<PAGE>
As filed with the Securities and Exchange Commission on December 21, 1999.
Registration No. 333-92161
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
AMENDMENT NO. 1
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)
----------------
Pharmaceutical HOLDRs SM Trust
yet-to-be formed
[Issuer with respect to the receipts]
Delaware 6211 13-5674085
(Primary Standard (I.R.S. Employer
(State or other Industrial Identification Number)
jurisdiction Classification Code
of incorporation or Number)
organization)
----------------
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
<TABLE>
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<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>
Pharmaceutical HOLDRs... 1,000,000,000 $100 $299,800,000 $79,148
receipts
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act. 2,000,000 receipts are
estimated to be offered in the initial offering at $100 per receipt and
998,000,000 receipts are estimated to be offered continuously after the
initial offering at $0.10 per receipt.
(2) 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.
(3) Merrill Lynch, Pierce, Fenner & Smith Incorporated previously paid on
December 6, 1999, $2,640 of this registration fee for 100,000 receipts
based on a proposed maximum offering price of $100 per receipt.
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>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We +
+have filed a registration statement relating to these receipts with the +
+Securities and Exchange Commission. We cannot sell these receipts until the +
+registration statement becomes effective. This prospectus is not an offer to +
+sell these receipts and we are not soliciting offers to buy these receipts in +
+any state where such offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
Preliminary Prospectus dated December 21, 1999
PROSPECTUS
[LOGO]
PHARMACEUTICAL
HOLDERs SM
HOLding Company Depositary Receipts SM
1,000,000,000 Depositary Receipts
Pharmaceutical HOLDRsSM Trust
The Pharmaceutical HOLDRsSM Trust will issue Depositary Receipts called
Pharmaceutical HOLDRsSM representing your undivided beneficial ownership in the
U.S.-traded common stock of a group of 20 specified companies that are involved
in various segments of the pharmaceutical industry. The Bank of New York will
be the trustee. You only may acquire, hold or transfer Pharmaceutical HOLDRs in
a round-lot amount of 100 Pharmaceutical HOLDRs or round-lot multiples.
Pharmaceutical HOLDRs are separate from the underlying deposited common stocks
that are represented by the Pharmaceutical HOLDRs. For a list of the names and
the number of shares of the companies that make up a Pharmaceutical HOLDRs, see
"Highlights of Pharmaceutical HOLDRs--The Pharmaceutical HOLDRs" starting on
page 8. The trust will issue the additional Pharmaceutical HOLDRs on a
continuous basis after the initial distribution.
Investing in Pharmaceutical HOLDRs involves significant risks. See "Risk
factors" starting on page 4.
The initial public offering price for a round-lot of 100 Pharmaceutical
HOLDRs will equal the sum of the closing market price on the primary trading
market on the pricing date for each deposited share multiplied by the share
amount specified in this prospectus, plus an underwriting fee.
Pharmaceutical HOLDRs are neither interests in nor obligations of either
the initial depositor, Merrill Lynch, Pierce, Fenner & Smith Incorporated, or
The Bank of New York, as trustee.
Prior to this issuance, there has been no public market for Pharmaceutical
HOLDRs. Application has been made to list the Pharmaceutical HOLDRs on the
American Stock Exchange under the symbol "PPH".
-----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
<TABLE>
<CAPTION>
Initial Price Underwriting
to Public* Fee
------------- ------------
<S> <C> <C>
Per Pharmaceutical HOLDR...................... 2%
</TABLE>
-----
* Includes underwriting fee.
For purchases of Pharmaceutical HOLDRs in excess of Pharmaceutical
HOLDRs, the underwriting fee will be %.
-----------
Merrill Lynch & Co.
-----------
The date of this prospectus is , 2000.
"HOLDRs" and "HOLding Company Depositary Receipts" are service marks of Merrill
Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................... 3
Risk factors............................................................... 4
Highlights of Pharmaceutical HOLDRs........................................ 9
The trust.................................................................. 15
Description of Pharmaceutical HOLDRs....................................... 15
Description of the underlying securities................................... 16
Description of the depositary trust agreement.............................. 18
Federal income tax consequences............................................ 21
ERISA considerations....................................................... 22
Plan of distribution....................................................... 22
Year 2000.................................................................. 23
Legal matters.............................................................. 24
Where you can find more information........................................ 24
</TABLE>
----------------
This prospectus contains information you should consider when making your
investment decision. With respect to information about Pharmaceutical 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 Pharmaceutical HOLDRs in any
jurisdiction where the offer or sale is not permitted.
2
<PAGE>
SUMMARY
The Pharmaceutical HOLDRs trust will be formed under the depositary trust
agreement, dated as of January , 2000 among The Bank of New York, as trustee,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the
owners of the Pharmaceutical 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
pharmaceutical industry. The number of shares of each common stock held by the
trust with respect to each round-lot of Pharmaceutical HOLDRs is specified
under "Highlights of Pharmaceutical HOLDRs-The Pharmaceutical 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 Pharmaceutical HOLDRs that represent your undivided
beneficial ownership interest in the shares of common stock held by the trust
on your behalf. The Pharmaceutical HOLDRs are separate from the underlying
common stocks that are represented by the Pharmaceutical HOLDRs.
3
<PAGE>
RISK FACTORS
An investment in Pharmaceutical HOLDRs involves risks similar to
investing in each of the underlying securities outside of the Pharmaceutical
HOLDRs, including the risks associated with concentrated investments in the
pharmaceutical industry.
General Risk Factors
. Loss of investment. Because the value of Pharmaceutical HOLDRs
directly relates to the value of the underlying securities, you
may lose all or a substantial portion of your investment in the
Pharmaceutical HOLDRs if the underlying securities decline in
value.
. Discount trading price. Pharmaceutical HOLDRs may trade at a
discount to the aggregate value of the underlying securities.
. Not necessarily representative of the pharmaceutical
industry. While the underlying securities are common stocks of
companies generally considered to be involved in various segments
of the pharmaceutical industry, the underlying securities and the
Pharmaceutical HOLDRs may not necessarily follow the price
movements of the entire pharmaceutical industry generally. If the
underlying securities decline in value, your investment in the
Pharmaceutical HOLDRs will decline in value even if common stock
prices in the pharmaceutical 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
pharmaceutical industry. In this case, the Pharmaceutical HOLDRs
may no longer consist of securities issued only by companies
involved in the pharmaceutical industry.
. No investigation of underlying securities. The underlying
securities included in the Pharmaceutical 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 pharmaceutical industry, without regard for
the value, price performance, volatility or investment merit of
the underlying securities. The Pharmaceutical 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, Pharmaceutical HOLDRs may not necessarily
continue to be a diversified investment in the pharmaceutical
industry. As a result of market fluctuation and/or reconstitution
events, Pharmaceutical 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 Pharmaceutical HOLDRs and
receive delivery of each of the underlying securities. The
cancellation of your Pharmaceutical HOLDRs will allow you to sell
individual underlying securities or to deliver individual
underlying securities in a tender offer. If you choose not to
cancel your Pharmaceutical HOLDRs you cannot participate in a
tender offer relating to an underlying security. The cancellation
of Pharmaceutical HOLDRs will involve payment of a cancellation
fee to the trustee.
4
<PAGE>
Currently some of the underlying securities of the
Pharmaceutical HOLDRs are the subject of, or are involved in, a
tender offer. For example: (1) Pfizer Inc. filed on November 15,
1999 a registration statement on Form S-4 in an effort to acquire
the outstanding shares of common stock of Warner-Lambert Company
and (2) American Home Products Corporation has entered into an
Agreement and Plan of Merger with Warner-Lambert Company and on
December 20, 1999, filed a registration statement on Form S-4
whereby each outstanding share of Warner-Lambert common stock will
convert into shares of AmericanWarner common stock. There are no
assurances that either of these tender offers will be completed.
For more detail on the underlying securities mentioned above, see
"Annex A." In addition, it is likely that other tender offers for
some of the underlying securities of the Pharmaceutical HOLDRs
will be made in the future.
. Trading halts. Trading in Pharmaceutical 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 Pharmaceutical HOLDRs
even though there is trading in some of the underlying securities,
however, you will be able to cancel your Pharmaceutical HOLDRs to
receive the underlying securities.
. 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
Pharmaceutical HOLDRs. If the Pharmaceutical HOLDRs are delisted
by the American Stock Exchange, a termination event will result if
the Pharmaceutical HOLDRs are not listed for trading on another
national securities exchange or through NASDAQ within five
business days from the date the Pharmaceutical HOLDRs are
delisted.
. Possible conflicts of interest. Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as initial depositor, has selected 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 included in the Pharmaceutical HOLDRs,
the selection of the pharmaceutical industry, Merrill Lynch's
activity in the secondary market in the underlying securities, and
the creation and cancellation of Pharmaceutical 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 Pharmaceutical HOLDRs, particularly in connection with
the initial issuance of Pharmaceutical 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
securities may decline after these purchases as the volume of
purchases subsides. This in turn is likely to have an immediate,
adverse effect on the trading price of Pharmaceutical HOLDRs.
Risk Factors Specific to the Pharmaceutical Industry
. Pharmaceutical company stock prices have been and will likely
continue to be extremely volatile. Pharmaceutical companies stock
prices could be subject to wide fluctuations in response to a
variety of factors, including:
5
<PAGE>
. announcements of technological innovations or new commercial
products;
. developments in patent or proprietary rights;
. government regulatory initiatives;
. public concern as to the safety or other implications of
pharmaceutical products;
. fluctuations in quarterly and annual financial results; and
. market conditions.
. Pharmaceutical companies face uncertainty with respect to pricing
and third party reimbursement. The ability of many pharmaceutical
companies to commercialize current and any future products depends
in part on the extent to which reimbursement for the cost of such
products and related treatments are available from government
health agencies, private health insurers and other third-party
payors. Third-party payors are increasingly challenging the price
and cost-effectiveness of medical products. Significant
uncertainty exists as to the reimbursement status of health care
products, and there can be no assurance that adequate third-party
coverage will be available for pharmaceutical companies to obtain
satisfactory price levels for their products. Government and other
third-party payors are increasingly attempting to contain health
care costs by a variety of means, including limiting both the
degree of coverage and the level of reimbursement for new
therapeutic products. If pharmaceutical companies do not obtain
adequate coverage and reimbursement levels from government and
third-party payors for use of existing and potential products, the
costs and market acceptance of their products could be adversely
affected.
. Protection of patent and proprietary rights of pharmaceutical
companies is difficult and costly. The success of many
pharmaceutical companies is highly dependent on their ability to
obtain patents, to defend their existing patents and trade secrets
and to operate in a manner that does not infringe the proprietary
rights of other pharmaceutical companies. Patent disputes are
frequent and can preclude the successful commercial introduction
of products and technologies. As a result, there is significant
litigation in the pharmaceutical industry regarding patent and
other intellectual property rights. Litigation is costly, diverts
resources and can subject a pharmaceutical company to significant
liabilities to third parties. In addition, a pharmaceutical
company could be forced to obtain costly third-party licenses or
cease using the technology or product in dispute.
. Many pharmaceutical companies face intense competition from new
products and less costly generic products. The pharmaceutical
industry is highly competitive and rapidly changing. Many
pharmaceutical companies are major international corporations with
substantial resources for research and development, production and
marketing. Proprietary pharmaceutical products, which are products
under patent protection, face intense competition from other
competitors' similar proprietary products and many pharmaceutical
companies also face increasing competition from similar generic
products. Generic pharmaceutical competitors generally are able to
obtain regulatory approval for drugs no longer covered by patents
without investing in costly and time-consuming clinical trials,
and need only demonstrate that their product is equivalent to the
drug they wish to copy. As a result of their substantially reduced
developments costs, generic pharmaceutical products are sold at
lower prices than the original proprietary product. The
introduction of a generic product can significantly reduce
revenues received from a patented pharmaceutical product.
. Research and development efforts may not result in successful
products. A pharmaceutical company's success depends on its
ability to commit substantial resources to research and
development and to obtain regulatory approval to market new
pharmaceutical products. Development of a product requires
substantial technical, financial and human resources and
6
<PAGE>
the research and development process often takes 10 or more years
from discovery to commercial product launch. This process is
conducted in various stages, and during each stage there is a
substantial risk that a pharmaceutical company will not achieve
its goals and will have to abandon a product in which it has
invested substantial amounts. A pharmaceutical company may choose
product candidates that are unsuccessful, unable to be developed
in a timely manner or that require excessive resources to bring to
market. Delays or unanticipated increases in costs of development
at any stage of development, or failure to obtain regulatory
approval or market acceptance of products could adversely affect a
pharmaceutical company's results and financial condition.
. Pharmaceutical companies must keep pace with rapid technological
change to remain competitive. The pharmaceutical industry is
highly competitive and is subject to rapid and significant
technological change. The success of a pharmaceutical company will
depend in large part on its ability to maintain a competitive
position, measured largely by the effectiveness and marketing of
its products. Any technological advancement, product or process
that these companies develop may become obsolete before research
and development expenses are recovered.
. Pharmaceutical companies are subject to extensive government
regulation. Pharmaceutical products offered by pharmaceutical
companies are subject to strict regulation by governmental
regulatory authorities in countries throughout the world. Products
require extensive pre-clinical testing and other testing, clinical
trials, government review and final approval before any marketing
of the products will be permitted. This procedure could take a
number of years and involves the expenditure of substantial
resources. The success of a pharmaceutical company's products will
depend, in part, upon obtaining and maintaining regulatory
approval to market products and, once approved, complying with the
continued review by regulatory agencies. For instance, the Food
and Drug Administration (FDA), the agency which regulates and
investigates drugs in the United States, can take as long as eight
to nine years after an application is originally filed to approve
a new drug application. The manufacturing process for
pharmaceutical products is also highly regulated and
pharmaceutical companies are subjected to periodic inspection of
manufacturing facilities by regulatory agencies in many countries.
Regulatory agencies may shut down manufacturing facilities that
they find do not comply with regulations. The failure to obtain
necessary government approvals, the restriction of existing
approvals, loss of or changes to previously obtained approvals or
the failure to comply with regulatory requirements could result in
fines, unanticipated expenditures, product delays, non-approval or
recall, interruption of production and even criminal prosecution.
. Pharmaceutical companies may be exposed to extensive product
liability costs. Product liability is a significant commercial
risk for many pharmaceutical companies. Substantial damage awards
have been granted in several jurisdiction against pharmaceutical
companies based upon claims for injuries allegedly caused by the
use of their products. Many pharmaceutical companies obtain
product liability insurance; however, a single product liability
claim could exceed the coverage limits of a pharmaceutical
company. Further, there can be no assurance that a pharmaceutical
company will be able to obtain or maintain its product liability
insurance, that it will continue to be able to obtain adequate
product liability insurance on reasonable terms or that any
product liability insurance obtained will provide adequate
coverage against potential liabilities. The business, financial
condition and results of operations of a pharmaceutical company
could be materially and adversely affected by one or more
successful product liability claims.
. Many pharmaceutical companies are dependent on key personnel for
success. The success of many pharmaceutical companies is highly
dependent on the experience, abilities, and continued services of
key executive officers and key scientific and technical personnel.
If
7
<PAGE>
these companies lose the services of any of these officers or key
scientific and technical personnel, their future success could be
undermined. The success of many pharmaceutical companies also
depends upon their ability to attract and retain other highly
qualified scientific, technical, sales and manufacturing personnel
and their ability to develop and maintain relationships with
qualified clinical researchers. Competition for such personnel and
relationships is intense and many of these companies compete with
each other and with universities and non-profit research
organizations. There is no certainty that any of these
pharmaceutical companies will be able to continue to attract and
retain qualified personnel or develop and maintain relationships
with clinical researchers.
8
<PAGE>
HIGHLIGHTS OF PHARMACEUTICAL HOLDRs
This discussion highlights information regarding Pharmaceutical HOLDRs;
we present certain information more fully in the rest of this prospectus. You
should read the entire prospectus carefully before you purchase Pharmaceutical
HOLDRs.
Issuer.......................
Pharmaceutical HOLDRs Trust.
The trust....................
The Pharmaceutical HOLDRs Trust will be formed
under the depositary trust agreement, dated as
of January , 2000 among The Bank of New York,
as trustee, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, other depositors and the
owners of the Pharmaceutical 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 Pharmaceutical
HOLDRs................. Pharmaceutical HOLDRs are designed to achieve
the following:
Diversification. Pharmaceutical HOLDRs are
designed to allow you to diversify your
investment in the pharmaceutical industry
through a single, exchange-listed instrument
representing your undivided beneficial
ownership of the underlying securities.
Flexibility. The beneficial owners of
Pharmaceutical HOLDRs have undivided beneficial
ownership interests in each of the underlying
securities represented by the Pharmaceutical
HOLDRs, and can cancel their Pharmaceutical
HOLDRs to receive each of the underlying
securities represented by the Pharmaceutical
HOLDRs.
Transaction costs. The expenses associated with
trading Pharmaceutical 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
pharmaceutical 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 Pharmaceutical 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.
9
<PAGE>
The Pharmaceutical HOLDRs....
The trust will issue Pharmaceutical HOLDRs that
represent your undivided beneficial ownership
interest in the shares of U.S.-traded common
stock held by the trust on your behalf. The
Pharmaceutical HOLDRs themselves are separate
from the underlying securities that are
represented by the Pharmaceutical HOLDRs.
The specific share amounts for each round-lot
of 100 Pharmaceutical HOLDRs are set forth in
the chart below and were determined on December
15, 1999 so that the initial weightings of each
underlying security included in the
Pharmaceutical HOLDRs approximated 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 December
15, 1999 and the date the Pharmaceutical 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 the Pharmaceutical
HOLDRs,
. stock ticker symbols,
. share amounts represented by a round-lot of
100 Pharmaceutical HOLDRs,
. initial weightings as of December 15, 1999
and
. the principal market on which the shares of
common stock of the selected companies are
traded.
<TABLE>
<CAPTION>
Primary
Share Initial Trading
Name of Company Ticker Amounts Weighting Market
-------------------------- ------ ------- --------- -------
<S> <C> <C> <C> <C>
Merck & Co., Inc. MRK 22 17.50% NYSE
Pfizer Inc. PFE 36 13.75% NYSE
Johnson & Johnson JNJ 13 13.72% NYSE
Bristol-Myers Squibb
Company BMY 18 13.37% NYSE
Eli Lilly & Company LLY 10 7.63% NYSE
Warner-Lambert Company WLA 8 7.56% NYSE
Schering-Plough
Corporation SGP 14 7.04% NYSE
American Home Products
Corporation AHP 12 6.38% NYSE
Abbott Laboratories ABT 14 5.45% NYSE
Pharmacia & Upjohn, Inc. PNU 5 3.02% NYSE
Biovail Corporation
International BVF 1 0.83% NYSE
King Pharmaceuticals, Inc. KING 1 0.61% NASDAQ
Forest Laboratories, Inc. FRX 1 0.60% NYSE
Andrx Corporation ADRX 1 0.48% NASDAQ
Allergan, Inc. AGN 1 0.47% NYSE
Jones Pharma Inc. JMED 1 0.45% NASDAQ
Watson Pharmaceuticals,
Inc. WPI 1 0.40% NYSE
ICN Pharmaceuticals, Inc. ICN 1 0.27% NYSE
Mylan Laboratories, Inc. MYL 1 0.25% NYSE
IVAX Corporation IVX 1 0.22% AMEX
</TABLE>
10
<PAGE>
These companies generally are considered to be
among the 20 largest and most liquid companies
with U.S.-traded common stock involved in the
pharmaceutical industry as measured by market
capitalization and trading volume on December
15, 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,
Pharmaceutical HOLDRs in a round-lot of 100
Pharmaceutical HOLDRs and round-lot multiples.
The trust will only issue Pharmaceutical HOLDRs
upon the deposit of the whole shares
represented by a round-lot of 100
Pharmaceutical HOLDRs. In the event that a
fractional share comes to be represented by a
round-lot of Pharmaceutical HOLDRs, the trust
may require a minimum of more than one round-
lot of 100 Pharmaceutical HOLDRs for an
issuance so that the trust will always receive
whole share amounts for issuance of
Pharmaceutical HOLDRs.
The number of outstanding Pharmaceutical 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 Pharmaceutical 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
Pharmaceutical HOLDRs will equal the sum of the
closing market price on the primary trading
market 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
Pharmaceutical 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 purchase Pharmaceutical 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 Pharmaceutical HOLDRs
or fewer, 2%.
. For purchases in excess of
Pharmaceutical HOLDRs, %.
You will not be charged any issuance fee or
other sales commission in connection with
purchases of Pharmaceutical HOLDRs made in the
initial public offering.
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<PAGE>
Issuance and cancellation
fees........................
After the initial offering, if you wish to
create Pharmaceutical HOLDRs by delivering to
the trust the requisite shares of common stock
represented by a round-lot of 100
Pharmaceutical 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
Pharmaceutical HOLDRs. If you wish to cancel
your Pharmaceutical 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
Pharmaceutical HOLDRs.
Commissions..................
If you choose to deposit underlying securities
in order to receive Pharmaceutical HOLDRs after
the conclusion of the 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
Pharmaceutical 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
Pharmaceutical 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
Pharmaceutical HOLDRs....... You have the right to withdraw the underlying
securities upon request by delivering a round-
lot or integral multiple of a round-lot of
Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical 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.
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<PAGE>
. 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
Pharmaceutical 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."
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
Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical HOLDRs, unless the merger,
consolidation or other corporate combination
is between companies that are already
included in the Pharmaceutical 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 such
securities are delisted, then the trustee
will distribute the shares of that company
to the owners of the Pharmaceutical HOLDRs.
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.
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<PAGE>
Termination events...........
A. The Pharmaceutical 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
Pharmaceutical 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
Pharmaceutical 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 The federal income tax laws will treat a U.S.
consequences........... holder of Pharmaceutical HOLDRs as directly
owning the underlying securities. The
Pharmaceutical HOLDRs themselves will not
result in any federal tax consequences separate
from the tax consequences associated with
ownership of the underlying securities.
Listing......................
Application has been made to list the
Pharmaceutical HOLDRs on the American Stock
Exchange under the symbol "PPH". Trading will
take place only in round-lots of 100
Pharmaceutical HOLDRs and round-lot multiples.
A minimum of 150,000 Pharmaceutical 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
Pharmaceutical HOLDRs. Bid and ask prices,
however, will be quoted per single
Pharmaceutical HOLDRs.
Clearance and settlement.....
The trust will issue Pharmaceutical HOLDRs in
book-entry form. Pharmaceutical 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
Pharmaceutical HOLDRs."
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<PAGE>
THE TRUST
General. This discussion highlights information about the Pharmaceutical
HOLDRs trust. You should read this information, information about the
depositary trust agreement as well as the depositary trust agreement before you
purchase Pharmaceutical HOLDRs. The material terms of the depositary trust
agreement are described in this prospectus under the heading "Description of
the depositary trust agreement."
The Pharmaceutical HOLDRs trust. The trust will be formed pursuant to the
depositary trust agreement, dated as of January , 2000. The Bank of New York
will be the trustee. The Pharmaceutical HOLDRs trust is not a registered
investment company under the Investment Company Act of 1940.
The Pharmaceutical HOLDRs trust is intended to hold deposited shares for
the benefit of owners of Pharmaceutical 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, 2040 or earlier if a
termination event occurs.
DESCRIPTION OF PHARMACEUTICAL HOLDRs
The trust will issue Pharmaceutical 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 Pharmaceutical HOLDRs on a continuous basis when an investor
deposits the requisite underlying securities with the trustee.
You may only acquire, hold, trade and surrender Pharmaceutical HOLDRs in
a round-lot of 100 Pharmaceutical HOLDRs and round-lot multiples. The trust
will only issue Pharmaceutical HOLDRs upon the deposit of the whole shares of
underlying securities that are represented by a round-lot of 100 Pharmaceutical
HOLDRs. In the event of a stock split, reverse stock split, or other
distribution by the issuer of an underlying security that results in a
fractional share becoming represented by a round-lot of Pharmaceutical HOLDRs,
the trust may require a minimum of more than one round-lot of 100
Pharmaceutical HOLDRs for an issuance so that the trust will always receive
whole share amounts for issuance of Pharmaceutical HOLDRs.
Pharmaceutical 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 Pharmaceutical HOLDRs--The
Pharmaceutical HOLDRs."
Beneficial owners of Pharmaceutical 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 Pharmaceutical HOLDRs to receive the underlying securities. See
"Description of the depositary trust agreement." Pharmaceutical 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. Pharmaceutical 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 Pharmaceutical HOLDRs wishes to realize the
dollar value of the underlying securities, that owner will have to cancel the
Pharmaceutical HOLDRs. Such cancellation will require payment of fees and
expenses as described in "Description of the depositary trust agreement--
Withdrawal of underlying securities."
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<PAGE>
Pharmaceutical 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. Pharmaceutical HOLDRs will be available only in
book-entry form. Owners of Pharmaceutical HOLDRs may hold their Pharmaceutical
HOLDRs through DTC, if they are participants in 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
pharmaceutical 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 pharmaceutical industry as
measured by market capitalization and trading volume. The following criteria
were used in selecting the underlying securities on December 15, 1999:
. Market capitalization equal to or greater than $950 million;
. Average daily trading volume of at least 270,000 shares over the
60 trading days prior to and including December 15, 1999;
. Average daily dollar volume (that is, the average daily trading
volume multiplied by the closing price on December 15, 1999) of at
least $7.5 million over the 60 trading days prior to and including
December 15, 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 met the above-stated criteria
for inclusion in the Pharmaceutical HOLDRs, Merrill Lynch, Pierce, Fenner &
Smith Incorporated examined available public information about the company. 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 Pharmaceutical
industry. In this case, the Pharmaceutical HOLDRs may no longer consist of
securities issued by companies involved in the pharmaceutical industry. Merrill
Lynch, Pierce, Fenner & Smith Incorporated will determine, in its sole
discretion, whether the issuer of a particular underlying security remains in
the pharmaceutical industry and will undertake to make adequate disclosure when
necessary.
Underlying securities. For a list of the underlying securities
represented by Pharmaceutical HOLDRs, please refer to "Highlights of
Pharmaceutical HOLDRs--The Pharmaceutical 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 stated
selection criteria. Accordingly, before you acquire Pharmaceutical HOLDRs, you
should consider publicly available financial and other information about the
issuers of the underlying securities. See "Risk factors" and "Where you can
find more information." Investors and market participants should not conclude
that the inclusion of a company in the list is any form of
16
<PAGE>
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."
The following table sets forth the composite performance of all of the
underlying securities represented by a single Pharmaceutical HOLDR, measured at
the close of each business day from June 25, 1998, the first date when all of
the underlying securities were publicly traded, and thereafter as of the end of
each month to December 15, 1999. The following graph sets forth such
performance at the close of each business day during the same period. The
performance table and graph data are 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>
Pharmaceutical Pharmaceutical
HOLDRs HOLDRs
-------------- --------------
<S> <C> <C> <C>
June 25, 1998........... 83.44 March 1999.............. 100.35
June 1998............... 83.29 April 1999.............. 92.96
July 1998............... 83.53 May 1999................ 89.88
August 1998............. 75.13 June 1999............... 94.63
September 1998.......... 84.95 July 1999............... 88.14
October 1998............ 87.75 August 1999............. 91.85
November 1998........... 93.12 September 1999.......... 85.15
December 1998........... 96.47 October 1999............ 97.50
January 1999............ 96.55 November 1999........... 96.89
February 1999........... 98.39 December 15, 1999....... 89.87
</TABLE>
[Graph to come]
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<PAGE>
DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT
General. The depositary trust agreement, dated as of January , 2000,
among Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Bank of New York,
as trustee, other depositors and the owners of the Pharmaceutical HOLDRs,
provides that Pharmaceutical HOLDRs will represent an owner's undivided
beneficial ownership interest in the common stock of the underlying companies.
The trustee. The Bank of New York will serve 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 Pharmaceutical HOLDRs. You may create
and cancel Pharmaceutical HOLDRs only in round-lots of 100 Pharmaceutical
HOLDRs. You may create Pharmaceutical HOLDRs by delivering to the trustee the
requisite underlying securities. The trust will only issue Pharmaceutical
HOLDRs upon the deposit of the whole shares represented by a round-lot of 100
Pharmaceutical HOLDRs. In the event that an issuer of underlying securities
distributes a fractional share that is represented in a round-lot of
Pharmaceutical HOLDRs, the trust may require a minimum of more than one round-
lot of 100 Pharmaceutical HOLDRs for an issuance so that the trust will always
receive whole share amounts for issuance of Pharmaceutical HOLDRs. Similarly,
you must surrender Pharmaceutical HOLDRs in integral multiples of 100
Pharmaceutical 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 Pharmaceutical 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
Pharmaceutical HOLDRs, other than Merrill Lynch, Pierce, Fenner & Smith
Incorporated owning Pharmaceutical 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
Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical
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.
18
<PAGE>
Shareholder communications. The trustee promptly will forward to you all
shareholder communications that it receives from issuers of the underlying
securities.
Withdrawal of underlying securities. You may surrender your
Pharmaceutical 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 Pharmaceutical 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
Pharmaceutical HOLDRs.
Further issuances of Pharmaceutical HOLDRs. The depositary trust
agreement provides for further issuances of Pharmaceutical 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 an
underlying security and the trustee will distribute the shares of
that company to the owners of the Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical HOLDRs, unless the merger, consolidation or
other corporate combination is between companies that are already
included in the Pharmaceutical 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 such securities are delisted,
then the trustee will distribute the shares of that company to the
owners of the Pharmaceutical HOLDRs.
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 Pharmaceutical
HOLDRs will surrender their Pharmaceutical 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
the underlying securities. The trust also will terminate if Pharmaceutical
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 Pharmaceutical HOLDRs are delisted. Finally,
the trust will terminate if 75% of the owners of outstanding Pharmaceutical
HOLDRs other than Merrill Lynch, Pierce, Fenner & Smith Incorporated vote to
dissolve and liquidate the trust.
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<PAGE>
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 the depositary trust agreement. The trustee and the initial
depositor may amend any provisions of the depositary trust agreement without
the consent of any other depositor or any of the owners of the Pharmaceutical
HOLDRs. Promptly after the execution of any amendment to the agreement, the
trustee must furnish or cause to be furnished written notification of the
substance of the amendment to each owner of Pharmaceutical 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
Pharmaceutical HOLDRs will not become effective until 30 days after notice of
the amendment is given to the owners of Pharmaceutical HOLDRs.
Issuance and cancellation fees. After the initial public offering, the
trust expects to issue more Pharmaceutical HOLDRs. If you wish to create
Pharmaceutical 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 Pharmaceutical HOLDRs. If you wish to cancel your
Pharmaceutical 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
Pharmaceutical 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 Pharmaceutical HOLDRs after the
conclusion of the 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 a quarterly custody fee of $2.00 for each round-lot of 100
Pharmaceutical HOLDRs to be deducted from any dividend payments or other cash
distributions on underlying securities received by the trustee. With respect to
the aggregate custody fee payable in any calendar year for each Pharmaceutical
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 Pharmaceutical 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 Pharmaceutical 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.
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<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
General
The following is a summary of the U.S. federal income tax consequences
relating to the Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical HOLDRs
A receipt holder purchasing and owning Pharmaceutical HOLDRs will be
treated, for U.S. federal income tax purposes, as directly owning a
proportionate share of the underlying securities represented by Pharmaceutical
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 Pharmaceutical
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 Pharmaceutical
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
Pharmaceutical HOLDRs. Similarly, with respect to sales of Pharmaceutical
HOLDRs for cash in the secondary market, the amount realized with respect to a
sale of Pharmaceutical 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
Pharmaceutical 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.
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<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 Pharmaceutical
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 Pharmaceutical
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 Pharmaceutical 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 Pharmaceutical HOLDRs. Merrill Lynch & Co., as underwriter, proposes to
offer the Pharmaceutical HOLDRs to the public at the offering price set forth
on the cover page of this prospectus. Merrill Lynch expects the trust to
deliver the initial distribution of Pharmaceutical HOLDRs against deposit of
the underlying securities in New York, New York on January , 2000. After the
initial offering, the public offering price, concession and discount may be
changed. The trust will continue to issue Pharmaceutical HOLDRs, in connection
with deposits of underlying securities. Merrill Lynch will not make sales to
discretionary accounts without the prior written approval of a purchaser of
Pharmaceutical HOLDRs.
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 may use this
prospectus, as updated from time to time, in connection with offers and sales
related to market-making transactions in the Pharmaceutical HOLDRs. Merrill
Lynch, Pierce, Fenner & Smith Incorporated may act as principal or agent in
such transactions. Market-making sales will be made at prices related to
prevailing market prices at the time of sale.
22
<PAGE>
Merrill Lynch, Pierce, Fenner & Smith Incorporated has agreed to
indemnify the trustee against certain civil liabilities related to acts
performed or not performed by the trustee in accordance with the depositary
trust agreement or periodic reports filed or not filed with the SEC with
respect to the Pharmaceutical HOLDRs. Should a court determine not to enforce
the indemnification provision, Merrill Lynch, Pierce, Fenner & Smith
Incorporated also has agreed to contribute to payments the trustee may be
required to make with respect to such liabilities.
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
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 Year 2000 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 financial services 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 has replaced certain service providers that were
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 was
expected to be completed by the end of November 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
23
<PAGE>
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 regulators. The estimated cost of the Year 2000 project is approximately
$82 million. In the first nine months of 1999 the trustee spent $16 million on
making computer systems Year 2000 compliant. Total expenses since 1997 have
been $67 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
the 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 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 can be no certainty as
to its impact.
LEGAL MATTERS
Legal matters, including the validity of the Pharmaceutical 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. 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 Pharmaceutical HOLDRs.
WHERE YOU CAN FIND MORE INFORMATION
Merrill Lynch, Pierce, Fenner & Smith Incorporated has filed a
registration statement on Form S-1 with the SEC covering the Pharmaceutical
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.
24
<PAGE>
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 Pharmaceutical HOLDRs. This prospectus relates only to Pharmaceutical 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 Pharmaceutical 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 Pharmaceutical HOLDRs, have been publicly disclosed.
25
<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 November 1999. All market prices in excess of one dollar
are rounded to the nearest one sixty-fourth of a 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.
ABBOTT LABORATORIES
Abbott Laboratories develops, manufactures and sells a broad and
diversified line of health care products and services. Abbott's products
include pharmaceuticals, diagnostic, hospital, nutritional, chemical and
agricultural products. Abbott markets its products worldwide through affiliates
and distributors to retailers, wholesalers and hospitals.
<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 14 3/4 January 17 11/16 January 21 1/4 January 27 1/4 January 35 13/32 January 46 7/16
February 13 13/16 February 17 3/4 February 20 7/8 February 28 1/8 February 37 13/32 February 46 5/16
March 13 5/16 March 17 7/8 March 20 3/8 March 28 1/16 March 37 21/32 March 46 13/16
April 14 3/16 April 19 11/16 April 20 5/16 April 30 1/2 April 36 9/16 April 48 3/8
May 14 15/16 May 20 May 21 9/16 May 31 1/2 May 37 3/32 May 45 3/16
June 14 1/2 June 20 1/4 June 21 3/4 June 33 3/8 June 41 June 45 3/8
July 14 1/16 July 20 July 21 15/16 July 32 23/32 July 41 5/8 July 42 15/16
August 15 August 19 3/8 August 22 1/2 August 29 31/32 August 38 1/2 August 43 3/8
September 15 11/16 September 21 5/16 September 24 5/8 September 31 31/32 September 43 7/16 September 36 11/16
October 15 1/2 October 19 7/8 October 25 3/8 October 30 21/32 October 47 October 40 3/8
November 15 15/16 November 20 5/16 November 27 13/16 November 32 9/16 November 48 November 38
December 16/5///16/ December 20 13/16 December 25 3/8 December 32 3/4 December 49
</TABLE>
The closing price on , 2000 was .
ALLERGAN, INC.
Allergan, Inc. develops, manufactures and markets a broad range of eye
care specialty pharmaceutical products and ophthalmic surgical products.
Allergan's eye care products treat a variety of diseases and disorders of the
eye and include consumer contact lens products. Its speciality pharmaceutical
products include therapeutic and cosmetic skin care products and products used
for the treatment of neuromuscular disorders. Allergan's surgical products are
primarily used in cataract surgery. Allergan's eye products are marketed and
sold through a global marketing and regional sales force system. Its speciality
pharmaceutical products are sold to drug wholesalers and retail chains.
Allergan effected a 2-for-1 stock split on its common stock in the form of a
stock dividend to shareholders of record on November 18, 1999. The shares of
common stock began trading on a split-adjusted basis on December 9, 1999. The
following table is adjusted to account for this stock split.
<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 11 5/8 January 14 1/2 January 16 5/8 January 17 11/16 January 17 January 38 7/16
February 11 3/4 February 14 7/16 February 18 5/8 February 17 February 17 1/2 February 40 3/4
March 10 3/16 March 14 3/4 March 18 7/16 March 14 9/16 March 19 March 43 15/16
April 10 3/4 April 13 9/16 April 17 11/16 April 13 3/8 April 20 25/32 April 44 15/16
May 12 3/8 May 13 5/16 May 19 1/4 May 14 13/16 May 21 May 46 1/2
June 10 13/16 June 13 9/16 June 19 3/4 June 15 29/32 June 23 3/16 June 55 1/2
July 12 1/8 July 15 1/8 July 20 3/8 July 15 31/32 July 26 1/8 July 47 1/4
August 13 11/16 August 15 3/16 August 19 7/16 August 16 3/16 August 23 5/8 August 49 15/16
September 12 11/16 September 16 11/16 September 19 1/16 September 18 3/32 September 29 3/16 September 55
October 13 3/16 October 14 11/16 October 15 3/16 October 16 15/32 October 31 7/32 October 53 11/16
November 15 1/16 November 15 1/2 November 16 1/16 November 16 15/16 November 30 7/16 November 49 3/16
December 14 1/8 December 16 1/4 December 17 13/16 December 16 25/32 December 32 3/8
</TABLE>
The closing price on , 2000 was .
A-1
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION
American Home Products Corporation researches, develops, manufactures and
markets a diversified line of products in three primary business segments:
pharmaceuticals, consumer health care and agricultural products. The
pharmaceutical segment manufactures and sells branded and generic ethical
pharmaceuticals, and animal biologicals and pharmaceuticals. The consumer
healthcare segment manufactures and distributes cold and allergy remedies and
nutritional products including Advil, Robitussin, Dimetapp and Centrum Silver
vitamins. The agricultural products segment manufactures and distributes crop
protection and pest control products. American Home Products agreed on November
4, 1999 to merge with Warner-Lambert Company, but this merger agreement is
being presently challenged by Pfizer Inc. Pfizer's challenge is scheduled to be
heard by a Delaware court on January 24, 2000.
<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 15 7/8 January 17 17/32 January 25 1/2 January 31 11/16 January 47 23/32 January 58 11/16
February 14 15/16 February 17 7/8 February 24 21/32 February 32 February 46 7/8 February 59 1/2
March 14 1/2 March 17 13/16 March 27 3/32 March 30 March 47 11/16 March 65 1/4
April 14 15/32 April 19 5/16 April 26 3/8 April 33 1/16 April 46 9/16 April 61
May 14 1/2 May 18 7/16 May 26 3/4 May 38 May 48 5/16 May 57 5/8
June 14 3/16 June 19 11/32 June 30 1/16 June 38 1/4 June 51 3/4 June 57 3/8
July 14 11/32 July 19 3/4 July 28 3/8 July 41 7/32 July 51 1/2 July 51
August 14 27/32 August 19 1/4 August 29 5/8 August 36 August 50 1/8 August 41 1/2
September 15 September 21 7/32 September 31 7/8 September 36 1/2 September 52 5/8 September 41 1/2
October 15 7/8 October 22 5/32 October 30 5/8 October 37 1/16 October 48 15/16 October 52 1/4
November 16 5/16 November 22 13/16 November 32 3/16 November 34 29/32 November 53 3/8 November 52
December 15 11/16 December 24 1/4 December 29 5/16 December 38 1/4 December 56 3/8
</TABLE>
The closing price on , 2000 was .
ANDRX CORPORATION
Andrx Corporation formulates and commercializes oral controlled-release
pharmaceuticals using proprietary drug delivery technologies. Andrx develops
generic versions of selected high sales volume controlled-release brand name
pharmaceuticals and develops its own brand name formulations of certain
existing drugs available only in immediate-release form. Andrx focuses on
pharmaceutical products with high sales volumes and patents that will expire in
a time frame that allows Andrx to complete development prior to expiration.
Products include a variety of treatments for hypertension, angina, ulcers and
inflammation.
<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 9 1/2 January 17 1/8 January 28 5/164
February * February * February * February 9 3/4 February 15 17/32 February 33 15/16
March * March * March * March 12 1/2 March 13 15/16 March 45 9/16
April * April * April * April 10 5/8 April 18 3/4 April 39 3/8
May * May * May * May 11 7/8 May 16 3/4 May 50 7/164
June * June * June 7 9/16 June 19 1/8 June 18 3/8 June 77 1/8
July * July * July 6 5/8 July 16 5/8 July 17 7/8 July 67 1/16
August * August * August 7 1/4 August 19 5/8 August 14 21/32 August 71 7/8
September * September * September 6 5/8 September 22 3/4 September 18 3/8 September 58 17/32
October * October * October 7 1/8 October 19 1/4 October 19 1/2 October 47 3/4
November * November * November 7 November 19 7/16 November 19 3/4 November 51 1/2
December * December * December 8 1/16 December 17 1/8 December 25 5/8
</TABLE>
The closing price on , 2000 was .
A-2
<PAGE>
BIOVAIL CORPORATION INTERNATIONAL
Biovail Corporation International is a global integrated pharmaceutical
company which specializes in the development of oral controlled-release drugs.
Controlled-release products are formulations which release active drug
compounds in the body gradually and predictably over a 12 to 24 hour period.
Biovail formulates, clinically tests, registers, manufactures and out-licenses
its own drug products. Biovail markets it products through its own sales force
and through licensees.
<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 2 21/64 January 2 3/4 January 25 7/8 January 28 7/8 January 36 January 42 1/4
February 2 21/64 February 3 1/2 February 28 3/8 February 24 1/8 February 43 9/16 February 38 3/16
March 2 21/64 March 4 1/4 March 28 3/8 March 23 1/4 March 48 1/4 March 38 1/2
April 1 43/64 April 5 5/8 April 28 1/4 April 25 April 40 7/8 April 35 1/16
May 2 11/64 May 5 19/64 May 34 1/8 May 29 5/8 May 33 15/16 May 38 3/16
June 2 5/64 June 6 13/64 June 31 1/4 June 30 3/16 June 32 June 51 1/16
July 2 1/4 July 7 61/64 July 26 1/2 July 26 3/4 July 32 7/8 July 56 3/16
August 2 9/32 August 8 21/64 August 30 August 28 7/16 August 28 1/16 August 57 13/16
September 2 35/64 September 11 1/2 September 35 1/2 September 29 1/16 September 26 15/16 September 50 3/4
October 2 53/64 October 12 59/64 October 29 1/4 October 28 7/8 October 31 3/16 October 55 3/16
November 2 43/64 November 17 1/2 November 28 1/2 November 30 7/8 November 34 November 69 3/4
December 2 3/4 December 25 3/4 December 25 5/8 December 39 1/16 December 37 13/16
</TABLE>
The closing price on , 2000 was .
BRISTOL-MYERS SQUIBB COMPANY
Bristol-Myers Squibb Company is a diversified health and personal care
company that focuses on the manufacture and sales of a broad range of
pharmaceutical and related products. These products include: cardiovascular,
anti-cancer, anti-infective and central nervous system prescription
pharmaceuticals; consumer medicines, such as analgesics; personal care, such as
skin and hair care products, cold remedies and deodorants; nutritional
products; medical devices; and beauty care products. Bristol-Myers markets its
products internationally to the retail and wholesale markets and some of its
products are sold directly to other pharmaceutical companies, hospitals and
healthcare professionals.
<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 14 15/32 January 15 3/8 January 22 1/8 January 31 11/16 January 49 27/32 January 64 1/8
February 13 13/16 February 15 15/32 February 21 9/32 February 32 5/8 February 50 3/32 February 62 31/32
March 12 7/8 March 15 23/32 March 21 13/32 March 29 1/2 March 52 5/32 March 64 1/8
April 13 15/16 April 16 19/32 April 20 9/16 April 32 3/4 April 52 15/16 April 63 9/16
May 13 21/32 May 16 9/32 May 21 11/32 May 36 11/16 May 53 3/4 May 68 3/4
June 13 13/32 June 17 1/32 June 22 1/2 June 40 1/2 June 57 15/32 June 70 7/16
July 13 5/32 July 17 5/16 July 21 21/32 July 39 5/32 July 56 31/32 July 66 1/2
August 14 13/32 August 17 3/16 August 21 15/16 August 38 August 48 15/16 August 70 3/8
September 14 11/32 September 18 7/32 September 2 3/8 September 41 3/8 September 51 15/16 September 67 1/2
October 14 19/32 October 19 1/16 October 26 7/16 October 43 15/16 October 55 11/32 October 76 13/16
November 14 7/16 November 20 1/16 November 28 7/16 November 46 13/16 November 61 November 73
December 14 15/32 December 21 15/32 December 27 1/4 December 47 5/16 December 66 29/32
</TABLE>
The closing price on , 2000 was .
A-3
<PAGE>
ELI LILLY & COMPANY
Eli Lilly & Company researches, develops, manufactures and sells
pharmaceutical products for humans and animals. Research efforts are primarily
directed toward discovering and developing products to diagnose and treat
disease in humans and animals and to increase the efficiency of animal food
production. Eli Lilly products include neuroscience products, such as Prozac,
endocrine products, cardiovascular agents, oncology products and animal health
products for cattle, poultry and swine. Eli Lilly's pharmaceutical products are
distributed primarily through independent wholesale distribution outlets and
marketed through its own sales force. The animal health products are marketed
by its own sales force to distributors and feed manufacturers.
<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 14 13/324 January 16 15/32 January 28 5/8 January 43 9/16 January 67 5/8 January 93 11/16
February 13 27/32 February 16 3/4 February 30 5/16 February 43 11/16 February 65 13/16 February 94 1/2
March 12 15/32 March 18 9/324 March 32 1/2 March 41 1/8 March 59 5/8 March 84 7/8
April 12 5/16 April 18 11/16 April 29 9/16 April 43 15/16 April 69 9/16 April 73 5/8
May 14 5/164 May 18 21/32 May 32 1/8 May 46 1/2 May 61 3/8 May 71 7/16
June 14 7/32 June 19 5/8 June 32 1/2 June 54 21/32 June 66 1/4 June 71 5/8
July 12 5/32 July 19 9/164 July 28 July 56 1/2 July 67 1/4 July 65 11/16
August 14 1/4 August 20 15/32 August 28 5/8 August 52 5/16 August 65 3/4 August 74 5/8
September 14 15/32 September 22 15/32 September 32 1/4 September 60 1/2 September 78 5/16 September 64 3/16
October 15 1/2 October 24 5/32 October 35 1/4 October 67 1/16 October 81 October 68 7/8
November 15 21/32 November 24 7/8 November 38 1/4 November 63 November 89 11/16 November 72 11/64
December 16 13/32 December 28 1/8 December 36 1/2 December 69 5/8 December 88 7/8
</TABLE>
The closing price on , 2000 was .
FOREST LABORATORIES, INC.
Forest Laboratories, Inc. develops, manufactures, and sells branded and
generic prescription drugs and nonprescription pharmaceutical products which
are used for the treatment of a wide range of illnesses. Forest's branded
products include treatment for depression, respiratory ailments, hypertension,
angina and urinary tract infection. Forest's generic products include generic
equivalents of its branded products and certain controlled-release products.
Its products are marketed in the United States, Eastern Europe and the United
Kingdom through its own sales force and through independent distributors in
other parts of the world.
<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 25 7/16 January 24 3/4 January 27 January 18 7/8 January 29 11/16 January 46 3/16
February 25 1/16 February 25 3/8 February 26 February 19 1/16 February 31 9/32 February 49 9/16
March 21 7/16 March 23 13/16 March 24 3/8 March 18 13/16 March 37 1/2 March 56 3/8
April 22 3/16 April 22 1/2 April 23 1/16 April 17 1/16 April 36 3/16 April 44 1/2
May 22 May 22 1/16 May 20 5/8 May 21 1/8 May 33 May 47 5/8
June 21 3/4 June 22 3/16 June 19 5/16 June 20 23/32 June 35 3/4 June 46 1/4
July 21 3/8 July 22 3/16 July 17 1/16 July 22 3/4 July 37 1/2 July 51 1/4
August 23 1/2 August 22 3/8 August 20 9/16 August 20 23/32 August 32 3/4 August 48 1/2
September 24 5/8 September 22 1/4 September 18 1/16 September 21 1/16 September 34 3/8 September 42 1/8
October 23 October 20 11/16 October 19 1/4 October 23 1/8 October 41 13/16 October 45 7/8
November 23 7/16 November 21 1/4 November 19 3/8 November 22 3/8 November 46 5/8 November 51 3/16
December 23 5/16 December 22 5/8 December 16 3/8 December 24 21/32 December 53 3/16
</TABLE>
The closing price on , 2000 was .
A-4
<PAGE>
ICN PHARMACEUTICALS, INC.
ICN Pharmaceuticals, Inc. develops, manufactures, distributes and sells
pharmaceutical, research and diagnostic products as well as biotechnology
research products. ICN's pharmaceutical and nutritional products treat viral
and bacterial infections, diseases of the skin, neuromuscular disorders,
cancer, cardiovascular disease, diabetes and psychiatric disorders.
<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 5 21/32 January 12 13/64 January 13 1/4 January 15 1/4 January 34 1/4 January 24 1/8
February 6 11/16 February 9 7/16 February 15 21/64 February 16 53/64 February 38 1/2 February 21 7/8
March 5 37/64 March 10 March 14 53/64 March 14 53/64 March 49 March 25 1/8
April 6 9/64 April 10 63/64 April 15 April 14 11/64 April 49 1/4 April 33 3/16
May 5 21/32 May 11 1/16 May 17 43/64 May 14 27/64 May 43 1/16 May 32 7/8
June 5 17/64 June 10 1/4 June 15 37/64 June 19 1/8 June 45 11/16 June 32 3/16
July 5 13/16 July 12 49/64 July 14 July 22 3/4 July 28 3/8 July 30 3/4
August 7 1/64 August 13 21/64 August 14 August 24 11/64 August 15 3/8 August 20 3/4
September 8 9/32 September 14 13/32 September 13 43/64 September 32 51/64 September 17 1/2 September 17 3/16
October 7 13/32 October 13 1/2 October 12 37/64 October 32 5/64 October 23 5/16 October 23
November 14 17/64 November 13 21/64 November 12 59/64 November 32 61/64 November 25 1/4 November 24 5/16
December 11 7/32 December 12 53/64 December 13 5/64 December 32 43/64 December 22 5/8
</TABLE>
The closing price on , 2000 was .
IVAX CORPORATION
IVAX Corporation researches, develops, manufactures and markets
proprietary and generic pharmaceuticals in the United States and international
markets. IVAX's primary focus is on proprietary oncology and respiratory
pharmaceutical products and generic pharmaceuticals in less competitive market
segments. IVAX markets its proprietary pharmaceutical products through
licensing arrangements and its generic pharmaceutical products are sold to drug
wholesalers and retail drug store 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 32 1/8 January 21 1/8 January 26 1/4 January 11 5/8 January 7 1/2 January 13 9/16
February 35 1/8 February 21 5/8 February 28 5/8 February 12 1/4 February 8 7/16 February 14 3/4
March 25 March 25 March 25 7/8 March 9 7/8 March 8 3/4 March 11 13/16
April 24 1/4 April 26 April 29 1/8 April 7 9/16 April 9 3/4 April 13 3/16
May 18 7/8 May 25 3/4 May 27 1/2 May 10 3/4 May 9 3/16 May 13 7/16
June 16 3/8 June 24 5/8 June 15 3/4 June 11 3/16 June 9 1/4 June 14 1/8
July 16 7/8 July 24 1/8 July 14 5/8 July 9 3/8 July 8 15/16 July 15 13/16
August 19 7/8 August 25 5/8 August 16 1/8 August 9 7/16 August 7 3/4 August 16 1/2
September 19 1/2 September 30 1/8 September 16 1/4 September 11 15/16 September 8 3/4 September 16 1/2
October 19 October 22 3/4 October 16 1/2 October 7 9/16 October 9 1/2 October 17 9/16
November 18 3/8 November 26 5/8 November 11 November 7 1/16 November 9 1/2 November 20 5/16
December 19 December 28 1/2 December 10 1/4 December 6 3/4 December 12 7/16
</TABLE>
The closing price on , 2000 was .
A-5
<PAGE>
JOHNSON & JOHNSON
Johnson & Johnson manufactures and sells health care products and
provides related services in countries around the globe. Johnson & Johnson's
principal consumer segment focuses on personal care and hygienic products and
its product brands include Band-Aid, Tylenol and Stayfree sanitary products.
Johnson & Johnson's pharmaceutical segment focuses on allergy, anti-infective,
anti-fungal, contraceptives and pain management products. Johnson & Johnson's
professional segment, catering to physicians, nurses, therapists and hospitals,
focuses on diagnostic products, surgical instruments, cardiology products and
other medical equipment and devices. Johnson & Johnson markets and distributes
its products directly and through wholesalers. In a $4.9 billion stock-for-
stock exchange, Johnson & Johnson recently merged with Centocor, Inc., a
leading biopharmaceutical company.
<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 21 3/16 January 29 1/16 January 48 January 57 3/4 January 66 15/16 January 85 1/8
February 20 1/16 February 28 3/8 February 46 3/4 February 57 1/2 February 75 3/8 February 85 3/8
March 18 7/8 March 29 3/4 March 46 1/8 March 52 7/8 March 73 7/16 March 93 1/2
April 20 11/16 April 32 1/2 April 46 1/4 April 61 1/8 April 71 1/2 April 97 1/2
May 22 1/8 May 33 1/16 May 48 11/16 May 60 May 69 1/16 May 92 5/8
June 21 7/16 June 33 3/4 June 49 1/2 June 64 3/8 June 74 June 98
July 23 1/2 July 35 7/8 July 47 3/4 July 62 1/8 July 77 1/4 July 91 1/16
August 25 1/16 August 34 1/2 August 49 1/4 August 56 11/16 August 69 August 102 1/4
September 25 7/8 September 37 1/16 September 51 1/4 September 57 11/16 September 78 1/4 September 91 7/8
October 27 5/16 October 40 3/4 October 49 1/4 October 57 3/8 October 81 1/2 October 104 3/4
November 26 11/16 November 43 5/16 November 53 1/4 November 62 15/16 November 81 1/4 November 103 3/4
December 27 3/8 December 42 3/4 December 49 3/4 December 65 7/8 December 83 7/8
</TABLE>
The closing price on , 2000 was .
JONES PHARMA INC.
Jones Pharma Inc. manufactures, markets, distributes and sells specialty
pharmaceutical products under its own trademarks and tradenames. Jones Pharma
seeks to build a portfolio of growing products through the acquisition of
under-promoted or promotion sensitive FDA-approved products from other
pharmaceutical companies. Jones Pharma's principal products serve the endocrine
treatment and critical care segments of the health care industry as well as the
companion animal segment of the veterinary industry. Jones Pharma markets and
promotes its products primarily through a direct sales force.
<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 4 3/8 January 2 9/64 January 11 21/64 January 25 21/64 January 23 19/64 January 21 1/4
February 3 55/64 February 2 33/64 February 13 1/16 February 20 11/64 February 24 3/4 February 18 3/4
March 3 13/16 March 2 9/16 March 17 7/64 March 16 March 24 1/8 March 23 11/64
April 3 13/32 April 2 57/64 April 23 7/32 April 23 1/2 April 19 43/64 April 21 27/64
May 3 9/64 May 2 31/32 May 23 7/16 May 23 59/64 May 20 1/2 May 23 45/64
June 3 9/64 June 3 19/64 June 22 11/64 June 31 43/64 June 22 5/64 June 26 1/4
July 2 17/64 July 4 3/16 July 23 5/64 July 19 3/4 July 21 13/64 July 28 15/16
August 2 7/64 August 4 21/64 August 26 43/64 August 19 53/64 August 13 59/64 August 27 1/16
September 2 19/64 September 5 19/64 September 32 21/64 September 21 September 19 11/64 September 32 31/32
October 2 9/16 October 5 25/32 October 29 October 20 5/64 October 21 35/64 October 31
November 2 21/64 November 6 7/32 November 26 43/64 November 22 November 24 November 34 5/8
December 1 31/32 December 7 9/64 December 24 27/64 December 25 1/2 December 24 21/64
</TABLE>
A-6
<PAGE>
KING PHARMACEUTICALS, INC.
King Pharmaceuticals, Inc. manufactures, markets and sells primarily
name-brand prescription pharmaceutical products. King acquires these
pharmaceutical products and seeks to increase their sales by focused promotion
and marketing, as well as by developing product line extensions and through
product life cycle management. King, through a national sales force, markets
its products to general/family practitioners and hospitals across the United
States. King also provides contract manufacturing to pharmaceutical and
biotechnology companies.
<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 16 5/64
February * February * February * February * February * February 16 5/64
March * March * March * March * March * March 18 1/2
April * April * April * April * April * April 18 27/64
May * May * May * May * May * May 15 53/64
June * June * June * June * June 9 21/64 June 17 1/4
July * July * July * July * July 10 3/4 July 18 5/64
August * August * August * August * August 9 37/64 August 23 5/64
September * September * September * September * September 9 11/64 September 23 21/64
October * October * October * October * October 10 3/8 October 20 11/64
November * November * November * November * November 10 November 46 1/8
December * December * December * December * December 17 37/64
</TABLE>
The closing price on , 2000 was .
MERCK & CO., INC.
Merck & Co., Inc. develops, manufactures and markets a broad range of
human and animal health products. Merck's operations are divided into a
pharmaceutical and a pharmaceutical benefit services segment. The
pharmaceutical segment creates a variety of therapeutic products including
Zocar (high cholesterol treatment), Pepcid (anti-ulcerant) and Propecia (male
baldness treatment). The pharmaceutical benefit services segment fills and
manages prescriptions and operates health management programs. Merck markets
its health products to drug retailers and wholesalers, hospitals, managed
healthcare providers and government agencies through its own representatives.
Its pharmaceutical benefit management services are marketed to corporations,
insurance companies and government agencies.
<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 18 1/4 January 20 1/8 January 35 1/16 January 45 5/16 January 58 11/16 January 73 3/8
February 16 3/16 February 21 3/16 February 33 1/8 February 46 1/16 February 63 25/32 February 81 1/2
March 14 7/8 March 21 5/16 March 31 1/8 March 42 1/8 March 64 3/32 March 80 1/8
April 14 13/16 April 21 7/16 April 30 1/4 April 45 3/16 April 60 1/4 April 70 3/8
May 15 1/4 May 23 1/2 May 32 5/16 May 44 15/16 May 58 1/2 May 67 5/8
June 14 7/8 June 24 9/16 June 32 5/16 June 51 5/32 June 66 7/8 June 73 5/8
July 14 13/16 July 25 13/16 July 32 1/8 July 51 15/16 July 61 25/32 July 67 5/8
August 17 1/16 August 24 15/16 August 32 13/16 August 45 29/32 August 57 31/32 August 67 3/16
September 17 13/16 September 28 September 35 3/16 September 49 31/32 September 64 25/32 September 64 13/16
October 17 13/16 October 28 3/4 October 36 15/16 October 44 5/8 October 67 17/32 October 79 9/16
November 18 5/8 November 30 15/16 November 41 1/2 November 47 13/32 November 77 9/16 November 78 11/16
December 19 1/16 December 32 13/16 December 39 13/164 December 53 December 73 3/4
</TABLE>
The closing price on , 2000 was .
A-7
<PAGE>
MYLAN LABORATORIES, INC.
Mylan Laboratories Inc. develops, licenses, manufactures, markets and
distributes generic and branded pharmaceutical products. Mylan operates through
its generic and branded pharmaceutical segments. Its generic pharmaceutical
segment focuses on marketing a wide variety of lower cost alternatives to
branded products and investing resources in developing new drug delivery
systems. Mylan's branded pharmaceutical segment focuses on the cardiology,
neurology and dermatology areas. Mylan develops its branded pharmaceutical
segment through its own product development and product acquisitions. Mylan
markets its products to retail drug stores, wholesalers, distributors and
public and governmental agencies.
<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 15 53/64 January 18 43/64 January 19 January 16 3/8 January 18 January 30 1/2
February 15 3/4 February 20 53/64 February 19 1/2 February 16 3/4 February 20 3/8 February 27 5/16
March 11 43/64 March 21 11/64 March 21 March 14 3/4 March 23 March 27 7/16
April 12 37/64 April 20 1/2 April 19 1/2 April 12 April 27 1/8 April 22 11/16
May 12 3/4 May 19 5/64 May 19 May 15 1/8 May 30 May 25 3/8
June 14 11/64 June 20 1/2 June 17 3/8 June 14 3/4 June 30 1/4 June 26 1/2
July 14 3/4 July 20 July 15 July 16 7/8 July 27 3/8 July 22 7/8
August 17 11/64 August 22 7/8 August 16 3/8 August 21 1/4 August 22 7/8 August 19 13/16
September 17 September 20 1/8 September 17 1/8 September 22 7/16 September 29 1/2 September 18 3/8
October 18 43/64 October 19 1/8 October 15 1/8 October 21 7/8 October 34 7/16 October 17 15/16
November 19 11/64 November 23 3/8 November 14 3/4 November 22 3/16 November 33 3/16 November 23 9/16
December 18 December 23 1/2 December 16 5/8 December 20 15/16 December 31 1/2
The closing price on , 2000 was .
PFIZER INC.
Pfizer Inc. develops, manufactures and markets medicines for humans and
animals. Pfizer's operations are divided into a pharmaceutical, animal health
and consumer products segments. The pharmaceutical segment includes
prescription drugs for treating cardiovascular and infectious diseases, central
nervous system disorders, diabetes, erectile dysfunction, allergies, arthritis
and other disorders. A leading Pfizer pharmaceutical product is Viagra. The
animal health segment includes antiparasitic, anti-infective and anti-
inflammatory medicines and vaccines for animals. The consumer products segment
focuses on over-the-counter medications and personal care products. Leading
Pfizer consumer products include Zyrtec, Visine and Bengay. Pfizer's
pharmaceutical products are sold principally to wholesalers. Its animal health
products are marketed and sold to animal healthcare professionals and
distributors. Pfizer's consumer products are marketed and sold by its own
representatives to retailers. Pfizer is currently engaged in a hostile takeover
bid for Warner-Lambert Company. Pfizer's challenge is scheduled to be heard by
a Delaware court on January 24, 2000.
<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 5 25/64 January 6 13/16 January 11 27/64 January 15 27/64 January 27 1/4 January 42 7/8
February 4 53/64 February 6 59/64 February 10 63/64 February 15 17/64 February 29 1/2 February 43 63/64
March 4 1/2 March 7 9/64 March 11 13/64 March 14 1/64 March 33 15/64 March 46 1/4
April 4 59/64 April 7 7/32 April 11 31/64 April 16 April 37 15/16 April 38 23/64
May 5 5/16 May 7 11/32 May 11 51/64 May 17 11/64 May 34 15/16 May 35 43/64
June 5 17/64 June 7 43/64 June 11 57/64 June 19 59/64 June 36 15/64 June 36 21/64
July 5 11/64 July 8 7/16 July 11 41/64 July 19 7/8 July 36 39/64 July 33 7/8
August 5 11/16 August 8 15/64 August 11 53/64 August 18 31/64 August 31 August 37 3/4
September 5 49/64 September 8 57/64 September 13 3/16 September 20 3/64 September 35 1/4 September 35 7/8
October 6 11/64 October 9 9/16 October 13 51/64 October 23 43/64 October 35 49/64 October 39 11/16
November 6 29/64 November 9 43/64 November 14 15/16 November 24 1/4 November 37 5/16 November 36 5/8
December 6 7/16 December 10 1/2 December 13 53/64 December 24 55/64 December 41 43/64
</TABLE>
The closing price on , 2000 was .
A-8
<PAGE>
PHARMACIA & UPJOHN, INC.
Pharmacia & Upjohn, Inc. develops, manufactures and sells pharmaceutical
and healthcare products. Pharmacia provides prescription and nonprescription
products for humans and pharmaceutical chemicals and other products for
livestock and companion animals. Its principal prescription and non-
prescription pharmaceutical products focus on the treatment of a broad range of
conditions including growth hormone deficiency, erectile dysfunction,
depression, male baldness, smoking addiction and diarrhea. Pharmacia products
include Nicorette, Rogaine and Kaopectate. Pharmacia markets its products
through its own representatives and through local distributors and licensees.
On December 19, 1999, Pharmacia announced that it had entered into a definitive
agreement to merge with Monsanto Company.
<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 20 11/16 January 23 3/16 January 41 5/8 January 37 1/4 January 38 9/16 January 57 1/2
February 20 February 24 5/16 February 41 7/8 February 37 February 39 27/32 February 54 1/2
March 18 45/64 March 24 9/16 March 39 7/8 March 36 5/8 March 43 3/4 March 62 3/8
April 18 29/64 April 25 April 38 1/4 April 29 7/8 April 42 1/16 April 55 5/8
May 22 15/64 May 25 3/32 May 40 7/8 May 34 5/8 May 44 3/16 May 55 7/16
June 20 3/32 June 25 61/64 June 44 3/8 June 34 3/4 June 46 1/8 June 56 13/16
July 20 11/16 July 26 35/64 July 41 1/8 July 37 3/4 July 47 5/16 July 53 13/16
August 24 29/32 August 29 7/32 August 42 August 34 1/16 August 41 11/16 August 52 1/4
September 23 17/32 September 30 25/32 September 41 1/4 September 36 1/2 September 50 3/16 September 49 5/8
October 22 49/64 October 35 October 36 October 31 3/4 October 52 7/8 October 53 15/16
November 22 5/32 November 35 7/8 November 38 5/8 November 33 3/4 November 52 1/8 November 54 11/16
December 21 13/64 December 38 3/4 December 39 5/8 December 36 5/8 December 56 5/8
The closing price on , 2000 was .
SCHERING-PLOUGH CORPORATION
Schering-Plough Corporation researches, develops and markets new
therapies and treatment programs. Schering-Plough's core product groups include
allergy, respiratory, anti-infective, anticancer, dermatologicals, and
cardiovascular pharmaceutical products, and healthcare products, including foot
care and sun care products. Schering-Plough also develops and markets animal
health biological and pharmaceutical products. Schering-Plough's products
include Claritin (allergy), Coppertone (sun care) and Dr. Scholl's (footcare).
<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 7 27/37 January 9 13/16 January 13 9/16 January 18 29/32 January 36 3/16 January 54 1/2
February 7 15/32 February 9 51/64 February 14 1/32 February 19 3/32 February 38 1/32 February 55 11/16
March 7 3/64 March 9 19/64 March 14 17/32 March 18 3/16 March 40 7/8 March 55 1/4
April 7 5/8 April 9 27/64 April 14 11/32 April 19 15/16 April 40 5/32 April 48 5/16
May 8 5/32 May 9 27/32 May 14 21/32 May 22 11/16 May 41 13/16 May 45 1/16
June 7 21/32 June 11 1/32 June 15 11/16 June 23 15/16 June 45 13/16 June 52 1/2
July 8 1/64 July 11 5/8 July 13 3/4 July 27 9/32 July 48 3/8 July 49
August 8 47/64 August 11 21/32 August 13 31/32 August 24 August 43 August 52 5/8
September 8 7/8 September 12 27/32 September 15 11/32 September 25 3/4 September 51 27/32 September 43 5/8
October 8 29/32 October 13 13/32 October 16 October 28 1/32 October 51 7/16 October 49 1/2
November 9 23/64 November 14 11/32 November 17 13/16 November 31 11/32 November 53 3/8 November 51 1/8
December 9 1/4 December 13 11/16 December 16 3/16 December 31 1/16 December 55 1/4
</TABLE>
The closing price on , 2000 was .
A-9
<PAGE>
WARNER-LAMBERT COMPANY
Warner-Lambert Company researches, develops, manufactures and markets a
widely diversified line of health care and consumer products. Warner-Lambert's
principal business segments are: pharmaceutical products, consumer health care
products and confectionery products. Warner-Lambert's pharmaceutical products
include a variety of analgesic, anti-infective and cardiovascular
pharmaceuticals and are marketed primarily under the Parke-Davis and Goedecke
trade name directly to healthcare professionals. Warner-Lambert's consumer
healthcare products include a wide variety of products including dermatological
products, such as Lubriderm, and cold and allergy treatments, such as Benadryl
and Sudafed. Warner-Lambert's confectionary products primarily include chewing
gum, such as Trident, breath mints and cough drops. Both the consumer
healthcare and confectionary products are marketed directly to wholesalers and
retailers. Warner-Lambert agreed on November 4, 1999 to merge with American
Home Products Corporation, but that merger agreement is being contested by
Pfizer Inc., which is seeking to acquire Warner-Lambert in a hostile take-over
bid. Pfizer's challenge is scheduled to be heard by a Delaware court on January
24, 2000.
<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 10 55/64 January 13 January 15 5/8 January 27 January 50 11/64 January 72 3/8
February 10 39/64 February 12 3/4 February 16 31/64 February 28 February 48 51/64 February 68 13/16
March 10 5/16 March 13 3/64 March 17 13/64 March 28 53/64 March 56 49/64 March 66 1/4
April 11 19/64 April 13 5/16 April 18 41/64 April 32 43/64 April 63 1/8 April 67 13/16
May 11 47/64 May 13 51/64 May 18 43/64 May 33 43/64 May 63 13/16 May 62
June 11 June 14 25/64 June 18 21/64 June 41 27/64 June 69 3/8 June 69 1/8
July 10 55/64 July 13 63/64 July 18 11/64 July 46 39/64 July 75 3/8 July 66
August 13 59/64 August 15 1/16 August 19 53/64 August 42 23/64 August 65 1/4 August 66 3/8
September 13 3/8 September 15 7/8 September 22 September 44 63/64 September 75 1/2 September 66 3/8
October 12 45/64 October 14 3/16 October 21 13/64 October 47 51/64 October 78 3/8 October 79 13/16
November 12 57/64 November 14 7/8 November 23 53/64 November 46 5/8 November 75 1/2 November 90
December 12 53/64 December 16 3/16 December 25 December 41 25/64 December 75 3/16
The closing price on , 2000 was .
WATSON PHARMACEUTICALS, INC.
Watson Pharmaceuticals, Inc. develops, produces, markets, and distributes
branded and generic pharmaceutical products. Watson's products include
prescription and over-the-counter therapeutic and preventive agents used for
the treatment of human diseases and disorders in the primary care, women's
health, dermatology and neurology/psychiatry areas. Watson markets its branded
pharmaceutical products through specialty sales groups who focus on healthcare
professionals. Watson's generic pharmaceutical products are sold to drug
wholesalers, distributors and retailers, hospitals and health maintenance
organizations.
<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 13 7/8 January 12 3/8 January 22 7/8 January 22 13/32 January 36 3/4 January 54 5/8
February 9 7/8 February 12 29/32 February 21 1/2 February 21 13/16 February 35 7/8 February 48 3/8
March 7 5/8 March 14 3/4 March 20 March 17 7/8 March 36 March 44 1/8
April 8 April 15 9/16 April 23 3/4 April 17 7/8 April 43 1/16 April 40 1/2
May 8 5/8 May 18 3/8 May 22 1/2 May 19 9/16 May 43 3/4 May 38 5/16
June 9 1/4 June 19 1/2 June 18 15/16 June 21 1/8 June 46 11/16 June 35 1/16
July 8 5/8 July 18 July 19 1/2 July 24 3/4 July 45 1/8 July 34 7/16
August 11 7/16 August 20 11/16 August 14 1/2 August 26 9/32 August 45 1/16 August 35 7/8
September 12 5/8 September 20 1/2 September 18 3/4 September 29 7/8 September 51 3/4 September 30 9/16
October 13 5/32 October 22 3/8 October 16 11/16 October 31 3/4 October 55 13/16 October 31 3/4
November 12 3/4 November 23 9/16 November 19 1/2 November 29 3/4 November 53 7/8 November 37 3/16
December 13 1/8 December 24 1/2 December 22 15/32 December 32 7/16 December 62 7/8
</TABLE>
The closing price on , 2000 was .
A-10
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,000,000,000 Depositary Receipts
Pharmaceutical HOLDRsSM Trust
-------------------
P R O S P E C T U S
-------------------
Merrill Lynch & Co.
, 2000
Until , 2000 (25 days after the date of this prospectus), all
dealers effecting transactions in the offered Pharmaceutical 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.
The expenses expected to be incurred in connection with the issuance and
distribution of the securities being registered, other than underwriting
compensation, are as set forth below. Except for the registration fee payable
to the Securities and Exchange Commission, all such expenses are estimated:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........... $ 79,148
Printing and engraving expenses............................... $ 150,000
Legal fees and expenses....................................... $ 800,000
Rating agency fees............................................ $ 0
Miscellaneous................................................. $ 20,852
----------
Total....................................................... $1,050,000
==========
</TABLE>
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.
II-1
<PAGE>
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:
(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. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, on December
21, 1999.
Merrill Lynch, Pierce, Fenner &
Smith
Incorporated
By: *
----------------------------------
Name:Ahmass L. Fakahany
Title: Senior Vice President,
Chief Financial Officer
and Controller
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities indicated on December 21, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* Chief Executive Officer,
___________________________________________ Chairman of the Board and
John L. Steffens Director
* Director
___________________________________________
E. Stanley O'Neal
* Director
___________________________________________
George A. Schieren
* Senior Vice President,
___________________________________________ Chief Financial Officer
Ahmass L. Fakahany and Controller
</TABLE>
*By /s/ Stephen G. Bodurtha Attorney-in-Fact
----------------------------------
Stephen G. Bodurtha
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibits
--------
<C> <S>
4.1 Standard Terms for Depositary Trust Agreements between Merrill Lynch,
Pierce, Fenner & Smith Incorporated and The Bank of Bank of New York,
as Trustee dated as of September 2, 1999, and included as exhibits
thereto, form of Depositary Trust Agreement and form of HOLDRs
5.1 Opinion of Shearman & Sterling regarding the validity of the
Pharmaceutical HOLDRs Receipts
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 in Part II of Registration Statement)
</TABLE>
- --------
* Previously filed.
II-4
<PAGE>
[Execution Copy]
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 September 2, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS AND ASSUMPTIONS
<S> <C> <C>
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 and Other Charges ......................... 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
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
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
ARTICLE 5
THE TRUSTEE AND THE INITIAL DEPOSITOR
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>
Page
----
EXHIBIT A
FORM OF DEPOSITARY TRUST AGREEMENT ......................................... A-1
EXHIBIT B
FORM OF CERTIFICATE EVIDENCING RECEIPTS .................................... B-1
-iii-
<PAGE>
STANDARD TERMS FOR DEPOSITARY TRUST AGREEMENTS agreed to as of
September 2, 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.
"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.
-2-
<PAGE>
"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.
"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
-3-
<PAGE>
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.
"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.
-4-
<PAGE>
"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.
Section 1.2. Rules of Construction. Unless the context otherwise
---------------------
requires:
(i) a term has the meaning assigned to it;
-5-
<PAGE>
(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 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
-6-
<PAGE>
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.
(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 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.
-7-
<PAGE>
(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 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.
-8-
<PAGE>
(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 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
-9-
<PAGE>
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 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
-10-
<PAGE>
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 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.
-11-
<PAGE>
(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
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
-12-
<PAGE>
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
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
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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)
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
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<PAGE>
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, 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, 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
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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.
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 and Other Charges. 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.
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<PAGE>
Section 3.3. Warranties on Deposit of Shares.
-------------------------------
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
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other than a distribution described in Sections 4.1, 4.3 or 4.4 or any
distribution 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 shall find it
necessary or convenient in respect of any matter, the Trustee shall fix a record
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<PAGE>
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
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
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<PAGE>
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, 4.2 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, (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.
(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
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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 4.1. 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.
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
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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 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
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<PAGE>
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), 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
-24-
<PAGE>
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 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
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<PAGE>
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 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
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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 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
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<PAGE>
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.
(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
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<PAGE>
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
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).
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,
depositary banks or transfer agents in the ordinary course of their respective
businesses, (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.
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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.
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 which is known to the Initial Depositor 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 reasonably
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.
-30-
<PAGE>
ARTICLE 6
AMENDMENT AND TERMINATION
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
-31-
<PAGE>
(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 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
--- ----
-32-
<PAGE>
Receipts which have not theretofore been Surrendered, such Owners thereupon
becoming 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.
-33-
<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.
(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
-34-
<PAGE>
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.
-35-
<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:/S/ STEPHEN G. BODURTHA
___________________________
Stephen G. Bodurtha
First Vice President
THE BANK OF NEW YORK,
as Trustee
By:/S/ HERNAN F. RODRIGUEZ
___________________________
Hernan F. Rodriguez
Vice President
-36-
<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 September 2, 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 Round Lot of Receipts and which
shall be represented thereby shall be as follows:
Quantity which
must be deposited
Issuer and Title of Security per Round Lot of Receipts
---------------------------- -------------------------
[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 Round Lot of Receipts 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 execute contracts, and sue and be sued. [The termination
date of the Trust will be December 31, 2039].
A-1
<PAGE>
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 REPRE SENTATIVE 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 REPRESENTA TIVE 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 Round Lot of
Receipts represents the right to receive the following securities:
-------------------------------------------
Quantity
Initially
Issuer and Title Represented by
of Security Each Round Lot
----------- of Receipts
-----------
-------------------------------------------
-------------------------------------------
-------------------------------------------
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 Round Lot of Receipts 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, properly endorsed or accompanied by proper
instruments of transfer, and duly stamped as
B-3
<PAGE>
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
---------------------
(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 of the Standard Terms does not apply, the Trustee shall, if it
has actual knowledge of such
B-4
<PAGE>
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, 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 AND OTHER CHARGES.
----------------------------------------------
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 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
B-5
<PAGE>
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, depositary banks or transfer agents in the
ordinary course of their respective businesses, (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 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.
B-6
<PAGE>
(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.
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
B-7
<PAGE>
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 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
B-8
<PAGE>
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 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.
B-9
<PAGE>
(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, 4.2 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 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.
--------------------------------------------------
B-10
<PAGE>
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. 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
B-11
<PAGE>
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.
(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-12
<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. After making such sale, the Trustee shall be
discharged from all obligations under these
B-13
<PAGE>
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-14
<PAGE>
EXHIBIT 5.1
December 20, 1999
Merrill Lynch, Pierce, Fenner & Smith Incorporated
250 Vesey Street
New York, New York 10281
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Pharmaceutical HOLDRsSM Trust
Registration Statement on Form S-1
Registration No. 333-92161
-------------------------------------
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 Pharmaceutical HOLDRsSM 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 Pharmaceutical HOLDRsSM (the "HOLDRsSM") 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 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, 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 HOLDRsSM 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 substantially in the form filed as an exhibit
to the Registration Statement; and (iv) the HOLDRsSM 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
HOLDRsSM 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
<PAGE>
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.
Very truly yours,
/s/ Shearman & Sterling
<PAGE>
EXHIBIT 8.1
December 20, 1999
Merrill Lynch, Pierce, Fenner & Smith Incorporated
World Financial Center
North Tower--4th Floor
New York, New York 10281
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Pharmaceutical HOLDRsSM Trust
Registration Statement on Form S-1
Registration No. 333-92161
-------------------------------------
Ladies and Gentlemen:
We have acted as special Tax Counsel to Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"), as Initial Depositor, and the
Pharmaceutical HOLDRsSM Trust in connection with the preparation and filing of
a Prospectus and Registration Statement on Form S-1, No. 333-92161, 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 Pharmaceutical HOLDRsSM (the "HOLDRsSM") to be issued
by the Trust. Capitalized terms used herein have the meaning ascribed to them
in the Prospectus. The HOLDRsSM 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 HOLDRsSM (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) 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 foregoing, 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. Moreover,
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 HOLDRsSM 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 under the caption "Legal Matters" in
the Prospectus.
Very truly yours,
/s/ Shearman & Sterling
