<PAGE>
As filed with the Securities and Exchange Commission on September 1, 1999
Registration No. 333-78575
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 5
TO
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Initial Depositor
(Exact name of registrant as specified in charter)
---------------
Internet HOLDRs SM Trust
yet-to-be formed
[Issuer with respect to the receipts]
<TABLE>
<CAPTION>
Delaware 6211 13-5674085
<S> <C> <C>
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
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250 Vesey Street
New York, New York 10281
(212) 449-1000
(Address, including zip code, and telephone number, including area code, of
registrant's
principal executive offices)
---------------
Andrea L. Dulberg, Esq. Copies to:
Corporate Secretary Andrew B. Janszky
Merrill Lynch, Pierce, Fenner & Smith Shearman & Sterling
Incorporated 599 Lexington Avenue
250 Vesey Street New York, New York 10022
New York, New York 10281 (212) 848-4000
(212) 449-1000
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the
same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title of Each Class of Proposed Maximum Proposed Maximum
Securities to Be Amount to Be Offering Price Aggregate Offering Amount of
Registered Registered Per Receipt(1) Price(1) Registration Fee(2)(3)
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<S> <C> <C> <C> <C>
Internet HOLDRs......... 1,000,000,000 $100 $1,248,850,000 $430,639
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</TABLE>
(1)Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act. 11,500,000 Receipts are
estimated to be offered in the initial offering at $100.00 per Receipt and
988,500,000 Receipts are estimated to be offered continuously after the initial
offering at $0.10 per Receipt.
(2)$3,448.00 was previously paid on May 14, 1999 and $1,724.00 was previously
paid on August 16, 1999.
(3) This Registration Statement also registers, where required, an
indeterminate amount of securities to be sold by Merrill Lynch, Pierce,
Fenner & Smith Incorporated in market-making transactions.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to such
Section 8(a), may determine.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Summary.................................................................... 3
Risk factors............................................................... 4
Highlights of Internet HOLDRs.............................................. 7
The trust.................................................................. 13
Description of Internet HOLDRs............................................. 13
Description of the underlying securities................................... 14
Description of the depositary trust agreement.............................. 16
Federal income tax consequences............................................ 19
ERISA considerations....................................................... 20
Plan of distribution....................................................... 20
Year 2000.................................................................. 20
Legal matters.............................................................. 22
Where you can find more information........................................ 22
</TABLE>
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This prospectus contains information you should consider when making your
investment decision. With respect to information about Internet HOLDRs, you
should rely only on the information contained in this prospectus. We have not
authorized any other person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. We are not making an offer to sell Internet HOLDRs in any
jurisdiction where the offer or sale is not permitted.
2
<PAGE>
SUMMARY
The Internet HOLDRs trust will be formed under the depositary trust
agreement, dated as of September 2, 1999 among The Bank of New York, as
trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as the initial
depositor, other depositors and the owners of the Internet HOLDRs. The trust
is not a registered investment company under the Investment Company Act of
1940.
The trust will hold shares of common stock issued by 20 specified
companies generally considered to be involved in various segments of the
internet industry. The number of shares of each common stock held by the trust
with respect to each round lot of HOLDRs is specified under "Highlights of
Internet HOLDRs--The Internet HOLDRs." This group of common stocks is referred
to as the underlying securities. Except when a reconstitution event occurs,
the underlying securities will not change.
Under no circumstances will a new company be added to the group of
issuers of underlying securities.
The trust will issue Internet HOLDRs that represent your undivided
beneficial ownership interest in the shares of common stock held by the trust
on your behalf. The Internet HOLDRs are separate from the underlying common
stocks that are represented by the Internet HOLDRs.
3
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RISK FACTORS
An investment in Internet HOLDRs involves risks similar to investing in
each of the underlying securities outside of the Internet HOLDRs, including the
risks associated with concentrated investments in the internet industry.
General Risk Factors
. Loss of investment. Because the value of Internet HOLDRs directly
relates to the value of the underlying securities, you may lose
all or a substantial portion of your investment in the Internet
HOLDRs if the underlying securities decline in value.
. Discount trading price. Internet HOLDRs may trade at a discount to
the aggregate value of the underlying securities.
. Not necessarily representative of the internet industry. While the
underlying securities are common stocks of companies generally
considered to be involved in various segments of the internet
industry, the underlying securities and the Internet HOLDRs may
not necessarily follow the price movements of the entire internet
industry generally. If the underlying securities decline in value,
your investment in the Internet HOLDRs will decline in value even
if common stock prices in the internet industry generally increase
in value. Furthermore, after the initial deposit, one or more of
the issuers of the underlying securities may no longer be involved
in the internet industry. In this case, the Internet HOLDRs may no
longer consist of securities issued only by companies involved in
the internet industry.
. No investigation of underlying securities. The underlying
securities included in the Internet HOLDRs were selected by
Merrill Lynch, Pierce, Fenner & Smith Incorporated based on the
market capitalization of issuers and the market liquidity of
common stocks in the internet industry, without regard for the
value, price performance, volatility or investment merit of the
underlying securities. Consequently, the Internet HOLDRs trust,
the trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
and their affiliates, have not performed any investigation or
review of the selected companies, including the public filings by
the companies. Investors and market participants should not
conclude that the inclusion of a company is any form of investment
recommendation by the trust, the trustee, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, or their affiliates.
. Loss of diversification. As a result of business developments,
reorganizations, or market fluctuations affecting issuers of the
underlying securities, Internet HOLDRs may not necessarily
continue to be a diversified investment in the internet industry.
As a result of market fluctuation and/or reconstitution events,
Internet HOLDRs may represent a concentrated investment in one or
more of the underlying securities which would reduce investment
diversification and increase your exposure to the risks of
concentrated investments.
. Conflicting investment choices. In order to sell one or more of
the underlying securities individually or to participate in a
tender offer relating to one or more of the underlying securities,
you will be required to cancel your Internet HOLDRs and receive
delivery of each of the underlying securities. The cancellation of
your Internet HOLDRs will allow you to sell individual underlying
securities or to deliver individual underlying securities in a
tender offer. The cancellation of Internet HOLDRs will involve
payment of a cancellation fee to the trustee.
. Trading halts. Trading in Internet HOLDRs may be halted in the
event trading in one or more of the underlying securities is
halted. If so, you will not be able to trade Internet HOLDRs even
though there is trading in some of the underlying securities,
however, you will be able to cancel your HOLDRs to receive the
underlying securities.
4
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. Delisting from the American Stock Exchange. If the number of
companies whose common stock is held in the trust falls below
nine, the American Stock Exchange may consider delisting the
receipts. If the receipts are delisted by the American Stock
Exchange, a termination event will result if the receipts are not
listed for trading on another national securities exchange or
through NASDAQ within five business days from the date the
industry receipts are delisted.
. Possible conflicts of interest. Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as initial depositor, will select the
underlying securities and may face possible conflicts of interest
in connection with its activities. For example, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and its affiliates,
collectively referred to as Merrill Lynch, may engage in
investment banking and other activities, may provide services to
issuers of the underlying securities in connection with its
business, or may trade in the underlying securities for its own
account. All of these activities may result in conflicts of
interest with respect to the financial interest of Merrill Lynch,
on the one hand, and, on the other hand, the initial selection of
the underlying securities to be included in the Internet HOLDRs,
the selection of the internet industry, Merrill Lynch's activity
in the secondary market in the underlying securities, and the
creation and cancellation of Internet HOLDRs by Merrill Lynch.
. Temporary price increases in the underlying
securities. Purchasing activity in the secondary trading market
associated with acquiring the underlying securities for deposit
into the trust may affect the market price of the deposited
shares. Large volumes of purchasing activity, which may occur in
connection with the issuance of Internet HOLDRs, particularly in
connection with the initial issuance of Internet HOLDRs, could
temporarily increase the market price of the underlying
securities, resulting in a higher price on that date. This
purchasing activity could create a temporary imbalance between
the supply and demand of the underlying securities, thereby
limiting the liquidity of the underlying securities due to a
temporary increased demand for underlying securities.
Consequently, prices for the underlying common stocks may decline
subsequent to these purchases as the volume of purchases
subsides. This in turn is likely to have an immediate, adverse
effect on the trading price of Internet HOLDRs.
Risk Factors Specific to the Internet Industry
. Internet company stock prices have been and may continue to be
extremely volatile. The trading prices of the common stocks of
Internet companies have been and are likely to be extremely
volatile. Internet companies' stock prices could be subject to
wide fluctuations in response to a variety of factors, including
the following:
. actual or anticipated variations in companies' quarterly
operating results;
. announcements of technological innovations or new services by
Internet companies or their competitors;
. changes in financial estimates by securities analysts;
. conditions or trends in the Internet and online commerce
industries;
. conditions or trends in online securities trading;
. changes in the market valuations of Internet or online service
companies;
. developments in Internet regulations;
. announcements by Internet companies or their competitors of
significant acquisitions, strategic partnerships, joint
ventures or capital commitments;
. unscheduled system downtime;
. additions or departures of key personnel; and
. sales of Internet companies' common stock or other securities
in the open market.
5
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. In addition, the trading price of Internet stocks in general have
experienced extreme price and volume fluctuations in recent
months. These fluctuations often have been unrelated or
disproportionate to the operating performance of these companies.
The valuations of many Internet stocks are extraordinarily high
based on conventional valuation standards such as price to
earnings and price to sales ratios. Some of the companies do not
or in the future might not have earnings. As a result, these
trading prices may decline substantially. These trading prices and
valuations may not be sustained. Any negative change in the
public's perception of the prospects of Internet or e-commerce
companies could depress Internet stock prices regardless of
Internet companies' results. Other broad market and industry
factors may decrease the market price of Internet stocks,
regardless of Internet companies' operating performance. Market
fluctuations, as well as general political and economic conditions
such as recession or interest rate or currency rate fluctuations,
also may decrease the market price of Internet stocks.
. Internet companies must keep pace with rapid technological change
to remain competitive. The Internet market is characterized by
rapidly changing technology, evolving industry standards and
practices, frequent new product and service introductions and
enhancements and changing customer demands. These market
characteristics are worsened by the emerging nature of the
Internet and the apparent need of companies from a multitude of
industries to offer Web-based products and services. Internet
companies' success therefore will depend on their ability to adapt
to rapidly changing technologies, to adapt their services to
evolving industry standards and to continually improve the
performance, features and reliability of their service. Failure to
adapt to such changes would harm their business. In addition, the
widespread adoption of new Internet, networking or
telecommunications technologies or other technological changes
could require substantial expenditures to modify or adapt their
services or infrastructure. The online commerce market,
particularly over the Internet, is new, rapidly evolving and
intensely competitive, which competition is expected to intensify
in the future. Barriers to entry are minimal, and current and new
competitors can launch new sites and services at a relatively low
cost.
. New laws and regulations with respect to the Internet could impede
its commercial development. Due to the increasing popularity and
use of the Internet and other online services, it is possible that
a number of laws and regulations may be adopted with respect to
the Internet or other online services covering issues such as user
privacy, pricing, content, copyrights, distribution and
characteristics and quality of products and services. Furthermore,
the growth and development of the market for online interaction
and commerce may prompt calls for more stringent consumer
protection laws that may impose additional burdens on companies
conducting business online. The adoption of any additional laws or
regulations may impede the growth of the Internet or other online
services.
. Internet companies depend on continued growth of Internet use and
online commerce. Future revenues and any future profits of
Internet companies depend substantially upon the widespread
acceptance and use of the Internet and other online services as an
effective medium of communication and commerce by consumers. Rapid
growth in the use of and interest in the Web, the Internet and
other online services is a recent phenomenon. There is no
assurance that acceptance and use will continue to develop or that
a sufficiently broad base of consumers will adopt, and continue to
use, the Internet and other online services as a medium of
communication and commerce. Demand and market acceptance for
recently introduced services and products over the Internet are
subject to a high level of uncertainty and few proven services and
products exist. Internet companies rely on consumers who have
previously used traditional means of commerce to exchange
information and to purchase goods and services. For Internet
companies to be successful, consumers must accept and utilize
novel ways of conducting business and exchanging information.
6
<PAGE>
HIGHLIGHTS OF INTERNET HOLDRs
This discussion highlights information regarding Internet HOLDRs; we
present certain information more fully in the rest of this prospectus. You
should read the entire prospectus carefully before you purchase Internet
HOLDRs.
Issuer.......................
Internet HOLDRs Trust.
The trust....................
The Internet HOLDRs Trust will be formed under
the depositary trust agreement, dated as of
September 2, 1999 among The Bank of New York,
as trustee, and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as the initial depositor,
other depositors and the owners of the Internet
HOLDRs. The trust is not a registered
investment company under the Investment Company
Act of 1940.
Initial depositor............ Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
Trustee......................
The Bank of New York, a New York state-
chartered banking organization, will be the
trustee and receive compensation as set forth
in the depositary trust agreement.
Purpose of Internet HOLDRs... Internet HOLDRs are designed to achieve the
following:
Diversification. Internet HOLDRs are designed
to allow you to diversify your investment in
the internet industry through a single,
exchange-listed instrument representing your
undivided beneficial ownership of the
underlying securities.
Flexibility. The beneficial owners of Internet
HOLDRs have undivided beneficial ownership
interests in each of the underlying securities
represented by the Internet HOLDRs, and can
cancel their Internet HOLDRs to receive each of
the underlying securities represented by the
Internet HOLDRs.
Transaction costs. The expenses associated with
trading Internet HOLDRs are expected to be less
than trading each of the underlying securities
separately.
Trust assets.................
The trust will hold shares of common stock
issued by 20 specified companies in the
internet industry. Except when a reconstitution
event occurs, the group of companies will not
change. Reconstitution events are described in
this prospectus under the heading "Description
of the Depositary Trust Agreement--
Reconstitution Events." Under no circumstances
will the common stock of a new company be added
to the common stocks underlying the Internet
HOLDRs.
The trust's assets may increase or decrease as
a result of in-kind deposits and withdrawals of
the underlying securities during the life of
the trust.
The Internet HOLDRs..... The trust will issue Internet HOLDRs that
represent your undivided beneficial ownership
interest in the shares of common stock held by
the trust on your behalf. The Internet HOLDRs
themselves are separate from the underlying
securities that are represented by the Internet
HOLDRs.
The specific share amounts for each round-lot
of 100 Internet HOLDRs are set forth in the
chart below and were determined on
7
<PAGE>
August 31, 1999 so that the initial weightings
of each underlying security included in the
Internet HOLDRs will approximate the relative
market capitalizations of the specified
companies, subject to a maximum weight of 20%.
Because these weightings are a function of
market prices, it is expected that these
weightings will change substantially over time,
including during the period between the date of
this prospectus and the date the Internet
HOLDRs are first issued to the public.
The share amounts set forth below will not
change, except for changes due to corporate
events such as stock splits or reverse stock
splits on the underlying securities or
reconstitution events.
The following chart provides the
. names of the 20 issuers of the underlying
securities represented by an Internet
HOLDRs,
. stock ticker symbols,
. share amounts represented by a round-lot of
100 Internet HOLDRs,
. initial weightings, and
. the principal market on which the shares of
common stock of the selected companies are
traded.
<TABLE>
<CAPTION>
Primary
Name of Share Initial Trading
Company Ticker Amounts Weighting Market
------------------------ ------ ------- --------- -------
<S> <C> <C> <C> <C>
America Online Inc. AOL 21 19.60% NYSE
Yahoo Inc. YHOO 13 19.60% NASDAQ
Amazon.com Inc. AMZN 9 11.44% NASDAQ
eBay Inc. EBAY 6 7.70% NASDAQ
At Home Corp. ATHM 17 6.97% NASDAQ
Priceline.Com Inc. PCLN 7 4.87% NASDAQ
CMGI Inc. CMGI 5 4.29% NASDAQ
Inktomi Corporation INKT 3 3.48% NASDAQ
RealNetworks, Inc. RNWK 4 3.34% NASDAQ
Exodus Communications,
Inc. EXDS 4 3.29% NASDAQ
E*TRADE Group Inc EGRP 12 3.07% NASDAQ
DoubleClick Inc. DCLK 2 2.04% NASDAQ
Ameritrade Holding Corp. AMTD 9 1.87% NASDAQ
Lycos, Inc. LCOS 4 1.66% NASDAQ
CNET, Inc. CNET 4 1.54% NASDAQ
PSINet Inc. PSIX 3 1.47% NASDAQ
Network Associates, Inc. NETA 7 1.21% NASDAQ
EarthLink Network, Inc. ELNK 2 1.00% NASDAQ
MindSpring Enterprises,
Inc. MSPG 3 0.90% NASDAQ
Go2Net, Inc. GNET 1 0.66% NASDAQ
</TABLE>
8
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These companies generally are considered to be
among the 20 largest and most liquid companies
involved in the internet industry as measured
by market capitalization and trading volume on
August 31, 1999. The market capitalization of a
company is determined by multiplying the price
of its common stock by the number of
outstanding shares of its common stock.
The trust only will issue and cancel, and you
only may obtain, hold, trade or surrender,
Internet HOLDRs in a round-lot of 100 Internet
HOLDRs and round-lot multiples. The trust will
only issue Internet HOLDRs upon the deposit of
the whole shares represented by a round-lot of
100 Internet HOLDRs. In the event that a
fractional share comes to be represented by a
round-lot of Internet HOLDRs, the trust may
require a minimum of more than one round-lot of
100 Internet HOLDRs for an issuance so that the
trust will always receive whole share amounts
for issuance of Internet HOLDRs.
The number of outstanding Internet HOLDRs will
increase and decrease as a result of in-kind
deposits and withdrawals of the underlying
securities. The trust will stand ready to issue
additional Internet HOLDRs on a continuous
basis when an investor deposits the required
shares of common stock with the trustee.
Public offering price........
The initial public offering price for 100
Internet HOLDRs will equal the sum of the
closing market price on the pricing date for
each underlying security multiplied by the
share amount appearing in the above table, plus
an underwriting fee.
Purchases....................
After the initial offering, you may acquire
Internet HOLDRs in two ways:
. through an in-kind deposit of the required
number of shares of common stock of the
underlying issuers with the trustee, or
. through a cash purchase in the secondary
trading market.
Underwriting fees............
If you wish to purchase Internet HOLDRs in the
initial public offering, you will pay Merrill
Lynch, Pierce, Fenner & Smith Incorporated, in
its role as underwriter, an underwriting fee
equal to:
. For purchases of [ ] Internet HOLDRs or
fewer, 2%.
. For purchases in excess of [ ] Internet
HOLDRs, [ ]%.
You will not be charged any issuance fee or
other sales commission in connection with
purchases of Internet HOLDRs made in the
initial public offering.
Issuance and cancellation
fees......................... After the initial offering, if you wish to
create Internet HOLDRs by delivering to the
trust the requisite shares of common stock
evidencing an Internet HOLDRs, The Bank of New
York as trustee will charge you an issuance fee
of up to $10.00 for each round-lot of 100
Internet HOLDRs. If you wish to cancel your
Internet HOLDRs and withdraw your underlying
securities, The Bank of New York as trustee
will charge you a cancellation fee of up to
$10.00 for each round-lot of 100 Internet
HOLDRs.
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Commissions..................
If you choose to deposit underlying securities
in order to receive Internet HOLDRs after the
conclusion of the trust's initial public
offering, you will not be charged the
underwriting fee. However, in addition to the
issuance fee charged by the trustee described
above, you will be responsible for paying any
sales commission associated with your purchase
of the underlying securities that is charged by
your broker, whether it be Merrill Lynch,
Pierce, Fenner & Smith Incorporated or another
broker.
Custody fees............ The Bank of New York, as trustee and as
custodian, will charge you a quarterly custody
fee of $2.00 for each round-lot of 100 Internet
HOLDRs to be deducted from any cash dividend or
other cash distributions on underlying
securities received by the trust. With respect
to the aggregate custody fee payable in any
calendar year for each Internet HOLDR, the
Trustee will waive that portion of the fee
which exceeds the total cash dividends and
other cash distributions received, or to be
received, and payable with respect to such
calendar year.
Rights relating to Internet You have the right to withdraw the underlying
HOLDRs.................. securities upon request by delivering a round-
lot or integral multiple of a round-lot of
Internet HOLDRs to the trustee, during the
trustee's business hours, and paying the
cancellation fees, taxes, and other charges.
You should receive the underlying securities no
later than the business day after the trustee
receives a proper notice of cancellation. The
trustee will not deliver fractional shares of
underlying securities. To the extent that any
cancellation of Internet HOLDRs would otherwise
require the delivery of a fractional share, the
trustee will sell such share in the market and
the trust, in turn, will deliver cash in lieu
of such share. Except with respect to the right
to vote for dissolution of the trust, the
Internet HOLDRs themselves will not have voting
rights.
Rights relating to the
underlying securities....... You have the right to:
. Receive all shareholder disclosure
materials, including annual and quarterly
reports, distributed by the issuers of the
underlying securities.
. Receive all proxy materials distributed by
the issuers of the underlying securities and
will have the right to instruct the trustee
to vote the underlying securities or may
attend shareholder meetings yourself.
. Receive dividends and other distributions on
the underlying securities, if any are
declared and paid to the trustee by an
issuer of the underlying securities, net of
any applicable taxes or fees.
If you wish to participate in a tender offer
for underlying securities, you must obtain the
underlying securities by surrendering your
Internet HOLDRs and receiving all of your
underlying securities. For specific information
about obtaining your underlying securities, you
should read the discussion under the caption
"Description of the Depositary Trust
Agreement."
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Reconstitution events........
A. If an issuer of underlying securities no
longer has a class of common stock
registered under section 12 of the
Securities Exchange Act of 1934, then its
securities will no longer be an underlying
security and the trustee will distribute the
shares of that company to the owners of the
Internet HOLDRs.
B. If the SEC finds that an issuer of
underlying securities should be registered
as an investment company under the
Investment Company Act of 1940, and the
trustee has actual knowledge of the SEC
finding, then the trustee will distribute
the shares of that company to the owners of
the Internet HOLDRs.
C. If the underlying securities of an issuer
cease to be outstanding as a result of a
merger, consolidation or other corporate
combination, the trustee will distribute the
consideration paid by and received from the
acquiring company to the beneficial owners
of Internet HOLDRs, unless the acquiring
company already is included in the Internet
HOLDRs and the consideration paid is
additional underlying securities. In this
case, the additional underlying securities
will be deposited into the trust.
D. If an issuer's underlying securities are
delisted from trading on a national
securities exchange or NASDAQ and are not
listed for trading on another national
securities exchange or through NASDAQ within
5 business days from the date the such
securities are delisted.
If a reconstitution event occurs, the trustee
will deliver the underlying security to you as
promptly as practicable after the date that the
trustee has knowledge of the occurrence of a
reconstitution event.
Termination events...........
A. The Internet HOLDRs are delisted from the
American Stock Exchange and are not listed
for trading on another national securities
exchange or through NASDAQ within 5 business
days from the date the Internet HOLDRs are
delisted.
B. The trustee resigns and no successor trustee
is appointed within 60 days from the date
the trustee provides notice to the initial
depositor of its intent to resign.
C. 75% of beneficial owners of outstanding
Internet HOLDRs vote to dissolve and
liquidate the trust.
If a termination event occurs, the trustee will
distribute the underlying securities to you as
promptly as practicable after the termination
event.
Federal income tax
consequences................. The federal income tax laws will treat a U.S.
holder of Internet HOLDRs as directly owning
the underlying securities. The Internet HOLDRs
themselves will not result in any federal tax
consequences separate from the tax consequences
associated with ownership of the underlying
securities.
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<PAGE>
Listing......................
Application has been made to list Internet
HOLDRs on the American Stock Exchange under the
symbol "HHH." Trading will take place only in
round-lots of 100 Internet HOLDRs and round-lot
multiples. A minimum of 150,000 Internet HOLDRs
will be required to be outstanding when trading
begins.
Trading......................
Investors only will be able to acquire, hold,
transfer and surrender a round-lot of 100
Internet HOLDRs. Bid and ask prices, however,
will be quoted per single Internet HOLDRs.
Clearance and settlement.....
The trust will issue Internet HOLDRs in book-
entry form. Internet HOLDRs will be evidenced
by one or more global certificates that the
trustee will deposit with The Depositary Trust
Company, referred to as DTC. Transfers within
DTC will be in accordance with DTC's usual
rules and operating procedures. For further
information see "Description of Internet
HOLDRs".
12
<PAGE>
THE TRUST
General. This discussion highlights information about the Internet HOLDRs
trust. You should read this information, information about the depositary trust
agreement as well as the depositary trust agreement before you purchase a
receipt. The material terms of the depositary trust agreement are described in
this prospectus under the heading "Description of the Depositary Trust
Agreement."
The Internet HOLDRs Trust. The trust will be formed pursuant to the
depositary trust agreement, dated as of September 2, 1999. The Bank of New York
will be the trustee. The Internet HOLDRs Trust is not a registered investment
company under the Investment Company Act of 1940.
The Internet HOLDRs Trust is intended to hold deposited shares for the
benefit of owners of Internet HOLDRs. The trustee will perform only
administrative and ministerial acts. The property of the trust will consist of
the underlying securities and all monies or other property, if any, received by
the trustee. The trust will terminate on December 31, 2039, or earlier if a
termination event occurs.
DESCRIPTION OF INTERNET HOLDRs
The trust will issue Internet HOLDRs under the depositary trust agreement
described in this prospectus under the heading "Description of the Depositary
Trust Agreement." After the initial offering, the trust may issue additional
Internet HOLDRs on a continuous basis when an investor deposits the requisite
underlying securities with the trustee.
You may only acquire, hold, trade and surrender Internet HOLDRs in a
round-lot of 100 Internet HOLDRs and round-lot multiples. The trust will only
issue Internet HOLDRs upon the deposit of the whole shares of underlying
securities that are represented by a round-lot of 100 Internet HOLDRs. In the
event of a stock split, reverse split, or other distribution by the issuer of
an underlying security that results in a fractional share becoming an
underlying security, the trust may require a minimum of more than one round-lot
of 100 Internet HOLDRs for an issuance so that the trust will always receive
whole share amounts for issuance of Internet HOLDRs.
Internet HOLDRs will represent your individual and undivided beneficial
ownership interest in the common stock of the specified underlying securities.
The 20 companies selected as part of this receipt program are listed above in
the section entitled "Highlights of Internet HOLDRs--The Internet HOLDRs".
Beneficial owners of Internet HOLDRs will have the same rights and
privileges as they would have if they beneficially owned the underlying
securities outside of the trust. These include the right of investors to
instruct the trustee to vote the common stock, and to receive dividends and
other distributions on the underlying securities, if any are declared and paid
to the trustee by an issuer of an underlying security, as well as the right to
cancel Internet HOLDRs to receive the underlying securities. See "Description
of the Depositary Trust Agreement". Internet HOLDRs are not intended to change
your beneficial ownership in the underlying securities under federal securities
laws, including Sections 13(d) and 16(a) of the Securities Exchange Act of
1934.
The trust will not publish or otherwise calculate net asset value per
receipt. Internet HOLDRs may trade in the secondary market at prices that are
lower than the aggregate value of the corresponding underlying securities. If,
in such case, an owner of Internet HOLDRs wishes to realize the dollar value of
the underlying securities, that owner will have to cancel the Internet HOLDRs.
Such cancellation will require payment of fees and expenses as described in
"Withdrawal of underlying securities" below.
13
<PAGE>
Internet HOLDRs will be evidenced by one or more global certificates that
the trustee will deposit with DTC and register in the name of Cede & Co., as
nominee for DTC. Internet HOLDRs will be available only in book-entry form.
Owners of Internet HOLDRs may hold their Internet HOLDRs through DTC, if they
are participants of DTC, or indirectly through entities that are participants
in DTC.
DESCRIPTION OF THE UNDERLYING SECURITIES
Selection criteria. The underlying securities are the common stocks of a
group of 20 specified companies involved in various segments of the internet
industry and whose common stock is registered under Section 12 of the Exchange
Act. The issuers of the underlying securities are among the 20 largest
capitalized, most liquid companies in the internet industry as measured by
market capitalization and trading volume. The following criteria were used in
selecting the underlying securities on August 31, 1999:
. Market capitalization equal to or greater than $1.0 billion;
. Average daily trading volume of at least 1.2 million shares over the
60 trading days prior to August 31, 1999;
. Average daily dollar volume (that is, the average daily trading
volume multiplied by the closing price on August 31, 1999) of at
least $60 million over the 60 trading days prior to August 31, 1999;
and
. A trading history of at least 90 calendar days.
The market capitalization of a company is determined by multiplying the price
of its common stock by the number of shares of its common stock that are held
by stockholders. In determining whether a company was to be considered for
inclusion in the Internet HOLDRs, Merrill Lynch, Pierce, Fenner & Smith
Incorporated examined available public information about the company, including
analysts' reports and other independent market sources. The ultimate
determination of the inclusion of the 20 specified companies, however, rested
solely within the discretion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
After the initial deposit, one or more of the issuers of the underlying
securities may no longer be substantially involved in the internet industry. In
this case, the Internet HOLDRs may no longer consist of securities issued by
companies involved in the internet industry. Merrill Lynch, Pierce, Fenner &
Smith Incorporated will determine, in its sole discretion, whether the receipt
with respect to that particular group of underlying securities remains in the
internet industry and will undertake to make adequate disclosure when
necessary.
Underlying securities. For a list of the underlying securities
represented by Internet HOLDRs, please refer to "Highlights of Internet
HOLDRs--The Internet HOLDRs." If the underlying securities change because of a
reconstitution event, a revised list of underlying securities will be set forth
in a prospectus supplement and will be available from the American Stock
Exchange and through a widely-used electronic information dissemination system
such as Bloomberg or Reuters.
No investigation. In selecting the underlying securities, the trust, the
trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and any affiliate
of these entities, have not performed any investigation or review of the
selected companies, including the public filings by the companies, other than
to the extent required to determine whether the companies satisfied the
program's stated selection criteria. Accordingly, before you acquire Internet
HOLDRs, you should consider publicly available financial and other information
about the issuers of the underlying securities. See "Risk Factors" and
"Available Information." Investors and market participants should not conclude
that the inclusion of a company in the list is any form of investment
recommendation of that company by the trust, the trustee, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, and any of their affiliates.
General background and historical information. For a brief description of
the business of each of the issuers of the underlying securities and monthly
pricing information showing the historical performance of each underlying
issuer's securities see "Annex A."
14
<PAGE>
The following table and graph set forth the composite performance of all
of the underlying securities measured at the close of each business day from
March 30, 1999, the first date when all of the underlying securities were
publicly traded, to August 31, 1999. The performance table and graph data were
determined by using the specific share amounts reflected in a round-lot of 100
Internet HOLDRs, as adjusted for any splits that may have occurred over the
measurement period. Past movements of the underlying securities are not
necessarily indicative of future values.
<TABLE>
<CAPTION>
Closing
1999 Price
- ---- -------
<S> <C>
March 30........ 121.94
March 31........ 123.94
April 1......... 126.96
April 5......... 140.35
April 6......... 142.91
April 7......... 139.66
April 8......... 143.30
April 9......... 147.50
April 12........ 152.40
April 13........ 153.76
April 14........ 142.31
April 15........ 139.00
April 16........ 137.72
April 19........ 113.34
April 20........ 124.66
April 21........ 134.71
April 22........ 139.41
April 23........ 145.80
April 26........ 155.92
April 27........ 150.99
April 28........ 140.85
April 29........ 142.18
April 30........ 144.79
</TABLE>
<TABLE>
<CAPTION>
Closing
1999 Price
- ---- -------
<S> <C>
May 3........... 133.68
May 4........... 128.47
May 5........... 134.38
May 6........... 126.30
May 7........... 125.45
May 10.......... 132.94
May 11.......... 137.76
May 12.......... 136.68
May 13.......... 131.43
May 14.......... 128.50
May 17.......... 133.33
May 18.......... 131.40
May 19.......... 133.84
May 20.......... 127.44
May 21.......... 126.02
May 24.......... 116.07
May 25.......... 106.83
May 26.......... 114.77
May 27.......... 110.40
May 28.......... 116.04
</TABLE>
<TABLE>
<CAPTION>
Closing
1999 Price
- ---- -------
<S> <C>
June 1.......... 107.75
June 2.......... 107.05
June 3.......... 101.59
June 4.......... 107.61
June 7.......... 112.97
June 8.......... 109.10
June 9.......... 110.18
June 10......... 107.60
June 11......... 100.31
June 14......... 87.29
June 15......... 90.38
June 16......... 102.30
June 17......... 104.56
June 18......... 106.10
June 21......... 114.25
June 22......... 110.00
June 23......... 112.02
June 24......... 107.95
June 25......... 104.22
June 28......... 107.85
June 29......... 111.28
June 30......... 117.66
</TABLE>
<TABLE>
<CAPTION>
Closing
1999 Price
- ---- -------
<S> <C>
July 1.......... 118.35
July 2.......... 120.32
July 6.......... 122.77
July 7.......... 120.98
July 8.......... 122.52
July 9.......... 121.73
July 12......... 115.61
July 13......... 117.42
July 14......... 118.40
July 15......... 117.32
July 16......... 114.86
July 19......... 111.66
July 20......... 106.04
July 21......... 109.84
July 22......... 104.09
July 23......... 104.57
July 26......... 97.86
July 27......... 97.04
July 28......... 102.13
July 29......... 97.47
July 30......... 95.02
</TABLE>
<TABLE>
<CAPTION>
Closing
1999 Price
- ---- -------
<S> <C>
August 2........ 91.66
August 3........ 87.05
August 4........ 82.49
August 5........ 88.48
August 6........ 85.37
August 9........ 82.14
August 10....... 84.42
August 11....... 85.96
August 12....... 87.34
August 13....... 91.05
August 16....... 93.15
August 17....... 97.43
August 18....... 99.31
August 19....... 93.70
August 20....... 96.44
August 23....... 100.33
August 24....... 100.37
August 25....... 104.61
August 26....... 103.01
August 27....... 101.24
August 30....... 95.98
August 31....... 97.83
</TABLE>
15
<PAGE>
DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT
General. The depositary trust agreement, dated as of September 2, 1999,
among Merrill Lynch, Pierce, Fenner & Smith, as initial depositor, The Bank of
New York, as trustee, other depositors and the owners of the Internet HOLDRs,
provides that Internet HOLDRs will represent the common stock of the underlying
companies.
The trustee. The Bank of New York serves as trustee. The Bank of New
York, which was founded in 1784, was New York's first bank and is the oldest
bank in the country still operating under its original name. The Bank is a
state-chartered New York banking corporation and a member of the Federal
Reserve System. The Bank conducts a national and international wholesale
banking business and a retail banking business in the New York City, New Jersey
and Connecticut areas, and provides a comprehensive range of corporate and
personal trust, securities processing and investment services.
Issuance, transfer and surrender of Internet HOLDRs. You may create and
cancel Internet HOLDRs only in round-lots of 100 Internet HOLDRs. You may
create Internet HOLDRs by delivering to the trustee the requisite underlying
securities. The trust will only issue Internet HOLDRs upon the deposit of the
whole shares represented by a round-lot of 100 Internet HOLDRs. In the event
that an issuer of underlying securities distributes a fractional share that is
represented in a round-lot of Internet HOLDRs, the trust may require a minimum
of more than one round-lot of 100 Internet HOLDRs for an issuance so that the
trust will always receive whole share amounts for issuance of Internet HOLDRs.
Similarly, you must surrender Internet HOLDRs in integral multiples of 100
Internet HOLDRs to withdraw deposited shares from the trust. The trustee will
not deliver fractional shares of underlying securities, to the extent that any
cancellation of Internet HOLDRs would otherwise require the delivery of
fractional shares, the trust will deliver cash in lieu of such shares. You may
request withdrawal of your deposited shares during the trustee's normal
business hours. The trustee expects that in most cases it will deliver your
deposited shares within one business day of your withdrawal request.
Voting rights. The trustee will deliver you proxy soliciting materials
provided by issuers of the deposited shares so as to permit you to give the
trustee instructions as to how to vote on matters to be considered at any
annual or special meetings held by issuers of the underlying securities.
Under the depositary trust agreement, the beneficial owners of Internet
HOLDRs, other than Merrill Lynch, Pierce, Fenner & Smith Incorporated owning
Internet HOLDRs for its own proprietary account as principal, will have the
right to vote to dissolve and liquidate the trust.
Distributions. You will be entitled to receive, net of trustee fees,
distributions of cash, including dividends, securities or property, if any,
made with respect to the underlying securities. The trustee will use its
reasonable efforts to ensure that it distributes these distributions as
promptly as practicable after the date on which it receives the distribution.
Therefore, you may receive your distributions substantially later than you
would have had you held the underlying securities directly. You will be
obligated to pay any tax or other charge that may become due with respect to
Internet HOLDRs. The trustee may deduct the amount of any tax or other
governmental charge from a distribution before making payment to you. In
addition, the trustee will deduct its quarterly custody fee of $2.00 for each
round-lot of 100 Internet HOLDRs from quarterly dividends, if any, paid to the
trustee by the issuers of the underlying securities. With respect to the
aggregate custody fee payable in any calendar year for each Internet HOLDR, the
Trustee will waive that portion of the fee which exceeds the total cash
dividends and other cash distributions received, or to be received, and payable
with respect to such calendar year.
Record dates. With respect to dividend payments and voting instructions,
the trustee expects to fix the trust's record dates as close as possible to the
record date fixed by the issuer of the underlying securities.
Shareholder communications. The trustee promptly will forward to you all
shareholder communications that it receives from issuers of the underlying
securities.
16
<PAGE>
Withdrawal of underlying securities. You may surrender your Internet
HOLDRs and receive underlying securities during the trustee's normal business
hours and upon the payment of applicable fees, taxes or governmental charges,
if any. You should receive your underlying securities no later than the
business day after the trustee receives your request. If you surrender Internet
HOLDRs in order to receive underlying securities, you will pay to the trustee a
cancellation fee of up to $10.00 per round-lot of 100 Internet HOLDRs.
Further issuances of Internet HOLDRs. The depositary trust agreement will
provide for further issuances of Internet HOLDRs on a continuous basis without
your consent.
Reconstitution events. The depositary trust agreement provides for the
automatic distribution of underlying securities to you in four circumstances.
A. If an issuer of underlying securities no longer has a class of
common stock registered under section 12 of the Securities
Exchange Act of 1934, then its securities will no longer be a
underlying security and the trustee will distribute the shares
of that company to the owners of the Internet HOLDRs.
B. If the SEC finds that an issuer of underlying securities should
be registered as an investment company under the Investment
Company Act of 1940, and the trustee has actual knowledge of
the SEC finding, then the trustee will distribute the shares of
that company to the owners of the Internet HOLDRs.
C. If the underlying securities of an issuer cease to be
outstanding as a result of a merger, consolidation or other
corporate combination, the trustee will distribute the
consideration paid by and received from the acquiring company
to the beneficial owners of Internet HOLDRs, unless the
acquiring company is already included in the Internet HOLDRs
and the consideration paid is additional underlying securities.
In this case, the additional underlying securities will be
deposited into the trust.
D. If an issuer's underlying securities are delisted from trading
on a national securities exchange or NASDAQ and are not listed
for trading on another national securities exchange or through
NASDAQ within 5 business days from the date the such securities
are delisted.
If a reconstitution event occurs, the trustee will deliver the underlying
security to you as promptly as practicable after the date that the trustee has
knowledge of the occurrence of a reconstitution event.
Termination of the trust. The trust will terminate if the trustee resigns
and no successor trustee is appointed by the initial depositor within 60 days
from the date the trustee provides notice to the initial depositor of its
intent to resign. Upon termination, the beneficial owners of Internet HOLDRs
will surrender their Internet HOLDRs as provided in the depositary trust
agreement, including payment of any fees of the trustee or applicable taxes or
governmental charges due in connection with delivery to the owners of Internet
HOLDRs. The trust also will terminate if Internet HOLDRs are delisted from the
American Stock Exchange and are not listed for trading on another national
securities exchange or through NASDAQ within 5 business days from the date the
Internet HOLDRs are delisted. Finally, the trust will terminate if 75% of the
owners of outstanding Internet HOLDRs other than Merrill Lynch, Pierce, Fenner
& Smith Incorporated vote to dissolve and liquidate the trust.
If a termination event occurs, the trustee will distribute the underlying
securities to you as promptly as practicable after the termination event
occurs.
Amendment of depositary trust agreement. The trustee and the initial
depositor may amend any provisions of the depositary trust agreement without
the consent of the initial depositor or any of the owners of the Internet
HOLDRs. Promptly after the execution of any amendment to the agreement, the
trustee must
17
<PAGE>
furnish or cause to be furnished written notification of the substance of the
amendment to each owner of Internet HOLDRs. Any amendment that imposes or
increases any fees or charges, subject to exceptions, or that otherwise
prejudices any substantial existing right of the owners of Internet HOLDRs will
not become effective until 30 days after notice of the amendment is given to
the owners of Internet HOLDRs.
Issuance and cancellation fees. After the initial public offering, the
trust expects to issue more Internet HOLDRs. If you wish to create Internet
HOLDRs by delivering to the trust the requisite underlying securities, the
trustee will charge you an issuance fee of up to $10.00 for each round-lot of
100 Internet HOLDRs. If you wish to cancel your Internet HOLDRs and withdraw
your underlying securities, the trustee will charge you a cancellation fee of
up to $10.00 for each round-lot of 100 Internet HOLDRs issued. The trustee may
negotiate either of these fees depending on the volume, frequency and size of
the issuance or cancellation transactions.
Commissions. If you choose to create Internet HOLDRs after the conclusion
of the trust's initial public offering, you will not be charged the
underwriting fee. However, in addition to the issuance and cancellation fees
described above, you will be responsible for paying any sales commissions
associated with your purchase of the underlying securities that is charged by
your broker, whether it be Merrill Lynch, Pierce, Fenner & Smith Incorporated
or another broker.
Custody fees. The Bank of New York, as trustee and as custodian, will
charge you quarterly custody fee of $2.00 for each round-lot of 100 Internet
HOLDRs to be deducted from any dividend payments on underlying securities
received by the trustee. With respect to the aggregate custody fee payable in
any calendar year for each Internet HOLDR, the Trustee will waive that portion
of the fee which exceeds the total cash dividends and other cash distributions
received, or to be received, and payable with respect to such calendar year.
The trustee cannot recapture unpaid custody fees from prior years.
Address of the trustee. The Bank of New York, ADR Department, 101 Barclay
Street, New York, New York 10286.
Governing law. The depositary trust agreement and Internet HOLDRs will be
governed by the laws of the State of New York. The trustee will provide the
depositary trust agreement to any owner of the underlying securities free of
charge upon written request.
Duties and immunities of the trustee. The trustee will assume no
responsibility or liability for, and makes no representations as to, the
validity or sufficiency, or as to the accuracy of the recitals, if any, set
forth in the Internet HOLDRs.
The trustee undertakes to perform only those duties as are specifically
set forth in the depositary trust agreement. Subject to the preceding sentence,
the trustee will be liable for its own negligence or misconduct except for good
faith errors in judgment so long as the trustee was not negligent in
ascertaining the relevant facts.
18
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
General
The following is a summary of the U.S. federal income tax consequences
relating to the Internet HOLDRs for:
. a citizen or resident of the United States, a corporation or
partnership created or organized in the United States or under the
laws of the United States, an estate, the income of which is
includible in gross income for U.S. federal income tax purposes
regardless of its source, or a trust if a court within the United
States is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust (a
"U.S. receipt holder"), and
. any person other than a U.S. receipt holder (a "Non-U.S. receipt
holder").
This summary is based upon laws, regulations, rulings and decisions
currently in effect, all of which are subject to change, possibly on a
retroactive basis. The discussion does not deal with all U.S. federal income
tax consequences applicable to all categories of investors, some of which may
be subject to special rules. In addition, this summary generally is limited to
investors who will hold the Internet HOLDRs as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended. We suggest that you consult with
your own tax advisor.
Taxation of the trust
The trust will provide for flow through tax consequences as it will be
treated as a grantor trust or custodial arrangement for United States federal
income tax purposes.
Taxation of Internet HOLDRs
A receipt holder purchasing and owning Internet HOLDRs will be treated,
for U.S. federal income tax purposes, as directly owning a proportionate share
of the underlying securities represented by Internet HOLDRs. Consequently, if
there is a taxable cash distribution on an underlying security, a holder will
recognize income with respect to the distribution at the time the distribution
is received by the trustee, not at the time that the holder receives the cash
distribution from the trustee.
A receipt holder will determine its initial tax basis in each of the
underlying securities by allocating the purchase price for the Internet HOLDRs
among the underlying securities based on their relative fair market values at
the time of purchase. Similarly, when a holder sells a receipt, it will
determine the amount realized with respect to each security by allocating the
sales price among the underlying securities based on their relative fair market
values at the time of sale. A holder's gain or loss with respect to each
security will be computed by subtracting its basis in the security from the
amount realized on the security. With respect to purchases of Internet HOLDRs
for cash in the secondary market, a receipt holder's aggregate tax basis in
each of the underlying securities will be equal to the purchase price of the
Internet HOLDRs. Similarly, with respect to sales of Internet HOLDRs for cash
in the secondary market, the amount realized with respect to a sale of Internet
HOLDRs will be equal to the aggregate amount realized with respect to each of
the underlying securities.
The distribution of any securities by the trust upon the surrender of
Internet HOLDRs, the occurrence of a reconstitution event, or a termination
event will not be a taxable event. The receipt holders holding period with
respect to the distributed securities will include the period that the holder
held the securities through the trust.
19
<PAGE>
Brokerage fees and custodian fees
The brokerage fee incurred in purchasing a receipt will be treated as
part of the cost of the underlying securities. Accordingly, a holder includes
this fee in its tax basis in the underlying securities. A holder will allocate
the brokerage fee among the underlying securities using either a fair market
value allocation or pro rata based on the number of shares of each underlying
security. Similarly, the brokerage fee incurred in selling Internet HOLDRs will
reduce the amount realized with respect to the underlying securities.
A holder will be required to include in its income the full amount of
dividends paid on the underlying securities, even though the depositary trust
agreement provides that the custodian fees will be deducted directly from any
dividends paid. These custodian fees will be treated as an expense incurred in
connection with a holder's investment in the underlying securities and may be
deductible. If a holder is an individual, estate or trust, however, the
deduction of its share of custodian fees will be a miscellaneous itemized
deduction that may be disallowed in whole or in part.
Non-U.S. receipt holders
Non-U.S. receipt holders should consult their tax advisors regarding U.S.
withholding and other taxes which may apply to an investment in the underlying
securities.
ERISA CONSIDERATIONS
Any plan fiduciary which proposes to have a plan acquire Internet HOLDRs
should consult with its counsel with respect to the potential applicability of
ERISA and the Code to this investment and whether any exemption would be
applicable and determine on its own whether all conditions have been satisfied.
Moreover, each plan fiduciary should determine whether, under the general
fiduciary standards of investment prudence and diversification, an acquisition
of Internet HOLDRs is appropriate for the plan, taking into account the overall
investment policy of the plan and the composition of the plan's investment
portfolio.
PLAN OF DISTRIBUTION
In accordance with the depository trust agreement, the trust will issue
to Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Merrill Lynch,
Pierce, Fenner & Smith Incorporated will deposit the underlying securities to
receive Internet HOLDRs. Merrill Lynch & Co., as underwriter, proposes to offer
the Internet HOLDRs to the public at the offering price set forth on the cover
page of this prospectus. After the initial offering, the public offering price,
concession and discount may be changed. The trust will continue to issue
Internet HOLDRs, in connection with deposits of underlying securities.
Merrill Lynch has from time to time provided investment banking and other
financial services to certain of the issuers of the underlying securities and
expects in the future to provide these services, for which it has received and
will receive customary fees and commissions. It also may have served as
counterparty in other transactions with certain of the issuers of the
underlying securities.
Merrill Lynch, Pierce, Fenner & Smith Incorporated will indemnify the
trustee against civil liabilities related to the initial deposit, including
liabilities under the Securities Act, or will contribute to payments the trust
may be required to make in respect thereof.
YEAR 2000
The trustee's Year 2000 compliance program consists of updating major
trustee-owned application systems, business-area supported systems, and the
trustee's proprietary customer software and evaluating the Year 2000 compliance
efforts of vendors of major vendor-supplied systems. The trustee's compliance
efforts have also considered the Year 2000 readiness of its global sub-
custodians, major service providers, correspondents, business partners, and
borrowers. The current focus is to monitor continued preparedness and
20
<PAGE>
contingency planning. While contingency planning has been defined as part of
the Year 2000 compliance program, all new measures have been incorporated into
the trustee's existing Business Continuity Plans.
The trustee divided its major proprietary applications systems into three
business line groups. The applications in each group were subjected to a phased
process of assessment, renovation, certification testing, and implementation.
All critical systems have completed all phases. A program is in place to
continue to monitor critical systems to prevent Y2K problems from being
reintroduced. Major business-line products have been made available in isolated
future-dated environments for selected customers to test their interfaces and
to assure themselves of the trustee's compliance. The trustee is satisfied with
the results of testing with customers and agencies. Continued participation at
the request of the agencies and customers will continue as required.
Remediation of the trustee's proprietary customer software has been
completed. Installation on client desktop computers is substantially complete.
Customers have been advised of their obligation to assure that their
environments are compliant in order for the trustees's software to function
correctly during and after the century date change.
The trustee has substantially completed an evaluation of its significant
business partners, including other financials service providers,
correspondents, counterparties, sub-custodians, vendors and settlement
agencies, for the purpose of assessing their Year 2000 compliance. The trustee
is currently satisfied with the information it has received concerning the
progress and Year 2000 readiness programs of each significant third party. The
trustee will continue to monitor the readiness and progress of these parties
throughout 1999. The trustee intends to replace service providers that are seen
as not managing the Year 2000 issue adequately.
The trustee considers Year 2000 readiness in its credit decisions and
factors this into borrower ratings. Based on a review of significant obligors,
the trustee believes that exposure to obligor Year 2000 problems does not
present a material risk to the trustee.
The trustee's personal computers considered to be critical to the
trustee's operations have been upgraded. Upgrading of physical facilities that
is considered critical to the trustee's operations to Year 2000 readiness are
expected to be completed by the end of September 1999.
The trustee's contingency plans relating to Year 2000 issues include the
identification and assessment of the impact of various worst case scenarios on
the critical operational components for each of the trustee's business units.
The trustee has reviewed the applicability of its current contingency plans,
which include creation of an information center, establishment of special rapid
response technology teams, scheduling availability of key personnel, testing
and simulation activities, offsite data center facilities, and emergency backup
power. These plans, with minor modification have been determined to be adequate
to mitigate Year 2000 related risks. The information center, which has been
established as a repository and focus for analysis of information, will publish
the status of the organization internally and externally during critical
periods. It is also authorized to requisition and deploy resources as needed to
address unanticipated situations.
Overall the trustee's Year 2000 compliance program is on or ahead of
schedule to meet the needs of its customers and compliance deadlines defined by
its requlators. The estimated cost of the Year 2000 project is approximately
$82 million. In the first half of 1999 the trustee spent $11 million on making
computer systems Year 2000 compliant. Total expenses since 1997 have been $62
million.
A material Year 2000 problem could result in an interruption in, or a
failure of, certain normal business activities or operations. Such problems
could materially and adversely affect the trustee's results of operations,
liquidity and financial condition. Due to the general uncertainty inherent in
thee year 2000 problem, resulting in part from the uncertainty of the Year 2000
readiness of suppliers, customers and other business partners, as well as
entities with which the trustee does not have direct business relations, the
trustee is unable to determine at this time whether the consequences of the
Year 2000 failures will have a material impact on the trustee's results of
operations, liquidity or financial condition. The Year 2000 compliance program
is intended
21
<PAGE>
to significantly reduce the trustee's level of uncertainty about the Year 2000
problem and, in particular, about the Year 2000 compliance and readiness of its
material business partners. The trustee believes that, with completion of its
Year 2000-compliance program as scheduled, the possibility of significant
interruptions of normal operations should be reduced. However, because of the
unprecedented nature of this issue, there an be no certainty as to its impact.
LEGAL MATTERS
Legal matters, including the validity of the Internet HOLDRs will be
passed upon for Merrill Lynch, Pierce, Fenner & Smith Incorporated, the initial
depositor and the underwriter, by Shearman & Sterling, New York, New York, by
the time the registration statement is effective. Shearman & Sterling, as
special U.S. tax counsel to the trust, also will render an opinion regarding
the material federal income tax consequences relating to the Internet HOLDRs by
the time the registration statement is effective.
WHERE YOU CAN FIND MORE INFORMATION
Merrill Lynch, Pierce, Fenner & Smith Incorporated has filed a
registration statement on Form S1 with the SEC covering the Internet HOLDRs.
While this prospectus is a part of the registration statement, it does not
contain all the exhibits filed as part of the registration statement. You
should consider reviewing the full text of those exhibits.
The registration statement is available over the Internet at the SEC's
web site at http://www.sec.gov. You also may read and copy the registration
statement at the SEC's public reference rooms in Washington, D.C., New York,
New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for more
information on the public reference rooms and their copy charges. Merrill
Lynch, Pierce, Fenner & Smith Incorporated will not and the trust may not be
subject to the requirements of the Exchange Act and accordingly may not file
periodic reports.
Because the common stock of the issuers of the underlying securities is
registered under the Exchange Act, the issuers of the underlying securities are
required to file periodically financial and other information specified by the
SEC. For more information about the issuers of the underlying securities,
information provided to or filed with the SEC by the issuers of the underlying
securities with respect to their registered securities can be inspected at the
SEC's public reference facilities or accessed through the SEC's web site
referenced above. In addition, information regarding the issuers of the
underlying securities may be obtained from other sources including, but not
limited to, press releases, newspaper articles and other publicly disseminated
information.
The trust and Merrill Lynch, Pierce, Fenner & Smith Incorporated and its
affiliates are not affiliated with the issuers of the underlying securities,
and the issuers of the underlying securities have no obligations with respect
to Internet HOLDRs. This prospectus relates only to Internet HOLDRs and does
not relate to the common stock or other securities of the issuers of the
underlying securities. The information in this prospectus regarding the issuers
of the underlying securities has been derived from the publicly available
documents described in the preceding paragraph. We have not participated in the
preparation of these documents or made any due diligence inquiries with respect
to the issuers of the underlying securities in connection with Internet HOLDRs.
We make no representation that these publicly available documents or any other
publicly available information regarding the issuers of the underlying
securities are accurate or complete. Furthermore, we cannot assure you that all
events occurring prior to the date of this prospectus, including events that
would affect the accuracy or completeness of the publicly available documents
described in the preceding paragraph, that would affect the trading price of
the common stock of the issuers of the underlying securities, and therefore the
offering and trading prices of the Internet HOLDRs, have been publicly
disclosed.
22
<PAGE>
ANNEX A
This annex forms an integral part of the prospectus.
The following tables provide a brief description of the business of each
of the issuers of the underlying securities and set forth the split-adjusted
closing market prices, as reported on the applicable primary trading market, of
each of the underlying securities in each month during 1994, 1995, 1996, 1997,
1998 and 1999 through August 1999. All market prices in excess of one dollar
are rounded to the nearest one-sixtyfourth dollar. An asterisk (*) denotes that
no shares of the issuer were outstanding during that month. The historical
prices of the underlying securities should not be taken as an indication of
future performance.
AMAZON.COM
Amazon.com, Inc., an online retailer, sells books, music, videotapes,
audiotapes, and other products. Amazon.com offers a catalog of approximately
three million titles, search and browse features, e-mail services, personalized
shopping services, Web-based credit card payment, and direct shipping to
customers.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January 9 53/64 January 116 15/16
February * February * February * February * February 12 53/64 February 128 1/8
March * March * March * March * March 14 1/4 March 172 3/16
April * April * April * April * April 15 19/64 April 172 1/16
May * May * May * May 3 May 14 11/16 May 118 3/14
June * June * June * June 3 5/64 June 33 1/4 June 125 1/8
July * July * July * July 4 51/64 July 36 61/64 July 100 1/16
August * August * August * August 4 43/64 August 27 59/64 August 124 3/8
September * September * September * September 8 43/64 September 37 13/64
October * October * October * October 10 11/64 October 42 9/64
November * November * November * November 8 1/4 November 64
December * December * December * December 10 3/64 December 107 5/64
</TABLE>
AMERICA ONLINE
America Online, Inc. provides interactive communications and services
through its America Online and CompuServe worldwide Internet online services.
America Online's Web sites offer such features as a personalized news service,
electronic mail via the Web, an online community center, public and private
meeting rooms and interactive conversations, and guest interviews.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- ---- ------- --------- ------- --------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 0.99609 January 1 45/64 January 5 19/32 January 4 5/8 January 11 61/64 January 87 7/8
February 1 5/16 February 2 7/32 February 6 9/64 February 4 11/16 February 15 11/64 February 88 15/16
March 1 1/8 March 2 21/64 March 7 March 5 5/16 March 17 5/64 March 147
April 1 7/64 April 2 29/32 April 8 April 5 41/64 April 19 63/64 April 142 3/4
May 1 3/32 May 2 15/64 May 7 1/16 May 6 57/64 May 20 53/64 May 119 1/4
June 57/64 June 2 3/4 June 5 15/32 June 6 61/64 June 26 9/32 June 110
July 0.86914 July 3 29/64 July 3 13/16 July 8 7/16 July 29 9/32 July 95 1/8
August 1 11/64 August 4 1/8 August 3 25/32 August 8 1/16 August 20 31/64 August 91 5/16
September 1 1/16 September 4 19/64 September 4 7/16 September 9 7/16 September 27 29/32
October 1 7/64 October 5 October 3 25/64 October 9 5/8 October 31 27/32
November 1 5/16 November 5 7/64 November 4 13/32 November 9 3/8 November 43 25/32
December 1 3/4 December 4 11/16 December 4 5/32 December 11 11/16 December 77 9/16
</TABLE>
A-1
<PAGE>
AMERITRADE
Ameritrade Holding Corporation provides on-line discount securities
brokerage and clearing execution services to its retail customers. Ameritrade
provides on-line investment news and information as well as educational
services. Ameritrade also offers clearing and execution services for both its
own brokerage operations as well as for unaffiliated broker-dealers.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- ------- --------- ------- --------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January 2 1/64 January 13 3/8
February * February * February * February * February 2 19/64 February 16 1/4
March * March * March * March 1 19/64 March 2 5/16 March 20 31/64
April * April * April * April 1 3/64 April 2 23/64 April 44 33/64
May * May * May * May 1 11/64 May 2 13/32 May 29 57/64
June * June * June * June 1 5/16 June 2 1/4 June 35 21/64
July * July * July * July 1 9/32 July 3 13/64 July 24 15/16
August * August * August * August 1 9/16 August 2 3/8 August 20 3/8
September * September * September * September 2 1/16 September 3
October * October * October * October 2 11/64 October 2 35/64
November * November * November * November 2 51/64 November 4 1/8
December * December * December * December 2 7/16 December 5 1/4
</TABLE>
AT HOME
At Home Corporation provides broadband Internet services through the
cable television infrastructure. At Home's service allows residential
subscribers to connect their personal computers via cable modems to a high-
speed network.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- ------- --------- ------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January 11 9/16 January 62 1/2
February * February * February * February * February 17 1/16 February 53 1/16
March * March * March * March * March 16 29/32 March 78 3/4
April * April * April * April * April 16 21/32 April 71 31/32
May * May * May * May * May 17 3/8 May 63 3/8
June * June * June * June * June 23 21/32 June 53 15/16
July * July * July * July 9 3/4 July 21 1/16 July 45 11/16
August * August * August * August 9 9/16 August 14 1/4 August 40 1/8
September * September * September * September 11 9/16 September 23 15/16
October * October * October * October 12 1/16 October 22 1/8
November * November * November * November 10 5/16 November 29 1/8
December * December * December * December 12 9/16 December 37 1/8
</TABLE>
A-2
<PAGE>
CMGI
CMGI Inc. invests in, develops, and operates advanced Internet,
interactive, and database management technologies.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- ------- --------- ------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January .31664 January 0.86086 January 3 33/64 January 2 January 4 17/32 January 61
February .31664 February 0.94991 February 4 19/32 February 1 37/64 February 5 63/64 February 61 5/16
March .30674 March 0.7718 March 4 11/16 March 1 7/16 March 7 1/4 March 91 7/32
April 0.26716 April 0.84601 April 3 17/32 April 1 33/64 April 12 5/64 April 127 9/32
May 0.35622 May 0.72727 May 2 49/64 May 2 3/64 May 11 3/32 May 103 5/8
June 0.35622 June 1 9/16 June 3 13/64 June 1 41/64 June 17 11/16 June 114 1/16
July 0.35127 July 1 19/32 July 1 29/32 July 2 3/64 July 17 1/32 July 92 3/16
August 0.3859 August 1 43/64 August 1 31/32 August 2 51/64 August 9 17/32 August 83 15/16
September 0.43538 September 1 11/16 September 1 23/32 September 3 5/64 September 13 5/16
October 0.63327 October 2 1/16 October 1 3/16 October 2 49/64 October 14 7/32
November 0.6877 November 4 29/64 November 1 57/64 November 2 5/8 November 19 3/8
December 0.92023 December 5 33/64 December 1 63/64 December 3 25/32 December 26 5/8
</TABLE>
CNET
CNET, Inc. provides original Internet content and television programming
related to computers, the Internet, and digital technologies. CNET produces a
network of information and services offered under the "CNET" brand name.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- ------- --------- ------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January 7 1/4 January 6 31/32 January 26 1/4
February * February * February * February 6 7/32 February 9 1/16 February 28 21/32
March * March * March * March 6 1/8 March 6 23/32 March 46 1/16
April * April * April * April 5 1/16 April 8 5/16 April 64 1/4
May * May * May * May 5 25/32 May 9 1/16 May 54 1/8
June * June * June * June 7 5/16 June 17 1/16 June 57 5/8
July * July * July 3 1/4 July 6 21/32 July 12 7/8 July 40
August * August * August 3 5/16 August 8 7/32 August 9 3/4 August 37 9/16
September * September * September 4 11/16 September 9 57/64 September 11 7/16
October * October * October 4 October 6 1/32 October 9 33/64
November * November * November 4 9/32 November 5 3/16 November 13 17/64
December * December * December 7 1/4 December 7 3/8 December 13 5/16
</TABLE>
A-3
<PAGE>
DOUBLECLICK
DoubleClick Inc. provides Internet advertising solutions for advertisers
and publishers of Web sites. Doubleclick's DoubleClick Network provides ad
sales, targeted ad delivery, and related services to publishers of Web site and
advertisers. DoubleClick's DART Service provides Web site publishers and
advertisers with the ability to control the delivery, measurement, and analysis
of their marketing campaigns.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- ------- --------- ------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January * January 48 1/4
February * February * February * February * February 15 31/32 February 44 15/16
March * March * March * March * March 17 9/16 March 91 1/32
April * April * April * April * April 20 27/32 April 139 13/16
May * May * May * May * May 17 5/16 May 97 7/16
June * June * June * June * June 24 27/32 June 91 3/4
July * July * July * July * July 22 July 81
August * August * August * August * August 11 15/16 August 99 7/8
September * September * September * September * September 11 15/16
October * October * October * October * October 16 1/2
November * November * November * November * November 20 1/4
December * December * December * December * December 22 1/4
</TABLE>
EARTHLINK NETWORK
EarthLink Network, Inc. provides Internet access and hosting services.
Earthlink provides access, information, assistance, and services to its
members. Earthlink operates through a nationwide telecommunications network of
high-speed, dedicated data lines and dial-up access sites.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- ------- --------- ------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January 8 3/4 January 15 9/16 January 79 7/8
February * February * February * February 8 February 24 1/2 February 60 3/16
March * March * March * March 6 1/4 March 28 7/32 March 60
April * April * April * April 4 1/4 April 35 15/32 April 68 15/16
May * May * May * May 6 1/8 May 27 1/4 May 53 1/2
June * June * June * June 6 1/2 June 38 3/8 June 61 7/16
July * July * July * July 5 3/8 July 35 1/4 July 48 5/16
August * August * August * August 7 1/4 August 26 1/2 August 49
September * September * September * September 9 3/8 September 41 1/4
October * October * October * October 9 October 38 1/2
November * November * November * November 9 9/16 November 60 13/16
December * December * December * December 12 7/8 December 57
</TABLE>
A-4
<PAGE>
eBAY
eBay Inc. is a person-to-person trading community on the Internet. eBay's
service is used by buyers and sellers for the exchange of personal items such
as coins, collectibles, computers, memorabilia, stamps, and toys. eBay is a
fully automated, topically arranged 24-hour service on which sellers can list
items for sale and buyers can bid on the prices.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- ------- --------- ------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January * January 92 35/64
February * February * February * February * February * February 111 21/64
March * March * March * March * March * March 137 5/16
April * April * April * April * April * April 208 1/8
May * May * May * May * May * May 177 3/16
June * June * June * June * June * June 151 3/8
July * July * July * July * July * July 97 11/16
August * August * August * August * August * August 125 9/16
September * September * September * September * September 15 1/64
October * October * October * October * October 27 45/64
November * November * November * November * November 65 7/8
December * December * December * December * December 80 27/64
</TABLE>
E*TRADE
E*TRADE Group, Inc. provides online investing services for self-directed
investors through its website. E*TRADE provides automated order placement and
execution, personalized portfolio tracking, and real-time market analysis 24
hours per day, seven days a week. E*TRADE can also be accessed through touch-
tone telephone, interactive television, and direct modem access.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- ------- --------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January 4 13/32 January 5 29/64 January 27 19/32
February * February * February * February 6 February 6 11/16 February 23
March * March * March * March 4 1/2 March 6 15/64 March 29 5/32
April * April * April * April 3 3/4 April 6 15/64 April 57 3/4
May * May * May * May 4 13/32 May 5 31/32 May 45 1/2
June * June * June * June 4 29/32 June 5 47/64 June 39 15/16
July * July * July * July 7 5/8 July 6 13/16 July 30 1/8
August * August * August 2 5/8 August 8 1/32 August 4 5/32 August 25
September * September * September 3 19/64 September 11 3/4 September 4 43/64
October * October * October 2 25/32 October 7 23/32 October 4 1/2
November * November * November 2 47/64 November 6 17/64 November 6 49/64
December * December * December 2 7/8 December 5 3/4 December 11 45/64
</TABLE>
A-5
<PAGE>
EXODUS COMMUNICATIONS
Exodus Communications, Inc. provides solutions for Internet system
problems and computer network problems for enterprises with critical Internet
operations. Exodus manages its operations through Internet data centers located
throughout the United States and a server hosting facility in England. Exodus
also provides, through a subsidiary, network and system security consulting
services.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- ------- --------- ------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January * January 26 1/8
February * February * February * February * February * February 18 11/32
March * March * March * March * March 7 March 33 5/8
April * April * April * April * April 9 1/2 April 45 1/16
May * May * May * May * May 8 35/64 May 37 1/2
June * June * June * June * June 11 3/16 June 59 31/32
July * July * July * July * July 8 11/32 July 60 1/32
August * August * August * August * August 7 3/16 August 80 3/8
September * September * September * September * September 6 3/32
October * October * October * October * October 7 15/16
November * November * November * November * November 8 7/16
December * December * December * December * December 16 1/16
</TABLE>
GO2NET
Go2Net, Inc. is a network of branded, technology, and community driven
Web sites focused on personal finance, information search, commerce and games.
Go2Net Web sites include Silicon Investor, a financial discussion site;
MetaCrawler, a search/index guide; and HyperMart, a Web hosting service. Other
sites include 100hot, StockSite, PlaySite, and WebMarket.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- ------- ---- ------- --------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January 2 7/16 January 27 3/4
February * February * February * February * February 4 5/64 February 29 1/4
March * March * March * March * March 4 1/4 March 66 5/16
April * April * April * April 2 43/64 April 6 3/4 April 76 3/4
May * May * May * May 2 1/32 May 6 3/16 May 51 31/32
June * June * June * June 1 17/32 June 7 3/8 June 91 7/8
July * July * July * July 1 11/16 July 6 3/4 July 58 3/4
August * August * August * August 1 11/16 August 5 17/32 August 65
September * September * September * September 2 7/32 September 3 3/4
October * October * October * October 2 October 5 1/2
November * November * November * November 1 25/32 November 8 1/2
December * December * December * December 1 23/32 December 8 27/32
</TABLE>
A-6
<PAGE>
INKTOMI
Inktomi Corporation develops and markets software applications designed
to enhance the performance and intelligence of large-scale networks. Inktomi's
systems use parallel-processing technology across clusters of workstations to
deliver greater speed and performance while utilizing smaller workstations.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- ------- --------- ------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January * January 71 15/16
February * February * February * February * February * February 62
March * March * March * March * March * March 85 1/2
April * April * April * April * April * April 120 1/8
May * May * May * May * May * May 102 3/4
June * June * June * June * June 19 13/16 June 131 1/2
July * July * July * July * July 28 7/16 July 108 3/16
August * August * August * August * August 24 1/4 August 113 3/8
September * September * September * September * September 37 1/2
October * October * October * October * October 42 5/32
November * November * November * November * November 66 25/32
December * December * December * December * December 64 31/32
</TABLE>
LYCOS
Lycos, Inc. develops and provides guides to various information available
on the Internet. Lycos also provides Internet users the ability to create
personal home-pages and join interest-based communities on the Internet.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- ------- --------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January 4 7/32 January 9 35/64 January 68 1/2
February * February * February * February 4 11/16 February 10 5/16 February 43 13/16
March * March * March * March 3 33/64 March 11 1/16 March 43 1/32
April * April * April 4 3/8 April 3 7/32 April 15 29/64 April 49 27/32
May * May * May 3 27/32 May 3 5/8 May 13 17/64 May 50 1/4
June * June * June 2 25/32 June 3 3/16 June 18 27/32 June 45 15/16
July * July * July 1 31/64 July 4 23/32 July 14 9/32 July 41 5/16
August * August * August 1 11/16 August 7 53/64 August 10 27/32 August 40 5/8
September * September * September 2 31/32 September 8 1/2 September 16 29/32
October * October * October 2 17/32 October 6 17/32 October 20 5/16
November * November * November 2 29/32 November 7 41/64 November 29 1/2
December * December * December 2 5/8 December 10 11/32 December 27 15/32
</TABLE>
A-7
<PAGE>
MINDSPRING
MindSpring Enterprises, Inc. provides Internet access primarily to
individual and small business subscribers in United States. MindSpring's
business services include web hosting, high-speed dedicated Internet access,
web page design, and domain name registration.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- ------- --------- ------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January 1 39/64 January 5 37/64 January 51
February * February * February * February 1 1/2 February 8 1/16 February 42 3/4
March * March * March 1 5/16 March 1 3/16 March 10 45/64 March 43 1/32
April * April * April 1 19/32 April 1 7/16 April 11 1/4 April 48 15/32
May * May * May 2 1/16 May 1 5/8 May 8 27/32 May 37
June * June * June 1 49/64 June 1 3/4 June 17 9/64 June 44 5/16
July * July * July 1 5/8 July 2 21/64 July 20 3/8 July 33 9/16
August * August * August 1 39/64 August 2 37/64 August 13 7/16 August 29 3/16
September * September * September 1 53/64 September 3 39/64 September 20 3/4
October * October * October 1 19/64 October 4 9/16 October 19 27/32
November * November * November 1 3/64 November 4 55/64 November 32 9/32
December * December * December 1 1/64 December 5 39/64 December 30 17/32
</TABLE>
NETWORK ASSOCIATES
Network Associates, Inc. develops and provides software products that
address network security and network management. Network Associates also offers
a range of consumer-oriented security and management software products to
retail customers, including anti-virus, Internet security/privacy, and desktop
utilities software.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- -------- --------- -------- --------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 1 53/64 January 2 63/64 January 14 13/16 January 38 53/64 January 36 January 52 3/8
February 1 25/32 February 4 17/64 February 15 55/64 February 30 37/64 February 43 5/64 February 47
March 1 47/64 March 5 47/64 March 16 7/32 March 29 1/2 March 44 11/64 March 30 11/16
April 1 31/32 April 6 33/64 April 18 9/64 April 37 11/64 April 45 43/64 April 13 1/4
May 1 37/64 May 5 17/32 May 16 7/16 May 43 7/8 May 40 53/64 May 14 11/16
June 1 3/8 June 5 63/64 June 21 25/62 June 42 5/64 June 47 7/8 June 14 11/16
July 1 31/64 July 7 1/2 July 22 21/64 July 43 29/64 July 47 11/16 July 17 1/2
August 1 25/32 August 8 43/64 August 26 1/2 August 37 3/4 August 32 1/4 August 16 7/8
September 1 53/64 September 10 11/64 September 30 43/64 September 35 21/64 September 35 1/2
October 2 31/32 October 11 1/2 October 30 21/64 October 33 11/64 October 42 1/4
November 2 27/32 November 14 9/64 November 31 53/64 November 30 1/2 November 50 7/8
December 4 December 13 December 29 21/64 December 35 1/4 December 66 1/4
</TABLE>
A-8
<PAGE>
PRICELINE.COM
Priceline.com Incorporated enables consumers to use the Internet to name
their own price on products or services and communicates that demand directly
to participating sellers or to their private databases. Participants include
domestic and international airlines, and hotel chains.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- ------- --------- ------- --------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January * January *
February * February * February * February * February * February *
March * March * March * March * March * March 82 7/8
April * April * April * April * April * April 162 3/8
May * May * May * May * May * May 112 1/32
June * June * June * June * June * June 115 9/16
July * July * July * July * July * July 75 9/16
August * August * August * August * August * August 68 1/8
September * September * September * September * September *
October * October * October * October * October *
November * November * November * November * November *
December * December * December * December * December *
</TABLE>
PSINET
PSINet Inc. provides Internet access services and related products.
PSINet offers dedicated and dial-up Internet connection to businesses in
various metropolitan areas in the United States, as well as in Canada, Europe,
and Asia. PSINet also provides value-added services, including corporate
intranets, web hosting services, and remote user access services.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- -------- --------- ------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January 13 1/4 January 9 7/8 January 7 7/16 January 33 15/16
February * February * February 10 1/8 February 8 1/8 February 7 23/32 February 35 13/16
March * March * March 9 11/16 March 7 3/8 March 11 1/8 March 42 9/16
April * April * April 14 1/8 April 5 3/4 April 13 7/8 April 50 1/2
May * May 13 7/8 May 14 1/2 May 7 9/16 May 10 3/4 May 44 1/2
June * June 15 3/16 June 11 1/2 June 7 1/2 June 13 June 43 3/4
July * July 20 1/2 July 9 3/4 July 8 13/16 July 17 1/2 July 51 23/32
August * August 18 1/2 August 11 August 8 3/16 August 10 1/2 August 47 7/8
September * September 21 1/2 September 10 7/8 September 8 1/16 September 13 15/16
October * October 17 3/4 October 9 1/2 October 8 3/8 October 14 7/16
November * November 21 1/8 November 12 11/16 November 6 3/4 November 18 3/4
December * December 22 7/8 December 10 7/8 December 5 1/8 December 20 7/8
</TABLE>
A-9
<PAGE>
REALNETWORKS
RealNetworks, Inc. develops and markets software products and services.
RealNetworks' software and services enable the creation and real-time delivery
and playback of audio, video, text, animation, and other media content over the
Internet and intranets on both a live and on-demand basis. Products and
services include RealSystem G2, Real Broadcast Network, and RealJukebox.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- ------- --------- ------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January 7 1/2 January 35 13/32
February * February * February * February * February 7 1/2 February 35 1/16
March * March * March * March * March 14 1/2 March 61 3/32
April * April * April * April * April 16 31/32 April 110 3/4
May * May * May * May * May 11 9/16 May 70 7/8
June * June * June * June * June 18 21/32 June 68 7/8
July * July * July * July * July 14 27/32 July 76 5/16
August * August * August * August * August 9 7/8 August 81 3/4
September * September * September * September * September 17 11/32
October * October * October * October * October 16 27/32
November * November * November * November 7 11/16 November 19
December * December * December * December 6 15/16 December 17 15/16
</TABLE>
YAHOO!
Yahoo! Inc., a global Internet media company, offers an online guide to
Web navigation, aggregated information content, communication services, and
commerce. Yahoo!'s site includes a hierarchical, subject-based directory of Web
sites, which enables users to locate and access desired information and
services through hypertext links included in the directory.
<TABLE>
<CAPTION>
Closing Closing Closing Closing Closing Closing
1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price
- ---- ------- --------- ------- --------- ------- --------- -------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January 5 41/64 January 15 27/32 January 177 1/8
February * February * February * February 5 3/64 February 18 19/64 February 153 1/2
March * March * March * March 4 11/16 March 23 7/64 March 168 3/8
April * April * April 4 61/64 April 5 11/16 April 29 47/64 April 174 11/16
May * May * May 4 43/64 May 5 3/8 May 27 3/8 May 148
June * June * June 3 1/2 June 5 7/8 June 39 3/8 June 172 1/4
July * July * July 3 July 9 27/64 July 45 31/64 July 136 7/16
August * August * August 3 17/64 August 9 59/64 August 34 1/2 August 147 1/2
September * September * September 3 35/64 September 12 17/32 September 64 3/4
October * October * October 3 19/64 October 10 31/32 October 65 27/64
November * November * November 3 3/16 November 12 25/32 November 96
December * December * December 2 53/64 December 17 5/16 December 118 15/32
</TABLE>
A-10
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,000,000,000 Depositary Receipts
Internet HOLDRs SM Trust
-----------------------
P R O S P E C T U S
-----------------------
Merrill Lynch & Co.
September , 1999
Until [ ], 1999 (25 days after the date of this prospectus), all
dealers effecting transactions in the offered Internet HOLDRs, whether or not
participating in this distribution, may be required to deliver a prospectus.
This requirement is in addition to the obligations of dealers to deliver a
prospectus when acting as underwriters and with respect to unsold allotments or
subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Information regarding other expenses of issuance and distribution is not
included because these expenses will be paid by the initial depositor and not
by the trust or the investors in the securities being issued.
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware, as
amended, provides that under certain circumstances a corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or
is or was serving at its request in such capacity in another corporation or
business association, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful.
Article XIV, Section 2 of the Restated Certificate of Incorporation of
Merrill Lynch, Pierce, Fenner & Smith Incorporated provides in effect that,
subject to certain limited exceptions, Merrill Lynch, Pierce, Fenner & Smith
Incorporated shall indemnify its directors and officers to the full extent
authorized or permitted by law.
The directors and officers of Merrill Lynch, Pierce, Fenner & Smith
Incorporated are insured under policies of insurance maintained by Merrill
Lynch, Pierce, Fenner & Smith Incorporated, subject to the limits of the
policies, against certain losses arising from any claim made against them by
reason of being or having been such directors or officers. In addition, Merrill
Lynch, Pierce, Fenner & Smith Incorporated has entered into contracts with all
of its directors providing for indemnification of such persons by Merrill
Lynch, Pierce, Fenner & Smith Incorporated to the full extent authorized or
permitted by law, subject to certain limited exceptions.
Item 16. Exhibits.
See Exhibit Index.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
II-1
<PAGE>
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of the prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective.
(5) For purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to Item 15 of this
registration statement, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person
of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant hereby certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-1 and has duly caused this
Amendment No. 5 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, on September
1, 1999.
Merrill Lynch, Pierce, Fenner &
Smith
Incorporated
By: *
----------------------------------
Name: Michael Castellano
Title:Chief Financial Officer and
Controller
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 4 to the Registration Statement has been signed by the following
persons in the capacities indicated below on September 1, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* Chief Financial Officer
___________________________________________ and Controller
Michael Castellano
* Director
___________________________________________
George A. Schieren
* Director
___________________________________________
</TABLE> John L. Steffens
*By: /s/ Stephen G. Bodurtha Attorney-in-Fact
---------------------------------
Stephen G. Bodurtha
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequential
page
Exhibits numbers
-------- ----------
<C> <S> <C>
4.1 Form of Depositary Trust Agreement.......................
*4.2 Form of Internet HOLDRs..................................
5.1 Opinion of Shearman & Sterling regarding the validity of
the Internet HOLDRs......................................
8.1 Opinion of Shearman & Sterling, as special U. S. tax
counsel regarding the material federal income tax
consequences.............................................
*24.1 Power of Attorney (included on page II-3 of original
filing)..................................................
</TABLE>
- --------
* Previously filed.
II-4
<PAGE>
S&C Draft of 8/31/99
Exhibit 4.1
STANDARD TERMS FOR DEPOSITARY TRUST AGREEMENTS
between
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
and
THE BANK OF NEW YORK,
as Trustee
Dated as of ______________, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 DEFINITIONS AND ASSUMPTIONS
Section 1.1. Definitions................................................................................1
Section 1.2. Rules of Construction......................................................................5
ARTICLE 2 FORM OF RECEIPTS, DEPOSIT OF SECURITIES, DELIVERY,
REGISTRATION OF TRANSFER AND SURRENDER OF RECEIPTS
Section 2.1. Depositary Trust Agreements................................................................6
Section 2.2. Creation and Declaration of Trusts; Deposit of Securities..................................6
Section 2.3. Acceptance by Trustee......................................................................8
Section 2.4. Form and Transferability of Receipts.......................................................8
Section 2.5. Delivery of Receipts.....................................................................10
Section 2.6. Registration; Registration of Transfer; Combination and Split-up of Certificates..........11
Section 2.7. Surrender of Receipts and Withdrawal of Underlying Securities.............................12
Section 2.8. Limitations on Delivery, Registration of Transfer and Surrender of Receipts...............13
Section 2.9. Lost Certificates, Etc....................................................................14
Section 2.10. Cancellation and Destruction of Surrendered Certificates.................................14
Section 2.11. Reconstitution Events....................................................................14
ARTICLE 3 CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS
Section 3.1. Filing Proofs, Certificates and Other Information.........................................16
Section 3.2. Liability of Owner for Taxes..............................................................16
Section 3.3. Warranties on Deposit of Shares...........................................................17
ARTICLE 4 THE UNDERLYING SECURITIES
Section 4.1. Cash Distributions........................................................................17
Section 4.2. Distributions Other Than Cash or Securities...............................................17
Section 4.3. Distributions in Securities...............................................................18
Section 4.4. Rights Offerings..........................................................................19
Section 4.5. Fixing of Record Date.....................................................................19
Section 4.6. Reports...................................................................................20
Section 4.7. Voting Instructions for Underlying Securities.............................................20
Section 4.8. Changes Affecting Underlying Securities...................................................21
Section 4.9. Withholding...............................................................................22
Section 4.10. Limitation on Distributions..............................................................22
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 5 THE TRUSTEE AND THE INITIAL DEPOSITOR
<S> <C>
Section 5.1. Maintenance of Office and Transfer Books by the Trustee...................................22
Section 5.2. Prevention or Delay in Performance by the Initial Depositor or the Trustee................23
Section 5.3. Obligations of the Initial Depositor and the Trustee......................................24
Section 5.4. Resignation or Removal of the Trustee; Appointment of Successor Trustee...................26
Section 5.5. Indemnification...........................................................................27
Section 5.6. Charges of Trustee........................................................................29
Section 5.7. Retention of Trust Documents..............................................................30
Section 5.8. Federal Securities Law Filings............................................................30
Section 5.9. Prospectus Delivery.......................................................................30
ARTICLE 6 AMENDMENT AND TERMINATION
Section 6.1. Amendment.................................................................................31
Section 6.2. Early Termination.........................................................................31
ARTICLE 7 MISCELLANEOUS
Section 7.1. Counterparts.............................................................................33
Section 7.2. Third-Party Beneficiaries................................................................33
Section 7.3. Severability.............................................................................34
Section 7.4. Owners and Beneficial Owners as Parties; Binding Effect..................................34
Section 7.5. Notices..................................................................................34
Section 7.6. Governing Law............................................................................35
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXHIBIT A
FORM OF DEPOSITARY TRUST AGREEMENT.....................................................................A-1
EXHIBIT B
FORM OF CERTIFICATE EVIDENCING RECEIPTS................................................................B-1
</TABLE>
-iii-
<PAGE>
STANDARD TERMS FOR DEPOSITARY TRUST AGREEMENTS agreed to as of
_______________, 1999 (these "Standard Terms"), between MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED, a Delaware corporation (the "Initial Depositor")
and THE BANK OF NEW YORK, a New York banking corporation, as trustee (the
"Trustee").
W I T N E S S E T H :
WHEREAS, from time to time, the Initial Depositor and the Trustee may
enter into one or more depositary trust agreements providing for the deposit
with the Trustee of specified Securities (as hereinafter defined), the creation
of Depositary Trust Receipts representing the Securities so deposited and the
execution and delivery of certificates evidencing the Depositary Trust Receipts;
and
WHEREAS, the Initial Depositor and the Trustee wish to establish the
general terms and conditions of such depositary trust agreements and the form of
the certificates evidencing Depositary Trust Receipts;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in these Standard Terms, the parties hereby agree as
follows:
ARTICLE 1
DEFINITIONS AND ASSUMPTIONS
Section 1.1. Definitions. Except as otherwise specified in these
-----------
Standard Terms or in the applicable Depositary Trust Agreement or as the context
may otherwise require, the following terms have the respective meanings set
forth below for all purposes of these Standard Terms and the applicable
Depositary Trust Agreement.
<PAGE>
"Beneficial Owner" means any Person owning a beneficial interest in
any Receipt.
"Closing Date" means the day on which the initial deposit of
Securities is to be made, which date may be specified in the applicable
Depositary Trust Agreement.
"Commission" means the Securities and Exchange Commission of the
United States or any successor governmental agency in the United States.
"Corporate Trust Office" means the office of the Trustee at which its
depositary receipt business is administered which, at the date of these Standard
Terms, is 101 Barclay Street, New York, New York 10286.
"Deliver" means (a) when used with respect to Securities, either (i)
one or more book-entry transfers of such Securities to an account at DTC
designated by the Person entitled to such delivery for further credit as
specified by such Person or (ii) in the case of Securities for which DTC book-
entry settlement is not available, the delivery of certificates evidencing such
Securities to the Person entitled to such delivery, duly endorsed for transfer
or accompanied by proper instruments of transfer and (b) when used with respect
to Receipts, either (i) one or more book-entry transfers of Receipts to an
account at DTC designated by the Person entitled to such delivery for further
credit as specified by such Person or (ii) in the event DTC ceases to make its
book-entry settlement system available for the Receipts, execution and delivery
at the Corporate Trust Office of the Trustee of one or more certificates
evidencing such Receipts.
-2-
<PAGE>
"Depositary Trust Agreement" means a depositary trust agreement
entered into by the Initial Depositor and the Trustee pursuant to these Standard
Terms which incorporates by reference these Standard Terms.
"Depositor" means any Person who deposits Securities into the Trust,
either for its own account or on behalf of another Person who is the owner
or beneficial owner of such Securities.
"Depositor Order" means a written order or request signed in the name
of the Initial Depositor or any other Depositor, as applicable.
"DTC" means The Depository Trust Company, its nominees and their
respective successors.
"Initial Depositor" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, a Delaware corporation, or its successor.
"Issuance Denomination" is defined in Section 2.4, subject to increase
as provided in Sections 4.3 and 4.8.
"Owner" means the Person in whose name a Receipt is registered in the
books of the Trustee maintained for that purpose.
"Person" means any individual, limited liability company, corporation,
partnership, joint venture, association, joint stock company, trust (including
any trust beneficiary), unincorporated organization or government or any agency
or political subdivision thereof.
-3-
<PAGE>
"Receipt" means a depositary trust receipt which is issued under the
Depositary Trust Agreement and which represents the Owner's right to receive
the Underlying Securities which must be deposited into the Trust for issuance of
a Receipt plus any other Underlying Securities received by the Trustee with
respect to such Underlying Securities and held by the Trustee under the
Depositary Trust Agreement at such time. The Trustee shall only accept for
deposit whole Securities and shall not issue Receipts except to the extent
such Receipts represent, in the aggregate, whole Underlying Securities.
"Registrar" means any bank or trust company having an office in the
Borough of Manhattan, The City of New York, which shall be appointed to register
Receipts and transfers of Receipts as herein provided.
"Restricted Securities" means Securities, or Receipts representing
such Securities, which are acquired directly or indirectly from the issuer or
its affiliates (as defined in Rule 144 under the Securities Act of 1933) in a
transaction or chain of transactions not involving any public offering, or which
are held by an officer or director (or person performing similar functions) or
other affiliate of the issuer, or which would require registration under the
Securities Act of 1933 in connection with the public offer and sale thereof in
the United States, or which are subject to other restrictions on sale or deposit
under the federal securities laws of the United States, a shareholder agreement
or the corporate documents of the issuer.
"Round Lot" means 100.
-4-
<PAGE>
"Securities" means any shares of a class of securities which must be
deposited for issuance of Receipts.
"Securities Issuer" means, as of any time, the issuer of a class of
Securities.
"Securities Registrar" means the entity that presently carries out the
duties of registrar for any Securities or any successor as registrar for any
Securities and any other appointed agent of a Securities Issuer for the transfer
and registration of Securities.
"Surrender" means, when used with respect to Receipts, (a) one or more
book-entry transfers of Receipts to the DTC account of the Trustee or (b)
surrender to the Trustee at its Corporate Trust Office of one or more
certificates evidencing such Receipts, in each case in a Round Lot or an
integral multiple thereof.
"Trust" means the trust entity created by the Depositary Trust
Agreement.
"Trustee" means The Bank of New York, a New York banking corporation,
in its capacity as Trustee under the Depositary Trust Agreement, or any
successor as Trustee thereunder.
"Underlying Securities" means, as of any time, Securities of each of
the classes and in the quantities required by the Depositary Trust Agreement to
be deposited in the Trust for the issuance of Receipts and which are at such
time deposited under the applicable Depositary Trust Agreement and any other
securities, property or cash received by the Trustee in respect thereof and at
such time held hereunder.
-5-
<PAGE>
Section 1.2. Rules of Construction. Unless the context otherwise
---------------------
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in effect
in the United States from time to time;
(iii) "or" is not exclusive;
(iv) the words "herein", "hereof", "hereunder" and other words of
similar import refer to these Standard Terms or the Depositary Trust Agreement
as a whole and not to any particular Article, Section or other subdivision;
(v) "including" means including without limitation; and
(vi) words in the singular include the plural and words in the plural
include the singular.
ARTICLE 2
FORM OF RECEIPTS, DEPOSIT OF SECURITIES, DELIVERY,
REGISTRATION OF TRANSFER AND SURRENDER OF RECEIPTS
Section 2.1. Depositary Trust Agreements. Each Depositary Trust
---------------------------
Agreement entered into between the Initial Depositor and the Trustee for the
purposes set
-6-
<PAGE>
forth herein shall be in substantially the form of Exhibit A to these Standard
Terms and shall provide that these Standard Terms shall be incorporated by
reference into, and form a part of, such Depositary Trust Agreement.
Section 2.2. Creation and Declaration of Trusts; Deposit of
----------------------------------------------
Securities. (a) The Initial Depositor, concurrently with the execution and
- ----------
delivery of the Depositary Trust Agreement, does hereby agree to deposit with
the Trustee under the Depositary Trust Agreement all the right, title and
interest of the Initial Depositor in, to and under Securities, of each of
the classes and in the quantities necessary to create Receipts in accordance
with Section 2 of the Depositary Trust Agreement in effect at the time of
deposit. Unless otherwise specified in the Depositary Trust Agreement, such
deposit shall include all cash dividends and distributions in respect of such
Securities. The Initial Depositor shall make such deposit on or prior to the
Closing Date.
(b) From time to time after the date of the Depositary Trust
Agreement, a Depositor may deposit with the Trustee, in the manner specified in
subsection (a), Securities, of each of the classes and in the quantities
necessary to create Receipts in accordance with Section 2 of the Depositary
Trust Agreement in effect at the time of deposit by Delivery of such Securities
to the Trustee.
(c) The Trustee shall only accept for deposit whole Securities and
shall not issue Receipts except to the extent such Receipts represent, in the
aggregate, whole Underlying Securities.
(d) The Trust shall not engage in any business or activities
other than those required or authorized by these Standard Terms or incidental
and necessary to carry out the duties and responsibilities set forth in the
Depositary Trust
-7-
<PAGE>
Agreement. Other than issuance of the Receipts, the Trust shall not issue or
sell any certificates or other obligations or otherwise incur, assume or
guarantee any indebtedness for money borrowed.
(e) Anything herein to the contrary notwithstanding, the Trustee
does not assume any of the duties, responsibilities, obligations or liabilities
of the Initial Depositor or any other Depositor in respect of the Underlying
Securities.
(f) Underlying Securities shall be held by the Trustee at such
place and in such manner as the Trustee shall determine.
Section 2.3. Acceptance by Trustee. The Trustee will hold the
---------------------
Underlying Securities for the benefit of the Owners for the purposes, and
subject to and limited by the terms and conditions, set forth in these Standard
Terms and the applicable Depositary Trust Agreement.
Section 2.4. Form and Transferability of Receipts. (a) The
------------------------------------
certificates evidencing Receipts shall be substantially in the form set forth in
Exhibit B annexed to these Standard Terms, with appropriate insertions,
modifications and omissions, as hereinafter provided or as may be provided in
the Depositary Trust Agreement. The Issuance Denominations of a certificate
shall be any integral multiple of a Round Lot of Receipts, subject to increase
or decrease as provided in Sections 4.3 and 4.8. No Receipt shall be entitled
to any benefits under the Depositary Trust Agreement or be valid or obligatory
for any purpose unless a certificate evidencing such Receipt shall have been
executed by the Trustee by the manual or facsimile signature
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<PAGE>
of a duly authorized signatory of the Trustee and, if a Registrar (other than
the Trustee) for the Receipts shall have been appointed, countersigned by the
manual or facsimile signature of a duly authorized officer of the Registrar. The
Trustee shall maintain books on which the registered ownership of each Receipt
and transfers, if any, of such registered ownership shall be recorded.
Certificates evidencing Receipts bearing the manual or facsimile signature of a
duly authorized signatory of the Trustee and Registrar, if applicable, who was
at the time such certificates were executed a proper signatory of the Trustee or
Registrar, if applicable, shall bind the Trustee, notwithstanding that such
signatory has ceased to hold such office prior to the delivery of such
certificates.
(b) The certificates evidencing Receipts may be endorsed with or have
incorporated in the text thereof such legends or recitals or modifications not
inconsistent with the provisions of the Depositary Trust Agreement as may be
required by the Trustee or required to comply with any applicable law or
regulations thereunder or with the rules and regulations of any securities
exchange upon which Receipts may be listed or to conform with any usage with
respect thereto, or to indicate any special limitations or restrictions to which
any particular Receipts are subject by reason of the date of issuance of the
Underlying Securities or otherwise.
(c) The Initial Depositor and the Trustee will apply to DTC for
acceptance of the Receipts in its book-entry settlement system. Receipts
deposited with DTC shall be represented by one or more global certificates which
shall be registered in the name of Cede & Co., as nominee for DTC, and shall
bear the following legend:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE AGENT AUTHORIZED BY THE ISSUER FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF
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<PAGE>
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
(d) So long as the Receipts are eligible for book-entry settlement
with DTC and such settlement is available, unless otherwise required by law,
notwithstanding anything to the contrary in the Depositary Trust Agreement, all
Receipts shall be evidenced by one or more global certificates registered in the
name of a nominee of DTC and no person acquiring beneficial ownership of such
Receipts shall receive or be entitled to receive physical delivery of Receipts.
Ownership of beneficial interests in Receipts evidenced by such global
certificate or certificates shall be shown on, and the transfer of such
ownership shall be effected only through, records maintained by (i) DTC or (ii)
institutions that have accounts with DTC.
(e) If, at any time when Receipts are evidenced by a global
certificate, DTC ceases to make its book-entry settlement system available for
such Receipts, the Trustee shall issue separate certificates evidencing Receipts
to the DTC book-entry settlement system participants entitled thereto, with such
additions, deletions and modifications to the Depositary Trust Agreement and to
the form of certificate evidencing Receipts as the Initial Depositor and the
Trustee may, from time to time, agree.
(f) Title to a certificate evidencing Receipts (and to the Receipts
evidenced thereby), when properly endorsed or accompanied by proper
instruments of transfer, shall be transferable by delivery with the same effect
as in the case of a negotiable instrument under the laws of New York; provided,
--------
however, that the Trustee, notwithstanding any notice to the contrary, may treat
- -------
the Owner of Receipts as the
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absolute owner thereof for the purpose of determining the person entitled to
distribution of dividends or other distributions or to any notice provided for
in the Depositary Trust Agreement and for all other purposes.
Section 2.5. Delivery of Receipts. Upon receipt by the Trustee of
---------------------
any deposit pursuant to Section 2.2, together with a Depositor Order and the
other documents required as above specified, if any, the Trustee, subject to the
terms and conditions of the applicable Depositary Trust Agreement, shall Deliver
to or upon the written order of the Depositor the number of Receipts issuable in
respect of such deposit, provided such number is an integral multiple of an
Issuance Denomination, but only upon payment to the Trustee of the fees and
expenses of the Trustee as provided in Section 5.6 and of all taxes and
governmental charges and fees payable in connection with such deposit and the
transfer of the Underlying Securities.
Section 2.6. Registration; Registration of Transfer; Combination and
-------------------------------------------------------
Split-up of Certificates. (a) The Trustee shall keep or cause to be kept a
- -------------------------
register of Owners of Receipts and shall provide for the registration of
Receipts and the registration of transfers and exchanges of Receipts.
(b) The Trustee, subject to the terms and conditions of these Standard
Terms and the applicable Depositary Trust Agreement, shall register transfers of
ownership of Receipts on its transfer books from time to time, upon any
Surrender of a certificate evidencing such Receipts in any integral multiple of
a Round Lot, by the Owner in person or by a duly authorized attorney, properly
endorsed or accompanied by proper instruments of transfer, and duly stamped as
may be required by the laws of the State of New York and of the United States of
America. Thereupon the Trustee shall execute a new certificate or certificates
evidencing such Receipts in any integral multiple
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of a Round Lot requested, and deliver the same to or upon the order of the
Person entitled thereto.
(c) The Trustee, subject to the terms and conditions of these Standard
Terms and the applicable Depositary Trust Agreement, shall, upon Surrender of a
certificate evidencing Receipts for the purposes of effecting a split-up or
combination of such certificate or certificates, execute and deliver one or more
new certificate or certificates evidencing such Receipts in any integral
multiple of a Round Lot requested.
(d) The Trustee may appoint one or more co-transfer agents for the
purpose of effecting transfers, combinations and split-ups of Receipts at
designated transfer offices on behalf of the Trustee. In carrying out its
functions, a co-transfer agent may require evidence of authority and compliance
with applicable laws and other requirements by Owners or Persons entitled to
Receipts and will be entitled to protection and indemnity to the same extent as
the Trustee.
Section 2.7. Surrender of Receipts and Withdrawal of Underlying
--------------------------------------------------
Securities. (a) Upon Surrender at the Corporate Trust Office of the Trustee
- ----------
of a Round Lot of Receipts or integral multiple thereof for the purpose of
withdrawal of the Underlying Securities represented thereby, and upon payment of
the fee of the Trustee in connection with the Surrender of Receipts as provided
in Section 5.6 and payment of all taxes and charges payable in connection with
such Surrender and withdrawal of the Underlying Securities, and subject to the
terms and conditions of the applicable Depositary Trust Agreement, including,
without limitation, Section 4.10, the Owner of such Receipts shall be entitled
to Delivery of the amount of Underlying Securities at the time represented by
such Receipts. Delivery of such Underlying Securities may be made by (i)
Delivery of Securities to such Owner or as ordered by such Owner and (ii) any
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available form of delivery of any other securities, property and cash to which
such Owner is then entitled to such Owner or as ordered by such Owner. The
Trustee shall make such delivery as promptly as practicable.
(b) A certificate evidencing Receipts Surrendered for such purposes
may be required by the Trustee to be properly endorsed in blank or accompanied
by proper instruments of transfer in blank, and if the Trustee so requires, the
Owner thereof shall execute and deliver to the Trustee a written order directing
the Trustee to cause the Underlying Securities being withdrawn to be delivered
to or upon the written order of a Person or Persons designated in such order.
Thereupon the Trustee shall Deliver through the facilities of DTC or, if
applicable, at its Corporate Trust office, subject to Sections 2.8, 3.1, 3.2 and
4.10 and to the other terms and conditions of the Depositary Trust Agreement, to
or upon the written order of the Person or Persons designated in the order
delivered to the Trustee as above provided, the amount of Underlying Securities
represented by such Receipts.
Section 2.8. Limitations on Delivery, Registration of Transfer and
-----------------------------------------------------
Surrender of Receipts. (a) As a condition precedent to the Delivery,
- ---------------------
registration of transfer, split-up, combination or Surrender (including, for the
avoidance of doubt, any Surrender in connection with an exchange) of any Receipt
or withdrawal of any Underlying Securities, the Trustee or Registrar may require
payment from the Depositor of Securities or the presentor of the Receipts of a
sum sufficient to reimburse it for any tax or other charge and any stock
transfer or registration fee with respect thereto (including any such tax or
charge and fee with respect to Securities being deposited or withdrawn) and
payment of any applicable fees as herein provided, may require the production of
proof satisfactory to it as to the identity and genuineness of any signature and
may also require compliance with any regulations the Trustee may establish
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consistent with the provisions of the Depositary Trust Agreement, including,
without limitation, this Section 2.8.
(b) The Delivery of Receipts against deposits of Securities, the
registration of transfer of Receipts or the Surrender of Receipts for the
purpose of withdrawal of Underlying Securities may be suspended, generally or in
particular instances, during any period when the transfer books of the Trustee
are closed or the transfer books of a Securities Issuer are closed or if any
such action is deemed necessary or advisable by the Trustee at any time or from
time to time, subject to the provisions of the following sentence.
Notwithstanding any other provision of any applicable Depositary Trust Agreement
or the Receipts, the Surrender of Receipts and withdrawal of Underlying
Securities may not be suspended except for (i) temporary delays caused by
closing the transfer books of the Trustee or a Securities Issuer, (ii) the
payment of fees, taxes and applicable charges, and (iii) compliance with any
U.S. laws or governmental regulations relating to the Receipts or to the
withdrawal of the Underlying Securities. Without limitation of the foregoing,
the Trustee shall not knowingly accept for deposit under the Depositary Trust
Agreement any Securities required to be registered under the provisions of the
Securities Act of 1933, as amended, for the public offer and sale thereof in the
United States unless a registration statement is in effect as to such Securities
for such offer and sale.
Section 2.9. Lost Certificates, Etc. In case any certificate
----------------------
evidencing Receipts shall be mutilated, destroyed, lost or stolen, the Trustee
shall execute and deliver a new certificate of like tenor in exchange and
substitution for such mutilated certificate upon cancellation thereof, or in
lieu of and in substitution for such destroyed, lost or stolen certificate.
Before the Trustee shall execute and deliver a new certificate in substitution
for a destroyed, lost or stolen certificate, the Owner thereof shall have (a)
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filed with the Trustee (i) a request for such execution and delivery before the
Trustee has notice that the Receipts have been acquired by a bona fide purchaser
and (ii) a sufficient indemnity bond, and (b) satisfied any other reasonable
requirements imposed by the Trustee.
Section 2.10. Cancellation and Destruction of Surrendered
-------------------------------------------
Certificates. All certificates evidencing Receipts Surrendered to the Trustee
- ------------
shall be canceled by the Trustee. The Trustee is authorized to destroy
certificates so canceled.
Section 2.11. Reconstitution Events. (a) If any class of Securities
---------------------
ceases to be outstanding as a result of a merger, consolidation or other
corporate combination of the Securities Issuer and Section 4.8 does not apply,
the Trustee shall, if it has actual knowledge of such event, to the extent
lawful and feasible and subject to Section 4.10, distribute any securities
which shall be received by the Trustee in exchange for or in conversion of or in
respect of Underlying Securities which are not Securities issued by a Securities
Issuer to the Owners in proportion to their ownership of Receipts. Effective on
the date that such Securities cease to be outstanding, such class of Securities
shall cease to be part of the Securities which must be deposited for
issuance of Receipts.
(b) If any class of Securities is delisted from trading on its
primary exchange or market and is not listed for trading on another national
securities exchange or through NASDAQ within five business days from the date of
such delisting, the Trustee shall, if it has actual knowledge of such event, to
the extent lawful and feasible and subject to Section 4.10, distribute the
Underlying Securities of such class to the Owners in proportion to their
ownership of Receipts. Effective on the date of such distribution,
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such class of Securities shall cease to be a part of the securities which must
be deposited for issuance of Receipts.
(c) In the event that any Securities Issuer no longer has a class of
common stock registered under section 12 of the Securities Exchange Act of 1934,
as amended, the Trustee shall, if it has actual knowledge of such event, to the
extent lawful and feasible and subject to Section 4.10, distribute the
Underlying Securities of such Securities Issuer to the Owners in proportion to
their ownership of Receipts. Effective on the date of such distribution, such
class of Securities shall cease to be part of the securities which must be
deposited for issuance of Receipts.
(d) If the Commission determines that a Securities Issuer is an
investment company under the Investment Company Act of 1940, and the Trustee has
actual knowledge of such Commission determination, then the Trustee shall, to
the extent lawful and feasible and subject to Section 4.10, distribute the
Underlying Securities of such Securities Issuer to the Owners in proportion to
their ownership of Receipts. Effective on the date of such distribution, such
class of Securities shall cease to be part of the securities which must be
deposited for issuance of Receipts.
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<PAGE>
ARTICLE 3
CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS
Section 3.1. Filing Proofs, Certificates and Other Information. Any
-------------------------------------------------
Person presenting Securities for deposit or any Owner of Receipts may be
required from time to time to file with the Trustee such proof of citizenship or
residence, exchange control approval, or such information relating to the
registration on the books of any Securities Issuer or Securities Registrar, if
applicable, to execute such certificates and to make such representations and
warranties, as the Trustee may require. The Trustee may withhold the Delivery
or registration of transfer of any Receipts or the delivery of any Underlying
Securities until such proof or other information is filed or such certificates
are executed or such representations and warranties made.
Section 3.2. Liability of Owner for Taxes. If any tax or other
----------------------------
charge shall become payable with respect to any Receipts or any Underlying
Securities represented thereby, such tax or other charge shall be payable by the
Owner of such Receipts to the Trustee. The Trustee shall refuse to effect
any registration of transfer of such Receipts or any withdrawal of
Underlying Securities represented by such Receipt until such payment is made,
and may withhold any dividends or other distributions, or may sell for the
account of the Owner thereof Underlying Securities constituting any multiples of
the securities which must be deposited for issuance of Receipts, and may
apply such dividends or other distributions or the proceeds of any such sale in
payment of such tax or other charge and the Owner of such Receipt shall remain
liable for any deficiency.
Section 3.3. Warranties on Deposit of Shares.
-------------------------------
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<PAGE>
Every Person depositing Securities under the Depositary Trust Agreement shall
be deemed thereby to represent and warrant that such Securities and each
certificate therefor are validly issued and fully paid, that the person making
such deposit is duly authorized to do so and that at the time of delivery, such
Securities are free and clear of any lien, pledge, encumbrance, right, charge or
claim (other than the rights created by the Depositary Trust Agreement). Every
such person shall also be deemed to represent that such Securities are not, and
Receipts representing such Securities would not be, Restricted Securities. Such
representations and warranties shall survive the deposit of Securities, issuance
of Receipts or termination of the Depositary Trust Agreement.
ARTICLE 4
THE UNDERLYING SECURITIES
Section 4.1. Cash Distributions. Whenever the Trustee shall receive
------------------
any cash dividend or other cash distribution on any Underlying Securities, the
Trustee shall distribute the amount thus received (net of the fees of the
Trustee as provided in Section 5.6, if applicable) to the Owners entitled
thereto, in proportion to the number of Receipts held by them respectively;
provided, however, that in the event that the respective Securities Issuer or
- -------- -------
the Trustee shall be required to withhold and does withhold from such cash
dividend or such other cash distribution an amount on account of taxes, the
amount distributed to the Owners shall be reduced accordingly. The Trustee
shall distribute only such amount, however, as can be distributed without
attributing to any Owner a fraction of one cent. Any such fractional amounts
shall be rounded to the nearest whole cent and so distributed to Owners entitled
thereto.
Section 4.2. Distributions Other Than Cash or Securities. Subject to
-------------------------------------------
the provisions of Sections 4.8 and 5.6, whenever the Trustee shall receive any
distribution other than a distribution described in Sections 4.1, 4.3 or 4.4
or any distribution
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which would otherwise be distributed hereunder except that the Trustee deems
such distribution not to be lawful and feasible, the Trustee shall, subject to
Section 4.10, cause the securities or property received by it to be distributed
to the Owners entitled thereto, in proportion to the number of Receipts held by
them respectively, in any manner that the Trustee may deem equitable and
practicable for accomplishing such distribution;
provided, however, that if in the opinion of the Trustee such distribution
- -------- -------
cannot be made proportionately among the Owners entitled thereto, or if for any
other reason (including, but not limited to, any requirement that a Securities
Issuer or the Trustee withhold an amount on account of taxes or other
governmental charges or that such securities must be registered under the
Securities Act of 1933 in order to be distributed to Owners) the Trustee deems
such distribution not to be feasible, the Trustee shall adopt such method as it
deems equitable and practicable for the purpose of effecting such distribution,
including, but not limited to, the public or private sale of the securities or
property thus received, or any part thereof, and the net proceeds of any such
sale (net of the fees of the Trustee as provided in Section 5.6) shall be
distributed by the Trustee to the Owners entitled thereto as in the case of a
distribution received in cash.
Section 4.3. Distributions in Securities. If any distribution upon
---------------------------
any Underlying Securities consists of a dividend in, or free distribution of,
Securities, the Trustee shall, to the extent lawful and feasible, retain
such Securities under the Depositary Trust Agreement, and, in such case, the
(i) the amount of such Securities so retained in respect of each Receipt shall
be added to the classes and quantities of securities which must be deposited for
issuance of Receipts and (ii) the number of Receipts in an Issuance
Denomination may be increased or decreased by the Trustee to the lowest multiple
of 100 Receipts such that no fractional shares are thereby represented in such
Issuance Denomination.
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<PAGE>
Section 4.4. Rights Offerings. (a) If a Securities Issuer offers
----------------
or causes to be offered to the holders of any Underlying Securities any rights
to subscribe for additional Securities or other securities, the Trustee shall
have discretion in accordance with this Section 4.4 as to the procedure to be
followed in making such rights available to any Owners or in disposing of such
rights on behalf of Owners and making the net proceeds available to Owners or,
if by the terms of such rights offering or for any other reason (including the
absence of an effective registration statement covering the distribution of
securities underlying the rights), the Trustee may not make such rights
available to any Owners or dispose of such rights and make the net proceeds
available to Owners, then the Trustee shall allow the rights to lapse.
(b) The Trustee will not offer rights to Owners unless both the rights
and the securities to which such rights relate are either exempt from
registration under the Securities Act of 1933 with respect to a distribution to
all Owners or are registered under the provisions of such Act.
(c) The Trustee shall not be responsible for any failure to determine
that it may be lawful or feasible to make such rights available to Owners in
general or any Owner in particular.
Section 4.5. Fixing of Record Date. Whenever any cash dividend or
---------------------
other cash distribution shall become payable or any distribution other than cash
shall be made, or whenever the Trustee receives notice of any meeting of or
solicitation of proxies from holders of any Underlying Securities, or whenever a
fee shall be charged by the Trustee under Section 5.6, or whenever for any
reason there is a reconstitution or other event under the Depositary Trust
Agreement that causes a change in the composition of the securities which must
be deposited for issuance of Receipts, or whenever the Trustee
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shall find it necessary or convenient in respect of any matter, the Trustee
shall fix a record date (a) for the determination of the Owners who shall be (i)
entitled to receive such dividend or distribution or the net proceeds of the
sale thereof, (ii) entitled to give instructions to the Trustee for the exercise
of voting rights at any such meeting or solicitation or (iii) required to pay
such fee, or (b) on or after which each Receipt will represent such changed
group of Securities. In the case of subsections (a)(i) and (a)(ii) of this
Section 4.5, the Trustee shall use its reasonable efforts to ensure that, to the
extent practicable, the record date set hereunder will be the same as the record
date set by the Securities Issuer. Subject to the terms and conditions of the
Depositary Trust Agreement, the Owners on such record date shall be entitled, as
the case may be, to receive the amount distributable by the Trustee with respect
to such dividend or other distribution or the net proceeds of sale thereof, or
to give voting instructions, or to act in respect of any other such matter, or
shall be obligated to pay such fee.
Section 4.6. Reports. The Trustee shall, to the extent lawful,
-------
forward to Owners any reports and communications, including any proxy statement
or other soliciting material, received from a Securities Issuer which are
received by the Trustee as the holder of the Underlying Securities or its
appointed agent, unless such reports and communications have been forwarded
directly to Owners by such Securities Issuer or its appointed agent.
Section 4.7. Voting Instructions for Underlying Securities. Upon
---------------------------------------------
receipt by the Trustee or its appointed agent of notice of any meeting of, or
solicitation of proxies from, holders of Underlying Securities, the Trustee
shall, to the extent lawful, mail to the Owners a notice, the form of which
notice shall be in the sole discretion of the Trustee, which shall contain (a)
such information as is contained in such notice of meeting or solicitation, and
(b) a statement that the Owners as of the close of business on a specified
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record date will be entitled, subject to applicable law and the provisions of
the corporate documents of the Securities Issuer, to instruct the Trustee as to
the exercise of the voting rights, if any, or giving of proxies, as applicable,
in respect of the amount of Underlying Securities represented by their
respective Receipts and (c) a statement as to the manner in which such
instructions may be given. Upon the written request of an Owner of a Receipt on
such record date, received on or before the date established by the Trustee for
such purpose, the Trustee shall endeavor, insofar as practicable, to vote or
cause to be voted, or to give a proxy, as applicable, in respect of the amount
of Underlying Securities represented by such Receipt in accordance with the
instructions set forth in such request. The Trustee shall not vote or attempt
to exercise the right to vote that attaches to, or give a proxy with respect to,
Underlying Securities other than in accordance with such instructions.
Section 4.8. Changes Affecting Underlying Securities. (a) In
---------------------------------------
circumstances where the provisions of Sections 2.11 and 4.3 do not apply, upon
any change in nominal value, change in par value, split-up, consolidation or any
other reclassification of any Underlying Securities, or upon any
recapitalization, reorganization, merger or consolidation or sale of assets
affecting the issuer of any Underlying Security, if the relevant Securities
Issuer survives such event, the Trustee shall, to the extent lawful and
feasible, retain such Securities under the Depositary Trust Agreement, and, in
such case, the (A) the amount of such Securities so retained in respect of
each Receipt shall be added to the classes and quantities of securities which
must be deposited for issuance of Receipts and (B) the number of Receipts
in an Issuance Denomination may be increased or decreased by the Trustee to the
lowest multiple of 100 Receipts such that no fractional shares are thereby
represented in such Issuance Denomination.
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<PAGE>
(b) Securities of any class which are surrendered by the Trustee in
connection with any such conversion or exchange shall, effective on the date of
such surrender, no longer be part of the securities which must be deposited
for issuance of Receipts. In any such case, or in the case of an event to which
Section 2.11 applies, the Trustee may call for the Surrender of outstanding
certificates evidencing Receipts to be exchanged for new certificates
specifically describing any applicable change in the classes and quantities of
securities which must be deposited for issuance of Receipts.
Section 4.9. Withholding. In the event that the Trustee determines
-----------
that any distribution in property (including Securities and rights to subscribe
therefor) is subject to any tax or other charge which the Trustee is obligated
to withhold, notwithstanding anything to the contrary in these Standard Terms or
the applicable Depositary Trust Agreement, the Trustee may by public or private
sale dispose of all or a portion of such property (including Securities and
rights to subscribe therefor) in such amounts and in such manner as the Trustee
deems necessary and practicable to pay any such taxes or charges and the
Trustee shall distribute the net proceeds of any such sale after deduction of
such taxes or charges to the Owners entitled thereto in proportion to the number
of Receipts held by them respectively.
Section 4.10. Limitation on Distributions. Notwithstanding any
---------------------------
provision of the Depositary Trust Agreement which requires or permits the
Trustee to distribute or Deliver any securities to Owners, the Trustee shall not
distribute to any Owner any fraction of a share. Instead, the Trustee shall, to
the extent lawful, sell the aggregate of such fractions and distribute the net
proceeds to the Owners entitled thereto as in the case of a distribution
received in cash.
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ARTICLE 5
THE TRUSTEE AND THE INITIAL DEPOSITOR
Section 5.1. Maintenance of Office and Transfer Books by the Trustee.
-------------------------------------------------------
(a) Until termination of this Depositary Trust Agreement in accordance with its
terms, the Trustee shall maintain in the Borough of Manhattan, The City of New
York, facilities for the execution and Delivery, registration, registration of
transfers and Surrender of Receipts in accordance with the provisions of these
Standard Terms and the applicable Depositary Trust Agreement.
(b) The Trustee shall keep books for the registration of Receipts and
transfers of Receipts which at all reasonable times shall be open for inspection
by the Owners.
(c) The Trustee may close the transfer books at any time or from time
to time.
(d) If any Receipts evidenced thereby are listed on one or more stock
exchanges in the United States, the Trustee shall act as Registrar or appoint a
registrar or one or more co-registrars for registry of such receipts in
accordance with any requirements of such exchange or exchanges.
Section 5.2. Prevention or Delay in Performance by the Initial
-------------------------------------------------
Depositor or the Trustee. Neither the Initial Depositor nor the Trustee nor any
- ------------------------
of their respective directors, employees, agents or affiliates shall incur any
liability to any Owner or Beneficial Owner of any Receipt, if by reason of any
provision of any present or future
-24-
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law or regulation of the United States or any other country, or of any
governmental or regulatory authority or stock exchange, or by reason of any
provision, present or future, of the corporate documents of any Securities
Issuer, or by reason of any provisions of any securities issued or distributed
by any Securities Issuer, or any offering or distribution thereof, or by reason
of any act of God or war or other circumstances beyond its control, the Initial
Depositor or the Trustee shall be prevented or forbidden from, or be subject to
any civil or criminal penalty on account of, doing or performing any act or
thing which by the terms of these Standard Terms or the applicable Depositary
Trust Agreement it is provided shall be done or performed; nor shall the Initial
Depositor or the Trustee incur any liability to any Owner or Beneficial Owner of
any Receipt by reason of any non-performance or delay, caused as aforesaid, in
the performance of any act or thing which by the terms of these Standard Terms
or the applicable Depositary Trust Agreement it is provided shall or may be done
or performed, or by reason of any exercise of, or failure to exercise, any
discretion provided for in these Standard Terms or the applicable Depositary
Trust Agreement. Where, by the terms of an offering or distribution to which
Sections 2.11, 4.2 or 4.4 applies, or for any other reason, it is not lawful and
feasible to make such distribution or offering available to Owners, and the
Trustee may not dispose of such distribution or offering on behalf of such
Owners and make the net proceeds available to such Owners, then the Trustee
shall not make such distribution or offering available to Owners and shall allow
any rights, if applicable, to lapse.
Section 5.3. Obligations of the Initial Depositor and the Trustee.
----------------------------------------------------
(a) Neither the Initial Depositor nor the Trustee assumes any obligation nor
shall they be subject to any liability under these Standard Terms or the
applicable Depositary Trust Agreement to any Owner or Beneficial Owner of any
Receipt (including, without limitation, liability with respect to the validity
or worth of the Underlying Securities),
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<PAGE>
except that each agrees to perform its respective obligations specifically set
forth in these Standard Terms and the applicable Depositary Trust Agreement
without negligence or bad faith.
(b) Neither the Initial Depositor nor the Trustee shall be under any
obligation to prosecute any action, suit or other proceeding in respect of any
Underlying Securities or in respect of the Receipts.
(c) Neither the Initial Depositor nor the Trustee shall be liable for
any action or non-action by it in reliance upon the advice of or information
from legal counsel, accountants, any person presenting Securities for deposit,
any Owner or any other person believed by it in good faith to be competent to
give such advice or information.
(d) The Trustee shall not be liable for any acts or omissions made by
a successor Trustee whether in connection with a previous act or omission of the
Trustee or in connection with any matter arising wholly after the resignation of
the Trustee, provided that in connection with the issue out of which such
potential liability arises the Trustee performed its obligations without
negligence or bad faith while it acted as Trustee.
(e) The Trustee shall not be responsible for any failure to carry out
any instructions to vote any of the Underlying Securities, or for the manner in
which any such vote is cast or the effect of any such vote, provided that any
such action or non-action is without negligence or bad faith.
(f) Except as specifically provided in Section 4.6, the Trustee shall
have no obligation to monitor or to obtain any information concerning the
business or
-26-
<PAGE>
affairs of any Securities Issuer or to advise Owners or Beneficial Owners of any
event or condition affecting any Securities Issuer.
(g) The Trustee shall have no obligation to comply with any direction
or instruction from any Owner or Beneficial Owner regarding Receipts except to
the extent specifically provided in these Standard Terms or any applicable
Depositary Trust Agreement.
(h) The Trustee shall be a fiduciary under these Standard Terms and
the applicable Depositary Trust Agreement; provided, however, that the fiduciary
-------- -------
duties and responsibilities and liabilities of the Trustee shall be limited by,
and shall be only those specifically set forth in, these Standard Terms and the
applicable Depositary Trust Agreement.
Section 5.4. Resignation or Removal of the Trustee; Appointment of
-----------------------------------------------------
Successor Trustee. (a) The Trustee may at any time resign as Trustee hereunder
- -----------------
by written notice of its election so to do, delivered to the Initial Depositor,
and such resignation shall take effect upon the appointment of a successor
Trustee and its acceptance of such appointment as hereinafter provided.
(b) If at any time the Trustee is in material breach of its
obligations under the Depositary Trust Agreement and the Trustee fails to cure
such breach within 30 days after receipt by the Trustee of written notice from
the Initial Depositor or Owners of 25% or more of the outstanding Receipts
specifying such default and requiring the Trustee to cure such default, the
Initial Depositor, acting on behalf of the Owners, may remove the Trustee by
written notice delivered to the Trustee in the manner provided
-27-
<PAGE>
in Section 7.5, and such removal shall take effect upon the appointment of the
successor Trustee and its acceptance of such appointment as hereinafter
provided.
(c) In case at any time the Trustee acting hereunder shall resign or
be removed, the Initial Depositor, acting on behalf of the Owners, shall use its
reasonable efforts to appoint a successor Trustee, which shall be a bank or
trust company having an office in the Borough of Manhattan, The City of New
York. Every successor Trustee shall execute and deliver to its predecessor and
to the Initial Depositor, acting on behalf of the Owners, an instrument in
writing accepting its appointment hereunder, and thereupon such successor
Trustee, without any further act or deed, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor; but such predecessor,
nevertheless, upon payment of all sums due it and on the written request of the
Initial Depositor, acting on behalf of the Owners, shall execute and deliver an
instrument transferring to such successor all rights and powers of such
predecessor hereunder, shall duly assign, transfer and deliver all right, title
and interest in the Underlying Securities to such successor, and shall deliver
to such successor a list of the Owners of all outstanding Receipts. The Initial
Depositor or any such successor Trustee shall promptly mail notice of the
appointment of such successor Trustee to the Owners.
(d) Any corporation into or with which the Trustee may be merged,
consolidated or converted shall be the successor of such Trustee without the
execution or filing of any document or any further act.
Section 5.5. Indemnification. (a) The Initial Depositor shall indemnify
---------------
the Trustee, its directors, employees, agents and affiliates against, and hold
each of them harmless from, any loss, liability, cost, expense or judgment
(including, but not limited to, the fees and expenses of counsel) (collectively
"Indemnified Amounts") which is
-28-
<PAGE>
incurred by any of them and which arises out of acts performed or omitted
pursuant to the provisions of these Standard Terms or any Depositary Trust
Agreement, as the same may be amended, modified or supplemented from time to
time, or any filings with or submissions to the Commission in connection with or
with respect to such Receipts (which by way of illustration and not by way of
limitation, include any registration statement and any amendments or supplements
thereto filed with the Commission or any periodic reports or updates that may be
filed under the Securities Exchange Act of 1934, as amended, or any failure to
make any filings or submissions to the Commission which are required to be made
in connection with or with respect to such Receipts), except that the Initial
Depositor shall not have any obligations under this Section 5.5(a) to pay
Indemnified Amounts incurred as a result of and attributable to (i) the
negligence or bad faith of, or material breach of the terms of this Agreement
by, the Trustee, (ii) written information regarding the name and address of the
Trustee furnished in writing to the Initial Depositor (and not materially
changed or altered) expressly for use in the registration statement filed with
the Commission relating to the Receipts, or (iii) any misrepresentations or
omissions made by a Depositor (other than Initial Depositor) in connection with
such Depositor's offer and sale of Receipts.
(b) The Trustee shall indemnify the Initial Depositor, its directors,
employees, agents and affiliates against, and hold each of them harmless from,
any Indemnified Amounts (i) caused by the negligence or bad faith of the Trustee
or (ii) arising out of any written information regarding the name and address of
the Trustee furnished in writing to the Initial Depositor (and not materially
changed or altered) expressly for use in the registration statement filed with
the Commission relating to the Receipts.
-29-
<PAGE>
[(c) If the indemnification provided for in this Section 5.5 is
unavailable or insufficient to hold harmless the indemnified party under
subsection (a) or (b) above, then the indemnifying party shall contribute to the
Indemnified Amounts referred to in subsection (a) or (b) above (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Initial Depositor on the one hand and the Trustee on the other hand from the
offering of the Receipts which are the subject of the action or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Initial
Depositor on the one hand and the Trustee on the other hand in connection with
the action, statement or omission which resulted in such Indemnified Amount as
well as any other relevant equitable considerations. The relative benefits
received by the Initial Depositor on the one hand and the Trustee on the other
shall be deemed to be in the same proportions as the total commissions from the
offering of the Receipts which are the subject of the action (before deducting
expenses) received by the Initial Depositor bear to the total fees received by
the Trustee from the offering of such Receipts. The relative fault shall be
determined by reference to, among other things, whether any untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact which from which the action arises relates to information
supplied by the Initial Depositor or the Trustee and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission or the act or omission from which the action
arises. The amount of Indemnified Amounts referred to in the first sentence of
this subsection (c) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any action or claim which is the subject of this subsection (c).]
-30-
<PAGE>
Section 5.6. Charges of Trustee. The following charges shall be
------------------
incurred by any party depositing or withdrawing Securities or by any party
Surrendering Receipts or to whom Receipts are Delivered or any Owner, as
applicable: (1) taxes and charges and other fees payable in respect of the
Underlying Securities assessed by third-party custodians, depositories, transfer
agents, and other service providers in the ordinary course of their
respective businesses (whether in connection with the deposit of Securities or
withdrawal of Underlying Securities or otherwise), (2) a fee of $10 or less per
100 Receipts for the execution and Delivery of Receipts pursuant to Section 2.5,
and the Surrender of Receipts pursuant to Section 2.7, and (3) a fee which
shall accrue on the first day of each calendar quarter at a rate of $.02 or less
per Receipt per quarter for the Trustee's services as such under the Depositary
Trust Agreement (which fee shall be assessed against Owners of record as of the
date or dates set by the Trustee in accordance with Section 4.5 and shall be
collected at the Trustee's discretion by deducting such fee from one or more
cash dividends or other cash distributions); provided, however, that with
-------- -------
respect to the aggregate fee accrued in any calendar year under this clause
(3) with respect to each Receipt, the Trustee will waive that portion which
exceeds the total cash dividends and other cash distributions the record
date for which falls in such calendar year and payable with respect to such
Receipt.
Section 5.7. Retention of Trust Documents. The Trustee is authorized
----------------------------
to destroy those documents, records, bills and other data compiled during the
term of the Depositary Trust Agreement at the times permitted by the laws or
regulations governing the Trustee.
-31-
<PAGE>
Section 5.8. Federal Securities Law Filings. The Initial
------------------------------
Depositor shall (i) prepare and file a registration statement with the
Commission and take such action as is necessary from time to time to qualify the
Receipts for offering and sale under the federal securities laws of the United
States, including the preparation and filing of amendments and supplements to
such registration statement, (ii) promptly notify the Trustee of any amendment
or supplement to the registration statement or prospectus, of any order
preventing or suspending the use of any prospectus, of any request for the
amending or supplementing of the registration statement or prospectus or if
any event or circumstance occurs as a result of which the registration statement
or prospectus, as then amended or supplemented, would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, (iii) provide the Trustee from time to time with
copies, including copies in electronic form, of the prospectus, as amended and
supplemented, in such quantities as the Trustee may request and (iv) prepare and
file any periodic reports or updates that may be required under the Securities
Exchange Act of 1934, as amended.
Section 5.9. Prospectus Delivery. The Trustee shall, if required by
-------------------
the federal securities laws of the United States, in any manner permitted by
such laws, deliver at the time of issuance of Receipts, a copy of the relevant
prospectus, as amended and supplemented at such time, to each Person depositing
Underlying Securities into the Trust for issuance of Receipts.
ARTICLE 6
AMENDMENT AND TERMINATION
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<PAGE>
Section 6.1. Amendment. The Trustee and the Initial Depositor may
---------
amend any provisions of the Depositary Trust Agreement without the consent of
any Owner. Any amendment that imposes or increases any fees or charges
(other than taxes and other charges, registration fees or other
such expenses), or that otherwise prejudices any substantial existing right
of the Owners will not become effective until 30 days after notice of such
amendment is given to the Owners. Every Owner and Beneficial Owner, at the time
any amendment so becomes effective, shall be deemed, by continuing to hold any
Receipt or an interest therein, to consent and agree to such amendment and to be
bound by the Depositary Trust Agreement as amended thereby. In no event shall
any amendment impair the right of the Owner of any Receipt to Surrender such
Receipt and receive therefor the Underlying Securities represented thereby,
except in order to comply with mandatory provisions of applicable law.
Section 6.2. Early Termination. (a) The Trust shall terminate by
-----------------
the Trustee mailing notice of such termination to the Owners of all Receipts
then outstanding at least 30 days prior to the date set for termination if any
of the following occurs:
(i) The Trustee is notified that the Receipts are delisted from a
national securities exchange and are not approved for listing on another
national securities exchange within 5 business days of their delisting;
(ii) Owners of at least 75% of the outstanding Receipts notify the
Trustee that they elect to terminate the Trust; or
(iii) 60 days shall have expired after the Trustee shall have
delivered to the Initial Depositor and the Owners a written notice of its
election to resign and a
-33-
<PAGE>
successor trustee shall not have been appointed and accepted its
appointment as provided in Section 5.4.
(b) On and after the date of termination, the Owner of a Receipt will, upon
(i) Surrender of such Receipt at the Corporate Trust Office of the Trustee, (ii)
payment of the fee of the Trustee for the Surrender of Receipts referred to in
Section 2.7, and (iii) payment of any applicable taxes or charges, be entitled
to Delivery, to him or upon his order, of the amount of Underlying Securities
evidenced by such Receipt. If any Receipts shall remain outstanding after the
date of termination, the Trustee thereafter shall discontinue the registration
of transfers of Receipts, shall suspend the distribution of dividends or other
distribution to the Owners thereof, and shall not give any further notices or
perform any further acts under these Standard Terms or the applicable Depositary
Trust Agreement, except that the Trustee shall continue to collect dividends and
other distributions pertaining to Underlying Securities and hold the same
uninvested and without liability for interest, shall sell rights as provided in
these Standard Terms or the applicable Depositary Trust Agreement, and shall
continue to deliver Underlying Securities, together with any dividends or other
distributions received with respect thereto and the net proceeds of the sale of
any rights or other property, in exchange for Receipts Surrendered to the
Trustee (after deducting or upon payment of, in each case, the fee of the
Trustee set forth in 5.6 for the Surrender of Receipts, any expenses for the
account of the Owner of such Receipts in accordance with the terms and
conditions of the Depositary Trust Agreement, and any applicable taxes or
charges). At any time after the expiration of one year following the date of
termination, the Trustee may sell the Underlying Securities then held hereunder
and may thereafter hold uninvested the net proceeds of any such sale, together
with any other cash then held by it hereunder, unsegregated and without
liability for interest, for the pro rata benefit of the Owners of Receipts which
--- ----
have not theretofore been Surrendered, such Owners thereupon becoming
-34-
<PAGE>
general creditors of the Trustee with respect to such net proceeds. After making
such sale, the Trustee shall be discharged from all obligations under these
Standard Terms with respect to the Receipts and the applicable Depositary Trust
Agreement, except to account for such net proceeds and other cash (after
deducting, in each case, the fee of the Trustee for the Surrender of Receipts,
any fees of the Trustee due and owing from the Owner of such Receipts pursuant
to Section 5.6, any expenses for the account of the Owner of such Receipts in
accordance with the terms and conditions of the Depositary Trust Agreement, and
any applicable taxes or governmental charges). Upon the termination of the
applicable Depositary Trust Agreement, the Initial Depositor shall be discharged
from all obligations under such Depositary Trust Agreement except for its
obligations to the Trustee under Section 5.5.
ARTICLE 7
MISCELLANEOUS
Section 7.1. Counterparts. These Standard Terms and each Depositary
------------
Trust Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of such counterparts shall constitute one
and the same instrument. Copies of these Standard Terms and the applicable
Depositary Trust Agreement shall be filed with the Trustee and shall be open to
inspection by any Owner of a Receipt during business hours.
Section 7.2. Third-Party Beneficiaries. These Standard Terms and
--------------------------
each Depositary Trust Agreement are for the exclusive benefit of the respective
parties hereto and thereto, and shall not be deemed to give any legal or
equitable right, remedy or claim whatsoever to any other person.
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<PAGE>
Section 7.3. Severability. In case any one or more of the
------------
provisions contained in these Standard Terms or the applicable Depositary Trust
Agreement or in the Receipts should be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein or therein shall in no way be affected,
prejudiced or disturbed thereby.
Section 7.4. Owners and Beneficial Owners as Parties; Binding
------------------------------------------------
Effect. The Owners, Beneficial Owners and Depositors from time to time
shall be parties to the applicable Depositary Trust Agreement and shall be
bound by all of the terms and conditions hereof and thereof and of the Receipts
by their acceptance of Receipts or any interest therein or by their depositing
Securities, as the case may be.
Section 7.5. Notices. (a) Any and all notices to be given to the
-------
Initial Depositor shall be deemed to have been duly given if personally
delivered or sent by mail or cable, telex or facsimile transmission confirmed by
letter, addressed to Merrill Lynch, Pierce, Fenner & Smith Incorporated,
World Financial Center, New York, New York 10281, Attention: Director,
Customized Investments, or any other place to which the Initial Depositor may
have transferred its principal office with notice to the Trustee.
(b) Any and all notices to be given to the Trustee shall be deemed to
have been duly given if personally delivered or sent by mail or cable, telex or
facsimile transmission confirmed by letter, addressed to The Bank of New York,
101 Barclay Street, 22-W, New York, New York 10286, Attention: ADR
Administration, or any other place to which the Trustee may have transferred its
Corporate Trust Office with notices to the Initial Depositor.
-36-
<PAGE>
(c) Any and all notices to be given to any Owner shall be deemed to
have been duly given if personally delivered or sent by mail or cable, telex or
facsimile transmission confirmed by letter, addressed to such Owner at the
address of such Owner as it appears on the transfer books of the Trustee, or, if
such Owner shall have filed with the Trustee a written request that notices
intended for such Owner be mailed to some other address, at the address
designated in such request.
(d) Delivery of a notice sent by mail or cable, telex or facsimile
transmission shall be deemed to be effected at the time when a duly addressed
letter containing the same (or a confirmation thereof in the case of a cable,
telex or facsimile transmission) is deposited, postage prepaid, in a post-office
letter box. The Trustee may, however, act upon any cable, telex or facsimile
transmission received by them, notwithstanding that such cable, telex or
facsimile transmission shall not subsequently be confirmed by letter as
aforesaid.
Section 7.6. Governing Law. This Depositary Trust Agreement and the
-------------
Receipts shall be interpreted and all rights hereunder and thereunder and
provisions hereof and thereof shall be governed by the substantive laws (but not
the choice of law rules) of the State of New York.
-37-
<PAGE>
IN WITNESS WHEREOF, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
and THE BANK OF NEW YORK have duly executed these Standard Terms as of the day
and year first set forth above.
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By:
--------------------------------
Steven G. Budurtha
First Vice President
THE BANK OF NEW YORK,
as Trustee
By:
--------------------------------
Name:
Title:
-38-
<PAGE>
EXHIBIT A
[NAME OF TRUST]
[FORM OF] DEPOSITARY TRUST AGREEMENT
DEPOSITARY TRUST AGREEMENT dated as of __________ (this "Depositary
Trust Agreement"), between MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, a
Delaware corporation (the "Initial Depositor"), THE BANK OF NEW YORK, a New York
banking corporation, as trustee (the "Trustee"), and all Holders and Beneficial
Owners (each as hereinafter defined) from time to time of Depositary Trust
Receipts issued hereunder and all Depositors (as hereinafter defined) from time
to time.
Section 1. Incorporation of Standard Terms. The Standard Terms for
-------------------------------
Depositary Trust Agreements agreed to as of ____________, 1999 (the "Standard
Terms"), between the Initial Depositor and the Trustee are hereby incorporated
by reference into and made a part of this Depositary Trust Agreement. If there
is any conflict between the provisions of this Depositary Trust Agreement and
the Standard Terms, the provisions of this Depositary Trust Agreement shall
control.
Section 2. Securities to be Deposited. Initially, the securities
--------------------------
which must be deposited for issuance of one Receipt and which shall be
represented thereby shall be as follows:
Quantity which
must be deposited
Issuer and Title of Security per Receipt
---------------------------- ---------------------
[Issuer and title of security] [Quantity]
[Issuer and title of security] [Quantity]
; provided, however, that if an event to which Section 2.11 of the Standard
-------- -------
Terms applies or an event described in Sections 4.3 or 4.8 of the Standard Terms
occurs, the definition of the securities that must be deposited for issuance of
one Receipt shall be changed as provided in such Sections, if applicable.
Section 3. Creation and Declaration of Trust; Termination Date. The
---------------------------------------------------
trust created hereby shall be known as [Name of Trust], for which the Trustee,
-------------
or the Initial Depositor to the extent provided herein, may conduct the business
of the Trust, make and
A-1
<PAGE>
execute contracts, and sue and be sued. [The termination date of the Trust will
be December 31, 2039].
Section 4. Closing. The "Closing Date" shall be [specify date].
------- ------------
IN WITNESS WHEREOF, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
and THE BANK OF NEW YORK have duly executed this agreement as of the day and
year first set forth above. All Owners and Beneficial Owners shall become
parties hereto upon acceptance by them of Receipts issued in accordance with the
terms hereof or any interest therein, and all Depositors shall become parties
hereto upon depositing any Securities hereunder.
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By:
---------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By:
---------------------------------
Name:
Title:
A-2
<PAGE>
EXHIBIT B
[Form of Receipt]
THE RECEIPTS EVIDENCED HEREBY REPRESENT RIGHTS WITH RESPECT TO UNDERLYING
SECURITIES (AS DEFINED IN THE DEPOSITARY TRUST AGREEMENT REFERRED TO HEREIN)
HELD BY THE TRUST AND DO NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND
ARE NOT GUARANTEED BY THE INITIAL DEPOSITOR OR THE TRUSTEE OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THE RECEIPTS NOR THE UNDERLYING SECURITIES ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR ANY OTHER PERSON.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE AGENT
AUTHORIZED BY THE ISSUER FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
B-1
<PAGE>
DEPOSITARY TRUST RECEIPTS
ISSUED BY
[NAME OF TRUST]
REPRESENTING [COMMON STOCK] OF
[LIST COMPANIES HERE]
THE BANK OF NEW YORK, as Trustee
No. CUSIP NO.
THE BANK OF NEW YORK, as Trustee (hereinafter called the "Trustee"),
hereby certifies that CEDE & CO., as nominee of the Depositary Trust Company, or
registered assigns, IS THE OWNER OF * Depositary Trust Receipts issued by
[Name of Trust], each representing the securities described in the within-
- --------------
mentioned Depositary Trust Agreement. At the date hereof, each Receipt
represents the right to receive the following securities:
Quantity Initially
Issuer and Title Represented by
of Security Each Receipt
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
which are deposited under the Depositary Trust Agreement referred to herein at
the Corporate Trust Office of the Trustee. The specification of the securities
represented by each Receipt is subject to change as provided in the Depositary
Trust Agreement. The Trustee's Corporate Trust Office is located at a different
address than its principal executive office. Its Corporate Trust Office is
located at 101 Barclay Street, New York, New York 10286, and its principal
executive office is located at One Wall Street, New York, New York 10286.
THE TRUSTEE'S CORPORATE TRUST OFFICE ADDRESS IS
101 BARCLAY STREET, NEW YORK, NEW YORK 10286
- ------------------
* That number of Receipts held at The Depository Trust Company at any given
point in time.
B-2
<PAGE>
(1) THE DEPOSITARY TRUST AGREEMENT.
------------------------------
This Receipt is issued upon the terms and conditions set forth in the
Depositary Trust Agreement, dated as of _________, 1999 (the "Depositary Trust
Agreement"), agreed to by and among the Initial Depositor, the Trustee, all
Owners and Beneficial Owners from time to time of Receipts issued thereunder and
all Depositors. By becoming an Owner or Beneficial Owner, or by depositing
Securities, such Person agrees to become a party to the Depositary Trust
Agreement and become bound by all the terms and conditions thereof. The
Depositary Trust Agreement sets forth the rights of Owners and the rights and
duties of the Trustee in respect of the Securities deposited thereunder and any
and all other securities, property and cash from time to time received in
respect of such Securities and held thereunder (such Securities, other
securities, property, and cash are herein called "Underlying Securities").
Copies of the Depositary Trust Agreement are on file at the Trustee's Corporate
Trust Office in New York City.
The statements made on the face and reverse of this Receipt are summaries
of certain provisions of the Depositary Trust Agreement and are qualified by and
subject to the detailed provisions of the Depositary Trust Agreement, to which
reference is hereby made. Capitalized terms not defined herein shall have the
meanings set forth in the Depositary Trust Agreement.
(2) SURRENDER OF RECEIPTS AND WITHDRAWAL OF SECURITIES.
--------------------------------------------------
Upon Surrender at the Corporate Trust Office of the Trustee of a Round Lot
of Receipts or integral multiples thereof for the purpose of withdrawal of the
Underlying Securities represented thereby, and upon payment of the fee of the
Trustee in connection with the Surrender of Receipts as provided in Section 5.6
of the Standard Terms and payment of all taxes and charges payable in connection
with such Surrender and withdrawal of the Underlying Securities, and subject to
the terms and conditions of the applicable Depositary Trust Agreement,
including, without limitation, Section 4.10 thereof, the Owner of such Receipts
shall be entitled to Delivery of the amount of Underlying Securities at the time
represented by such Receipts. Delivery of such Underlying Securities may be
made by (i) Delivery of Securities to such Owner or as ordered by such Owner and
(ii) any available form of delivery of any other securities, property and cash
to which such Owner is then entitled to such Owner or as ordered by such Owner.
The Trustee shall only deliver whole Underlying Securities upon Surrender of
Receipts representing such Underlying Securities.
(3) REGISTRATION OF TRANSFERS, SPLIT-UPS AND COMBINATIONS OF CERTIFICATES;
----------------------------------------------------------------------
LIMITATIONS.
-----------
The transfer of ownership of Receipts evidenced by this certificate is
registrable on the books of the Trustee at its Corporate Trust Office by the
Owner hereof in person or by a duly authorized attorney, upon Surrender of this
certificate evidencing Receipts,
B-3
<PAGE>
properly endorsed or accompanied by proper instruments of transfer, and duly
stamped as may be required by the laws of the State of New York and of the
United States of America. This certificate evidencing Receipts may be split up
into other such certificates, each evidencing any integral multiple of a Round
Lot of Receipts, or may be combined with other certificates evidencing Receipts
into one such certificate, in each case evidencing the same aggregate number of
Receipts as the certificate or certificates Surrendered.
As a condition precedent to the Delivery, registration of transfer, split-
up, combination or Surrender (including, for the avoidance of doubt, any
Surrender in connection with an exchange) of any Receipt or withdrawal of any
Underlying Securities, the Trustee or Registrar may require payment from the
Depositor of Securities or the presentor of the Receipts of a sum sufficient to
reimburse it for any tax or other charge and any stock transfer or registration
fee with respect thereto (including any such tax or charge and fee with respect
to Securities being deposited or withdrawn) and payment of any applicable fees
as herein provided, may require the production of proof satisfactory to it as to
the identity and genuineness of any signature and may also require compliance
with any regulations the Trustee may establish consistent with the provisions of
the Depositary Trust Agreement, including, without limitation, Section 2.8 of
the Standard Terms.
The Delivery of Receipts against deposits of Securities, the registration
of transfer of Receipts or the Surrender of Receipts for the purpose of
withdrawal of Underlying Securities may be suspended, generally or in particular
instances, during any period when the transfer books of the Trustee are closed
or the transfer books of a Securities Issuer are closed or if any such action is
deemed necessary or advisable by the Trustee at any time or from time to time
for any reason, subject to the provisions of the following sentence.
Notwithstanding any other provision of any applicable Depositary Trust Agreement
or the Receipts, the Surrender of Receipts and withdrawal of Underlying
Securities may not be suspended subject to only (i) temporary delays caused by
closing the transfer books of the Trustee or a Securities Issuer, (ii) the
payment of fees, taxes and similar charges, and (iii) compliance with any U.S.
laws or governmental regulations relating to the Receipts or to the withdrawal
of the Underlying Securities. Without limitation of the foregoing, the Trustee
shall not knowingly accept for deposit under the Depositary Trust Agreement any
Securities required to be registered under the provisions of the Securities Act
of 1933, as amended, for the public offer and sale thereof in the United States
unless a registration statement is in effect as to such Securities for such
offer and sale.
(4) RECONSTITUTION EVENTS
---------------------
B-4
<PAGE>
If any class of Securities ceases to be outstanding as a result of
a merger, consolidation or other corporate combination of the Securities Issuer
and Section 4.8 of the Standard Terms does not apply, the Trustee shall, if
it has actual knowledge of such event, to the extent lawful and feasible and
subject to Section 4.10 of the Standard Terms, distribute any securities
which shall be received by the Trustee in exchange for or in conversion of or in
respect of Underlying Securities which are not Securities issued by a Securities
Issuer to the Owners in proportion to their ownership of Receipts. Effective on
the date that such Securities cease to be outstanding, such class of Securities
shall cease to be part of the securities which must be deposited for
issuance of Receipts.
(b) If any class of Securities is delisted from trading on its
primary exchange or market and is not listed for trading on another national
securities exchange or through NASDAQ within five business days from the date of
such delisting, the Trustee shall, if it has actual knowledge of such event, to
the extent lawful and feasible and subject to Section 4.10 of the Standard
Terms, distribute the Underlying Securities of such class to the Owners in
proportion to their ownership of Receipts. Effective on the date of such
distribution, such class of Securities shall cease to be a part of the
securities which must be deposited for issuance of Receipts.
(c) In the event that any Securities Issuer no longer has a class of
common stock registered under section 12 of the Securities Exchange Act of 1934,
as amended, the Trustee shall, if it has actual knowledge of such event, to the
extent lawful and feasible and subject to Section 4.10 of the Standard Terms,
distribute the Underlying Securities of such Securities Issuer to the Owners in
proportion to their ownership of Receipts. Effective on the date of such
distribution, such class of Securities shall cease to be part of the
securities which must be deposited for issuance of Receipts.
(d) If the Commission determines that a Securities Issuer is an
investment company under the Investment Company Act of 1940, and the Trustee has
actual knowledge of such Commission determination, then the Trustee shall, to
the extent lawful and feasible and subject to Section 4.10 of the Standard
Terms, distribute the Underlying Securities of such Securities Issuer to the
Owners in proportion to their ownership of Receipts. Effective on the date of
such distribution, such class of Securities shall cease to be part of the
securities which must be deposited for issuance of Receipts.
(5) LIABILITY OF OWNER FOR TAXES.
----------------------------
If any tax or other governmental charge shall become payable with respect
to any Receipts or any Underlying Securities represented thereby, such tax or
other governmental charge shall be payable by the Owner hereof to the Trustee.
The Trustee
B-5
<PAGE>
shall refuse to effect any registration of transfer of such Receipts
or any withdrawal of Underlying Securities represented by such Receipt until
such payment is made, and may withhold any dividends or other distributions, or
may sell for the account of the Owner hereof Underlying Securities constituting
any multiples of the securities which must be deposited for issuance of
Receipts, and may apply such dividends or other distributions of the proceeds of
any such sale in payment of such tax or other charge and the Owner hereof shall
remain liable for any deficiency.
(6) WARRANTIES ON DEPOSIT OF SECURITIES.
-----------------------------------
Every Person depositing Securities under the Depositary Trust Agreement
shall be deemed thereby to represent and warrant that such Receipts and each
certificate therefor are validly issued and fully paid, that the person making
such deposit is duly authorized to do so and that at the time of delivery, such
Securities are free and clear of any lien, pledge, encumbrance, right, charge or
claim (other than the rights created by the Depositary Trust Agreement). Every
such person shall also be deemed to represent that such Securities are not, and
Receipts representing such Securities would not be, Restricted Securities. Such
representations and warranties shall survive the deposit of Securities, issuance
of Receipts or termination of the Depositary Trust Agreement.
(7) FILING PROOFS, CERTIFICATES AND OTHER INFORMATION.
-------------------------------------------------
Any person presenting Securities for deposit or any Owner of a Receipt may
be required from time to time to file with the Trustee such proof of citizenship
or residence, exchange control approval, or such information relating to the
registration on the books of any Securities Issuer or Securities Registrar, if
applicable, to execute such certificates and to make such representations and
warranties, as the Trustee may require. The Trustee may withhold the Delivery
or registration of transfer of any Receipts or the delivery of any Underlying
Securities until such proof or other information is filed or such certificates
are executed or such representations and warranties made.
(8) CHARGES OF TRUSTEE. The following charges shall be incurred by any party
------------------
depositing or withdrawing Securities or by any party Surrendering Receipts or to
whom Receipts are Delivered or any Owner, as applicable: (1) taxes and charges
and other fees payable in respect of the Underlying Securities assessed by
third-party custodians, depositories, transfer agents, and other service
providers in the ordinary course of their respective businesses (whether in
connection with the deposit of Securities or withdrawal of Underlying Securities
or otherwise), (2) a fee of $10 or less per 100 Receipts for the execution and
Delivery of Receipts pursuant to Section 2.5 of the Standard Terms, and the
Surrender of Receipts pursuant to Section 2.7 Standard Terms, and (3) a fee
which shall accrue on the first day of each calendar quarter at a rate of $.02
or less per Receipt per quarter for the Trustee's services as such under the
Depositary Trust Agreement (which fee shall be assessed against Owners of
B-6
<PAGE>
record as of the date or dates set by the Trustee in accordance with
Section 4.5 of the Standard Terms and shall be collected at the Trustee's
discretion by deducting such fee from one or more cash dividends or other
cash distributions); provided, however, that with respect to the aggregate
-------- -------
fee accrued in any calendar year under this clause (3) with respect to each
Receipt, the Trustee will waive that portion which exceeds the total cash
dividends and other cash distributions the record date for which falls in
such calendar year and payable with respect to such Receipt.
(9) TITLE TO RECEIPTS.
-----------------
It is a condition of the Receipts and every successive Owner of the
Receipts by accepting or holding a certificate for Receipts consents and agrees,
that title to such certificate (and the Receipts evidenced thereby) , when
properly endorsed or accompanied by proper instruments of transfer, is
transferable by delivery with the same effect as in the case of a negotiable
instrument under the laws of New York; provided, however, that the Trustee,
-------- -------
notwithstanding any notice to the contrary, may treat the person in whose name
Receipts are registered on the books of the Trustee as the absolute owner
thereof for the purpose of determining the person entitled to distribution or
dividends or other distributions or to any notice provided for in the Depositary
Trust Agreement and for all other purposes.
(10) VALIDITY OF RECEIPTS.
--------------------
Receipts shall not be entitled to any benefits under the Depositary Trust
Agreement or be valid or obligatory for any purpose, unless a certificate
evidencing such Receipts shall have been executed by the Trustee by the manual
or facsimile signature of a duly authorized signatory of the Trustee and, if a
Registrar for the Receipts shall have been appointed, countersigned by the
manual or facsimile signature of a duly authorized officer of the Registrar.
(11) REPORTS; INSPECTION OF TRANSFER BOOKS.
-------------------------------------
The issuer of each class of Securities is subject to the periodic reporting
requirements of the Securities Exchange Act of 1934 and, accordingly, files
certain reports with the Securities and Exchange Commission (herein called the
"Commission"). Such reports will be available for inspection and copying at the
public reference facilities maintained by the Commission located at 450 Fifth
Street, NW, Washington, DC 20549.
The Trustee shall, to the extent lawful, forward to Owners, any reports
and communications, including any proxy statement or other soliciting material,
received from a Securities Issuer which are received by the Trustee as the
holder of the Underlying Securities, unless such reports and communications have
been forwarded directly to Owners by such Securities Issuer.
B-7
<PAGE>
The Trustee shall keep books for the registration of Receipts and transfers
of Receipts which at all reasonable times shall be open for inspection by the
Owners.
(12) DIVIDENDS AND DISTRIBUTIONS.
---------------------------
Whenever the Trustee shall receive any cash dividend or other cash
distribution on any Underlying Securities, the Trustee shall, subject to the
Depositary Trust Agreement, distribute the amount thus received (net of the fees
of the Trustee as provided in the Depositary Trust Agreement, if applicable) to
the Owners of Receipts entitled thereto; provided, however, that in the event
-------- -------
that the respective Securities Issuer or the Trustee shall be required to
withhold and does withhold from such cash dividend or such other cash
distribution in respect of any Underlying Securities an amount on account of
taxes, the amount distributed to the Owners of the Receipts representing such
Underlying Securities shall be reduced accordingly.
Subject to the provisions of Sections 4.8 and 5.6 of the Standard Terms,
whenever the Trustee shall receive any distribution other than a distribution
described in Sections 4.1, 4.3 or 4.4 of the Standard Terms or a
distribution which would otherwise be distributed under the Depositary Trust
Agreement except that the Trustee deems such distribution not to be lawful and
feasiable, the Trustee shall, subject to Section 4.10 of the Standard Terms,
cause the securities or property received by it to be distributed to the Owners
of Receipts entitled thereto, in any manner that the Trustee may deem equitable
and practicable for accomplishing such distribution; provided, however, that if
-------- -------
in the opinion of the Trustee such distribution cannot be made proportionately
among the Owners of Receipts entitled thereto, or if for any other reason
(including, but not limited to, any requirement that a Securities Issuer or the
Trustee withhold an amount on account of taxes or other governmental charges or
that such securities must be registered under the Securities Act of 1933 in
order to be distributed to Owners) the Trustee deems such distribution not to be
feasible, the Trustee shall adopt such method as it deems equitable and
practicable for the purpose of effecting such distribution, including, but not
limited to, the public or private sale of the securities or property thus
received, or any part thereof, and the net proceeds of such sale (net of the
fees of the Trustee as provided in Section 5.6 of the Standard Terms) shall be
distributed by the Trustee to the Owners entitled thereto as in the case of a
distribution received in cash.
If any distribution upon any Underlying Securities consists of a dividend
in, or free distribution of, Securities, the Trustee shall, to the extent
lawful and feasible, retain such Securities under the Depositary Trust
Agreement, and, in such case, the (i) the amount of such Securities so retained
in respect of each Receipt shall be added to the classes and quantities of
securities which must be deposited for issuance of Receipts and (ii) the
number of Receipts in an Issuance Denomination may be increased
B-8
<PAGE>
or decreased by the Trustee to the lowest multiple of 100 Receipts such that no
fractional shares are thereby represented in such Issuance Denomination.
In the event that the Trustee determines that any distribution in property
(including Securities and rights to subscribe therefor) is subject to any tax or
other charge which the Trustee is obligated to withhold, notwithstanding
anything to the contrary in the Standard Terms or the applicable Depositary
Trust Agreement, the Trustee may by public or private sale dispose of all or a
portion of such property (including Securities and rights to subscribe therefor)
in such amounts and in such manner as the Trustee deems necessary and
practicable to pay any such taxes or charges and the Trustee shall distribute
the net proceeds or any such sale after deduction of such taxes or charges to
the Owners entitled thereto.
(13) RIGHTS OFFERINGS.
----------------
(a) If a Securities Issuer offers or cause to be offered to the holders of
any Underlying Securities any rights to subscribe for additional Securities or
other securities, the Trustee shall have discretion in accordance with Section
4.4 of the Standard Terms as to the procedure to be followed in making such
rights available to any Owners or in disposing of such rights on behalf of
Owners and making the net proceeds available to Owners or, if by the terms of
such rights offering or for any other reason (including the absence of an
effective registration statement covering the distribution of securities
underlying the rights), the Depositary may not make such rights available to any
Owners or dispose of such rights and make the net proceeds available to Owners,
then the Trustee shall allow the rights to lapse.
(b) The Trustee will not offer rights to Owners unless both the rights and
the securities to which such rights relate are either exempt from registration
under the Securities Act of 1933 with respect to a distribution to all Owners or
are registered under the provisions of such Act.
(c) The Trustee shall not be responsible for any failure to determine that
it may be lawful or feasible to make such rights available to Owners in general
or any Owner in particular.
(14) RECORD DATES.
------------
Whenever any cash dividend or other cash distribution shall become payable
or any distribution other than cash shall be made, or whenever the Trustee
receives notice of a meeting of or solicitation of proxies from holders of any
Underlying Securities, or whenever a fee shall be changed by the Trustee under
Section 5.6 of the Standard Terms, or whenever for any reason there is a
reconstitution or other event under the Depositary Trust Agreement that causes a
change in the composition of the Securities which must be
B-9
<PAGE>
deposited for issuance of Receipts, or whenever the Trustee shall find it
necessary or convenient in respect of any matter, the Trustee shall fix a record
date (a) for the determination of the Owners who shall be (i) entitled to
receive such dividend, distribution or rights or the net proceeds of the sale
thereof or (ii) entitled to give instructions for the exercise of voting rights
at any such meeting or solicitation, or (iii) required to pay such fee, or (b)
on or after which each Receipt will represent such changed group of Securities,
subject to the provisions of the Depositary Trust Agreement. In the case of
subsections (a)(i) and (a)(ii) of this Article (13), the Trustee shall use its
reasonable efforts to ensure that, to the extent practicable, the record date
set under the Depositary Trust Agreement will be the same as the record date set
by the Securities Issuer.
(15) VOTING OF UNDERLYING SECURITIES.
-------------------------------
Upon receipt by the Trustee or its appointed agent of notice of any meeting
of, or solicitation of proxies from, holders of Underlying Securities, the
Trustee shall, to the extent lawful, mail to the Owners a notice which shall
contain (a) such information as is contained in such notice of meeting or
solicitation, (b) a statement that the Owners of Receipts as of the close of
business on a specified record date will be entitled, subject to applicable law
and the provisions of the corporate documents of the Securities Issuer, to
instruct the Trustee as to the exercise of the voting rights, if any, or giving
of proxies, as applicable, in respect of the amount of Underlying Securities
represented by their respective Receipts and (c) a statement as to the manner in
which such instructions may be given. Upon the written request of an Owner of a
Receipt on such record date, received on or before the date established by the
Trustee, the Trustee shall endeavor, insofar as practicable, to vote or cause to
be voted, or to give a proxy, as applicable, in respect of the amount of
Underlying Securities represented by such Receipt in accordance with the
instructions set forth in such request. The Trustee shall not vote or attempt
to exercise the right to vote that attaches to, or give a proxy with respect to,
Underlying Securities other than in accordance with such instructions.
(16) CHANGES AFFECTING UNDERLYING SECURITIES.
---------------------------------------
(a) In circumstances where the provisions of Sections 2.11 and 4.3 of the
Standard Terms do not apply, upon any change in nominal value, change in par
value, split-up, consolidation or any other reclassification of any Underlying
Securities, or upon any recapitalization, reorganization, merger or
consolidation or sale of assets affecting the issuer of any Underlying Security,
if the relevant Securities Issuer survives such event, the Trustee shall, to the
extent lawful and feasible, retain such Securities under the Depositary Trust
Agreement, and, in such case, the (A) the amount of such Securities so retained
in respect of each Receipt shall be added to the classes and quantities of
Securities which must be deposited for issuance of Receipts and (B) the number
of Receipts in an Issuance Denomination may be increased or decreased
B-10
<PAGE>
by the Trustee to the lowest multiple of 100 Receipts such that no fractional
shares are thereby represented in such Issuance Denomination.
(b) Securities of any class which are surrendered by the Trustee in
connection with any such conversion or exchange shall, effective on the date of
such surrender, no longer be part of the securities which must be deposited for
issuance of Receipts. In any such case, or in the case of an event to which
Section 2.11 of the Standard Terms applies, the Trustee may call for the
Surrender of outstanding certificates evidencing Receipts to be exchanged for
new certificates specifically describing any applicable change in the classes
and quantities of securities which must be deposited for issuance of
Receipts.
(17) LIABILITY OF THE INITIAL DEPOSITOR AND THE TRUSTEE.
--------------------------------------------------
Neither the Initial Depositor nor the Trustee nor any of their respective
directors, employees, agents or affiliates shall incur any liability to any
Owner or Beneficial Owner of any Receipt, if by reason of any provision of any
present or future law or regulation of the United States or any other country,
or of any governmental or regulatory authority or stock exchange, or by reason
of any act of God or war or other circumstances beyond its control, the Initial
Depositor or the Trustee shall be prevented or forbidden from, or be subject to
any civil or criminal penalty on account of, doing or performing any act or
thing which by the terms of the Standard Terms or the applicable Depositary
Trust Agreement it is provided shall be done or performed; nor shall the Initial
Depositor or the Trustee incur any liability to any Owner or Beneficial Owner of
any Receipt by reason of any non-performance or delay, caused as aforesaid, in
the performance of any act or thing which by the terms of the Standard Terms or
the applicable Depositary Trust Agreement it is provided shall or may be done or
performed, or by reason of any exercise of, or failure to exercise, any
discretion provided for in the Standard Terms or the applicable Depositary Trust
Agreement. Where, by the terms of an offering or distribution to which
Sections 2.11, 4.2 or 4.4 of the Standard Terms applies, or for any
other reason, it is not lawful and feasible to make such distribution or
offering available to Owners, and the Trustee may not dispose of such
distribution or offering on behalf of such Owners and make the net proceeds
available to such Owners, then the Trustee shall not make such distribution or
offering available to Owners and shall allow any rights, if applicable, to
lapse. The Trustee shall not be subject to any liability with respect to the
validity or worth of the Underlying Securities. Neither the Initial Depositor
nor the Trustee shall be under any obligation to prosecute any action, suit or
other proceeding in respect of any Underlying Securities or in respect of the
Receipts. Neither the Initial Depositor nor the Trustee shall be liable for any
action or non-action by it in reliance upon the advice of or information
from legal counsel, accountants, any person presenting Securities for deposit,
any Owner or Beneficial Owner, or any other person believed by it in good faith
to be competent to give such advice or information.
B-11
<PAGE>
The Trustee shall not be liable for any acts or omissions made by a successor
depositary whether in connection with a previous act or omission of the Trustee
or in connection with any matter arising wholly after the resignation of the
Trustee, provided that in connection with the issue out of which such potential
liability arises the Trustee performed its obligations without negligence or bad
faith while it acted as Trustee. The Trustee shall not be responsible for any
failure to carry out any instructions to vote any of the Underlying Securities,
or for the manner in which any such vote is cast or the effect of any such vote,
provided that any such action or non-action is without negligence or bad faith.
Except as specifically provided in Section 4.6 of the Standard Terms, the
Trustee shall have no obligation to monitor or to obtain any information
concerning the business or affairs of any Securities Issuer or to advise Owners
or Beneficial Owners of any event or condition affecting any Securities Issuer.
The Trustee shall have no obligation to comply with any direction or instruction
from any Owner or Beneficial Owner regarding Receipts except to the extent
specifically provided in the Standard Terms or any applicable Depositary Trust
Agreement. The Trustee shall be a fiduciary under the Standard Terms and the
applicable Depositary Trust Agreement; provided, however, that the fiduciary
duties and responsibilities and liabilities of the Trustee shall be limited by,
and shall be only those specifically set forth in, the Standard Terms and the
applicable Depositary Trust Agreement. No disclaimer of liability under the
Securities Act of 1933 is intended by any provision of the Depositary Trust
Agreement.
(18) RESIGNATION OR REMOVAL OF THE TRUSTEE.
-------------------------------------
(a) The Trustee may at any time resign as Trustee under the Depositary
Trust Agreement by written notice of its election so to do, delivered to the
Initial Depositor, and such resignation shall take effect upon the appointment
of a successor Trustee and its acceptance of such appointment.
(b) If at any time the Trustee is in material breach of its obligations
under the Depositary Trust Agreement and the Trustee fails to cure such breach
within 30 days after receipt by the Trustee of written notice from the Initial
Depositor or the Owners of 25% or more of the outstanding Receipts
specifying such default and requiring the Trustee to cure such default, the
Initial Depositor, acting on behalf of the Owners, may remove the Trustee by
written notice delivered to the Trustee, and such removal shall take effect upon
the appointment of the successor Trustee and its acceptance of such appointment.
(c) In case at any time the Trustee acting hereunder shall resign or be
removed, the Initial Depositor, acting on behalf of the Owners, shall use its
reasonable efforts to appoint a successor Trustee, which shall be a bank or
trust company having an office in the Borough of Manhattan, The City of New
York.
B-12
<PAGE>
(19) AMENDMENT.
---------
The Trustee and the Initial Depositor may amend any provisions of the
Depositary Trust Agreement without the consent of any Owner. Any amendment that
imposes or increases any fees or charges (other than taxes and other
charges, registration fees or other such expenses), or that otherwise
prejudices any substantial existing right of the Owners will not become
effective until 30 days after notice of such amendment is given to the Owners.
Every Owner and Beneficial Owner, at the time any amendment so becomes
effective, shall be deemed, by continuing to hold any Receipt or an interest
therein, to consent and agree to such amendment and to be bound by the
Depositary Trust Agreement as amended thereby. In no event shall any amendment
impair the right of the Owner of any Receipt to Surrender such Receipt and
receive therefor the Underlying Securities represented thereby, except in order
to comply with mandatory provisions of applicable law.
B-13
<PAGE>
(20) EARLY TERMINATION OF DEPOSITARY TRUST AGREEMENT.
-----------------------------------------------
(a) The Trust shall terminate by the Trustee mailing notice of such
termination to the Owners of all Receipts then outstanding at least 30 days
prior to the date set for termination if any of the following occurs:
(i) The Trustee is notified that the Receipts are delisted from a
national securities exchange and are not approved for listing on another
national securities exchange within 5 business days of their
delisting;
(ii) Owners of at least 75% of the outstanding Receipts notify the
Trustee that they elect to terminate the Trust; or
(iii) 60 days shall have expired after the Trustee shall have
delivered to the Initial Depositor and the Owners a written notice of its
election to resign and a successor trustee shall not have been appointed
and accepted its appointment.
(b) On and after the date of termination, the Owner of a Receipt will, upon
(a) Surrender of such Receipt at the Corporate Trust Office of the Trustee, (b)
payment of the fee of the Trustee for the Surrender of Receipts referred to in
Section 2.7 of the Standard Terms, and (c) payment of any applicable taxes or
charges, be entitled to Delivery, to him or upon his order, of the amount of
Underlying Securities evidenced by such Receipt. If any Receipts shall remain
outstanding after the date of termination, the Trustee thereafter shall
discontinue the registration of transfers of Receipts, shall suspend the
distribution of dividends or other distribution to the Owners thereof, and shall
not give any further notices or perform any further acts under these Standard
Terms or the applicable Depositary Trust Agreement, except that the Trustee
shall continue to collect dividends and other distributions pertaining to
Underlying Securities and hold the same uninvested and without liability for
interest, shall sell rights as provided in these Standard Terms or the
applicable Depositary Trust Agreement, and shall continue to deliver Underlying
Securities, together with any dividends or other distributions received with
respect thereto and the net proceeds of the sale of any rights or other
property, in exchange for Receipts Surrendered to the Trustee (after deducting
or upon payment of, in each case, the fee of the Trustee set forth in 5.6 of the
Standard Terms for the Surrender of Receipts, any expenses for the account of
the Owner of such Receipts in accordance with the terms and conditions of the
Depositary Trust Agreement, and any applicable taxes or charges). At any time
after the expiration of one year following the date of termination, the Trustee
may sell the Underlying Securities then held hereunder and may thereafter hold
uninvested the net proceeds of any such sale, together with any other cash then
held by it hereunder, unsegregated and without liability for interest, for the
pro rata benefit of the Owners of Receipts which have not theretofore been
- --- ----
Surrendered, such Owners thereupon becoming general creditors of the Trustee
with respect to such net proceeds.
B-14
<PAGE>
After making such sale, the Trustee shall be discharged from all obligations
under these Standard Terms with respect to the Receipts and the applicable
Depositary Trust Agreement, except to account for such net proceeds and other
cash (after deducting, in each case, the fee of the Trustee for the Surrender of
Receipts, any fees of the Trustee due and owing from the Owner of such Receipts
pursuant to Section 5.6 of the Standard Terms, any expenses for the account of
the Owner of such Receipts in accordance with the terms and conditions of the
Depositary Trust Agreement, and any applicable taxes or charges). Upon the
termination of the applicable Depositary Trust Agreement, the Initial Depositor
shall be discharged from all obligations under such Depositary Trust Agreement
except for its obligations to the Trustee under Section 5.5 of the Standard
Terms.
B-15
<PAGE>
EXHIBIT 5.1
September 1, 1999
Merrill Lynch, Pierce, Fenner & Smith Incorporated
250 Vesey Street
New York, New York 10281
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Internet HOLDRs_ Trust
Registration Statement on Form S-1
Registration No. 333-78575
--------------------------
Ladies and Gentlemen:
We are acting as counsel to Merrill Lynch, Pierce, Fenner & Smith
Incorporated, a Delaware corporation (the "Initial Depositor"), and as special
counsel to the Internet HOLDRs_ Trust (the "Trust") in connection with the
preparation and filing with the Securities and Exchange Commission (the
"Commission") of the Registration Statement on Form S-1, as amended from time to
time and filed by the Initial Depositor (the "Registration Statement"), of which
the prospectus forms a part (the "Prospectus"), for the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of 1,000,000,000
Internet HOLDRs_ (the "HOLDRs_") to be issued by the Trust.
In this capacity, we have examined (a) a signed copy of the
Registration Statement and (b) a copy of the depositary trust agreement, to be
signed on September 1, 1999 between The Bank of New York, as trustee (the
"Trustee"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial
depositor (the "Depositary Trust Agreement"). We have also examined originals,
or copies certified or otherwise identified to our satisfaction, of such other
corporate records of the Initial Depositor, such other certificates and advice
of public officials and of officers of the Initial Depositor, including
resolutions of the Board of Directors of the Initial Depositor, and such other
agreements, instruments and documents as we have deemed necessary as a basis for
the opinions expressed below. In such examination we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, and the conformity with the originals of all documents submitted
to us as copies. As to questions of fact material to such opinions, we have
relied upon such certificates and advice. The opinions set forth below are also
based upon the assumptions that: (i) the Registration Statement, as finally
amended (including any post-effective amendments), has become effective under
the Securities Act; (ii) the amount, price, and other principal terms of the
HOLDRs_ have been approved by the Board of Directors of the Initial Depositor or
an authorized designee thereof; (iii) the Depositary Trust Agreement will be
duly authorized, executed and delivered by the parties thereto
<PAGE>
substantially in the form filed as an exhibit to the Registration Statement; and
(iv) the HOLDRs_ will be duly authenticated by the Trustee in accordance with
the Depositary Trust Agreement and sold and delivered by the Initial Depositor
against payment therefor.
Our opinions expressed herein are limited to the laws of the State of
New York, and the Federal law of the United States, and we do not express any
opinion herein concerning any other law.
Based upon and subject to the foregoing, and having regard for such
legal considerations as we have deemed relevant, we are of the opinion that the
HOLDRs_ will be legally issued, fully paid and nonassessable, will be legal,
valid and binding obligations of the Trust, enforceable against the Trust in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and except as enforcement thereof is
subject to general principles of equity (regardless of whether enforcement is
considered in a proceeding at law or in equity).
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
matters" in the Prospectus. In giving this consent, we do not thereby concede
that we come within the category of persons whose consent is required by the
Securities Act or the General Rules and Regulations promulgated thereunder.
The opinions expressed above are given only as of the date hereof, and
we do not assume (and shall not have) any obligation to update such opinions.
Very truly yours,
/s/ Shearman & Sterling
<PAGE>
EXHIBIT 8.1
Shearman & Sterling
202/508-8000
September 1, 1999
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower - 4th Floor
New York, NY 10281
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Internet HOLDRs_ Trust
Registration Statement on Form S-1
Registration No. 333-78575
Dear Ladies and Gentlemen:
We have acted as special Tax Counsel to Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"), as Initial Depositor, and the Internet
HOLDRs_ Trust in connection with the preparation and filing of a Prospectus and
Registration Statement on Form S-1, No. 333-78575, as amended from time to time
and filed by the Initial Depositor (the "Registration Statement"), of which the
prospectus forms a part (the "Prospectus"), for the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of 1,000,000,000
Internet HOLDRs_ to be issued by the Trust. Capitalized terms used herein have
the meaning ascribed to them in the Prospectus. The Internet HOLDRs_ are being
issued pursuant to the Depositary Trust Agreement between the Initial Depositor,
The Bank of New York, as trustee (in such capacity, the "Trustee"), other
depositors and owners of Internet HOLDRs_ to be dated as of September 1, 1999
(the Trust Agreement").
In connection with the preparation of this opinion, we have examined and
relied on such documents as we have deemed appropriate, including, inter alia,
(i) the Trust Agreement and (ii)
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2
the Prospectus. We have made such investigations of law as we have deemed
appropriate as a basis for the opinion expressed below.
Based on the forgoing, it is our opinion that the Trust will provide for
flow through tax consequences since it will be treated as a grantor trust or
custodial arrangement for United States Federal income tax purposes. Morever,
the discussion set forth under the caption "Federal Income Tax Consequences" in
the Prospectus represents our opinion of and, subject to the limitations
contained therein, accurately describes, the principal United States Federal
income tax consequences to a holder of Internet HOLDRs_ receipts. The foregoing
opinion is based upon provisions of the Internal Revenue Code of 1986, as
amended, Treasury regulations and administration and judicial interpretations as
of the date hereof (all of which are subject to change, possibly with
retroactive effect, or different interpretations).
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to our firm ounder the caption "Legal Matters" in
the Prospecuts.
Very truly yours,
s// Shearman & Sterling
