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As Filed Pursuant to Rule 424(b)(2)
Registration No. 333-85283
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 17, 1999)
J.P. MORGAN & CO. INCORPORATED
60 WALL STREET
NEW YORK, NEW YORK 10260-0060
(212) 483-2323
$10,000,000,000
MEDIUM-TERM NOTES, SERIES A
J.P. Morgan & Co. Incorporated (the "Company," which may also be referred to as
"we" or "us") may at various times offer its Medium-Term Notes, Series A (the
"Notes"). A pricing supplement will describe the specific terms of the
particular Notes being offered.
The following terms may apply to particular Notes being offered:
- - They may be Senior Medium-Term Notes, which are "Senior Debt Securities," as
described in the attached prospectus, or Subordinated Medium-Term Notes, which
are "Subordinated Debt Securities," as described in the attached prospectus.
- - They will mature more than nine months after issuance.
- - They may bear interest at a fixed or floating rate (or both). Certain Notes
issued at a discount may not bear interest.
- - Floating interest rates may be based on any of the following formulas or on
other interest rate formulas specified in the applicable pricing supplement:
- COMMERCIAL PAPER RATE
- FEDERAL FUNDS RATE
- LIBOR
- PRIME RATE
- TREASURY RATE
Any floating interest rate may be adjusted by adding or subtracting a specified
spread or margin or by applying a spread multiplier.
- - They may be denominated in foreign or composite currencies, if specified in
the applicable pricing supplement.
- - They will not be redeemable prior to maturity and will not be subject to a
sinking fund, unless otherwise specified in the applicable pricing supplement.
- - They may be issued in certificated or book-entry form.
The Notes will not be listed on any securities exchange.
THE NOTES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY. THE
NOTES ARE NOT SECURED.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSIONS HAVE APPROVED THESE
SECURITIES, NOR HAVE THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus supplement and the attached prospectus and pricing supplement
may be used by affiliates of the Company, including J.P. Morgan Securities Inc.
("J.P. Morgan & Co."), in connection with offers and sales of the Notes in the
secondary market. These affiliates may act as principal or agent in those
transactions. Secondary market sales by these affiliates will be made at prices
related to market prices at the time of sale.
We expect to pay agents commissions ranging from 0.125% to 0.750% on the
principal amount of the Notes.
J.P. Morgan & Co. has agreed to use its best efforts to sell Notes and may
purchase Notes for resale.
This prospectus supplement is dated September 17, 1999.
J.P. MORGAN & CO.
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY ANY AGENT. THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY NOTES BY ANYONE IN ANY JURISDICTION 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 ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT, ANY PRICING SUPPLEMENT OR THE PROSPECTUS, NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
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PAGE
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<S> <C>
About this Prospectus Supplement; Pricing Supplement........ S-3
Description of the Notes.................................... S-3
Foreign Currency Notes...................................... S-11
Plan of Distribution........................................ S-11
Legal Opinions.............................................. S-12
United States Taxation...................................... S-13
Glossary.................................................... S-17
PROSPECTUS
About this Prospectus....................................... 2
Where You Can Find More Information about J.P. Morgan & Co.
Incorporated.............................................. 3
J.P. Morgan & Co. Incorporated.............................. 4
Consolidated Ratio of Earnings to Fixed Charges............. 7
Consolidated Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends................................. 7
Use of Proceeds............................................. 8
Description of J.P. Morgan Debt Securities.................. 8
Description of Series Preferred Stock....................... 13
Description of Securities Warrants.......................... 18
Description of Universal Warrants........................... 18
Description of Capital Stock................................ 19
Plan of Distribution........................................ 21
Experts..................................................... 22
Legal Opinions.............................................. 22
</TABLE>
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ABOUT THIS PROSPECTUS SUPPLEMENT; PRICING SUPPLEMENT
The Company intends to use this prospectus supplement together with the attached
prospectus and a pricing supplement to offer our Medium-Term Notes (the
"Notes").
This prospectus supplement describes the terms of the Notes that we may offer.
It supplements the description of the Debt Securities contained in
the attached prospectus. If information in this prospectus supplement is
inconsistent with the prospectus, this prospectus supplement will supersede that
information in the prospectus.
Each time we issue Notes, we will attach a pricing supplement to this prospectus
supplement. The pricing supplement will contain the specific description of the
Notes being offered and the terms of the offering. The pricing supplement may
also add, update or change information in this prospectus supplement or the
attached prospectus. Any information in the pricing supplement, including any
change in how interest is calculated, that is different from this prospectus
supplement will supersede the information in this prospectus supplement.
You should read and consider all information contained in this prospectus
supplement and the attached prospectus and pricing supplement in making your
investment decision. You should also read and consider the information in the
documents we have referred you to in "Where You Can Find More Information About
J.P. Morgan & Co. Incorporated" in the attached prospectus.
DESCRIPTION OF THE NOTES
The following description of the Notes (referred to in the accompanying
prospectus as the "J.P. Morgan Debt Securities," the "Debt Securities," the
"Senior Debt Securities" or the "Subordinated Debt Securities," as applicable)
supplements, and replaces if inconsistent, the description of these Debt
Securities in the prospectus. Unless otherwise specified in an accompanying
pricing supplement (the "Pricing Supplement"), the Notes will have the terms
described below, except that references to interest payments do not apply to
certain Original Issue Discount Notes. Notes may have different or additional
terms that are described in the pricing supplement.
GENERAL
The following summary of certain terms of the Notes is not complete. You should
refer to the Indentures under which the Notes will be issued, copies of which
are exhibits to the Registration Statement (as defined in the prospectus).
Certain terms used in this prospectus supplement are defined in the Glossary
beginning on page S-17. Terms used in this prospectus supplement but not defined
in this prospectus supplement (including the Glossary) have the meanings
assigned in the attached prospectus and/or the applicable indenture.
We may offer unsecured general obligations of J.P. Morgan, which may be senior
(the "Senior Notes") or subordinated (the "Subordinated Notes"). The Senior
Notes and the Subordinated Notes are together referred to in this prospectus
supplement as the "Notes." The Senior Notes will have the same rank in
liquidation as all of our other unsecured unsubordinated debt. Payments of
principal and interest on Subordinated Notes may only be made when we are
current on all payment obligations on our Senior Indebtedness. In addition,
under certain circumstances relating to our insolvency or a similar event, the
Subordinated Notes will be entitled to payment only after the payment of claims
relating to Derivative Obligations. At June 30, 1999, the amount of Senior
Indebtedness was approximately $26.7 billion and the amount of Derivative
Obligations was immaterial.
The Notes will be issued under either of two indentures:
- - an Indenture dated August 15, 1982 with U.S. Bank Trust National Association
("U.S. Bank Trust"), as successor Trustee to Chemical Bank. This Indenture is
referred to as the "Senior Indenture."
- - an Indenture dated March 1, 1993 with U.S. Bank Trust, as successor Trustee to
Citibank, N.A. This Indenture is referred to as the "Subordinated Indenture."
The Senior Notes will be issued under the Senior Indenture and the Subordinated
Notes will be issued under the Subordinated Indenture.
Certain restrictions apply to Subordinated Notes:
- - payment of the Subordinated Notes may be accelerated only in the event of our
bankruptcy or reorganization.
- - holders may not accelerate the maturity of the Subordinated Notes if we miss a
payment or if we default in the performance of any covenant contained in the
Subordinated Indenture. See
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"Subordinated Debt Securities -- Limited Right of Acceleration" in the
attached prospectus.
- - we cannot convert this debt into any other security unless stated in the
pricing supplement.
We will offer the Notes in an aggregate principal amount of up to
$10,000,000,000 or its equivalent in foreign or composite currencies, on a
continuing basis. This amount may be reduced by any other securities issued
under our accompanying prospectus. Each Note will mature on a Business Day not
less than nine months from its date of issue, as agreed between the purchaser
and us. Unless otherwise specified in the pricing supplement, the Notes will not
be subject to redemption or repayment prior to maturity and will not be subject
to any sinking fund.
The Notes may bear interest at (1) a fixed rate (a "Fixed Rate Note"), or (2) a
floating rate (a "Floating Rate Note"). Interest on Floating Rate Notes will be
determined, and adjusted periodically, by reference to an interest rate basis or
formula and may be adjusted by a Spread or Spread Multiplier. See "Floating Rate
Notes" below.
We may issue Notes at prices less than their stated principal amount. Certain
discounted Notes will be considered Original Issue Discount Notes (as defined
below under "United States Taxation -- Tax Consequences to U.S. Holders").
Original Issue Discount Notes may or may not bear periodic interest. Unless
otherwise specified in the attached pricing supplement, the amount payable to
the holder of an Original Issue Discount Note upon an acceleration of its
maturity will equal its adjusted issue price (which will be less than the amount
payable at maturity). For a discussion of the United States federal income tax
consequences relating to Original Issue Discount Notes, see "United States
Taxation" below.
Unless otherwise specified in the pricing supplement, the Notes will be
denominated in U.S. dollars and payments of principal of and interest on the
Notes will be made in U.S. dollars. The authorized denominations of the Notes
denominated in U.S. dollars will be in multiples of $1,000 or its equivalent if
issued in a foreign currency. The U.S. dollar equivalent of the foreign currency
will be determined at the noon dollar-buying rate, New York City time, on the
Business Day before the Note is issued. The Federal Reserve Bank of New York
publishes this rate, known as the Market Exchange Rate.
We will issue each Note in fully registered form without coupons. We will issue
each Note initially in either of two ways:
- - book-entry form (a "Book-Entry Note") with a permanent global note registered
in the name of the Depository Trust Company ("DTC"), or its nominee, as
depositary, or
- - certificated form (a "Certificated Note") where each Note is registered in the
name of the noteholder.
We will pay interest on the Notes at the office of U.S. Bank Trust, which is the
Company's paying agent and note registrar (the "Paying Agent and Note
Registrar", also referred to as the "Paying Agent"), currently located at 100
Wall Street, Suite 1600, New York, New York 10005. Unless otherwise stated in
the pricing supplement, we will pay interest on Certificated Notes other than
interest payable upon maturity, or upon earlier redemption or repayment, by
check to the person in whose name the Certificated Note is registered at the
close of business on the applicable Record Date before each Interest Payment
Date. However, we may pay a holder of $10,000,000 or more in U.S. dollars by
wire transfer. We will do this if the noteholder requests a wire transfer from
the Paying Agent in writing not less than 15 calendar days prior to the
applicable Interest Payment Date. If interest is due because of an early
redemption or repayment of principal, we will pay the interest to the person to
whom we owe the principal. At maturity, or upon earlier redemption or repayment,
we will make payments of principal and interest only when the Certificated Note
is presented to the Paying Agent.
PAYMENT CURRENCY
Some Notes may allow a noteholder to request that payments of interest and
principal on a foreign currency denominated Note be made in U.S. dollars.
Conversion of foreign currency into U.S. dollars on such Notes will be
calculated as follows: the exchange rate will be the highest bid quotation at
approximately 11:00 a.m., New York City time, two Business Days prior to the
applicable payment date. The exchange rate agent named in the pricing supplement
(the "Exchange Rate Agent") will set the rate. Three recognized foreign exchange
dealers (one of which may be the Exchange Rate Agent) will provide quotes for
the purchase of the foreign currency for U.S. dollars as of the payment date. If
no bid quotations are available, payments will be made in the
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foreign currency. The noteholder will pay all currency exchange costs.
If any Note is payable in a currency other than U.S. dollars and the currency is
not available due to exchange controls imposed or other circumstances beyond our
control or is no longer used by the government of the country issuing such
currency, then we will make payments in U.S. dollars on the basis of the Market
Exchange Rate on the date of such payment. If a foreign currency (the "National
Currency Unit") is converted into, or is substituted with another currency (the
"New Currency"), the New Currency will be used to make payments at the
conversion rate prescribed by applicable law at the time. If substitution or
conversion occurs, we will make payment either in the National Currency Unit or
in the New Currency at the conversion rate prescribed by applicable law at the
time if such option is allowed under the relevant laws.
INTEREST AND INTEREST RATES
Each Note will earn interest from and including its date of issue. The pricing
supplement will designate whether a particular Note is a Fixed Rate Note or a
Floating Rate Note.
The interest rate on the Notes will not be higher than the maximum rate
permitted by applicable law. This limit does not apply to Notes in a principal
amount of $2,500,000 or more.
Interest payments on a Note will generally begin on the first Interest Payment
Date following its date of issue. However, if a Note is issued on or after the
Record Date for the first Interest Payment Date, interest will first be paid on
the second Interest Payment Date following the Note's issue.
If the maturity date of a Note falls on a day that is not a Business Day (or
London Business Day for LIBOR Notes), payment of principal, premium, if any, and
interest that is due on the maturity date for that Note will be paid on the next
Business Day (or London Business Day, as the case may be). A Note will not earn
any additional interest beyond its stated maturity.
FIXED RATE NOTES
Fixed Rate Notes will bear interest at a fixed rate of interest per year (which
may be zero). The annual rate of interest payable on a Fixed Rate Note may be
different for each interest period. The Interest Payment Dates will ordinarily
be on March 15 and September 15 of each year and the regular Record Dates will
ordinarily be on March 1 and September 1 of each year. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
If an Interest Payment Date for a Fixed Rate Note is not a Business Day, payment
of the interest due on that day may be made on the next succeeding Business Day.
No additional interest will be due as a result of any such delay.
FLOATING RATE NOTES
Interest on Floating Rate Notes will be calculated with reference to an index.
The index may be:
- - Commercial Paper Rate (a "Commercial Paper Rate Note");
- - Federal Funds Rate (a "Federal Funds Rate Note");
- - LIBOR (a "LIBOR Note");
- - Treasury Rate (a "Treasury Rate Note");
- - Prime Rate (a "Prime Rate Note"); or
- - another interest rate basis.
The rate of interest from the date of issuance to the first Reset Date on
Floating Rate Notes will be the Initial Interest Rate. The rate of interest will
then be reset daily, weekly, monthly, quarterly, semi-annually or annually.
Each interest payment on any Floating Rate Note will include interest
accumulated from and including the date of issue or the last date to which
interest has been paid to but excluding the applicable Interest Payment Date or
the date of maturity.
Interest earned on a Floating Rate Note will be calculated by multiplying the
principal amount of the Note by an accrued interest factor. The accrued interest
factor will be computed by adding the interest factors calculated for each day
in the period for which interest is being calculated. The interest factor for
each day is computed by dividing the interest rate in effect on that day by:
- - the actual number of days in the year, in the case of Treasury Rate Notes, or
- - 360, in the case of all other Floating Rate Notes.
The pricing supplement will specify a calculation agent (the "Calculation
Agent") for each Floating Rate Note. The Calculation Agent will determine the
interest rate for each Note.
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The interest rate on a Floating Rate Note in effect on any day will be:
- - if the day is a Reset Date, the interest rate for the Interest Determination
Date relating to that Reset Date or
- - if the day is not a Reset Date, the interest rate for the Interest
Determination Date relating to the preceding Reset Date.
The interest rate is subject to adjustment by any Spread or a Spread Multiplier
and to any Maximum Interest Rate or Minimum Interest Rate. However, the interest
rate in effect for the ten calendar days before the maturity date will be that
in effect on the tenth calendar day prior to the date of maturity.
If an Interest Payment Date is not a Business Day, then interest will be paid on
the following Business Day. In the case of a LIBOR Note, if an Interest Payment
Date is not a London Business Day, then interest will be paid on the following
London Business Day; if the following London Business Day is in the following
calendar month, then the Interest Payment Date will be the preceding London
Business Day. The Notes will earn interest through the revised Interest Payment
Date.
All percentages and decimals resulting from any calculation of interest on
Floating Rate Notes will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point, with five one-millionths of a point
rounded upwards. For example, 9.876545% (or .09876545) will be rounded to
9.87655% (or .0987655) and 9.876544% (or .09876544) will be rounded to 9.87654%
(or .0987654). All dollar amounts used in or resulting from any such calculation
will be rounded to the nearest cent (with one-half cent being rounded upwards).
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will earn interest at the interest rates (calculated
with reference to the Commercial Paper Rate and the Spread and/or Spread
Multiplier, if any) stated in the applicable pricing supplement.
The "Commercial Paper Rate" for any Interest Determination Date is the Money
Market Yield of the rate on that date for commercial paper having the Index
Maturity specified in the pricing supplement, as published in H.15 (519), by
9:00 a.m., New York City time, on the Calculation Date pertaining to that
Interest Determination Date under the heading "Commercial Paper --
Nonfinancial."
The following procedures will be followed if the Commercial Paper Rate cannot be
determined as described above:
- - the Commercial Paper Rate will be the Money Market Yield of the rate on the
Interest Determination Date for commercial paper having the Index Maturity
specified in the pricing supplement, as published in H.15 Daily Update under
the heading "Commercial Paper -- Nonfinancial."
- - if the rate is not published in H.15 Daily Update by 3:00 p.m., New York City
time, on the Calculation Date, then the Calculation Agent will determine the
Commercial Paper Rate to be the Money Market Yield of the average of the
offered rates of three leading dealers of commercial paper in New York City by
11:00 a.m., New York City time, on that Interest Determination Date, for
commercial paper having the Index Maturity specified in the pricing supplement
placed for an industrial issuer whose bond rating is "AA," or the equivalent,
from a nationally recognized statistical rating organization. The Calculation
Agent will select the three dealers referred to above.
- - if fewer than three dealers selected by the Calculation Agent are quoting as
mentioned above, the Commercial Paper Rate will be the Commercial Paper Rate
in effect on that Interest Determination Date.
FEDERAL FUNDS RATE NOTES
A Federal Funds Rate Note will bear interest at the interest rate (calculated
with reference to the Federal Funds Rate and the Spread or Spread Multiplier, if
any) specified in the applicable pricing supplement.
The "Federal Funds Rate" for any Interest Determination Date is the rate on that
date for Federal Funds as published in H.15 (519) by 9:00 a.m., New York City
time, on the Calculation Date pertaining to that Interest Determination Date
under the heading "Federal Funds (Effective Rate)."
The following procedures will be followed if the Federal Funds Rate cannot be
determined as described above:
- - the Federal Funds Rate will be the rate on the Interest Determination Date, as
published in
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H.15 Daily Update under the heading "Federal Funds/(Effective Rate)."
- - if the rate is not published in H.15 Daily Update by 3:00 p.m., New York City
time, on the Calculation Date, then the Calculation Agent will determine the
Federal Funds Rate to be the average of the rates for the last transaction in
overnight Federal Funds arranged by each of three leading dealers of Federal
Funds transactions in New York City. The Calculation Agent will select and
obtain quotes from the three leading dealers in Federal Funds transactions by
9:00 a.m., New York City time, on that Interest Determination Date.
- - if the dealers selected are not quoting, the Federal Funds Rate will be the
Federal Funds Rate in effect on that Interest Determination Date.
LIBOR NOTES
A LIBOR Note will bear interest at the interest rate (calculated with reference
to LIBOR and the Spread or Spread Multiplier, if any) specified in the pricing
supplement.
The Calculation Agent will determine LIBOR as follows on each Interest
Determination Date:
- - if "LIBOR Telerate" -- LIBOR will be the rate for deposits in the Index
Currency at the Index Maturity specified beginning on the second London
Business Day immediately following the applicable Interest Determination Date,
as such rate appears on the Designated LIBOR Page as of 11:00 a.m. London
time, on that Interest Determination Date.
- - if "LIBOR Reuters" -- LIBOR will be the average of the offered rates for
deposits in the Index Currency having the Index Maturity stated in the pricing
supplement, beginning on the second London Business Day immediately following
the applicable Interest Determination Date, as such rates appear on the
Designated LIBOR Page as of 11:00 a.m., London time, on that Interest
Determination Date, if at least two such offered rates appear on the
Designated LIBOR Page. If the Designated LIBOR Page by its terms provides for
a single rate, that single rate will be used regardless of the foregoing
provisions requiring more than one rate.
- - if less than the required number of rates appear (LIBOR Reuters) or no rate
appears (LIBOR Telerate) on the Designated LIBOR Page, the Calculation Agent
will determine LIBOR on the basis of the rates on deposits, in the Index
Currency at the Index Maturity specified, in a principal amount that is
representative of a single transaction in that market. The rates will be the
offered rates at approximately 11:00 a.m., London time, to prime banks in the
London interbank market on the Interest Determination Date beginning on the
second London Business Day immediately following the Interest Determination
Date. The Calculation Agent will select four major reference banks in the
London interbank market and request the principal London office of each to
provide a quotation of its rate. If at least two quotations are provided,
LIBOR for that Interest Determination Date will be the average of those
quotations.
- - if fewer than two quotations are provided by the selected banks in the London
interbank market, LIBOR will be the average of the rates quoted by three major
banks in the principal financial center of the Index Currency at approximately
11:00 a.m., New York City time, on the Interest Determination Date for loans
to leading European banks in the Index Currency having the Index Maturity
designated in the pricing supplement beginning on the second London Business
Day immediately following and in a principal amount that is representative for
a single transaction in that market at that time. The Calculation Agent will
select the three banks referred to above.
- - if the three banks selected are not quoting as mentioned above, LIBOR will be
LIBOR in effect on the Interest Determination Date.
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rates (calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if any)
specified in the applicable pricing supplement.
The "Treasury Rate" for any Treasury Rate Interest Determination Date, will be
the rate for the most recent auction of direct obligations of the United States
("Treasury Bills") at the Index Maturity designated in the pricing supplement as
such rate appears on either the display designated as Page 56 or the display
designated as Page 57 on Telerate under the heading "AVGE INVEST YIELD."
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The following procedures will be followed if the rate cannot be determined as
described above:
- - the Calculation Agent will determine the Treasury Rate to be the auction
average rate as otherwise announced by the United States Department of
Treasury.
- - if the result of the most recent auction of Treasury bills at the Index
Maturity specified are not published or announced as described above by 3:00
p.m., New York City time, on the Calculation Date, or if no auction is held in
a particular week, then the Calculation Agent will determine the Treasury Rate
to be the yield to maturity (expressed as a bond equivalent on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) of the
average of the secondary market bid rates, by approximately 3:30 p.m., New
York City time, on the Interest Determination Date of three leading primary
United States government securities dealers selected by the Calculation Agent
for the issue of Treasury bills with a remaining maturity closest to the Index
Maturity specified in the pricing supplement.
- - if the three dealers selected are not quoting as mentioned above, the Treasury
Rate will be the Treasury Rate in effect on that Interest Determination Date.
PRIME RATE NOTES
A Prime Rate Note will bear interest at the interest rate (calculated with
reference to the Prime Rate and Spread or Spread Multiplier, if any) specified
in the pricing supplement.
The "Prime Rate" for any Interest Determination Date is the prime rate on that
date, as published in H.15 (519) by 9:00 a.m., New York City time, on the
Calculation Date pertaining to the Interest Determination Date under the heading
"Bank Prime Loan."
Below are the procedures that will be followed if the rate cannot be set as
described above:
- - the Prime Rate will be the rate for the Interest Determination Date published
prior to 3:00 p.m., New York City time, on the Calculation Date, in H.15 Daily
Update opposite the caption "Bank Prime Loan."
- - if no such rate appears in H.15 Daily Update, the Calculation Agent will
determine the Prime Rate to be the average of the rates of interest publicly
announced by each bank that appears on the Reuters Screen USPRIME 1 as that
bank's prime rate or base lending rate as in effect for that Interest
Determination Date.
- - if fewer than four rates appear on the Reuters Screen USPRIME 1 Page on the
Interest Determination Date, then the Prime Rate will be the average of the
prime rates or base lending rates quoted (on the basis of the actual number of
days in the year divided by a 360-day year) as of the close of business on the
Interest Determination Date by at least two of the three major money center
banks in New York City selected by the Calculation Agent.
- - if fewer than two banks selected by the Calculation Agent are quoting as
mentioned above, the Prime Rate will be the average of the prime rates in New
York City quoted by substitute banks or trust companies selected by the
Calculation Agent. The substitute banks or trust companies must be organized
and doing business under the laws of the United States and must have a total
equity capital of at least U.S. $500 million and be subject to supervision or
examination by federal or state authority.
- - if the substitute banks or trust companies are not quoting, the Prime Rate
will be the Prime Rate in effect on the Interest Determination Date.
INDEXED NOTES
A pricing supplement may indicate that amounts payable under the Indexed Notes
(the "Indexed Notes") will be determined by reference to one of the following:
- - currencies;
- - currency units or composite currencies;
- - commodity prices;
- - financial or non-financial indices;
- - securities;
- - baskets of securities;
- - indices;
- - baskets of indices;
- - interest rates;
- - interest rate swap rates; or
- - other instruments or factors.
If you hold Indexed Notes, you may receive a principal amount at maturity that
is greater than or less than the face amount of such Indexed Notes, or an
interest rate that is greater than or less than the stated interest rate on the
Indexed Notes, or both. These differences depend upon the structure of the
Indexed Note and fluctuation of
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the relative value at maturity or at the relevant Interest Payment Date, as the
case may be, of the specified indexed item.
EXTENSION OF MATURITY
Certain Notes (other than an Amortizing Note) may give us the option to extend
their maturity date for a specified period or periods (each an "Extension
Period") up to but not beyond a specified date (the "Final Maturity Date"). If a
Note provides such an option (an "Extendible Note"), the following procedures
will apply.
We will notify the Trustee and the Paying Agent that we intend to extend the
maturity date, in writing, 45 to 60 days before the maturity date originally in
effect (the "Original Maturity Date") or, if the maturity date has already been
extended, prior to the maturity date then in effect (an "Extended Maturity
Date"). No later than 38 days before the Original Maturity Date or an Extended
Maturity Date, as the case may be, the Paying Agent will mail you a notice (the
"Extension Notice") by first class mail, postage prepaid, detailing:
- - our election to extend the maturity of such Note;
- - the new Extended Maturity Date;
- - the interest rate applicable to the Extension Period (which, in the case of a
Floating Rate Note, will be calculated with reference to a Base Rate and the
Spread and/or Spread Multiplier, if any); and
- - how you may redeem the Notes during the Extension Period, if applicable. You
will be told the date or dates, the period or periods, and the price or prices
at which you may require us to repay the Notes during the Extension Period.
Once the Paying Agent mails the Extension Notice the maturity date will be
extended automatically. The Note will have the same terms it had prior to the
mailing of such Extension Notice, except as modified by the Extension Notice
and as described in the next paragraph.
We reserve the right to change the interest rate provided for in the Extension
Notice and establish a higher interest rate (or, in the case of a Floating Rate
Note, a higher Spread and/or Spread Multiplier, if any) for the Extension
Period. If we change the interest rate we will notify you of the change at least
twenty days prior to the maturity date then in effect for an Extendible Note, by
first class mail, postage prepaid.
If we extend the maturity of an Extendible Note, you will have the option to
require us to repay such Note on the maturity date then in effect at a price
equal to the principal amount thereof plus any accrued and unpaid interest to
such date. In order for an Extendible Note to be repaid on such maturity date,
you must follow the procedures set forth below under "Repayment and Repurchase"
for optional repayment, except that the period for delivery of such Note or
notification to the Paying Agent will be 25 to 35 days prior to the maturity
date then in effect. A Holder who has tendered an Extendible Note for repayment
pursuant to an Extension Notice may, by written notice to the Paying Agent,
revoke any such tender for repayment until 3:00 p.m., New York City time, on the
twentieth calendar day prior to the maturity date then in effect (or if such day
is not a Business Day, until 3:00 p.m., New York City time, on the immediately
succeeding Business Day).
AMORTIZING NOTES
Amortizing notes are Fixed Rate Notes for which payments combining principal and
interest are made in installments over the life of each Note ("Amortizing
Notes"). Interest on each Amortizing Note will be computed on the basis of a
360-day year of twelve 30-day months. Payments will be applied first to interest
due and payable and then to the reduction of the unpaid principal amount.
Information concerning additional terms and conditions of any issue of
Amortizing Notes will be provided in the applicable pricing supplement. A table
showing the repayment information in respect of each Amortizing Note will be
included in the applicable pricing supplement.
REDEMPTION
We will not generally have the right to redeem Notes prior to maturity. However,
a pricing supplement may state the date or dates on which early redemption is
permitted as well as the price at which the Notes may be redeemed. We will
notify you within 30 to 60 days prior to the redemption date. If less than all
of the Notes are to be redeemed, the Note Registrar shall select Notes to be
redeemed by a fair and appropriate method.
REPAYMENT AND REPURCHASE
Although Notes will not generally be repayable at the option of the Holder prior
to maturity, we
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may allow you to have certain Notes repaid prior to their maturity at prices and
dates specified in the pricing supplement.
If so, you must send the Paying Agent 30 to 45 days prior to the repayment date
(1) the Note with the form entitled "Option to Elect Repayment" on the reverse
of the Note duly completed or (2) a telegram, telex, facsimile transmission or a
letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust company in
the United States of America. The telegram, telex, facsimile transmission or
letter, should include (1) the name of the Holder of the Note, (2) the principal
amount of the Note, (3) the principal amount of the Note to be repaid, (4) the
certificate number or a description of the tenor and terms of the Note, (5) a
statement that the option to elect repayment is being exercised thereby and (6)
a guarantee that the Notes to be repaid with the form entitled "Option to Elect
Repayment" on the reverse of the Note duly completed will be received by the
Paying Agent not later than five Business Days after the date of such telegram,
telex, facsimile transmission or letter and such Note and form duly completed
are received by the Paying Agent by such fifth Business Day. Except in the case
of Renewable Notes or Extendible Notes, and unless otherwise specified in the
applicable pricing supplement, your exercise of the repayment option shall be
irrevocable. You may exercise the repayment option for less than the entire
principal amount of the Notes provided that the remaining principal amount of
the Notes is an authorized denomination.
If you have Book-Entry Notes you will have to instruct the broker or other
participant through which you hold Notes to exercise a right to repayment. You
should consult with your broker or other participant to find out what procedures
you must follow.
The Company may at any time purchase Notes at any price in the open market or
otherwise. Those Notes may be held or resold or, at our discretion, may be
surrendered to the Trustee for cancellation.
BOOK-ENTRY SYSTEM
Upon issuance, all Book-Entry Notes will be represented by two Global Securities
(as defined in the prospectus) in the form of master securities evidencing
Senior Debt Securities and Subordinated Debt Securities, respectively (the
"Master Securities"). The Master Securities representing Book-Entry Notes will
be deposited with, or on behalf of, DTC, as Depositary (the "Depositary"), and
registered in the name of a nominee of the Depositary.
Book-Entry Notes will not be exchangeable for Certificated Notes, except that if
the Depositary is unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, the Company will
issue Certificated Notes in exchange for the Master Security or Master
Securities representing Book-Entry Notes. In addition, the Company may at any
time and in its sole discretion determine not to have Book-Entry Notes
represented by Master Securities, and, in such event, will issue Certificated
Notes in exchange for all Master Securities representing such Book-Entry Notes.
Beneficial interests in a Book-Entry Note will be shown on, and transfers of
those interests will be made only through records maintained by DTC or its
participants. Except under limited circumstances, Book-Entry Notes will not be
issued as a Certificated Note. We will make payments of principal and interest
on Book-Entry Notes to DTC or its nominee. We will make payments to beneficial
owners of interests in Book-Entry Notes through DTC and its participants.
The Depositary has advised the Company and the Agents as follows: The Depositary
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 Uniform Commercial Code and a "clearing agency" registered pursuant to
provisions of Section 17A of the Securities Exchange Act of 1934. The Depositary
holds securities that its participants ("Participants") deposit with The
Depositary. The Depositary 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 and trust
companies, clearing corporations and certain other organization. Access to the
Depositary's system is
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also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to The Depositary and its Participants are on file with the
Securities and Exchange Commission. See "Description of J.P. Morgan Debt
Securities" in the prospectus.
FOREIGN CURRENCY NOTES
EXCHANGE RATES AND EXCHANGE CONTROLS
There are significant risks to investing in Notes which are denominated or
derive their value from a currency other than U.S. dollars. Such risks include
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies (or composite currencies) and the
possibility that either the U.S. or a foreign government will impose or modify
exchange controls. Such risks generally depend on economic and political events
over which we have no control. In recent years, rates of exchange between U.S.
dollars and certain foreign currencies have been highly volatile and such
volatility may be expected to continue in the future. Historical fluctuations in
any particular exchange rate do not necessarily indicate how a rate will
fluctuate during the term of any Note. Depreciation against the U.S. dollar of
the currency in which a Note is payable would result in a decrease in the
effective yield of such Note below its coupon rate and, in certain
circumstances, could result in a loss to the investor on a U.S. dollar basis. In
addition, depending on the specific terms of a currency-linked Note, changes in
exchange rates relating to any of the currencies involved may result in a
decrease in its effective yield and, in certain circumstances, could result in a
loss of all or a substantial portion of the principal of a Note to the investor.
THERE ARE OTHER RISKS INVOLVED WITH NOTES ISSUED IN A FOREIGN OR COMPOSITE
CURRENCY THAT CANNOT BE ENTIRELY DESCRIBED IN ANY ONE DOCUMENT. WE DO NOT ASSUME
ANY RESPONSIBILITY IN REGARDS TO THESE RISKS AT THIS TIME OR IN THE FUTURE. YOU
SHOULD CONSULT YOUR OWN FINANCIAL AND OR LEGAL ADVISORS AND BE FULLY INFORMED
BEFORE YOU MAKE ANY INVESTMENT.
The sale of these Notes and the information included in this prospectus
supplement is intended for United States residents only. We disclaim any
responsibility to advise prospective purchasers who are not residents of the
United States of any matters that may affect the purchase, holding or receipt of
payments on the Notes. Such persons should consult their own counsel with regard
to such matters.
Governments have imposed from time to time, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a specified currency at the time of payment of a Note. Even if there are no
actual exchange controls, it is possible that the particular foreign currency
would not be available when payments on such note are due. In that event, we
will make the required payments in U.S. dollars on the basis of the Market
Exchange Rate on the date of such payment, or if such rate of exchange is not
then available, on the basis of the Market Exchange Rate as of the most recent
practicable date. See "Description of the Notes-Payment Currency."
GOVERNING LAW AND JUDGMENTS
The Notes will be governed and will be construed in accordance with New York
State law. In the event an action was brought to court in the United States for
Notes denominated in a currency other than U.S. dollars, it is likely that such
court would grant judgment relating to the Notes only in U.S. dollars. If an
action is brought to court in New York, however, for Notes denominated in a
currency other than U.S. dollars, a New York court should render or enter a
judgment or decree in the specified currency. Such judgment should then be
converted into U.S. dollars at the rate of exchange prevailing on the date of
entry of the judgment or decree.
PLAN OF DISTRIBUTION
We may sell the Notes:
- - through agents;
- - through underwriters or dealers; or
- - directly to purchasers.
THROUGH AGENTS
We may sell the Notes on a continuing basis through J.P. Morgan & Co. (the
"Agent"). The Agent will use reasonable efforts when requested by us to solicit
purchases of the Notes. We will pay the Agent a commission to be negotiated at
the time of sale. Unless otherwise specified in the attached pricing supplement,
the commission may range from .125% to .750% of the principal
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amount of each Note sold through the Agent, depending on its stated maturity.
The Company may also sell Notes through one or more additional agents on
substantially the same terms as those sold to or through the Agent.
THROUGH UNDERWRITERS
We may also sell Notes to any agent, acting as principal, for its own account or
for resale to one or more investors or other purchasers, including other
broker-dealers.
The agents may sell any Notes they have purchased as principal to any dealer at
a discount. Unless indicated in the applicable pricing supplement, the discount
allowed to any dealer will not be in excess of the discount to be received by
the Agent from the Company. The Notes may be resold by the Agent to investors
and other purchasers form 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, or the Notes may be resold to certain dealers as
described above. After the initial public offering of any Notes, the public
offering price and discount may be changed.
DIRECT SALES
We may sell Notes directly to investors, without involving any agent or
underwriter. In this case, we would not be obligated to pay any commission or
discount in connection with the sale.
GENERAL INFORMATION
The name of any agents or other persons to which we sell any Notes, as well as
any commissions or discounts payable to those agents or other persons will be
indicated in the applicable pricing supplement.
We will have the sole right to accept offers to purchase Notes and may, in our
absolute discretion, reject any proposed purchase of Notes in whole or in part.
Each agent will have the right, in its reasonable discretion, to reject in whole
or in part any proposed purchase of Notes through it.
Any agent, underwriter or dealer that participates in the offering of the Notes
may be deemed an "underwriter" as defined in the Securities Act of 1933 (the
"Act"). The Company has agreed to indemnify each agent and certain other persons
against certain liabilities, including liabilities under the Act.
The Company may also accept (but not solicit) offers to purchase Notes through
additional agents on substantially the same terms and conditions (including
commissions) as would apply to purchases by agents under the Master Agency
Agreement.
The Notes will not be listed on any securities exchange. The agents have advised
the Company that they may from time to time purchase and sell the Notes in the
secondary market. However, no agent is obligated to do so and any agent may
discontinue making a market in the Notes at any time without notice. No
assurance can be given as to the existence or liquidity of any secondary market
for the Notes.
The agents through which we may sell Notes, may engage in transactions with us
and perform services for us in the ordinary course of business.
J.P. Morgan & Co. is a wholly owned subsidiary of the Company. The offer and
sale of any Notes by J.P. Morgan & Co. will comply with the requirements of Rule
2720 of the Conduct Rules of the National Association of Securities Dealers,
Inc. regarding a member firm's underwriting securities of an affiliate. As
required by Rule 2720, any such offer and sale will not be made to any
discretionary account without the prior approval of the customer. See "Plan of
Distribution" in the applicable prospectus.
In connection with certain offerings of the Notes, the agents may engage in
overallotment, stabilizing transactions, or syndicate covering transactions in
accordance with Regulation M under the Securities Exchange Act of 1934.
Overallotment involves sales in excess of the offering size, which create a
short position of the agents. Stabilizing transactions involve bids to purchase
the Notes in the open market for the purpose of pegging, fixing or maintaining
the price of the Notes. Syndicate covering transactions involve purchases of the
Notes in the open market after the distribution has been completed in order to
cover short positions. Stabilizing transactions and syndicate covering
transactions may cause the price of the Notes to be higher than it would
otherwise be in the absence of those transactions. Those activities, if
commenced, may be discontinued at any time.
LEGAL OPINIONS
The validity of the Notes will be passed upon for the Company by Gene A.
Capello, Vice President and Assistant General Counsel of the Company
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and for the Agent by Cravath, Swaine & Moore, Worldwide Plaza, New York, New
York.
UNITED STATES TAXATION
GENERAL
This section summarizes the material U.S. tax consequences to holders of Notes.
It represents the opinion of Gene A. Capello, Vice President and Assistant
General Counsel of the Company. However, the discussion is limited in certain
ways and as such:
- - it only covers holders that buy the Notes in the initial offering.
- - it only covers holders that hold the Notes as capital assets (that is, for
investment purposes), and that do not have a special tax status.
- - it only covers the general tax consequences to holders of Notes. It does not
cover tax consequences that depend upon the individual tax circumstances of
holders.
- - it is based on current law. Changes in the law may change the tax treatment of
the Notes.
- - it does not cover state, local or foreign law.
- - it does not cover every type of Note that might be issued. If we intend to
issue a Note of a type not described in this summary, additional tax
information will be provided in the Pricing Supplement for that Note.
- - it does not apply to holders owning 10% or more of the voting stock of the
Company, or corporate holders that are "controlled foreign corporations" with
respect to the Company.
If you are considering buying Notes, you should consult your tax advisors about
the tax consequences of holding the Notes in your particular situation. The tax
consequences depend upon whether a holder is a "U.S. Holder" or a "Non-U.S.
Holder."
A "U.S. Holder" is:
- - an individual U.S. citizen or resident;
- - a corporation, or entity taxable as a corporation, that was created under U.S.
law (federal or state); or
- - an estate or trust whose worldwide income is subject to U.S. federal income
tax.
A "Non-U.S. Holder" is:
- - an individual that is a nonresident alien;
- - a corporation organized or created under non-U.S. law; or
- - an estate or trust that is not taxable in the U.S. on its worldwide income.
If a partnership holds Notes, the tax treatment of a partner will generally
depend upon the status of the partner and upon the activities of the
partnership. Partners of partnerships holding Notes should consult their tax
advisors.
TAX CONSEQUENCES TO U.S. HOLDERS
INTEREST
The tax treatment of interest paid on the Notes depends upon whether the
interest is "Qualified Stated Interest."
"Qualified Stated Interest" is any interest that meets all the following
conditions:
- - it is payable at least once each year;
- - it is payable over the entire term of the Note;
- - it is payable at a single fixed rate or under a single formula; and
- - the Note has a maturity of more than one year from its issue date.
If any interest on a Note is Qualified Stated Interest, then
- - if you are a cash method taxpayer (including most individual holders), you
must report that interest in your income when it is received by you, or
- - if you are an accrual method taxpayer, you must report that interest in your
income as it accrues.
If any interest on a Note is not Qualified Stated Interest, it is subject to the
rules for Original Issue Discount ("OID") described below.
DETERMINING AMOUNT OF OID
Notes that have OID are subject to additional tax rules. The amount of OID, if
any, on a Note is determined as follows:
- - OID on a Note is defined as the "stated redemption price at maturity" of the
Note minus the "issue price" of the Note. If this amount is negative, there is
no OID.
- - the "stated redemption price at maturity" of a Note is the total amount of all
principal and interest payments to be made on the Note, other than Qualified
Stated Interest. In a typical case where all interest is Qualified Stated
Interest, the stated redemption price at maturity is the same as the principal
amount.
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- - the "issue price" of a Note is the first price at which a substantial amount
of the Notes are sold to the public.
- - under a special rule, any OID determined under the general formula is
disregarded (and not treated as OID) if it is very small. This rule applies if
the amount of OID is less than the following items multiplied together: (a)
.25% (1/4 of 1%), (b) the number of full years from the issue date of the Note
to the final maturity date of the Note, and (c) the stated redemption price at
maturity. This OID is disregarded and is called "de minimis OID".
ACCRUAL OF OID INTO INCOME
If a Note has OID, the following consequences arise:
- - a holder must report the total amount of OID as ordinary income over the life
of the Note.
- - all holders of Notes, even those on the cash method of accounting, are
required to report OID income as the OID accrues on the Notes. This means that
holders are required to report OID income, and in some cases pay tax on that
income before they receive the cash that corresponds to that income.
- - OID accrues on a Note on a "constant yield" method. This method takes into
account the compounding of interest. Under this method, the accrual of OID on
a Note, combined with the inclusion into income of any Qualified Stated
Interest on the Note, will result in the holder being taxed at approximately a
constant percentage of the unrecovered investment in the Note.
- - the accruals of OID on a Note will generally be less in the early years and
more in the later years.
- - if any of the interest paid on the Note is not Qualified Stated Interest, that
interest is taxed solely as OID. It is not separately taxed when it is paid to
the holder.
- - your tax basis in the Note is initially your cost. It increases by any OID
(not including Qualified Stated Interest) you report as income. It decreases
by any principal payments you receive on the Note, and by any interest
payments you receive that are not Qualified Stated Interest.
NOTES SUBJECT TO ADDITIONAL TAX RULES
Additional or different tax rules apply to several types of Notes that we may
issue.
Short-Term Notes
We may issue Notes with a maturity of one year or less. These are referred to as
"short-term Notes."
- - no interest on these Notes is Qualified Stated Interest. Otherwise, the amount
of OID is calculated in the same manner as described above.
- - accrual method taxpayers and certain others, such as banks and securities
dealers, must report OID income as it accrues.
- - if you are a cash method taxpayer, you do not report OID income until you
actually receive payments on the Note. Alternatively, you can elect to report
OID as it accrues.
- - two special rules apply if you are a cash method taxpayer and you do not elect
to report OID as it accrues. First, if you sell the Note or it is paid at
maturity, and you have a taxable gain, then the gain is ordinary income to the
extent of the accrued OID at the time of the sale that you have not yet taken
into income. Second, if you took out a loan to buy the Note, then while you
hold the Note you cannot deduct any interest on the loan that corresponds to
accrued OID until you report the OID as income.
Floating Rate Notes
Floating Rate Notes are subject to special OID rules.
- - if the interest rate is based on a single fixed formula based on objective
financial information (which may include a fixed interest rate for the initial
period), all the interest will be Qualified Stated Interest. The amount of OID
(if any), and the method of accrual of OID, will then be calculated by
converting the Note's initial floating rate into a fixed rate and by applying
the general OID rules described above.
- - if the Note has more than one formula for interest rates, it is possible that
the combination of interest rates might create OID. You should consult your
tax advisor concerning the OID accruals on such a Note.
Foreign Currency Notes
A "Foreign Currency Note" is a Note denominated in a currency other than U.S.
dollars. Special tax rules apply to these Notes:
- - if you are a cash method taxpayer, you will be taxed on the U.S. dollar value
of any foreign currency you receive as interest. The dollar
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value will be determined as of the date when you receive the payments.
- - if you are an accrual method taxpayer, you must report interest income as it
accrues. You can use the average foreign currency exchange rate during the
relevant interest accrual period (or, if that period spans two taxable years,
during the portion of the interest accrual period in the relevant taxable
year). In this case, you will make an adjustment upon receipt of the foreign
currency to reflect actual exchange rates at that time. Certain alternative
elections may also be available.
- - any OID on Foreign Currency Notes will be determined in the relevant foreign
currency. All holders must accrue OID in the same manner that an accrual basis
holder accrues interest income.
- - your initial tax basis in a Foreign Currency Note is the amount of U.S.
dollars you pay for the Note (or, if you pay in foreign currency, the value of
that foreign currency on the purchase date). Adjustments are made to reflect
OID and other items as described above.
- - if you collect foreign currency upon the maturity of the Note, or if you sell
the Note for foreign currency, your gain or loss will be based on the U.S.
dollar value of the foreign currency you receive. For a publicly traded
Foreign Currency Note, this value is determined for cash basis taxpayers on
the settlement date for the sale of the Note, and for accrual basis taxpayers
on the trade date for the sale (although such taxpayers can also elect the
settlement date). You will then have a tax basis in the foreign currency equal
to the value reported on the sale.
- - any gain or loss on the sale or retirement of a Note will be ordinary income
or loss to the extent it arises from currency fluctuations between your
purchase date and sale date. Any gain or loss on the sale of foreign currency
will also be ordinary income or loss.
OTHER CATEGORIES OF NOTES
Additional rules may apply to certain other categories of Notes. The Pricing
Supplement for these Notes may describe these rules. In addition, you should
consult your tax advisor in these situations. These categories of Notes include:
- - Notes with contingent payments;
- - Notes that can be put to the Company by the holder before their maturity;
- - Notes that are callable by the Company before their maturity, other than
typical calls at a premium;
- - Indexed Notes with an index tied to currencies; and
- - Notes that are extendable at the option of the Company.
PREMIUM AND DISCOUNT
Additional special rules apply in the following situations involving discount or
premium:
- - if you buy a Note for more than its stated redemption price at maturity, the
excess amount you pay will be "bond premium". You can use this amount to
reduce your taxable interest income over the life of the Note.
- - similarly, if a Note has OID and you buy it for more than the issue price, the
excess (up to the total amount of OID) is called "acquisition premium". The
amount of OID you are required to include in income will be reduced by this
amount over the life of the Note.
- - if you buy a Note for less than the issue price, special rules concerning
"market discount" may apply.
Appropriate adjustments to tax basis are made in these situations. Holders in
these situations should consult their tax advisors.
ACCRUAL ELECTION
A holder of a Note can elect to be taxed on the income from the Note in a
different manner than described above. Under the election:
- - no interest is Qualified Stated Interest.
- - the holder includes amounts in income as it economically accrues to the holder
on the Note. The accrual of income is in accordance with the constant yield
method, based on the compounding of interest. The accrual of income takes into
account stated interest, OID (including de minimis OID), market discount, and
premium.
- - the holder's tax basis is increased by all accruals of income and decreased by
all payments received on the Note.
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SALE OR RETIREMENT OF NOTES
On a sale or retirement of a Note:
- - a holder will have taxable gain or loss equal to the difference between the
tax basis of the Note and the amount received on the sale or retirement.
- - any gain or loss will generally be capital gain or loss, and will be long term
capital gain or loss if the Note was held for more than one year.
- - if (a) you purchased the Note with de minimis OID, (b) you did not make the
election to accrue all OID into income, and (c) you receive the principal
amount of the Note upon the sale or retirement, then you will generally have
capital gain equal to the amount of the de minimis OID.
- - if you sell the Note between interest payment dates, a portion of the amount
you receive reflects interest that has accrued on the Note but has not yet
been paid by the sale date. That amount is treated as ordinary interest income
and not as sale proceeds.
- - all or part of any gain may be ordinary income rather than capital gain in
certain cases. These cases include sales of short-term Notes, Notes with
market discount, Notes with contingent payments, or Foreign Currency Notes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under the tax rules concerning information reporting to the IRS:
- - we are required to provide information to the IRS concerning interest, OID and
retirement proceeds we pay to you on Notes held by you, unless an exemption
applies.
- - similarly, unless an exemption applies, you are required to provide us with a
correct Taxpayer Identification Number for our use in reporting information to
the IRS. If you are an individual, this is your social security number. You
are also required to comply with other IRS requirements concerning information
reporting.
- - if you are subject to these requirements, but do not comply, we are required
to withhold 31% of all amounts payable to you on the Notes (including
principal payments). If we do withhold payments, you may use the withheld
amount as a credit against your federal income tax liability.
- - all U.S. Holders that are individuals, partnerships and trusts are subject to
these requirements. Certain U.S. Holders, including all corporations,
tax-exempt organizations and individual retirement accounts, are exempt from
these requirements.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
Withholding Taxes
Generally, payments of principal and interest on the Notes will not be subject
to U.S. withholding taxes. However, in order for the exemption from withholding
taxes to apply, you must meet the following requirements:
- - if the Notes are registered Notes, you, as the beneficial owner of a Note must
provide a statement to the effect that you are not a U.S. Holder. This
statement is generally made on IRS Form W-8. You should consult your tax
advisor about the specific method to satisfy this requirement. The procedures
for satisfying this requirement will change on January 1, 2001.
- - you must not be a bank that is making a loan in the ordinary course of its
business.
Even if you comply with these conditions, withholding tax might arise if the
amount of interest payable on a Note is based on the earnings of the Company. If
this exception applies, additional information will be provided in the Pricing
Supplement.
Sale or Retirement of Notes
If you sell a Note or it is redeemed, you will not be subject to federal income
tax on any gain unless either of the following applies:
- - the gain is connected with a trade or business that you conduct in the U.S.;
or
- - you are an individual, you are present in the U.S. for at least 183 days
during the year in which you dispose of the Note, and certain other conditions
are satisfied.
U.S. Trade or Business
If you hold a Note in connection with a trade or business that you are
conducting in the U.S.:
- - any interest on the Note, and any gain from disposing of the Note, generally
will be subject to income tax as if you were a U.S. Holder.
- - any interest and gain will be exempt from U.S. withholding tax as discussed
above as long as you submit to us a proper form, generally IRS Form 4224, that
includes certain required information. You should consult your tax advisor
S-16
<PAGE> 17
about how to satisfy this requirement. The procedures for satisfying this
requirement will change on January 1, 2001.
- - if you are a corporation, you may be subject to the "branch profits tax" on
your earnings that are connected with your U.S. trade or business, including
earnings from the Note. This tax is 30%, but may be reduced or eliminated by
an applicable income tax treaty.
Estate Taxes
If you are an individual Non-U.S. Holder, the Note will not be subject to U.S.
estate tax when you die. However, this rule only applies if, at the time of your
death, payments on the Note would not have been connected to a trade or business
that you were conducting in the U.S.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. rules concerning information reporting and backup withholding are described
above. You automatically avoid these requirements when you provide the tax
certifications needed to avoid withholding tax on interest, as described above
(unless the Company or an intermediate entity knows that the certification is
false). See "Withholding Taxes" above.
Similarly, if you dispose of a Note through a broker and you are not exempt from
the information reporting requirements:
- - if you provide appropriate certification of your non-U.S. status to the
broker, you will not be subject to information reporting or backup
withholding.
- - if you do not provide such certification, and you use the U.S. office of a
broker, you may be subject to information reporting and backup withholding.
- - if you do not provide such certification, and you use the non-U.S. office of a
broker, you will not be subject to backup withholding. However, you may be
subject to information reporting depending upon whether the broker has certain
connections to the U.S.
You should consult your tax advisor about the tax rules concerning information
reporting requirements and backup withholding.
GLOSSARY
Terms used in this prospectus supplement and not defined in the attached
prospectus are defined below.
"Business Day" -- any day other than (a) a Saturday or Sunday, or (b) a day on
which banking institutions in New York City, or the Principal Financial Center
in the case of foreign-denominated Notes, generally are authorized or required
by law or executive order to close.
If the currency of a foreign-denominated Note is the Euro, Business Day shall be
a day on which the Trans-European Automated Real-time Gross Settlement Express
Transfer (TARGET) System is open. If a Euro currency denominated Note is also a
LIBOR Note, Business Day shall also be a London Business Day.
"Calculation Agent" -- the agent appointed by the Company to calculate interest
rates for Floating Rate Notes. Normally this will be Morgan Guaranty Trust
Company of New York.
"Calculation Date" -- with respect to any Interest Determination Date, the date
on which the Calculation Agent is to calculate an interest rate for a Floating
Rate Note. Unless otherwise specified in the applicable pricing supplement, the
Calculation Date will be the earlier of: (a) ten (10) calendar days after that
Interest Determination Date or, if that day is not a Business Day, the next
succeeding Business Day or (b) the Business Day preceding the applicable
Interest Payment Date or date of maturity (or the date of redemption or
repayment, if any) of that Note, as the case may be.
"Derivative Obligations" -- obligations of J.P. Morgan to make payments on
claims in respect of derivative products such as interest and foreign exchange
rate contracts, commodity contracts and similar arrangements; provided, however,
that Derivative Obligations do not include claims in respect of Senior
Indebtedness or obligations which, by their terms, are expressly stated not to
be superior in right of payment to the Subordinated Debt Securities or to rank
pari passu with the Subordinated Debt Securities.
"Designated LIBOR Page" -- (a) if "LIBOR Reuters" is designated in the pricing
supplement, the display on the Reuters Monitor Money Rates Service for the
purpose of displaying the London interbank rates of major banks for the
applicable Index Currency, or (b) if "LIBOR Telerate" is designated in the
pricing supplement, the display on the Bridge Telerate Inc. Service for the
purpose of displaying the London interbank rates of major banks for the
applicable Index Currency. If neither LIBOR Reuters nor LIBOR Telerate is
S-17
<PAGE> 18
specified, LIBOR for the applicable Index Currency will be determined as if
LIBOR Telerate had been specified.
"H.15 (519)" -- the publication entitled "Statistical Release H.15 (519),
Selected Interest Rates," or any successor publication, published by the Board
of Governors of the Federal Reserve System.
"H.15 Daily Update" -- the daily update of H.15 (519), available through the
worldwide website of the Board of Governors of the Federal Reserve System at
http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
"Index Currency" -- the currency (including composite currencies) specified in
the pricing supplement as the currency for which LIBOR shall be calculated. If
no currency is specified, the Index Currency will be U.S. dollars.
"Index Maturity" -- the period of time designated as the representative maturity
of the certificates of deposit, the commercial paper, the Index Currency or the
Treasury bills, respectively, by reference to transactions in which the
Commercial Paper Rate, LIBOR and the Treasury Rate, respectively, are to be
calculated, as set forth in the pricing supplement.
"Initial Interest Rate" -- the rate at which a Floating Rate Note will bear
interest for the first interest period.
"Interest Determination Date" -- the date as of which the interest rate for a
Floating Rate Note is to be determined, to be effective for the following Reset
Date and calculated on the related Calculation Date. Generally:
- - the Interest Determination Date pertaining to a Reset Date for a Commercial
Paper Rate Note, Federal Funds Rate Note or Prime Rate Note will be the second
Business Day preceding that Reset Date;
- - the Interest Determination Date pertaining to a Reset date for a LIBOR Note
will be the second London Business Day preceding that Reset Date; and
- - the Interest Determination Date pertaining to a Reset Date for a Treasury Rate
Note will be the day of the week during which that Reset Date falls on which
Treasury bills of the Index Maturity designated in the pricing supplement are
auctioned. Treasury bills are usually sold at auction on Monday of each week
unless that day is a legal holiday, in which case the auction is usually held
on the following Tuesday or may be held on the preceding Friday. If, as the
result of a legal holiday, an auction is held on the preceding Friday, that
Friday will be the Interest Determination Date pertaining to the Reset Date
occurring in the following week.
"Interest Payment Date" -- the date on which interest is paid except for the
maturity date.
"London Business Day" -- a Business Day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"Maximum Interest Rate" -- a maximum numerical interest rate limitation, or
ceiling, on the rate at which interest may accrue on a Floating Rate Note during
any interest period.
"Minimum Interest Rate" -- a minimum numerical interest rate limitation, or
floor, on the rate at which interest may accrue on a Floating Rate Note during
any interest period.
"Money Market Yield" -- a yield calculated in accordance with the following
formula:
Money Market Yield = D X 360 X 100
360-(D x M)
where "D" refers to the annual rate for commercial paper, quoted on bank
discount basis and expressed as a decimal, and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
"Paying Agent" -- the agent appointed by us to make payments of principal,
premium, if any, and interest on the Notes. Typically this is U.S. Bank Trust.
"Principal Financial Center" -- the capital city of the country issuing the
specified currency of a foreign-denominated Note, except for the following: (a)
United States dollars, the City of New York; (b) Australian dollars, the cities
of Sydney and Melbourne; (c) Canadian dollars, the city of Toronto; (d) Deutsche
marks, the city of Frankfurt; (e) Dutch gilders, the city of Amsterdam; (f)
South African rand, the city of Johannesburg; and (g) Swiss franc, the city of
Zurich.
If a LIBOR Note is denominated in Portuguese escudos, Principal Financial Center
shall be London.
"Record Date" -- the date on which a noteholder must own the Note in order to
receive an interest payment on the next Interest Payment Date, usually the
fifteenth day (whether or not a
S-18
<PAGE> 19
Business Day or a London Business Day) prior to that Interest Payment Date.
"Reset Date" -- the date on which an interest rate is set and a Note begins to
earn interest for the next Interest Period. The Reset Dates will be:
- - in the case of Floating Rate Notes that reset daily, each Business Day;
- - in the case of Floating Rate Notes (other than Treasury Rate Notes) that reset
weekly, Wednesday of each week;
- - in the case of Treasury Rate Notes that reset weekly, Tuesday of each week;
- - in the case of Floating Rate Notes that reset monthly, the third Wednesday of
each month;
- - in the case of Floating Rate Notes that reset quarterly, the third Wednesday
of March, June, September and December of each year;
- - in the case of Floating Rates Notes that reset semi-annually, the third
Wednesday of each of two months of each year specified in the pricing
supplement; and
- - in the case of Floating Rate Notes that reset annually, the third Wednesday of
one month of each year specified in the pricing supplement.
If a Reset Date for any Floating Rate Note is not a Business Day (or, in the
case of a LIBOR Note, a day that is not a London Business Day), that Reset Date
will be postponed to the next Business Day or London Business Day, as the case
may be, (except that, in the case of a LIBOR Note, if that London Business Day
is in the following calendar month, that Reset Date will be the preceding London
Business Day). If a Treasury bill auction (as described in the definition of
"Interest Determination Date") will be held on any day that could otherwise be a
Reset Date for a Treasury Rate Note, then that Reset Date will instead be the
Business Day immediately following that auction date.
"Reuters Screen USPRIME 1 Page" -- the display designated as Page "USPRIME 1" on
the Reuters Monitor Money Rates Service (or any other page that replaces that
page on that service for the purpose of displaying prime rates or base lending
rates of major Unites States banks).
"Senior Indebtedness" -- principal of, premium, if any, and interest on (a) all
indebtedness of J.P. Morgan for money borrowed, whether outstanding on this date
or hereafter created, assumed or incurred, except for (1) indebtedness issued
under the Subordinated Indenture; (2) Antecedent Subordinated Indebtedness of
J.P. Morgan; and (3) such indebtedness as is by its terms expressly stated to be
junior in right of payment to the Subordinated Notes or to rank pari passu with
the Subordinated Debt Securities including without limitation the junior
subordinated obligations in respect of capital securities, and (b) any
deferrals, renewals or extensions of any such Senior Indebtedness.
"Spread" -- the constant amount, if any, to be added to or subtracted from the
Floating Rate specified in the pricing supplement throughout the term of the
Note.
"Spread Multiplier" -- the percentage by which the Floating Rate specified in
the pricing supplement is to be multiplied throughout the term of the Note.
S-19
<PAGE> 20
PROSPECTUS
J.P. MORGAN & CO. INCORPORATED
60 WALL STREET
NEW YORK, NY 10260-0060
(1-212) 483-2323
DEBT SECURITIES
SERIES PREFERRED STOCK
DEPOSITARY SHARES
WARRANTS TO PURCHASE SECURITIES
UNIVERSAL WARRANTS
We will provide specific terms of these securities in supplements to this
prospectus. You should read this prospectus and any supplement carefully before
you invest.
These securities are not deposits or other obligations of a bank and are not
insured by the Federal Deposit Insurance Corporation or any other federal
agency.
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SEC OR ANY STATE SECURITIES
COMMISSION NOR HAVE THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This prospectus is dated September 17, 1999.
<PAGE> 21
ABOUT THIS PROSPECTUS
THIS PROSPECTUS IS PART OF A REGISTRATION STATEMENT THAT WE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") UTILIZING A "SHELF"
REGISTRATION PROCESS. UNDER THIS SHELF PROCESS, WE MAY, FROM TIME TO TIME OVER
APPROXIMATELY THE NEXT TWO YEARS, SELL ANY COMBINATION OF THE SECURITIES
DESCRIBED IN THE PROSPECTUS IN ONE OR MORE OFFERINGS UP TO A TOTAL DOLLAR AMOUNT
OF $10,251,491,123 OR THE EQUIVALENT OF THIS AMOUNT IN FOREIGN CURRENCIES OR
FOREIGN CURRENCY UNITS.
THIS PROSPECTUS PROVIDES YOU WITH A GENERAL DESCRIPTION OF THE SECURITIES
WE MAY OFFER. EACH TIME WE SELL SECURITIES, WE WILL PROVIDE A PROSPECTUS
SUPPLEMENT THAT WILL CONTAIN SPECIFIC INFORMATION ABOUT THE TERMS OF THE
OFFERING. THE PROSPECTUS SUPPLEMENT MAY ALSO ADD, UPDATE OR CHANGE INFORMATION
CONTAINED IN THIS PROSPECTUS. YOU SHOULD READ BOTH THIS PROSPECTUS AND ANY
PROSPECTUS SUPPLEMENT TOGETHER WITH ADDITIONAL INFORMATION DESCRIBED UNDER THE
HEADING "WHERE YOU CAN FIND MORE INFORMATION ABOUT J.P. MORGAN & CO.
INCORPORATED" BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
YOU SHOULD RELY ONLY ON THE INFORMATION PROVIDED IN THIS PROSPECTUS AND IN
ANY PROSPECTUS SUPPLEMENT INCLUDING THE INFORMATION INCORPORATED BY REFERENCE.
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE
NOT OFFERING THE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU
SHOULD NOT ASSUME THAT THE INFORMATION IN THE PROSPECTUS, ANY SUPPLEMENT TO THIS
PROSPECTUS, OR ANY INCORPORATED DOCUMENT IS ACCURATE AT ANY DATE OTHER THAN THE
DATE INDICATED ON THE COVER PAGE OF THAT DOCUMENT.
2
<PAGE> 22
WHERE YOU CAN FIND MORE INFORMATION
ABOUT J.P. MORGAN & CO. INCORPORATED
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy these documents at the SEC's
public reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices at Northeast Regional
Office, Seven World Trade Center, Suite 1300, New York, New York 10048 and
Midwest Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of this material can also be obtained from the
Public Reference Room of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Please call the SEC at
1-800-SEC-0330 for further information about the Public Reference Room. The SEC
also maintains an Internet website that contains reports, proxy and information
statements and other materials that are filed through the SEC's Electronic Data
Gathering, Analysis and Retrieval (EDGAR) System. This website can be accessed
at http:/www.sec.gov. You can find information we have filed with the SEC by
reference to file number 1-5885. In addition, you may inspect our reports, proxy
statements and other information at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with the SEC. This means that we can disclose important
information to you by directing you to those documents. The information
incorporated by reference is considered to be a part of this prospectus, and
later information filed with the SEC after the date of this prospectus will
update and supersede this information. We incorporate by reference the documents
listed below and any future filings made with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until our offering is
completed:
(a) our Annual Report on Form 10-K for the year ended December 31, 1998;
(b) our Quarterly Reports on Form 10-Q for the quarters ended March 31,
1999 and June 30, 1999; and
(c) our Reports on Form 8-K dated January 19, 1999, April 14, 1999, July
19, 1999, September 1, 1999 and September 8, 1999.
You may request, at no cost to you, a copy of these documents (other than
exhibits to such documents) by writing or telephoning us at: Office of the
Secretary, J.P. Morgan & Co. Incorporated, 60 Wall Street, New York, New York
10260-0060 (Telephone: (212) 648-3380).
3
<PAGE> 23
J.P. MORGAN & CO. INCORPORATED
J.P. Morgan & Co. Incorporated ("J.P. Morgan", "Morgan", "the Company", "we", or
"us"), whose origins date to a merchant banking firm founded in London in 1838,
is the holding company for subsidiaries engaged globally in providing a wide
range of financial services to corporations, governments, financial
institutions, institutional investors, professional firms, privately held
companies, nonprofit organizations, and financially sophisticated individuals.
Our activities are summarized in eight segments and grouped into three sectors
as follows:
GLOBAL FINANCE SECTOR
Our Global Finance sector comprises the highly integrated advisory, capital
raising, and market making activities we undertake for clients worldwide. This
sector comprises the following segments: Investment Banking, Equities, Interest
Rate and Foreign Exchange Markets, Credit Markets, and Credit Portfolio.
The Investment Banking segment includes corporate and institutional client
relationship management, which is conducted through our global network of client
bankers. Bankers coordinate marketing and origination activities for our full
range of products. This segment includes revenues from advisory services; in
partnership with clients, our advisory professionals analyze and implement
strategic alternatives including mergers, acquisitions, privatizations, and
changes in clients' capital structure.
Our Equities activities comprise underwriting, market making, research, equity
derivatives, and American depositary receipt (ADR) services. We help clients
execute their strategies by raising equity capital in the public and private
markets and structure derivative transactions to provide hedges or enhanced
returns. As a market maker, we act as both principal and agent to facilitate
clients' transactions in exchange-listed and over-the-counter securities. Equity
research supports both underwriting and market making.
The Interest Rate Markets/Foreign Exchange segment encompasses market making and
risk management activities across interest rate markets, as well as foreign
exchange spot, short-term interest rate instruments, and currency derivatives
sales and trading. Within interest rate markets, J.P. Morgan acts as a dealer
and market maker in all the G-10 government bond markets, in the U.S. government
agency and municipal bond markets, as well as in the local currency government
bond markets of various Eastern European and Asian countries. Also within this
segment J.P. Morgan makes markets in swaps and other interest rate derivatives
and provides futures and options brokerage to help clients manage their
long-term exposures to interest rates and currencies.
Credit Markets provides underwriting, market making, and research related to
investment-grade, high-yield, and hard-currency emerging market debt securities.
We also act as a dealer and market maker in the currencies and local currency
government securities of Latin American countries. In addition, this segment
includes global loan syndications, structured finance, and credit derivatives
activities.
Credit Portfolio includes results from managing our principal extensions of
credit, including loans, commitments to lend, standby letters of credit, and
guarantees. In addition, this segment is responsible for managing our credit
risk arising from both traditional credit activities and derivatives trading
activities. As part of this responsibility, Credit Portfolio is compensated by
other business segments, and its revenues are reduced by an estimate of our
portfolio's potential credit loss and any costs associated with hedging our
credit risk.
ASSET MANAGEMENT AND SERVICING SECTOR
J.P. Morgan's Asset Management and Servicing sector provides: global asset
management for pension plans, governments, endowments, and foundations;
integrated financial services for high-net-worth individuals; with American
Century, fully bundled services for defined contribution pension plans; and
mutual fund distribution to intermediaries. This sector also operates, under
contract, the Euroclear System, the world's largest clearance and settlement
system for internationally traded securities. We provide credit and deposit
services to Euroclear participants.
The Asset Management and Servicing sector provides portfolio management across
asset classes and markets to institutional and individual investors in both
discretionary account and mutual fund form. Portfolio management is supported by
dedicated global research capabilities.
4
<PAGE> 24
J.P. Morgan also offers high-net-worth clients an advice-based, integrated array
of financial services that include tax-advantaged asset structures; a wide range
of investment options, including managed portfolios and brokerage; and credit
and liquidity services. These capabilities form the foundation for selective
expansion into the growing market for personal financial services.
In January 1998 we completed the purchase of a 45% economic interest in American
Century Companies, the fifth-largest U.S. no-load direct distribution mutual
fund company. With this investment J.P. Morgan has gained scale and expertise in
the technology and operations for distributing and servicing mutual funds, as
well as complementary investment capabilities that broaden its product offerings
significantly. With American Century, we are jointly pursuing the growing
retirement market, distribution of mutual funds to third parties such as
financial advisors, and other opportunities in integrated personal financial
services.
Building on the firm's leadership in pension asset management, J.P. Morgan
continues to expand its global channels for gathering assets. In Japan we
entered into a joint venture with Dai-Ichi Kangyo Bank to offer investment
trusts (mutual funds) to Japanese clients. In France we entered into an
agreement with Banques Populaires to offer international mutual funds through
its branch network. We also broadened its product offerings with a full range of
real estate investment and private equity capabilities.
PROPRIETARY INVESTMENTS SECTOR
Our Proprietary Investments sector complements the firm's client-focused
activities. It represents a diversified set of risk-taking activities ranging
from short-term trading risk to multiyear equity investment risk. Within
Proprietary Investments are the Equity Investments and Proprietary Investing and
Trading segments.
Equity Investments invests our capital in private equity investments worldwide,
seeking significant capital appreciation. Professionals in the group actively
leverage our global network and client relationships. This interaction generates
unique investment opportunities. We invest in private equity and equity-related
securities in leveraged and unleveraged acquisitions, privatizations,
recapitalizations, rapidly growing companies, expansion financings, turnaround
situations, and other special equity situations. On average, we hold investments
three to five years and typically exit through a public offering of securities
or a sale of the company.
J.P. Morgan's Proprietary Investing and Trading segment takes market and credit
risk positions for our own account. In addition to the activities of our
dedicated proprietary positioning group, this segment also includes the
following separately managed investments: a credit investment securities
portfolio, and our investment in Long-Term Capital Management, L.P. Experienced
market professionals across several segments manage these investments, employing
many currencies and types of instruments, including fixed income securities,
foreign exchange, equity securities, commodity products, and related
derivatives. Positions may be held for various lengths of time, depending on the
strategy and actual market performance. Longer-term investments are made in
government, mortgage-backed, and corporate debt securities. This segment also
manages our liquidity and capital profile to ensure that we have access to
funding at a reasonable cost, under all market conditions, to support all our
business activities.
REGULATION
J.P. Morgan is subject to regulation under the Bank Holding Company Act of 1956
(the "Bank Act"). Under the Bank Act, we are required to file reports with the
Board of Governors of the Federal Reserve System (the "Board"). We are also
subject to examination by the Board. The Bank Act prevents us and our
subsidiaries from engaging in activities not related to banking, and limits the
amount of securities we can acquire of a company engaging in nonbanking
activities. An exception may be made if the Board determines that the company's
activities are closely related to banking. Federal law and Board interpretations
limit the extent to which we can engage in certain aspects of the securities
business. The Glass-Steagall Act prohibits bank affiliates 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). This prohibition restricts JPMSI's gross revenues from these
activities to a maximum of 25% of total gross revenues.
5
<PAGE> 25
Our largest subsidiary, Morgan Guaranty Trust Company of New York ("Morgan
Guaranty"), 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. It is examined and regulated 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. It is also restricted on
some other types of transactions with us, or involving our securities.
AMONG OTHER WHOLLY OWNED SUBSIDIARIES
JPMSI is a broker-dealer registered with and subject to regulation by 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 advisor 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. As used in this prospectus, unless the context otherwise
requires, the terms "J.P. Morgan", "Morgan", "the Company", "we", or "us" refer
to J.P. Morgan & Co. Incorporated and its consolidated and unconsolidated
subsidiaries.
6
<PAGE> 26
CONSOLIDATED RATIOS
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX
MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, --------------------
1999 1998 1997 1996 1995 1994
-------- ------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Excluding Interest on Deposits................... 1.47 1.16(a) 1.27 1.35 1.35 1.40
Including Interest on Deposits................... 1.35 1.12(a) 1.20 1.26 1.24 1.28
</TABLE>
- -------------------------
(a) For twelve months ended December 31, 1998, the ratio of earnings to fixed
charges, excluding the fourth quarter 1998 after tax charge of $86 million ($143
million before tax) related to cost reduction programs; excluding the third
quarter 1998 after tax gain of $34 million ($56 million before tax) related to
the sale of the firm's investment management business in Australia; excluding
the second quarter 1998 after tax gain of $79 million ($131 million before tax)
related to the sale of the firm's global trust and agency service business; and
excluding the first quarter 1998 after tax charge of $129 million ($215 million
before tax) related to restructuring of business activities, was 1.17 excluding
interest on deposits and 1.13 including interest on deposits.
CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
<TABLE>
<CAPTION>
SIX
MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, --------------------
1999 1998 1997 1996 1995 1994
-------- ------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Excluding Interest on Deposits................... 1.47 1.16(a) 1.26 1.34 1.34 1.39
Including Interest on Deposits................... 1.35 1.12(a) 1.20 1.25 1.23 1.27
</TABLE>
- -------------------------
(a) For twelve months ended December 31, 1998, the ratio of earnings to combined
fixed charges and preferred stock dividends, excluding the fourth quarter 1998
after tax charge of $86 million ($143 million before tax) related to cost
reduction programs; excluding the third quarter 1998 after tax gain of $34
million ($56 million before tax) related to the sale of the firm's investment
management business in Australia; excluding the second quarter 1998 after tax
gain of $79 million ($131 million before tax) related to the sale of the firm's
global trust and agency service business; and excluding the first quarter 1998
after tax charge of $129 million ($215 million before tax) related to
restructuring of business activities, was 1.17 excluding interest on deposits
and 1.13 including interest on deposits.
7
<PAGE> 27
USE OF PROCEEDS
Unless otherwise indicated in the applicable prospectus supplement, the net
proceeds we receive from the sale of the securities offered by this prospectus
and the accompanying prospectus supplement will be used for general corporate
purposes. General corporate purposes may include repayment of debt, investments
in or extensions of credit to our subsidiaries, or redemption or repurchases of
our stock. We may temporarily invest the net proceeds or use them to repay
short-term debt until they are used for their stated purpose.
DESCRIPTION OF J.P. MORGAN DEBT SECURITIES
GENERAL
The following description of the terms of the Debt Securities contains certain
general terms that may apply to the Debt Securities. The specific terms of any
Debt Securities will be described in the prospectus supplement relating to those
Debt Securities.
The Debt Securities will be either our senior debt securities (the "Senior
Securities") or our subordinated debt securities (the "Subordinated
Securities"). The Senior Securities will be issued under an Indenture dated as
of August 15, 1982 and related supplemental indentures, including the First
Supplemental Indenture dated as of May 5, 1986, the Second Supplemental
Indenture dated as of February 27, 1996, and the Third Supplemental Indenture
dated as of January 30, 1997 (together these indentures are referred to as the
"Senior Indenture"), between J.P. Morgan and U.S. Bank Trust National
Association ("U.S. Bank Trust"), successor to Chemical Bank, as Trustee. The
Subordinated Securities will be issued under an Indenture dated as of March 1,
1993, and any related supplemental indentures (together these indentures are
referred to as the "Subordinated Indenture"), between J.P. Morgan and U.S. Bank
Trust, successor to Citibank, N.A., as Trustee. The Senior Indenture and the
Subordinated Indenture are sometimes together referred to as the "Indentures".
The following summary of certain provisions of the Indentures is not complete.
You should refer to the Indentures, copies of which are filed as exhibits to the
Registration Statement of which this prospectus is a part. Section references
below are to the sections or articles of the applicable Indenture. Capitalized
terms have the meanings assigned to them in the applicable Indenture. Wherever
we refer to particular provisions of the Indentures, such provisions are
included within this prospectus and are part of the statements made and such
statements are wholly qualified by such reference.
Neither Indenture limits the amount of Debt Securities that we may issue. Each
Indenture provides that Debt Securities may be issued up to the principal amount
authorized by us from time to time. The Senior Securities will have the same
rank in liquidation as all of our other unsecured unsubordinated debt. Payments
of principal and interest on Subordinated Securities may only be made when we
are current on all payment obligations on our Senior Indebtedness. In addition,
under certain circumstances relating to our insolvency or a similar event, the
Subordinated Securities will be entitled to payment only after the payment of
claims relating to Derivative Obligations.
We are a holding company and conduct substantially all of our operations through
subsidiaries. As a result, claims of holders of the Debt Securities will
generally have a junior position to claims of creditors of our subsidiaries,
except to the extent that we may be recognized as a creditor of those
subsidiaries. In addition, our right to participate as a shareholder in any
distribution of assets of any subsidiary (and thus the ability of holders of the
Debt Securities to benefit as creditors of the Company from such distribution)
is junior to creditors of that subsidiary. Claims of creditors of our
subsidiaries include:
- - substantial amounts for long-term debt;
- - deposit liabilities;
- - federal funds purchased;
- - securities sold under repurchase agreements; and
- - short-term borrowings.
Other restrictions may exist which could prohibit our subsidiaries from paying
dividends or supplying funds to us.
The Debt Securities may be issued in one or more separate series of Senior
and/or Subordinated Securities. The prospectus supplement relating to the
particular series of Debt Securities being offered will specify the particular
amounts, prices,
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and terms of those Debt Securities. These terms may include:
- - the title and type of Debt Securities;
- - any limit on the aggregate principal amount and authorized denominations of
the Debt Securities;
- - the purchase price of the Debt Securities (expressed as a percentage of the
principal amount thereof);
- - the date or dates on which the principal of the Debt Securities will be
payable;
- - the interest rate or rates (including any interest rates applicable to overdue
payments) on the Debt Securities, or the method for determining those rates;
- - if other than U.S. dollars, the currency or currencies (including composite
currencies or currency units) in which the Debt Securities may be purchased
and in which payments on the Debt Securities will be made (which currencies
may be different for principal, premium and interest payments);
- - the dates on which any interest will be payable;
- - the terms of any mandatory or optional redemption (including any sinking
fund);
- - any currencies, currency units, composite currencies, commodity prices,
financial or non-financial indices, securities, baskets of securities,
indices, baskets of indices, interest rates, swap rates, baskets of swap rates
or factors, to which the principal, any premium, or interest of the Debt
Securities will be indexed;
- - any conversion or exchange provisions applicable to the Debt Securities;
- - whether the Debt Securities will be issued in registered form without coupons,
or in bearer form with coupons; and
- - any other specific terms of the Debt Securities.
Payments on Debt Securities will generally be made at the office of U.S. Bank
Trust; interest on Debt Securities in registered form may be made at our option
by check mailed to the registered holders.
Some of the Debt Securities may be issued as original issue discount Debt
Securities (the "Original Issue Discount Securities"). Original Issue Discount
Securities bear no interest or bear interest at below-market rates and will be
sold at a discount below their stated principal amount. The prospectus
supplement relating to an issue of Original Issue Discount Securities will
contain information relating to Federal income tax, accounting, and other
special considerations applicable to Original Issue Discount Securities.
The applicable Indenture, the Debt Securities, and the prospectus supplement
tell you how and where you may exchange a Debt Security you own for Debt
Securities of the same series but in smaller allowed denominations, exchange
several Debt Securities of a single series you own into a single Debt Security
with a larger denomination, or transfer a Debt Security you own to a new owner.
Debt Securities in bearer form will normally be transferred by delivery.
Although we do not charge a fee for transfers or exchanges of Debt Securities,
we may require you to pay any tax or government-imposed charge on a transfer or
exchange of Debt Securities. (Sections 2.8 of the Indentures.)
We will generally have no obligation to repurchase, redeem, or change the terms
of Debt Securities upon any event (including a change in control) that might
have an adverse effect on our credit quality.
SUBORDINATED DEBT SECURITIES
Subordination. The Subordinated Securities will be direct, unsecured general
obligations of the Company. The Subordinated Securities will be subordinate in
right of payment to all Senior Indebtedness and, in certain circumstances
relating to our bankruptcy or insolvency, Derivative Obligations.
The Subordinated Securities will be subordinate in right of payment to all
Senior Indebtedness. Under the Subordinated Indenture, we are not permitted to
pay amounts due on Subordinated Securities and holders of Subordinated
Securities are not entitled to demand or receive any such payment, if:
- - we have not paid or duly provided for all amounts of principal, any premium,
and interest then due to the holders of all Senior Indebtedness; or
- - an event has occurred which permits, or after the giving notice or the lapse
of time will permit, the holders of Senior Indebtedness to accelerate the
maturity of the Senior Indebted-
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ness. (Section 10.2 of the Subordinated Indenture.)
Upon our dissolution, winding up, liquidation or reorganization:
- - the holders of Senior Indebtedness will be paid the full amounts of principal,
any premium, and any interest before any payment or distribution is made on
the Subordinated Securities; and
- - if, after such payments on the Senior Indebtedness have been made, there are
amounts available for payment on the Subordinated Securities ("Excess
Proceeds") and creditors in respect of Derivative Obligations have not
received their full payments, then the Excess Proceeds will first be used to
pay in full of all such Derivative Obligations before any payment will be made
on the Subordinated Securities. (Sections 10.3 and 10.12 of the Subordinated
Indenture.)
As a result, in the event of our dissolution, winding up, liquidation, or
reorganization, holders of Senior Indebtedness and Derivative Obligations may
receive more, ratably, and holders of the Subordinated Securities may receive
less, ratably, than the other creditors of the Company. No series of our
Subordinated Securities will be subordinated to any other series of our
Subordinated Securities. However, because Excess Proceeds will first be used to
pay Derivative Obligations before any payment will be made on the Subordinated
Securities, upon our dissolution, winding up, liquidation, or reorganization,
the holders of the Subordinated Securities may receive less, ratably, than
holders of our Subordinated Indebtedness issued prior to March 1, 1993. Such
subordination will not prevent the occurrence of any Event of Default in respect
of the Subordinated Securities. The Subordinated Indenture does not limit the
amount of Senior Indebtedness we may incur.
Senior Indebtedness means the principal of, any premium and interest on all
indebtedness for money borrowed by us, whether outstanding on the date the
Subordinated Indenture became effective or created, assumed or incurred after
that date (including all indebtedness for money borrowed by another person that
we guarantee). However, Senior Indebtedness does not include:
- - Subordinated Securities issued under the Subordinated Indenture;
- - Subordinated Indebtedness that was issued prior to March 1, 1993; and
- - other debt of ours which is expressly stated to rank equal or junior to the
Subordinated Securities in right of payment. (Section 1.1 of the Subordinated
Indenture.)
Derivative Obligations means all indebtedness of the Company for claims in
respect of derivative products, such as interest and foreign exchange rate
contracts, commodity contracts, and similar arrangements. Derivative Obligations
exclude Senior Indebtedness and obligations that are expressly stated not to
have the same rank as or to be junior to the Subordinated Securities. (Section
1.1 of the Subordinated Indenture.)
Limited Right of Acceleration. There will be no right of acceleration of the
payment of principal of the Subordinated Securities upon a default in the
payment of principal or interest or in the performance of any covenant or
agreement in the Subordinated Securities or the Subordinated Indenture. In the
event of a default in the payment of principal, any premium or interest, or in
the performance of any covenant or agreement in the Subordinated Securities or
the Subordinated Indenture, the Trustee may, subject to certain limitations and
conditions, seek to enforce that payment or the performance of that covenant or
agreement. (Sections 5.2 and 5.4 of the Subordinated Indenture.)
If a default due to certain events of bankruptcy or reorganization occurs and is
continuing, either the Subordinated Trustee or the holders of at least 25% in
principal amount of all Subordinated Securities then outstanding, voting as one
class may declare the principal of all outstanding Subordinated Securities and
any interest accrued thereon to be due and payable immediately. In the case of
original issue discount Subordinated Securities, a specified portion of the
principal amount may be accelerated. Subject to certain conditions the
declaration may be annulled and past defaults, except for uncured payment
defaults on the Subordinated Securities, may be waived by the holders of a
majority in principal amount of the outstanding Subordinated Securities of all
series. (Sections 5.1 and 5.10 of the Subordinated Indenture.)
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SENIOR DEBT SECURITIES
Seniority. The Senior Securities will be our direct, unsecured general
obligations. The Senior Securities will have the same rank in liquidation as all
of our other unsecured and unsubordinated debt.
Right of Acceleration. If a default in the payment of principal, any premium or
interest, or any sinking fund installment, with respect to one or more series of
Senior Securities occurs and is continuing, either the Senior Trustee or the
holders of at least 25% in principal amount of the Senior Securities of such
series then outstanding, each series voting as a separate class, may declare the
principal of all outstanding Senior Securities of such series and any interest
accrued thereon, to be due and payable immediately. In the case of original
issue discount Senior Securities, only a specified portion of the principal
amount may be accelerated. If a default in the performance of any covenant or
agreement with respect to one or more series of Senior Securities occurs and is
continuing, either the Senior Trustee or the holders of at least 25% in
principal amount of the Senior Securities of such series then outstanding, all
affected series voting as a single class, may declare the principal of all
outstanding Senior Securities of such series and any interest accrued thereon,
to be due and payable immediately. In the case of original issue discount Senior
Securities, only a specified portion of the principal amount may be accelerated.
If a default due to certain events of bankruptcy or reorganization occurs and is
continuing, either the Senior Trustee or the holders of at least 25% in
principal amount of all Senior Securities then outstanding, voting as one class,
may declare the principal of all outstanding Senior Securities of such series
and any interest accrued thereon to be due and payable immediately. In the case
of original issue discount Senior Securities, only a specified portion of the
principal amount may be accelerated. Subject to certain conditions such
declarations may be annulled and past defaults, except for uncured payment
defaults on the Senior Securities, may be waived by the holders of a majority in
principal amount of the outstanding Senior Securities of the series affected.
(Sections 5.1 and 5.10 of the Senior Indenture.)
EVENTS OF DEFAULT, WAIVER, DEBT SECURITIES IN FOREIGN CURRENCIES
An Event of Default with respect to a series of Debt Securities is defined in
the Indentures as:
- - default for 30 days in the payment of interest on any Debt Securities of that
series;
- - default in payment of principal of or any premium on any Debt Securities of
that series when due, at maturity, upon redemption, by declaration, or
otherwise;
- - default in the payment of any sinking fund installment on the Debt Securities
of that series;
- - failure by the Company for 90 days after notice to perform any other covenants
or warranties contained in the Indenture applicable to that series; and
- - certain events of bankruptcy or reorganization of the Company. (Sections 5.1
of the Indentures.)
An Event of Default with respect to one series of Debt Securities does not
necessarily constitute an Event of Default with respect to any other series of
Debt Securities. Each Indenture provides that the Trustee may withhold notice to
the holders of the Debt Securities of any default if the Trustee considers it in
the interest of the holders of Debt Securities to do so. The Trustee may not
withhold notice of a default in the payment of principal of or interest or any
premium, on such Debt Securities or in the making of any sinking fund payment
with respect to Debt Securities. (Sections 5.11 of the Indentures.)
The Indentures provide that the holders of a majority in principal amount of
outstanding Debt Securities of any series may direct the time, method, and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or other power conferred on the Trustee. The Trustee may
decline to act if the direction is contrary to law and in certain other
circumstances set forth in the Indentures. (Sections 5.9 of the Indentures.)The
Trustee is not obligated to exercise any of its rights or powers under the
Indentures at the request or direction of the holders of Debt Securities unless
the holders offer the Trustee reasonable indemnity against expenses and
liabilities. (Sections 6.2(d) of the Indentures.)
The Indentures require us to file annually with the Trustee a written statement
of no default, or
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specifying any default that exists. (Sections 3.5 of the Indentures.)
Whenever either Indenture provides for an action by, or the determination of any
of the rights of, or any distribution to, holders of J.P. Morgan Debt
Securities, in the absence of any provision to the contrary in the form of J.P.
Morgan Debt Security, any amount in respect of any Debt Security denominated in
a currency or currency unit other than U.S. dollars may be treated as the amount
of U.S. dollars that could reasonably be exchanged for such non-U.S. dollar
amount. This amount will be calculated as of a date that we specify to the
Trustee or, if we fail to specify a date, on a date that the Trustee may
determine. (Section 12.11 of the Subordinated Indenture and Section 11.11 of the
Senior Indenture.)
MODIFICATION OF THE INDENTURES; WAIVER OF COMPLIANCE
Each of the Indentures contains provisions permitting us and the Trustee to
modify that Indenture or the rights of the holders of Debt Securities with the
consent of the holders of not less than a majority in principal amount of each
outstanding series of Debt Securities affected by the modification. Each holder
of an affected Debt Security must consent to a modification that would:
- - change the stated maturity date of the principal of, or of any installment of
principal of or interest on any Debt Security;
- - reduce the principal amount of or any premium, or interest, on any Debt
Security;
- - change the currency or currency unit of payment of any Debt Security;
- - change the method in which amounts of payments of principal or interest are
determined on any Debt Security;
- - reduce the portion of the principal amount of an original issue discount Debt
Security payable upon acceleration of the maturity thereof;
- - reduce any amount payable upon redemption of any Debt Security;
- - impair the right of a holder to institute suit for the payment of or, if the
Debt Securities provide, any right of repayment at the option of the holder of
a Debt Security; or
- - reduce the percentage of Debt Securities of any series, the consent of the
holders of which is required for any modification. (Sections 8.2 and 8.6 of
the Indentures.)
The Indentures also permit us and the Trustee to amend such Indenture in certain
circumstances without the consent of the holders of Debt Securities to evidence
our merger, the replacement of the Trustee, to effect changes which do not
affect any outstanding series of Debt Security, and for certain other purposes.
(Sections 8.1 of the Indentures.)
CONSOLIDATIONS, MERGERS AND SALES OF ASSETS
We may not merge or consolidate with any other corporation or sell or convey all
or substantially all of our assets to any other corporation, unless either:
- - we are the continuing corporation or the successor corporation is a United
States corporation which expressly assumes the payment of the principal of,
any premium and interest on the Debt Securities and the performance and
observance of all the covenants and conditions of the Indentures binding upon
us, and
- - we or the successor corporation shall not, immediately after the merger or
consolidation, sale or conveyance, be in default in the performance of any
covenant or condition. (Articles Nine of the Indentures.)
CONCERNING THE TRUSTEE, PAYING AGENT,
REGISTRAR AND TRANSFER AGENT
Our subsidiaries and we have normal banking relationships with the Trustee, U.S.
Bank Trust. U.S. Bank Trust will also be the paying agent, registrar and
transfer agent for the Debt Securities.
GLOBAL DEBT SECURITIES
Any series of Debt Securities may be issued in the form of one or more global
certificates (the "Global Debt Security") registered in the name of a depository
or a nominee of a depository. The depository will generally be the Depository
Trust Company ("DTC").
Each Global Debt Security deposited with DTC, as depository, will be registered
in the name of DTC or a nominee of DTC, which will be the only holder of the
Global Debt Security. Except under limited circumstances described below, Global
Debt Securities are not exchangeable for definitive Debt Securities. If you wish
to invest in
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Debt Securities issued in global form, you will be able to do so only by owning
a beneficial interest in the Global Debt Security through an institution that
has an account with DTC or its nominee (a "participant"), or through DTC or its
nominee if you are a participant.
DTC is a specialized company subject to regulation by the Federal Reserve and
the SEC, and under the New York Banking Law, the New York Uniform Commercial
Code, and the 1934 Act. DTC was created to hold securities of its participants
and to facilitate the clearance and settlement of securities transactions among
its participants through electronic book-entry, thereby eliminating the need for
physical movement of certificates. DTC's participants include securities brokers
and dealers, banks, trust companies, clearing corporations, and certain other
organizations.
Persons who are not participants but desire to purchase, sell, or otherwise
transfer beneficial ownership of, or other beneficial interests in, Debt
Securities issued in global form may do so only through participants. Because
DTC can only act on behalf of participants, and on behalf of certain banks,
trust companies, and other persons approved by it, the ability of an owner of a
beneficial interest in Debt Securities in global form to pledge his interest to
persons who do not participate in the DTC system, or otherwise to act with
respect to his interest, may be limited due to the absence of physical
certificates. Owners of beneficial interests in Debt Securities issued in global
form may experience some delay in their receipt of payments, since those
payments will be forwarded by our agent to DTC or its nominee. DTC or its
nominee will then forward them to its participants, who will forward them to the
ultimate beneficial owners.
Under rules governing DTC and its operations, DTC will be required to make
book-entry transfers of Debt Securities among participants and to receive and
transmit payments to participants. Each participant similarly is required to
make book-entry transfers and receive and transmit such payments on behalf of
persons holding beneficial interests in the Debt Securities through the
participant.
DTC has advised us that it will take any action permitted to be taken by a
holder under the relevant Indenture only at the direction of one or more
participants to whose accounts the Debt Securities are credited. The Global Debt
Security may be exchanged for definitive Debt Securities registered in the names
of persons other than DTC or its nominee only if (i) DTC notifies us that it is
unwilling or unable to continue as depository or if DTC ceases to be a
registered clearing agency (and registration is required by law) or (ii) we
issue a Company Order that such Global Debt Security may be exchanged. Any
Global Debt Security that may be exchanged under either of those circumstances
shall be exchanged for Debt Securities registered in such names as DTC shall
direct.
Upon the occurrence of any event described in the immediately preceding
paragraph, DTC is generally required to notify all participants of the
availability through DTC of definitive Debt Securities. Upon surrender by DTC of
the Global Debt Security representing the Debt Securities and instructions for
registration, the Trustee will reissue the Debt Securities as definitive
securities, and thereafter the Trustee will recognize the holders of such
definitive securities as the registered holders of the Debt Securities entitled
to the benefits of the applicable Indenture.
Neither DTC nor its nominee may transfer the Global Debt Security except as a
whole, and then only to DTC, a nominee of DTC or to a successor Depository
appointed by us. DTC may not sell, assign, transfer or otherwise convey any
beneficial interest in a Global Debt Security unless such beneficial interest is
an amount equal to an authorized denomination for the Debt Securities.
GOVERNING LAW AND JUDGMENTS
The Debt Securities will be governed by and interpreted under the laws of the
State of New York. In an action involving Debt Securities denominated in a
currency other than U.S. dollars, it is likely that any judgment granted by a
U.S. court would be made only in U.S. dollars. However, a New York court should
enter a judgment in the denominated currency. Such judgment should then be
converted into U.S. dollars at the rate of exchange prevailing on the date of
entry of the judgment.
DESCRIPTION OF SERIES PREFERRED STOCK
We are authorized to issue up to 10,000,000 shares of preferred stock without
par value (the "Series Preferred Stock"), from time to time in one or more
series, without stockholder action.
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Our Board of Directors will determine the number of shares of each series, and
the rights, preferences, and limitations of each series. All shares of Series
Preferred Stock, regardless of series, constitute a single class. See
"Description of Capital Stock". The following description of the terms of the
Series Preferred Stock sets forth certain general terms that may apply to the
Series Preferred Stock. The specific terms of any series of Series Preferred
Stock will be described in the prospectus supplement relating to that series.
Those terms will generally include:
- - the number of shares in the series;
- - the dividend rate or the method of calculation of the dividend, and whether
dividends are cumulative;
- - whether or not the shares of the series will be redeemable and the applicable
terms;
- - the terms and amount of any sinking fund;
- - whether or not the shares of the series are convertible or exchangeable for
cash, shares of any other series, or other securities and the applicable
terms;
- - the amount per share payable upon our liquidation;
- - any voting rights;
- - any restrictions on the issue or reissue of additional preferred stock of the
same or higher rank in liquidation or as to dividends; and
- - other rights and privileges, and limitations on those rights or privileges.
In the event we liquidate, dissolve, or wind-up our business, each series of
Series Preferred Stock will generally have the same rank as to dividends and
distributions as our currently outstanding Series Preferred Stock and each other
series of Series Preferred Stock we may issue in the future.
Since we are a holding company, our right to participate as a shareholder in any
distribution of assets of any of our subsidiaries upon its liquidation or
reorganization or otherwise (and thus the ability of our creditors and
stockholders to benefit from such distribution) is junior to creditors of that
subsidiary, except to the extent that our claims as a creditor of the subsidiary
are recognized.
The following summary of the principal provisions of the Series Preferred Stock
is not complete. You should refer to the prospectus supplement and the
Certificate of Designation creating the series of Series Preferred Stock for a
more complete description.
DIVIDEND RIGHTS
Holders of the Series Preferred Stock will be entitled to receive, when, as and
if declared by the Board, cash dividends at the rates and on the quarterly dates
stated in the prospectus supplement (each, a "Dividend Payment Date"). Dividend
rates may be fixed or variable. Different series of the Series Preferred Stock
may be entitled to dividends at different dividend rates or based upon different
methods of determination. Each dividend will be payable to the holders of record
as they appear on the stock books of the Company (or, if applicable, the records
of the Depositary referred to below under "Depositary Shares") on record dates
determined by our Board.
Dividends payable on the Series Preferred Stock for a period that is less than a
full quarter will be determined on the basis of the actual number of days
elapsed over a 360-day year. Dividends payable for a period of a full calendar
quarter will be computed on the basis of a 360-day year consisting of twelve
30-day months.
Dividends shall be payable from, and shall be cumulative from, the date of
original issue of each share. Thus, if in any quarter dividends at the rate set
forth in the prospectus supplement have not been paid, for such quarter and all
preceding quarters, then the full deficiency must be paid without interest on
the deficiency, before any dividends may be declared or paid on our Common
Stock. This cutting-off of dividends on Common Stock, and any voting rights set
forth in the prospectus supplement relating to a series of Series Preferred
Stock will be the only consequences of the failure to pay dividends on the
Series Preferred Stock. After payment in full of all dividend arrearages on the
Series Preferred Stock, dividends on the Common Stock may be declared and paid
as our Board may determine.
OPTIONAL REDEMPTION
We may, at our option redeem one or more series of the Series Preferred Stock in
whole or in part. At least 30 and not more than 60 days notice will be required.
The redemption provisions that apply to a series of Series Preferred Stock,
including the redemption dates and the redemption prices for
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that series will be detailed in the prospectus supplement.
We must obtain any required approval of the appropriate bank regulatory
authorities before we exercise our option to redeem any Series Preferred Stock.
Presently, approval by the Federal Reserve Board is required.
If less than all the outstanding shares of a series of the Series Preferred
Stock are to be redeemed, the Board will determine the method for selecting the
shares to be redeemed. Shares may be selected by lot, on a pro rata basis or by
any other method determined to be fair. From and after the redemption date,
dividends will not accrue on the shares of Series Preferred Stock called for
redemption. Holders will have no rights other than the right to receive the
redemption price.
Shares of Series Preferred Stock that we redeem or otherwise acquire may be
restored to the status of authorized but unissued shares of Series Preferred
Stock.
CONVERSION OR EXCHANGE
The prospectus supplement will state any terms on which shares of the Series
Preferred Stock are convertible into cash, shares of Common Stock, shares of
another series of Series Preferred Stock, or other securities.
VOTING RIGHTS
Except as indicated below or in the prospectus supplement, or except as
expressly required by applicable law, the holders of the Series Preferred Stock
will not be entitled to vote. In the event we issue full shares of any series of
Series Preferred Stock, each share will be entitled to one vote on matters on
which holders of that series are entitled to vote. However, as more fully
described under "Depositary Shares" below, if we issue Depositary Shares
representing a fraction of a share of a series of Series Preferred Stock, each
Depositary Share will, in effect, be entitled to that fraction of a vote rather
than a full vote.
If, at the time of any annual meeting of our stockholders, the equivalent of six
quarterly dividends, whether or not consecutive, payable on any series of Series
Preferred Stock are in default, the number of directors on our Board will be
increased by two. The holders of record of all outstanding series of Series
Preferred Stock, voting as a single class, will be entitled to elect those two
additional directors until all dividends in default have been paid.
The approval of at least two-thirds of the outstanding shares of Series
Preferred Stock will normally be required to change the provisions of the Series
Preferred Stock in a way that is adverse to the holders. If a change will not
adversely affect all series of outstanding Series Preferred Stock, then the
change need only be approved by those holders of at least two-thirds of the
shares of the series adversely affected. No vote will be necessary to make any
change if we provide for the redemption or retirement of all outstanding Series
Preferred Stock.
No vote of holders of Series Preferred Stock will be necessary to authorize an
increase in the amount of the authorized Series Preferred Stock or the creation
and issuance of other series of Series Preferred Stock. Holders of all series of
Series Preferred Stock which are entitled to vote will vote as a single class,
except as specifically provided otherwise.
Under regulations adopted by the Federal Reserve Board, if the holders of a
series of Series Preferred Stock become entitled to vote for the election of
directors because dividends on such series are in arrears, such series may be a
"class of voting securities" and a holder of 25% or more of such series, or a
holder of 5% or more if it otherwise exercises a "controlling influence" over
the Company, may then be subject to regulation as a bank holding company. In
addition, at any time:
- - a bank holding company may be required to obtain the approval of the Federal
Reserve Board to acquire or retain 5% or more of any series of Series
Preferred Stock; and
- - a person other than a bank holding company may be required to obtain the
approval of the Federal Reserve Board to acquire 10% or more of such series of
Series Preferred Stock.
LIQUIDATION RIGHTS
If we liquidate, dissolve, or wind-up our affairs, either voluntarily or
involuntarily, the holders of each series of Series Preferred Stock will be
entitled to receive liquidating distributions in the amount stated in the
prospectus supplement relating to each series of Series Preferred Stock before
any distribution of assets is made to holders of Common Stock. If there are
insufficient assets to
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make the full liquidating payment on a series of Series Preferred Stock and any
other stock having the same rank, including outstanding shares of other series
of Series Preferred Stock, then holders of those series shall share ratably in
accordance with the respective amounts which would be payable on all stock
having the same rank if all such liquidating amounts were paid in full. After
the holders of each series of Series Preferred Stock are paid in full, they will
have no right or claim to any of our remaining assets. Neither a sale of all or
substantially all of our property or business, nor our consolidation or merger
with any other company will be considered a liquidation, dissolution or winding
up of our business or affairs.
MISCELLANEOUS
First Chicago Trust Company, a division of EquiServe, will serve as transfer
agent, dividend disbursing agent and registrar for the Series Preferred Stock.
The holders of any series of Series Preferred Stock will not have any preemptive
rights to purchase or subscribe for any shares of any class or other securities
of any type of the Company. When issued, each series of the Series Preferred
Stock will be fully paid and nonassessable. The Certificate of Designation for a
series of Series Preferred Stock will become effective after the date of the
prospectus supplement, but on or before issuance of such series of Series
Preferred Stock.
DEPOSITARY SHARES
General. We may offer fractional shares of Series Preferred Stock rather than
full shares. If we do, we will issue to the public receipts for Depositary
Shares, and each of those Depositary Shares will represent a fraction to be set
forth in the prospectus supplement of a share of a particular series of Series
Preferred Stock.
The shares of any series of Series Preferred Stock underlying the Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between us and a bank or trust company selected by us (the "Depositary"). The
Depositary will have its principal office in the United States and a combined
capital and surplus of at least $50,000,000. Under the Deposit Agreement, each
owner of a Depositary Share will be entitled, in proportion to the applicable
fraction of a share of Series Preferred Stock underlying such Depositary Share,
to all the rights and preferences of the Series Preferred Stock underlying that
Depositary Share. Those rights include dividend, voting, redemption, and
liquidation rights.
The Deposit Agreement provides that a holder will receive a receipt for
Depositary Shares ("Depositary Receipts"). Depositary Receipts will be issued to
those persons who purchase the fractional shares of the particular series of
Series Preferred Stock underlying the Depositary Shares, in accordance with the
terms of the offering. Copies of the forms of the Deposit Agreement and
Depositary Receipt are filed as exhibits to the Registration Statement. The
following summary of the Deposit Agreement, the Depositary Shares, and the
Depositary Receipt is not complete. You should refer to the forms of the Deposit
Agreement and Depositary Receipt that are filed as exhibits to the Registration
Statement.
The Depositary may, at our written order, issue temporary Depositary Receipts
substantially identical to the definitive Depositary Receipts but not in
definitive form, while the definitive engraved Deposit Receipts are being
prepared. The temporary Depositary Receipts will be exchangeable for definitive
Depositary Receipts at our expense.
Dividends and Other Distributions. The Depositary will distribute all cash
dividends or other cash distributions received on the Series Preferred Stock to
the record holders of Depositary Shares relating to that Series Preferred Stock
in proportion to the number of such Depositary Shares owned by those holders.
If there is a distribution other than in cash, the Depositary will distribute
property received by it to the record holders of Depositary Shares that are
entitled to receive the distribution, unless the Depositary determines that it
is not feasible to make the distribution. If this occurs, the Depositary may,
with our approval, sell the property and distribute the net proceeds from such
sale to the holders.
Redemption of Depositary Shares. If a series of Series Preferred Stock
underlying the Depositary Shares is subject to redemption, the Depositary Shares
will be redeemed from the proceeds received by the Depositary resulting from the
redemption, in whole or in part, of that series of Series Preferred Stock held
by the Depositary. The redemption price per Depositary Share will be equal to
the applicable fraction of the redemption
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price per share payable with respect to that series of the Series Preferred
Stock. Whenever we redeem shares of Series Preferred Stock held by the
Depositary, the Depositary will redeem, as of the same redemption date, the
number of Depositary Shares representing shares of the Series Preferred Stock so
redeemed. If less than all the Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed will be selected by lot or pro rata as
determined by the Depositary.
Voting the Series Preferred Stock. Upon receipt of notice of any meeting at
which the holders of Series Preferred Stock are entitled to vote, the Depositary
will mail the information contained in the notice of meeting to the record
holders of the Depositary Shares relating to the Series Preferred Stock. Each
record holder of those Depositary Shares on the record date, which will be the
same date as the record date for the Series Preferred Stock, will be entitled to
instruct the Depositary as to the exercise of the voting rights pertaining to
the amount of the Series Preferred Stock represented by that holder's Depositary
Shares. The Depositary will try, as far as practicable, to vote the number of
shares of the Series Preferred Stock underlying those Depositary Shares in
accordance with such instructions, and we will agree to take all action
requested deemed necessary by the Depositary in order to enable the Depositary
to do so. The Depositary will not vote shares of the Series Preferred Stock to
the extent it does not receive specific instructions from the holders of
Depositary Shares relating to such Series Preferred Stock.
Amendment and Termination of the Deposit Agreement. The form of Depositary
Receipt evidencing the Depositary Shares and any provision of the Deposit
Agreement may be amended at any time by agreement between the Depositary and us.
However, any amendment that materially and adversely alters the rights of the
holders of Depositary Shares will not be effective unless such amendment has
been approved by the holders of at least a majority of the Depositary Shares
then outstanding. The Deposit Agreement may be terminated by us or the
Depositary only if:
- - all outstanding Depositary Shares have been redeemed; or
- - there has been a final distribution in respect of the Series Preferred Stock
in connection with any liquidation, dissolution or winding up of the Company,
and such distribution has been distributed to the holders of Depositary
Receipts.
Charges of Depositary. We will pay all transfer and other taxes and
governmental charges arising solely from the existence of the depositary
arrangements. We will also pay charges of the Depositary in connection with the
initial deposit of the Series Preferred Stock and any redemption of the Series
Preferred Stock. Holders of Depositary Receipts will pay transfer and other
taxes and governmental charges and any other charges as are expressly provided
in the Deposit Agreement to be for their accounts.
Resignation and Removal of Depositary. The Depositary may resign at any time by
delivering a notice to us of its election to do so. We may remove the Depositary
at any time. Any resignation or removal will take effect upon the appointment of
a successor Depositary and its acceptance of its appointment. The successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $50 million.
Miscellaneous. The Depositary will forward to holders of Depositary Receipts
all reports and communications from us that we deliver to the Depositary and we
are required to furnish to the holders of the Series Preferred Stock.
Neither the Depositary nor we will be liable if either of us is prevented or
delayed by law or any circumstance beyond our control in performing our
respective obligations under the Deposit Agreement. Our obligations and those of
the Depositary under the Deposit Agreement will be limited to the performance in
good faith of our respective duties under the Deposit Agreement. Neither the
Depositary nor we will be obligated to prosecute or defend any legal proceeding
in respect of any Depositary Shares or Series Preferred Stock unless
satisfactory indemnity is furnished. We and the Depositary may rely upon written
advice of counsel or accountants, or upon information provided by persons
presenting Series Preferred Stock for deposit, holders of Depositary Receipts or
other persons believed to be competent, and on documents believed to be genuine.
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DESCRIPTION OF SECURITIES WARRANTS
We may issue Securities Warrants for the purchase of Debt Securities, Series
Preferred Stock, or Depositary Shares. The Securities Warrants are to be issued
under warrant agreements (each a "Securities Warrant Agreement") to be entered
into between us and Morgan Guaranty, as warrant agent (the "Warrant Agent"), all
as set forth in the prospectus supplement relating to the particular issue of
Securities Warrants (the "Offered Warrants"). A copy of each of the Debt Warrant
Agreement, including the form of warrant certificate (the "Debt Warrant
Certificate") representing the Debt Warrants, and the Preferred Stock Warrant
Agreement, including the form of preferred stock warrant certificate (the
"Preferred Stock Warrant Certificate") representing the Preferred Stock
Warrants, each substantially in the form in which it will be executed, is filed
as an exhibit to the Registration Statement. The following brief summary of the
Warrant Agreements and the Warrant Certificates is not complete. You should
refer to the Warrant Agreements filed with the Registration Statement.
The prospectus supplement for a series of Securities Warrants describes:
- - the principal amount of Debt Securities or the number of shares of Series
Preferred Stock or Depositary Shares that a holder is entitled to purchase;
- - the exercise price or method of determining the exercise price;
- - whether the exercise price is subject to adjustment upon the occurrence of
certain events;
- - the expiration date; and
- - the place or places where, and the manner in which, Securities Warrants may be
exercised.
Offered Securities Warrants may be exercised at any time up to the close of
business on the expiration date. After the close of business on the expiration
date, unexercised Securities Warrants will become void.
Prior to the exercise of any Securities Warrants to purchase Debt Securities,
Series Preferred Stock or Depositary Shares, holders of the Securities Warrants
will not have any rights of holders of the Debt Securities, Series Preferred
Stock, or Depositary Shares, as the case may be, purchasable upon such exercise.
Specifically Securities Warrants for the purchase of Debt Securities shall have
the right to receive payments of principal of, any premium, or interest on the
Debt Securities purchasable upon such exercise or to enforce covenants in the
applicable Indenture. No holder of Securities Warrants for the purchase of
Series Preferred Stock or Depositary Shares shall have the right to receive
payments of dividends on the Series Preferred Stock or Depositary Shares
purchasable upon such exercise or to exercise any applicable right to vote.
DESCRIPTION OF UNIVERSAL WARRANTS
The following description of the terms of the Universal Warrants sets forth
certain general terms and provisions of the Universal Warrants that we may
offer. The particular terms of the Universal Warrants and the extent, if any, to
which the general provisions described below do not apply to the Universal
Warrants offered will be described in the prospectus supplement.
Universal Warrants will be issued under a warrant agreement (a "Universal
Warrant Agreement") between Morgan Guaranty, as warrant agent, (the "Universal
Warrant Agent") and us, as described in the prospectus supplement. A copy of the
form of Universal Warrant Agreement, including the form of Universal Warrant
certificate (the "Universal Warrant Certificate"), substantially in the form in
which it will be executed, will be filed as an exhibit to the Registration
Statement. The following summary of the principal provisions of the Universal
Warrants and the Universal Warrant Agreement is not complete. You should refer
to the Universal Warrant Agreement and the Universal Warrant Certificate
relating to the Universal Warrants being offered for the complete terms of those
Universal Warrants.
We may issue Universal Warrants:
- - to purchase or sell securities of any entity not affiliated with us,
securities based on the performance of such entity, securities based on the
performance of such entity but excluding the performance of a particular
subsidiary or subsidiaries of such entity, a basket of securities, an index or
indices of securities, a basket of indices, or any combination of the above;
- - to purchase or sell currencies or currency units or composite currencies;
- - to purchase or sell commodities; or
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- - entitling the holders thereof to receive an amount in cash determined by
reference to increases or decreases in the yield or closing price of one or
more debt instruments, interest rates, interest swap rates, or other rates; or
any combination of the above.
We may satisfy our obligations under Universal Warrants by delivering the
underlying securities, currencies or commodities (if applicable) or the cash
value of the Universal Warrant, as set forth in the applicable prospectus
supplement.
You should be aware of special United States Federal income tax considerations
applicable to instruments such as the Universal Warrants. The prospectus
supplement relating to each issue of Universal Warrants will describe special
tax considerations.
Universal Warrants will be issued in the form of a single global Universal
Warrant Certificate, registered in the name of a depositary or its nominee.
Holders will not be entitled to receive definitive certificates representing
Universal Warrants. A holder's ownership of a Universal Warrant will be recorded
on or through the records of the brokerage firm or other entity that maintains
the holder's account. In turn, the total number of Universal Warrants held by an
individual brokerage firm for its clients will be maintained on the records of
the depositary in the name of that brokerage firm or its agent. Transfer of
ownership of any Universal Warrant will be effected only through the selling
holder's brokerage firm.
Listing on a national securities exchange, subject only to official notice of
issuance and exchange approval, may be a condition of sale to some series of the
Universal Warrants. If we seek listing, there can be no assurance that the
exchange will grant approval. In the event that the Universal Warrants are
delisted from, or permanently suspended from trading on, an exchange, the
expiration date for such Universal Warrants will be the date such delisting or
trading suspension becomes effective and Universal Warrants not previously
exercised will be deemed automatically exercised on such date. The applicable
Universal Warrant agreement will contain a covenant from us that we will not
seek delisting of or suspension of trading in the Universal Warrants, on the
exchange unless we have, at the same time, arranged for listing on another
national securities exchange.
Universal Warrants involve a high degree of risk, including the risk of expiring
worthless. Prospective purchasers should be prepared to sustain a loss of some
or all of the purchase price of their Universal Warrants. You should be
experienced with respect to options and option transactions and should reach an
investment decision only after careful consideration with your advisers of the
suitability of the Universal Warrants in light of your particular financial
circumstances, the information set forth under "Description of Universal
Warrants" in this prospectus and the risk factors and information regarding the
Universal Warrants set forth in the prospectus supplement relating to such
Universal Warrants.
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue 500,000,000 shares of our Common Stock, $2.50 par
value, and 10,000,000 shares of our Series Preferred Stock, no par value. At
June 30, 1999, we had outstanding:
- - 175,949,606 shares of Common Stock;
- - 2,444,300 shares of Series A Adjustable Rate Cumulative Preferred Stock;
- - 50,000 shares of each of Series B, C, D, E, and F Variable Cumulative
Preferred Stock; and
- - 400,000 shares of Series H Fixed Cumulative Preferred Stock.
The following brief summary is not complete. You should refer to the provisions
of our Restated Certificate of Incorporation and the Certificates of Designation
creating the outstanding series of Series Preferred Stock for a more complete
description.
COMMON STOCK
General. Subject to the rights of holders of the Series Preferred Stock,
holders of our Common Stock are entitled to receive dividends, when, as, and if
declared by the Board out of funds legally available for their payment. If we
liquidate, dissolve, or wind-up our affairs, either voluntarily or
involuntarily, the holders of Common Stock will be entitled to receive pro rata
all of our assets remaining after we have paid all of our creditors and have
made the required liquidating distributions to holders of the Series Preferred
Stock.
Federal banking laws limit the amount of dividends that Morgan Guaranty Trust
Company of
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New York, our bank subsidiary, can declare. The greatest restriction requires
approval of the Board of Governors of the Federal Reserve System (the
"Governors") if dividends declared exceed the net profits for the most recent
three years. At December 31, 1998, approximately $502 million is available for
distribution as dividends by the bank in 1999 without approval of the Governors.
In addition, if the Governors determine that the bank's payment of dividends
would be an unsafe or unsound practice, they may prohibit the bank from doing
so.
Voting Rights. Each holder of Common Stock is entitled to one vote per share.
Subject to the voting rights of the holders of the Series Preferred Stock, all
voting rights are vested in the holders of shares of our Common Stock.
Preemptive Rights. Holders of our Common Stock do not have any preemptive
rights to subscribe to any additional securities that we may issue.
SERIES PREFERRED STOCK
The Series Preferred Stock has been described above under the caption
"Description of Series Preferred Stock." The following summaries describe the
Series Preferred Stock that we have issued in the past and are currently
outstanding.
Adjustable Rate Cumulative Preferred Stock, Series A. In March 1983, we issued
2,500,000 shares of Adjustable Rate Cumulative Preferred Stock, Series A (the
"Series A Preferred Stock"). Currently 2,444,300 shares are outstanding.
Dividends on the Series A Preferred Stock are cumulative. If we have not paid
six full quarterly dividends on the Series A Preferred Stock, then the number of
directors on our Board will be increased by two and the holders of the Series A
Preferred Stock, voting together as a single class with holders of shares of any
other Series Preferred Stock with the same rights, will be entitled to elect two
additional directors until all unpaid dividends are paid. Each share of the
Series A Preferred Stock will be entitled to 1/10 of one vote. If we liquidate
or dissolve the Company, the holders of shares of Series A Preferred Stock are
entitled to receive a distribution of $100 per share, plus accrued and unpaid
dividends to the date of final distribution. Dividends on the Series A Preferred
Stock are established quarterly by a formula based on the interest rates of
certain actively traded U.S. Treasury obligations, subject to a minimum rate of
5.00% and a maximum rate of 11.50% per annum. Since February 29, 1988, shares of
Series A Preferred Stock have been redeemable at our option, in whole or in
part, at $100 per share, plus any unpaid dividends thereon to the redemption
date.
Variable Cumulative Preferred Stock, Series B, C, D, E, and F. In January 1990,
we issued $250 million, or 250,000 shares, of Variable Cumulative Preferred
Stock, Series B, C, D, E and F (the "Variable Cumulative Preferred Stock"). Each
of the five series is composed of 50,000 shares and is identical except that the
dividend rates and payment dates vary and separate auctions are held by each
series. These issues were priced at $1,000 per share and have contingent voting
rights similar to the Series A Preferred Stock discussed above. If we liquidate
or dissolve the Company, the holders of shares of Variable Cumulative Preferred
Stock are entitled to receive a distribution of $1,000 per share, plus accrued
and unpaid dividends. Dividends on each series of Variable Cumulative Preferred
Stock are cumulative and are payable generally every 49 days, subject to certain
conditions. The dividend rates are determined either by an auction conducted on
each series on the business day before a new dividend period or by a
remarketing. The rate for any dividend period is subject to a maximum rate based
upon the "AA" Composite Commercial Paper Rate and the credit ratings of the
Variable Cumulative Preferred Stock on the auction date. Except under certain
circumstances, shares of each series of Variable Cumulative Preferred Stock are
redeemable, at our option, in whole or in part (in units of 100 shares), at
$1,000 per share plus accrued and unpaid dividends.
Fixed Cumulative Preferred Stock, Series H. In February 1996, we issued $200
million, or 400,000 shares, of 6 5/8% Cumulative Preferred Stock, Series H (the
"Series H Preferred Stock"). Each share of the Series H Preferred Stock has a
stated value of $500. Dividends on this Series H Preferred Stock are cumulative
at a rate of 6 5/8% per annum on the stated value of the shares. Dividends are
payable generally on March 31, June 30, September 30, and December 31 of each
year. We may not redeem shares of this Series H Preferred Stock before March 31,
2006. After that, we may, at our option (with the approval of bank regulators,
if required), redeem the Series H
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Preferred Stock, in whole or in part, at $500 per share plus accrued and unpaid
dividends.
PLAN OF DISTRIBUTION
We may sell the Debt Securities, Series Preferred Stock, Depositary Shares,
Securities Warrants, or Universal Warrants:
- - through agents;
- - through underwriters;
- - through dealers; and
- - directly to purchasers, any of whom may be customers of, engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
If we offer and sell Securities through an agent, that agent will be named, and
any commissions payable to that agent by us, will be set forth in the prospectus
supplement. Any agent will be acting on a best efforts basis for the period of
its appointment which will usually be five business days or less. An agent may
be deemed to be an underwriter under the federal securities laws.
If underwriters are used in the sale of the Securities, we will sign an
underwriting agreement with them. The underwriting agreement will provide that
the obligations of the underwriters are subject to certain conditions and that
the underwriters will be obligated to purchase all of the Securities if any are
purchased. Underwriters will buy the Securities for their own account and may
resell them from time to time in one or more transactions, including negotiated
transactions, at fixed public offering prices or at varying prices determined at
the time of sale. Securities may be offered to the public either through
underwriting syndicates represented by managing underwriters, or directly by the
managing underwriters. The name of the managing underwriter or underwriters, as
well as any other underwriters, and the terms of the transaction, including
compensation of the underwriters and dealers, if any, will be set forth in the
prospectus supplement. The underwriters named in the prospectus supplement will
be the only underwriters for the Securities offered by that prospectus
supplement.
If a dealer is utilized in the sale of Securities, we will sell those Securities
to the dealer, as principal. The dealer may resell those Securities to the
public at varying prices to be determined by the dealer at the time of resale. A
dealer may be deemed to be an underwriter of those Securities under the
securities laws. The name of the dealer and the terms of the transaction will be
set forth in the prospectus supplement.
We may agree to indemnify agents, underwriters, or dealers against certain
liabilities, including liabilities under the securities laws, or to contribute
to payments that agents, underwriters, or dealers may be required to make.
We may directly solicit offers to purchase Securities, and we may sell
Securities directly to institutional investors or others, who may be deemed to
be underwriters within the meaning of the securities laws. The terms of any such
sales will be described in the prospectus supplement.
We may authorize agents, underwriters, and dealers to solicit offers by certain
institutions to purchase Securities pursuant to Delayed Delivery Contracts
("Contracts") providing for payment and delivery on a future date and on terms
described in the prospectus supplement. Institutions with whom Contracts may be
made include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions, and other
institutions but shall in all cases be institutions which we have approved.
These contracts will be subject only to the conditions that:
- - the underwriters purchase the Securities at the time of the Contract; and
- - the purchase is not prohibited under the laws of any jurisdiction in the
United States to which the purchase is subject.
We will pay a commission, as indicated in the prospectus supplement, to agents
and dealers soliciting purchases of Securities pursuant to Contracts that we
have accepted.
This prospectus and related prospectus supplement may be used by direct or
indirect wholly-owned subsidiaries of ours in connection with offers and sales
related to secondary market transactions in the Securities. Those subsidiaries
may act as principal or agent in those transactions. Secondary market sales will
be made at prices related to prevailing market prices at the time of sale.
The offer and sale of the Securities by an affiliate of ours will comply with
the requirements of Rule 2720 of the Rules of Conduct of the National
Association of Securities Dealers, Inc. (the "NASD") regarding underwriting of
securi-
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ties of an affiliate and will comply with any restrictions imposed on the
underwriter by the Governors. Accordingly, an affiliate of ours that is a member
of the NASD may participate in a public offering and sale of our Debt
Securities, Series Preferred Stock, or Depositary Shares if the offering is of a
class of securities rated investment grade by a nationally recognized
statistical rating organization. In addition, an affiliate of ours that is a
member of the NASD may participate in any public offering and sale of the
Securities, including without limitation Securities Warrants and Universal
Warrants, if the price at which an equity issue is distributed to the public is
no higher or the yield at which a debt issue is distributed to the public is no
lower than that recommended by a "qualified independent underwriter" (determined
to be so qualified by the NASD prior to commencement of such offering), in each
case in compliance with the Conduct Rules of the NASD.
No NASD member participating in offers and sales of the Securities will execute
a transaction in the Securities in a discretionary account without the prior
written specific approval of the member's customer.
EXPERTS
The audited financial statements contained in our Annual Report on Form 10-K for
the year ended December 31, 1998, (included in our Annual Report to
Stockholders) are incorporated by reference in this prospectus in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of that firm as experts in auditing and accounting.
LEGAL OPINIONS
The validity of the Securities will be passed upon by Gene A. Capello, Vice
President and Assistant General Counsel of J.P. Morgan, and by Cravath, Swaine &
Moore, New York, New York, counsel for any underwriters, selling agents and
certain other purchasers.
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