
promptly make payments to the Holders of Securities of the
corresponding Series of Securities from the Property Account in
accordance with Section 6.01. Funds in each Property Account shall be
held uninvested, and without liability for interest thereon, until
disbursed in accordance with this Declaration. Each Property Account
shall be an account which is maintained with a banking institution
whose long term unsecured indebtedness is rated by a "nationally
recognized statistical rating organization", as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act, at least equal
to (but in no event less than "A" or the equivalent) the rating
assigned to the Preferred Securities of the corresponding series by a
nationally recognized statistical rating organization;
(ii) engage in such ministerial activities as shall be
necessary or appropriate to effect promptly the redemption of
Securities of any series to the extent the Note associated with such
series is redeemed or matures; and
(iii) have the legal power, in accordance with the
instructions of Holders of a Majority in Principal Amount of the
outstanding Preferred Securities of any series if applicable, to
exercise all of the rights, powers and privileges of a Holder of the
corresponding series of Notes and the Note Guarantee and, if an Event
of Default occurs and is continuing, the Property Trustee, subject to
Section 2.06(b), shall, for the benefit of the Holders of Securities of
the applicable series, enforce its rights as Holder of the Note
relating to such series or the Note Guarantee, subject to the rights of
the Holders of such Securities pursuant to the terms of this
Declaration, the Business Trust Act and the Trust Indenture Act.
(d) The Property Trustee shall take all actions and perform
such duties as may be specifically required of the Property Trustee pursuant to
the terms of any Series of
<PAGE> 32
25
Securities set forth in the Declaration Supplement establishing such Series of
Securities.
(e) The Property Trustee shall take any Legal Action which
arises out of or in connection with an Event of Default or the Property
Trustee's duties and obligations under this Declaration, the Business Trust Act
or the Trust Indenture Act.
(f) All moneys deposited in any Property Account, and all
Notes held by the Property Trustee for the benefit of the Holders of the
Securities, will not be subject to any right, charge, security interest, lien or
claim of any kind in favor of, or for the benefit of, the Property Trustee or
its agents or their creditors.
(g) The Property Trustee shall, within 30 days after the
occurrence of a default with respect to any Series of Securities, transmit by
mail, first class postage prepaid, to the Holders of Securities of such series,
as their names and addresses appear upon the register, notice of all defaults
with respect to such Series of Securities known to the Property Trustee, unless
such defaults shall have been cured before the giving of such notice (the term
"defaults" for the purposes of this Section 3.10(g) being hereby defined to be a
Note Event of Default under the Note associated with such Series of Securities,
not including any periods of grace provided for in such Note and irrespective of
the giving of any notice provided therein); provided that, except in the case of
default in the payment of the principal of (or premium, if any) or interest on
any Note associated with any Series of Securities, the Property Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Property Trustee in good faith determines that the withholding
of such notice is in the interests of the Holders of the corresponding
Securities. The Property Trustee shall not be deemed to have knowledge of any
default, except (i) a default in the payment of principal of (or premium, if
any) or interest on any Note associated with any Series of Securities, or (ii)
any default as to which the Property Trustee shall have received written notice
or a Responsible Officer charged with the administration of this Declaration
shall have obtained written notice.
(h) The Property Trustee shall not resign as a Trustee unless
either:
(i) the Trust has been completely liquidated and the proceeds
thereof distributed to the Holders of each Series of Securities
pursuant to the terms of each such Series of Securities; or
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26
(ii) a Successor Property Trustee has been appointed and
accepted that appointment in accordance with Article V.
(i) The Property Trustee shall act as paying agent in respect
of each Series of Securities and, subject to Section 3.08(r), may authorize one
or more Persons (each, a "Paying Agent") to pay Distributions, redemption
payments or liquidation payments on behalf of the Trust with respect to
Securities of such series. Any such Paying Agent shall comply with Section
317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the
Property Trustee, after consultation with the Regular Trustees, at any time and
a successor Paying Agent or additional Paying Agents may be appointed at any
time by the Property Trustee, subject to Section 3.08(r).
(j) Subject to this Section 3.10, the Property Trustee shall
have none of the powers or the authority of the Regular Trustees set forth in
Section 3.08.
(k) The Property Trustee shall exercise the powers, duties and
rights set forth in this Section 3.10 and Section 3.12 in a manner which is
consistent with the purposes and functions of the Trust set out in Section 3.05,
and the Property Trustee shall not take any action which is inconsistent with
the purposes and functions of the Trust set forth in Section 3.05.
SECTION 3.11. Delaware Trustee. Notwithstanding any other
provision of this Declaration other than Section 5.01(a)(3), the Delaware
Trustee shall not be entitled to exercise any powers, nor shall the Delaware
Trustee have any of the duties and responsibilities of the Regular Trustees or
the Property Trustee described in this Declaration. Except as set forth in
Section 5.01(a)(3), the Delaware Trustee shall be a Trustee for the sole and
limited purpose of fulfilling the requirements of Section 3807 of the Business
Trust Act. No implied covenants or obligations shall be read into this
Declaration against the Delaware Trustee.
SECTION 3.12. Certain Rights and Duties of the Property
Trustee. (a) The Property Trustee, before the occurrence of an Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Declaration, and no implied covenants shall be read into this Declaration
against the Property Trustee. In case an Event of Default has occurred (that has
not been cured or waived pursuant to Section 2.06), the Property Trustee shall
exercise such of the rights and powers vested in it by this Declaration, and use
the same degree of care and skill in their exercise, as a prudent
<PAGE> 34
27
person would exercise or use under the circumstances in the conduct of his or
her own affairs.
(b) No provision of this Declaration shall be construed to
relieve the Property Trustee from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct,
except that:
(i) prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Property
Trustee shall be determined solely by the express provisions
of this Declaration, and the Property Trustee shall not be
liable except for the performance of such duties and
obligations as are specifically set forth in this Declaration,
and no implied covenants or obligations shall be read into
this Declaration against the Property Trustee; and
(B) in the absence of bad faith on the part of the
Property Trustee, the Property Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Property Trustee and conforming to the
requirements of this Declaration; but in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Property Trustee,
the Property Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements
of this Declaration;
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders as provided herein
relating to the time, method and place of conducting any proceeding for
any remedy available to the Property Trustee hereunder or under any
Note associated with any Series of Securities, or exercising any trust
or power conferred upon the Property Trustee under this Declaration;
and
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28
(iv) no provision of this Declaration shall require the
Property Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or
in the exercise of any of its rights or powers, if it shall have
reasonable ground for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this
Declaration or adequate indemnity against such risk or liability is not
reasonably assured to it.
(c) Subject to the provisions of Section 3.12(a) and (b):
(i) whenever in the administration of this Declaration, the
Property Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Property Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part
request and rely upon a certificate, which shall comply with the
provisions of Section 314(e) of the Trust Indenture Act, signed by any
two of the Regular Trustees or by an authorized officer of the Sponsor,
as the case may be;
(ii) the Property Trustee (A) may consult with counsel (which
may be counsel to the Sponsor or any of its Affiliates and may include
any of its employees) selected by it in good faith and with due care
and the written advice or opinion of such counsel with respect to legal
matters shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon and in accordance with such advice
and opinion and (B) shall have the right at any time to seek
instructions concerning the administration of this Declaration from any
court of competent jurisdiction;
(iii) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys and the Property Trustee shall not be
responsible for any misconduct or negligence on the part of any agent
or attorney appointed by it in good faith and with due care;
(iv) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration
at the request or direction of any Holders, unless such Holders shall
have offered to the Property Trustee reasonable
<PAGE> 36
29
security and indemnity against the costs, expenses (including
attorneys' fees and expenses) and liabilities that might be incurred by
it in complying with such request or direction; provided that nothing
contained in this clause (iv) shall relieve the Property Trustee of the
obligation, upon the occurrence of an Event of Default (which has not
been cured or waived) to exercise such of the rights and powers vested
in it by this Declaration, and to use the same degree of care and skill
in this exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs;
(v) any action taken by the Property Trustee or its agents
hereunder shall bind the Trust and the Holders of Securities of the
applicable Series of Securities and the signature of the Property
Trustee or its agents alone shall be sufficient and effective to
perform any such action; and no third party shall be required to
inquire as to the authority of the Property Trustee to so act, or as to
its compliance with any of the terms and provisions of this
Declaration, both of which shall be conclusively evidenced by the
Property Trustee's or its agent's taking such action;
(vi) the Property Trustee may rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, bond, security or other paper or document
believed by it to be genuine and to have been signed, sent or presented
by the proper party or parties; and
(vii) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, bond, security or other paper or document, but the
Property Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit.
SECTION 3.13. Registration Statement and Related Matters. In
accordance with the Original Declaration, JPM, the Regular Trustees and the
Delaware Trustee have authorized and directed, and hereby confirm the
authorization of, JPM, as the sponsor of the Trust (with appropriate changes
relating to the listing of the Preferred Securities on the American Stock
Exchange instead of the New York Stock Exchange), (i) to file with the
Commission and execute, in each case on behalf of the Trust, (a) a
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30
Registration Statement on Form S-3 (File Nos. 333-01121 and 333-01121-01) (the
"1933 Act Registration Statement") including any amendments thereto and any
further pre-effective or post-effective amendments to such Registration
Statement, relating to the registration under the Securities Act of, among other
things, the Preferred Securities and the related guarantees of such Preferred
Securities by the Sponsor and (b) a Registration Statement on Form 8-A or other
appropriate form (the "1934 Act Registration Statement") (including all
pre-effective and post-effective amendments thereto) relating to the
registration of the Preferred Securities of any series and the related
guarantees of such Preferred Securities by the Sponsor under Section 12(b) of
the Exchange Act; (ii) to file with the American Stock Exchange and execute on
behalf of the Trust a listing application and all other applications,
statements, certificates, agreements and other instruments as shall be necessary
or desirable to cause the Preferred Securities of any series to be listed on the
American Stock Exchange; (iii) to file and execute on behalf of the Trust such
applications, reports, surety bonds, irrevocable consents, appointments of
attorney for service of process and other papers and documents as shall be
necessary or desirable to register the Preferred Securities under the securities
or "Blue Sky" laws of such jurisdictions as JPM, on behalf of the Trust, may
deem necessary or desirable and (iv) to negotiate and execute on behalf of the
Trust any Underwriting Agreement. In the event that any filing referred to in
clauses (i)-(iii) above is required by the rules and regulations of the
Commission, the American Stock Exchange or state securities or blue sky laws, to
be executed on behalf of the Trust by the Trustees, the Regular Trustees, in
their capacities as Trustees of the Trust, are hereby authorized and directed to
join in any such filing and to execute on behalf of the Trust any and all of the
foregoing, it being understood that the Property Trustee and the Delaware
Trustee, in their capacities as Trustees of the Trust, shall not be required to
join in any such filing or execute on behalf of the Trust any such document
unless required by the rules and regulations of the Commission, the American
Stock Exchange or state securities or blue sky laws. In connection with all of
the foregoing, JPM and each Trustee, solely in its capacity as a Trustee of the
Trust, have constituted and appointed, and hereby confirm the appointment of
Gene A. Capello and James C.P. Berry, and each of them, as his, her or its, as
the case may be, true and lawful attorneys-in-fact, and agents, with full power
of substitution and resubstitution, for JPM or such Trustee or in JPM's or such
Trustee's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to the 1933 Act Registration
Statement and the 1934 Act Registration Statement and to file the same, with all
exhibits thereto, and other
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documents in connection therewith, with the Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as JPM or such Trustee might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his or her substitute or substitutes, shall
do or cause to be done by virtue hereof.
SECTION 3.14. Filing of Amendments to Certificate of Trust.
The Certificate of Trust as filed with the Secretary of State of the State of
Delaware on December 12, 1996 is attached hereto as Exhibit A. On or after the
date of execution of this Declaration, the Trustees shall cause the filing with
the Secretary of State of the State of Delaware of such amendments to the
Certificate of Trust as the Trustees shall deem necessary or desirable.
SECTION 3.15. Execution of Documents by Regular Trustees.
Unless otherwise determined by the Regular Trustees and except as otherwise
required by the Business Trust Act with respect to the Certificate of Trust or
otherwise, a majority of, or if there are only two, both of, the Regular
Trustees are authorized to execute and deliver on behalf of the Trust (including
on behalf of the Holders of any Securities) any documents which the Regular
Trustees have the power and authority to execute or deliver pursuant to this
Declaration.
SECTION 3.16. Trustees Not Responsible for Recitals or
Issuance of Securities. The recitals contained in this Declaration and any of
the Securities shall be taken as the statements of the Sponsor and the Trustees
do not assume any responsibility for their correctness. The Trustees make no
representations as to the value or condition of the property of the Trust or any
part thereof. The Trustees make no representations as to the validity or
sufficiency of this Declaration or any of the Securities.
SECTION 3.17. Duration of Trust. The Trust, absent termination
pursuant to the provisions of Article VIII hereof, shall have existence until
November 21, 2105.
SECTION 3.18. Assets and Liabilities Associated with Series of
Securities; Recordkeeping of Series of Securities. (a) All proceeds received by
the Trust with respect to a Note associated with a particular Series of
Securities, together with such Note, shall be deemed to be "assets associated
with" the Series of Securities relating to or associated with such Note for all
purposes and shall
<PAGE> 39
32
not be deemed to be "assets associated with" any other Series of Securities and
such assets shall be subject only to the rights of the creditors with respect to
such series. In addition, any assets, income, fees, earnings, profits or funds,
or payments and proceeds with respect thereto, that are not readily identifiable
as being associated with any Series of Securities relating to a particular Note
shall be allocated by the Property Trustee between and among one or more Series
of Securities in such manner as the Property Trustee, in its reasonable
discretion, deems fair and equitable, and such assets, income, fees, earnings,
profits or funds, or payments and proceeds with respect thereto shall be assets
associated with such series. The assets associated with a particular Series of
Securities shall be so recorded upon the books of the Trust, and shall be held
in trust for the benefit of the Holders of Securities of such series. The assets
associated with each particular Series of Securities shall be charged with the
liabilities associated with that series and with all other expenses, costs,
charges and reserves attributable to that series. Any general liabilities,
expenses, costs, charges or reserves of the Trust that are not readily
identifiable as being associated with any Series of Securities relating to a
particular Note shall be allocated and charged by the Property Trustee between
or among any one or more of the Series of Securities in such manner as the
Property Trustee, in its reasonable discretion, deems fair and equitable.
Without limitation of the foregoing provisions of this Section 3.18, but subject
to the right of the Property Trustee in its reasonable discretion to allocate
general liabilities, expenses, costs, charges or reserves as herein provided,
the debts, liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to a particular Series of Securities shall be
enforceable against the assets associated with such series only, and not against
the assets of the Trust generally or the assets associated with any other Series
of Securities. Notice of this contractual limitation on inter-series liabilities
shall be set forth in the Certificate (whether originally or by amendment), and
upon the giving of such notice in the Certificate the statutory provisions of
Section 3804 of the Business Trust Act relating to the limitations on
inter-series liabilities (and the statutory effect under such section of the
setting forth of such notice in the Certificate) shall become applicable to the
Trust and each Series of Securities. Any Person extending credit to, contracting
with, or having any claim against any Series of Securities may look only to the
assets associated with that series to satisfy or enforce any debt, liability,
obligation or expense incurred, contracted for or otherwise existing with
respect to that series. No Holder or former Holder of Securities of any Series
of Securities shall have any claim on or right to any assets allocated or
associated with any
<PAGE> 40
33
other Series of Securities (except if, and to the extent that, such Holder is
also a Holder of Securities of such other series).
(b) Separate and distinct books and records shall be
maintained by the Trust for each Series of Securities and the assets associated
with any such series shall be held and accounted for separately from the assets
of the Trust or the assets associated with any other series.
ARTICLE IV
Sponsor
SECTION 4.01. Purchase of Common Securities by Sponsor. On any
date, including on any Option Closing Date, the Sponsor shall purchase all of
the Common Securities of any series issued by the Trust at the same time as the
Preferred Securities of the corresponding series to be issued on such date are
issued, such purchase to be in such amount so that the Common Securities at all
times represent 0.001% of the total capital of the Trust and of each Series of
Securities.
SECTION 4.02. Expenses. (a) In connection with the purchase of
the Note associated with any Series of Securities by the Trust on behalf of the
Holders of Securities of such series, the Sponsor, in its capacity as Sponsor
and not as a Holder, shall be responsible for and shall pay for all debts and
obligations (other than with respect to such Series of Securities) and all costs
and expenses of the Trust (including, but not limited to, costs and expenses
relating to the organization of the Trust, the issuance of the Preferred
Securities of such series to initial purchasers thereof, the fees and expenses
(including reasonable counsel fees and expenses) of the Trustees (including any
amounts payable under Article X), the costs and expenses relating to the
operation of the Trust, including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, Paying Agent(s),
registrars, transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the disposition of Trust assets).
(b) In connection with the purchase by the Trust of the Note
associated with any Series of Securities, the Sponsor, in its capacity as
Sponsor and not as a Holder, will pay any and all taxes (other than United
States withholding taxes attributable to the Trust or its assets)
<PAGE> 41
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and all liabilities, costs and expenses with respect to such taxes of the Trust.
(c) The Sponsor's obligations under this Section 4.02 shall be
for the benefit of, and shall be enforceable by, any Person to whom any such
debts, obligations, costs, expenses and taxes are owed (a "Creditor") whether or
not such Creditor has received notice hereof. Any such Creditor may enforce the
Sponsor's obligations under this Section 4.02 directly against the Sponsor and
the Sponsor irrevocably waives any right or remedy to require that any such
Creditor take any action against the Trust or any other Person before proceeding
against the Sponsor. The Sponsor agrees to execute such additional agreements as
may be necessary or desirable in order to give full effect to the provisions of
this Section 4.02.
ARTICLE V
Trustees
SECTION 5.01. Number of Trustees; Qualifications. (a) Except
as provided in (1) below, the number of Trustees initially shall be five (5). At
any time (i) before the issuance of Securities of any Series of Securities, the
Sponsor may, by written instrument, increase or decrease the number of, and
appoint, remove and replace the, Trustees, and (ii) after the issuance of
Securities of any Series of Securities the number of Trustees may be increased
or decreased solely by, and Trustees may be appointed, removed or replaced
solely by, vote of Holders of Common Securities of all series representing a
Majority in Principal Amount of the Common Securities of all series voting as a
class; provided that in any case:
(1) the number of Trustees shall be at least five (5) unless
the Trustee that acts as the Property Trustee also acts as the Delaware
Trustee, in which case the number of Trustees shall be at least three
(3);
(2) at least a majority of the Trustees shall at all times be
officers or employees of JPM;
(3) if required by the Business Trust Act, one Trustee (the
"Delaware Trustee") shall be either a natural person who is a resident
of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware and
otherwise is permitted to act as a Trustee hereunder under the laws of
the State of Delaware,
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35
except that if the Property Trustee has its principal place of business
in the State of Delaware and otherwise is permitted to act as a Trustee
hereunder under the laws of the State of Delaware, then the Property
Trustee shall also be the Delaware Trustee and Section 3.09 shall have
no application; and
(4) there shall at all times be a Property Trustee hereunder
which shall satisfy the requirements of Section 5.01(c).
Each Trustee shall be either a natural person at least 21 years of age or a
legal entity which shall act through one or more duly appointed representatives.
(b) The initial Regular Trustees shall be:
H. Christian Raymond
Andrew G. Kerber
Susan L. McCullin
In care of J.P. Morgan & Co. Incorporated
60 Wall Street
New York, New York 10260-0060
(c) There shall at all times be one Trustee which shall act as
Property Trustee. In order to act as Property Trustee hereunder, such Trustee
shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof
or of the District of Columbia, or a corporation or Person permitted by
the Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000,
and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to
the requirements of the supervising or examining authority referred to
above, then for the purposes of this Section 5.01(c)(ii), the combined
capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published.
If at any time the Property Trustee shall cease to satisfy the
requirements of clauses (i)-(iii) above, the Property Trustee shall immediately
resign in the manner and
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36
with the effect set out in Section 5.02(d). If the Property Trustee has or shall
acquire any "conflicting interest" within the meaning of Section 310(b) of the
Trust Indenture Act, the Property Trustee and the Holders of the Common
Securities of each series (as if such Holders were the obligor referred to in
Section 310(b) of the Trust Indenture Act) shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act. The Preferred Guarantee
shall be deemed to be specifically described in this Declaration for the
purposes of clause (i) of the first proviso contained in Section 310(b) of the
Trust Indenture Act.
The initial Trustee which shall serve as the Property Trustee
is First Trust of New York, National Association, whose address is as set forth
in Section 14.01(b).
(d) The initial Trustee which shall serve as the Delaware
Trustee is Wilmington Trust Company, a Delaware banking corporation, whose
address is as set forth in Section 14.01(c).
(e) Any action taken by Holders of Common Securities pursuant
to this Article V shall be taken at a meeting of Holders of Common Securities
convened for such purpose or by written consent as provided in Section 12.02.
(f) No amendment may be made to this Section 5.01 which would
change any rights with respect to the number, existence or appointment and
removal of Trustees, except with the consent of each Holder of the Common
Securities of each series.
SECTION 5.02. Appointment, Removal and Resignation of
Trustees. (a) Subject to Section 5.02(b), Trustees may be appointed or removed
without cause at any time:
(i) until the issuance of Securities of any Series of
Securities, by written instrument executed by the Sponsor; and
(ii) after the issuance of Securities of any Series of
Securities by vote of the Holders of a Majority in Principal Amount of
Common Securities of each series voting as a class.
(b)(i) The Trustee that acts as Property Trustee shall not be
removed in accordance with Section 5.02(a) until a Successor Property
Trustee possessing the qualifications to act as Property Trustee under
Section 5.01(c) (a "Successor Property Trustee") has been appointed and
has accepted such appointment by
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37
written instrument executed by such Successor Property Trustee and
delivered to the Regular Trustees, the Sponsor and the Property Trustee
being removed; and
(ii) the Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 5.02(a) until a successor Trustee
possessing the qualifications to act as Delaware Trustee under Section
5.01(a)(3) (a "Successor Delaware Trustee") has been appointed and has
accepted such appointment by written instrument executed by such
Successor Delaware Trustee and delivered to the Regular Trustees, the
Sponsor and the Delaware Trustee being removed.
(c) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or
resignation.
(d) Any Trustee may resign from office (without need for prior
or subsequent accounting) by an instrument (a "Resignation Request") in
writing signed by the Trustee and delivered to the Sponsor and the
Trust, which resignation shall take effect upon such delivery or upon
such later date as is specified therein; provided, however, that:
(i) no such resignation of the Trustee that acts as the
Property Trustee shall be effective until a Successor Property Trustee
possessing the qualifications to act as Property Trustee under Section
5.01(c) has been appointed and has accepted such appointment by
instrument executed by such Successor Property Trustee and delivered to
the Trust, the Sponsor and the resigning Property Trustee; or
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee
has been appointed and has accepted such appointment by instrument
executed by such Successor Delaware Trustee and delivered to the Trust,
the Sponsor and the resigning Delaware Trustee.
(e) If no Successor Property Trustee or Successor Delaware
Trustee shall have been appointed and accepted appointment as provided
in this Section 5.02 within 60 days after delivery to the Sponsor and
the Trust of a Resignation Request, the resigning Property Trustee or
Delaware Trustee may petition any court of competent jurisdiction for
appointment of a Successor Property Trustee or Successor Delaware
Trustee. Such court may thereupon after such notice, if any, as it may
deem proper and prescribe, appoint a Successor Property
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Trustee or Successor Delaware Trustee, as the case may be.
(f) The Sponsor shall provide notice to the Property Trustee
of any resignation or removal of a Regular Trustee.
SECTION 5.03. Vacancies Among Trustees. If a Trustee ceases to
hold office for any reason and the number of Trustees is not reduced pursuant to
Section 5.01 or if the number of Trustees is increased pursuant to Section 5.01,
a vacancy shall occur. A resolution certifying the existence of such vacancy by
a majority of the Regular Trustees shall be conclusive evidence of the existence
of such vacancy. The vacancy shall be filled with a Trustee appointed in
accordance with the requirements of this Article V.
SECTION 5.04. Effect of Vacancies. The death, resignation,
retirement, removal, bankruptcy, dissolution, liquidation, incompetence or
incapacity to perform the duties of a Trustee, or any one of them, shall not
operate to annul the Trust. Whenever a vacancy in the number of Regular Trustees
shall occur until such vacancy is filled as provided in this Article V, the
Regular Trustees in office, regardless of their number, shall have all the
powers granted to the Regular Trustees and shall discharge all the duties
imposed upon the Regular Trustees by this Declaration.
SECTION 5.05. Meetings. Meetings of the Regular Trustees shall
be held from time to time upon the call of any Trustee. Regular meetings of the
Regular Trustees may be held at a time and place fixed by resolution of the
Regular Trustees. Notice of any in-person meeting of the Regular Trustees shall
be hand delivered or otherwise delivered in writing (including by facsimile,
with a hard copy by overnight courier) not less than 48 hours before such
meeting. Notice of any telephonic meeting of the Regular Trustees or any
committee thereof shall be hand delivered or otherwise delivered in writing
(including by facsimile, with a hard copy by overnight courier) not less than 24
hours before such meeting. Notices shall contain a brief statement of the time,
place and anticipated purposes of the meeting. The presence (whether in person
or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of
notice of such meeting except where a Regular Trustee attends a meeting for the
express purpose of objecting to the transaction of any activity on the ground
that the meeting has not been lawfully called or convened. Unless provided
otherwise in this Declaration, any action of the Regular Trustees may be taken
at a meeting by vote of a majority of the Regular Trustees present (whether in
person
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or by telephone) and eligible to vote with respect to such matter; provided that
a Quorum is present, or without a meeting by the unanimous written consent of
the Regular Trustees.
SECTION 5.06. Delegation of Power. (a) Any Regular Trustee
may, by power of attorney consistent with applicable law, delegate to any other
natural person over the age of 21 his or her power for the purpose of executing
any registration statement or amendment thereto or other document or schedule
filed with the Commission or making any other governmental filing (including,
without limitation the filings referred to in Section 3.13).
(b) The Regular Trustees shall have the power to delegate from
time to time to such of their number or to officers of the Trust or to officers
of JPM the doing of such things and the execution of such instruments either in
the name of the Trust or the names of the Regular Trustees or otherwise as the
Regular Trustees may deem expedient, to the extent such delegation is not
prohibited by applicable law or contrary to the provisions of the Trust, as set
forth herein.
ARTICLE VI
Distributions
SECTION 6.01. Distributions. Holders of Securities shall
receive periodic distributions, redemption payments and liquidation
distributions in accordance with the applicable terms of the relevant Series of
Securities ("Distributions"). Distributions shall be made to the Holders of
Securities in accordance with the terms of the applicable Securities as set
forth in the Declaration Supplement(s) relating to the applicable Series of
Securities. If and to the extent that Morgan Guaranty makes a payment of
interest, premium or principal on the Note relating to any Series of Securities
held by the Property Trustee (the amount of any such payment being a "Payment
Amount"), the Property Trustee shall and is directed to promptly make a
Distribution of the Payment Amount to Holders of Securities of the corresponding
series in accordance with the terms of such Securities as set forth in the
Declaration Supplement(s) relating to such Series of Securities.
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ARTICLE VII
Issuance of Securities
SECTION 7.01. General Provisions Regarding Securities. (a) The
Regular Trustees shall issue on behalf of the Trust Securities of one or more
separate Series of Securities in fully registered form representing undivided
beneficial interests in the Note associated with such Series of Securities held
by the Property Trustee for the benefit of Holders of Securities of such Series
of Securities in accordance with Section 7.01(b) and for the consideration
specified in Section 3.03.
(b) The Regular Trustees shall (i) issue on behalf of the
Trust Preferred Securities of a Series of Securities representing undivided
beneficial interests in the Note associated with such Series of Securities held
by the Property Trustee for the benefit of Holders of Securities of such Series
of Securities having such terms as are set forth in the Declaration Supplement
relating to such Series of Securities (the "Preferred Securities") which terms
shall be deemed incorporated by reference in, and made a part of, this
Declaration as if specifically set forth herein, and Common Securities of a
Series of Securities representing undivided beneficial interests in the Note
associated with such Series of Securities held by the Property Trustee for the
benefit of Holders of Securities of such Series of Securities having such terms
as are set forth in the Declaration Supplement relating to such Series of
Securities (the "Common Securities") which terms shall be deemed incorporated by
reference in, and made a part of, this Declaration as if specifically set forth
herein and (ii) notify the Property Trustee of the terms of any Declaration
Supplement and the planned issuance of the Securities created thereunder at
least three Business Days prior to such issuance. The Trust shall have no
securities or other interests in the assets of the Trust other than the
Securities of each Series of Securities.
(c) The Certificates shall be signed on behalf of the Trust by
the Regular Trustees (or if there are more than two Regular Trustees by any two
of the Regular Trustees). Such signatures may be the manual or facsimile
signatures of the present or any future Regular Trustee. Typographical and other
minor errors or defects in any such reproduction of any such signature shall not
affect the validity of any Certificate. In case any Regular Trustee of the Trust
who shall have signed any of the Certificates shall cease to be such Regular
Trustee before the Certificate so signed shall be delivered by the Trust, such
Certificate nevertheless may be delivered as though the person who signed such
Certificate had not ceased to be such Regular Trustee; and
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any Certificate may be signed on behalf of the Trust by such persons as, at the
actual date of the execution of such Certificate, shall be the Regular Trustees
of the Trust, although at the date of the execution and delivery of the
Declaration any such person was not such a Regular Trustee. Certificates shall
be printed, lithographed or engraved or may be produced in any other manner as
is reasonably acceptable to the Regular Trustees, as evidenced by their
execution thereof, and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements as the Regular
Trustees may deem appropriate, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Securities may be listed, or to conform to
usage. Pending the preparation of definitive Certificates, the Regular Trustees
on behalf of the Trust may execute temporary Certificates (printed, lithographed
or typewritten), in substantially the form of the definitive Certificates in
lieu of which they are issued, but with such omissions, insertions and
variations as may be appropriate for temporary Certificates, all as may be
determined by the Regular Trustees. Each temporary Certificate shall be executed
by the Regular Trustees on behalf of the Trust upon the same conditions and in
substantially the same manner, and with like effect, as definitive Certificates.
Without unnecessary delay, the Regular Trustees on behalf of the Trust will
execute and furnish definitive Certificates and thereupon any or all temporary
Certificates may be surrendered to the transfer agent and registrar in exchange
therefor (without charge to the Holders). Each Certificate whether in temporary
or definitive form shall be countersigned by the manual or facsimile signature
of an authorized signatory of the Person acting as registrar and transfer agent
for the Securities, which shall initially be the Property Trustee.
(d) The consideration received by the Trust on behalf of the
Holders of Securities of a Series of Securities for the issuance of Securities
of such series shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust.
(e) Upon issuance of Securities of any series as provided in
this Declaration, the Securities so issued shall be deemed to be validly issued,
fully paid and non-assessable.
(f) Every Person, by virtue of having become a Holder or a
Preferred Security Beneficial Owner in accordance with the terms of this
Declaration, shall be deemed to have expressly assented and agreed to the terms
of, and shall be bound by, this Declaration.
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(g) Upon issuance of Securities of any series as provided in
this Declaration, the Regular Trustees on behalf of the Trust shall return to
JPM the $10 constituting initial trust assets as set forth in the Original
Declaration.
ARTICLE VIII
Dissolution and Termination of Trust
SECTION 8.01. Dissolution and Termination of Trust. The
Trust shall dissolve when:
(i) the Securities of all of the Series of Securities shall
have been called for redemption and the amounts necessary for
redemption thereof shall have been paid to the Holders of the
Securities of each such series in accordance with the terms of the
Securities of each such series; or
(ii) upon the expiration of the term of the Trust
as set forth in Section 3.17,
and thereafter the Trustees shall, after satisfaction of all obligations of the
Trust, file a certificate of cancelation with the Secretary of State of the
State of Delaware and the Trust shall terminate. The Trustees shall so file such
a certificate as soon as practicable after the occurrence of an event referred
to in this Section 8.01.
The provisions of Sections 3.12 and 4.02 and Article X shall
survive the termination of the Trust.
ARTICLE IX
Transfer of Interests
SECTION 9.01. Transfer of Securities. (a) Securities may only
be transferred, in whole or in part, in accordance with the terms and conditions
set forth in this Declaration. Any transfer or purported transfer of any
Security not made in accordance with this Declaration shall be null and void.
(b) Subject to this Article IX, Preferred Securities shall be
freely transferable.
(c) Notwithstanding anything to the contrary in this
Declaration, Common Securities shall be non-assignable
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and non-transferable, and may only be issued to, and held by, the Sponsor.
SECTION 9.02. Transfer of Certificates. The Regular Trustees
shall cause to be kept at an office or agency to be maintained by the Trust a
register in which, subject to such reasonable regulations as it may prescribe,
the Trust shall provide for the registration of Certificates and of transfers of
Certificates, which will be effected without charge but only upon payment (with
such indemnity as the Trust may require) in respect of any tax or other
government charges which may be imposed in relation to it. The Property Trustee
will be the initial registrar and transfer agent (the "Registrar") for the
purpose of registering Certificates and transfers of Certificates as provided
herein.
Upon surrender for registration of transfer of any Certificate
at the office or agency of the Registrar, the Regular Trustees shall execute and
the Registrar shall countersign in accordance with section 7.01(c) one or more
new Certificates of any authorized denominations and of a like aggregate
Principal Amount to be issued in the name of the designated transferee or
transferees. Every Certificate surrendered for registration of transfer shall be
accompanied by a written instrument of transfer in form satisfactory to the
Trust duly executed by the Holder or such Holder's attorney duly authorized in
writing. Each Certificate surrendered for registration of transfer shall be
canceled by the Regular Trustees. A transferee of a Certificate shall be
entitled to the rights and subject to the obligations of a Holder hereunder upon
the receipt by such transferee of a Certificate. By acceptance of a Certificate,
each transferee shall be deemed to have agreed to be bound by this Declaration.
SECTION 9.03. Deemed Security Holders. The Trustees may treat
the Person in whose name any Certificate shall be registered on the books and
records of the Trust as the sole Holder of such Certificate and of the
Securities represented by such Certificate for purposes of receiving
Distributions in respect of such Securities and for all other purposes
whatsoever and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such Certificate or in the Securities represented
by such Certificate on the part of any Person, whether or not the Trustees shall
have actual or other notice thereof.
SECTION 9.04. Book Entry Interests. Unless otherwise specified
in the terms of any Series of Securities, (a) the Common Securities Certificates
of any such series will be issued in the form of one or more, fully
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registered, global Common Security Certificates of such series to be delivered
to and in the name of J.P. Morgan & Co. Incorporated by, or on behalf of, the
Trust and (b) the Preferred Securities Certificates of such series, on original
issuance (including Preferred Securities of such series, if any, issued on any
Option Closing Date pursuant to the exercise of the overallotment option set
forth in any Underwriting Agreement), will be issued in the form of one or more,
fully registered, global Preferred Security Certificates of such series (each a
"Global Certificate"), to be delivered to DTC, the initial Clearing Agency, by,
or on behalf of, the Trust. Such Global Certificates shall initially be
registered on the books and records of the Trust in the name of Cede & Co., the
nominee of DTC, and no Preferred Security Beneficial Owner of Preferred
Securities of any series will receive a definitive Preferred Security
Certificate of such series representing such Preferred Security Beneficial
Owner's interests in such Global Certificates, except as provided in Section
9.07. Unless and until definitive, fully registered Preferred Security
Certificates of a series (the "Definitive Preferred Security Certificates") have
been issued to the Preferred Security Beneficial Owners of such series pursuant
to Section 9.07:
(i) the provisions of this Section 9.04 shall be in full force
and effect;
(ii) the Trust and the Trustees shall be entitled to deal with
the Clearing Agency for all purposes of this Declaration (including the
payment of Distributions on the Global Certificates of such series and
receiving approvals, votes or consents hereunder) as the Holder of the
Preferred Securities of such series and the sole Holder of such Global
Certificates and shall have no obligation to such Preferred Security
Beneficial Owners;
(iii) to the extent that the provisions of this Section 9.04
conflict with any other provisions of this Declaration, the provisions
of this Section 9.04 shall control; and
(iv) the rights of the Preferred Security Beneficial Owners of
such series shall be exercised only through the Clearing Agency and
shall be limited to those established by law and agreements between
such Preferred Security Beneficial Owners and the Clearing Agency
and/or the Clearing Agency Participants. DTC will make book entry
transfers among the Clearing Agency Participants and receive and
transmit payments of Distributions on the Global Certificates of such
series to such Clearing Agency Participants.
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SECTION 9.05. Notices to Holders of Certificates. Whenever a
notice or other communication to the Holders of Securities of any Series of
Securities is required to be given under this Declaration, unless and until
Definitive Preferred Security Certificates of such series shall have been issued
pursuant to Section 9.07, the relevant Trustees shall give all such notices and
communications, specified herein to be given to Preferred Securities Holders of
such series, to the Clearing Agency and, with respect to any Preferred Security
Certificate of such series registered in the name of a Clearing Agency or the
nominee of a Clearing Agency, the Trustees shall, except as set forth herein
have no notice obligations to the Preferred Security Beneficial Owners of such
series.
SECTION 9.06. Appointment of Successor Clearing Agency. If any
Clearing Agency elects to discontinue its services as securities depository with
respect to the Preferred Securities of any series, the Regular Trustees may, in
their sole discretion, appoint a successor Clearing Agency with respect to the
Preferred Securities of such series.
SECTION 9.07. Definitive Preferred Securities Certificates. If
(i) a Clearing Agency elects to discontinue its services as securities
depository with respect to the Preferred Securities of any series and a
successor Clearing Agency is not appointed within 90 days after such
discontinuance pursuant to Section 9.06 or (ii) the Regular Trustees elect after
consultation with the Sponsor to terminate the book entry system through the
Clearing Agency with respect to the Preferred Securities of any series, then (x)
Definitive Preferred Security Certificates of such series shall be prepared by
the Regular Trustees on behalf of the Trust with respect to such Preferred
Securities and (y) upon surrender of the Global Certificates of such series by
the Clearing Agency, accompanied by registration instructions, the Regular
Trustees shall cause definitive Preferred Security Certificates of such series
to be delivered to Preferred Security Beneficial Owners of such series in
accordance with the instructions of the Clearing Agency. Neither the Trustees
nor the Trust shall be liable for any delay in delivery of such instructions and
each of them may conclusively rely on, and shall be protected in relying on,
such instructions.
SECTION 9.08. Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificates should be surrendered to the
Regular Trustees, or if the Regular Trustees shall receive evidence to their
satisfaction of the destruction, loss or theft of any Certificate and (b) there
shall be delivered to the Regular
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Trustees such security or indemnity as may be required by them to keep each of
them harmless, then in the absence of notice that such Certificate shall have
been acquired by a bona fide purchaser, any two Regular Trustees on behalf of
the Trust shall execute and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
denomination. In connection with the issuance of any new Certificate under this
Section 9.08, the Regular Trustees may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Certificate issued pursuant to this Section shall
constitute conclusive evidence of an ownership interest in the relevant
Securities, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
ARTICLE X
Limitation of Liability; Indemnification
SECTION 10.01 Exculpation. (a) No Indemnified Person shall be
liable, responsible or accountable in damages or otherwise to the Trust or any
Covered Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith on behalf
of the Trust and in a manner such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Declaration or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's gross
negligence (or, in the case of the Property Trustee, negligence) or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Securities of any Series of Securities might
properly be paid.
(c) Pursuant to Section 3803(a) of the Business Trust Act, the
Holders of Securities of any Series of Securities,
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in their capacities as Holders, shall be entitled to the same limitation of
personal liability that is extended to stockholders of private corporations for
profit organized under the General Corporation Law of the State of Delaware.
SECTION 10.02. Indemnification and Compensation. (a) To the
fullest extent permitted by applicable law, the Sponsor shall indemnify and hold
harmless each Indemnified Person from and against any loss, damage or claim
incurred by such Indemnified Person by reason of any act or omission performed
or omitted by such Indemnified Person in good faith on behalf of the Trust and
in a manner such Indemnified Person reasonably believed to be within the scope
of authority conferred on such Indemnified Person by this Declaration, except
that no Indemnified Person shall be entitled to be indemnified in respect of any
loss, damage or claim incurred by such Indemnified Person by reason of gross
negligence (or, in the case of the Property Trustee, negligence) or willful
misconduct with respect to such acts or omissions.
(b) To the fullest extent permitted by applicable law,
expenses (including legal fees) incurred by an Indemnified Person in defending
any claim, demand, action, suit or proceeding shall, from time to time, be
advanced by the Sponsor prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Sponsor of an undertaking by or
on behalf of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be indemnified as
authorized in Section 10.02(a).
(c) The Sponsor agrees to pay the Property Trustee and the
Delaware Trustee from time to time such compensation for all services rendered
by the Property Trustee and the Delaware Trustee hereunder as may be mutually
agreed upon in writing by the Sponsor and the Property Trustee or the Delaware
Trustee, as the case may be, and, except as otherwise expressly provided herein,
to reimburse the Property Trustee and the Delaware Trustee upon its or their
request for all reasonable expenses, disbursements and advances incurred or made
by the Property Trustee or the Delaware Trustee, as the case may be, in
accordance with the provisions of this Declaration, except any such expense,
disbursement or advance as may be attributable to its or their negligence or bad
faith.
SECTION 10.03. Outside Businesses. Any Covered Person, the
Sponsor, JPM, the Delaware Trustee and the Property Trustee may engage in or
possess an interest in other business ventures of any nature or description,
independently or with others, similar or dissimilar to the business of the
Trust, and the Trust and the Holders of
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Securities of any Series of Securities shall have no rights by virtue of this
Declaration in and to such independent ventures or the income or profits derived
therefrom, and the pursuit of any such venture, even if competitive with the
business of the Trust, shall not be deemed wrongful or improper. None of the
Covered Persons, the Sponsor, JPM, the Delaware Trustee or the Property Trustee
shall be obligated to present any particular investment or other opportunity to
the Trust even if such opportunity is of a character that, if presented to the
Trust, could be taken by the Trust, and any Covered Person, the Sponsor, JPM,
the Delaware Trustee and the Property Trustee shall have the right to take for
its own account (individually or as a partner or fiduciary) or to recommend to
others any such particular investment or other opportunity. Any Covered Person,
the Delaware Trustee and the Property Trustee may engage or be interested in any
financial or other transaction with the Sponsor or any Affiliate of the Sponsor,
or may act as depositary for, trustee or agent for, or act on any committee or
body of Holders of, securities or other obligations of the Sponsor or its
Affiliates.
ARTICLE XI
Accounting
SECTION 11.01. Fiscal Year. The fiscal year ("Fiscal Year") of
the Trust shall be the calendar year, or such other year as is required by the
Code.
SECTION 11.02. Certain Accounting Matters. (a) At all times
during the existence of the Trust, the Regular Trustees shall keep, or cause to
be kept, full books of account, records and supporting documents, which shall
reflect in reasonable detail each transaction of the Trust. The books of account
shall be maintained on the accrual method of accounting, in accordance with
generally accepted accounting principles consistently applied. The Trust shall
use the accrual method of accounting for United States Federal income tax
purposes. The books and records of the Trust, together with a copy of this
Declaration and a certified copy of the Certificate of Trust, or any amendment
thereto, shall at all times be maintained at the principal office of the Trust
and shall be open for inspection for any examination by any Holder or its duly
authorized representative for any purpose reasonably related to its interest in
the Trust during normal business hours.
(b) The Property Trustee shall prepare and mail to each Holder
of Securities an annual United States Federal income tax information statement,
on such form as is required by the Code, containing such information with
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regard to the Securities held by each Holder as is required by the Code and the
Treasury Regulations. Notwithstanding any right under the Code to deliver any
such statement at a later date, the Property Trustee shall endeavor to deliver
all such statements within 30 days after the end of each Fiscal Year of the
Trust. The Property Trustee shall deliver to the Regular Trustees records of
payments made to Holders of Securities within 20 days after the end of each
Fiscal Year of the Trust.
(c) The Regular Trustees shall cause to be prepared and filed
with the appropriate taxing authority an annual United States Federal income tax
return, on such form as is required by the Code, and any other annual income tax
returns required to be filed by the Regular Trustees on behalf of the Trust with
any state or local taxing authority, such returns to be filed as soon as
practicable after the end of each Fiscal Year of the Trust.
SECTION 11.03. Banking. The Trust shall maintain one or more
bank accounts in the name and for the sole benefit of the Trust; provided,
however, that all payments of funds in respect of any Note relating to any
Series of Securities held by the Property Trustee shall be made directly to the
Property Account for such Series of Securities and no other funds from the Trust
shall be deposited in the Property Account for such Series of Securities. The
sole signatories for such accounts shall be designated by the Regular Trustees;
provided, however, that the Property Trustee shall designate the sole
signatories for the Property Account.
SECTION 11.04. Withholding. The Trust and the Trustees shall
comply with all withholding requirements under United States Federal, state and
local law. The Regular Trustees (or their counsel) shall notify the Property
Trustee of any withholding requirements under local law. The Trust shall
request, and the Holders shall provide to the Trust, such forms or certificates
as are necessary to establish an exemption from withholding with respect to each
Holder, and any representations and forms as shall reasonably be requested by
the Trust to assist it in determining the extent of, and in fulfilling, its
withholding obligations. The Property Trustee shall file required forms with
applicable jurisdictions and, unless an exemption from withholding is properly
established by a Holder, the Property Trustee shall remit amounts withheld with
respect to the Holder to applicable jurisdictions. To the extent that the Trust
is required to withhold and pay over any amounts to any authority with respect
to distributions or allocations to any Holder, the amount withheld shall be
deemed to be a distribution in the amount of the withholding to the Holder. In
the event of any
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claimed overwithholding, Holders shall be limited to an action against the
applicable jurisdiction. If the amount to be withheld was not withheld from a
Distribution in respect of any Series of Securities, the Property Trustee may
reduce subsequent Distributions in respect of such Series of Securities by the
amount of such withholding.
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ARTICLE XII
Amendments and Meetings
SECTION 12.01. Amendments. (a) Except as otherwise provided in
this Declaration or by any applicable terms of any Series of Securities, this
Declaration may be amended by, and only by, a written instrument executed by a
majority of the Regular Trustees (or, if there are only two Regular Trustees,
both Regular Trustees); provided, however, that (i) no amendment to this
Declaration shall be made unless the Regular Trustees shall have obtained (A)
either a ruling from the Internal Revenue Service or a written unqualified
opinion of nationally recognized independent tax counsel experienced in such
matters to the effect that such amendment will not cause the Trust to be
classified for United States Federal income tax purposes as an association
taxable as a corporation or a partnership and to the effect that the Trust will
continue to be treated as a grantor trust for purposes of United States Federal
income taxation and (B) a written unqualified opinion of nationally recognized
independent counsel experienced in such matters to the effect that such
amendment will not cause the Trust to be an Investment Company which is required
to be registered under the Investment Company Act, (ii) if Securities of any
Series of Securities are outstanding, any amendment which would adversely affect
the rights, privileges or preferences of any Holder of such Securities may be
effected only after satisfaction of such additional requirements as may be set
forth in the terms of such Securities, (iii) Section 4.02, Section 9.01(c) and
this Section 12.01 shall not be amended without the consent of all Holders of
the Securities, (iv) no amendment which adversely affects the rights, powers and
privileges of the Property Trustee or the Delaware Trustee shall be made without
the consent of the Property Trustee or the Delaware Trustee, as the case may be,
(v) Article IV shall not be amended without the consent of the Sponsor, and (vi)
the rights of Holders of Common Securities under Article V to increase or
decrease the number of, and to appoint, replace or remove, Trustees shall not be
amended without the consent of each Holder of Common Securities. The Regular
Trustees shall deliver to the Property Trustee written notice of any proposed
amendment to this Declaration containing the form, or describing the terms, of
such amendment no less than three Business Days prior to the effectiveness of
such amendment.
(b) Notwithstanding Section 12.02(a)(ii), this Declaration may
be amended without the consent of the Holders of Securities of any series to (i)
cure any ambiguity, (ii) correct or supplement any provision in this Declaration
that may be defective or inconsistent with any other provision of this
Declaration, (iii) to add to the
<PAGE> 59
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covenants, restrictions or obligations of the Sponsor, and (iv) to conform to
any changes in the Investment Company Act or the trust exemption thereunder or
any change in interpretation or application of the Investment Company Act or the
trust exemption thereunder by the Commission, so long as such amendment does not
adversely affect the rights, preferences or privileges of the Holders of
Securities of any series.
(c) The Regular Trustees shall promptly furnish to each of the
Property Trustee and the Delaware Trustee a copy of each amendment to this
Declaration and each Declaration Supplement.
SECTION 12.02. Meetings of the Holders of Securities; Action
by Written Consent. (a) Meetings of the Holders of Preferred Securities of any
series and/or Common Securities of any series may be called at any time by the
Regular Trustees (or as provided in the terms of such Securities) to consider
and act on any matter on which Holders of such series or class of Securities are
entitled to act under the terms of this Declaration, the terms of such
Securities or the rules of any stock exchange on which such Preferred Securities
are listed or admitted for trading. The Regular Trustees shall call a meeting of
Holders of Preferred Securities of any series or Common Securities of any series
if directed to do so by Holders of at least 10% in Principal Amount of
Securities of such series or class. Such direction shall be given by delivering
to the Regular Trustees one or more notices in writing stating that the signing
Holders of Securities of such series or class wish to call a meeting and
indicating the general or specific purpose for which the meeting is to be
called. Any Holders of Securities of such series or class calling a meeting
shall specify in writing the Certificates held by the Holders of Securities of
such series or class exercising the right to call a meeting and only those
specified Certificates shall be counted for purposes of determining whether the
required percentage set forth in the second sentence of this paragraph has been
met.
(b) Except to the extent otherwise provided in the terms of
any Series of Securities, the following provision shall apply to meetings of
Holders of Securities of such series:
(i) Notice of any such meeting shall be given by mail to each
Trustee and all the Holders of Securities of such series having a right
to vote thereat not less than seven days nor more than 60 days prior to
the date of such meeting. Whenever a vote, consent or approval of the
Holders of Securities of any Series of Securities is permitted or
required under this Declaration or the rules of any stock exchange on
which
<PAGE> 60
53
any Preferred Securities are listed or admitted for trading, such vote,
consent or approval may be given at a meeting of the Holders of
Securities of any series. Any action that may be taken at a meeting of
the Holders of Securities of any series may be taken without a meeting
if a consent in writing setting forth the action so taken is signed by
Holders of such Securities owning not less than the minimum aggregate
Principal Amount of Securities that would be necessary to authorize or
take such action at a meeting at which all Holders of such Securities
having a right to vote thereon were present and voting. Prompt notice
of the taking of action without a meeting shall be given to the Holders
of such Securities entitled to vote who have not consented in writing.
The Regular Trustees may specify that any written ballot submitted to
the Holders of such Securities for the purpose of taking any action
without a meeting shall be returned to the Trust within the time
specified by the Regular Trustees.
(ii) Each Holder of a Security may authorize any Person to act
for it by proxy on all matters in which a Holder of a Security is
entitled to participate, including waiving notice of any meeting, or
voting or participating at a meeting. No proxy shall be valid after the
expiration of 11 months from the date thereof unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the
Holder of Security executing it. Except as otherwise provided herein or
in the terms of any Series of Securities, all matters relating to the
giving, voting or validity of proxies shall be governed by the General
Corporation Law of the State of Delaware relating to proxies and
judicial interpretations thereunder as if the Trust were a Delaware
corporation and the Holders of Securities of such Series of Securities
were stockholders of a Delaware corporation.
(iii) Each meeting of the Holders of Securities of any Series
of Securities shall be conducted by the Regular Trustees or by such
other Person that the Regular Trustees may designate.
(iv) Unless otherwise provided in the Business Trust Act, this
Declaration or the rules of any stock exchange on which any Preferred
Securities of any series are then listed or admitted for trading, the
Regular Trustees, in their sole discretion, shall establish all other
provisions relating to meetings of Holders of Securities of such
series, including notice of the time, place or purpose of any meeting
at which any matter is to be voted on by any Holders of such
Securities, waiver of any such notice, action by
<PAGE> 61
54
consent without a meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote.
ARTICLE XIII
Representations of Property Trustee
and Delaware Trustee
SECTION 13.01. Representations and Warranties of Property
Trustee. (a) The Trustee which acts as initial Property Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Property Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:
(i) The Property Trustee is a banking corporation with trust
powers, duly organized, validly existing and in good standing under the
laws of the State of its incorporation, with trust power and authority
to execute and deliver, and to carry out and perform its obligations
under the terms of, this Declaration.
(ii) The execution, delivery and performance by the Property
Trustee of this Declaration has been duly authorized by all necessary
corporate action on the part of the Property Trustee. The Declaration
has been duly executed and delivered by the Property Trustee, and
constitutes a legal, valid and binding obligation of the Property
Trustee, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, reorganization, moratorium, insolvency, and
other similar laws affecting creditors' rights generally and to general
principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding
in equity or at law).
(iii) The execution, delivery and performance of this
Declaration by the Property Trustee does not conflict with or
constitute a breach of the charter or By-laws of the Property Trustee.
(iv) No consent, approval or authorization of, or registration
with or notice to, any banking authority which supervises or regulates
the Property Trustee is required for the execution, delivery or
performance by the Property Trustee of this Declaration (including any
Declaration Supplement).
<PAGE> 62
55
(v) The Property Trustee satisfies the qualifications set
forth in Section 5.01(c).
(b) The Trustee which acts as initial Delaware Trustee
represents and warrants to the Trust and the Sponsor at the date of this
Declaration and each Declaration Supplement, and each Successor Delaware Trustee
represents and warrants to the Trust and the Sponsor at the time of the
Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee,
that it satisfies, or will satisfy, as applicable, the qualifications set forth
in Section 5.01(a)(3).
ARTICLE XIV
Miscellaneous
SECTION 14.01. Notices. All notices provided for in this
Declaration shall be in writing, duly signed by the party giving such notice,
and shall be delivered, telecopied or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at
the Trust's mailing address set forth below (or such other address as
the Regular Trustees on behalf of the Trust may give notice of to the
Property Trustee, the Delaware Trustee and the Holders of Securities of
any Series of Securities):
J.P. Morgan Index Funding Company I
In care of J.P. Morgan & Co. Incorporated
60 Wall Street
New York, New York 10260-0060
Attention of H. Christian Raymond
Andrew G. Kerber
Susan L. McCullin
Trustees
Facsimile No: (212) 648-5175
(b) if given to the Property Trustee, at the mailing address
of the Property Trustee set forth below (or such other address as the
Property Trustee may give notice of to the Trust and the Holders of
Securities of any Series of Securities):
First Trust of New York, National Association
100 Wall Street, Suite 1600
New York, New York 10005
Attention of Corporate Trust Administration
Facsimile No: (212) 809-5459
<PAGE> 63
56
(c) if given to the Delaware Trustee, at the mailing address
of the Delaware Trustee set forth below (or such other address as the
Delaware Trustee may give notice of to the Trust and the Holders of
Securities of any Series of Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention of Corporate Trust Administration
Facsimile No: (302) 651-8882
(d) if given to the Holder of Common Securities of any series,
at the mailing address of the Sponsor set forth below (or such other
address as the Holder of such Common Securities may give notice to the
Property Trustee, the Delaware Trustee and the Trust):
J.P. Morgan & Co. Incorporated
60 Wall Street
New York, New York 10260-0060
Attention of Assistant Secretary
Facsimile No: (212) 648-5175
(e) if given to any other Holder, at the address set forth on
the books and records of the Trust.
A copy of any notice to the Property Trustee or the Delaware
Trustee shall also be sent to the Trust. All notices shall be deemed to have
been given when received in person, telecopied with receipt confirmed, or mailed
by first class mail, postage prepaid except that if a notice or other document
is refused delivery or cannot be delivered because of a changed address of which
no notice was given, such notice or other document shall be deemed to have been
delivered on the date of such refusal or inability to deliver.
SECTION 14.02. Undertaking for Costs. All parties to this
Declaration agree, and each Holder of Securities of any Series of Securities by
his or her acceptance thereof shall be deemed to have agreed, that any court may
in its discretion require, in any suit for the enforcement of any right or
remedy under this Declaration, or in any suit against the Property Trustee for
any action taken or omitted by it as Property Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions
<PAGE> 64
57
of this Section 14.02 shall not apply to any suit instituted by the Property
Trustee, to any suit instituted by any Holder of Preferred Securities of any
series, or group of Holders of Preferred Securities of any series, holding more
than 10% in aggregate Principal Amount of such outstanding Preferred Securities,
or to any suit instituted by any Holder of Preferred Securities of any series
for the enforcement of the payment of the principal of (or premium, if any) or
interest on the Note associated with such Preferred Securities, on or after the
respective due dates expressed in such Note.
SECTION 14.03. Governing Law. This Declaration and the rights
of the parties hereunder shall be governed by and interpreted in accordance with
the laws of the State of Delaware and all rights and remedies shall be governed
by such laws without regard to the principles of conflict of laws of the State
of Delaware or any other jurisdiction that would call for the application of the
law of any jurisdiction other than the State of Delaware; provided, however,
that there shall not be applicable to the Trust, the Trustees or this
Declaration any provision of the laws (statutory or common) of the State of
Delaware pertaining to trusts that relate to or regulate, in a manner
inconsistent with the terms hereof (a) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges, (b)
affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (c) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (d) fees or other sums payable to trustees, officers,
agents or employees of a trust, (e) the allocation of receipts and expenditures
to income or principal, (f) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding or investing trust assets or (g)
the establishment of fiduciary or other standards of responsibility or
limitations on the acts or powers of trustees that are inconsistent with the
limitations or liabilities or authorities and powers of the Trustees as set
forth or referenced in this Declaration. Section 3540 of Title 12 of the
Delaware Code shall not apply to the Trust.
SECTION 14.04. Headings. Headings contained in this
Declaration are inserted for convenience of reference only and do not affect the
interpretation of this Declaration or any provision hereof.
SECTION 14.05. Partial Enforceability. If any provision of
this Declaration, or the application of such provision to any Person or
circumstance, shall be held invalid, the remainder of this Declaration, or the
<PAGE> 65
58
application of such provision to persons or circumstances other than those to
which it is held invalid, shall not be affected thereby.
SECTION 14.06. Counterparts. This Declaration may contain more
than one counterpart of the signature pages and this Declaration may be executed
by the affixing of the signature of the Sponsor and each of the Trustees to one
of such counterpart signature pages. All of such counterpart signature pages
shall be read as though one, and they shall have the same force and effect as
though all of the signers had signed a single signature page.
SECTION 14.07. Intention of the Parties. It is the intention
of the parties hereto that the Trust not be classified for United States Federal
income tax purposes as an association taxable as a corporation or partnership
but that the Trust be treated as a grantor trust for United States Federal
income tax purposes. The provisions of this Declaration shall be interpreted to
further this intention of the parties.
<PAGE> 66
59
SECTION 14.08. Successors and Assigns. Whenever in this
Declaration any of the parties hereto is named or referred to, the successors
and assigns of such party shall be deemed to be included, and all covenants and
agreements in this Declaration by the Sponsor and the Trustees shall bind and
inure to the benefit of their respective successors and assigns, whether so
expressed.
SECTION 14.09. Effect of Declaration Supplements. Upon the
execution of any Declaration Supplement, such Declaration Supplement shall form
a part of this Declaration for all purposes, and every Holder of Certificates
thereafter authenticated and delivered hereunder or thereunder shall be bound
hereby.
SECTION 14.10. Merger. Notwithstanding anything contained
herein to the contrary, the parties hereto hereby acknowledge that J.P. Morgan
Index Funding Company, LLC (the "LLC"), a limited liability company formed under
the laws of the State of Delaware, will be merged into the Trust, and the Trust
will be the surviving entity of such merger. The parties hereto hereby consent
to such merger. The securities issued by the LLC prior to the consummation of
the merger are the Series A Securities of the LLC. Upon the effectiveness of the
merger, such Series A Securities shall constitute a Series of Securities
hereunder, shall be designated as Series A Securities of the Trust and shall be
entitled to the benefits of the provisions contained in this Declaration,
including Section 3.18. The Note issued by Morgan Guaranty to the LLC in
connection with the issuance of the Series A Securities of the LLC together all
proceeds thereof shall be deemed to be assets associated with the Series A
Securities of the Trust.
IN WITNESS WHEREOF, the undersigned have caused these presents
to be executed as of the day and year first above written.
J.P. MORGAN & CO. INCORPORATED,
as Sponsor,
by
/s/ Gene A. Capello
Name: Gene A. Capello
Title: Vice President and
Assistant General
Counsel
H. Christian Raymond, as
Trustee,
<PAGE> 67
60
by /s/ H. Christian Raymond
------------------------------
H. Christian Raymond
Andrew G. Kerber, as Trustee,
by /s/ Andrew G. Kerber
------------------------------
Andrew G. Kerber
Susan L. McCullin, as Trustee,
by /s/ Susan L. McCullin
------------------------------
Susan L. McCullin
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION, as
Property Trustee,
by /s/ Catherine F. Donohue
------------------------------
Name: Catherine F. Donohue
Title: Vice President
WILMINGTON TRUST COMPANY, as
Delaware Trustee,
by /s/ Debra Eberly
------------------------------
Name: Debra Eberly
Title: Administrative
Account Manager
<PAGE> 68
STATE OF , )
) ss.
COUNTY OF , )
BEFORE ME, the undersigned authority, on this __ day of
October, 1997, personally appeared (on behalf of J.P. Morgan & Co.
Incorporated), H. Christian Raymond, Andrew G. Kerber and Susan McCullin, each
known to me (or proved to me by introduction upon the oath of a person known to
me) to be the person and officer, as the case may be, whose name is subscribed
to the foregoing instrument, and each acknowledged to me that he executed the
same as the act of such trust for the purposes and consideration herein
expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS day of
OCTOBER, 1997.
------------------------------
NOTARY PUBLIC, STATE OF NEW
YORK
Print Name:
Commission Expires:
<PAGE> 69
STATE OF NEW YORK, )
) ss.
COUNTY OF NEW YORK, )
BEFORE ME, the undersigned authority, on this ___day of
October, 1997, personally appeared of J.P. Morgan & Co.
Incorporated, known to me (or proved to me by introduction upon the oath of a
person known to me) to be the person and officer, as the case may be, whose name
is subscribed to the foregoing instrument, and acknowledged to me that he
executed the same as the act of such trust for the purposes and consideration
herein expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS day of
OCTOBER, 1997.
------------------------------
NOTARY PUBLIC, STATE OF NEW
YORK
Print Name:
Commission Expires:
<PAGE> 70
STATE OF NEW YORK, )
) ss.
COUNTY OF NEW YORK, )
BEFORE ME, the undersigned authority, on this ____ day of
October, 1997, personally appeared _______ of First Trust of New York, National
Association known to me (or proved to me by introduction upon the oath of a
person known to me) to be the person and officer whose names are subscribed to
the foregoing instrument, and acknowledged to me that she executed the same as
the act of such trust for the purposes and consideration herein expressed and in
the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS day of
OCTOBER, 1997.
(SEAL)
------------------------------
NOTARY PUBLIC, STATE OF NEW
YORK
Print Name:
Commission Expires:
<PAGE> 71
STATE OF DELAWARE, )
) ss.
COUNTY OF , )
BEFORE ME, the undersigned authority, on this ___ day of
October, 1997, personally appeared ________ of Wilmington Trust Company known
to me (or proved to me by introduction upon the oath of a person known to me) to
be the person and officer whose names are subscribed to the foregoing
instrument, and acknowledged to me that she executed the same as the act of such
trust for the purposes and consideration herein expressed and in the capacity
therein stated.
GIVEN UNDER MY HAND AND SEAL THIS day of
OCTOBER, 1997.
(SEAL)
------------------------------
NOTARY PUBLIC, STATE OF
DELAWARE
Print Name:
Commission Expires:
<PAGE> 72
EXHIBIT A
CERTIFICATE OF TRUST
OF
J.P. MORGAN INDEX FUNDING COMPANY I
This Certificate of Trust is being executed as of December 12,
1996 for the purpose of creating a business trust pursuant to the Delaware
Business Trust Act, 12 Del. C. Sections 3801 et seq. (the "Act").
The undersigned hereby certify as follows:
1. Name. The name of the business trust is "J.P. Morgan
Index Funding Company I" (the "Trust").
2. Delaware Trustee. The name and business address of the
Delaware resident trustee of the Trust meeting the requirements of Section 3807
of the Act are as follows:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
3. Effective Date. This Certificate of Trust shall be
effective immediately upon filing in the office of the Secretary of State of
the State of Delaware.
4. Counterparts. This Certificate of Trust may be
executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned, being all of the trustees
of the Trust, have executed this Certificate of Trust as of the day and year
first above written.
WILMINGTON TRUST COMPANY, as
Delaware Trustee,
by ______________________
Name:
Title:
<PAGE> 73
--------------------------------------
H. Christian Raymond
Trustee
--------------------------------------
Andrew G. Kerber
Trustee
--------------------------------------
Susan L. McCullin
Trustee
<PAGE> 74
EXHIBIT B
DECLARATION SUPPLEMENT DATED [ ], 199[ ]
TERMS OF
SECURITIES
Pursuant to Section 3.03 of the Amended and Restated
Declaration of Trust of J.P. Morgan Index Funding Company I (the "Trust") dated
as of October 10, 1997 (as amended from time to time, the "Declaration"), the
undersigned, as Sponsor of the Trust, and the undersigned Regular Trustees
hereby authorizes the issuance of, and establishes the designations, rights,
privileges, restrictions, preferences and other terms and provisions of a Series
of Securities as set forth below (each capitalized term used but not defined
herein having the meaning set forth in the Declaration):
1. Definitions. All capitalized terms used but not defined
herein shall have the meanings assigned to them in the Declaration. The
following additional terms have the respective meanings specified below:
"Business Day" means any day other than a day on which banking
institutions in The City of New York are permitted or required by applicable law
to close.
"Guarantee" means the Guarantee Agreement dated as of [ ],
199 , executed and delivered by JPM for the benefit of the Holders from time to
time of the Series [ ] Preferred Securities, as amended from time to time.
"Note Guarantee" means the Note Guarantee Agreement dated as
of [ ], 199_, executed and delivered by JPM for the benefit of the Property
Trustee for the benefit of the Holders from time to time of the Series [ ]
Securities, as amended from time to time.
"Principal Amount" means, initially, the face amount of the
Series [ ] Securities, and, at any time during the life of the Series [ ]
Securities, the product of (a) the face amount of the Series [ ] Securities and
(b) (i) a fraction the numerator of which shall equal the average of the
[ ] Total Return Index for the 10 consecutive trading days prior to such
time and the denominator of which shall equal the [ ] Total Return Index
on the date the Series [ ] Securities are issued minus (ii) the
<PAGE> 75
2
applicable factor, which is designed to offset the costs of issuing and hedging
the indexation of the Series [ ] Securities.
"Redemption Price" means, with respect to any date fixed for
redemption (whether pursuant to optional redemption by the Holders thereof or
otherwise) of any Series [ ] Security, the Principal Amount of such Series [ ]
Security, plus accumulated and unpaid dividends (whether or not declared) to
such date.
"Series [ ] Common Securities" has the meaning assigned to
such term in paragraph 2 hereof.
"Series [ ] Note" means the $[ ] initial principal amount
(or up to [ ] initial principal amount if and to the extent the
over-allotment option granted by the Trust to the Underwriters of the Series [ ]
Preferred Securities is exercised) Series [ ] Note due [ ] of Morgan
Guaranty and any other Notes issued in exchange for such Series [ ] Note upon
the terms and subject to the conditions set forth in Section 7(e) hereof.
"Series [ ] Preferred Securities" has the meaning assigned to
such term in paragraph 2 hereof.
"Series [ ] Securities" means the Series [ ] Preferred
Securities and the Series [ ] Common Securities.
2. Authorization and Designation. A Series of Securities,
"Series [ ] Securities", is hereby created, and (a) [ ] Preferred
Securities of Series [ ] Securities (or up to [ ] Preferred Securities of
Series [ ]Securities if and to the extent the over-allotment option granted by
the Trust to the underwriters of the Series [ ] Preferred Securities is
exercised) with a Face Amount of $[ ] per Preferred Security are hereby
authorized and designated as "Preferred Securities, Series[ ]" (hereinafter
called the "Series [ ] Preferred Securities"), and (b) [ ] Common
Securities of Series [ ] Securities with Face Amount of $[ ] per Common
Security and designated as "Common Securities, Series [ ]" (hereinafter called
the "Series [ ] Common Securities").
The Preferred Security Certificates evidencing the Series [ ]
Preferred Securities shall be substantially in the form attached hereto as Annex
I, with such changes and additions thereto or deletions therefrom as may be
required by ordinary usage, custom or practice or to conform to the rules of any
stock exchange on which the Series [ ] Preferred Securities are listed, and the
Common Security
<PAGE> 76
3
Certificates evidencing the Series [ ] Common Securities shall be substantially
in the form attached hereto as Annex II, with such changes and additions thereto
or deletions therefrom as may be required by ordinary usage, custom or practice.
The Series [ ] Common Securities are to be issued and sold to J.P. Morgan & Co.
Incorporated ("JPM") in consideration of $[ ] in cash. In connection with
the issuance and sale of the Series [ ] Securities, the Trust, on behalf of the
Holders of the Series [ ] Securities, will purchase, as trust assets, the Series
[ ] Note having an aggregate principal amount equal to the sum of the aggregate
initial Principal Amount of the Series [ ] Preferred Securities and the
aggregate Principal Amount of the Series [ ] Common Securities so issued and
bearing interest at an annual rate equal to the annual Distribution rate on the
Series [ ] Securities and having payment and redemption provisions which
correspond to the payment and redemption provisions of the Series [ ]
Securities. The Series [ ] Note and the proceeds thereof shall be deemed to be
"associated with" the Series [ ] Securities.
3. Distributions. (a) Distributions payable on each Series [ ]
Security will be [describe method of determination thereof] [fixed at a rate per
annum of [ ]% (the "Coupon Rate")] of the [Face Amount] [Principal Amount] of
the Series [ ] Securities. The term "Distributions" as used in these terms means
such periodic cash distributions and any such interest payable unless otherwise
stated. A Distribution on the Series [ ] Securities will be made by the Property
Trustee only to the extent that interest payments are made in respect of the
Series [ ] Notes held by the Property Trustee. The amount of dividends payable
for any full quarterly dividend period shall be computed on the basis of a
360-day year of twelve 30-day months and, for any period shorter than a full
quarterly dividend period, shall be computed on the basis of a 360-day year of
twelve 30-day months and on the basis of the actual number of days elapsed (but
never greater than 30) in any period shorter than a month.
(b) Distributions on the Series [ ] Preferred Securities will
be [noncumulative] [cumulative], will accrue from [ ] and will be payable
quarterly in arrears, on the last calendar day of each March, June, September
and December of each year commencing on [ ], except as otherwise described
below, but only if and to the extent that interest payments are made in respect
of the Series [ ] Notes held by the Property Trustee.
(c) Distributions on the Series [ ] Securities will be payable
promptly by the Property Trustee (or other Paying Agent) upon receipt of
immediately available funds to
<PAGE> 77
4
the Holders thereof as they appear on the books and records of the Trust on the
relevant record dates. While the Series [ ] Preferred Securities remain in
book-entry only form, the relevant record dates shall be one Business Day prior
to the relevant Distribution date, and if the Series [ ] Preferred Securities
are no longer in book-entry only form, the relevant record dates will be
selected by the [Sponsor] [Regular Trustee] but shall be at least one Business
Day prior to the relevant Distribution date, which record and payment dates
correspond to the record and payment dates for the Series [ ] Note.
Distributions payable on the Series [ ] Securities that are not punctually paid
on any Distribution payment date as a result of Morgan Guaranty having failed to
make the corresponding interest payment on the Series [ ] Note will forthwith
cease to be payable to the Person in whose name such Series [ ] Security is
registered on the relevant record date, and such defaulted Distribution will
instead be payable to the Person in whose name such Series [ ] Security is
registered on the special record date established by the Regular Trustees, which
record date shall correspond to the special record date. Subject to any
applicable laws and regulations and the provisions of the Declaration, each
payment in respect of the Series [ ] Securities will be made as described in
paragraph 10 hereof. If any date on which Distributions are payable on the
Series [ ] Securities is not a Business Day, then payment of the Distribution
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay)
except that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date.
(d) All Distributions paid with respect to the Series [ ]
Preferred Securities and the Series [ ] Common Securities will be paid pro rata
to the Holders thereof entitled thereto. If an Event of Default has occurred and
is continuing, the Series [ ] Preferred Securities shall have a priority over
the Series [ ] Common Securities with respect to Distributions.
(e) In the event that there is any money or other property
held by or for the Trust on behalf of the Holders of the Series [ ] Securities
that is not accounted for under the Declaration, such money or property shall be
distributed pro rata among the Holders of the Series [ ] Preferred Securities
and the Series [ ] Common Securities.
4. Ranking; Liquidation. (a) Subject to the last paragraph of this paragraph 4,
the Series [ ] Preferred Securities shall, with respect to dividend rights
<PAGE> 78
5
and rights on dissolution of the Trust, rank pari passu with the Series [ ]
Common Securities.
(b) In the event of any voluntary or involuntary dissolution
of the Trust, the Holders of the Series [ ] Preferred Securities and the Series
[ ] Common Securities at the date of the dissolution will be entitled to receive
pro rata solely out of the assets of the Trust available for distribution to
Holders of Series [ ] Preferred Securities and Series [ ] Common Securities
which assets shall consist solely of the Series [ ] Note and the proceeds
thereof, after paying or making reasonable provision to pay all claims and
obligations of the Trust associated with the Series [ ] Securities in
accordance with Section 3808(e) of the Business Trust Act, an amount equal to
the aggregate of the Principal Amount of such Series [ ] Preferred Security
and Series [ ] Common Security plus accrued and unpaid Distributions thereon
to the date of payment (such amount being the "Liquidation Distribution"). No
Holder of any Security of any Series of Securities other than the Series [ ]
Securities shall have any rights to the Series [ ] Note or the proceeds thereof
or any payments relating to the Series [ ] Note. The Holders of the Series [ ]
Securities shall have rights to no asset of the Trust other than the Series [ ]
Note and the proceeds thereof and shall receive Distributions on the Series [ ]
Securities only to the extent that payments on the Series [ ] Note have been
made by Morgan Guaranty.
If, upon any such dissolution, the Liquidation Distribution
can be paid only in part because the Trust has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Series [ ] Preferred Securities and the Series [ ]
Common Securities shall be paid, subject to the next paragraph, on a pro rata
basis.
Holders of Series [ ] Common Securities will be entitled to
receive dividends or Liquidation Distributions upon any such payment or
dissolution pro rata with Holders of Series [ ] Preferred Securities, except
that, if an Event of Default has occurred and is continuing, the Series [ ]
Preferred Securities shall have a priority over the Series [ ] Common Securities
with respect to such dividends or Liquidation Distribution.
5. Redemption or Exchange. (a) The Series [ ] Securities shall
be redeemable at the option of the Holders thereof, in whole or in part on each
[anniversary of Stated Maturity] prior to the stated maturity thereof, beginning
[ ], 199 , upon not less than 22 Business Days but no more than 32
Business Days notice to DTC (which shall notify the Trust which shall promptly
notify the Property Trustee),
<PAGE> 79
6
at the Redemption Price. The Series [ ] Preferred Securities and the Series [ ]
Common Securities shall be redeemed on a pro-rata basis as described in
paragraph 5(d) hereof.
(b) If there shall have occurred after [ ], 199 , a
change in any applicable U.S. law or regulation or in the interpretation thereof
(including but not limited to the enactment or imminent enactment of any
legislation, the publication of any judicial decisions, regulatory rulings,
regulatory procedures, or notices or announcements (including notices or
announcements of intent to adopt such procedures or regulations), or a change in
the official position or in the interpretation of any law or regulation by any
legislative body, court, governmental authority or regulatory body, irrespective
of the manner in which such change is made known) (any such change relating to
taxes, a "Tax Event" and, any such change relating to the Investment Company
Act, an "Investment Company Event" and, together with a Tax Event, a "Special
Event"), and the Trust and JPM shall have been advised by legal counsel (which
counsel shall not be an employee of JPM or the Trust) that, as a result of such
change, there exists more than an insubstantial risk that (i) (A) Morgan
Guaranty will be precluded from deducting the interest paid on the Series [ ]
Note for federal income tax purposes, (B) the Trust will be subject to federal
income tax with respect to the interest received on the Series [ ] Note, (C) the
contingent principal in excess of the Face Amount of the Series [ ] Preferred
Securities (if any) payable on Series [ ] Note is not or would not be deductible
by Morgan Guaranty for federal income tax purposes or (D) the Trust is or would
be subject to more than a de minimis amount of other taxes, duties or other
governmental charges or (ii) the Trust is or will be considered an "investment
company" that is required to be registered under the Investment Company Act,
then within 90 days following the occurrence and during the continuance of any
such Special Event, JPM shall have the right to direct Morgan Guaranty to redeem
the Series [ ] Note in whole or in an amount sufficient to cause the
discontinuance of such Special Event, in either case in cash, or, in the case of
a Tax Event, to allow the Series [ ] Note to remain outstanding and to indemnify
the Trust for any taxes payable by the Trust as a result of such Tax Event. In
the event that Morgan Guaranty shall redeem the Series [ ] Note, the Trust will
redeem at the Redemption Price a principal amount of the Series [ ] Preferred
Securities and the related Series [ ] Common Securities equal to the principal
amount of the Series [ ] Note so redeemed. If a Tax Event shall have occurred
and be continuing and JPM shall have elected to allow the Series [ ] Note to
remain outstanding and provided that the Trust shall received indemnification by
JPM for all taxes payable
<PAGE> 80
7
by the Trust as a result of such Tax Event, then the Trust may allow the Series
[ ] Preferred Securities and the related Series [ ] Common Securities to remain
outstanding.
(c) The Series [ ] Securities shall be redeemed at the
Redemption Price with the proceeds from the repayment by Morgan Guaranty when
due of the Series [ ] Note or upon any redemption by Morgan Guaranty of such
Series [ ] Note pursuant to the terms thereof.
(d) If fewer than all the outstanding Series [ ] Preferred
Securities and Series [ ] Common Securities are to be so redeemed, the Series
[ ] Preferred Securities and the Series [ ] Common Securities will be redeemed
pro rata, it being understood that Series [ ] Preferred Securities held of
record by a Clearing Agency or nominee will be redeemed as described in
paragraph 5(f)(ii) below. If a partial redemption would result in the delisting
of the Series [ ] Preferred Securities by any national securities exchange or
other organization on which the Series [ ] Preferred Securities are then listed,
the Trust will only redeem the Series [ ] Securities in whole.
(e) The Trust may not redeem fewer than all the outstanding
Series [ ] Securities unless all accrued and unpaid Distributions have been paid
on all Series [ ] Securities for all quarterly distribution periods terminating
on or prior to the date of redemption.
(f)(i) Notice of any redemption of the Series [ ] Securities
(a "Redemption/Distribution Notice") will be given by the Regular Trustees on
behalf of the Trust by mail to each Holder of Series [ ] Securities to be
redeemed or exchanged not less than 30 nor more than 60 days prior to the date
fixed for redemption or exchange thereof. For purposes of the calculation of the
date of redemption or exchange and the dates on which notices are given pursuant
to this paragraph (f)(i), a Redemption/Distribution Notice shall be deemed to be
given on the day such notice is first mailed by first-class mail, postage
prepaid, to Holders of Series [ ] Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of Series [ ] Securities at the address
of each such Holder appearing in the books and records of the Trust. No defect
in the Redemption/ Distribution Notice or in the mailing of either thereof with
respect to any Holder shall affect the validity of the redemption or exchange
proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Series
[ ] Securities are to be redeemed, the Series [ ] Securities to be redeemed will
be redeemed pro rata from each Holder of Series [ ] Securities (subject to
<PAGE> 81
8
adjustment to eliminate fractional Securities), it being understood that, in
respect of Series [ ] Preferred Securities registered in the name of and held of
record by DTC (or a successor Clearing Agency) or any other nominee, the Series
[ ] Preferred Securities will be redeemed from, and the distribution of the
proceeds of such redemption will be made to, each Clearing Agency Participant
(or person on whose behalf such nominee holds such securities) in accordance
with the procedures applied by such agency or nominee.
(iii) If the Trust gives or any Holder of Series [ ]
Securities gives the Regular Trustees, on behalf of the Trust, a
Redemption/Distribution Notice in respect of a redemption of Series [ ]
Securities as provided in this paragraph 5 (which notice will be irrevocable)
then (A) while the Series [ ] Preferred Securities are in book-entry only form,
by 12:00 noon, New York City time, on the redemption date, provided that Morgan
Guaranty has paid the Property Trustee in immediately available funds a
sufficient amount of cash in connection with the related redemption or maturity
of the Series [ ] Note, the Property Trustee will deposit irrevocably with DTC
(or any successor Clearing Agency) funds sufficient to pay the applicable
Redemption Price with respect to the Series [ ] Preferred Securities and will
give DTC (or any successor Clearing Agency) irrevocable instructions and
authority to pay the Redemption Price to the Holders of the Series [ ] Preferred
Securities and (B) if the Series [ ] Preferred Securities are issued in
definitive form and, in any event with respect to the Series [ ] Common
Securities, and in either case provided that Morgan Guaranty has paid the
Property Trustee in immediately available funds a sufficient amount of cash in
connection with the related redemption or maturity of the Series [ ] Note, the
Property Trustee will pay the relevant Redemption Price to the Holders of such
Series [ ] Securities by check mailed to the address of the relevant Holder
appearing on the books and records of the Trust on the redemption date. If a
Redemption/Distribution Notice shall have been given and funds deposited as
required, if applicable, then immediately prior to the close of business on the
redemption date, Distributions will cease to accrue on the Series [ ] Securities
called for redemption, such Series [ ] Securities will no longer be deemed to be
outstanding and all rights of Holders of such Series [ ] Securities so called
for redemption will cease, except the right of the Holders of such Series [ ]
Securities to receive the Redemption Price, but without interest on such
Redemption Price. Neither the Trustees nor the Trust shall be required to
register or cause to be registered the transfer of any Series [ ] Securities
which have been so called for redemption. If any date fixed for redemption of
Series [ ] Securities is not a Business Day, then payment of the
<PAGE> 82
9
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay) except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date fixed for
redemption. If payment of the Redemption Price in respect of Series [ ]
Securities is improperly withheld or refused and not paid either by the Property
Trustee or, in the case of the Series [ ] Preferred Securities, pursuant to the
Guarantee, by JPM, Distributions on such Series [ ] Securities will continue to
accrue at the Coupon Rate, from the original redemption date to the date of
payment, in which case the actual payment date will be considered the date fixed
for redemption for purposes of calculating the Redemption Price.
(iv) Redemption/Distribution Notices shall be sent by the
Regular Trustees on behalf of the Trust (x) in the case of the Series [ ]
Preferred Securities, to DTC or its nominee (or any successor Clearing Agency or
its nominee) if the Global Certificates have been issued or, if Definitive
Preferred Security Certificates have been issued, to the Holders of the Series
[ ] Preferred Securities and (y) in the case of the Series [ ] Common
Securities, to the Holders of the Series [ ] Common Securities.
(v) Subject to the foregoing and applicable law (including,
without limitation, United States Federal securities laws), JPM or any of its
subsidiaries may at any time and from time to time purchase outstanding Series
[ ] Preferred Securities by tender, in the open market or by private agreement.
6. Voting Rights. (a) Except as shall be otherwise established
herein and except as otherwise required by the Business Trust Act, (i) the
Holders of the Series [ ] Preferred Securities shall have, with respect to
such Series [ ]Preferred Securities, no right or power to vote on any question
or matter or in any proceeding or to be represented at, or to receive notice of,
any meeting of Holders and (ii) all voting rights of the Trust shall be vested
exclusively in the Holders of the Series [ ] Common Securities. The Series
[ ] Common Securities shall entitle the Holders of Series [ ] Common
Securities to vote in proportion to their percentage ownership interest in the
Trust upon all matters upon which Series [ ] Common Members have the right to
vote. All Holders of Series [ ] Common Securities shall have the right to vote
separately as a class on any matter on which the Holders of Series [ ] Common
Securities have the right to vote regardless of the voting rights of any other
Holder.
<PAGE> 83
10
(b) Subject to paragraph 5(e), if (i) the Trust fails to pay
dividends or other distributions in full on the Series [ ] Securities for 30
days following the date on which such payment was due in accordance with the
terms of the Series [ ] Securities; or (ii) an Event of Default (as defined in
the Series [ ] Note) occurs and is continuing with respect to such Note, then
the Holders holding a Majority in Principal Amount of the outstanding Series [ ]
Preferred Securities, acting as a single class, will be entitled to cause the
Trust, by written direction to the Property Trustee, (A) to waive any such Event
of Default and its consequences or to enforce the Trust's rights under the
Series [ ] Note against Morgan Guaranty, (B) in the case of clause (i) above,
declare and pay dividends or other distributions on the Series [ ] Securities;
provided that any such payments or other distributions shall be paid solely from
the proceeds of dividend or other payments made on the Series [ ] Note and
received by the Trust on behalf of the Holders of the Series [ ] Securities and
(C) in the case of clause (ii) above, to waive any such Event of Default and its
consequences or to enforce the Trust's rights under the Note Guarantee with
respect to the Series [ ] Securities. For purposes of determining whether the
Trust has failed to pay dividends in full within 30 days of the applicable
payment date, dividends or other distributions shall be deemed to remain in
arrears, notwithstanding any payments in respect thereof, until full cumulative
dividends or other distributions have been or contemporaneously are declared and
paid with respect to all dividend or other distribution periods terminating on
or prior to the date of payment of such full cumulative dividends or other
distributions. Not later than 30 days after the right to vote arises, the
Property Trustee will solicit such vote. If the Property Trustee fails to
solicit such vote within such 30-day period, the Holders holding 10% in
Principal Amount of the outstanding Series [ ] Preferred Securities, acting as a
single class, will be entitled to convene such meeting. Any such voting rights
shall cease immediately if, in the case of clause (i) above, the Trust shall
have paid in full all accumulated and unpaid dividends or other distributions on
the Series [ ] Securities or if, in the case of clause (ii) above, such default
of Morgan Guaranty shall have been cured or waived. Subject to paragraph 5(e),
Holders of the Series [ ] Preferred Securities may, by vote of at least a
Majority in Principal Amount of the Series [ ] Preferred Securities direct the
time, method and place of conducting any proceeding for any remedy available to
the Property Trustee, or exercising any trust or power conferred upon the
Property Trustee.
(c) If any resolution is proposed to be adopted by the Holders
providing for, or the Regular Trustees propose to take, any action to effect:
<PAGE> 84
11
(i) any variation or abrogation of the powers, preferences and
special rights of the Series [ ] Securities by way of amendment of this
Declaration or otherwise, which variation or abrogation adversely
affects the Holders of Series [ ] Securities,
(ii) the dissolution of the Trust, or
(iii) the commencement of any bankruptcy, insolvency,
reorganization or other similar proceeding involving the Trust,
then, in the case of any resolution or action described in clause (i) above, the
Holders holding outstanding Series [ ] Securities and, in the case of any
resolution or action described in clause (ii) or (iii) above, the Holders
holding any outstanding Series of Securities will be entitled to vote together
as a class on such resolution or action of the Sponsor (but not any other
resolution or action) and such resolution or action shall not be effective
except with the approval of the Holders holding a Majority in Principal Amount
of all outstanding Securities or the Series [ ] Securities, as applicable;
provided that no such resolution or action shall, without the consent of each
Holder of Securities of any series affected thereby, (1) change the terms of the
Securities established pursuant to paragraphs 2, 3, 4, 5 or 14 hereof in a
manner adverse to such Holder, (2) reduce the stated percentage of Principal
Amount necessary to approve such resolution or action or (3) amend the
provisions of this paragraph 5(c); provided further, however, that no such
approval shall be required under clauses (i) and (ii) if the dissolution of the
Trust is proposed or initiated upon the occurrence of any of the events
specified in Section 8.01 of the Declaration. The powers, preferences or special
rights of the Series [ ] Securities will be deemed not to be varied by the
creation or issuance of, and no vote will be required for the creation or
issuance of, any Securities of any other series.
(d) Notwithstanding that Holders of the Series [ ] Preferred
Securities are entitled to vote or consent under any of the circumstances
described above, any of the Series [ ] Preferred Securities that are owned by
JPM or by any entity directly or indirectly controlling or controlled by or
under indirect or direct common control with JPM, shall not be entitled to vote
or consent and shall, for the purposes of such vote or consent, be treated as if
they were not outstanding.
(e) The right of any Holder of the Series [ ] Securities to
receive payment of Distributions on the Series [ ] Securities in accordance with
this Declaration
<PAGE> 85
12
Supplement and the Declaration on or after the respective payment dates
therefor, or to institute suit for the enforcement of any such payment on or
after such payment dates, shall not be impaired without the consent of such
Holder.
(f) A waiver of a Series [ ] Note Event of Default by the
Property Trustee at the written direction of the Holders of the Series [ ]
Securities constitutes a waiver of the corresponding Event of Default in respect
of the Series [ ] Securities; provided that if the Series [ ] Note Event of
Default is not waivable under the Series [ ] Note, then the Event of Default in
respect of the Series [ ] Securities shall also not be waivable.
(g)(i) Morgan Guaranty and the Property Trustee may, without
the consent of the Holders of any Preferred Securities, enter into
senior notes supplemental to any Note relating to any Series of
Securities for, among others, one or more of the following purposes:
(x) to evidence the succession of another person to, and the assumption
by such successor of, Morgan Guaranty's obligations under such Note;
(y) to add covenants of Morgan Guaranty, or surrender any rights of
Morgan Guaranty, for the benefit of the Property Trustee; and (z) to
cure any ambiguity, or correct any inconsistency in, such Note. Morgan
Guaranty and the Trust, with the consent of the Holders of not less
than a Majority in Principal Amount of the outstanding Preferred
Securities of any series may modify the Note relating to such Series of
Securities, provided that no such modification may, without the consent
of the Holders of all outstanding Preferred Securities affected
thereby, (w) reduce the amount of Preferred Securities of such series
the Holders of which must consent to any amendment, supplement or
waiver of such Note; (x) reduce the rate of or extend the time for the
payment of interest on the Note; (y) alter the method of calculation
of, or reduce, the amount paid at stated maturity or extend the stated
maturity of such Note (other than pursuant to the terms of such Note)
or (z) make such Note payable in money or property other than that
stated in such Note.
(ii) The Note Guarantee with respect to a Series of Securities
may be amended only with the prior approval of the Property Trustee
acting on behalf of the Holders of the Securities of such Series of
Securities; provided that no such amendment shall adversely affect the
Holders of the Preferred Securities of any Series of Securities without
the consent of a Majority in Principal Amount of the Preferred
Securities of such affected Series of
<PAGE> 86
13
Securities, with Holders of Preferred Securities of each such affected
series voting as a single and separate class. All guarantees and
agreements contained in the Note Guarantee shall bind the successors,
assignees, receivers, trustees and representatives of JPM and shall
inure to the benefit of the Property Trustee, for the benefit of
Holders of the Securities of each Series of Securities, as the holder
of each Note then outstanding.
(iii) Except with respect of any changes that do not adversely
affect the rights of Holders of the Preferred Securities of any series
(in which case no vote will be required), the Preferred Guarantee may
be amended only with the prior approval of the Holders of not less than
a Majority in Principal Amount of the outstanding Preferred Securities
of each affected series, with Holders of Preferred Securities of each
such affected series voting as a single and separate class. All
guarantees and agreements contained in any Preferred Guarantee shall
bind the successors, assignees, receivers, trustees and representatives
of JPM and shall inure to the benefit of the Holders of the Preferred
Securities of the applicable series then outstanding.
(iv) The procedures and mechanisms for implementing any such
modification to any Note, Note Guarantee or Preferred Guarantee shall
be identical to the procedures and mechanisms set forth in paragraph
(b) above and in the following paragraph.
Any required approval or direction of Holders of any class of
Series [ ] Securities may be given at a separate meeting of Holders of
such class of Series [ ] Securities convened for such purpose, at a
meeting of all of the Holders of Securities or pursuant to written
consent. The Regular Trustees will cause a notice of any meeting at
which Holders of any class of Series [ ] Securities are entitled to
vote, or of any matter upon which action by written consent of such
Holders is to be taken, to be mailed to each Holder of record of such
class of Series [ ] Preferred Securities. Each such notice will include
a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are
entitled to vote or of such matter upon which written consent is sought
and (iii) instructions for the delivery of proxies or consents.
No vote or consent of the Holders of Series [ ] Securities
will be required for the Trust to redeem and
<PAGE> 87
14
cancel Series [ ] Securities in accordance with the Declaration.
(h) A Note Event of Default under a Note associated with any
particular Series of Securities or an Event of Default under the Declaration in
respect of such Series of Securities shall not constitute a Note Event of
Default under a Note associated with any other Series of Securities or an Event
of Default under the Declaration in respect of any other Series of Securities
and shall not prohibit payments in respect of such other Series of Securities.
Payments in respect of principal of or interest on a Note, the Note Guarantee or
the Guarantee, in each case associated with a particular Series of Securities
shall be for the sole benefit of the Holders of Securities of such Series of
Securities.
Except as provided in this paragraph 6, Holders of the Series
[ ] Preferred Securities will have no rights to increase or decrease the number
of Trustees or to appoint, remove or replace a Trustee, which voting rights are
vested solely in the Holders of the Series [ ] Common Securities.
7. Pro Rata Treatment. A reference in these terms of the
Series [ ] Securities to any payment, distribution or treatment as being "pro
rata" shall mean pro rata to each Holder of Series [ ] Securities according to
the aggregate Principal Amount of the Series [ ] Preferred Securities or the
Series [ ] Common Securities, as the case may be, held by the relevant Holder in
relation to the aggregate Principal Amount of all Series [ ] Common Securities
and all Series [ ] Preferred Securities outstanding unless, in relation to a
payment, an Event of Default has occurred and is continuing, in which case any
funds available to make such payment shall be paid first to each Holder of the
Series [ ] Preferred Securities pro rata according to the aggregate Principal
Amount of Series [ ] Preferred Securities held by the relevant Holder relative
to the aggregate Principal Amount of all Series [ ] Preferred Securities
outstanding, and only after satisfaction of all amounts owed to the Holders of
the Series [ ] Preferred Securities, to each Holder of Series [ ] Common
Securities pro rata according to the aggregate Principal Amount of Series [ ]
Common Securities held by the relevant Holder relative to the aggregate
Principal Amount of all Series [ ] Common Securities outstanding.
8. Ranking. The Series [ ] Preferred Securities rank pari
passu and payment thereon will be made pro rata with the Series [ ] Common
Securities except that where an Event of Default occurs and is continuing, the
rights of Holders of Series [ ] Preferred Securities to payment in respect of
Distributions and payments upon liquidation,
<PAGE> 88
15
redemption or otherwise rank prior to the rights of Holders of the Series [ ]
Common Securities to such payments
9. Mergers, Consolidations or Amalgamations. The Trust may not
consolidate, amalgamate, merge with or into, or be replaced by, or sell,
transfer or lease all or substantially all its properties and assets to, any
Person.
10. Transfer, Exchange, Method of Payments. Payment of
Distributions and payments on redemption of the Series [ ] Securities will be
payable, the transfer of the Series [ ] Preferred Securities will be
registrable, and Series [ ] Securities will be exchangeable for Series [ ]
Securities of other denominations of the applicable class and of a like
aggregate Principal Amount at the principal corporate trust office of the
Property Trustee in The City of New York; provided that payment of Distributions
may be made at the option of the Regular Trustees on behalf of the Trust on
behalf of the Holders of Series [ ] Securities by check mailed to the address of
the Persons entitled thereto and that the payment on redemption of any Series [
] Security will be made only upon surrender of such Series [ ] Security to the
Property Trustee. Notwithstanding anything to the contrary set forth herein, the
Series [ ] Common Securities shall not be transferable or assignable by the
Holders thereof.
11. Acceptance of Agreements. Each Holder of Series [ ]
Securities, by the acceptance thereof, agrees to the provisions of the Note
Guarantee, including the subordination provisions therein, and the Series [ ]
Note and in the case of Holders of Series [ ] Preferred Securities, the
Guarantee, including the subordination provisions therein.
12. No Preemptive Rights. The Holders of Series [ ] Securities
shall have no preemptive rights to subscribe to any additional Series [ ]
Securities or any Securities of any other series.
13. Miscellaneous. These terms shall constitute a part of the
Declaration. The Trust will provide a copy of the Declaration and the Series [ ]
Note to a Holder without charge on written request to the Trust at its principal
place of business.
14. Sinking Fund. The Series [ ] Securities [shall] [shall
not] be subject to the operation of a retirement or sinking fund.
15. Guarantee of Liabilities. It shall be a condition
precedent to the issuance of the Series [ ] Securities that JPM execute the
Guarantee.
<PAGE> 89
16
16. Authorization of Agreements. The Sponsor, on behalf of
the Trust, may enter into and perform the Underwriting Agreement without any
further act, vote or approval of any Holder.
17. Registrar and Transfer Agent. The Sponsor hereby
appoints First Trust of New York, National Association as its initial registrar,
transfer agent and Paying Agent for the Series [ ] Securities.
18. Governing Law. This Declaration Supplement shall be
governed by and construed in accordance with the laws of the State of Delaware
without giving effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, the undersigned Sponsor of the Trust has
hereto set its hands as of the day and year first above written.
J.P. MORGAN & CO.
INCORPORATED, as Sponsor,
By:______________________
Name:
Title: Regular Trustee
By:______________________
Name:
Title: Regular Trustee
By:______________________
Name:
Title: Regular Trustee
<PAGE> 90
ANNEX I
IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE
INSERT--THIS PREFERRED SECURITY IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF
THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS PREFERRED SECURITY IS
EXCHANGEABLE FOR PREFERRED SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
DECLARATION AND NO TRANSFER OF THIS PREFERRED SECURITY (OTHER THAN A TRANSFER OF
THIS PREFERRED SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF
DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED
CIRCUMSTANCES.
UNLESS THIS PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY TO THE TRUST OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY PREFERRED SECURITY ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC OR ANY SUCCESSOR DEPOSITARY AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC OR ANY SUCCESSOR DEPOSITARY, ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL, SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
Preferred Securities _______________
Number ________________
CUSIP NO. _____________
<PAGE> 91
Certificate Evidencing Preferred Securities
of
J.P. Morgan Index Funding Company I
[ ]% Series [ ] Preferred Securities
J.P. Morgan Index Funding Company I, a statutory business
trust created under the laws of the State of Delaware (the "Trust"), hereby
certifies that [ ] (the "Holder") is the registered owner of [ ] preferred
securities of the Trust representing undivided beneficial interests in certain
assets of the Trust designated the [ ]% Preferred Securities, Series [ ] (the
"Preferred Securities"). The transfer of Preferred Securities is registrable on
the books and records of the Trust, in person or by a duly authorized attorney,
upon surrender of this certificate duly endorsed and in proper form for
registration of transfer. The designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred Securities are set
forth in, and this certificate and the Preferred Securities represented hereby
are issued and shall in all respects be subject to the terms and provisions of,
the Amended and Restated Declaration of Trust of the Trust dated as of October
10, 1997, as the same may be amended from time to time or supplemented by a
Declaration Supplement (the "Declaration"), including the designation of the
terms of Preferred Securities as set forth in a Declaration Supplement. The
Preferred Securities and the related Common Securities issued by the Trust
pursuant to the Declaration represent undivided beneficial interests in certain
assets of the Trust, specifically (a) the Note associated with the Preferred
Securities and the related Common Securities (the "Note") issued by Morgan
Guaranty Trust Company of New York ("Morgan Guaranty"), a trust company with
full banking powers organized under the laws of the State of New York and a
wholly owned subsidiary of J.P. Morgan & Co. Incorporated, a Delaware
corporation ("JPM"), to the Property Trustee for the benefit of the Holders of
the Preferred Securities and the related Common Securities and (b) the proceeds
of the Note. The Holder is entitled to the benefits of the Guarantee Agreement
of JPM dated as of [ ], 199_ (the "Guarantee"), to the extent provided therein
and is
<PAGE> 92
2
entitled to direct the Property Trustee (as defined in the Declaration) to
enforce its rights under the Note to the extent provided therein. The Trust will
furnish a copy of the Declaration, the Guarantee and the Note Guarantee (as
defined below) to the Holder without charge, upon written request to the Trust,
at its principal place of business or registered office.
The Holder of this Certificate, by accepting this Certificate,
is deemed to have agreed to the terms of (i) the Note related to the Preferred
Securities and (ii) the Guarantee and the Note Guarantee Agreement dated as of [
], 199_, executed and delivered by JPM for the benefit of the Property Trustee
for the benefit of the Holders of the Preferred Securities and the related
Common Securities (the "Note Guarantee"), including that each of the Guarantee
and the Note Guarantee is subordinate and junior in right of payment to all
other indebtedness, liabilities and obligations of JPM and pari passu with the
most senior preferred or preference stock of any series now or hereafter issued
by JPM and pari passu with any guarantee now or hereafter entered into by JPM in
respect of any preferred or preference stock or interest of any affiliate of
JPM, as and to the extent provided in the Guarantee or the Note Guarantee, as
applicable.
<PAGE> 93
3
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, the Trustees of the Trust have executed
this certificate this day of , 199 .
----- ----------
J.P. MORGAN INDEX FUNDING
COMPANY I,
by
-----------------------------------
Name:
Title: Trustee
by
------------------------------------
Name:
Title: Trustee
Dated:
Countersigned and Registered:
First Trust of New York, National Association, as
Transfer Agent and Registrar
By:
--------------------------
Authorized Officer
<PAGE> 94
4
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Preferred Security Certificate on the
books of the Trust. The agent may substitute another to act
for him or her.
Date:
Signature:
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE> 95
Annex II
THIS CERTIFICATE MAY NOT BE TRANSFERRED
Certificate Number of Common Securities
Certificate Evidencing Common Securities
of
J.P. Morgan Index Funding Company I
[ ]% Series [ ] Common Securities
J.P. Morgan Index Funding Company I, a statutory business
trust formed under the laws of the State of Delaware (the "Trust"), hereby
certifies that J.P. Morgan & Co. Incorporated (the "Holder") is the registered
owner of [ ] common securities of the Trust representing undivided beneficial
interests in certain assets of the Trust designated the "[ ]% Common Securities"
(the "Common Securities"). The transfer of Common Securities is registrable on
the books and records of the Trust, in person or by a duly authorized attorney,
upon surrender of this certificate duly endorsed and in proper form for
registration of transfer and satisfaction of the other conditions set forth in
the Declaration (as defined below) including, without limitation, Section
9.01(c) thereof. The designations, rights, privileges, restrictions, preferences
and other terms and provisions of the Common Securities are set forth in, and
this certificate and the Common Securities represented hereby are issued and
shall in all respects be subject to the terms and provisions of, the Amended and
Restated Declaration of Trust of the Trust dated as of October 10, 1997, as the
same may be amended from time to time or supplemented by a Declaration
Supplement (the "Declaration"), including the designation of the terms of Common
Securities as set forth in a Declaration Supplement. The Common Securities and
the related Preferred Securities issued by the Trust pursuant to the Declaration
represent undivided beneficial interests in certain assets of the Trust,
specifically (a) the Note associated with the Common
<PAGE> 96
2
Securities and the related Preferred Securities (the "Note") issued by Morgan
Guaranty Trust Company of New York ("Morgan Guaranty"), a trust company with
full banking powers organized under the laws of the State of New York and a
wholly owned subsidiary of J.P. Morgan & Co. Incorporated, a Delaware
corporation ("JPM"), to the Property Trustee for the benefit of the Holders of
the Common Securities and the related Preferred Securities and (b) the proceeds
of the Note. The Trust will furnish a copy of the Declaration and the Note
Guarantee (as defined below) to the Holder without charge upon written request
to the Trust at its principal place of business or registered office.
The Holder of this Certificate, by accepting this Certificate,
is deemed to have agreed to the terms of the (i) Note related to the Common
Securities and (ii) the Note Guarantee Agreement dated as of [ ],
199_, executed and delivered by JPM for the benefit of the Property Trustee for
the benefit of the Holders of the Common Securities and the related Preferred
Securities (the "Note Guarantee"), including that the Note Guarantee is
subordinate and junior in right of payment of all other indebtedness,
liabilities and obligations of JPM and pari passu with the most senior preferred
or preference stock of any series now or hereafter issued by JPM and pari passu
with any guarantee now or hereafter entered into by JPM in respect of any
Preferred or preference stock or interest of any affiliate of JPM, as and to the
extent provided in the Note Guarantee.
<PAGE> 97
3
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, the Trustees of the Trust have executed
this certificate this [ ] day of [ ] 199_.
J.P. MORGAN INDEX FUNDING
COMPANY I,
by_________________________,
Name:
Title: Trustee
by_________________________,
Name:
Title: Trustee
Dated:
Countersigned and Registered:
First Trust of New York, National Association
Transfer Agent and Registrar
by_____________________________
Authorized Officer
<PAGE> 98
4
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
___________________________________________________________
___________________________________________________________
___________________________________________________________
(Insert assignee's social security or tax identification
number)
___________________________________________________________
___________________________________________________________
___________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
___________________________________________________________
___________________________________________________________
___________________________________________________________
agent to transfer this Common Security Certificate on the
books of the Trust. The agent may substitute another to act
for him or her.
Date: _____________________
Signature: _________________________
(Sign exactly as your name appears on the other side of this
Common Security Certificate)
<PAGE> 1
EXHIBIT 4(b)(1)
[FORM OF] AMENDED AND RESTATED GUARANTEE AGREEMENT
[FORM OF] AMENDED AND RESTATED GUARANTE
AGREEMENT (this "Guarantee Agreement"),
dated as of , 199[ ],
executed and delivered by J.P. Morgan &
Co. Incorporated, a Delaware corporatio
("J.P. Morgan") and First Trust of New
York, National Association, as the
initial Guarantee Trustee (as defined
below) for the benefit of the Holders
(as defined below) from time to time of
the Preferred Securities (as defined
below) of J.P. Morgan Index Funding
Company I, a Delaware statutory busines
trust (the "Trust"), successor by merge
to J.P. Morgan Index Funding Company,
LLC, a Delaware limited liability
company (the "Company").
WHEREAS, the Company issued its common limited liability
company interests, Series [A] (the "Common Securities") to and received related
capital contributions from J.P. Morgan and J.P. Morgan Ventures Corporation
("JPM Ventures"), and issued and sold preferred limited liability company
interests, Series [A] (the "Preferred Securities"; the Preferred Securities and
the Common Securities collectively referred to herein as the "Series [A]
Securities") with such rights, preferences, privileges, limitations and
restrictions as were set forth in a written resolution or resolutions (a
"Written Action") by the managing members of the Company providing for the issue
of such series;
WHEREAS, the Company purchased a Related Note (as defined
below) from Morgan Guaranty Trust Company of New York, a trust company with full
banking powers organized under the laws of the State of New York ("Morgan
Guaranty") with the proceeds from such issuance and sale of the Preferred
Securities and the Common Securities; and
WHEREAS, J.P. Morgan irrevocably and unconditionally agreed to
the extent set forth in the Guarantee Agreement dated as [ ], 199[ ] (the
"Original Guarantee Agreement") to pay to the Holders of the Preferred
Securities the Guarantee Payments (as defined therein) and to make certain other
payments on the terms and conditions set forth therein.
<PAGE> 2
2
WHEREAS, pursuant to an Agreement and Plan of Merger dated as
of [ ], 199[ ], the Company has been merged into the Trust;
WHEREAS, J.P. Morgan desires to amend and restate the Original
Guarantee Agreement in order to subject it to the provisions of the Trust
Indenture Act (as defined below), including to appoint an indenture trustee
(hereunder, and pursuant to Section 5.02 of the Original Guarantee Agreement,
such amendment may be effectuated without the consent of the Holders of the
Series [A] Securities;
NOW, THEREFORE, J.P. Morgan executes and delivers
this Guarantee Agreement for the benefit of the Holders.
ARTICLE I
Definitions
(a) Capitalized terms used in this Guarantee Agreement but not
defined in the preamble above have the respective meanings assigned to them in
this Article I.
(b) A term defined anywhere in this Guarantee Agreement has
the same meaning throughout.
(c) All references to "the Guarantee Agreement" or "this
Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented
or amended from time to time.
(d) All references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified.
(e) A term defined in the Trust Indenture Act has the same
meaning when used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires.
(f) A reference to the singular includes the
plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule
405 of the Securities Act of 1933, as amended, or any successor rule thereunder.
"Commission" means the Securities and Exchange Commission.
<PAGE> 3
3
"Common Securities" means the securities representing
undivided beneficial interests in the Related Note held by the Property Trustee
for the benefit of the Holders of the Series [A] Securities, and having the
terms set forth in the Written Action.
"Covered Person" means any Holder of Preferred Securities.
"Declaration" means the Amended and Restated Declaration of
Trust dated as of October 10, 1997 among J.P. Morgan, as Sponsor, and the
trustees of the Trust.
"Distributions" means the periodic distributions and other
payments payable to Holders of Preferred Securities in accordance with the terms
of the Preferred Securities set forth in the Written Action.
"Event of Default" means a default by J.P. Morgan
on any of its payment or other obligations under this
Guarantee Agreement.
"Guarantee Payments" means, with respect to the Preferred
Securities, the following payments, without duplication, to the extent not paid
by the Trust: (i) any accumulated and unpaid distributions which have been
theretofore declared on the Preferred Securities, to the extent Morgan Guaranty
has made a corresponding payment on the Related Note, out of funds legally
available therefor, (ii) the Preferred Redemption Price (including all
accumulated and unpaid distributions), to the extent Morgan Guaranty has made a
corresponding payment on the Related Note, payable out of funds legally
available therefor with respect to any Preferred Securities called for
redemption upon redemption thereof and (iii) upon the liquidation of the Trust,
the lesser of (a) the Liquidation Distribution (as defined below) with respect
to such series and (b) the amount of the assets of the Trust consisting of the
Related Note and the proceeds thereof, legally available for distribution to
Holders of Preferred Securities of such series in liquidation.
"Guarantee Trustee" means First Trust of New York, National
Association until a Successor Guarantee Trustee has been appointed and accepted
such appointment pursuant to the terms of this Guarantee Agreement and
thereafter means each such Successor Guarantee Trustee.
<PAGE> 4
4
"Holder" means any Person from time to time holding any
Preferred Securities; provided, however, that in determining whether the Holders
of the requisite percentage of Preferred Securities have given any request,
notice, consent or waiver hereunder, "Holder" shall not include J.P. Morgan or
any entity directly or indirectly controlling or controlled by or under direct
or indirect common control with J.P. Morgan.
"Indemnified Person" means the Guarantee Trustee, any
Affiliate of the Guarantee Trustee, and any officers, directors, shareholders,
members, partners, employees, representatives or agents of the Guarantee
Trustee.
"Liquidation Distribution" means, with respect to the
Preferred Securities, the aggregate Principal Amount of the Preferred Securities
and all accumulated and unpaid distributions (whether or not declared) with
respect to the Preferred Securities to but excluding the date of payment.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Redemption Price" means, with respect to the
Preferred Securities, the aggregate Principal Amount of all the Preferred
Securities plus accumulated and unpaid distributions (whether or not declared)
with respect to the Preferred Securities to but excluding the date of
redemption.
"Preferred Securities" has the meaning set forth
in the first WHEREAS clause above.
"Principal Amount" means, at any time with respect to any
Preferred Security, the Redemption Value, the applicable Early Redemption Value
or the stated liquidation preference thereof, as applicable, as determined in
accordance with the Written Consent.
"Property Trustee" means the Person acting as
Property Trustee under the Declaration.
"Related Note" means the obligation of Morgan Guaranty in
which the proceeds from the issuance of the
<PAGE> 5
5
Preferred Securities and the related Common Securities were invested. The
Related Note shall be deemed to be "associated with" the Series [A] Securities.
"Responsible Officer" means, with respect to the Guarantee
Trustee, the chairman of the board of directors, the president, any
vice-president, any assistant vice-president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer or any other officer of the Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.
"Series of Securities" means any series of Preferred
Securities and the related series of Common Securities including the Series [A]
Securities.
"Successor Guarantee Trustee" means a successor Guarantee
Trustee possessing the qualifications to act as a Guarantee Trustee under
Section 4.01.
"Trust Indenture Act" means the Trust Indenture
Act of 1939, as amended.
ARTICLE II
Trust Indenture Act
SECTION 2.01. Trust Indenture Act; Application. (a) This
Guarantee Agreement is subject to the provisions of the Trust Indenture Act that
are required to be part of this Guarantee Agreement and shall, to the extent
applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
(c) The application of the Trust Indenture Act to this
Guarantee Agreement shall not affect the nature of the Preferred Securities as
equity securities representing
<PAGE> 6
6
undivided beneficial interests in the relevant Related Note held by the Trust.
SECTION 2.02. Lists of Holders of Preferred Securities. (a)
J.P. Morgan shall provide the Guarantee Trustee with such information as is
required under Section 312(a) of the Trust Indenture Act at the times and in the
manner provided in Section 312(a).
(b) The Guarantee Trustee shall comply with its obligations
under Sections 310(b), 311 and 312(b) of the Trust Indenture Act.
SECTION 2.03. Reports by the Guarantee Trustee. Within 60 days
after May 15 of each year, the Guarantee Trustee shall provide to the Holders of
the Preferred Securities such reports as are required by Section 313 of the
Trust Indenture Act, if any, in the form, in the manner and at the times
provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.04. Periodic Reports to the Guarantee Trustee. J.P.
Morgan shall provide to the Guarantee Trustee, the Commission and the Holders of
the Preferred Securities, as applicable, such documents, reports and information
as required by Section 314(a)(1)-(3) (if any) of the Trust Indenture Act and the
compliance certificates required by Section 314(a)(4) and (c) of the Trust
Indenture Act, any such certificates to be provided in the form, in the manner
and at the times required by Section 314(a)(4) and (c) of the Trust Indenture
Act (provided that any certificate to be provided pursuant to Section 314(a)(4)
of the Trust Indenture Act shall be provided within 120 days of the end of each
fiscal year of the Trust).
SECTION 2.05. Evidence of Compliance with Conditions
Precedent. J.P. Morgan shall provide the Guarantee Trustee such evidence of
compliance with any conditions precedent, if any, provided for in this Guarantee
Agreement which relate to any of the matters set forth in Section 314(c) of the
Trust Indenture Act. Any certificate or opinion required to be given pursuant to
Section 314(c) shall comply with Section 314(e) of the Trust Indenture Act.
SECTION 2.06. Events of Default; Waiver. (a) Subject to
Section 2.06(b), Holders of Preferred
<PAGE> 7
7
Securities may by vote of at least a majority in Principal Amount of the
Preferred Securities, (A) direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee, or exercising any
trust or power conferred upon by the Guarantee Trustee, in either case with
respect to the Series [A] Securities or (B) on behalf of the Holders of all
Preferred Securities waive any past Event of Default with respect to the Series
[A] Securities and its consequences. Upon such waiver, any such default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default (with
respect to the Series [A] Securities or any other series of securities) or
impair any right consequent thereon.
(b) The right of any Holder of Preferred Securities to receive
payment of the Guarantee Payments in accordance with this Guarantee Agreement,
or to institute suit for the enforcement of any such payment, shall not be
impaired without the consent of each such Holder.
SECTION 2.07. Disclosure of Information. The disclosure of
information as to the names and addresses of the Holders of the Preferred
Securities in accordance with Section 312 of the Trust Indenture Act, regardless
of the source from which such information was derived, shall not be deemed to be
a violation of any existing law, or any law hereafter enacted which does not
specifically refer to Section 312 of the Trust Indenture Act, nor shall the
Guarantee Trustee be held accountable by reason of mailing any material pursuant
to a request made under Section 312(b) of the Trust Indenture Act.
SECTION 2.08. Conflicting Interest. The Declaration shall be
deemed to be specifically described in this Guarantee Agreement for the purposes
of clause (i) of the first proviso contained in Section 310(b) of the Trust
Indenture Act.
<PAGE> 8
8
ARTICLE III
Powers, Duties and Rights of Guarantee Trustee
SECTION 3.01. Powers and Duties of the Guarantee Trustee. (a)
This Guarantee Agreement shall be held by the Guarantee Trustee in trust for the
benefit of the Holders of the Preferred Securities. The Guarantee Trustee shall
not transfer its right, title and interest in this Guarantee Agreement to any
Person except a Successor Guarantee Trustee on acceptance by such Successor
Guarantee Trustee of its appointment to act as Guarantee Trustee or to a Holder
of Preferred Securities exercising his or her rights pursuant to Section 5.04.
The right, title and interest of the Guarantee Trustee to this Guarantee
Agreement shall vest automatically in each Person who may hereafter be appointed
as Guarantee Trustee in accordance with Article IV. Such vesting and cessation
of title shall be effective whether or not conveyancing documents have been
executed and delivered.
(b) If an Event of Default with respect to the Preferred
Securities occurs and is continuing, the Guarantee Trustee shall enforce this
Guarantee Agreement for the benefit of the Holders of the Preferred Securities.
(c) This Guarantee Agreement and all moneys received by the
Property Trustee hereunder in respect of the Guarantee Payments will not be
subject to any right, charge, security interest, lien or claim of any kind in
favor of, or for the benefit of the Guarantee Trustee or its agents or their
creditors.
(d) The Guarantee Trustee shall, within 30 days after the
occurrence of an Event of Default with respect to the Preferred Securities,
transmit by mail, first class postage prepaid, to the Holders of the Preferred
Securities, as their names and addresses appear upon the register, notice of all
Events of Default known to the Guarantee Trustee, unless such defaults shall
have been cured before the giving of such notice; provided, that, the Guarantee
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee, or a trust committee of directors
and/or Responsible Officers, of the Guarantee Trustee in good faith determine
that the withholding of such notice is in the interests of the Holders of the
Preferred Securities. The Guarantee Trustee shall not be deemed to have
knowledge of any default except any default as to which the Guarantee Trustee
shall
<PAGE> 9
9
have received written notice or a Responsible Officer charged with the
administration of the Guarantee Agreement shall have obtained written notice.
(e) The Guarantee Trustee shall not resign as a Trustee unless
a Successor Guarantee Trustee has been appointed and accepted that appointment
in accordance with Article IV.
SECTION 3.02. Certain Rights and Duties of the Guarantee
Trustee. (a) The Guarantee Trustee, before the occurrence of an Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Guarantee Agreement, and no implied covenants shall be read into this Guarantee
Agreement against the Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.06(a)), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
this conduct of his or her own affairs.
(b) No provision of this Guarantee Agreement shall be
construed to relieve the Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act or its own wilful misconduct, except
that:
(i) prior to the occurrence of an Event of Default
and after the curing or waiving of all such Events of
Default that may have occurred;
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express provisions
of this Guarantee Agreement, and the Guarantee Trustee shall
not be liable except for the performance of such duties and
obligations as are specifically set forth in this Guarantee
Agreement, and no implied covenants or obligations shall be
read into this Guarantee Agreement against the Guarantee
Trustee; and
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively
rely, as to the truth of the statements and the correctness of
the opinions
<PAGE> 10
10
expressed therein, upon any certificates or opinions furnished
to the Guarantee Trustee and conforming to the requirements of
this Guarantee Agreement; but in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Guarantee
Trustee, the Guarantee Trustee shall be under a duty to
examine the same to determine whether or not they conform to
the requirements of this Guarantee Agreement;
(ii) the Guarantee Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the
Guarantee Trustee, unless it shall be proved that the Guarantee Trustee
was negligent in ascertaining the pertinent facts;
(iii) the Guarantee Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of Preferred Securities as
provided herein relating to the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee, or
exercising any trust or power conferred upon the Guarantee Trustee
under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require
the Guarantee Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of its duties or
in the exercise of any of its rights or powers, if it shall have
reasonable ground for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this
Guarantee Agreement or adequate indemnity against such risk or
liability is not reasonably assured to it.
<PAGE> 11
11
(c) Subject to the provisions of Section 3.02(a) and (b):
(i) whenever in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter
be proved or established prior to taking, suffering or omitting any
action hereunder, the Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on its
part, request and rely upon a certificate, which shall comply with the
provisions of Section 314(e) of the Trust Indenture Act, signed by any
authorized officer of J.P. Morgan;
(ii) the Guarantee Trustee (A) may consult with counsel of its
choice (which may be counsel to J.P. Morgan or any of its Affiliates
and may include any of its employees) selected by it in good faith and
with due care and the written advice or opinion of such counsel with
respect to legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon and in accordance with
such advice and opinion and (B) shall have the right at any time to
seek instructions concerning the administration of this Guarantee
Agreement from any court of competent jurisdiction;
(iii) the Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys and the Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any agent
or attorney appointed by it in good faith and with due care;
(iv) the Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
Agreement at the request or direction of any Holders of Preferred
Securities, unless such Holders shall have offered to the Guarantee
Trustee reasonable security and indemnity against the costs, expenses
(including its attorneys' fees and expenses) and liabilities that might
be incurred by it in complying with such request or direction; provided
that nothing contained in this clause (iv) shall relieve the Guarantee
Trustee of the obligation, upon the occurrence of an Event of Default
(which has not
<PAGE> 12
12
been cured or waived) to exercise such of the rights and powers vested
in it by this Guarantee Agreement, and to use the same degree of care
and skill in this exercise, as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs; and
(v) any action taken by the Guarantee Trustee or its agents
hereunder shall bind the Holders of any affected series of Preferred
Securities and the signature of the Guarantee Trustee or its agents
alone shall be sufficient and effective to perform any such action; and
no third party shall be required to inquire as to the authority of the
Guarantee Trustee to so act, or as to its compliance with any of the
terms and provisions of this Guarantee Agreement, both of which shall
be conclusively evidenced by the Guarantee Trustee's or its agent's
taking such action.
SECTION 3.03. Not Responsible for Recitals or Issuance of
Guarantee Agreement. The recitals contained in this Guarantee Agreement shall be
taken as the statements of J.P. Morgan and the Guarantee Trustee does not assume
any responsibility for their correctness. The Guarantee Trustee makes no
representations as to the validity or sufficiency of this Guarantee Agreement.
ARTICLE IV
Guarantee Trustee
SECTION 4.01. Qualifications. (a) There shall at all times be
a Guarantee Trustee which shall:
(i) not be an Affiliate of J.P. Morgan; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof
or of the District of Columbia, or a corporation or Person permitted by
the Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000,
and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority. If such corporation
publishes reports of condition at
<PAGE> 13
13
least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then for the
purposes of this Section 4.01(a)(ii), the combined capital and surplus
of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.
If at any time the Guarantee Trustee shall cease to satisfy
the requirements of clauses (i)-(ii) above, the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.02. If
the Guarantee Trustee has or shall acquire any "conflicting interest" within the
meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and
J.P. Morgan shall in all respects comply with the provisions of Section 310(b)
of the Trust Indenture Act.
SECTION 4.02. Appointment, Removal and Resignation of
Guarantee Trustee. (a) Subject to Section 4.02(b), the Guarantee Trustee may be
appointed or removed without cause at any time by J.P. Morgan.
(b) The Guarantee Trustee shall not be removed in accordance
with Section 4.02(a) until a Successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 4.01(a) has been
appointed and has accepted such appointment by written instrument executed by
such Successor Guarantee Trustee and delivered to J.P.
Morgan and the Guarantee Trustee being removed.
(c) The Guarantee Trustee appointed to office shall hold
office until his successor shall have been appointed or until its removal or
resignation.
(d) The Guarantee Trustee may resign from office (without need
for prior or subsequent accounting) by an instrument (a "Resignation Request")
in writing signed by the Guarantee Trustee and delivered to J.P. Morgan, which
resignation shall take effect upon such delivery or upon such later date as is
specified therein; provided, however, that no such resignation of the Guarantee
Trustee shall be effective until a Successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 4.01(a) has been
appointed and has accepted such appointment by instrument executed by such
Successor Guarantee Trustee and delivered to J.P. Morgan and the resigning
Guarantee Trustee.
<PAGE> 14
14
(e) If no Successor Guarantee Trustee shall have been
appointed and accepted appointed as provided in this Section 4.02 within 60 days
after delivery to J.P. Morgan of a Resignation Request, the resigning Guarantee
Trustee may petition any court of competent jurisdiction for appointment of a
Successor Guarantee Trustee. Such court may thereupon after such notice, if any,
as it may deem proper and prescribe, appoint a Successor Guarantee Trustee.
ARTICLE V
Guarantee
SECTION 5.01. Guarantee. J.P. Morgan irrevocably and
unconditionally agrees, to the extent set forth herein, to pay in full to the
Holders of the Preferred Securities the Guarantee Payments with respect to the
Preferred Securities, as and when due (except to the extent paid by the Trust),
regardless of any defense, right of set-off or counterclaim which the Trust may
have or assert. This Guarantee Agreement is continuing, irrevocable,
unconditional and absolute.
SECTION 5.02. Waiver of Notice. J.P. Morgan hereby waives
notice of acceptance of this Guarantee Agreement and of any liability to which
it applies or may apply, presentment, demand for payment, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
SECTION 5.03. Obligations Not Affected. The obligations,
covenants, agreements and duties of J.P. Morgan under this Guarantee Agreement
shall in no way be affected or impaired by reason of the happening from time to
time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Trust of any express or implied
agreement, covenant, term or condition relating to the Preferred
Securities to be performed or observed by the Trust;
(b) the extension of time for the payment by the Trust of all
or any portion of the distributions, Preferred Redemption Price,
liquidation distributions
<PAGE> 15
15
or any other sums payable under the terms of the Preferred Securities
or the extension of time for the performance of any other obligation
under, arising out of, or in connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the
terms of the Preferred Securities, or any action on the part of the
Trust granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings
affecting, the Trust or any of the assets of the Trust;
(e) any invalidity of, or defect or deficiency in, any of the
Preferred Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstances whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it
being the intent of this Section 5.03 that the obligations of J.P.
Morgan hereunder shall be absolute and unconditional under any and all
circumstances.
There shall be no obligation of the Holders to give notice to, or obtain consent
of, J.P. Morgan with respect to the happening of any of the foregoing.
SECTION 5.04. Enforcement of Guarantee Agreement. J.P. Morgan
and the Guarantee Trustee expressly acknowledge that (i) this Guarantee
Agreement will be deposited with the Guarantee Trustee to be held for the
benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this
Guarantee Agreement on behalf of the Holders; (iii) Holders representing not
less than a majority in Principal Amount of the Preferred Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available in respect of this Guarantee Agreement with respect to the
Preferred Securities including the giving of directions to the Guarantee
Trustee, or exercising any trust
<PAGE> 16
16
or other power conferred upon the Guarantee Trustee under this Guarantee
Agreement, and (iv) if the Guarantee Trustee fails to enforce this Guarantee
Agreement with respect to the Preferred Securities, any Holder of the Preferred
Securities may institute a legal proceeding directly against J.P. Morgan to
enforce its rights under this Guarantee Agreement, without first instituting a
legal proceeding against the Trust, the Guarantee Trustee, or any other Person.
SECTION 5.05. Guarantee of Payment. This is a guarantee of
payment and not of collection. This Guarantee Agreement will not be discharged
except by payment of the Guarantee Payments in full (without duplication of
amounts theretofore paid by the Trust).
SECTION 5.06. Subrogation. J.P. Morgan shall be subrogated to
all (if any) rights of the Holders against the Trust in respect of any amounts
paid to the Holders by J.P. Morgan under this Guarantee Agreement and the Trust
shall not be required to make payment to the Holders of any amount of Guarantee
Payments in respect of which payment has theretofore been made by J.P. Morgan
pursuant to Section 5.01 hereof; provided, however, that J.P. Morgan shall not
(except to the extent required by mandatory provisions of law) exercise any
rights which it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of a payment under
this Guarantee Agreement, if, at the time of any such payment, any amounts are
due and unpaid under this Guarantee Agreement. If any amount shall be paid to
J.P. Morgan in violation of the preceding sentence, J.P. Morgan agrees to pay
over such amount to the Holders for application to the Guarantee Payments then
due hereunder, if any, or to offset payments due to the Holders by the Trust.
SECTION 5.07. Independent Obligations. J.P. Morgan
acknowledges that its obligations hereunder are independent of the obligations
of the Trust with respect to the Preferred Securities and that J.P. Morgan shall
be liable as principal and sole debtor hereunder to make Guarantee Payments
pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence
of any event referred to in subsections (a) through (g), inclusive, of Section
5.03 hereof.
ARTICLE VI
<PAGE> 17
17
Limitation of Transactions; Subordination
SECTION 6.01. Limitation of Transactions. So long as any
Preferred Securities remain outstanding, J.P. Morgan shall: (i) not cause or
permit any Common Securities to be transferred; (ii) maintain 100% ownership of
all outstanding securities of each series of the Trust other than the Preferred
Securities of any series; (iii) not voluntarily dissolve, wind up, liquidate or
terminate the Trust; (iv) not incur or permit to exist any indebtedness of the
Trust; and (v) not take any actions inconsistent with the treatment of the Trust
as a grantor trust for United States Federal income tax purposes. So long as any
Preferred Securities remain outstanding, J.P. Morgan will not declare or pay
dividends on, or redeem, purchase, acquire or make a distribution or liquidation
payment with respect to, any of its common stock or preferred stock or make any
Guarantee Payment with respect thereto if at such time (i) J.P. Morgan shall be
in default with respect to its Guarantee Payments or other payment obligations
hereunder or (ii) there shall have occurred any event of default under the
Declaration; provided, however, that the foregoing restrictions shall not apply
to (a) dividends, redemptions, purchases, acquisitions, distributions or
payments made by J.P. Morgan by way of issuance of shares of its capital stock,
(b) payments of accrued dividends by J.P. Morgan upon the redemption, exchange
or conversion of any preferred stock of J.P. Morgan as may be outstanding from
time to time in accordance with the terms of such preferred stock, (c) cash
payments made by J.P. Morgan in lieu of delivering fractional shares upon the
redemption, exchange or conversion of any preferred stock of J.P. Morgan as may
be outstanding from time to time in accordance with the terms of such preferred
stock, (d) repurchases, redemptions or other acquisitions of shares of capital
stock of J.P. Morgan in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of employees, officers,
directors of consultants, or (e) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of such
rights pursuant thereto.
SECTION 6.02. Subordination. This Guarantee Agreement will
constitute an unsecured obligation of J.P. Morgan and will rank (i) subordinate
and junior in right of payment to all other liabilities of J.P. Morgan, (ii)
pari
<PAGE> 18
18
passu with the most senior preferred stock outstanding as of the date hereof of
J.P. Morgan and (iii) senior to J.P. Morgan's common stock. J.P. Morgan's
obligations under this Guarantee Agreement will rank pari passu with respect to
obligations under other guarantee agreements which it may enter into from time
to time to the extent that such agreements shall be entered into in
substantially the form hereof and provided for comparable guarantees by J.P.
Morgan of payment on other preferred securities issued by the Trust or any
similar trust sponsored by J.P. Morgan.
ARTICLE VII
Termination
SECTION 7.01. This Guarantee Agreement shall terminate and be
of no further force and effect as to the Preferred Securities upon full payment
of the Preferred Redemption Price of the Preferred Securities, and shall
terminate completely upon full payment of the amounts payable to Holders upon
liquidation of the Trust; provided, however, that this Guarantee Agreement shall
continue to be effective or shall be reinstated, as the case may be, if at any
time any Holder must restore payment of any sums paid under the Preferred
Securities or under this Guarantee Agreement for any reason whatsoever. J.P.
Morgan agrees to indemnify each Holder and hold it harmless against any loss it
may suffer in such circumstances.
ARTICLE VIII
Limitation of Liability; Indemnification
SECTION 8.01. Exculpation. (a) No Indemnified Person shall be
liable, responsible or accountable in damages or otherwise to J.P. Morgan or any
Covered Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith and in a
manner such Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this Guarantee Agreement or by
law, except that an Indemnified Person shall be liable for any such loss, damage
or claim incurred by reason of such Indemnified Person's negligence or wilful
misconduct with respect to such acts or omissions.
<PAGE> 19
19
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of J.P. Morgan and upon such information,
opinions, reports or statements presented to J.P. Morgan by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of J.P. Morgan, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits, losses, or any other facts pertinent to the existence and amounts of
assets from which Distributions to Holders of Preferred Securities might
properly be paid.
SECTION 8.02. Indemnification. (a) To the fullest extent
permitted by applicable law, J.P. Morgan shall indemnify and hold harmless each
Indemnified Person from and against any loss, damage or claim incurred by such
Indemnified Person by reason of any act or omission performed or omitted by such
Indemnified Person in good faith and in a manner such Indemnified Person
reasonably believed to be within the scope of authority conferred on such
Indemnified Person by this Guarantee Agreement, except that no Indemnified
Person shall be entitled to be indemnified in respect of any loss, damage or
claim incurred by such Indemnified Person by reason of negligence or wilful
misconduct with respect to such acts or omissions.
(b) To the fullest extent permitted by applicable law,
expenses (including legal fees) incurred by an Indemnified Person in defending
any claim, demand, action, suit or proceeding shall, from time to time, be
advanced by J.P. Morgan prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by J.P. Morgan of an undertaking by or
on behalf of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be indemnified as
authorized in Section 8.02(a).
<PAGE> 20
20
ARTICLE IX
Miscellaneous
SECTION 9.01. Successors and Assigns. All guarantees and
agreements contained in this Guarantee Agreement shall bind the successors,
assigns, receivers, trustees and representatives of J.P. Morgan and shall inure
to the benefit of the Holders. J.P. Morgan shall not assign its obligations
hereunder without the prior approval of Holders of not less than a majority in
Principal Amount of all Preferred Securities of all series then outstanding
voting as a single class.
SECTION 9.02. Amendments. Except with respect to any changes
or waivers which do not adversely affect the rights of Holders (in which case no
vote will be required), this Guarantee Agreement may only be amended or waived
by instrument in writing signed by J.P. Morgan and the Guarantee Trustee with
the prior approval of the Holders of not less than a majority in Principal
Amount of all Preferred Securities then outstanding. The provisions of Section
12.02 of the Declaration concerning meetings of Holders shall apply to the
giving of such approval.
SECTION 9.03. Notices. Any notice, request or other
communication required or permitted to be given hereunder to J.P. Morgan shall
be given in writing by mail or by facsimile transmission (followed by mail),
addressed to J.P. Morgan, as follows:
(a) if given to J.P. Morgan, to the address set forth below or
such other address as J.P. Morgan may give notice of to the Holders:
J.P. Morgan & Co. Incorporated
60 Wall Street
New York, New York 10260-0060
Facsimile No.: (212) 648-5175
Attention: Assistant Secretary
<PAGE> 21
21
(b) if given to the Guarantee Trustee, to the address set
forth below or such other address as the Guarantee Trustee may give
notice to the Holders:
First Trust of New York, National Association
100 Wall Street
Suite 1600
New York, New York 10005
Facsimile No.: (212) 809-5459
Attention: Corporate Trust Administration
(c) if given to any Holder of Preferred Securities, at the
address set forth on the books and records of the Trust relating to
such series.
All notices hereunder shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 9.04. Genders. The masculine, feminine and neuter
genders used herein shall include the masculine, feminine and neuter genders.
SECTION 9.05. Benefit. This Guarantee Agreement is solely for
the benefit of the Holders and, subject to Section 3.01(a), is not separately
transferable from the Preferred Securities.
<PAGE> 22
22
SECTION 9.06. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS).
SECTION 9.07. Counterparts. This Guarantee Agreement may be
executed in counterparts, each of which shall be an original; but such
counterparts shall together constitute one and the same instrument.
[SECTION 9.08. Exercise of Overallotment Option. If and to
the extent that any Preferred Securities are issued by the Trust upon exercise
of the overallotment option referred to the third WHEREAS clause, J.P. Morgan
agrees to give prompt notice thereof to the Guarantee Trustee but the failure to
give such notice shall not relieve J.P. Morgan of any of its obligations
hereunder.]
IN WITNESS WHEREOF, this Guarantee Agreement is executed as of
the day and year first above written.
J.P. MORGAN & CO.
INCORPORATED,
By _________________________
Name:
Title:
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION, as
Guarantee Trustee,
By _________________________
Name:
Title:
<PAGE> 23
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, on this
[ ] day of [ ], 199_, personally appeared
of J.P. Morgan & Co. Incorporated, known to me (or proved to me by introduction
upon the oath of a person known to me) to be the person and officer whose name
is subscribed to the foregoing instrument, and acknowledged to me that he/she
executed the same as the act of such trust for the purposes and consideration
herein expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS [ ] DAY OF [ ], 199_.
{SEAL}
--------------------------------
NOTARY PUBLIC, STATE OF NEW YORK
Print Name:
--------------------
Commission Expires:
-------------
<PAGE> 24
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, on this [ ] day of
[ ], 199_ , personally appeared [ ] of First Trust
of New York, National Association, known to me (or proved to me by introduction
upon the oath of a person known to me) to be the person and officer whose name
is subscribed to the foregoing instrument, and acknowledged to me that he/she
executed the same as the act of such trust for the purposes and consideration
herein expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS [ ] DAY OF [ ], 199_.
{SEAL}
--------------------------------
NOTARY PUBLIC, STATE OF NEW YORK
Print Name:
--------------------
Commission Expires:
------------
<PAGE> 1
EXHIBIT 4(b)(2)
[FORM OF] GUARANTEE AGREEMENT
[FORM OF] GUARANTEE AGREEMENT (this "Guarantee
Agreement"), dated as of [ ], 199[ ], executed and delivered
by J.P. Morgan & Co. Incorporated, a Delaware corporation
("J.P. Morgan") and First Trust of New York, National
Association, as the initial Guarantee Trustee (as defined
below) for the benefit of the Holders (as defined below) from
time to time of the Preferred Securities (as defined below) of
J.P. Morgan Index Funding Company I, a Delaware statutory
business trust (the "Trust").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust
(as amended from time to time, the "Declaration") dated as of October 10, 1997
among the trustees of the Trust, J.P. Morgan, as sponsor (the "Sponsor"), and
the Holders from time to time of undivided beneficial interests in certain
assets of the Trust, the Trust intends to issue and sell from time to time, in
one or more series, up to $700,000,000 aggregate principal amount of its
Commodity-Indexed Preferred Securities (the "Preferred Securities") and related
common securities (the "Common Securities"), in each case representing undivided
beneficial interests in a Related Note (as defined below) associated with such
series and having such rights, preferences, privileges, limitations and
restrictions as are set forth in a declaration supplement (a "Declaration
Supplement") by the Sponsor in the form of Exhibit B to the Declaration
providing for the issue of such series;
WHEREAS, the Trust, on behalf of each Series of Securities (as
defined below), will purchase Related Notes (as defined below) from Morgan
Guaranty Trust Company of New York, a trust company with full banking powers
organized under the laws of the State of New York ("Morgan Guaranty"), with the
proceeds from the issuance and sale of each series of Preferred Securities and
related Common Securities; and
WHEREAS, J.P. Morgan desires hereby to irrevocably and
unconditionally agree to the extent set forth herein to pay to the Holders the
Guarantee Payments (as defined below)
<PAGE> 2
2
and to make certain other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
the Preferred Securities, which purchase J.P. Morgan hereby agrees shall benefit
J.P. Morgan and which purchase J.P. Morgan acknowledges will be made in reliance
upon the execution and delivery of this guarantee, J.P. Morgan executes and
delivers this Guarantee Agreement for the benefit of the Holders.
ARTICLE I
Definitions
(a) Capitalized terms used in this Guarantee Agreement but not
defined in the preamble above have the respective meanings assigned to them in
this Article I.
(b) A term defined anywhere in this Guarantee Agreement has the same
meaning throughout.
(c) All references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or amended
from time to time.
(d) All references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified.
(e) A term defined in the Trust Indenture Act has the same meaning
when used in this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires.
(f) A reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405
of the Securities Act of 1933, as amended, or any successor rule thereunder.
"Commission" means the Securities and Exchange Commission.
"Common Securities" means, with respect to a Series of Securities,
the securities representing undivided beneficial interests in a Related Note
associated with such Series of Securities and held by the Property Trustee for
<PAGE> 3
3
the benefit of the Holders of such Series of Securities, and having the terms
set forth in a Declaration Supplement in the form of Exhibit B to the
Declaration.
"Covered Person" means any Holder of Preferred Securities.
"Distributions" means the periodic distributions and other payments
payable to Holders of Preferred Securities in accordance with the terms of the
Preferred Securities set forth in a Declaration Supplement in the form of
Exhibit B to the Declaration.
"Event of Default" means a default by J.P. Morgan on any of its
payment or other obligations under this Guarantee Agreement.
"Guarantee Payments" means, with respect to Preferred Securities of
any series, the following payments, without duplication, to the extent not paid
by the Trust: (i) any accumulated and unpaid distributions which have been
theretofore declared on the Preferred Securities of such series, to the extent
Morgan Guaranty has made a corresponding payment on the relevant Related Note,
out of funds legally available therefor, (ii) the Preferred Redemption Price
(including all accumulated and unpaid distributions), to the extent Morgan
Guaranty has made a corresponding payment on the relevant Related Note, payable
out of funds legally available therefor with respect to any Preferred Securities
of such series called for redemption upon redemption thereof and (iii) upon the
liquidation of the Trust, the lesser of (a) the Liquidation Distribution (as
defined below) with respect to such series and (b) the amount of the assets of
the Trust consisting of the relevant Related Note and the proceeds thereof,
legally available for distribution to Holders of Preferred Securities of such
series in liquidation.
"Guarantee Trustee" means First Trust of New York, National
Association until a Successor Guarantee Trustee has been appointed and accepted
such appointment pursuant to the terms of this Guarantee Agreement and
thereafter means each such Successor Guarantee Trustee.
"Holder" means any Person from time to time holding any Preferred
Securities of any series; provided, however, that in determining whether the
Holders of the requisite percentage of Preferred Securities have given any
<PAGE> 4
4
request, notice, consent or waiver hereunder, "Holder" shall not include J.P.
Morgan or any entity directly or indirectly controlling or controlled by or
under direct or indirect common control with J.P. Morgan.
"Indemnified Person" means the Guarantee Trustee, any Affiliate of
the Guarantee Trustee, and any officers, directors, shareholders, members,
partners, employees, representatives or agents of the Guarantee Trustee.
"Liquidation Distribution" means, with respect to Preferred
Securities of any series, the aggregate Principal Amount of Preferred Securities
of such series and all accumulated and unpaid distributions (whether or not
declared) with respect to such Preferred Securities to but excluding the date of
payment.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Redemption Price" means, with respect to Preferred
Securities of any series, the aggregate Principal Amount of all Preferred
Securities of such series plus accumulated and unpaid distributions (whether or
not declared) with respect to such series to but excluding the date of
redemption.
"Preferred Securities" has the meaning set forth in the first
WHEREAS clause above.
"Principal Amount" means, at any time with respect to any Preferred
Security of any series, the Redemption Value, the applicable Early Redemption
Value or the stated liquidation preference thereof, as applicable, as determined
in accordance with the Declaration Supplement creating such Preferred
Securities.
"Property Trustee" means the Person acting as Property Trustee under
the Declaration.
"Related Note" means any obligation or obligations of Morgan
Guaranty in which the proceeds from the issuance of Preferred Securities of any
series and related Common Securities of such series are invested.
<PAGE> 5
5
"Responsible Officer" means, with respect to the Guarantee Trustee,
the chairman of the board of directors, the president, any vice-president, any
assistant vice-president, the secretary, any assistant secretary, the treasurer,
any assistant treasurer, any trust officer or assistant trust officer or any
other officer of the Guarantee Trustee customarily performing functions similar
to those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"Series of Securities" means any series of Preferred Securities and
related Common Securities issued under the Declaration or a Declaration
Supplement.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as a Guarantee Trustee under Section 4.01.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
ARTICLE II
Trust Indenture Act
SECTION 2.01. Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of the Trust Indenture
Act that are required to be part of this Guarantee Agreement and shall, to the
extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
(c) The application of the Trust Indenture Act to this Guarantee
Agreement shall not affect the nature of the Preferred Securities as equity
securities representing undivided beneficial interests in the relevant Related
Note held by the Trust.
<PAGE> 6
6
SECTION 2.02. Lists of Holders of Preferred Securities. (a) J.P.
Morgan shall provide the Guarantee Trustee with such information as is required
under Section 312(a) of the Trust Indenture Act at the times and in the manner
provided in Section 312(a).
(b) The Guarantee Trustee shall comply with its obligations under
Sections 310(b), 311 and 312(b) of the Trust Indenture Act.
SECTION 2.03. Reports by the Guarantee Trustee. Within 60 days after
May 15 of each year, the Guarantee Trustee shall provide to the Holders of the
Preferred Securities such reports as are required by Section 313 of the Trust
Indenture Act, if any, in the form, in the manner and at the times provided by
Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply
with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.04. Periodic Reports to the Guarantee Trustee. J.P. Morgan
shall provide to the Guarantee Trustee, the Commission and the Holders of the
Preferred Securities, as applicable, such documents, reports and information as
required by Section 314(a)(1)-(3) (if any) of the Trust Indenture Act and the
compliance certificates required by Section 314(a)(4) and (c) of the Trust
Indenture Act, any such certificates to be provided in the form, in the manner
and at the times required by Section 314(a)(4) and (c) of the Trust Indenture
Act (provided that any certificate to be provided pursuant to Section 314(a)(4)
of the Trust Indenture Act shall be provided within 120 days of the end of each
fiscal year of the Trust).
SECTION 2.05. Evidence of Compliance with Conditions Precedent. J.P.
Morgan shall provide the Guarantee Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Guarantee Agreement which
relate to any of the matters set forth in Section 314(c) of the Trust Indenture
Act. Any certificate or opinion required to be given pursuant to Section 314(c)
shall comply with Section 314(e) of the Trust Indenture Act.
SECTION 2.06. Events of Default; Waiver. (a) Subject to Section
2.06(b), Holders of Preferred Securities of any series may by vote of at least a
majority in Principal Amount of the Preferred Securities of such series, (A)
direct the time, method and place of conducting
<PAGE> 7
7
any proceeding for any remedy available to the Guarantee Trustee, or exercising
any trust or power conferred upon by the Guarantee Trustee, in either case with
respect to such series or (B) on behalf of the Holders of all Preferred
Securities of such series waive any past Event of Default with respect to such
series and its consequences. Upon such waiver, any such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Guarantee Agreement, but no such waiver shall
extend to any subsequent or other default or Event of Default (with respect to
such series or any other series) or impair any right consequent thereon.
(b) The right of any Holder of Preferred Securities to receive
payment of the Guarantee Payments in accordance with this Guarantee Agreement,
or to institute suit for the enforcement of any such payment, shall not be
impaired without the consent of each such Holder.
SECTION 2.07. Disclosure of Information. The disclosure of
information as to the names and addresses of the Holders of the Preferred
Securities in accordance with Section 312 of the Trust Indenture Act, regardless
of the source from which such information was derived, shall not be deemed to be
a violation of any existing law, or any law hereafter enacted which does not
specifically refer to Section 312 of the Trust Indenture Act, nor shall the
Guarantee Trustee be held accountable by reason of mailing any material pursuant
to a request made under Section 312(b) of the Trust Indenture Act.
SECTION 2.08. Conflicting Interest. The Declaration shall be deemed
to be specifically described in this Guarantee Agreement for the purposes of
clause (i) of the first proviso contained in Section 310(b) of the Trust
Indenture Act.
<PAGE> 8
8
ARTICLE III
Powers, Duties and Rights of Guarantee Trustee
SECTION 3.01. Powers and Duties of the Guarantee Trustee. (a) This
Guarantee Agreement shall be held by the Guarantee Trustee in trust for the
benefit of the Holders of the Preferred Securities. The Guarantee Trustee shall
not transfer its right, title and interest in this Guarantee Agreement to any
Person except a Successor Guarantee Trustee on acceptance by such Successor
Guarantee Trustee of its appointment to act as Guarantee Trustee or to a Holder
of Preferred Securities exercising his or her rights pursuant to Section 5.04.
The right, title and interest of the Guarantee Trustee to this Guarantee
Agreement shall vest automatically in each Person who may hereafter be appointed
as Guarantee Trustee in accordance with Article IV. Such vesting and cessation
of title shall be effective whether or not conveyancing documents have been
executed and delivered.
(b) If an Event of Default with respect to Preferred Securities of
any series occurs and is continuing, the Guarantee Trustee shall enforce this
Guarantee Agreement for the benefit of the Holders of such Preferred Securities.
(c) This Guarantee Agreement and all moneys received by the Property
Trustee hereunder in respect of the Guarantee Payments will not be subject to
any right, charge, security interest, lien or claim of any kind in favor of, or
for the benefit of the Guarantee Trustee or its agents or their creditors.
(d) The Guarantee Trustee shall, within 30 days after the occurrence
of an Event of Default with respect to Preferred Securities of any series,
transmit by mail, first class postage prepaid, to the holders of such Preferred
Securities, as their names and addresses appear upon the register, notice of all
Events of Default known to the Guarantee Trustee, unless such defaults shall
have been cured before the giving of such notice; provided, that, the Guarantee
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee, or a trust committee of directors
and/or Responsible Officers, of the Guarantee Trustee in good faith determine
that the withholding of such notice is in the interests of the Holders of such
Preferred Securities. The Guarantee Trustee shall not be deemed to have
knowledge of any default except any default as to which
<PAGE> 9
9
the Guarantee Trustee shall have received written notice or a Responsible
Officer charged with the administration of the Guarantee Agreement shall have
obtained written notice.
(e) The Guarantee Trustee shall not resign as a Trustee unless a
Successor Guarantee Trustee has been appointed and accepted that appointment in
accordance with Article IV.
SECTION 3.02. Certain Rights and Duties of the Guarantee Trustee.
(a) The Guarantee Trustee, before the occurrence of an Event of Default and
after the curing of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Guarantee Agreement, and no implied covenants shall be read into this Guarantee
Agreement against the Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.06(a)), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
this conduct of his or her own affairs.
(b) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act or its own wilful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after the
curing or waiving of all such Events of Default that may have occurred;
(A) the duties and obligations of the Guarantee Trustee shall
be determined solely by the express provisions of this Guarantee
Agreement, and the Guarantee Trustee shall not be liable except for
the performance of such duties and obligations as are specifically
set forth in this Guarantee Agreement, and no implied covenants or
obligations shall be read into this Guarantee Agreement against the
Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Guarantee
Trustee, the Guarantee Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions
<PAGE> 10
10
expressed therein, upon any certificates or opinions furnished to
the Guarantee Trustee and conforming to the requirements of this
Guarantee Agreement; but in the case of any such certificates or
opinions that by any provision hereof are specifically required to
be furnished to the Guarantee Trustee, the Guarantee Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Guarantee Agreement;
(ii) the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Guarantee Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of Preferred Securities as provided herein
relating to the time, method and place of conducting any proceeding for
any remedy available to the Guarantee Trustee, or exercising any trust or
power conferred upon the Guarantee Trustee under this Guarantee Agreement;
and
(iv) no provision of this Guarantee Agreement shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of its duties or in the
exercise of any of its rights or powers, if it shall have reasonable
ground for believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Guarantee Agreement or
adequate indemnity against such risk or liability is not reasonably
assured to it.
<PAGE> 11
11
(c) Subject to the provisions of Section 3.02(a) and (b):
(i) whenever in the administration of this Guarantee Agreement, the
Guarantee Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder,
the Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and rely
upon a certificate, which shall comply with the provisions of Section
314(e) of the Trust Indenture Act, signed by any authorized officer of
J.P. Morgan;
(ii) the Guarantee Trustee (A) may consult with counsel of its
choice (which may be counsel to J.P. Morgan or any of its Affiliates and
may include any of its employees) selected by it in good faith and with
due care and the written advice or opinion of such counsel with respect to
legal matters shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon and in accordance with such advice and
opinion and (B) shall have the right at any time to seek instructions
concerning the administration of this Guarantee Agreement from any court
of competent jurisdiction;
(iii) the Guarantee Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Guarantee Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney
appointed by it in good faith and with due care;
(iv) the Guarantee Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Guarantee Agreement at
the request or direction of any Holders of Preferred Securities, unless
such Holders shall have offered to the Guarantee Trustee reasonable
security and indemnity against the costs, expenses (including its
attorneys' fees and expenses) and liabilities that might be incurred by it
in complying with such request or direction; provided that nothing
contained in this clause (iv) shall relieve the Guarantee Trustee of the
obligation, upon the occurrence of an Event of Default (which has not
<PAGE> 12
12
been cured or waived) to exercise such of the rights and powers vested in
it by this Guarantee Agreement, and to use the same degree of care and
skill in this exercise, as a prudent person would exercise or use under
the circumstances in the conduct of his or her own affairs; and
(v) any action taken by the Guarantee Trustee or its agents
hereunder shall bind the Holders of any affected series of Preferred
Securities and the signature of the Guarantee Trustee or its agents alone
shall be sufficient and effective to perform any such action; and no third
party shall be required to inquire as to the authority of the Guarantee
Trustee to so act, or as to its compliance with any of the terms and
provisions of this Guarantee Agreement, both of which shall be
conclusively evidenced by the Guarantee Trustee's or its agent's taking
such action.
SECTION 3.03. Not Responsible for Recitals or Issuance of Guarantee
Agreement. The recitals contained in this Guarantee Agreement shall be
taken as the statements of J.P. Morgan and the Guarantee Trustee does not
assume any responsibility for their correctness. The Guarantee Trustee
makes no representations as to the validity or sufficiency of this
Guarantee Agreement.
ARTICLE IV
Guarantee Trustee
SECTION 4.01. Qualifications. (a) There shall at all times be a
Guarantee Trustee which shall:
(i) not be an Affiliate of J.P. Morgan; and
(ii) be a corporation organized and doing business under the laws of
the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the
Commission to act as an institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust powers, having
a combined capital and surplus of at least $50,000,000, and subject to
supervision or examination by Federal, State, Territorial or District of
Columbia authority. If such corporation publishes reports of condition at
<PAGE> 13
13
least annually, pursuant to law or to the requirements of the supervising
or examining authority referred to above, then for the purposes of this
Section 4.01(a)(ii), the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published.
If at any time the Guarantee Trustee shall cease to satisfy the
requirements of clauses (i)-(ii) above, the Guarantee Trustee shall immediately
resign in the manner and with the effect set out in Section 4.02. If the
Guarantee Trustee has or shall acquire any "conflicting interest" within the
meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and
J.P. Morgan shall in all respects comply with the provisions of Section 310(b)
of the Trust Indenture Act.
SECTION 4.02. Appointment, Removal and Resignation of Guarantee
Trustee. (a) Subject to Section 4.02(b), the Guarantee Trustee may be appointed
or removed without cause at any time by J.P. Morgan.
(b) The Guarantee Trustee shall not be removed in accordance with
Section 4.02(a) until a Successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 4.01(a) has been
appointed and has accepted such appointment by written instrument executed by
such Successor Guarantee Trustee and delivered to J.P. Morgan and the Guarantee
Trustee being removed.
(c) The Guarantee Trustee appointed to office shall hold office
until his successor shall have been appointed or until its removal or
resignation.
(d) The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument (a "Resignation Request") in
writing signed by the Guarantee Trustee and delivered to J.P. Morgan, which
resignation shall take effect upon such delivery or upon such later date as is
specified therein; provided, however, that no such resignation of the Guarantee
Trustee shall be effective until a Successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 4.01(a) has been
appointed and has accepted such appointment by instrument executed by such
Successor Guarantee Trustee and delivered to J.P. Morgan and the resigning
Guarantee Trustee.
<PAGE> 14
14
(e) If no Successor Guarantee Trustee shall have been appointed and
accepted appointed as provided in this Section 4.02 within 60 days after
delivery to J.P. Morgan of a Resignation Request, the resigning Guarantee
Trustee may petition any court of competent jurisdiction for appointment of a
Successor Guarantee Trustee. Such court may thereupon after such notice, if any,
as it may deem proper and prescribe, appoint a Successor Guarantee Trustee.
ARTICLE V
Guarantee
SECTION 5.01. Guarantee. J.P. Morgan irrevocably and unconditionally
agrees, to the extent set forth herein, to pay in full to the Holders of
Preferred Securities of each series the Guarantee Payments with respect to such
Preferred Securities, as and when due (except to the extent paid by the Trust),
regardless of any defense, right of set-off or counterclaim which the Trust may
have or assert. This Guarantee Agreement is continuing, irrevocable,
unconditional and absolute.
SECTION 5.02. Waiver of Notice. J.P. Morgan hereby waives notice of
acceptance of this Guarantee Agreement and of any liability to which it applies
or may apply, presentment, demand for payment, protest, notice of nonpayment,
notice of dishonor, notice of redemption and all other notices and demands.
SECTION 5.03. Obligations Not Affected. The obligations, covenants,
agreements and duties of J.P. Morgan under this Guarantee Agreement shall in no
way be affected or impaired by reason of the happening from time to time of any
of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of any express or implied
agreement, covenant, term or condition relating to the Preferred
Securities of any series to be performed or observed by the Trust;
(b) the extension of time for the payment by the Trust of all or any
portion of the distributions, Preferred Redemption Price, liquidation
distributions
<PAGE> 15
15
or any other sums payable under the terms of the Preferred Securities of
any series or the extension of time for the performance of any other
obligation under, arising out of, or in connection with, the Preferred
Securities of any series;
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities of any series, or any action on the part of the Trust granting
indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Trust
or any of the assets of the Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities of any series;
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) any other circumstances whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it
being the intent of this Section 5.03 that the obligations of J.P. Morgan
hereunder shall be absolute and unconditional under any and all
circumstances.
There shall be no obligation of the Holders to give notice to, or obtain consent
of, J.P. Morgan with respect to the happening of any of the foregoing.
SECTION 5.04. Enforcement of Guarantee Agreement. J.P. Morgan and
the Guarantee Trustee expressly acknowledge that (i) this Guarantee Agreement
will be deposited with the Guarantee Trustee to be held for the benefit of the
Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee
Agreement on behalf of the Holders; (iii) Holders representing not less than a
majority in Principal Amount of the Preferred Securities of any series have the
right to direct the time, method and place of conducting any proceeding for any
remedy available in respect of this
<PAGE> 16
16
Guarantee Agreement with respect to such Preferred Securities including the
giving of directions to the Guarantee Trustee, or exercising any trust or other
power conferred upon the Guarantee Trustee under this Guarantee Agreement, and
(iv) if the Guarantee Trustee fails to enforce this Guarantee Agreement with
respect to Preferred Securities of any series, any Holder of such Preferred
Securities may institute a legal proceeding directly against J.P. Morgan to
enforce its rights under this Guarantee Agreement, without first instituting a
legal proceeding against the Trust, the Guarantee Trustee, or any other Person.
SECTION 5.05. Guarantee of Payment. This is a guarantee of payment
and not merely of collection. This Guarantee Agreement will not be discharged
except by payment of the Guarantee Payments in full (without duplication of
amounts theretofore paid by the Trust).
SECTION 5.06. Subrogation. J.P. Morgan shall be subrogated to all
(if any) rights of the Holders against the Trust in respect of any amounts paid
to the Holders by J.P. Morgan under this Guarantee Agreement and the Trust shall
not be required to make payment to the Holders of any amount of Guarantee
Payments in respect of which payment has theretofore been made by J.P. Morgan
pursuant to Section 5.01 hereof; provided, however, that J.P. Morgan shall not
(except to the extent required by mandatory provisions of law) exercise any
rights which it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of a payment under
this Guarantee Agreement, if, at the time of any such payment, any amounts are
due and unpaid under this Guarantee Agreement. If any amount shall be paid to
J.P. Morgan in violation of the preceding sentence, J.P. Morgan agrees to pay
over such amount to the Holders for application to the Guarantee Payments then
due hereunder, if any, or to offset payments due to the Holders by the Trust.
SECTION 5.07. Independent Obligations. J.P. Morgan acknowledges that
its obligations hereunder are independent of the obligations of the Trust with
respect to the Preferred Securities and that J.P. Morgan shall be liable as
principal and sole debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof.
<PAGE> 17
17
ARTICLE VI
Limitation of Transactions; Subordination
SECTION 6.01. Limitation of Transactions. So long as any Preferred
Securities of any series remain outstanding, J.P. Morgan shall: (i) not cause or
permit any Common Securities to be transferred; (ii) maintain 100% ownership of
all outstanding securities of each series of the Trust other than the Preferred
Securities of any series; (iii) not voluntarily dissolve, wind up, liquidate or
terminate the Trust; (iv) not incur or permit to exist any indebtedness of the
Trust; and (v) not take any actions inconsistent with the treatment of the Trust
as a grantor trust for United States Federal income tax purposes. So long as any
Preferred Securities remain outstanding, J.P. Morgan will not declare or pay
dividends on, or redeem, purchase, acquire or make a distribution or liquidation
payment with respect to, any of its common stock or preferred stock or make any
Guarantee Payment with respect thereto if at such time (i) J.P. Morgan shall be
in default with respect to its Guarantee Payments or other payment obligations
hereunder or (ii) there shall have occurred any event of default under the
Declaration; provided, however, that the foregoing restrictions shall not apply
to (a) dividends, redemptions, purchases, acquisitions, distributions or
payments made by J.P. Morgan by way of issuance of shares of its capital stock,
(b) payments of accrued dividends by J.P. Morgan upon the redemption, exchange
or conversion of any preferred stock of J.P. Morgan as may be outstanding from
time to time in accordance with the terms of such preferred stock, (c) cash
payments made by J.P. Morgan in lieu of delivering fractional shares upon the
redemption, exchange or conversion of any preferred stock of J.P. Morgan as may
be outstanding from time to time in accordance with the terms of such preferred
stock, (d) repurchases, redemptions or other acquisitions of shares of capital
stock of J.P. Morgan in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of employees, officers,
directors of consultants, or (e) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of such
rights pursuant thereto.
<PAGE> 18
18
SECTION 6.02. Subordination. This Guarantee Agreement will
constitute an unsecured obligation of J.P. Morgan and will rank (i) subordinate
and junior in right of payment to all other liabilities of J.P. Morgan, (ii)
pari passu with the most senior preferred stock outstanding as of the date
hereof of J.P. Morgan and (iii) senior to J.P. Morgan's common stock. J.P.
Morgan's obligations under this Guarantee Agreement will rank pari passu with
respect to obligations under other guarantee agreements which it may enter into
from time to time to the extent that such agreements shall be entered into in
substantially the form hereof and provided for comparable guarantees by J.P.
Morgan of payment on other preferred securities issued by the Trust or any
similar trust sponsored by J.P. Morgan.
ARTICLE VII
Termination
SECTION 7.01. This Guarantee Agreement shall terminate and be of no
further force and effect as to Preferred Securities of any series upon full
payment of the Preferred Redemption Price of such series, and shall terminate
completely upon full payment of the amounts payable to Holders upon liquidation
of the Trust; provided, however, that this Guarantee Agreement shall continue to
be effective or shall be reinstated, as the case may be, if at any time any
Holder must restore payment of any sums paid under the Preferred Securities of
such series or under this Guarantee Agreement for any reason whatsoever. J.P.
Morgan agrees to indemnify each Holder and hold it harmless against any loss it
may suffer in such circumstances.
ARTICLE VIII
Limitation of Liability; Indemnification
SECTION 8.01. Exculpation. (a) No Indemnified Person shall be
liable, responsible or accountable in damages or otherwise to J.P. Morgan or any
Covered Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith and in a
manner such Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this Guarantee Agreement or by
law, except that an Indemnified Person shall
<PAGE> 19
19
be liable for any such loss, damage or claim incurred by reason of such
Indemnified Person's negligence or wilful misconduct with respect to such acts
or omissions.
(b) An Indemnified Person shall be fully protected in relying in
good faith upon the records of J.P. Morgan and upon such information, opinions,
reports or statements presented to J.P. Morgan by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of J.P. Morgan, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amounts of assets from
which Distributions to Holders of Preferred Securities might properly be paid.
SECTION 8.02. Indemnification. (a) To the fullest extent permitted
by applicable law, J.P. Morgan shall indemnify and hold harmless each
Indemnified Person from and against any loss, damage or claim incurred by such
Indemnified Person by reason of any act or omission performed or omitted by such
Indemnified Person in good faith and in a manner such Indemnified Person
reasonably believed to be within the scope of authority conferred on such
Indemnified Person by this Guarantee Agreement, except that no Indemnified
Person shall be entitled to be indemnified in respect of any loss, damage or
claim incurred by such Indemnified Person by reason of negligence or wilful
misconduct with respect to such acts or omissions.
(b) To the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by an Indemnified Person in defending any claim,
demand, action, suit or proceeding shall, from time to time, be advanced by J.P.
Morgan prior to the final disposition of such claim, demand, action, suit or
proceeding upon receipt by J.P. Morgan of an undertaking by or on behalf of the
Indemnified Person to repay such amount if it shall be determined that the
Indemnified Person is not entitled to be indemnified as authorized in Section
8.02(a).
ARTICLE IX
Miscellaneous
<PAGE> 20
20
SECTION 9.01. Successors and Assigns. All guarantees and agreements
contained in this Guarantee Agreement shall bind the successors, assigns,
receivers, trustees and representatives of J.P. Morgan and shall inure to the
benefit of the Holders of the Preferred Securities then outstanding. J.P. Morgan
shall not assign its obligations hereunder without the prior approval of Holders
of not less than a majority in Principal Amount of all Preferred Securities of
all series then outstanding voting as a single class.
SECTION 9.02. Amendments. Except with respect to any changes or
waivers which do not adversely affect the rights of Holders (in which case no
vote will be required), this Guarantee Agreement may only be amended or waived
by instrument in writing signed by J.P. Morgan and the Guarantee Trustee with
the prior approval of the Holders of not less than a majority in Principal
Amount of all Preferred Securities of each affected series then outstanding
voting as a single class. The provisions of Section 12.02 of the Declaration
concerning meetings of Holders shall apply to the giving of such approval.
SECTION 9.03. Notices. Any notice, request or other communication
required or permitted to be given hereunder to J.P. Morgan shall be given in
writing by mail or by facsimile transmission (followed by mail), addressed to
J.P. Morgan, as follows:
(a) if given to J.P. Morgan, to the address set forth below or such
other address as J.P. Morgan may give notice of to the Holders:
J.P. Morgan & Co. Incorporated
60 Wall Street
New York, New York 10260-0060
Facsimile No.: (212) 648-5175
Attention: Assistant Secretary
<PAGE> 21
21
(b) if given to the Guarantee Trustee, to the address set forth
below or such other address as the Guarantee Trustee may give notice to
the Holders:
First Trust of New York, National Association
100 Wall Street
Suite 1600
New York, New York 10005
Facsimile No.: (212) 809-5459
Attention: Corporate Trust Administration
(c) if given to any Holder of Preferred Securities of any series, at
the address set forth on the books and records of the Trust relating to
such series.
All notices hereunder shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 9.04. Genders. The masculine, feminine and neuter genders
used herein shall include the masculine, feminine and neuter genders.
SECTION 9.05. Benefit. This Guarantee Agreement is solely for the
benefit of the Holders and, subject to Section 3.01(a), is not separately
transferable from the Preferred Securities.
<PAGE> 22
22
SECTION 9.06. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS).
SECTION 9.07. Counterparts. This Guarantee Agreement may be executed
in counterparts, each of which shall be an original; but such counterparts shall
together constitute one and the same instrument.
[SECTION 9.08. Exercise of Overallotment Option. If and to the
extent that any Preferred Securities are issued by the Trust upon exercise of
the overallotment option referred to the third WHEREAS clause, J.P. Morgan
agrees to give prompt notice thereof to the Guarantee Trustee but the failure to
give such notice shall not relieve J.P. Morgan of any of its obligations
hereunder.]
IN WITNESS WHEREOF, this Guarantee Agreement is executed as of the
day and year first above written.
J.P. MORGAN & CO.
INCORPORATED,
By
-------------------------------------
Name:
Title:
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION, as
Guarantee Trustee,
By
-------------------------------------
Name:
Title:
<PAGE> 23
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, on this [ ] day of
[ ], 199_, personally appeared of J.P. Morgan & Co.
Incorporated, known to me (or proved to me by introduction upon the oath of a
person known to me) to be the person and officer whose name is subscribed to the
foregoing instrument, and acknowledged to me that he/she executed the same as
the act of such trust for the purposes and consideration herein expressed and in
the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS DAY OF
[ ], 199_.
{SEAL}
________________________________
NOTARY PUBLIC, STATE OF NEW YORK
Print Name: ____________________
Commission Expires: ____________
<PAGE> 24
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, on this [ ] day of
[ ], 199_ , personally appeared [ ] of First Trust of New York, National
Association, known to me (or proved to me by introduction upon the oath of a
person known to me) to be the person and officer whose name is subscribed to the
foregoing instrument, and acknowledged to me that he/she executed the same as
the act of such trust for the purposes and consideration herein expressed and in
the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS 31st DAY OF
[ ], 199_.
{SEAL}
________________________________
NOTARY PUBLIC, STATE OF NEW YORK
Print Name: ____________________
Commission Expires: ____________
<PAGE> 1
EXHIBIT 4(c)
[FORM OF] RELATED NOTE GUARANTEE AGREEMENT (the "Related
Note Guarantee"), dated as of ,
199[ ], executed and delivered by J.P. MORGAN & CO.
INCORPORATED, a Delaware corporation ("J.P. Morgan"), for the
benefit of FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION, as
Property Trustee (the "Property Trustee") of J.P. MORGAN INDEX
FUNDING COMPANY I, a Delaware statutory business trust (the
"Trust") and as the holder from time to time of the Related
Notes (as defined below).
WHEREAS, the Trust intends to issue from time to time, in one or
more series, its common trust securities (the "Common Securities") to and
receive related capital contributions from J.P. Morgan, and to issue and sell
from time to time, in one or more series, related preferred trust securities
(the "Preferred Securities") with such rights, preferences, privileges,
limitations and restrictions as are set forth in a declaration supplement or
supplements (each, a "Declaration Supplement") to the Declaration (as defined
below) providing for the issuance of such series;
WHEREAS, the Trust, on behalf of the holders from time to time of
each series of Preferred Securities and related Common Securities, will purchase
from Morgan Guaranty Trust Company of New York, a trust company with full
banking powers organized under the laws of the State of New York and a
wholly-owned subsidiary of J.P. Morgan ("Morgan Guaranty"), one or more related
notes (the "Related Notes") with the proceeds from the issuance and sale of each
series of Preferred Securities and related Common Securities, the distribution
and principal repayment terms of which Related Note shall mirror the related
series of securities; and
WHEREAS, J.P. Morgan desires hereby to irrevocably and
unconditionally agree to the extent set forth herein to pay to the Property
Trustee the Related Note Guarantee Payments (as defined below) and to make
certain other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by the Trust of the
Related Notes, which purchase J.P. Morgan hereby agrees shall benefit J.P.
Morgan and which
<PAGE> 2
2
purchase J.P. Morgan acknowledges will be made in reliance upon the execution
and delivery of this Related Note Guarantee, J.P. Morgan executes and delivers
this Related Note Guarantee for the benefit of the Property Trustee for the
benefit of the holders from time to time of the Preferred Securities and the
related Common Securities.
ARTICLE I
As used in this Related Note Guarantee, the terms set forth below
shall have the following meanings:
"Related Note Guarantee Payments" shall mean, with respect to any
Related Note, the following payments, without duplication, to the extent not
paid by Morgan Guaranty: (i) any accrued and unpaid interest on such Related
Note and (ii) the Related Note Redemption Price (including all accrued and
unpaid interest) payable with respect to such Related Note to be redeemed, in
whole or in part, upon redemption thereof.
"Declaration" shall mean the Trust's Amended and Restated
Declaration of Trust dated as of October 10, 1997, among the Sponsor, the
Regular Trustees, the Property Trustee, the Delaware Trustee (each as defined
therein) and the holders from time to time of securities of the Trust, as
amended from time to time.
"Principal Amount" shall mean, at any time with respect to any
Preferred Security of any series and, if applicable, the related Common
Securities, the Redemption Value, the applicable Early Redemption Value or
stated liquidation preference thereof, as applicable, determined in accordance
with the Declaration Supplement creating such series of Preferred Securities.
"Related Note Redemption Price" shall mean, with respect to any
Related Note at any time, an amount equal to the aggregate Principal Amount of
all Preferred Securities of the related series and related Common Securities to
be redeemed at such time, plus accrued and unpaid interest with respect to such
Related Note to but excluding the date of redemption.
ARTICLE II
<PAGE> 3
3
SECTION 2.01. J.P. Morgan irrevocably and unconditionally agrees, to
the extent set forth herein, to pay in full, to the Property Trustee, for the
benefit of the holders from time to time of the Preferred Securities and related
Common Securities associated with any Related Note, the Related Note Guarantee
Payments with respect to such Related Note, as and when due (except to the
extent paid by Morgan Guaranty), regardless of any defense, right of set-off or
counterclaim which the Morgan Guaranty may have or assert. This Related Note
Guarantee is continuing, irrevocable, unconditional and absolute.
SECTION 2.02. J.P. Morgan hereby waives notice of acceptance of this
Related Note Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
SECTION 2.03. The obligations, covenants, agreements and duties of
J.P. Morgan under this Related Note Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by Morgan Guaranty of any express or implied
agreement, covenant, term or condition relating to the Related Notes to be
performed or observed by Morgan Guaranty;
(b) the extension of time for the payment by Morgan Guaranty of all
or any portion of the interest payments, the Related Note Redemption Price
or any other sums payable under the terms of the Related Notes or the
extension of time for the performance of any other obligation under,
arising out of, or in connection with, the Related Notes;
(c) any failure, omission, delay or lack of diligence on the part of
the Property Trustee or the Trust to enforce, assert or exercise any
right, privilege, power or remedy conferred on the Property Trustee or the
Trust pursuant to the terms of the Related Notes, or any action on the
part of Morgan Guaranty granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership,
<PAGE> 4
4
insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment of debt of, or
other similar proceedings affecting, Morgan Guaranty or any of the assets
of Morgan Guaranty;
(e) any invalidity of, or defect or deficiency in, any of the
Related Notes; or
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred.
There shall be no obligation of the Property Trustee or the Trust to give notice
to, or obtain consent of, J.P. Morgan with respect to the happening of any of
the foregoing.
SECTION 2.04. This is a guarantee of payment and not of collection.
The Property Trustee may enforce this Guarantee directly against J.P. Morgan,
and J.P. Morgan waives any right or remedy to require that any action be brought
against Morgan Guaranty or any other person or entity before proceeding against
J.P. Morgan. Subject to Section 2.05 hereof, all waivers herein contained shall
be without prejudice to the Property Trustee's right to proceed against Morgan
Guaranty, whether by separate action or by joinder.
SECTION 2.05 J.P. Morgan shall be subrogated to all (if any) rights
of the Property Trustee against Morgan Guaranty in respect of any amounts paid
to the Property Trustee by J.P. Morgan under this Related Note Guarantee and
Morgan Guaranty shall not be required to make payment to the Property Trustee of
any amount of Related Note Guarantee Payments in respect of which payment has
theretofore been made by J.P. Morgan pursuant to Section 2.01 hereof; provided,
however, that J.P. Morgan shall not (except to the extent required by mandatory
provisions of law) exercise any rights which it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of a payment under this Related Note Guarantee, if, at the time of any
such payment, any amounts are due and unpaid under this Related Note Guarantee.
If any amount shall be paid to J.P. Morgan in violation of the preceding
sentence, J.P. Morgan agrees to pay over such amount to the Property Trustee for
application to the Related Note Guarantee Payments then due hereunder, if any,
or to amounts due the Trust from Morgan Guaranty under the relevant Related
Note.
<PAGE> 5
5
SECTION 2.06. J.P. Morgan acknowledges that its obligations
hereunder are independent of the obligations of Morgan Guaranty with respect to
the Related Notes and that J.P. Morgan shall be liable as principal and sole
debtor hereunder to make Related Note Guarantee Payments pursuant to the terms
of this Related Note Guarantee notwithstanding the occurrence of any event
referred to in subsections (a) through (f), inclusive, of Section 2.03 hereof.
ARTICLE III
The Related Note Guarantee will constitute an unsecured obligation
of J.P. Morgan and will rank (i) subordinate and junior in right of payment to
all other liabilities of J.P. Morgan, (ii) pari passu with the most senior
preferred stock outstanding as of the date hereof of J.P. Morgan and (iii)
senior to J.P. Morgan's common stock.
ARTICLE IV
This Related Note Guarantee shall terminate and be of no further
force and effect as to any Related Note upon full payment of the Related Note
Redemption Price with respect to such Related Note; provided, however, that this
Related Note Guarantee shall continue to be effective or shall be reinstated, as
the case may be, if at any time the Property Trustee must restore payment of any
sums paid under such Related Note or under this Related Note Guarantee for any
reason whatsoever. J.P. Morgan agrees to indemnify the Property Trustee and hold
it harmless against any loss it may suffer in such circumstances.
ARTICLE V
SECTION 5.01. All guarantees and agreements contained in this
Related Note Guarantee shall bind the successors, assigns, receivers, trustees
and representatives of J.P. Morgan and shall inure to the benefit of the
Property Trustee and its successors. J.P. Morgan shall not assign its
obligations hereunder without the prior approval of the Property Trustee.
SECTION 5.02. This Related Note Guarantee may be amended or waived
only with the prior approval of the
<PAGE> 6
6
Property Trustee; provided that no such amendment or waiver shall adversely
affect the holders of the Preferred Securities without the consent of at least a
majority in Principal Amount of all Preferred Securities of each affected series
then outstanding, voting as a single class.
SECTION 5.03. Any notice, request or other communication required or
permitted to be given hereunder to J.P. Morgan shall be given in writing by mail
or by facsimile transmission (followed by mail), addressed to J.P.
Morgan, as follows:
J.P. Morgan & Co. Incorporated
60 Wall Street
New York, NY 10260-0060
Facsimile No.: (212) 648-5175
Attention: Assistant Secretary
Any notice, request or other communication required or permitted to
be given hereunder to the Property Trustee shall be given by J.P. Morgan in the
same manner as set forth in Section 14.01 of the Declaration.
SECTION 5.04. This Related Note Guarantee is solely for the benefit
of the Property Trustee and is not separately transferable from the Related
Notes.
SECTION 5.05. Pursuant to the Declaration, under certain
circumstances, holders of not less than a majority in Principal Amount of
Preferred Securities of any series voting as a separate class shall have the
right to direct the Property Trustee to enforce its rights under this Related
Note Guarantee.
SECTION 5.06. THIS RELATED NOTE GUARANTEE SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, this Related Note Guarantee is executed as of
the day and year first above written.
J.P. MORGAN & CO.
INCORPORATED,
<PAGE> 7
7
By
-------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4(d)
[FORM OF] NOTE AGREEMENT (this "Note") made
as of , 199[ ], between MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, a trust company with full
banking powers organized under the laws of the State
of New York (the "Bank") and FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION, as Property Trustee (the
"Property Trustee") of J.P. MORGAN INDEX FUNDING
COMPANY I, a Delaware statutory business trust (the
"Trust").
WHEREAS, the Trust has issued and sold certain of its common trust
securities (the "Common Securities") and certain of its preferred trust
securities (the "Preferred Securities") having an aggregate initial principal
amount of [ ] and bearing interest at a rate of [ %] per annum, and with such
rights, preferences, privileges, limitations and restrictions as are set forth
in a declaration supplement dated , 199 (the "Declaration
Supplement") to that certain Amended and Restated Declaration of Trust dated as
of October 10, 1997 (as amended, the "Declaration") among the Sponsor, the
Regular Trustees, the Property Trustee, the Delaware Trustee and the holders
from time to time of securities of the Trust, providing for the issuance of such
series of Preferred Securities and related Common Securities; and
WHEREAS, the Trust desires to loan the proceeds of such issuance and
sale of Preferred Securities and Common Securities (collectively, the "Related
Securities") to the Bank on the terms and conditions set forth herein, which
terms and conditions shall substantially mirror the Trust's obligations under
the Related Securities.
NOW, THEREFORE, in consideration of the loan of such proceeds, which
the Bank hereby acknowledges to be adequate and sufficient, the Bank executes
and delivers this Note for the benefit of the Property Trustee on behalf of the
holders from time to time of the Related Securities.
1. General. (a) This Note is a duly authorized debt security of the
Bank, designated as its [ ]% Note Due [ , ] (the "Stated Maturity") in an
initial principal amount of $[ ].
<PAGE> 2
2
(b) THIS NOTE IS NOT A DEPOSIT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
(c) This Note is non-transferable and shall be registered in the
name of First Trust of New York, National Association, as Property Trustee, for
the benefit of the holders from time to time of the Related Securities. The
Property Trustee may (to the fullest extent permitted by applicable laws) be
treated at all times, by all persons and for all purposes as the absolute owner
of this Note regardless of any notice of ownership, theft or loss or of any
writing thereon.
2. Payments and Paying Agencies. (a) The amount of principal payable
at any time upon any redemption or at the Stated Maturity of this Note, as
applicable, shall be the aggregate outstanding principal amount payable at the
applicable time with respect to all Related Securities the proceeds of the sale
of which were loaned to the Bank in consideration of this Note, determined in
accordance with the Declaration Supplement relating thereto, attached hereto as
Annex I.
(b) Interest shall accrue on this Note at a rate of [ ]% per annum
and shall be payable at the dates (each such date, an "Interest Payment Date")
and times set forth in the Declaration Supplement attached hereto as Annex I,
subject to the terms and conditions contained therein.
(c) The Bank hereby promises to pay all amounts referred to in
paragraphs (a) and (b) of this Section 2 when and as the corresponding amounts
are due and payable by the Trust to the holders of Related Securities pursuant
to the terms thereof. Principal of this Note will be payable against surrender
of this Note, and interest will be payable at the office of the Paying Agent (as
defined in the Declaration) located at 100 Wall Street, New York, New York
10005, Attention: Corporate Trust Administration.
3. Redemption. This Note matures on the Stated Maturity and will be
subject to redemption prior to maturity as described below.
The Trust shall have the right to put the principal amount of this
Note for redemption prior to each [ ] of each year prior to the Stated Maturity
in an aggregate principal amount sufficient to allow the Trust to pay to any or
all of the holders of the Preferred Securities who have exercised their right to
redeem the Preferred Securities and, if applicable, a pro rata portion of the
<PAGE> 3
3
related Common Securities, an amount equal to the Early Redemption Value (as
defined in the Prospectus Supplement described below) plus accrued and unpaid
dividends on such Related Securities to but excluding the date of redemption. In
addition, within 90 days following the occurrence and during the continuance of
certain tax-related events (a "Tax Event") or events related to the Investment
Company Act of 1940, as amended (an "Investment Company Event", and together
with a Tax Event, a "Special Event"), the Bank shall have the right to redeem
this Note in whole or in an amount sufficient to cause the discontinuance of
such Special Event, in either case in cash, or, in the case of a Tax Event, to
allow this Note to remain outstanding and to indemnify the Trust for any taxes
payable by the Trust as a result of such Tax Event. In the event that the Bank
shall redeem this Note in whole or in part, the Trust will redeem a principal
amount of the Preferred Securities and the related Common Securities equal to
the principal amount of this Note so redeemed. If a Tax Event shall have
occurred and be continuing and J.P. Morgan & Co. Incorporated ("J.P. Morgan")
shall have elected to direct the Bank to allow this Note to remain outstanding
and provided that the Trust shall received indemnification by J.P. Morgan for
all taxes payable by the Trust as a result of such Tax Event, then the Trust may
allow the Preferred Securities and the related Common Securities to remain
outstanding. Notwithstanding the foregoing, if there is available to the Trust
the opportunity to eliminate, within such 90-day period, the Special Event by
taking some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure, that has no adverse effect on
the Trust, J.P. Morgan, the Bank or the holders of the Preferred Securities, the
Trust will pursue such measure in lieu of redemption; provided that the Bank
shall have no right to redeem this Note while the Trust is pursuing any such
ministerial action or reasonable measure unless the Special Event shall not have
been so eliminated by the 85th day following the occurrence thereof, in which
case J.P. Morgan shall be permitted to direct the Bank to provide, and the Bank
shall be permitted to so provide, notice to the Trust of the redemption of this
Note. The parties hereto agree that the terms Tax Event and Investment Company
Event shall have the meanings assigned to such terms in the Prospectus
Supplement dated [ ], 199[ ] (the "Prospectus Supplement") relating to the
Preferred Securities and filed with the Securities and Exchange Commission (the
"SEC") to the Prospectus dated [ ], 199[ ] and filed with the SEC (Registration
Nos. 333-01121 and 333-01121-01) and that such definitions are hereby
<PAGE> 4
4
incorporated herein by reference and made a part of this Note.
In the event of a Market Disruption Event (as defined in the
Prospectus Supplement and incorporated herein by reference), under certain
circumstances, payment of the Redemption Value (as defined in the Prospectus
Supplement) to the holder of the Preferred Securities could be delayed for an
indefinite period, in which case no interest or dividends on the Preferred
Securities will accrue or be payable thereon beyond the Stated Maturity. If such
circumstances occur, the Stated Maturity of this Note would be similarly delayed
and no interest will be payable on this Note beyond the Stated Maturity.
4. The indebtedness evidenced by this Note, including the principal
and interest, is pari passu with all unsecured, unsubordinated creditors of the
Bank.
The holder of this Note by its acceptance hereof agrees to and shall
be bound by the provisions of this paragraph 4.
5. Events of Default. The occurrence of any of the following events
shall constitute an event of default (herein referred to as an "Event of
Default") hereunder with respect to this Note:
(a) default in the payment of any interest on this Note as and when
the same shall become due and payable, which default continues for a
period of 30 days; or
(b) default in the due and punctual payment of the principal of this
Note as and when the same shall become due and payable; or
(c) default on the part of the Bank in the performance of any other
of the covenants or agreements on its part in this Note or in the Fiscal
and Paying Agency Agreement dated April 22, 1991, which default continues
for a period of 90 days after the date on which written notice, by
registered or certified mail, of such failure requiring the Bank to remedy
the same shall have been received by the Bank from the Trust specifying
such failure and requiring the same to be remedied and stating that such
is a "notice of default" hereunder; or
(d) decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a conservator
or
<PAGE> 5
5
receiver or liquidator in any insolvency proceedings, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of
the Bank or of all or substantially all of its property, or for the
winding-up or liquidation of its affairs, shall have been entered, and
such decree or order shall have remained in force undischarged or unstayed
for a period of 60 days; or
(e) the Bank shall have consented to the appointment of a
conservator or receiver or liquidator, in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of the
Bank or of all or substantially all of its property; or
(f) the Bank shall have filed a petition to take advantage of any
applicable insolvency or reorganization statute or voluntarily generally
suspended payment of its obligations.
In case one or more of the Events of Default specified above shall
have occurred and be continuing with respect to this Note, then and in each and
every such case, unless all the principal of this Note is due and payable
immediately, upon the declaration of the Trust the same shall become and shall
be immediately due and payable, anything contained in this Note to the contrary
notwithstanding. In case the Trust shall have proceeded to enforce any right as
set forth herein and such proceedings shall have been discontinued or abandoned
for any reason or shall have been determined adversely to the Trust, then and in
every such case the Bank and the Trust shall be restored to their respective
several positions and rights hereunder, and all rights, remedies and powers of
the Bank and the Trust shall continue as though no such proceeding had been
taken.
The Trust shall be entitled to file such proof of claim, claim,
petition or other document as may be necessary or advisable in order to have the
claims of such holder allowed in any insolvency proceedings, receivership,
conservatorship, reorganization, readjustment of debt, marshalling of assets and
liabilities, liquidation, winding-up or other similar proceedings of the Bank as
a whole or affecting its property.
6. Certain Covenants of the Bank. The Bank hereby agrees that, for
so long as this Note shall remain outstanding:
<PAGE> 6
6
(a) The Bank will maintain an office or agency in the Borough of
Manhattan, The City of New York, where this Note may be presented for
payment and notices and demands to or upon the Bank in respect of this
Note may be served; and
(b) The Bank will not merge or consolidate with or sell or convey
all or substantially all of its assets as an entirety to any other
corporation or association, unless (i) either (A) the Bank shall be the
surviving corporation in the case of a merger or (B) the surviving,
resulting or transferee corporation or association (the "successor
corporation") shall expressly assume the due and punctual payment of the
principal of and interest on this Note, according to its tenor and the due
and punctual performance of all of the covenants and obligations of the
Bank under this Note and (ii) the Bank or such successor corporation, as
the case may be, shall not, immediately after such merger, consolidation,
sale or conveyance, be in default in the performance of any covenants or
obligations of the Bank under this Note.
Upon any merger, consolidation, sale or conveyance as provided
above, the successor corporation shall succeed to and be substituted for, and
may exercise every right and power of and be subject to all the obligations of
the Bank under this Note with the same effect as if the successor corporation
had been named as the Bank herein and, in the case of any such sale or
conveyance of assets, the Bank shall be released from its liability as obligor
under this Note.
7. Replacement of Note. (a) In case this Note shall become
mutilated, defaced or be apparently destroyed, lost or stolen, the Bank shall
execute and the office of the Paying Agent shall authenticate and deliver a new
Note in exchange and substitution for the mutilated or defaced Note, or in lieu
and in substitution for the apparently destroyed, lost or stolen Note. In every
such case the Trust shall furnish to the Paying Agent such security or indemnity
as may be required by them to indemnify and defend and to save each of them and
any agent of the Paying Agent harmless and, in every case of destruction, loss
or theft evidence to their satisfaction of the apparent destruction, loss or
theft of such Note and of the ownership thereof. Upon the issuance of any
substitute Note, Paying Agent may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses connected therewith.
<PAGE> 7
7
8. Modifications and Amendments; Waiver. Modifications and
amendments to these Terms and Conditions may be made without the consent of the
holders of the Preferred Securities, to: (1) evidence succession of another
corporation or association to the Bank and the assumption by such a party of the
obligations of the Bank under this Note in the event in the event of a merger,
consolidation or sale of assets in accordance with the terms hereof; (2) add
further covenants, restrictions or conditions for the protection of holders of
this Note; (3) reduce or increase the principal amount hereof solely with
respect to the portion of this Note relating to the Common Securities of the
Trust; or (4) cure ambiguities or correct this Note in case of defects or
inconsistencies in the provisions hereof or supplement this Note with other
provisions, so long as any such cure, correction or supplement does not
adversely affect the interest of the holder of this Note in any material
respect. The Bank and the Property Trustee may, with the consent of the holders
of not less than a majority in principal amount of the outstanding Preferred
Securities, enter into written modifications to this Note; provided, that no
such amendment may, without the consent of the all holders of all Preferred
Securities, (1) reduce the amount of Preferred Securities the holders of which
must consent to any amendment, supplement or waiver of this Note, (2) extend the
final maturity of this Note, or reduce the rate or extend the time of payment of
interest hereon, or reduce the principal amount hereof (except as provided in
the previous sentence), (3) alter the method of calculation of the amount paid
at final maturity hereof or (4) make the principal hereof or interest hereon
payable in any coin or currency other than that provided in this Note. Any
modifications or amendments to these Terms and Conditions as provided in the
clauses above will be conclusive and binding on the holder of this Note, whether
or not its has given consent.
No provision of this Note shall alter or impair the obligation of
the Bank, which is absolute and unconditional, to pay the principal of and
interest on this Note at the places, at the respective times, at the rate and in
the coin or currency herein prescribed.
9. Non-business Days; Calculation of Interest. (a) In any case where
the date of maturity of the principal of or payment of interest on this Note
shall be, in the Borough of Manhattan, The City of New York, a Saturday, a
Sunday, a legal holiday or a day on which banking institutions are authorized or
obligated by law to close, then payment of principal or interest on this Note
need not be made on such date at such place but may be made on the next
succeeding day which, in the Borough of Manhattan, The
<PAGE> 8
8
City of New York, is not a Saturday, a Sunday, a legal holiday or a day on which
banking institutions are authorized or obligated by law to close, with the same
force and effect as if made on the date of maturity of the principal of, or any
applicable Interest Payment Date with respect to, this Note, and no interest
shall accrue for the period after such date.
(b) Interest shall be calculated on the basis of 360-day year of
twelve 30-day months.
10. Governing Law. This Note shall be construed in accordance with
and governed by the laws of the State of New York.
11. Descriptive Headings. The descriptive headings appearing in
these Terms and Conditions are for the convenience of reference only and shall
not alter, limit or define the provisions hereof.
IN WITNESS WHEREOF, this Note Agreement is executed and delivered as
of the date first above written.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
by:______________________
Name:
Title:
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION, as
Property Trustee,
by:______________________
Name:
Title:
<PAGE> 1
EXHIBIT 5(a)
[Letterhead of J.P. Morgan & Co. Incorporated]
October 20, 1997
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
RE: J.P. Morgan & Co. Incorporated
Amendment No. 3 to the
J.P. Morgan & Co. Incorporated and
J.P. Morgan Index Funding Company I
Registration Statement on Form S-3
File Nos. 333-01121--333-01121-01
Dear Sir or Madame:
I am a Vice President and Assistant General Counsel of J.P. Morgan &
Co. Incorporated, a Delaware corporation ("J.P. Morgan") and in such capacity am
acting as counsel in connection with J.P. Morgan's and J.P. Morgan Index Funding
Company I's (the "Trust") Amendment No. 3 to the Registration Statement on Form
S-3 (the "Registration Statement") being filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act") with respect
to $700,000,000 aggregate amount of Commodity-Indexed Preferred Securities to be
issued by the Trust (the "Preferred Securities") along with Guarantees to be
issued in connection with Preferred Securities (the "Registration Statement").
Capitalized terms not defined herein have the meaning given to them in the
Registration Statement.
I have examined such documents and made such other investigations as
I have deemed necessary or advisable for purposes of this opinion. Based
thereon, I am of the opinion that:
1. J.P. Morgan is a corporation duly organized and validly existing
under the laws of the State of Delaware.
<PAGE> 2
2. The Guarantees of the Preferred Securities, when such Preferred
Securities have been duly authorized, executed, authenticated and delivered
against payment therefor, will be legally issued and will constitute binding
obligations of J.P. Morgan in accordance with their terms.
I hereby consent to the filing of their opinion as an exhibit to the
Registration Statement. I also consent to the use of my name under the caption
"Legal Opinions" in the Prospectus contained in the Registration Statement.
Very truly yours,
/s/ Gene A. Capello
-----------------------------------
Name: Gene A. Capello
Title: Vice President and Assistant
General Counsel
<PAGE> 1
EXHIBIT 5(b)
[Letterhead of Morris, Nichols, Arsht & Tunnell]
October 20, 1997
J.P. Morgan Index Funding Company I
c/o J.P. Morgan & Co. Incorporated
60 Wall Street
New York, New York 10260
Re: J.P. Morgan Index Funding Company I
Ladies and Gentlemen:
We have acted as special Delaware counsel to J.P. Morgan Index
Funding Company I, a Delaware statutory business trust (the "Trust"), in
connection with certain matters relating to the creation of the Trust and the
proposed issuance of Preferred Securities of separate Series of Securities of
the Trust to beneficial owners pursuant to and as described in Registration
Statement No. 333-01121 and 333-01121-01 (and the Prospectus forming a part
thereof) on Form S-3 filed with the Securities and Exchange Commission on
February 21, 1996, as amended by Pre-effective Amendments No. 1 and No. 2 and
Post-effective Amendments No. 1, No. 2 and No. 3 thereto (as amended, the
"Registration Statement"). Capitalized terms used herein and not otherwise
herein defined are used as defined in the Amended and Restated Declaration of
Trust of the Trust in the form attached as an exhibit to the Registration
Statement (the "Governing Instrument").
In rendering this opinion, we have examined copies of the following
documents in the forms provided to us: the Certificate of Trust of the Trust as
filed in the Office of the Secretary of State of the State of Delaware (the
"State Office") on December 12, 1996 (the "Certificate"); the
<PAGE> 2
2
Restated Certificate of Trust of the Trust as filed in the State Office on
September 30, 1997; the Declaration of Trust of the Trust dated as of December
12, 1996 (the "Original Governing Instrument"); the Governing Instrument; the
form of Preferred Guarantee to be made by J.P. Morgan & Co. Incorporated; the
Registration Statement; and a certification of good standing of the Trust
obtained as of a recent date from the State Office. In such examinations, we
have assumed the genuineness of all signatures, the conformity to original
documents of all documents submitted to us as drafts or copies or forms of
documents to be executed and the legal capacity of natural persons to complete
the execution of documents. We have further assumed for purposes of this
opinion: (i) the due formation or organization, valid existence and good
standing of each entity (other than the Trust) that is a party to any of the
documents reviewed by us under the laws of the jurisdiction of its respective
formation or organization; (ii) the due authorization, execution and delivery
by, or on behalf of, each of the parties thereto of the above-referenced
documents (including, without limitation, the due authorization, execution and
delivery of the Governing Instrument prior to the first issuance of Preferred
Securities of any Series of Securities of the Trust); (iii) that J.P. Morgan &
Co. Incorporated, as Sponsor, and each applicable Trustee, will duly authorize,
execute and deliver a declaration supplement for each Series of Securities of
the Trust in the form of the Declaration Supplement attached as an exhibit to
the Governing Instrument and all other documents contemplated thereby or by the
Registration Statement or the Governing Instrument to be executed in connection
with the creation of each such Series of Securities and the issuance by the
Trust of Preferred Securities of such Series of Securities, in each case prior
to the first issuance of such Preferred Securities; (iv) that the Preferred
Securities of each Series of Securities of the Trust will be offered and sold
pursuant to the Registration Statement and a prospectus supplement that will be
consistent with (a) the terms of the applicable Declaration Supplement relating
to each such Series of Securities, and (b) accurately describe, the terms of the
Governing Instrument and the Preferred Guarantee and all other relevant
documents; (v) that no event has occurred or will occur subsequent to the filing
of the Certificate that would cause a dissolution or liquidation of the Trust
under the Original Governing Instrument or the Governing Instrument (or, as
applicable, any applicable Declaration Supplement); (vi) that the activities of
the Trust have been
<PAGE> 3
3
and will be conducted in accordance with the Original Governing Instrument or
the Governing Instrument (and any applicable Declaration Supplement), as
applicable, and the Delaware Business Trust Act, 12 Del. C. Sections 3801
et seq. (the "Delaware Act"); (vii) that each Holder of Preferred Securities of
any Series of Securities of the Trust will make payment of the required
consideration therefor and receive a Preferred Securities Certificate in
consideration thereof in accordance with the terms and conditions of the
Registration Statement and the Prospectus forming a part thereof, the Governing
Instrument and the applicable prospectus supplement and Declaration Supplement,
and that the Preferred Securities of each Series of Securities are otherwise
issued and sold to the Preferred Securities Holders of such Series of Securities
in accordance with the terms, conditions, requirements and procedures set forth
in the Registration Statement and the Prospectus forming a part thereof, the
Governing Instrument and the applicable prospectus supplement and Declaration
Supplement; and (viii) that the documents examined by us, or contemplated
hereby, express the entire understanding of the parties thereto with respect to
the subject matter thereof and have not been, and, prior to the issuance of
Preferred Securities of any Series of Securities of the Trust, will not be,
modified, supplemented or otherwise amended, except as herein referenced. No
opinion is expressed with respect to the requirements of, or compliance with,
federal or state securities or blue sky laws. Further, we express no opinion
with respect to the Registration Statement or any other offering materials
relating to the Preferred Securities of any Series of Securities and we assume
no responsibility for their contents. As to any fact material to our opinion,
other than those assumed, we have relied without independent investigation on
the above-referenced documents and on the accuracy, as of the date hereof, of
the matters therein contained.
Based on and subject to the foregoing, and limited in all respects
to matters of Delaware law, it is our opinion that:
1. The Trust is a duly created and validly existing
business trust in good standing under the laws of the State of
Delaware.
2. Upon issuance, the Preferred Securities of any Series of
Securities of the Trust will constitute validly-issued and,
subject to
<PAGE> 4
4
the terms of the Governing Instrument and the applicable
Declaration Supplement, fully-paid and non-assessable
beneficial interests in the assets of the Trust consisting of
the related Note of Morgan Guaranty associated with the
Preferred Securities of the applicable Series of Securities.
We note that, pursuant to Section 11.04 of the Governing
Instrument, the Trust may withhold amounts otherwise
distributable to a Holder and pay over such amounts to the
applicable jurisdictions in accordance with federal, state and
local law and any amount withheld will be deemed to have been
distributed to such Holder and that, pursuant to the Governing
Instrument (and, as applicable, the applicable Declaration
Supplement), Preferred Security Holders may be obligated to
make payments or provide indemnity or security under the
circumstances set forth therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the Prospectus forming a part thereof. In giving this consent, we do
not thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder. This
opinion speaks only as of the date hereof and is based on our understandings and
assumptions as to present facts, and on our review of the above-referenced
documents and the application of Delaware law as the same exist as of the date
hereof, and we undertake no obligation to update or supplement this opinion
after the date hereof for the benefit of any person or entity with respect to
any facts or circumstances that may hereafter come to our attention or any
changes in facts or law that may hereafter occur or take effect. This opinion is
intended solely for the benefit of the addressee hereof in connection with the
matters contemplated hereby and may not be relied on by any other person or
entity or for any other purpose without our prior written consent.
Very truly yours,
MORRIS, NICHOLS, ARSHT & TUNNELL
/s/ MORRIS, NICHOLS, ARSCHT & TUNNELL
<PAGE> 1
EXHIBIT 5(c)
[LETTERHEAD OF CRAVATH, SWAINE & MOORE]
October 20, 1997
J.P. Morgan & Co. Incorporated
J.P. Morgan Index Funding Company I
Commodity-Indexed Preferred Securities
Dear Sirs:
We have acted as special Federal tax counsel to J.P. Morgan & Co.
Incorporated, a Delaware corporation, and J.P. Morgan Index Funding Company I, a
Delaware trust (collectively, the "Registrants"), in connection with the filing
by the Registrants with the Securities and Exchange Commission of a Registration
Statement on Form S-3 (the "Registration Statement") registering Guarantees of
J.P. Morgan & Co. Incorporated and Preferred Securities of J.P. Morgan Index
Funding Company I (the "Securities").
We hereby confirm that the statements set forth in the form of
prospectus supplement (the "Prospectus Supplement") forming a part of the
Registration Statement under the heading "United States Federal Income
Taxation", accurately describe the material Federal income tax consequences to
holders of the Preferred Securities issued pursuant to the Prospectus
Supplement.
We know that we are referred to under the headings "United States
Federal Income Taxation" in the Prospectus Supplement forming a part of the
Registration Statement, and we hereby consent to such use of our name therein
and to the use of this opinion for filing with the Registration Statement as
Exhibits 5(c) and 23(d) thereto.
Very truly yours,
/s/ Cravath, Swaine & Moore
J.P. Morgan & Co. Incorporated
60 Wall Street
New York, NY 10260-0260
<PAGE> 2
J.P. Morgan Index Funding Company I
c/o J.P. Morgan & Co. Incorporated
60 Wall Street
New York, NY 10260-0260
120A
0
<PAGE> 1
EXHIBIT 23(a)
[Letterhead of Price Waterhouse]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
Supplement constituting part of the Registration Statement on Form S-3 of J.P.
Morgan & Co. Incorporated of our report dated January 8, 1997, which appears on
page 34 of J.P. Morgan & Co. Incorporated's 1996 Annual Report on Form 10-K for
the year ended December 31, 1996 (included in J.P. Morgan & Co. Incorporated's
Annual Report to Stockholders). We also consent to the reference to us under
the heading "Experts" in such Prospectus Supplement.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
New York, New York
October 16, 1997
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ Hanna H. Gray
- ---------------------------
<PAGE> 2
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ James R. Houghton
- ---------------------------
<PAGE> 3
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ James L. Ketelsen
- ---------------------------
<PAGE> 4
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ John A. Krol
- ---------------------------
<PAGE> 5
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ Douglas A. Warner
- ---------------------------
<PAGE> 6
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ Paul A. Allaire
- ---------------------------
<PAGE> 7
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ Riley P. Bechtel
- ---------------------------
<PAGE> 8
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ Martin Feldstein
- ---------------------------
<PAGE> 9
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ Ellen V. Futter
- ---------------------------
<PAGE> 10
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ Roberto G. Mendoza
- ---------------------------
<PAGE> 11
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ Michael E. Patterson
- ---------------------------
<PAGE> 12
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ Lee R. Raymond
- ---------------------------
<PAGE> 13
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ Richard D. Simmons
- ---------------------------
<PAGE> 14
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ Kurt F. Viermetz
- ---------------------------
<PAGE> 15
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ Dennis Weatherstone
- ---------------------------
<PAGE> 16
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ Douglas C. Yearley
- ---------------------------
<PAGE> 17
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ John A. Mayer, Jr.
- ---------------------------
<PAGE> 18
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E.
Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of
them, with full power to act without the others, as the undersigned's true and
lawful attorney-in-fact and agent, with full and several power of substitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any and all Registration Statements under the Securities
Act of 1933 as amended, for the purpose of registering the offering of (i)
securities of J.P. Morgan & Co. Incorporated in connection with any public
offering of such securities or (ii) securities under, and interests in, any plan
established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company
of New York for the benefit of their employees or employees of affiliated
companies; to sign any and all amendments (including post-effective amendments)
to such Registration Statements; and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they or the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 20th day of October, 1997.
/s/ David H. Sidwell
- ---------------------------
<PAGE> 1
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) _________
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
13-3781471
(I.R.S. Employer
Identification No.)
100 Wall Street, New York, NY 10005
(Address of principal executive offices) (Zip Code)
FOR INFORMATION, CONTACT:
Dennis Calabrese, President
First Trust of New York, National Association
100 Wall Street, 16th Floor
New York, NY 10005
Telephone: (212) 361-2506
J.P. MORGAN & CO. INCORPORATED
(Exact name of obligor as specified in its charter)
Delaware 13-2625764
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
J.P. MORGAN INDEX FUNDING COMPANY I
(Exact name of obligor as specified in its charter)
Delaware 13-3964134
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
60 Wall Street
New York, New York 10260-0060
(Address of principal executive offices) (Zip Code)
PREFERRED SECURITIES, GUARANTEES
<PAGE> 2
Item 1. GENERAL INFORMATION.
Furnish the following information as to the trustee - -
(a) Name and address of each examining or supervising authority to
which it is subject.
Name Address
---- -------
Comptroller of the Currency Washington, D. C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
Item 16. LIST OF EXHIBITS.
Exhibit 1. Articles of Association of First Trust of New York,
National Association, incorporated herein by reference to
Exhibit 1 of Form T-1, Registration No. 33-83774.
Exhibit 2. Certificate of Authority to Commence Business for First
Trust of New York, National Association, incorporated
herein by reference to Exhibit 2 of Form T-1,
Registration No. 33-83774.
Exhibit 3. Authorization of the Trustee to exercise corporate trust
powers for First Trust of New York, National Association,
incorporated herein by reference to Exhibit 3 of Form
T-1, Registration No. 33-83774.
Exhibit 4. By-Laws of First Trust of New York, National Association.
Exhibit 5. Not applicable.
Exhibit 6. Consent of First Trust of New York, National Association,
required by Section 321(b) of the Act, incorporated
herein by reference to Exhibit 6 of Form T-1,
Registration No. 33-83774.
Exhibit 7. Report of Condition of First Trust of New York, National
Association, as of the close of business on June 30,
1997, published pursuant to law or the requirements of
its supervising or examining authority.
<PAGE> 3
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of
1939, as amended, the trustee, First Trust of New York, National Association, a
national banking association organized and existing under the laws of the United
States, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 20th day of October, 1997.
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
By:
------------------------------
Catherine F. Donohue
Vice President
<PAGE> 4
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of
1939, as amended, the trustee, First Trust of New York, National Association, a
national banking association organized and existing under the laws of the United
States, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 20th day of October, 1997.
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
By: /s/ Catherine F. Donohue
------------------------------
Catherine F. Donohue
Vice President
<PAGE> 5
Exhibit 4
to Exhibit 25
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
BYLAWS
ARTICLE I
Meetings of Shareholders
Section 1.1. Annual Meeting. The annual meeting of the shareholders,
for the election of directors and the transaction of other business, shall be
held at a time and place as the Chairman or President may designate. Notice of
such meeting shall be given at least ten days prior to the date thereof, to each
shareholder of the Association. If, for any reason, an election of directors is
not made on the designated day, the election shall be held on some subsequent
day, as soon thereafter as practicable, with prior notice thereof.
Section 1.2. Special Meetings. Except as otherwise specially provided
by law, special meetings of the shareholders may be called for any purpose, at
any time by a majority of the board of directors, or by any shareholder or group
of shareholders owning at least ten percent of the outstanding stock. Every such
special meeting, unless otherwise provided by law, shall be called upon not less
than ten days prior notice stating the purpose of the meeting.
Section 1.3. Nominations for Directors. Nominations for election to the
board of directors may be made by the board of directors or by any shareholder.
Section 1.4. Proxies. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing. Proxies shall be valid only
for one meeting and any adjournments of such meeting and shall be filed with the
records of the meeting.
Section 1.5. Quorum. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law. A majority of the votes cast
shall decide every question or matter submitted to the shareholders at any
meeting, unless otherwise provided by law or by the Articles of Association.
-1-
<PAGE> 6
ARTICLE II
Directors
Section 2.1. Board of Directors. The board of directors (hereinafter
referred to as the "board"), shall have power to manage and administer the
business and affairs of the Association. All authorized corporate powers of the
Association shall be vested in and may be exercised by the board.
Section 2.2. Powers. In addition to the foregoing, the board of
directors shall have and may exercise all of the powers granted to or conferred
upon it by the Articles of Association, the Bylaws and by law.
Section 2.3. Number. The board shall consist of a number of members to
be fixed and determined from time to time by resolution of the board or the
shareholders at any meeting thereof, in accordance with the Articles of
Association.
Section 2.4. Organization Meeting. The newly elected board shall meet
for the purpose of organizing the new board and electing and appointing such
officers of the Association as may be appropriate. Such meeting shall be held on
the day of the election or as soon thereafter as practicable, and, in any event,
within thirty days thereafter. If, at the time fixed for such meeting, there
shall not be a quorum present, the directors present may adjourn the meeting
until a quorum is obtained.
Section 2.5. Regular Meetings. The regular meetings of the board shall
be held, without notice, as the Chairman or President may designate and deem
suitable.
Section 2.6. Special Meetings. Special meetings of the board may be
called by the Chairman or the President of the Association, or at the request of
two or more directors. Each member of the board shall be given notice stating
the time and place of each such meeting.
Section 2.7. Quorum. A majority of the directors shall constitute a
quorum at any meeting, except when otherwise provided by law; but fewer may
adjourn any meeting. Unless otherwise provided, once a quorum is established,
any act by a majority of those constituting the quorum shall be the act of the
board.
Section 2.8. Vacancies. When any vacancy occurs among the directors,
the remaining members of the board may appoint a director to fill such vacancy
at any regular meeting of the board, or at a special meeting called for that
purpose.
-2-
<PAGE> 7
ARTICLE III
Committees
Section 3.1. Advisory Board of Directors. The board may appoint
persons, who need not be directors, to serve as advisory directors on an
advisory board of directors established with respect to the business affairs of
either this Association alone or the business affairs of a group of affiliated
organizations of which this Association is one. Advisory directors, shall have
such powers and duties as may be determined by the board, provided, that the
board's responsibility for the business and affairs of this Association shall in
no respect be delegated or diminished.
Section 3.2. Audit Committee. The board shall appoint an Audit
Committee which shall consist of at least two Directors of the Association or of
an affiliate of the Association. If legally permissible, the Board may determine
to name itself as the Audit Committee. The Audit Committee shall direct and
review audits of the Association's fiduciary activities.
The members of the Audit Committee shall be appointed each year and
shall continue to act until their successors are named. The Audit Committee
shall have power to adopt its own rules and procedures and to do those things
which in the judgment of such Committee are necessary or helpful with respect to
the exercise of its functions or the satisfaction of its responsibilities.
Section 3.3. Executive Committee. The board may appoint an Executive
Committee which shall consist of at least three directors and which shall have,
and may exercise, all the powers of the board between meetings of the board or
otherwise when the board is not meeting.
Section 3.4. Other Committees. The board may appoint, from time to
time, committees of one or more persons who need not be directors, for such
purposes and with such powers as the board may determine. In addition, either
the Chairman or the President may appoint, from time to time, committees of one
or more officers, employees, agents or other persons, for such purposes and with
such powers as either the Chairman or the President deems appropriate and
proper.
Whether appointed by the board, the Chairman, or the President, any
such Committee shall at all times be subject to the direction and control of the
board.
Section 3.5. Meetings. Minutes and Rules. An advisory board of
directors and/or committee shall meet as necessary in consideration of the
purpose of the advisory board of directors or committee, and shall maintain
minutes in sufficient detail to indicate actions taken or recommendations made;
unless required by the members, discussions,
-3-
<PAGE> 8
votes or other specific details need not be reported. An advisory board of
directors or a committee may, in consideration of its purpose, adopt its own
rules for the exercise of any of its functions or authority.
ARTICLE IV
Officers and Employees
Section 4.1. Chairman of the Board. The board may appoint one of its
members to be Chairman of the board to serve at the pleasure of the board. The
Chairman shall supervise the carrying out of the policies adopted or approved by
the board; shall have general executive powers, as well as the specific powers
conferred by these Bylaws; shall also have and may exercise such powers and
duties as from time to time may be conferred upon or assigned by the board.
Section 4.2. President. The board may appoint one of its members to be
President of the Association. In the absence of the Chairman, the President
shall preside at any meeting of the board . The President shall have general
executive powers, and shall have and may exercise any and all other powers and
duties pertaining by law, regulation or practice, to the Office of President, or
imposed by these Bylaws. The President shall also have and may exercise such
powers and duties as from time to time may be conferred or assigned by the
Board.
Section 4.3. Vice President. The board may appoint one or more Vice
Presidents who shall have such powers and duties as may be assigned by the board
and to perform the duties of the President on those occasions when the President
is absent, including presiding at any meeting of the board in the absence of
both the Chairman and President.
Section 4.4. Secretary. The board shall appoint a Secretary, or other
designated officer who shall be Secretary of the board and of the Association,
and shall keep accurate minutes of all meetings. The Secretary shall attend to
the giving of all notices required by these Bylaws to be given; shall be
custodian of the corporate seal, records, document and papers of the
Association; shall provide for the keeping of proper records of all transactions
of the Association; shall have and may exercise any and all other powers and
duties pertaining by law, regulation or practice, to the Secretary, or imposed
by these Bylaws; and shall also perform such other duties as may be assigned
from time to time, by the Board .
Section 4.5. Other Officers. The board may appoint, and may authorize
the Chairman or the President to appoint, any officer as from time to time may
appear to the board, the Chairman or the President to be required or desirable
to transact the business of the Association. Such officers shall exercise such
powers and perform such duties as pertain to their several offices, or as may be
conferred upon or assigned to them by these Bylaws, the board, the Chairman or
the President.
-4-
<PAGE> 9
Section 4.6. Tenure of Office. The Chairman or the President and all
other officers shall hold office for the current year for which the board was
elected, unless they shall resign, become disqualified, or be removed. Any
vacancy occurring in the Office of Chairman or President shall be filled
promptly by the board.
Any officer elected by the board or appointed by the Chairman or the
President may be removed at any time, with or without cause, by the affirmative
vote of a majority of the board or, if such officer was appointed by the
Chairman or the President, by the Chairman or the President, respectively.
ARTICLE V
Stock
Section 5.1. Shares of stock shall be transferable on the books of the
Association, and a transfer book shall be kept in which all transfers of stock
shall be recorded. Every person becoming a shareholder by such transfer shall,
in proportion to such person's shares, succeed to all rights of the prior holder
of such shares. Each certificate of stock shall recite on its face that the
stock represented thereby is transferable only upon the books of the Association
properly endorsed.
ARTICLE VI
Corporate Seal
Section 6.1. The Chairman, the President, the Secretary, any Assistant
Secretary or other officer designated by the board, the Chairman, or the
President, shall have authority to affix the corporate seal to any document
requiring such seal, and to attest the same. Such seal shall be substantially in
the following form:
ARTICLE VII
Miscellaneous Provisions
Section 7.1. Execution of Instruments. All agreements, checks, drafts,
orders, indentures, notes, mortgages, deeds, conveyances, transfers,
endorsements, assignments, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, guarantees, proxies and other instruments or
documents may be signed, countersigned, executed, acknowledged, endorsed,
verified, delivered or accepted on behalf of the Association, whether in a
fiduciary capacity or otherwise, by any officer of the Association, or such
employee or agent as may be designated from time to time by the board by
resolution, or by the Chairman or the President by written instrument, which
resolution or instrument shall be certified as in effect by the Secretary or an
Assistant Secretary of the
-5-
<PAGE> 10
Association. The provisions of this section are supplementary to any other
provision of the Articles of Association or Bylaws.
Section 7.2. Records. The Articles of Association, the Bylaws and the
proceedings of all meetings of the shareholders, the board, and standing
committees of the board, shall be recorded in appropriate minute books provided
for the purpose. The minutes or each meeting shall be signed by the Secretary,
or other officer appointed to act as Secretary of the meeting.
Section 7.3. Trust Files. There shall be maintained in the Association
files all fiduciary records necessary to assure that its fiduciary
responsibilities have been properly undertaken and discharged.
Section 7.4. Trust Investments. Funds held in a fiduciary capacity
shall be invested according to the instrument establishing the fiduciary
relationship and according to law. Where such instrument does not specify the
character and class of investments to be made and does not vest in the
Association a discretion in the matter, funds held pursuant to such instrument
shall be invested in investments in which corporate fiduciaries may invest under
law.
Section 7.5. Notice. Whenever notice is required by the Articles of
Association, the Bylaws or law, such notice shall be by mail, postage prepaid,
telegram, in person, or by any other means by which such notice can reasonably
be expected to be received, using the address of the person to receive such
notice, or such other personal data, as may appear on the records of the
Association. Prior notice shall be proper if given not more than 30 days nor
less than 10 days prior to the event for which notice is given.
ARTICLE VIII
Indemnification
Section 8.1. The association shall indemnify to the full extent
permitted by, and in the manner permissible under, the Articles of Association
and the laws of the United States of America, as applicable and as amended from
time to time, any person made, or threatened to be made, a party to any action,
suit or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that such person is or was a director, advisory director,
officer or employee of the Association, or any predecessor of the Association,
or served any other enterprise as a director or officer at the request of the
Association or any predecessor of the Association.
Section 8.2. The board in its discretion may, on behalf of the
Association, indemnify any person, other than a director, advisory director,
officer or employee, made a party to any action, suit or proceeding by reason of
the fact that such person is or was an agent of the Association or any
predecessor of the Association serving in such capacity at the request of the
Association or any predecessor of the Association.
-6-
<PAGE> 11
ARTICLE IX
Bylaws: Interpretation and Amendment
Section 9.1. These Bylaws shall be interpreted in accordance with and
subject to appropriate provisions of law, and may be amended, altered or
repealed, at any regular or special meeting of the board.
Section 9.2. A copy of the Bylaws, with all amendments, shall at all
times be kept in a convenient place at the main office of the Association, and
shall be open for inspection to all shareholders during Association hours.
I, Catherine F. Donohue, hereby certify that: (i) I am a duly
constituted Assistant Secretary of FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
(the "Association") and (ii) the foregoing bylaws are the bylaws of the
Association, and all of them are now lawfully in force and effect.
I have hereunto affixed my official signature and the seal of the
Association, in the City of New York, on the 20th day of October, 1997.
By: /S/ Catherine F. Donohue
---------------------------
Name: Catherine F. Donohue
Title: Assistant Secretary
-7-
<PAGE> 12
ARTICLE IX
Bylaws: Interpretation and Amendment
Section 9.1. These Bylaws shall be interpreted in accordance with and
subject to appropriate provisions of law, and may be amended, altered or
repealed, at any regular or special meeting of the board.
Section 9.2. A copy of the Bylaws, with all amendments, shall at all
times be kept in a convenient place at the main office of the Association, and
shall be open for inspection to all shareholders during Association hours.
I, Catherine F. Donohue, hereby certify that: (i) I am a duly
constituted Assistant Secretary of FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
(the "Association") and (ii) the foregoing bylaws are the bylaws of the
Association, and all of them are now lawfully in force and effect.
I have hereunto affixed my official signature and the seal of the
Association, in the City of New York, on the 20th day of October, 1997.
By: /s/ Chtherine F. Donohue
-------------------------
Name: Catherine F. Donohue
Title: Assistant Secretary
-8-
<PAGE> 13
Exhibit 7
to Exhibit 25
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
STATEMENT OF FINANCIAL CONDITION
AS OF 6/30/97
($000'S)
<TABLE>
<CAPTION>
6/30/97
<S> <C>
ASSETS
Cash and Due From Depository Institutions $ 35,121
Federal Reserve Stock 3,490
Fixed Assets 802
Intangible Assets 77,269
Other Assets 5,921
TOTAL ASSETS $ 122,603
LIABILITIES
Other Liabilities 7,037
TOTAL LIABILITIES 703
EQUITY
Common and Preferred Stock 1,000
Surplus 120,932
Undivided Profits (6,367)
TOTAL EQUITY CAPITAL 115,565
TOTAL LIABILITIES AND EQUITY CAPITAL $ 122,603
</TABLE>
To the best of the undersigned's determination, as of this date the above
financial information is true and correct.
First Trust of New York, National Association
By: /S/ Catherine F. Donohue
---------------------------------
Vice President
Date: October 20, 1997
