-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Up30Iin6IX0RYERQ974l9OSuM2QIOnpqHjLlESY2f9Qw128Bei84wWQ5CnUE2InT cxcgpGe9+RNvj1KaHGQsPg== 0000950123-97-008857.txt : 19971027 0000950123-97-008857.hdr.sgml : 19971027 ACCESSION NUMBER: 0000950123-97-008857 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 19971024 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN J P & CO INC CENTRAL INDEX KEY: 0000068100 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 132625764 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-38633 FILM NUMBER: 97700146 BUSINESS ADDRESS: STREET 1: 60 WALL ST CITY: NEW YORK STATE: NY ZIP: 10260 BUSINESS PHONE: 2124832323 MAIL ADDRESS: STREET 1: P O BOX 271 STREET 2: C/O WILLIAM D HALL CITY: WILMINGTON STATE: DE ZIP: 19899 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN J P INDEX FUNDING CO I CENTRAL INDEX KEY: 0001035866 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133964134 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-38633-01 FILM NUMBER: 97700147 BUSINESS ADDRESS: STREET 1: 60 WALL ST STREET 2: C/O JP MORGAN & CO INC CITY: NEW YORK STATE: NY ZIP: 10260 BUSINESS PHONE: 2126482157 MAIL ADDRESS: STREET 1: 60 WALL ST CITY: NEW YORK STATE: NY ZIP: 10260-0060 S-3 1 J.P. MORGAN & CO./INDEX FUNDING COMPANY I 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 24, 1997 REGISTRATION NOS. [333- ] ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ J.P. MORGAN & CO. INCORPORATED (Exact name of Registrant as specified in its charter) DELAWARE 13-2625764 (State or other jurisdiction or incorporation of organization) (I.R.S. Employer Identification No.)
J.P. MORGAN INDEX FUNDING COMPANY I (Exact name of Registrant as specified in its charter) DELAWARE 13-3964134 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
------------------------ 60 WALL STREET NEW YORK, NEW YORK 10260-0060 TEL. NO. (212) 483-2323 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) RACHEL F. ROBBINS, ESQ. General Counsel and Secretary J.P. MORGAN & CO. INCORPORATED 60 WALL STREET NEW YORK, NEW YORK 10260-0060 TEL. NO.: (212) 648-3535 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------ COPIES TO: GENE A. CAPELLO, ESQ. B. ROBBINS KIESSLING, ESQ. VICE PRESIDENT AND ASSISTANT GENERAL COUNSEL CRAVATH, SWAINE & MOORE J.P. MORGAN & CO. INCORPORATED WORLDWIDE PLAZA 60 WALL STREET 825 EIGHTH AVENUE NEW YORK, NEW YORK 10260-0060 NEW YORK, NEW YORK 10019-7475
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this Registration Statement as determined by market conditions. If any of the securities being registered on this Form are to be offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. [X] ------------------------ CALCULATION OF REGISTRATION FEE
========================================================================================================================== PROPOSED PROPOSED MAXIMUM MAXIMUM AGGREGATE AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING PRICE REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1)(2)(3) (1)(2)(3) FEE(5) - -------------------------------------------------------------------------------------------------------------------------- Preferred Securities of the Trust(1).................. $0 $0.00(5) - -------------------------------------------------------------------------------------------------------------------------- Guarantees of Preferred Securities of the Trust, the Related Note Guarantee of the Related Note of Morgan Guaranty by, and certain backup obligations under the Declaration of, J.P. Morgan(4).................. - -------------------------------------------------------------------------------------------------------------------------- Total................................................. $0 $0.00(5) ==========================================================================================================================
Pursuant to Rule 429(b) under the Securities Act, the Prospectus and Prospectus Supplements included in this Registration Statement also relate to the Preferred Securities of J.P. Morgan Index Funding Company, LLC (the "Company") and the Guarantees thereof by J.P. Morgan previously registered under J.P. Morgan's and the Company's Registration Statement on Form S-3 (Nos. 333-01121 and 333-01121-01). This Registration Statement constitutes Post-Effective Amendment No. 4 to such Registration Statement. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a) MAY DETERMINE. ------------------------ (1) Such indeterminate number of Preferred Securities of the Trust as may from time to time be issued at indeterminate prices. (2) Estimated pursuant to Rule 457 under the Securities Act of 1933, as amended, solely for the purpose of calculating the registration fee. The aggregate public offering price of the Preferred Securities of the Trust registered hereby will not exceed $650,000,000. (3) Exclusive of accrued interest and distributions, if any. (4) The back-up obligations of J.P. Morgan, in addition to the Guarantee and the Related Note Guarantee, consist of the obligations of J.P. Morgan with respect to the Preferred Securities that are set forth in the Declaration. No separate consideration will be received for the Guarantee, the Related Note Guarantee or such backup obligations. See "Effect of the Obligations Under the Guarantee, the Related Note Guarantee and the Related Note" in the applicable Prospectus Supplement. (5) A filing fee aggregating $224,138 was previously paid in connection with a registration statement (nos. 333-01121 and 333-01121-01) filed earlier relating to the registration of in the aggregate $650,000,000 of preferred securities of the Trust. ================================================================================ 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED [ ], 1997 PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED OCTOBER [ ], 1997) COMMODITY-INDEXED PREFERRED SECURITIES (COMPS(SM)), SERIES [B] J.P. MORGAN INDEX FUNDING COMPANY I [2.5]% SERIES [B] PREFERRED SECURITIES INDEXED TO THE JPMCI CRUDE OIL TOTAL RETURN INDEX GUARANTEED TO THE EXTENT SET FORTH HEREIN BY J.P. MORGAN & CO. INCORPORATED ------------------------ The [2.5]% Series [B] Preferred Securities (each, a "Series [B] Preferred Security", and collectively, the "ComPS") offered hereby are being issued by J.P. Morgan Index Funding Company I, a statutory business trust formed under the laws of the State of Delaware (the "Trust"). The ComPS represent undivided beneficial preferred interests in certain assets of the Trust consisting of the Related Note (as defined below) and the proceeds thereof. Each Series [B] Preferred Security will have an initial principal amount of [$25] (the "Face Amount"), and thereafter, the change in value of the principal amount per Series [B] Preferred Security will be indexed to the change in value of the JPMCI Crude Oil Total Return Index (the "Applicable Index"), which is calculated based on the change in value of certain crude oil futures contracts included from time to time in the JPM Indices (such contracts, from time to time, the "Benchmark Crude Oil Contracts") plus a component of collateral yield computed on such fluctuating index value at the most recent auction rate for 3-month U.S. Treasury Bills or certain successor rates thereto (the "Collateral Yield Component"), reduced by a factor designed to offset the costs of issuing and hedging the indexation of the ComPS (the "Factor"). J.P. Morgan & Co. Incorporated, a Delaware corporation ("J.P. Morgan"), will own all the common securities (the "Series [B] Common Securities" and together with the ComPS, the "Series [B] Securities") representing undivided beneficial interests in certain assets of the Trust consisting of the Related Note and the proceeds thereof. The Trust exists for the sole purpose of issuing the Series [B] Securities and investing the proceeds thereof in a [2.5]% Related Note Due , [2000] (the "Related Note") of Morgan Guaranty Trust Company of New York, a trust company with full banking powers organized under the laws of the State of New York and a wholly-owned subsidiary of J.P. Morgan ("Morgan Guaranty"), and issuing similar preferred securities (the "Preferred Securities") and common securities (the "Common Securities" and, together with the Preferred Securities, the "Securities") of separate series and investing the proceeds thereof in similar notes in the future. SEE "RISK FACTORS" ON PAGE S-10 FOR CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE COMPS. THE COMPS ARE NOT FUTURES CONTRACTS AND DO NOT REPRESENT AN ACTUAL INVESTMENT IN FUTURES CONTRACTS. THE REDEMPTION VALUE (AS DEFINED BELOW) OF THE COMPS IS DIRECTLY LINKED TO THE PERFORMANCE OF THE JPMCI CRUDE OIL TOTAL RETURN INDEX, REDUCED BY THE FACTOR. AS A RESULT, THE REDEMPTION VALUE PER SERIES [B] PREFERRED SECURITY MAY BE MORE OR LESS THAN THE FACE AMOUNT AND MAY BE MORE OR LESS THAN THE RETURN FROM AN ACTUAL INVESTMENT IN THE BENCHMARK CRUDE OIL CONTRACTS. SEE "DESCRIPTION OF THE COMPS". "ComPS", "JPMCI" and the "J.P. Morgan Commodity Index" are service marks of J.P. Morgan & Co. Incorporated. The ComPS have been approved for listing on the American Stock Exchange (the "Amex") under the symbol ["JPO"], subject to official notice of issuance. Trading of the ComPS on the Amex is expected to commence within a 30-day period after the date of this Prospectus Supplement. See "Underwriting". THE SERIES [B] SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL AGENCY. THESE SERIES [B] SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Price $[25] per Series [B] Preferred Security plus accrued dividends, if any.
- ---------------------------------------------------------------------------------------------------------------- INITIAL PUBLIC UNDERWRITING PROCEEDS TO OFFERING PRICE(1) COMMISSIONS(2) THE TRUST(3)(4) - ---------------------------------------------------------------------------------------------------------------- Per Series [B] Preferred Security.......... $ (3) $ - ---------------------------------------------------------------------------------------------------------------- Total...................................... $ (3) $ - ----------------------------------------------------------------------------------------------------------------
(1) Plus accrued dividends, if any, from the Issue Date (as defined herein). (2) The Trust and J.P. Morgan have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting". (3) Because the proceeds of the sale of the ComPS will be invested in the Related Note, Morgan Guaranty has agreed to pay to the Underwriters a commission of $ per Series [B] Preferred Security (or $ in the aggregate). See "Underwriting". (4) Expenses of the offering which are payable by the Trust and J.P. Morgan are estimated to be $ . ------------------------ The ComPS offered hereby are offered by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that delivery of the ComPS will be made on or about , 1997, through the book-entry facilities of The Depository Trust Company, against payment therefor in same-day funds. J.P. MORGAN & CO. [ ], 1997. 3 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES [B] SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. S-2 4 STRUCTURAL OVERVIEW [DIAGRAM] 1. THE TRUST. The issuer of the ComPS is a Delaware statutory business trust formed by J.P. Morgan for the sole purpose of issuing the Series [B] Securities and other securities of separate series and lending the proceeds thereof to Morgan Guaranty. J.P. Morgan will own 100% of the Series [B] Common Securities representing 100% of the undivided beneficial common interests in the assets of the Trust consisting of the Related Note and the proceeds thereof. The Trust will be disregarded for United States Federal income tax purposes. J.P. Morgan Index Funding Company, LLC (the "Company"), a Delaware limited liability company, has been merged into the Trust. As a result of such merger, the Trust has succeeded to all rights and obligations of the Company, including any rights and obligations in respect of any securities that were issued by the Company prior to the merger (including the 2.5% Series A Securities (the "Series A Securities")) and any related notes and related note guarantees executed and delivered in connection therewith. 2. THE COMPS. The ComPS issued by the Trust represent undivided beneficial preferred interests in the assets of the Trust consisting of the Related Note and the proceeds thereof. For tax purposes, holders of ComPS are deemed to receive interest income in excess of interest accrued and paid on the Related Note, and dividends on ComPS are not eligible for the dividends received deduction for United States Federal income tax purposes. The ComPS Redemption Price and the ComPS Early Redemption Price are indexed to the JPMCI Crude Oil Total Return Index, reduced by the Factor. The ComPS Early Redemption Price or the ComPS Redemption Price may be more or less than the Face Amount of the ComPS. The Trust intends to issue more than one series of Securities. No holder of Securities of any series shall have any claim on, or any right to, any assets allocated to, or associated with, Securities of any other series (except if, and to the extent that, such holder is also a holder of Securities of such other series). 3. COMPS PROCEEDS LOANED TO MORGAN GUARANTY. Proceeds of ComPS and related Series [B] Common Securities will be used by the Trust on behalf of holders of the Series [B] Securities to purchase from Morgan Guaranty the Related Note with a maturity of [, 2000] and having the same economic terms as the ComPS. 4. REPAYMENT OF RELATED NOTE. Morgan Guaranty will repay the Related Note in whole or part to the extent required to repay Series [B] Securities upon any Early Redemption Date and in whole at the Stated Maturity (subject to extension in case of a Market Disruption Event). 5. RELATED NOTE GUARANTEE. J.P. Morgan will guarantee to the Trust, on a subordinated basis, the payment of any distributions on and principal of the Related Note as provided pursuant to the terms of the Related Note, at such times and in such amounts as provided therein. 6. GUARANTEE. J.P. Morgan will guarantee to the holders of ComPS, on a subordinated basis, the payment of (i) the ComPS Early Redemption Price or the ComPS Redemption Price, as applicable, but if and only if and to the extent that, in each case, Morgan Guaranty has made payment of interest or principal on the Related Note, as the case may be, and (ii) upon liquidation, the lesser of (a) the sum of the Early Redemption Value and the amount of accrued and unpaid dividends on the ComPS and (b) the amount of assets of the Trust consisting of the Related Note and the proceeds thereof available for distribution to holders of ComPS. 7. MORGAN GUARANTY. Morgan Guaranty, a trust company with full banking powers organized under the laws of the State of New York, is a wholly-owned subsidiary of J.P. Morgan. S-3 5 SUMMARY OF THE OFFERING SECURITIES OFFERED......[2.5]% Series [B] Preferred Securities ("ComPS") indexed to the JPMCI Crude Oil Total Return Index. ISSUER..................J.P. Morgan Index Funding Company I (the "Trust"), a Delaware statutory business trust and a subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan"). GUARANTOR...............J.P. Morgan, on a subordinated basis, (i) of payments to holders of ComPS of amounts received on the Related Note by the Trust on behalf of holders of Series [B] Securities and (ii) of payments to the Trust on behalf of holders of Series [B] Securities on the Related Note by Morgan Guaranty, a wholly-owned subsidiary of J.P. Morgan. INITIAL OFFERING PRICE PER SERIES [B] PREFERRED SECURITY ("FACE AMOUNT")................[$25]. AGGREGATE FACE AMOUNT..................$ COMPS REDEMPTION PRICE...................Redemption Value at Stated Maturity plus accrued and unpaid dividends. STATED MATURITY......... , [2000], subject to extension in the case of a Market Disruption Event. REDEMPTION VALUE PER SERIES [B] PREFERRED SECURITY................Face Amount X (Applicable Index Settlement Value) (------------------------------- -Factor) (Applicable Index Commencement Value) APPLICABLE INDEX........JPMCI Crude Oil Total Return Index. APPLICABLE INDEX COMMENCEMENT VALUE......[Set on date of pricing]. APPLICABLE INDEX SETTLEMENT VALUE........The average (rounded to four digits following the decimal point) of the Applicable Index over the 10 consecutive Trading Days meeting certain conditions immediately following the 20th Business Day prior to redemption (as described herein), unless such value has been permanently fixed prior to such time as described under "Description of ComPS -- Early Determination of Applicable Index Settlement Value and Redemption Value." CALCULATION AGENT.......Morgan Guaranty. DIVIDENDS...............Cumulative cash dividends of [2.5]% per annum on the Face Amount (calculated on the basis of a 360 day year of twelve 30-day months) accruing from , 199[ ] (the "Issue Date"), and payable quarterly in arrears on the last calendar day of each March, June, September and December. CASH REDEMPTION PRIOR TO STATED MATURITY OPTIONAL REDEMPTION............At the holders' option, on each prior to the Stated Maturity, for the ComPS Early Redemption Price. SPECIAL EVENT REDEMPTION............Under certain circumstances, upon the occurrence of a Tax Event or an Investment Company Event, for the ComPS Early Redemption Price. EARLY DETERMINATION OF APPLICABLE INDEX SETTLEMENT VALUE........Upon the occurrence of certain events affecting the liquidity or increasing the cost of holding or trading the Benchmark Crude Oil Contracts and the inability to find a suitable replacement Benchmark Crude Oil Contract, the Applicable Index Settlement Value may be fixed, and such fixed value will be used upon any subsequent Early Redemption and at Stated Maturity. COMPS EARLY REDEMPTION PRICE...................The Early Redemption Value (as defined in the Prospectus), which represents the payment of the discounted present value of dividends and Principal Amount on the applicable Early Redemption Date. See "Description of the ComPS -- Optional Redemption" and "-- Special Event Redemption". VOTING RIGHTS...........Holders of ComPS will have limited voting rights but will not be entitled to vote to appoint, remove or replace the Trustees of the Trust or to increase or decrease the number of Trustees (as defined in the Declaration). See "Description of the ComPS--Voting Rights". USE OF PROCEEDS.........The proceeds to the Trust from the sale of ComPS and related Series [B] Common Securities will be used to purchase a note of Morgan Guaranty (the "Related Note"), and Morgan Guaranty will use such proceeds for general corporate purposes and for hedging its obligations under the Related Note. See "Use of Proceeds". FACTOR..................[0.15 (15 percent)] [set on date of pricing], which is designed to offset the costs of issuing and hedging the indexation of the ComPS. ORIGINAL ISSUE DISCOUNT................The ComPS will be issued with original issue discount for Federal income tax purposes. During each taxable period, holders of ComPS will be required to include amounts in income in excess of current cash dividends. Such excess amounts will increase the holders' tax basis in the ComPS. S-4 6 THE OFFERING The information in this Prospectus Supplement concerning J.P. Morgan, Morgan Guaranty, the Trust, the ComPS, the Guarantee, the Related Note Guarantee and the Related Note supplements, and should be read in conjunction with, the information contained in the accompanying Prospectus. THE FOLLOWING SUMMARY OF PROVISIONS RELATING TO THE COMPS IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT (THIS "PROSPECTUS SUPPLEMENT") AND THE PROSPECTUS OF WHICH THIS PROSPECTUS SUPPLEMENT CONSTITUTES A PART (THE "PROSPECTUS"). Prospective purchasers of ComPS should carefully review such information. Certain capitalized terms used in this Prospectus Supplement have the meanings ascribed to them under the "Glossary of Terms" in Annex I hereto. GENERAL Subject to the more specific discussion of each item elsewhere in this Prospectus Supplement or in the Prospectus (including the effect of a Market Disruption Event, as defined herein), following is a general summary of the ComPS: The ComPS pay a fixed dividend rate on the Face Amount (which equals the initial price) and are principal-at-risk securities linked directly to the performance of the JPMCI Crude Oil Total Return Index (the "Applicable Index"), reduced by the Factor. As described herein, the Applicable Index will change based on the daily percentage change in value of the Benchmark Crude Oil Contracts plus a component of collateral yield computed on such fluctuating index value at the most recent auction rate for 3-month U.S. Treasury Bills or certain successor rates thereto (the "Collateral Yield Component"). At maturity, an investor will receive a principal amount determined by the following formula: Face Amount x (the 10-day average of the Applicable Index/the Applicable Index set on the day of pricing, minus the Factor). In no circumstances will the Redemption Value of the ComPS be less than zero, but the Redemption Value could be more or less than the Face Amount. Thus, the Redemption Value is linked directly to the performance of the Applicable Index, reduced by the Factor (e.g., if the average ending value of the Applicable Index is twice the beginning value, the Redemption Value will be twice the Face Amount, reduced by the Factor). If the Applicable Index decreases over the life of the ComPS, or if the percentage increase in the Applicable Index is less than the amount of the Factor, the Redemption Value will be less than the Face Amount. If the percentage increase in the Applicable Index over the life of the ComPS is greater than the amount of the Factor, the Redemption Value will be greater than the Face Amount. The Applicable Index (the JPMCI Crude Oil Total Return Index) is a Total Return Index. A Total Return Index, which is described more fully in the attached Prospectus under "The JPM Indices -- Total Return Methodology", represents the cumulative return of holding an unlevered position in the designated nearby commodity futures contracts underlying such Applicable Index, plus the Collateral Yield Component. Generally, since the Total Return Index is linked directly (i.e., on a one-to-one basis) to the underlying futures contracts, a 1% change on any day in the value of the specific underlying designated futures contract will create a 1% change in the value of the Applicable Index for such day (not including any change in value resulting from the Collateral Yield Component). Because the designated futures contracts underlying the Total Return Indices have maturities (generally less than three months) which are shorter than the maturity of the ComPS, the index calculation methodology replaces the underlying contract used to determine the daily change in the value of the Applicable Index with the next designated contract of the same commodity on a periodic basis. This process of replacement is called "rolling", and the 5-day period during which the replacement occurs is called the "Rollover Period". For any month during which a roll occurs, the daily change in value of a Total Return Index solely as a result of the change in value of the designated future contracts ("Change(t)") for all days prior to the Rollover Period is calculated as 100% of the daily change of the existing ("old") underlying designated contract. Beginning with the first day after the beginning of the Rollover Period, the daily Change(t) in a Total Return Index is calculated based 80% on the percentage change of the old contract and 20% on the percentage change in the replacement ("new") designated contract. Similar 20% adjustments are made in the weights attributable to each contract's change for each of the next four days of the Rollover Period such that, by the day after the Rollover Period ends and for all subsequent days until the next Rollover Period, 100% of the daily S-5 7 Change(t) is attributable to the percentage change of the new designated contract. Because the change in the Applicable Index is linked directly to the percentage change in the designated contracts underlying such index, plus the Collateral Yield Component, any events which affect the designated contracts underlying the Applicable Index may affect the Early Redemption Value and Redemption Value of the ComPS. The Principal Amount of each of the ComPS, which is initially equal to the Face Amount, will vary over the life of the ComPS in relation to the Applicable Index, reduced by the Factor. The Principal Amount repayable on any Early Redemption Date, upon the occurrence of any Special Event Redemption or at Stated Maturity will be determined, pursuant to the terms described herein (including, without limitation, the averaging of the Applicable Index over the Early Determination Period or Determination Period, as applicable, and the present-valuing of the dividends and Principal Amount in connection with early redemptions), by comparing the level of the Applicable Index set on the date of issuance of the ComPS with the level determined pursuant to the terms hereof for any such date of redemption, reduced by the Factor. The ComPS represent undivided beneficial preferred interests in certain assets of the Trust consisting of the Related Note and the proceeds thereof. The Related Note, in which the proceeds of the ComPS and the related Series [B] Common Securities will be invested, matures on , [2000] (which is the "Stated Maturity"), subject to extension in the case of a Market Disruption Event, and is redeemable at certain times, from time to time, at the option of the Trust upon an optional redemption by one or more holders of ComPS in an amount sufficient to fund such redemption and the redemption of the related Series [B] Common Securities and at any time by Morgan Guaranty in whole or in part upon the occurrence of a Special Event. The ComPS will be redeemed at Stated Maturity at the ComPS Redemption Price, which is equal to the sum of (a) the Redemption Value (as defined below) per Series [B] Preferred Security plus (b) accrued and unpaid dividends thereon to but excluding the date of redemption. In addition, if, as a result of a Special Event, Morgan Guaranty redeems the Related Note in whole or in part prior to Stated Maturity, the Trust must redeem ComPS and related Series [B] Common Securities having an aggregate Principal Amount equal to the Principal Amount of the Related Note so redeemed at the ComPS Early Redemption Price. See "Description of the ComPS -- Redemption at Stated Maturity"; -- Special Event Redemption". For purposes of this Prospectus Supplement, "Principal Amount" means (i) in the case of any Series [B] Preferred Security, the Early Redemption Value thereof or the Redemption Value thereof (as if determined as of such time), as applicable, and (ii) in the case of the Related Note, the principal amount thereof at such time determined pursuant to the terms thereof. DIVIDENDS The holders of ComPS are entitled to receive cumulative cash dividends at the rate of [2.5]% per annum on the Face Amount per Series [B] Preferred Security, accruing from the Issue Date, and payable quarterly in arrears on the last calendar day of each March, June, September and December, commencing , 199 , or, if any such date is not a Business Day (as defined herein), the next succeeding Business Day when, as and if available for payment by the Trust (as described herein), except as otherwise described herein. The first dividend payment will be for the period from and including the Issue Date to but excluding , 199 . Dividends (or amounts equal to accrued and unpaid dividends) payable on the ComPS for any period shorter than a quarterly dividend period will be computed on the basis of a 360-day year of twelve 30-day months and on the basis of the actual number of days elapsed (but never greater than 30) in any period shorter than a month. See "Description of the ComPS -- Dividends". REDEMPTION AT STATED MATURITY Unless previously redeemed pursuant to the optional or special redemption provisions described below, each of the outstanding ComPS will be redeemed by the Trust, in cash, on , [2000] which is the Stated Maturity of the Related Note, subject to extension in the case of a Market Disruption Event (as defined herein), at the ComPS Redemption Price, which is equal to (a) the Redemption Value per Series [B] Preferred Security plus (b) accrued and unpaid dividends thereon to but excluding the date of S-6 8 redemption. See "Description of the ComPS -- Redemption at Stated Maturity"; "Risk Factors -- Extension of Settlement Date or Stated Maturity". CALCULATION OF REDEMPTION VALUE The Principal Amount of each Series [B] Preferred Security is indexed to the difference of (i) the Applicable Index, which is calculated based on the change in value of certain crude oil futures contracts included from time to time in the JPM Indices (such contracts, from time to time, the "Benchmark Crude Oil Contracts") plus the Collateral Yield Component, and (ii) the Factor. On the date of this Prospectus Supplement, the Benchmark Crude Oil Contract is the Light "Sweet" Crude Oil contract traded on the New York Mercantile Exchange (the "NYMEX"). Any contracts for forward delivery on the NYMEX shall be referred to herein as "futures contracts" or "contracts." In summary, and subject to the complete definitions and formulae contained herein and in the Prospectus, the Principal Amount of each Series [B] Preferred Security at Stated Maturity, subject to extension in the case of a Market Disruption Event (the "Redemption Value"), shall be determined by multiplying the Face Amount of each Series [B] Preferred Security by the difference between (a) a fraction, the numerator of which is the Applicable Index Settlement Value and the denominator of which is the Applicable Index Commencement Value, and (b) the Factor. However, the Redemption Value may not be less than zero. Subject to the more complete definitions contained herein and in the accompanying Prospectus, "Applicable Index Settlement Value" means the arithmetic average of the values of the Applicable Index during the Determination Period (as defined below), and "Applicable Index Commencement Value" means [value set on date of issuance]. See "Description of ComPS--Calculation of Redemption Value" herein and "Description of ComPS-- Determination Period and Settlement Date" in the Prospectus. EARLY DETERMINATION OF APPLICABLE INDEX SETTLEMENT VALUE AND REDEMPTION VALUE Upon the occurrence of certain events affecting the liquidity or increasing the cost of holding or trading the Benchmark Crude Oil Contracts and the inability to find a suitable replacement Benchmark Crude Oil Contract, Morgan Guaranty has the right to cause the Applicable Index Settlement Value to be fixed. Following such an event, the Applicable Index Settlement Value will remain fixed and will be used in calculating the Applicable Index Early Settlement Value for the computation of any Early Redemption Value and as the Applicable Index Settlement Value at Stated Maturity. See "Description of the ComPS-- Early Determination of Applicable Index Settlement Value and Redemption Value". OPTIONAL REDEMPTION Each holder of ComPS may, by giving notice as specified herein before [anniversary of Stated Maturity] of each year prior to Stated Maturity (each, an "Optional Redemption Date"), cause the Trust to redeem some or all of such holder's ComPS at the ComPS Early Redemption Price, which is equal to (a) the Early Redemption Value (as defined in the Prospectus) per Series [B] Preferred Security as determined at such time plus (b) accrued and unpaid dividends thereon to but excluding the date of redemption. See "Description of the ComPS--Optional Redemption". SPECIAL EVENT REDEMPTION Upon the occurrence and during the continuation of a Tax Event or an Investment Company Event (each as defined herein and each a "Special Event"), Morgan Guaranty will have the right to redeem the Related Note in whole or, if redemption of less than all the ComPS will result in the discontinuance of such Special Event, in part in an amount sufficient to cause such discontinuance, in each case for cash, with the result that the Trust will redeem a Principal Amount of ComPS and related Series [B] Common Securities equal to the Principal Amount of the Related Note so redeemed for cash at the ComPS Early Redemption Price. However, in the case of a Tax Event, Morgan Guaranty may allow the Related Note and the Trust may allow the ComPS and related Series [B] Common Securities to remain outstanding upon the receipt of indemnification by J.P. Morgan of the Trust for all taxes payable by it as a result of such Tax Event. See "Description of the ComPS--Special Event Redemption". S-7 9 UNCONDITIONAL GUARANTEE BY J.P. MORGAN J.P. Morgan, through its obligations under the Guarantee, the Related Note Guarantee and the Declaration, taken together, will provide a full and unconditional guarantee, on a subordinated basis, of payments due on the ComPS. See "Risk Factors--Limitation on Rights Under the Guarantee, the Related Note Guarantee and the Related Note", "Description of the Related Note Guarantee" and "Effect of Obligations Under the Guarantee, the Related Note Guarantee and the Related Note". THE GUARANTEE The Guarantee by J.P. Morgan guarantees to the holders of the ComPS the payment of (i) the ComPS Early Redemption Price or the ComPS Redemption Price, as applicable, but if and only if and to the extent that, in each case, Morgan Guaranty has made payment of interest or principal on the Related Note, as the case may be, and (ii) upon a Liquidation Event (as defined herein) (other than in connection with the redemption of all the ComPS upon maturity or redemption in whole of the Related Note), the lesser of (A) the sum of (I) the Early Redemption Value of such ComPS and (II) the amount of accrued and unpaid dividends on such ComPS to but excluding the date of payment (the "Liquidation Distribution"), to the extent the Trust has funds available therefor, and (B) the amount of assets of the Trust consisting of the Related Note and the proceeds thereof remaining available for distribution to holders of the ComPS upon such Liquidation Event. J.P. Morgan's obligations under the Guarantee will be subordinated and junior in right of payment to all liabilities of J.P. Morgan, pari passu with the most senior preferred stock outstanding as of the date hereof of J.P. Morgan and senior to the common stock of J.P. Morgan. THE RELATED NOTE GUARANTEE The Related Note Guarantee by J.P. Morgan guarantees to the Property Trustee on behalf of holders of Series [B] Securities the payment of any dividends on and principal of the Related Note as provided pursuant to the terms of the Related Note, at such times and in such amounts as provided therein. J.P. Morgan's obligations under the Related Note Guarantee will be subordinated and junior in right of payment to all liabilities of J.P. Morgan, pari passu with the most senior preferred stock outstanding as of the date hereof of J.P. Morgan and senior to the common stock of J.P. Morgan. RELATED NOTE The Related Note will be issued as an unsecured obligation of Morgan Guaranty, limited in initial Principal Amount to approximately $ , such amount being the aggregate Face Amount of the ComPS and the related Series [B] Common Securities. The Related Note will mature on the Stated Maturity (subject to extension in the case of a Market Disruption Event), and will bear interest at an annual rate of [2.5]% on such aggregate Face Amount (which is equivalent to the annual dividend rate with respect to the ComPS), payable quarterly in arrears on the last day of each calendar quarter, commencing on , 199 . The Principal Amount of the Related Note at any time will be the aggregate Principal Amount of the outstanding ComPS and related Series [B] Common Securities at such time. The amount payable upon maturity of the Related Note will be the Related Note Redemption Price. The timing and amount of payments on the Related Note mirror the aggregate financial terms of the ComPS. The obligations of Morgan Guaranty under the Related Note will be pari passu with all present and future Senior Indebtedness of Morgan Guaranty. Morgan Guaranty's obligations under the Related Note are effectively subordinated to all liabilities (including indebtedness) of its consolidated and unconsolidated subsidiaries. VOTING RIGHTS Holders of ComPS will have certain voting rights but will not be entitled to vote to appoint, remove or replace the Trustees (as defined below) of the Trust or to increase or decrease the number of Trustees. See "Description of the ComPS--Voting Rights". S-8 10 USE OF PROCEEDS The Trust, on behalf of holders of Series [B] Securities, will invest the proceeds from the sale of the ComPS offered hereby and the related Series [B] Common Securities in the Related Note, the proceeds of which will be used by Morgan Guaranty for general corporate purposes and for hedging its obligations under the Related Note. See "Use of Proceeds". LISTING The ComPS have been approved for listing on the Amex under the symbol ["JPO"], subject to official notice of issuance. Trading of the ComPS on the Amex is expected to commence within a 30-day period after the date of this Prospectus Supplement. Prior to this offering, there has been no market for the ComPS. S-9 11 RISK FACTORS INDEXATION OF PRINCIPAL AMOUNT The Principal Amount of each of the ComPS, which is initially equal to the Face Amount, will vary until Stated Maturity of the ComPS in relation to the Applicable Index (the JPMCI Crude Oil Total Return Index), reduced by the Factor. The Principal Amount repayable on any Optional Redemption Date, upon the occurrence of any Special Event Redemption or in connection with any Liquidation Distribution (each such redemption date, an "Early Redemption Date") or at Stated Maturity will be determined, pursuant to the terms described herein (including, without limitation, the averaging of the Applicable Index over the Early Determination Period or Determination Period, as applicable, and the present-valuing of the dividends and Principal Amount in connection with early redemptions), by comparing the level of the Applicable Index at the date of issuance of the ComPS with the level determined pursuant to the terms hereof for any such date of redemption, reduced by the Factor. Accordingly, the Principal Amount to be received upon any date of redemption will fluctuate based on the Applicable Index (reduced by the Factor) and may be lower than the Face Amount. If the Applicable Index decreases over the life of the ComPS, or if the percentage increase in the Applicable Index is less than the amount of the Factor, the Redemption Value will be less than the Face Amount. If the percentage increase in the Applicable Index is greater than the amount of the Factor, the Redemption Value will be greater than the Face Amount. LIMITATION ON RIGHTS UNDER THE GUARANTEE, THE RELATED NOTE GUARANTEE AND THE RELATED NOTE The Guarantee will be effective with respect to the ComPS from the time of issuance of the ComPS but will not apply to any payment of dividends or other amounts due in respect of the ComPS to the extent Morgan Guaranty has failed to make a payment of principal of or interest on the Related Note. To the extent Morgan Guaranty were to default on its obligation to pay amounts payable on the Related Note, the Trust, on behalf of holders of the Series [B] Securities, would lack available funds for the payment of distributions on or amounts payable on redemption of the ComPS and, in such event, holders of the ComPS would not be able to rely on the Guarantee for payment of such amounts. Instead, holders of the ComPS would rely on the enforcement by the Trust, on behalf of holders of the Series [B] Securities, of its rights as holder of the Related Note against Morgan Guaranty and of its rights as holder of the Related Note Guarantee against J.P. Morgan. J.P. Morgan, through its obligations under the Guarantee, the Related Note Guarantee and the Declaration, taken together, will provide a full and unconditional guarantee, on a subordinated basis, of payments due on the ComPS. See "Description of the Guarantee" and "Description of the Related Note Guarantee". SPECIAL EVENT REDEMPTION Upon the occurrence of a Special Event, unless waived by Morgan Guaranty or subject to cure as specified herein, Morgan Guaranty shall have the right to redeem the Related Note, in whole or in part, in which event the Trust will redeem the ComPS and related Series [B] Common Securities on a pro rata basis to the same extent as the Principal Amount of the Related Note is redeemed by Morgan Guaranty. As described in more detail below, a Special Event is either (i) a Tax Event or (ii) an Investment Company Event. A Special Event may occur at any time. See "Description of the ComPS--Special Event Redemption". It is possible that the occurrence of a Special Event could cause the market price of the ComPS in any existing secondary market to decline. LIMITED VOTING RIGHTS Holders of ComPS will have certain voting rights relating to a payment default on or an adverse change to the ComPS, but will not be entitled to vote to appoint, remove or replace the Trustees of the Trust or to increase or decrease the number of Trustees, which voting rights are vested exclusively in the holders of S-10 12 the Series [B] Common Securities and other Common Securities. See "Description of the ComPS--Voting Rights". TRADING PRICE MAY NOT REFLECT ACTUAL ECONOMIC VALUE The ComPS have been approved for listing on the Amex under the symbol ["JPO"], subject to official notice of issuance. Trading of the ComPS on the Amex is expected to commence within a 30-day period after the date of this Prospectus Supplement. Prior to this offering there has been no market for the ComPS. It is not possible to predict whether the necessary number of holders will purchase and, for the remaining term of the ComPS, continue to hold ComPS in order that any secondary market which does develop will continue to exist. The Underwriters (as defined in "Underwriting") are not obligated to make a market for the ComPS, and although J.P. Morgan Securities Inc. ("JPMSI") as lead Underwriter, intends to use its reasonable efforts to do so, it is possible that no active secondary market for the ComPS will develop and remain in existence. There can be no assurance as to the market prices for the ComPS in any secondary market which does develop. Accordingly, the ComPS that an investor may purchase, whether pursuant to the offer made hereby or in the secondary market, may trade at a discount to the price that the investor paid to purchase such ComPS. VALUE OF THE COMPS The value of the ComPS at any time will depend upon the interaction of at least two key factors: (i) the level of the Applicable Index and (ii) the credit quality of Morgan Guaranty and J.P. Morgan. As discussed under "Description of the ComPS", adverse changes in the Applicable Index will directly correlate to adverse changes in the value of the ComPS. Also, a decline in the credit quality of Morgan Guaranty and J.P. Morgan could cause the trading price of the ComPS in any secondary market then existing to decline. RIGHT TO INTEREST ON RELATED NOTE Because holders of ComPS are essentially investing in a pro rata share of the Related Note, prospective purchasers of ComPS are also making an investment decision with regard to the Related Note and should carefully review all the information regarding the Related Note contained herein and in the accompanying Prospectus. Investors in ComPS have a direct right to interest distributions on the Related Note. See "Description of the Related Note". IMPOSITION OF BANK REGULATORY RESTRICTIONS The Trust's ability to make distributions and other payments on the ComPS is dependent upon Morgan Guaranty's making interest and other payments on the Related Note as and when required or collection by the Trust, on behalf of holders of Series [B] Securities, under the Related Note Guarantee. As noted in the accompanying Prospectus under "J.P. Morgan & Co. Incorporated--Regulation", Morgan Guaranty is subject to examination and regulation by U.S. federal and state banking authorities, and although there is no current restriction on Morgan Guaranty's ability to make payments under the Related Note, certain transactions with affiliates, including the Trust, are or may in the future become subject to restrictions imposed by bank regulatory authorities. EFFECT OF TRADING IN THE BENCHMARK CRUDE OIL CONTRACTS AND RELATED COMMODITIES AND INSTRUMENTS Morgan Guaranty and other affiliates of J.P. Morgan are and will be actively involved in the trading of the Benchmark Crude Oil Contracts, U.S. Treasury Bills and other instruments and derivative products based thereon. Morgan Guaranty, in particular, is an active participant in various commodity markets including the physical petroleum, precious and base metals and related derivatives markets. JPMSI and other affiliates may also issue or underwrite, or authorize unaffiliated entities to issue or underwrite, other securities or financial instruments with returns indexed to the Applicable Index, the Benchmark Crude Oil S-11 13 Contracts, U.S. Treasury Bills, one or more of the JPM Indices or to another commodity. Morgan Guaranty has licensed, and may in the future license, the Applicable Index, the JPM Indices, and related indices and sub-indices for use by affiliated and unaffiliated parties, for publication in newspapers and periodicals, for distribution by information and data dissemination services and for other purposes. Morgan Guaranty currently intends to publish individual commodity sub-indices for each of the commodities included in the JPMCI using the same calculation methodology as that described below. The Applicable Index on the date hereof is identical to the sub-index having the same underlying commodity. Trading in the foregoing contracts, U.S. Treasury Bills and commodities by Morgan Guaranty, its affiliates (including JPMSI) and unaffiliated third parties could adversely affect the value of the Applicable Index, which would in turn adversely affect the return on and the value of the ComPS. See "Description of the ComPS". Furthermore, additional issuances of securities linked or referenced to the Benchmark Crude Oil Contracts, similar crude oil futures contracts or crude oil could adversely affect the value of the ComPS. POTENTIAL FOR ADVERSE INTERESTS As noted above, Morgan Guaranty, JPMSI and their affiliates expect to engage in trading activities related to the Benchmark Crude Oil Contracts and U.S. Treasury Bills and other instruments or derivative products based on or related to the Applicable Index, for their accounts where permitted or for other accounts under their management. Morgan Guaranty, JPMSI and their affiliates, as well as unaffiliated third parties, may also engage in other activities related to the Applicable Index, as discussed above. Because Morgan Guaranty will issue the Related Note issued to the Trust on behalf of holders of Series [B] Securities, all such activities could create interests of Morgan Guaranty adverse to those of the holders of ComPS. For example, the issuance of other securities indexed to the Applicable Index, i.e., the introduction of competing products into the marketplace, could adversely affect the value of the ComPS. To the extent that J.P. Morgan or one of its affiliates serves as issuer, or JPMSI or one of its affiliates serves as agent or underwriter, for such securities or other instruments, their interests with respect to such products may be adverse to those of the holders of the ComPS. Morgan Guaranty will serve as Calculation Agent with respect to the ComPS and, accordingly, will in good faith calculate the Applicable Index, which could also raise certain adverse interests (e.g., in instances where Morgan Guaranty as the Calculation Agent is required to exercise discretion). RISK OF CARRYING AND ROLLING BENCHMARK CRUDE OIL CONTRACTS As discussed below, the Early Redemption Value and the Redemption Value of the ComPS will be calculated with reference to the Applicable Index, the value of which is designed to replicate to the extent provided herein the cumulative return of holding a continuous investment in the Benchmark Crude Oil Contracts, plus the Collateral Return Component. At any given time, the Applicable Index will be calculated based on the change in value of certain Benchmark Crude Oil Contracts for delivery in the near term (the "shorter-dated contracts"), plus the Collateral Return Component thereon. The Applicable Index will continue to be calculated based on the change in value of such shorter-dated contracts until they approach maturity, at which time the Applicable Index will, as described below, cease to be calculated based on the change in value of such shorter-dated contracts and begin to be calculated based on the change in value of the subsequent Benchmark Crude Oil Contracts (the "longer-dated contracts") plus the Collateral Return Component thereon on a regular periodic basis so as to be continuously indexed to the change in value of Benchmark Crude Oil Contracts. The period during which each such replacement of shorter-dated contracts with longer-dated contracts as the basis for the calculation of the change in value of the Applicable Index occurs is referred to herein as the "Rollover Period", as further defined below. If the market for Benchmark Crude Oil Contracts is in "contango" (i.e., the prices of longer-dated contracts are above the prices of shorter-dated contracts), the return on the Applicable Index may be adversely affected. The Applicable Index would decline if (i) the price of the longer-dated Benchmark Crude Oil Contracts during the Rollover Period were more than the price of the shorter-dated contracts which they will replace and (ii) the price of the longer-dated contracts were to decline as such contracts approach maturity (i.e., the price of the longer-dated contracts were to converge toward the price of the replaced S-12 14 shorter-dated contracts), in each case in an amount greater than the Collateral Return Component accruing during such period. While many of the commodities included in the JPM Indices have historically exhibited periods of both "backwardation" (i.e., the prices of longer-dated contracts are below the prices of shorter-dated contracts) and contango, there can be no assurance that backwardation will exist at any or all times. The absence of backwardation in the market for Benchmark Crude Oil Contracts could adversely affect the Applicable Index and, correspondingly, could adversely affect the value of the ComPS. Additionally, the issuance and/or the trading of the ComPS could adversely affect the market for Benchmark Crude Oil Contracts and the extent to which such markets are in backwardation or contango and, correspondingly, could adversely affect the value of the Applicable Index and the value of the ComPS. See "Description of ComPS--Calculation of Redemption Value". The following table sets forth the simulated month-end level of the JPMCI Crude Oil Total Return Index (the Applicable Index) for the months from January, 1984 through January 1996, and the actual level of the JPMCI Crude Oil Total Return Index thereafter. Because Morgan Guaranty did not commence actual calculation and publication of the JPMCI Crude Oil Total Return Index using the rules described herein until February 1, 1996, the levels prior to such date are simulated levels only, derived by applying the rules of the JPMCI Crude Oil Total Return Index as described herein to historical crude oil contract settlement values and using as a given the level of the previous JPMCI Crude Oil Total Return Index on January 31, 1996, as the basis for calculation:
--------------------------------------------------------------------------------------------------------- Level of the Applicable Index as of the end of: YEAR JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC. - ---- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ 1984 79.29 82.08 83.95 83.37 85.61 83.13 77.26 81.97 83.30 80.27 78.06 75.98 1985 76.36 79.72 86.77 87.15 90.32 90.48 94.20 100.02 106.66 114.89 116.88 107.78 1986 81.61 57.79 44.72 57.82 64.67 58.48 52.22 75.54 70.33 71.89 70.25 83.78 1987 88.34 78.96 90.76 92.47 97.82 104.14 112.74 105.91 106.69 109.98 102.90 95.08 1988 97.84 93.22 100.27 106.88 103.98 90.07 96.43 89.28 79.60 83.47 95.16 110.04 1989 114.00 126.05 144.72 153.97 159.54 171.94 163.76 172.17 188.41 189.52 191.87 214.11 1990 233.52 226.28 212.36 189.27 174.17 165.93 193.53 260.41 387.69 360.46 306.23 310.38 1991 244.52 235.23 246.55 268.26 272.86 265.80 283.24 293.27 294.68 313.37 290.84 259.69 1992 256.22 252.37 260.99 280.26 296.53 291.02 296.13 292.61 298.70 285.36 274.74 268.70 1993 277.34 282.70 280.21 279.52 270.69 252.06 236.33 237.33 239.29 213.93 192.72 173.80 1994 183.62 174.09 177.04 203.64 227.06 248.49 269.93 237.06 247.30 244.23 245.03 241.70 1995 252.55 257.67 269.47 289.49 272.59 254.22 261.06 269.96 271.94 278.79 293.17 322.34 1996 300.79 341.25 393.40 428.43 419.19 464.22 471.34 528.85 598.67 585.03 600.80 672.44 1997 643.71 548.53 559.75 546.26 567.40 531.36 539.20 522.09 562.47
Additionally, the level of the Applicable Index as of the close of business on [the date of pricing] was [ ]. S-13 15 The following is a graph of such simulated and actual month-end values: LEVELS OF JPMCI CRUDE OIL TOTAL RETURN INDEX, 1984-SEPTEMBER, 1997 [GRAPH] Source: Morgan Guaranty Using the year-end levels noted above as hypothetical ending values for the Applicable Index Settlement Values and the three-year prior year-end levels as hypothetical beginning values for the Applicable Index Commencement Values, the hypothetical Redemption Value of a Series [B] Preferred Security as if maturing at the end of each of the past ten years for a Series [B] Preferred Security priced three years prior, with a hypothetical Face Amount of $25.00 and a hypothetical Factor of 0.15 would be as follows:
-------------------------------------------------------------------------------------------- Hypothetical Applicable Index Commencement Value Hypothetical Applicable Index ComPS Hypothetical YEAR (3 years prior) Settlement Value Redemption Value - ---------------- ----------------------------- ----------------------------- ----------------------------- 1987............ 75.98 95.08 $ 27.53 1988............ 107.78 110.04 $ 21.77 1989............ 83.78 214.11 $ 60.14 1990............ 95.08 310.38 $ 77.86 1991............ 110.04 259.69 $ 55.25 1992............ 214.11 268.70 $ 27.62 1993............ 310.38 173.80 $ 10.25 1994............ 259.69 241.70 $ 19.52 1995............ 268.70 322.34 $ 26.24 1996............ 173.80 672.44 $ 92.98
WITH RESPECT TO THE FOREGOING MONTH-END VALUES AND HYPOTHETICAL REDEMPTION VALUES, PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE AND VALUES. S-14 16 VOLATILITY OF AND ADVERSE CHANGES TO CRUDE OIL AND CRUDE OIL FUTURES PRICES Oil prices can fluctuate widely and they are affected by numerous factors other than economic activity. They include weather, political events, labor activity, direct government intervention such as embargos, and, especially, supply disruptions in major producing or consuming regions such as the Middle East, the United States, Latin America and Russia. Supply disruptions tend to affect oil prices worldwide, regardless of the location of the disruption. Market expectations about these events and speculative activity also cause prices to fluctuate. Oil demand and supply adjust to price changes, but mainly in the long term. That is, the adjustment that eventually corrects the imbalance that caused the initial price fluctuation takes time. In the short term, demand/supply responsiveness to price changes is limited and, at times, in the opposite direction. This characteristic tends to prolong and exacerbate price fluctuations. For example, if prices rise, oil consumers will curtail their oil demand over time; but often their immediate response has been a rise in demand through increased stockpiling. In addition, the structure of oil supply is different from that of most other commodities. Since the early 1970s, market prices have been well above the average cost of production, while the marginal producers have been the large, low-cost producers of the Middle East. Also, political developments (especially in the Middle East) and the outcome of meetings of the Organization of Petroleum Exporting Countries can particularly affect world oil supply and oil prices. The following table shows the year-end levels of the Benchmark Crude Oil Contract from 1983:
------------------------ NYMEX 1st Nearby Crude Oil Futures Price at Year End ------------------------- 12/31/83.............................................................. 29.60 12/31/84.............................................................. 26.41 12/31/85.............................................................. 26.30 12/31/86.............................................................. 17.94 12/31/87.............................................................. 16.70 12/31/88.............................................................. 17.24 12/31/89.............................................................. 21.82 12/31/90.............................................................. 28.44 12/31/91.............................................................. 19.12 12/31/92.............................................................. 19.50 12/31/93.............................................................. 14.17 12/31/94.............................................................. 17.76 12/31/95.............................................................. 19.55 12/31/96.............................................................. 25.92
Furthermore, a significant proportion of world crude oil production capacity is controlled by a small number of producers, and such producers have in the recent past implemented curtailments of output and trade. Such efforts at supply curtailment (or the cessation thereof) could affect the value of the Applicable Index. Crude oil's major end-use as a refined product is as a transport fuel, industrial fuel and in-home heating. Potential for substitution exists in most areas, although considerations including relative cost often limit substitution levels. However, the development of a substitute product or transport fuel could adversely affect the value of the Applicable Index. The supply of and demand for crude oil influence the crude oil price in the medium-to-longer term. In the event of sudden disruptions in the supplies of crude oil, such as those caused by war, accidents, weather or acts of terrorism, prices of Benchmark Crude Oil Contracts and, consequently, the value of the Applicable Index, could become extremely volatile and unpredictable. Also, sudden and dramatic declines in Benchmark Crude Oil Contract prices as may occur, for example, upon a cessation of hostilities that may exist in countries producing crude oil or upon the discovery of significant additional sources or reserves of S-15 17 crude oil, the introduction of new or previously withheld supplies into the market (e.g., crude oil from Iraq) or the introduction of substitute products or commodities, could have a significant adverse effect on the value of the Applicable Index and on the value of the ComPS. In addition, the price of crude oil has on occasion been subject to very rapid and significant short-term changes due to speculative activities which, if such activities result in a price decrease, may cause the value of the ComPS to decrease. In any case, all such volatility in the Benchmark Crude Oil Contracts will correlate directly to volatility in the Applicable Index. Such volatility could lead some investors in the Benchmark Crude Oil Contracts to withdraw from the applicable futures markets, which could adversely affect the liquidity of such markets and could adversely affect the value of the Applicable Index and, correspondingly, the value of the ComPS. See "Description of the ComPS--Calculation of Redemption Value". CHANGE OF EXCHANGE METHODOLOGY Any exchange on which any Benchmark Crude Oil Contract is traded or which provides information relevant to the calculation of the Applicable Index may from time to time change any rule or bylaw or take emergency action under its rules, any of which could affect the settlement prices of the Benchmark Crude Oil Contracts underlying an Applicable Index. Any such change which causes a decrease in such settlement prices could adversely affect the value of the Applicable Index. SUSPENSION OR MATERIAL DISRUPTION OF FUTURES OR COMMODITIES TRADING; TEMPORARY DISTORTIONS The futures markets and the markets for crude oil are subject to temporary distortions or other disruptions due to conditions of illiquidity in the markets, the participation of speculators, government regulation and intervention and the other factors. In addition, U.S. futures exchanges (including the NYMEX) and certain foreign exchanges on which replacement Benchmark Crude Oil Contracts, if any, may trade (which exchanges must have information-sharing arrangements with the Securities and Exchange Commission and be regulated exchanges located in the United States, Canada, the United Kingdom, Japan, Singapore or a country that at such time is a member of the Organization of Economic Cooperation and Development) have regulations which may limit the amount of fluctuation of futures contract prices which may occur during a single trading day. Such limits are generally referred to as "daily price fluctuation limits" or, more commonly, "daily limits", and the maximum or minimum price of a contract on any given day, as a result of the effect of such limits, is referred to as a "limit price", as discussed below. In a particular futures contract, once the limit price has been reached in such a contract, no trades may be made on that day at a price above or below the limit price, as the case may be. Limit prices may have the effect of precluding trading in a particular contract for all or a portion of a trading day or forcing the liquidation of contracts at disadvantageous times or prices. Any such circumstances, particularly if they occur during the Rollover Period for the Applicable Index or during an Early Determination Period or the Determination Period for the Applicable Index, could adversely affect the value of the Applicable Index and/or could constitute a Market Disruption Event and, therefore, could adversely affect the value of the ComPS. Depending on the period of time over which a Market Disruption Event continues, the correlation between changes in the value of the Applicable Index and changes in the general level of prices of crude oil may be adversely affected. Under such circumstances, the value of the Applicable Index, and the value of the ComPS, may be adversely affected. Additionally, because the ComPS will be listed and will trade on a stock exchange, trading in the ComPS may be subject to interruption or delay due to extreme volatility in the trading prices of equity securities generally on such exchange (the so-called "circuit breaker" rules), notwithstanding the specific price movements of the ComPS. MARKET DISRUPTION EVENTS In the event of a Market Disruption Event during any Early Determination Period or the Determination Period, the Early Redemption Value or Redemption Value, as applicable, payable in respect of the ComPS S-16 18 will be calculated using the Applicable Index on the day or days on which open-outcry trading on either the NYMEX or the London Metals Exchange (the "LME") is scheduled to occur or occurs (each, a "Trading Day") immediately following the termination of such Market Disruption Event. However, if such Market Disruption Event remains in effect for longer than 20 consecutive Trading Days and, in the reasonable judgment of Morgan Guaranty, such Market Disruption Event is likely to remain in effect, then the Applicable Index Early Settlement Value or the Applicable Index Settlement Value, as applicable, for each Trading Day subject to a Market Disruption Event may be determined in good faith by Morgan Guaranty based on alternative pricing sources reasonably believed by it to be indicative of then-prevailing prices for notional transactions in futures contracts or commodities equal in size to the Applicable Index Early Settlement Value or the Applicable Index Settlement Value, as applicable, although Morgan Guaranty has no obligation to do so, and such value will be utilized in the calculation of the Early Redemption Value or the Redemption Value, as applicable, for such days. Because Morgan Guaranty's obligations under the Related Note will also be based on the Applicable Index Early Settlement Value or the Applicable Index Settlement Value, Morgan Guaranty may have an adverse interest with respect to such determination. HISTORICAL CORRELATIONS MAY NOT PREVAIL IN THE FUTURE Although historically the JPMCI Crude Oil Total Return Index and the spot prices of crude oil have shown some positive correlation with inflation and some negative correlation with stock and bond returns (in each case in the United States), there can be no assurance that such correlations will prevail in the future. As a result, investors who invest in ComPS in reliance on these correlations should individually assess the likelihood of such correlations continuing. CHANGES IN LAWS OR REGULATIONS OR INTERPRETATIONS THEREOF Prices of commodities and commodity futures contracts may be adversely affected by the promulgation of new laws or regulations or by the reinterpretation of existing laws or regulations (including, without limitation, those relating to taxes and duties on commodities or commodity components) by one or more governments, governmental agencies or instrumentalities, courts or other official bodies. Any such event could adversely affect the value of the Applicable Index and, correspondingly, could adversely affect the value of the ComPS. Additionally, the occurrence of certain events increasing the cost of holding or trading the Benchmark Crude Oil Contracts and the inability to find a suitable replacement Benchmark Crude Oil Contract could lead Morgan Guaranty to cause the Applicable Index Settlement Value to be fixed, which Applicable Index Settlement Value would be utilized to determine any Early Redemption Value and in which event the Redemption Value of the ComPS would not vary through Stated Maturity. Such an early determination of the Applicable Index Settlement Value may result in the holders of the ComPS receiving an amount that is less than what indicative commodity and futures prices prevailing on any Early Redemption Date or at the Stated Maturity would otherwise imply. EXTENSION OF SETTLEMENT DATE OR STATED MATURITY If any Benchmark Crude Oil Contract were to be affected by a Market Disruption Event during any Early Determination Period or the Determination Period, the applicable Settlement Date would be postponed until the later of (i) the applicable Early Redemption Date or the Stated Maturity and (ii) the fifth Business Day after the last day of the applicable Early Determination Period or the Determination Period. Such delay could be of indefinite duration, during which time a holder of ComPS will not receive the Early Redemption Value or Redemption Value thereof, as applicable. In the event that payment of the Redemption Value is postponed beyond the Stated Maturity, no interest or dividends will accrue or be payable on the Face Amount, as described under the caption "Description of the ComPS--Calculation of Redemption Value". In the event payment of the Early Redemption Value is postponed beyond the applicable Early Redemption Date, no dividends will be payable, and no interest will accrue and be payable, with respect to ComPS redeemed on such Early Redemption Date. S-17 19 DISCONTINUANCE OF PUBLISHING OF THE JPMCI CRUDE OIL TOTAL RETURN INDEX In the event that Morgan Guaranty discontinues publication of the JPMCI Crude Oil Total Return Index, the Calculation Agent will continue to calculate in good faith the Applicable Index during the remaining term of the ComPS, based on the methodology described in the Prospectus under "Description of the ComPS". However, such good-faith calculation may result in a ComPS Redemption Price or ComPS Early Redemption Price for the ComPS which is less than the ComPS Redemption Price or ComPS Early Redemption Price, as applicable, for such ComPS had it been calculated on the basis of the JPMCI Crude Oil Total Return Index. POTENTIAL MODIFICATIONS TO THE JPM INDICES AND/OR THE APPLICABLE INDEX Morgan Guaranty reserves the right at its discretion to make any modifications to the JPM Indices based on the recommendations of the JPMCI Policy Committee. As described under "Description of the ComPS--Early Determination of Applicable Index Settlement Value and Redemption Value", if any Benchmark Crude Oil Contract becomes less liquid or representative, the JPMCI Policy Committee could recommend a replacement Benchmark Crude Oil Contract. Such a change from a less liquid to a more liquid contract may result in a lower Early Redemption Value or Redemption Value for the ComPS than would have been the case if the less liquid contract had remained the benchmark. If at any time no replacement contracts can be found to serve as a Benchmark Crude Oil Contract, the Applicable Index Settlement Value of the ComPS will be determined at such time, as described under the caption "Description of the ComPS--Early Determination of Applicable Index Settlement Value and Redemption Value". Such an early determination of the Applicable Index Settlement Value may result in the holders of the ComPS receiving an amount that is less than what indicative commodity and futures prices prevailing on any Early Redemption Date or at the Stated Maturity would otherwise imply. Because Morgan Guaranty will be the Calculation Agent, such early determination may raise adverse interests. Additionally, if at any time any Benchmark Crude Oil Contract, or the trading thereof, becomes subject to any increased cost or additional tax, Morgan Guaranty reserves the right to designate a replacement Benchmark Crude Oil Contract or, if no such contract is designated, to cause, at its option, the Applicable Index Settlement Value of the ComPS to be determined at such time as described under "Description of the ComPS--Early Determination of Applicable Index Settlement Value and Redemption Value". Because Morgan Guaranty will, at the time any Benchmark Crude Oil Contract becomes subject to such increased cost or additional tax, in its discretion decide whether or not to cause an early determination of the Applicable Index Settlement Value of the ComPS, exercise of such option may raise an adverse interest. Such a change in contracts due to the imposition of any increased cost or additional tax may result in a lower Redemption Value for such ComPS than would have been the case if the contract on which such increased cost or additional tax were imposed had remained a Benchmark Crude Oil Contract. Any early determination of the Applicable Index Settlement Value may cause the market price of ComPS in any existing secondary market to decline. EARLY REDEMPTION The ComPS may be redeemed prior to their Stated Maturity upon the occurrence of a Special Event or redeemed at the option of the holders thereof on each Optional Redemption Date. In the case of a redemption upon the occurrence of a Special Event, the Early Redemption Value paid by the Trust at such time may be significantly less than the Redemption Value that would otherwise have been payable had the ComPS not been redeemed prior to their Stated Maturity and the occurrence of such Special Event may cause the market price of ComPS in any existing secondary market to decline. In the case of an optional redemption by holders, it is likely, under usually-prevailing market conditions, that the Early Redemption Value paid by the Trust will be less than the amount such holder could have realized by selling such ComPS in an existing secondary market, if any, ratably during the Early Determination Period. Delay in payment of the ComPS Early Redemption Price (as a result of a Market Disruption Event or a delay in the provision by DTC to the Trust of the Applicable Notice (as defined below)) will not entitle holders of S-18 20 ComPS to additional dividends on the ComPS or the accrual of any interest on such ComPS Early Redemption Price. CERTAIN CONSIDERATIONS REGARDING HEDGING Prospective purchasers of the ComPS who intend to hedge against the risks associated with the market for crude oil should recognize the complexities of utilizing the ComPS in this manner. The formula under which the Principal Amount is calculated is not guaranteed to produce distributions to holders having readily definable relationships with other crude oil market instruments and products. As described below, because the Applicable Index is a Total Return Index, the value of the ComPS will reflect not only the price of the Benchmark Crude Oil Contracts but also the state of the futures market for Benchmark Crude Oil Contracts (i.e., whether such market is in "backwardation" or "contango" over time, as discussed above) and the Collateral Return Component, reduced by the Factor. Also, under certain circumstances, amounts payable on the ComPS may be based on the good faith determination of Morgan Guaranty and not on the Applicable Index. For these reasons, investors should be cautious in using the ComPS in a hedging program. The risks associated with utilizing the ComPS in a hedging program may be magnified in periods of substantial crude oil price volatility, since properly correlating the ComPS either as a hedge of other assets or correlating the ComPS to a hedge thereof may become more difficult. Also, investing in ComPS should not be considered a complete investment program. ORIGINAL ISSUE DISCOUNT The ComPS will be issued with original issue discount for Federal income tax purposes. During each taxable period, holders of ComPS will be required to include amounts in income in excess of current cash dividends. Such excess amount, which will increase the holders' tax basis in the ComPS, may not be received by holders upon redemption or sale of the ComPS. In such case, holders will be entitled to tax loss (which would be ordinary under the position taken by the Trust) for Federal income tax purposes. J.P. MORGAN & CO. INCORPORATED J.P. Morgan, whose origins date to a merchant banking firm founded in London in 1838, is the holding company for subsidiaries engaged globally in providing a wide range of financial services to institutions, corporations, governments and individuals. J.P. Morgan's activities are summarized in the Prospectus. J.P. MORGAN INDEX FUNDING COMPANY I J.P. Morgan Index Funding Company I is a statutory business trust formed on December 12, 1996 under the Delaware Business Trust Act (the "Business Trust Act") pursuant to (i) a declaration of trust among the Trustees and J.P. Morgan and (ii) the filing of a certificate of trust with the Secretary of State of the State of Delaware on December 12, 1996, which was restated pursuant to the filing of a restated certificate of trust with the Secretary of State of the State of Delaware on September 30, 1997. On October 10, 1997, J.P. Morgan, as sponsor, and the Trustees entered into an amended and restated declaration of trust, dated as of October 10, 1997 (the "Declaration"), filed as an exhibit to the Registration Statement relating to this Prospectus Supplement and the Prospectus. J.P. Morgan will acquire all series of Common Securities, including the Series [B] Common Securities, of the Trust. The Declaration will be qualified under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Company has been merged into the Trust (the "Merger") pursuant to (i) an Agreement and Plan of Merger between the Trust and the Company and (ii) a Certificate of Merger merging the Company into the Trust filed with the Secretary of State of the State of Delaware. By operation of law, the Trust has become the owner of all assets of the Company, including any outstanding related notes corresponding to any series of Securities, and has succeeded to all the obligations of the Company, including any outstanding Preferred Securities and Common Securities theretofore issued by the Company, including the Series A Securities, and all the rights of the Company, including in respect of any related note guarantee executed in connection with such Series A Securities. Following the effectiveness of the Merger, the outstanding Series A Securities S-19 21 represent an undivided beneficial interest in the related note executed in connection with such Series A Securities. This description summarizes the material terms of the Declaration and is qualified in its entirety by reference to the form of Declaration, which has been filed as an exhibit to the Registration Statement of which this Prospectus is a part, and the Trust Indenture Act. SERIES [B] SECURITIES Upon issuance of the Series [B] Preferred Securities, the holders thereof will own all of the issued and outstanding Series [B] Preferred Securities, and J.P. Morgan will own all of the issued and outstanding Series [B] Common Securities. The certificates for each Series [B] Security will represent a fractional undivided beneficial interest in certain assets of the Trust consisting of the Related Note and the proceeds thereof, all monies due and to become due under the Related Note, and the right to receive a portion of the payments of principal of and interest on the Related Note. J.P. Morgan will acquire the Series [B] Common Securities in a principal amount equal to 0.001% of the total principal amount of the Series [B] Securities and will own all the issued and outstanding Common Securities of the Trust which will represent 0.001% of the total capital of the Trust. The Series [B] Preferred Securities and the Series [B] Common Securities will rank pari passu with each other and will have equivalent payment terms; provided that (i) if a Note Event of Default (as defined herein) under the Related Note occurs and is continuing, the holders of Series [B] Preferred Securities will have a priority over holders of Series [B] Common Securities with respect to payments in respect of distributions and payments upon liquidation, redemption and maturity and (ii) holders of Series [B] Common Securities have the exclusive right (subject to the terms of the Declaration) to appoint, remove or replace the Trustees and to increase or decrease the number of Trustees. A Note Event of Default under the Related Note will not prohibit payments in respect of distributions and payments upon liquidation, redemption and maturity under a related note corresponding to any other series of Securities or under such Securities. No holder of Securities of any series shall have any claim on, or right to, any assets allocated to, or associated with, any other series (except if, and to the extent that, such holder is also a holder of Securities of such other series). The Trust exists for the exclusive purposes of (a) issuing ComPS and Series [B] Common Securities, and from time to time issuing additional series of Securities, (b) investing the gross proceeds from the sale of the ComPS and the Series [B] Common Securities in the Related Note and investing the proceeds of such additional issuances of Securities in other debt obligations of Morgan Guaranty and (c) engaging in only such other activities as are necessary, convenient or incidental thereto. The rights of the holders of the Series [B] Securities, including economic rights, rights to information and voting rights, are set forth in the Declaration (which term shall include any Declaration Supplement), the Business Trust Act and the Trust Indenture Act. POWERS OF DUTIES OF TRUSTEES The number of trustees (the "Trustees") of the Trust shall initially be five. Three of such Trustees (the "Regular Trustees") are individuals who are employees or officers of J.P. Morgan. The fourth such trustee will be First Trust of New York, National Association, which is unaffiliated with J.P. Morgan and which will serve as the property trustee (the "Property Trustee") and act as the indenture trustee for purposes of the Trust Indenture Act. The fifth such trustee is Wilmington Trust Company, which has its principal place of business in the State of Delaware (the "Delaware Trustee"). Pursuant to the Declaration, legal title to the Related Note will be held by the Property Trustee for the benefit of the holders of the Series [B] Securities, and the Property Trustee will have the power to exercise all rights, powers and privileges with respect to the Related Note. In addition, the Property Trustee will maintain exclusive control of a separate segregated non-interest-bearing bank account for the Series [B] Securities (the "Property Account") to hold all payments in respect of the Related Note for the benefit of the holders of the Series [B] Securities. The Property Trustee will promptly make distributions to the holders of the Series [B] Securities out of funds from the Property Account. The Guarantee is separately qualified under the Trust Indenture Act and will be held by First Trust of New York, National Association, acting in its capacity as indenture trustee with respect thereto, for the benefit of the holders of the Series [B] Preferred Securities and other S-20 22 Preferred Securities. As used in this Prospectus Supplement, the term "Property Trustee" with respect to the Trust refers to First Trust of New York, National Association acting either in its capacity as a Trustee under the Declaration and the holder of legal title to the Related Note or in its capacity as indenture trustee under, and the holder of, the Guarantee, as the context may require. J.P. Morgan, as the owner of all of the Common Securities, will have the exclusive right (subject to the terms of the Declaration) to appoint, remove or replace Trustees and to increase or decrease the number of Trustees, provided that the number of Trustees shall be at least five and the majority of Trustees shall be Regular Trustees. The Regular Trustees are authorized and directed to take such action as they deem reasonable in order that the Trust will not be deemed to be an "investment company" required to be registered under the 1940 Act or that the Trust will not be classified for United States Federal income tax purposes as an association taxable as a corporation or a partnership and will be treated as a grantor trust for United States Federal income tax purposes. In this connection, the Regular Trustees are authorized to take any action, not inconsistent with applicable law, the certificate of trust of the Trust or the Declaration, that the Regular Trustees determine in their discretion to be reasonable and necessary or desirable for such purposes, as long as such action does not adversely affect the interests of holders of the Securities. The term of the Trust will be until November 21, 2105, but the Trust may terminate earlier as provided in the Declaration. The duties and obligations of the Trustees of the Trust will be governed by the Declaration. Under the Declaration, the Trust (on behalf of a series of Securities or otherwise) shall not, and the Trustees of the Trust shall not cause the Trust (on behalf of a series of Securities or otherwise) to, engage in any activity other than in connection with the purposes of the Trust or other than as required or authorized by the Declaration. In particular, the Trust (on behalf of a series of Securities or otherwise) shall not, and the Trustees of the Trust shall cause the Trust (on behalf of a series of Securities or otherwise) not to, (a) invest any proceeds received by the Trust from holding the Related Note, but shall promptly distribute from the Property Account all such proceeds to holders of the Series [B] Securities pursuant to the terms of the Declaration and of the Series [B] Securities; (b) acquire any assets other than as expressly provided in the Declaration; (c) possess Trust Property for other than a Trust purpose; (d) make any loans, other than loans represented by the Related Note and other related notes corresponding to other series of Securities; (e) exercise any power or otherwise act in such a way as to vary the assets of the Trust or the terms of the Series [B] Securities or other series of Securities in any way whatsoever; (f) issue any securities or other evidences of beneficial ownership of, or beneficial interests in, the Trust other than the Series [B] Securities or other series of Securities associated with other related notes; (g) incur any indebtedness for borrowed money or (h) (i) direct the time, method and place of exercising any trust or power conferred upon the Property Trustee of the Trust with respect to the Series [B] Securities or other series of Securities, (ii) waive any past default that is waivable under the Related Note (or other related notes) or the Declaration, (iii) exercise any right to rescind or annul any declaration that the principal of all the Related Note (or other related notes) deposited in the Trust as trust assets shall be due and payable or (iv) consent to any amendment, modification or termination of the Related Note (or other related notes) or the Declaration, in each case where such consent shall be required, unless in the case of this clause (h) the Property Trustee shall have received (i) an unqualified opinion of nationally recognized independent tax counsel recognized as expert in such matters to the effect that such action will not cause the Trust to be classified for United States Federal income tax purposes as an association taxable as a corporation or a partnership and that the Trust will continue to be classified as a grantor trust for United States Federal income tax purposes and (ii) if required, the approval of the holders of the Series [B] Securities or other series of Securities for the taking of any such action. See "J.P. Morgan Index Funding Company I -- Voting" and "Description of the ComPS -- Voting Rights". BOOKS AND RECORDS The books and records of the Trust will be maintained at the principal office of the Trust and will be open for inspection by a holder of Preferred Securities or such holder's representative for any purpose reasonably related to such holder's interest in the related note held by the Trust, on behalf of holders of Securities of the applicable series, during normal business hours. Separate and distinct books and records will be maintained by the Trust for each series of Securities, and the assets associated with, or related to, S-21 23 any such series will be held and accounted for separately from the assets of the Trust generally or from the assets associated with, or related to, any other series of Securities. VOTING Except as set forth below and under "Events of Default" below and under "Description of the ComPS -- Voting Rights" and as provided under the Business Trust Act, the Declaration and the Trust Indenture Act, holders of Series [B] Preferred Securities will have no voting rights. If any proposed amendment to the Declaration provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution or bankruptcy of the Trust, then the holders of outstanding Securities will be entitled to vote on such amendment or proposal as a class and such amendment or proposal shall not be effective except with the approval of the holders of Securities representing a majority in principal amount of such Securities; provided, however, that if any amendment or proposal referred to in clause (i) above would adversely affect only certain series of the Preferred Securities or certain series of the Common Securities, then only the affected series or class, as applicable, will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a majority in principal amount of such series or class, as applicable, of Securities. THE PROPERTY TRUSTEE The Property Trustee, for the benefit of holders of the Series [B] Securities, is authorized under the Declaration to exercise all rights with respect to the Related Note deposited with the Property Trustee as a trust asset, including its rights as the holder of the Related Note to enforce the Trust's rights under the Related Note upon the occurrence of a Note Event of Default. The Property Trustee is also authorized to enforce the rights of the Trust under the Related Note Guarantee. Holders of at least a majority in principal amount of the Series [B] Preferred Securities will have the right to direct the Property Trustee for the Trust with respect to certain matters under the Declaration and the Related Note Guarantee; provided that (a) such direction would not conflict with any applicable law or the Declaration and would not result in any personal liability or expense to the Property Trustee, (b) such direction would not cause the Trust not to be properly classified as a grantor trust for U.S. Federal income tax purposes and (c) the Property Trustee may take any other action deemed proper by the Property Trustee which is not inconsistent with such direction. The Declaration will provide that the Sponsor will pay the Property Trustee's fees and expenses and will indemnify the Property Trustee in respect of certain matters. The Property Trustee is a depository for funds and performs other services for, and transacts other banking business with, J.P. Morgan in the normal course of business. DISTRIBUTIONS Pursuant to the Declaration, distributions on the Series [B] Securities must be paid on the dates payable to the extent that the Property Trustee has cash on hand in the Property Account to permit such payment. The funds available for distribution to the holders of the Series [B] Securities will be limited to payments received by the Property Trustee in respect of the Related Note. If Morgan Guaranty does not make interest payments on the Related Note, the Property Trustee will not make distributions on the Series [B] Securities. Under the Declaration, except as set forth below, if and to the extent Morgan Guaranty does make interest payments on the Related Note, the Property Trustee is obligated to make distributions on the Series [B] Securities on a Pro Rata Basis (as defined below). The payment of distributions on the Series [B] Preferred Securities is guaranteed by J.P. Morgan on a subordinated basis as and to the extent set forth under "Description of the Guarantee." The Guarantee, when taken together with J.P. Morgan's obligations under the Related Note Guarantee and its obligations under the Declaration, provides a full and unconditional guarantee from the time of issuance of the Series [B] Preferred Securities of amounts due on the Series [B] Preferred Securities. Such Guarantee itself, however, covers distributions and other payments S-22 24 on the Series [B] Preferred Securities only if and to the extent that Morgan Guaranty has made a payment to the Property Trustee of interest or principal on the Related Note. As used in this Prospectus Supplement, the term "Pro Rata Basis" shall mean pro rata to each holder of Series [B] Securities according to the aggregate principal amount of all Series [B] Securities held by the relevant holder in relation to the aggregate principal amount of the Series [B] Securities outstanding unless, in relation to a payment, a Note Event of Default under the Related Note has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each holder of the Series [B] Preferred Securities pro rata according to the aggregate principal amount of the Series [B] Preferred Securities held by the relevant holder in relation to the aggregate principal amount of all the Series [B] Preferred Securities outstanding, and only after satisfaction of all amounts owed to the holders of the Series [B] Preferred Securities to each holder of Series [B] Common Securities pro rata according to the aggregate principal amount of the Series [B] Common Securities held by the relevant holder in relation to the aggregate principal amount of all Series [B] Common Securities outstanding. EVENTS OF DEFAULT In the event that the Trust fails to pay dividends or other distributions on the Series [B] Securities for 30 days following the date on which such payment was due in accordance with the terms of such Series [B] Securities or if a Note Event of Default occurs and is continuing with respect to the Related Note (a "Note Event of Default"), an Event of Default under the Declaration will occur and be continuing with respect to any outstanding Series [B] Securities. In such event, the Declaration provides that holders of a majority in principal amount of Series [B] Preferred Securities, acting as a single class, may cause the Trust, on behalf of holders of the Series [B] Securities, by written direction to the Property Trustee, to waive any such Note Event of Default or to enforce the Trust's rights under the Related Note against Morgan Guaranty or under the Related Note Guarantee against J.P. Morgan or, in the case of any failure to pay dividends or other distributions, to cause the Trust to declare and pay such dividends or distributions; provided, that such payments shall be paid solely from the proceeds of interest or other payments made on the Related Note and received by the Trust on behalf of holders of the Series [B] Securities. Notwithstanding the foregoing, the right of any holder of Series [B] Securities to receive payments or distributions on such Series [B] Securities in accordance with the terms of the Declaration or such Series [B] Securities on or after the respective payment dates therefor, or to institute suit for the enforcement of any such payment on or after such payment dates, shall not be impaired without the consent of such holder. RECORD HOLDERS The Declaration provides that the Trustees of the Trust may treat the person in whose name a certificate representing Series [B] Preferred Securities is registered on the books and records of the Trust as the sole holder thereof and of the Series [B] Preferred Securities represented thereby for purposes of receiving distributions and for all other purposes and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such certificate or in the Series [B] Preferred Securities represented thereby on the part of any person, whether or not the Trust shall have actual or other notice thereof. Series [B] Preferred Securities will be issued in fully registered form and will be represented by a global certificate registered on the books and records of the Trust in the name of The Depositary Trust Company ("DTC") or its nominee. Under the Declaration: (i) the Trust and the Trustees shall be entitled to deal with DTC (or any successor) for all purposes, including the payment of distributions and receiving approvals, votes or consents under the Declaration and, except as set forth in the Declaration with respect to the Property Trustee, shall have no obligation to persons owning a beneficial interest in any Series [B] Preferred Securities ("Series [B] Preferred Security Beneficial Owners") registered in the name of and held by DTC or its nominee; and (ii) the rights of Series [B] Preferred Security Beneficial Owners shall be exercised only through DTC (or any successor) and shall be limited to those established by law and agreements between such S-23 25 Series [B] Preferred Security Beneficial Owners and DTC and/or its participants. With respect to any Series [B] Preferred Securities registered in the name of and held by DTC or its nominee, all notices and other communications required under the Declaration shall be given to, and all distributions on such Series [B] Preferred Securities shall be given or made to, DTC (or its successor). DEBTS AND OBLIGATIONS The Declaration provides that any person or entity extending credit to, contracting with, or having any claim against, the Trust with respect to any series of Securities may look only to the assets of the Trust associated with such series to satisfy or enforce any debt, liability, obligation or expense incurred, contracted for or otherwise existing with respect to such series. In the Declaration, J.P. Morgan has agreed to pay for all debts and obligations (other than with respect to the Securities) and all costs and expenses of the Trust, including the fees and expenses of its Trustees and any taxes and all costs and expenses with respect thereto, to which the Trust may become subject, except for United States withholding taxes. The foregoing obligations of J.P. Morgan under the Declaration are for the benefit of, and shall be enforceable by, any person to whom any such debts, obligations, costs, expenses and taxes are owed a (a "Creditor"), whether or not such Creditor has received notice thereof. Any such Creditor may enforce such obligations of J.P. Morgan directly against J.P. Morgan and J.P. Morgan has irrevocably waived any right or remedy to require that any such Creditor take any action against the Trust or any other person before proceeding against J.P. Morgan. J.P. Morgan has agreed in the Declaration to execute such additional agreements as may be necessary or desirable in order to give full effect to the foregoing. The business address of the Trust is c/o J.P. Morgan & Co. Incorporated, 60 Wall Street, New York, New York 10260-0060, telephone number (212) 648-2323. USE OF PROCEEDS The Trust will invest the proceeds from the sale of the ComPS offered hereby and the related Series [B] Common Securities in the Related Note of Morgan Guaranty, the proceeds of which will be used by Morgan Guaranty for general corporate purposes and for hedging its obligations under the Related Note. At the time of the pricing of the ComPS, Morgan Guaranty hedged its anticipated exposure under the Related Note and, subject to market conditions, Morgan Guaranty expects that it will continue to hedge its exposure under the Related Note from time to time following this offering of ComPS by taking long or short positions in the Benchmark Crude Oil Contracts or in listed or over-the-counter options contracts in, or other derivative or synthetic instruments related to, several or all of the Benchmark Crude Oil Contracts. There can be no assurance that Morgan Guaranty's initial hedging did not, and that its continued hedging will not, affect the price of the Benchmark Crude Oil Contracts (and, as a result, the economic terms and the subsequent value of the ComPS). In addition, J.P. Morgan and its affiliates may from time to time purchase or otherwise acquire a long or short position in the ComPS and may, in their sole discretion, hold or resell such ComPS. Morgan Guaranty may also take positions in 3-month Treasury Bills and in other types of appropriate financial instruments that may become available in the future. To the extent Morgan Guaranty has a long hedge position in several or all of the Benchmark Crude Oil Contracts or options contracts in, or other derivative or synthetic instruments related to, several or all of the Benchmark Crude Oil Contracts, Morgan Guaranty may liquidate a portion or all of its holdings, as applicable, at or about the time of any Early Redemption Date or the Stated Maturity of the Related Note (which correspond to the Early Redemption Dates and the Stated Maturity of the ComPS). Depending on, among other things, future market conditions, the aggregate amount and the composition of those positions are likely to vary over time. Profits or losses from any such position cannot be ascertained until that position is closed out and any offsetting position or positions are taken into account. However, none of the contracts or securities acquired in connection with any hedging activity will be held for the benefit of holders of ComPS. S-24 26 DESCRIPTION OF THE COMPS The ComPS will be issued pursuant to the Declaration. The following summary of the principal terms and provisions of the ComPS does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Prospectus and the Declaration, a copy of which is filed as an exhibit to the Registration Statement relating to this Prospectus Supplement and the Prospectus. GENERAL The Principal Amount of each of the ComPS, which is initially equal to the Face Amount, will vary over the life of the ComPS in relation to the Applicable Index (the JPMCI Crude Oil Total Return Index), reduced by the Factor. As described herein, the Applicable Index will change based on the daily percentage change in value of the Benchmark Crude Oil Contracts plus the Collateral Return Component. The Principal Amount repayable on any Early Redemption Date, upon the occurrence of any Special Event Redemption or at Stated Maturity will be determined, pursuant to the terms described herein (including, without limitation, the averaging of the Applicable Index over the Early Determination Period or the Determination Period, as applicable, and the present-valuing of the dividends and Principal Amount in connection with redemptions prior to Stated Maturity), by comparing the level of the JPMCI Crude Oil Total Return Index set on the date of issuance of the ComPS with the level determined pursuant to the terms hereof for any such date of redemption, reduced by the Factor. The Declaration authorizes the Trust to issue Preferred Securities and Common Securities. All of the Common Securities will be owned by J.P. Morgan. Payments of dividends on and redemptions of principal of the ComPS and the related Series [B] Common Securities will be made on a pro rata basis among the ComPS and the related Series [B] Common Securities, except that upon the occurrence and during the continuance of a Note Event of Default or upon the occurrence of a liquidation of the Trust, the rights of the holders of the Series [B] Common Securities to receive payment of periodic dividends and payments upon liquidation, redemption or otherwise will be subordinated to the rights of the holders of all Series [B] Preferred Securities. The Guarantee does not permit the incurrence of any indebtedness by the Trust (other than any Preferred Securities thereof) while any Preferred Securities are outstanding. The payment of distributions out of money held by the Trust, and payments upon liquidation of the Trust, are guaranteed by J.P. Morgan to the extent described under "Description of the Guarantee". The Guarantee does not cover payment of distributions on, or payments of principal in respect of, the ComPS when Morgan Guaranty has not made payment of principal or interest, as applicable, on the Related Note. In such event, the remedy of a holder of ComPS is to direct the Trust to enforce its rights under the Related Note and the Related Note Guarantee with respect to such Related Note. See "-- Voting Rights" and "Effect of Obligations Under the Guarantee, the Related Note Guarantee and the Related Note". DIVIDENDS Dividends on the ComPS will be fixed at a rate per annum of [2.5]% of the Face Amount of $[25] per Series [B] Preferred Security. The amount of dividends payable for any period will be computed on the basis of a 360-day year of twelve 30-day months (and actual days elapsed (but never more than 30), in the case of periods of less than a month) and will include the first day but exclude the last day of such period. Dividends on the ComPS will be cumulative, will accrue from and including the Issue Date and will be payable quarterly in arrears on the last calendar day of each March, June, September and December, commencing , 199[ ], when, as and if available for payment. Dividends on the ComPS will be payable to the holders thereof as they appear on the books and records of the Trust on the relevant record dates, which, as long as the ComPS remain in book-entry only form, will be one Business Day prior to the relevant payment dates. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment will be made as described under "-- Book-Entry Only Issuance -- The Depository Trust Company". In the event that the ComPS do not continue to remain in book-entry only form, the Regular Trustees shall have the right to select relevant record dates, which shall be at least one Business Day prior to the relevant S-25 27 payment dates. In the event that any date on which dividends are to be made on the ComPS is not a Business Day, then payment of the dividends payable on such date will be made on the next succeeding Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. A "Business Day" shall mean any day other than Saturday, Sunday or any other day on which banking institutions in The City of New York, New York are permitted or required by any applicable law to close. The payment of dividends on the ComPS out of moneys held by the Trust, on behalf of holders of the Series [B] Securities, is guaranteed by J.P. Morgan on a subordinated basis as and to the extent set forth under "Description of the Guarantee". The Guarantee is effective from the time of issuance of the ComPS, but the Guarantee covers dividends and other payments on the ComPS only if and to the extent that Morgan Guaranty has made a payment to the Trust, on behalf of holders of the Series [B] Securities, of interest or principal on the Related Note, as the case may be. REDEMPTION AT STATED MATURITY Unless previously redeemed pursuant to the optional or special redemption provisions and subject to extension in the case of a Market Disruption Event (as defined below), each of the outstanding ComPS will be redeemed by the Trust, in cash, on the Stated Maturity, at the ComPS Redemption Price. The ComPS Redemption Price is the sum of (a) the Redemption Value per Series [B] Preferred Security plus (b) accrued but unpaid dividends on such ComPS to but excluding the date of redemption. CALCULATION OF REDEMPTION VALUE The Principal Amount of each Series [B] Preferred Security is indexed to the difference of (i) the Applicable Index, which is calculated based on the change in value of certain crude oil futures contracts included from time to time in the JPM Indices (such contracts, from time to time, the "Benchmark Crude Oil Contracts") plus the Collateral Yield Component, and (ii) the Factor. On the date of this Prospectus Supplement, the Benchmark Crude Oil Contract is the NYMEX Light "Sweet" Crude Oil contract. Subject to the more complete definitions and formulae contained in the accompanying Prospectus, the Principal Amount of each Series [B] Preferred Security payable at Stated Maturity, subject to extension in the case of a Market Disruption Event (the "Redemption Value"), shall be determined by multiplying the Face Amount of each Series [B] Preferred Security by the difference between (a) a fraction, the numerator of which is the Applicable Index Settlement Value and the denominator of which is the Applicable Index Commencement Value, and (b) the Factor. For purposes of this Prospectus Supplement, the "Applicable Index Settlement Value" means the arithmetic average (rounded to four digits following the decimal point) of the daily values of the Applicable Index for each day of the Determination Period (the period of ten consecutive Trading Days on which no Market Disruption Event occurs commencing immediately following the twentieth scheduled Business Day prior to Stated Maturity), and the "Applicable Index Commencement Value" means [ ]. The ComPS Redemption Price will first be payable on the later of the Stated Maturity and the fifth Business Day after the completion of the Determination Period. For a complete description and definition of a Total Return Index, see "Description of ComPS -- Calculation of Redemption Value" and "The JPM Indices -- Total Return Methodology" in the Prospectus. As defined in the accompanying Prospectus under "Description of ComPS -- Market Disruption Events", a Market Disruption Event, as determined by Morgan Guaranty, is the occurrence of one or more of the following on any Trading Day with respect to any Benchmark Crude Oil Contract underlying the Applicable Index, or an exchange on which any Benchmark Crude Oil Contract is traded (a "Relevant Exchange"): (a) a day on which the fluctuation of the price of any Benchmark Crude Oil Contract underlying the Applicable Index is materially limited by the rules of a Relevant Exchange setting the maximum or minimum price for such day (a "Limit Price"); (b) a day on which the official settlement price (the "Settlement Price") on the Relevant Exchange of a Benchmark Crude Oil Contract underlying the Applicable Index is the Limit Price; (c) the failure of a Relevant Exchange to determine, announce or publish the Settlement Price with respect to a Benchmark Crude Oil Contract underlying the Applicable S-26 28 Index; (d) the material suspension of trading in any Benchmark Crude Oil Contract underlying the Applicable Index on a Relevant Exchange; (e) the failure of trading to commence, or the permanent discontinuation of trading, in any Benchmark Crude Oil Contract underlying the Applicable Index on any Relevant Exchange and (f) the imposition of any material limitation on trading in any Benchmark Crude Oil Contract underlying the Applicable Index on any Relevant Exchange. EARLY DETERMINATION OF APPLICABLE INDEX SETTLEMENT VALUE AND REDEMPTION VALUE Morgan Guaranty reserves the right at its discretion to make any modifications to the JPM Indices based on the recommendations of the JPMCI Policy Committee. As discussed in the accompanying Prospectus, the JPMCI Policy Committee advises Morgan Guaranty with respect to, among other things, the composition of the JPM Indices, the price sources upon which the JPM Indices are based (i.e., the underlying futures contracts, including the Benchmark Crude Oil Contracts), and the weightings and calculation methodology of the JPM Indices, with a view toward maintaining the JPM Indices as appropriate commodity investment benchmarks that serve as a measure of performance of the commodity markets. The inclusion requirements for the futures contracts underlying the JPM Indices require that such futures contracts be sufficiently liquid and representative price sources. It is possible, however, that any such underlying contract could become less liquid or representative and, as a result, the JPMCI Policy Committee may recommend a modification in the calculation methodology or the contracts underlying the JPM Indices and, therefore, the Applicable Index. Any such replacement contract (i) will be required to satisfy the JPMCI Inclusion Criteria, as described in the Prospectus under the caption "The JPMCI Policy Committee", (ii) must be traded in a market or with a self-regulator which has established either (a) a comprehensive information sharing agreement with the exchange, if any, on which the ComPS are then traded or (b) suitable alternative arrangements with the Commission and (iii) will be with respect to the same general commodity type as the contract being replaced (e.g., assuming the JPMCI Policy Committee recommends a modification and assuming the requirements of clauses (i) and (ii) are satisfied, a NYMEX crude oil futures contract could be replaced by an International Petroleum Exchange crude oil futures contract). Under no circumstances will the general commodity type underlying the futures contract be changed (e.g., a crude oil futures contract could not be replaced by a gold futures contract). If at any time no contract satisfying both clauses (i) and (ii) of the previous paragraph can be found to serve as a Benchmark Crude Oil Contract, the Applicable Index Settlement Value of the ComPS will be determined at such time (in accordance with the methodology for the Total Return ComPS set forth above under the caption "Description of the ComPS--Early Redemption Upon the Occurrence of a Special Event or at the Election of the Holders") as if the last date of the inclusion of the final Benchmark Crude Oil Contract in the JPM Indices were the Early Redemption Date. However, the ComPS will not be redeemed at such time; rather, the ComPS will remain outstanding to Stated Maturity, will continue to be entitled to dividends and will be redeemed at Stated Maturity for a Redemption Value calculated using the Applicable Index Settlement Value determined at such time as no contract satisfying clauses (i) and (ii) of the previous paragraph was able to be found. Such ComPS will also be subject to redemption upon the occurrence of a Special Event and optional redemption on each Optional Redemption Date (treating the Applicable Index Settlement Value determined pursuant to the terms of this paragraph as the Applicable Index Early Settlement Value for any Early Redemption Date). Additionally, if at any time any Benchmark Crude Oil Contract, or the trading thereof, becomes subject to any increased cost or additional tax, whether imposed by any exchange or otherwise, Morgan Guaranty reserves the right (x) to designate a replacement Benchmark Crude Oil Contract, satisfying both clauses (i) and (ii) of the second preceding paragraph, which contract is subject to an amount of cost or tax less than or equal to such increased amount, or (y) if no contract satisfying clause (x) of this paragraph is designated by Morgan Guaranty, to cause, at its option, the Applicable Index Settlement Value of the ComPS to be determined at such time (in accordance with the methodology set forth above) as if the date of such increase in cost or tax (or, in Morgan Guaranty's discretion, the last calendar day of the month in which the determination of the Applicable Index Settlement Value is completed) were the applicable Early Redemption Date. However, the ComPS will not be redeemed at such time; rather, the ComPS will remain S-27 29 outstanding to Stated Maturity, will continue to be entitled to dividends and will be redeemed at Stated Maturity for a Redemption Value calculated using the Applicable Index Settlement Value determined pursuant to the terms of this paragraph. Such ComPS will also be subject to redemption upon the occurrence of a Special Event and optional redemption on each Optional Redemption Date (treating the Applicable Index Settlement Value determined pursuant to the terms of this paragraph as the Applicable Index Early Settlement Value for any Early Redemption Date). See "Risk Factors -- Potential Modification to the JPM Indices and/or the Applicable Index". OPTIONAL REDEMPTION The ComPS will be subject to redemption prior to their Stated Maturity at the election of the holders thereof on each [anniversary of Stated Maturity] prior to the Stated Maturity, beginning [anniversary of Stated Maturity], 1998 (each, an "Optional Redemption Date"). In order to effect an Optional Redemption, any such redeeming holder will be required to provide notice of the number of ComPS to be redeemed on such Optional Redemption Date to a Participant or Direct Participant in DTC, and such Participant or Direct Participant must communicate such notice to DTC no earlier than 32 scheduled Business Days prior to but no later than 22 scheduled Business Days prior to the applicable Optional Redemption Date. The DTC will then provide notice to the Trust (which will promptly notify the Property Trustee) or its Transfer Agent of the total number of ComPS to be redeemed on the Optional Redemption Date (the "Applicable Notice"). Each Applicable Notice will be provided by DTC to the Trust by 12:30 p.m. New York time on the Business Day next succeeding the last day of the applicable notice period. Each Applicable Notice will be irrevocable upon receipt by the Trust or its Transfer Agent, and may not be withdrawn or modified after such receipt. Additionally, the Early Determination Period will not commence until the Trust has received the Applicable Notice and the applicable Optional Redemption Date will be subject to extension in the case of a Market Disruption Event. The redeeming holders will be entitled to the ComPS Early Redemption Price for each Series [B] Preferred Security redeemed, which is equal to (a) the Early Redemption Value for such ComPS plus (b) accrued and unpaid dividends thereon to but excluding the scheduled Optional Redemption Date. The Early Redemption Value of such ComPS shall be determined in accordance with the formula specified in the Prospectus; provided that, for the purposes of this Prospectus Supplement, "Unused Costs" shall equal [1.0% (one percent)]. See "-- Book Entry Issuance -- The Depository Trust Company" herein and "Description of ComPS -- Early Redemption Upon the Occurrence of a Special Event or at the Election of the Holders of the ComPS" in the Prospectus. SPECIAL EVENT REDEMPTION The ComPS will be subject to redemption by the Trust prior to Stated Maturity, at its option, upon the occurrence of a Tax Event or an Investment Company Event (each, a "Special Event"), as discussed herein. "Tax Event" means that the Trust shall have obtained an opinion of nationally recognized independent tax counsel experienced in such matters (a "Tax Opinion") to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to, or change in, an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the theretofore generally accepted position or (d) any action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated, issued or announced or which interpretation or pronouncement is issued or announced or which action is taken, in each case on or after the date of this Prospectus Supplement, there is more than an insubstantial risk that at such time or within 90 days of the date thereof (i) the Trust is or would be subject to United States Federal income tax with respect to income accrued or received on the Related Note, (ii) the interest payable on the Related Note is not, or would not be, deductible by Morgan Guaranty for United States Federal income tax purposes, (iii) the S-28 30 contingent principal in excess of the Face Amount, if any, payable on the Related Note is not, or would not be, deductible by Morgan Guaranty for United States Federal income tax purposes or (iv) the Trust is or would be subject to more than a de minimis amount of other taxes, duties, assessments or other governmental charges. "Investment Company Event" means that the Trust shall have received an opinion of a nationally recognized independent counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation, a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority or the expiration or revocation of any exemption from any provisions of the Investment Company Act of 1940, as amended (the "1940 Act"), obtained by the Trust (a "Change in 1940 Act Law"), there is more than an insubstantial risk that the Trust is or will be considered an "investment company" that is required to be registered as such under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of this Prospectus Supplement. If at any time a Tax Event or an Investment Company Event shall occur and be continuing, J.P. Morgan shall elect to either: (a) direct, within 90 days following the occurrence of such Special Event, Morgan Guaranty to redeem the Related Note in whole or in part, upon not less than 22 scheduled Business Days' notice to DTC, in which case the Trust shall redeem in cash on a pro rata basis ComPS and related Series [B] Common Securities having an aggregate Principal Amount equal to the Principal Amount of the Related Note so redeemed, at a price per Series [B] Preferred Security of the Early Redemption Value, plus an amount equal to all accrued and unpaid dividends on such ComPS to but excluding such Early Redemption Date; provided, that Morgan Guaranty shall only be entitled to redeem the Related Note in part if such partial redemption is sufficient to cause such Special Event to cease; or (b) in the case of a Tax Event, allow the Related Note and the ComPS to remain outstanding and indemnify the Trust for all taxes payable by it as a result of such Tax Event (if any); provided that, if at the time there is available to the Trust the opportunity to eliminate, within such 90-day period, the Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure, that has no adverse effect on the Trust, J.P. Morgan, Morgan Guaranty or the holders of ComPS, the Trust will pursue such measure in lieu of redemption; provided further, that Morgan Guaranty shall have no right to redeem the Related Note while the Trust is pursuing any such ministerial action or reasonable measure unless the Special Event shall not have been so eliminated by the 85th day following the occurrence thereof, in which case J.P. Morgan shall be permitted to direct Morgan Guaranty to provide notice to the Trust of the redemption of the Related Note. Under current United States Federal income tax law, a redemption of ComPS upon the occurrence of a Special Event, whether or not upon dissolution of the Trust, would be a taxable event to such holders. See "United States Federal Income Taxation". REDEMPTION PROCEDURES In the case of a redemption by a holder of ComPS on an Optional Redemption Date, any such redeeming holder will be required to provide notice of the number of ComPS to be redeemed on such Optional Redemption Date to a Participant in DTC, and such Participant must communicate such notice to DTC no earlier than 32 scheduled Business Days prior to but no later than 22 scheduled Business Days prior to the applicable Optional Redemption Date. In the case of a redemption of ComPS upon the occurrence of a Special Event, the Trust will provide notice of such redemption to the Transfer Agent and to DTC on a date not less than 22 scheduled Business Days prior to such Early Redemption Date stating, among other things, the date of such redemption. S-29 31 The related Series [B] Common Securities will be redeemed on a pro rata basis with the ComPS except that, in the case of any dissolution or liquidation in which the assets of the Trust consisting of the Related Note and the proceeds thereof are insufficient to repay in full the Principal Amount of all Series [B] Preferred Securities then outstanding, all Series [B] Preferred Securities will be redeemed prior to the redemption of any Series [B] Common Securities. ComPS registered in the name of and held by DTC (as defined herein) or its nominee will be redeemed in accordance with DTC's standard procedures. See "--Book-Entry Only Issuance--The Depository Trust Company". Payment of the ComPS Redemption Price or the ComPS Early Redemption Price, as applicable, of the ComPS is conditioned upon delivery or book-entry transfer of such ComPS (together with necessary endorsements) to the Trust at any time (whether prior to, on or after the relevant Redemption Date) after the required notice is given (to the extent such notice is required). See "--Book-Entry Only Issuance--The Depository Trust Company". Payment of the ComPS Redemption Price or the ComPS Early Redemption Price, as applicable, for such ComPS will be made by the delivery of cash no later than the applicable Settlement Date with respect to such ComPS (subject to delay in the case of a Market Disruption Event) or, if later, the time of delivery or book-entry transfer of such ComPS. If the Trust, on behalf of holders of Series [B] Securities holds money sufficient to pay the ComPS Redemption Price or the ComPS Early Redemption Price, as applicable, of the ComPS on the applicable Settlement Date, then immediately at the close of business on such Settlement Date, such ComPS will cease to be outstanding and dividends with respect to such ComPS will cease to accrue, whether or not such ComPS are delivered to the Trust, and all rights of the holder of such ComPS shall terminate and lapse, other than the right to receive the ComPS Redemption Price or the ComPS Early Redemption Price, as applicable, upon delivery of the ComPS. Provided that Morgan Guaranty has paid to the Trust, on behalf of holders of Series [B] Securities the required amount of cash due upon any redemption or at the maturity of the Related Note, the Trust, on behalf of holders of Series [B] Securities will irrevocably deposit with DTC no later than the close of business on the applicable Settlement Date funds sufficient to pay the ComPS Redemption Price or the ComPS Early Redemption Price, as applicable, payable with respect to ComPS on such date and will give the Depositary irrevocable instructions and authority to pay such amount to the holders of ComPS entitled thereto. See "--Book-Entry Only Issuance--The Depository Trust Company". In the event that any Settlement Date is not a Business Day, then payment of the ComPS Redemption Price or the ComPS Early Redemption Price, as applicable, payable on such date will be made on the next succeeding Business Day with the same force and effect as if made on such date and no interest on such distributions will accrue from and after such date, except that, if such Business Day falls in the next calendar year such payment will be made on the immediately preceding Business Day. In the event that payment of the ComPS Redemption Price or the ComPS Early Redemption Price, as applicable, is improperly withheld or refused and not paid by the Trust or by J.P. Morgan pursuant to the Guarantee, dividends on such ComPS will continue to accrue from the original Redemption Date to the actual date of payment by the Trust to DTC. If a partial redemption as a result of a Special Event Redemption by Morgan Guaranty of a part or all of the Related Note would result in the delisting of the ComPS by any national securities exchange (or automated inter-dealer quotation system, including The Nasdaq Stock Market ("Nasdaq")) on which the ComPS are then listed, Morgan Guaranty may only redeem the Related Note in whole and, as a result, the Trust may only redeem the ComPS in whole. Subject to the foregoing and to applicable law (including, without limitation, United States Federal securities laws), J.P. Morgan or its affiliates may, at any time and from time to time, purchase outstanding ComPS by tender, in the open market or by private agreement. LIQUIDATION DISTRIBUTION UPON DISSOLUTION In the event of any dissolution of the Trust (a "Liquidation Event"), whether voluntary or involuntary, the holders of ComPS on the date of such Liquidation Event will be entitled to be paid out of the assets of the Trust consisting of the Related Note and the proceeds thereof, and after satisfaction of liabilities to creditors of the Trust with respect to Series [B] Securities, the Liquidation Distribution. The "Liquidation S-30 32 Distribution" will be equal to (a) the Early Redemption Value with respect to such ComPS (treating the date of such distribution as the Early Redemption Date) plus (b) the amount of accrued and unpaid dividends on such ComPS to but excluding the date of payment. To the extent such assets of the Trust are insufficient to repay all amounts due to holders of all the ComPS, holders of the ComPS then outstanding will be entitled to a pro rata share of such assets of the Trust, based upon the relative Principal Amounts of all ComPS outstanding. In addition, in the event that such assets of the Trust exceed the amount necessary to pay to all holders of ComPS the full amount of the Liquidation Distribution, such excess will be paid to the holders of the Series [B] Common Securities, in an amount sufficient to cover the Liquidation Distribution in respect of all Series [B] Common Securities, and thereafter pro rata to the holders of the ComPS and the Series [B] Common Securities. Pursuant to the Declaration, the legal existence of the Trust shall terminate on November 21, 2105. VOTING RIGHTS Except as described herein and under "--Modification of the Declaration" and under "J.P. Morgan Index Funding Company I -- Voting", and as otherwise required by law and the Declaration, the holders of the ComPS will have no voting rights. Pursuant to the provisions of the Guarantee, certain amendments to or modifications of the Guarantee may only be effected with the approval of a majority in aggregate Principal Amount at such time of the ComPS and all other affected Preferred Securities. See "Description of the Guarantee--Modification of the Guarantee". Pursuant to the provisions of the Related Note, the Related Note Guarantee and the Declaration, certain amendments to or modifications of the Related Note or the Related Note Guarantee may only be effected with the approval of a majority in aggregate Principal Amount at such time of the ComPS. See "Description of the Related Note--Modification of the Related Note". Notwithstanding that holders of ComPS are entitled to vote or consent under any of the circumstances described above, any of the ComPS that are owned at such time by J.P. Morgan or any entity directly or indirectly controlling or controlled by, or under direct or indirect common control with, J.P. Morgan, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if such ComPS were not outstanding. The procedures by which holders of ComPS may exercise their voting rights are described below under "--Book-Entry Only Issuance--The Depository Trust Company" and in the Declaration. MODIFICATION OF THE DECLARATION The Declaration may be amended or modified if approved by a written instrument executed by a majority in interest of the holders of Common Securities; provided that, if any proposed amendment provides for (i) any action that would adversely affect the powers, preferences or special rights of the ComPS or (ii) the dissolution of the Trust other than pursuant to the terms of the Declaration, then the holders of all affected outstanding Preferred Securities (or, in the case of an event described in clause (ii), all Preferred Securities, including the ComPS) of the Trust voting together as a single class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of holders of not less than a majority in aggregate Principal Amount of all affected outstanding Preferred Securities (or, in the case of an event described in clause (ii), all Preferred Securities) of the Trust affected thereby. The Declaration further provides that it may be amended without the consent of the holders of the ComPS to (i) cure any ambiguity, (ii) correct or supplement any provision in the Declaration that may be defective or inconsistent with any other provision of the Declaration, (iii) add to the covenants, restrictions or obligations of J.P. Morgan, (iv) conform to changes in, or a change in interpretation or application of, certain requirements of the 1940 Act by the Commission and (v) conform to certain requirements of the Code with respect to the characterization of the Trust for U.S. Federal income tax purposes, so long as S-31 33 such amendment does not adversely affect the rights, preferences or privileges of the holders of the ComPS. LISTING The ComPS have been approved for listing on the Amex under the symbol ["JPO"], subject to official notice of issuance. Trading of the ComPS on the Amex is expected to commence within a 30-day period after the date of this Prospectus Supplement. Prior to this offering, there has been no market for the ComPS. ACCOUNTING TREATMENT The financial statements of the Trust will be included in the consolidated financial statements of J.P. Morgan, with the ComPS included on the balance sheet as "Long-term debt not qualifying as risk-based capital", with a footnote disclosing that (1) the Trust is a wholly-owned subsidiary of J.P. Morgan, (2) the sole assets of the Trust are the Related Note and other similar notes, specifying the principal amount, interest rate and maturity of each, and (3) considered together, the Guarantee and the Related Note Guarantee and J.P. Morgan's obligations under the Declaration constitute a full and unconditional guarantee by J.P. Morgan with respect to the ComPS. MERGERS, CONSOLIDATIONS OR AMALGAMATIONS The Trust may not consolidate, amalgamate, merge with or into or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to, any corporation or other entity. BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY DTC will act as securities depositary for the ComPS. The ComPS will be issued only as fully-registered securities registered in the name of Cede & Co. (DTC's nominee). One or more fully-registered global ComPS certificates, representing the total aggregate number of ComPS, will be issued and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others, such as securities brokers and dealers, banks and trust companies that clear transactions through or maintain a direct or indirect custodial relationship with a Direct Participant either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Commission. Purchases of ComPS within the DTC system must be made by or through Direct Participants, which will receive a credit for the ComPS on DTC's records. The ownership interest of each actual purchaser of each Series [B] Preferred Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners purchased ComPS. Transfers of ownership interests in the ComPS are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial S-32 34 Owners will not receive certificates representing their ownership interests in the ComPS, except in the event that use of the book-entry system for the ComPS is discontinued. To facilitate subsequent transfers, all ComPS deposited by Participants with DTC are registered in the name of DTC's nominee, Cede & Co. The deposit of ComPS with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the ComPS. DTC's records reflect only the identity of the Direct Participants to whose accounts such ComPS are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements that may be in effect from time to time. In the case of a Special Event Redemption, redemption notices shall be sent to Cede & Co. If less than all of the ComPS are being redeemed, DTC will reduce the amount of the interest of each Direct Participant in such ComPS in accordance with its procedures. In the case of an Optional Redemption, redemption notices shall be provided by Beneficial Owners and Participants to DTC in accordance with its procedures. DTC will then provide the Applicable Notice to the Trust or its Transfer Agent of the number of ComPS to be redeemed on the applicable Optional Redemption Date. The Applicable Notice will be irrevocable upon receipt by the Trust or its Transfer Agent, and may not be withdrawn or modified after such receipt. Although voting with respect to the ComPS is limited, in those cases where a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to ComPS. Under its usual procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. consenting or voting rights to those Direct Participants to whose accounts the ComPS are credited on the record date (identified in a listing attached to the Omnibus Proxy). J.P. Morgan and the Trust believe that the arrangements among DTC, Direct and Indirect Participants and Beneficial Owners will enable the Beneficial Owners to exercise rights equivalent in substance to the rights that can be directly exercised by a holder of an interest in the assets of the Trust consisting of the Related Note and the proceeds thereof. Dividend payments on the ComPS will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on such payment date. Payments by participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the account of customers in bearer form or registered in "street name", and such payments will be the responsibility of such Participant and not of DTC, the Trust or J.P. Morgan, subject to any statutory or regulatory requirements to the contrary that may be in effect from time to time. Payment of dividends to DTC is the responsibility of the Trust, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depositary with respect to the ComPS at any time by giving reasonable notice to the Trust. Under such circumstances, in the event that a successor securities depositary is not obtained, ComPS certificates are required to be printed and delivered. Additionally, the Trust may decide to discontinue use of the system of book-entry transfers through DTC (or any successor depositary) with respect to the ComPS. In that event, certificates for the ComPS will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that J.P. Morgan believes to be reliable, but neither J.P. Morgan nor the Trust takes responsibility for the accuracy thereof. S-33 35 REGISTRAR, TRANSFER AGENT AND PAYING AGENT In the event the ComPS do not remain in book-entry only form, the following provisions will apply: Payment of distributions and payments on redemption of the ComPS will be payable, the transfer of the ComPS will be registrable and ComPS will be exchangeable for ComPS of other denominations of a like aggregate principal amount at the principal corporate trust office of the Property Trustee in The City of New York; provided that payment of distributions may be made at the option of the Regular Trustees on behalf of the Trust by check mailed to the address of the persons entitled thereto and that the payment on redemption of ComPS will be made only upon surrender of such ComPS to the Property Trustee. First Trust of New York, National Association or one of its affiliates will act as registrar and transfer agent for the ComPS. First Trust of New York, National Association will also act as paying agent and, with the consent of the Regular Trustees, may designate additional paying agents. Registration of transfers of ComPS will be effected without charge by or on behalf of the Trust, but upon payment (with the giving of such indemnity as the Trust may require) in respect of any tax or other governmental charges that may be imposed in relation to it. The Trust will not be required to register or cause to be registered the transfer of ComPS after such ComPS have been called for redemption. GOVERNING LAW The Declaration and the ComPS will be governed by and interpreted in accordance with the laws of the State of Delaware. DESCRIPTION OF THE RELATED NOTE Set forth below is a summary of the terms of the Related Note in which the Trust will invest the proceeds from the issuance and sale of the ComPS and the related Series [B] Common Securities. The following description does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Prospectus and the Related Note, the form of which is filed as an exhibit to the Registration Statement relating to this Prospectus Supplement and the Prospectus. Certain capitalized terms are used herein as defined in the Related Note. GENERAL The Related Note will be issued as an unsecured, unsubordinated obligation of Morgan Guaranty, limited in initial principal amount to approximately $ , such amount being the sum of the aggregate Initial Public Offering Price shown on the cover page hereof for the ComPS and the related Series [B] Common Securities issued in connection therewith. The Related Note is not subject to a sinking fund provision. The entire Principal Amount of the Related Note will mature and become due and payable, together with any accrued and unpaid interest thereon, if any, on the Stated Maturity (subject to extension in the case of a Market Disruption Event), subject to the prior redemption of the Related Note in whole or in part at the option of the holders of ComPS or in certain circumstances upon the occurrence of a Special Event. If Morgan Guaranty redeems the Related Note in whole or in part, the Trust must redeem on a pro rata basis ComPS and related Series [B] Common Securities having an aggregate Principal Amount equal to the Principal Amount of the Related Note so redeemed at the ComPS Early Redemption Price. See "Description of the ComPS--Redemption at Stated Maturity; --Special Event Redemption". RELATED NOTE REDEMPTION PRICE The amount payable under the Related Note by Morgan Guaranty to the Property Trustee, on behalf of holders of Series [B] Securities, at any time shall equal (a) the Principal Amount of the Related Note at S-34 36 such time plus (b) any accrued but unpaid distributions due to the Property Trustee (the "Related Note Redemption Price"). The Principal Amount of the Related Note at any time shall equal the aggregate Principal Amount of outstanding ComPS and the related Series [B] Common Securities at such time. The timing and amount of payments on the Related Note mirror the aggregate financial terms of the ComPS. SUBORDINATION Morgan Guaranty's obligations under the Related Note are effectively subordinated to all liabilities (including indebtedness) of its consolidated and unconsolidated subsidiaries. Moreover, Morgan Guaranty's subsidiaries may incur indebtedness and other liabilities and have obligations to third parties. Generally, the claims of such third parties to the assets of Morgan Guaranty's subsidiaries will be superior to those of Morgan Guaranty as a stockholder, and, therefore, the Related Note may be deemed to be effectively subordinated to the claims of such third parties. Upon any payment or distribution of all or substantially all of the assets of Morgan Guaranty or in the event of any insolvency, bankruptcy, receivership, liquidation, dissolution, reorganization or other similar proceeding, whether voluntary or involuntary, relative to Morgan Guaranty or its creditors, the holders of all Senior Indebtedness of Morgan Guaranty will be entitled to receive payment pari passu and pro rata with the Trust. However, depositors in Morgan Guaranty will have a preference over holders of Senior Indebtedness of Morgan Guaranty upon any such event. As used in the Related Note, the term "Senior Indebtedness" means the principal of, premium, if any, and interest on (a) all indebtedness of Morgan Guaranty for money borrowed, whether outstanding as of the date hereof or hereafter created, issued or incurred (other than Morgan Guaranty's obligations to its depositors), except any indebtedness expressly subordinated to such Senior Indebtedness, and (b) any deferrals, renewals or extensions of any such Senior Indebtedness. The Related Note does not limit the amount of Senior Indebtedness which Morgan Guaranty may incur. INTEREST The Related Note shall bear interest at the rate of [2.5]% per annum on the Face Amount from the original date of issuance, payable quarterly in arrears on the last calendar day of each March, June, September and December (each, an "Interest Payment Date"), commencing , 199[ ], to the Trust, subject to certain exceptions, at the close of business on the Business Day next preceding the relevant Interest Payment Date. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any period shorter than a full monthly period for which interest is computed will be computed on the basis of the actual number of days elapsed (but never more than 30) per 30-day month. In the event that any date on which interest is payable on the Related Note is not a Business Day, payment of the interest payable on such date will be made on the next succeeding Business Day with the same force and effect as if made on such date and no interest on such distributions will accrue from and after such date, except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. OPTIONAL REDEMPTION The Trust shall have the right to call for redemption prior to each Optional Redemption Date a Principal Amount of the Related Note sufficient to allow it to pay the ComPS Early Redemption Price to any holders of ComPS who exercise their right to redeem any or all of such holders' ComPS and in respect of a pro rata portion of the related Series [B] Common Securities. See "Description of the ComPS--Optional Redemption". S-35 37 SPECIAL EVENT REDEMPTION Upon the occurrence of a Special Event, Morgan Guaranty will have the right to elect to, under certain circumstances, (a) redeem the Related Note at the Related Note Redemption Price or (b) in the case of a Tax Event, allow the Related Note to remain outstanding and indemnify the Trust for any taxes payable by it as a result of such Tax Event. See "Description of the ComPS--Special Event Redemption". EVENTS OF DEFAULT The Note Events of Default are described in "Description of the Related Notes-- Note Events of Default" in the Prospectus of which this Prospectus Supplement constitutes a part. A default or event of default under any Senior Indebtedness would not constitute a default or event of default under the Related Note. A default or event of default under the Related Note would not constitute a default or event of default under any related note pertaining to any other series of Securities. MODIFICATION OF THE RELATED NOTE The Related Note contains provisions permitting Morgan Guaranty and the Property Trustee, with the consent of the holders of not less than a majority in Principal Amount of the outstanding ComPS, to modify the Related Note, subject to certain exceptions. See "Description of the Related Notes--Modification of the Related Notes" in the Prospectus of which this Prospectus Supplement constitutes a part. CONSOLIDATION, MERGER AND SALE The Related Note provides that Morgan Guaranty may, without the consent of the Trust or the holders of the ComPS, consolidate or merge with or into, or sell or transfer all or substantially all of its property or assets to, any corporation or association; provided that (i) the corporation (if other than Morgan Guaranty) or association formed by or resulting from any such consolidation or merger or which shall have received such property or assets shall have assumed Morgan Guaranty's obligations under the Related Note and (ii) immediately after giving effect to such transaction, Morgan Guaranty or such successor corporation shall not be in default under the terms of the Related Note. GOVERNING LAW The Related Note will be governed by, and construed in accordance with, the laws of the State of New York. MISCELLANEOUS Morgan Guaranty will have the right at all times to assign any of its rights or obligations under the Related Note to J.P. Morgan or to a direct or indirect wholly-owned subsidiary of Morgan Guaranty; provided that, in the event of any such assignment, Morgan Guaranty will remain jointly and severally liable for all such obligations. Subject to the foregoing, the Related Note will be binding upon and inure to the benefit of the parties thereto and their respective successors and assigns. The Related Note is not a deposit or other obligation of a bank and is not insured by the Federal Deposit Insurance Corporation or any other federal agency. The obligations of Morgan Guaranty under the Related Note are pari passu with all present and future Senior Indebtedness of Morgan Guaranty (as defined herein) and are junior to Morgan Guaranty's obligations to its depositors in the event of a receivership. In addition, J.P. Morgan's obligations under the Guarantee and the Related Note Guarantee and Morgan Guaranty's obligations under the Related Note are effectively subordinated to all liabilities (including indebtedness) of the respective consolidated and unconsolidated subsidiaries of each. DESCRIPTION OF THE GUARANTEE Set forth below is a summary of information concerning the Guarantee that will be delivered by J.P. Morgan for the benefit of the holders of ComPS and other Preferred Securities. The terms of the Guarantee S-36 38 will be those set forth in the Guarantee Agreement. The following summary does not purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the Prospectus and the form of Guarantee Agreement, which is filed as an exhibit to the Registration Statement relating to this Prospectus Supplement and the Prospectus. The Guarantee will be separately qualified under the Trust Indenture Act and will be held by the Property Trustee, acting in its capacity as indenture trustee with respect thereto. GENERAL Pursuant to the Guarantee, J.P. Morgan irrevocably and unconditionally agrees, on a subordinated basis, to pay in full to the holders of the ComPS the Guarantee Payments (as defined herein) (except to the extent paid by the Trust), as and when due, regardless of any defense, right of set-off or counterclaim that the Trust may have or assert. The following payments with respect to ComPS issued by the Trust (the "Guarantee Payments"), to the extent not paid by the Trust, will be subject to the Guarantee (without duplication): (i)(A) any accrued and unpaid dividends that are required to be paid on the ComPS and (B) the ComPS Early Redemption Price or the ComPS Redemption Price, as applicable, but if and only if to the extent that, in each case, Morgan Guaranty has made payment of interest or principal on the Related Note, as the case may be, and (ii) upon a Liquidation Event (other than in connection with the redemption of all of the ComPS at Stated Maturity or redemption in whole of the Related Note) the lesser of (A) the Liquidation Distribution to the extent the Trust has funds available therefor and (B) the amount of assets of the Trust consisting of the Related Note and the proceeds thereof remaining available for distribution to holders of the ComPS upon such Liquidation Event. J.P. Morgan's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by J.P. Morgan to the holders of ComPS or by causing the Trust to pay such amounts to such holders. The Guarantee will be effective with respect to the ComPS from the time of issuance of the ComPS to the extent Morgan Guaranty has made payments under the Related Note. If Morgan Guaranty does not make payments on the Related Note, the Trust may not pay distributions on the ComPS issued and may not have funds available therefor. See "Description of the Related Note". So long as any ComPS or other Preferred Securities remain outstanding, J.P. Morgan will not declare or pay dividends on, or redeem, purchase, acquire or make a distribution or liquidation payment with respect to, any of its common stock or preferred stock or make any Guarantee Payment with respect thereto if at such time (i) J.P. Morgan shall be in default with respect to its Guarantee Payments or other payment obligations under the Guarantee or (ii) there shall have occurred any event of default under the Declaration; provided, however, that the foregoing restrictions shall not apply to (a) dividends, redemptions, purchases, acquisitions, distributions or payments made by J.P. Morgan by way of issuance of shares of its capital stock, (b) payments of accrued dividends by J.P. Morgan upon the redemption, exchange or conversion of any preferred stock of J.P. Morgan as may be outstanding from time to time in accordance with the terms of such preferred stock, (c) cash payments made by J.P. Morgan in lieu of delivering fractional shares upon the redemption, exchange or conversion of any preferred stock of J.P. Morgan as may be outstanding from time to time in accordance with the terms of such preferred stock, (d) repurchases, redemptions or other acquisitions of shares of capital stock of J.P. Morgan in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors of consultants, or (e) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of such rights pursuant thereto. MODIFICATION OF THE GUARANTEE; ASSIGNMENT Except with respect to any changes that do not adversely affect the rights of holders of Preferred Securities (in which case no consent will be required), the Guarantee may be amended by J.P. Morgan and the Property Trustee only with the prior approval of the holders of not less than a majority in aggregate Principal Amount at such time of the holders of each series of affected Preferred Securities, voting as a single class. All guarantees and agreements contained in the Guarantee shall bind the successors, assignees, S-37 39 receivers, trustees and representatives of J.P. Morgan and shall inure to the benefit of the holders of the ComPS. REMEDIES OF HOLDERS The Guarantee will be deposited with First Trust of New York, National Association, as indenture trustee, to be held for the benefit of holders of the ComPS and Preferred Securities of other series. First Trust of New York, National Association shall enforce such Guarantee on behalf of holders of the ComPS and Preferred Securities of other series. The holders of not less than a majority in aggregate principal amount of the ComPS and Preferred Securities of each affected series have the right to direct the time, method and place of conducing any proceeding for any remedy available in respect of the Guarantee, including the giving of directions to First Trust of New York, National Association. If First Trust of New York, National Association fails to enforce the Guarantee as above provided, any holder of ComPS and Preferred Securities of other series may institute a legal proceeding directly against J.P. Morgan to enforce its right under such Guarantee, without first instituting a legal proceeding against the Trust or any other person or entity. Subject to the award by a court of competent jurisdiction of legal fees in connection with any such legal proceeding, each holder will be required to bear its own costs in connection with instituting a legal proceeding directly against J.P. Morgan, which cost may be significant. TERMINATION OF THE GUARANTEE The Guarantee will terminate with respect to the ComPS upon full payment of the aggregate ComPS Early Redemption Price or ComPS Redemption Price, as applicable, or upon full payment of the amounts payable in accordance with the Declaration upon liquidation of the Trust. The Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of ComPS must restore payment of any sums paid under such ComPS or the Guarantee (e.g., upon a subsequent bankruptcy of Morgan Guaranty or J.P. Morgan). STATUS OF THE GUARANTEE The Guarantee will constitute an unsecured obligation of J.P. Morgan and will rank (i) subordinate and junior in right of payment to all other liabilities of J.P. Morgan, (ii) pari passu with the most senior preferred or preference stock outstanding as of the date hereof of J.P. Morgan and with respect to obligations under other guarantee agreements which J.P. Morgan may enter into from time to time to the extent that such agreements provide for comparable guarantees by J.P. Morgan of payment on other preferred securities issued by the predecessor of the Trust or by other trusts sponsored by J.P. Morgan and (iii) senior to J.P. Morgan's common stock. The terms of the ComPS provide that each holder of ComPS by acceptance thereof agrees to the subordination provisions and other terms of the Guarantee. The Guarantee will constitute a guarantee of payment and not of collection (that is, the guaranteed party may institute a legal proceeding directly against the guarantor to enforce its rights under the Guarantee without instituting a legal proceeding against any other person or entity). GOVERNING LAW The Guarantee will be governed by and construed and interpreted in accordance with the laws of the State of New York. DESCRIPTION OF THE RELATED NOTE GUARANTEE Set forth below is a summary of information concerning the Related Note Guarantee that will be delivered by J.P. Morgan for the benefit of the Property Trustee for the benefit of holders of Securities of various series. The terms of the Related Note Guarantee will be those set forth in the Related Note Guarantee Agreement. The following summary does not purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the Prospectus and the form of Related Note S-38 40 Guarantee Agreement, which is filed as an exhibit to the Registration Statement relating to this Prospectus Supplement and the Prospectus. The Related Note Guarantee will be held by the Property Trustee (for the benefit of holders of Series [B] Securities), as the holder of the Related Note. GENERAL Pursuant to the Related Note Guarantee, J.P. Morgan irrevocably and unconditionally agrees, on a subordinated basis, to pay in full to the Property Trustee for the benefit of holders of Series [B] Securities the Related Note Guarantee Payments (as defined herein), as and when due, regardless of any defense, right of set-off or counterclaim that Morgan Guaranty may have or assert with respect to its obligation to make such Related Note Guarantee Payments. The following payments with respect to the Related Note issued by Morgan Guaranty (the "Related Note Guarantee Payments") will be subject to the Related Note Guarantee (without duplication): (i) any accrued and unpaid distributions that are required to be paid by Morgan Guaranty on the Related Note and (ii) any principal payable by Morgan Guaranty under the Related Note, as and when payable by Morgan Guaranty. J.P. Morgan's obligation to make a Related Note Guarantee Payment may be satisfied by direct payment of the required amounts by J.P. Morgan to the Property Trustee for the benefit of holders of Series [B] Securities or by causing Morgan Guaranty to pay such amounts to the Property Trustee for the benefit of holders of Series [B] Securities. The Related Note Guarantee will be a full and unconditional guarantee with respect to the Related Note from the time of issuance of the Related Note. MODIFICATION OF THE RELATED NOTE GUARANTEE; ASSIGNMENT The Related Note Guarantee may be amended only with the prior approval of the Property Trustee; provided that no such amendment shall adversely affect the holders of the Preferred Securities without the consent of a majority in aggregate Principal Amount at such time of the holders of Preferred Securities of each affected series, voting as a single class. All guarantees and agreements contained in the Related Note Guarantee shall bind the successors, assignees, receivers, trustees and representatives of J.P. Morgan and shall inure to the benefit of the Property Trustee (for the benefit of holders of Series [B] Securities) as the holder of the Related Note. REMEDIES OF THE TRUST AND HOLDERS OF THE COMPS The Trust has the sole right to direct the time, method and place of conducting any proceeding for any remedy available to it in respect of the Related Note Guarantee. Pursuant to the Declaration, the holders of a majority in Principal Amount of the ComPS in certain circumstances (including a payment default under the Related Note Guarantee by J.P. Morgan) have the right to direct the Trust, through the Property Trustee, to exercise certain of its rights as the holder of the Related Note Guarantee. TERMINATION OF THE RELATED NOTE GUARANTEE The Related Note Guarantee will terminate with respect to the Related Note upon full payment of the Related Note Redemption Price (as defined below) of the Related Note. The Related Note Guarantee will continue to be effective or will be reinstated with respect to the Related Note, as the case may be, if at any time the Property Trustee, on behalf of holders of Series [B] Securities, must restore payment of any sums paid under the Related Note or the Related Note Guarantee (e.g., upon a subsequent bankruptcy of J.P. Morgan). STATUS OF THE RELATED NOTE GUARANTEE The Related Note Guarantee will constitute an unsecured obligation of J.P. Morgan and will rank (i) subordinate and junior in right of payment to all other liabilities of J.P. Morgan, (ii) pari passu with the most senior preferred or preference stock outstanding as of the date hereof of J.P. Morgan and (iii) senior to J.P. Morgan's common stock. The terms of the ComPS provide that each holder of ComPS by acceptance thereof agrees to the subordination provisions and other terms of the Related Note Guarantee. S-39 41 The Related Note Guarantee will constitute a guarantee of payment and not of collection (that is, the Property Trustee may institute a legal proceeding directly against J.P. Morgan to enforce its rights under the Related Note Guarantee without instituting a legal proceeding against Morgan Guaranty). GOVERNING LAW The Related Note Guarantee will be governed by and construed and interpreted in accordance with the laws of the State of New York. EFFECT OF OBLIGATIONS UNDER THE GUARANTEE, THE RELATED NOTE GUARANTEE AND THE RELATED NOTE As set forth in the Declaration, the sole purpose of the Trust is to issue the Series [B] Securities and other Securities of separate series, and to invest the proceeds from such issuances in the Related Note and other debt obligations of Morgan Guaranty. As long as payments of interest and other payments are made when due on the Related Note, such payments will be sufficient to cover dividends and payments due on the ComPS because of the following factors: (i) the Principal Amount of the Related Note will be equal to the sum of the aggregate Principal Amount of the ComPS and the related Series [B] Common Securities outstanding at any time; (ii) the interest rate and the interest and other payment dates on the Related Note will match the dividend rate and dividend and other payment dates for the ComPS and the related Series [B] Common Securities; (iii) J.P. Morgan shall pay all, and the Trust shall not be obligated to pay, directly or indirectly, any, costs and expenses of the Trust other than principal of and dividends on the ComPS and the related Series [B] Common Securities; and (iv) the Declaration further provides that the J.P. Morgan shall not cause the Trust (on behalf of a series of Securities or otherwise) to, among other things, engage in any activity that is not consistent with the purposes of the Trust. Payments of dividends (to the extent Morgan Guaranty has made payments of interest on the Related Note) and other payments due on the ComPS (to the extent Morgan Guaranty has made payment of principal and other amounts on the Related Note) are guaranteed by J.P. Morgan as and to the extent set forth under "Description of the Guarantee" herein and in the Prospectus. If Morgan Guaranty does not make interest payments on the Related Note, it is expected that the Trust will not have sufficient funds to pay dividends on the ComPS. The Guarantee is a full and unconditional guarantee from the time of its issuance but does not apply to any dividends or other payments unless and until Morgan Guaranty has made payment of interest or other payments on the Related Note. If Morgan Guaranty fails to make interest or other payments on the Related Note when due, the Declaration provides a mechanism whereby the holders of the ComPS, using the procedures described in the Declaration, may direct the Property Trustee, on behalf of holders of the Series [B] Securities, to enforce its rights under the Related Note and the Related Note Guarantee. If J.P. Morgan fails to perform any of its payment or other obligations with respect to the ComPS under the Guarantee, any holder of ComPS may institute a legal proceeding directly against J.P. Morgan to enforce such holder's rights under the Guarantee without first instituting a legal proceeding against the Trust or any other person or entity. The Related Note Guarantee by J.P. Morgan guarantees to the Property Trustee the payment of any distributions on and principal of the Related Note as provided pursuant to the terms of the Related Note, at such times and in such amounts as provided therein. J.P. Morgan's obligations under the Related Note Guarantee will be subordinated and junior in right of payment to all liabilities of J.P. Morgan, pari passu with the most senior preferred stock outstanding as of the date hereof of J.P. Morgan and senior to the common stock of J.P. Morgan. The Declaration provides that J.P. Morgan will pay, or cause to be paid, all debts and obligations (other than with respect to the ComPS and other Preferred Securities to the extent set forth herein and in the Prospectus) and all costs and expenses of the Trust, including any taxes and all costs and expenses with S-40 42 respect thereto, to which the Trust may become subject. The Declaration provides that any person to whom such debts, obligations, costs and expenses are owed will have the right to enforce J.P. Morgan's obligations in respect of such debts, obligations, costs and expenses directly against J.P. Morgan without first proceeding against the Trust. J.P. Morgan, through its obligations under the Guarantee, the Related Note Guarantee and the Declaration, taken together, will provide a full and unconditional guarantee, on a subordinated basis, of payments due on the ComPS. See "Description of the Guarantee -- General" and "Description of the Related Note Guarantee -- General" herein and in the accompanying Prospectus. Upon any voluntary or involuntary dissolution of the Trust, the holders of Series [B] Securities will be entitled to receive, after satisfaction of liabilities to creditors of the Trust with respect to Series [B] Securities, the Liquidation Distribution. Holders of ComPS will be entitled to the benefits of the Guarantee with respect to the Liquidation Distribution. See "Description of the ComPS -- Liquidation Distribution Upon Dissolution". Upon any voluntary or involuntary liquidation or bankruptcy of Morgan Guaranty, the Property Trustee as holder of the Related Note on behalf of the Trust would rank equally in right of payment with creditors of Morgan Guaranty (other than any depositors therein), including all Senior Indebtedness, and would be entitled to receive payment in full of principal, premium, if any, and interest, before any stockholders of Morgan Guaranty receive payments of distributions. UNITED STATES FEDERAL INCOME TAXATION GENERAL The following is a summary of the material United States Federal income tax consequences of the purchase, ownership and disposition of ComPS by U.S. Holders (as defined herein). Unless otherwise stated, this summary deals only with ComPS held as capital assets by holders who purchase the ComPS upon original issuance ("Initial Holders"). This summary does not address tax considerations applicable to investors that may be subject to special U.S. Federal income tax treatment, such as dealers in securities or persons that will hold the ComPS as a position in a "straddle" (within the meaning of Section 1092 of the Internal Revenue Code of 1986, as amended (the "Code")), or as part of a "conversion transaction" (within the meaning of Section 1258 of the Code) or "synthetic security" or other integrated investment comprised of ComPS and one or more other investments. This summary also does not address the tax consequences to persons that have a functional currency other than the U.S. Dollar or the tax consequences to shareholders, partners or beneficiaries of a holder of ComPS. Further, it does not include any description of any alternative minimum tax consequences or the tax laws of any state or local government or of any foreign government that may be applicable to the ComPS. This summary is based on the Code, Treasury regulations thereunder and administrative and judicial interpretations thereof, as of the date hereof, all of which are subject to change, possibly on a retroactive basis. In the opinion of Cravath, Swaine & Moore, special tax counsel to J.P. Morgan and the Trust ("Tax Counsel"), the statements contained in the following summary, to the extent they constitute matters of law, accurately described the material U.S. Federal income tax consequences to Initial Holders of the acquisition, ownership and disposition of ComPS. For purposes of this summary, a "U.S. Holder" shall mean a holder who is (i) a citizen or a resident of the United States (or any state thereof), (ii) a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate or trust, the income of which is subject to U.S. Federal income tax regardless of its source, and (iv) any other person subject to U.S. Federal income tax on net income. S-41 43 CLASSIFICATION OF THE TRUST The Trust will be classified as "grantor trust" for Federal income tax purposes. As a result, a holder of ComPS will be treated as owning an undivided beneficial interest in the Related Note. Accordingly, for U.S. Federal income tax purposes, each holder will be required to report income, gain or loss as if the holder directly held its pro rata share of the Related Note. No portion of the income accrued by holders will be eligible for the corporate dividends received deduction. CLASSIFICATION OF THE RELATED NOTE It is believed that the Related Note is properly treated as a contingent payment debt instrument subject to the Treasury regulations promulgated in June 1996 governing such instruments (the "Contingent Payment Regulations"). The Trust intends to treat the Related Note accordingly. However, no ruling is being requested from the Internal Revenue Service (the "IRS") and there is no direct authority addressing the characterization of the Related Note. Other characterizations might result in consequences different than those discussed below. U.S. HOLDERS OF COMPS The following discussion of the tax consequences to U.S. Holders assumes both that the Trust will be treated as a grantor trust for U.S. Federal income tax purposes and that the Related Note will be treated as a contingent payment debt instrument. If these assumptions are not correct, holders could be subject to different consequences than those discussed below. The following discussion also assumes that the Initial Holders purchased ComPS at the Face Amount. INTEREST INCOME Under the Contingent Payment Regulations, the original issue discount ("OID") rules of the Code apply to a contingent payment debt instrument. OID must be accrued each year at a rate equal to the "comparable yield" for fixed debt issued by the issuer of the instrument (or, if a hedge is available to the issuer, the fixed yield on the combination of the contingent debt instrument and the hedge). The comparable yield is determined at the time of issuance of the obligations and cannot be less than the applicable federal rate ("AFR") on the issue date, which is the rate on United States Treasury obligations of comparable maturities. After the "comparable yield" is determined, a projected payment schedule for the instrument must be determined as of the issue date, which schedule remains fixed through the term of the debt instrument. Such schedule includes all noncontingent payments and projected contingent payments, and must result in a yield to investors equal to the comparable yield. If the actual amount of a contingent payment differs from the projected amount, adjustments to income accruals to holders are made at that time to account for the difference. In the case of ComPS, all payments except the final payment are fixed. The "comparable yield" for the ComPS will be the AFR applicable for the Issue Date, which is [ %]. For tax purposes, the projected payment at Stated Maturity is [ ]. Moreover, the rate of stated dividends will be less than the AFR. As a result, for each period prior to the Stated Maturity, an Initial Holder will be required to accrue a greater amount of OID into income than the actual cash payments received during that period. Actual cash payments of interest are not separately includible in income. In the case of U.S. Holder of ComPS that is a tax exempt organization, the interest would not be subject to the tax on unrelated business taxable income unless borrowing or activities of the organization itself caused the interest to be subject to such tax. SALE OR OTHER DISPOSITION OF COMPS Assuming that an Initial Holder purchased ComPS for their Face Amount, the Initial Holder's tax basis in ComPS will initially be their Face Amount. The Initial Holder's adjusted tax basis in ComPS will be the S-42 44 initial basis increased by the amount of OID accrued as income and reduced by the amount of cash payments received. For an Initial Holder who holds ComPS until the Stated Maturity, the adjusted tax basis at maturity would be approximately $[ ]. On the sale, exchange, early redemption or retirement of ComPS (a "Disposition"), the Initial Holder generally will recognize gain or loss in an amount equal to the difference between the proceeds of the Disposition and the adjusted tax basis of the ComPS. Any gain will be ordinary income. In the case of a U.S. Holder of ComPS that is a tax exempt organization, such gain would not be subject to the tax on unrelated business taxable income unless borrowing or activities of the organization itself caused the gain to be subject to such tax. Any loss will be an ordinary loss to the extent of the aggregate OID previously accrued by the Initial Holder on the ComPS, and any additional loss generally will be a capital loss (long term capital loss if at the time of the Disposition the ComPS had been held for more than one year). SECONDARY MARKET PURCHASERS If a secondary market purchaser purchases ComPS at a premium or discount as compared to the adjusted tax basis of an Initial Holder (as described under "Sale or Other Disposition of ComPS"), then, to the extent such premium or discount reflects an increase or decrease in the value of the stated dividend payments over the remaining life of the ComPS (due to changes in market interest rates or otherwise), an adjustment must be made to the amount of OID to be included in the income of the secondary market purchaser over the remaining life of the ComPS. Any premium or discount so allocated to the ComPS dividend payments will result in a decrease or increase, respectively, in the periodic amount of OID to be included in the holder's income prior to Stated Maturity. To the extent any such premium or discount reflects an increase or decrease in the expected payment at Stated Maturity, such premium or discount would not change the amount of OID the holder would include in income over the remaining life of the ComPS. Rather, such premium or discount would be reflected in the holder's tax basis in the ComPS and would decrease or increase, respectively, the holder's gain or loss on sale or at maturity of the ComPS. Notwithstanding the foregoing, under a safe harbor for exchange traded instruments, a secondary market purchaser can elect to allocate all the premium or discount (no matter how arising) on a pro-rata basis to daily accruals of OID over the remaining term of the ComPS, but only to the extent that the resulting yield to maturity on the ComPS is no less than the AFR determined on the holder's purchase date for the ComPS. (The applicable AFR can be determined from the weekly IRS Internal Revenue Bulletin.) For secondary market purchasers who purchase ComPS at a premium or discount, respectively, the election might decrease or increase, respectively, the OID income reportable over the life of the ComPS as compared to that which would be reported under the general rule. Any adjustment to OID accruals is limited to the premium or discount at which the ComPS are acquired as compared to the adjusted tax basis of an Initial Holder at the time of such acquisition (as described under "Sale or Other Disposition of ComPS"). As a result, for example, if market interest rates have decreased since the initial issuance of the ComPS, but the size of the purchase premium also reflects a decrease in the expected payment at Stated Maturity, then the reduction of OID accruals due to the acquisition of ComPS at a premium may not fully reflect the decrease in market interest rates. In all cases the tax basis to a secondary market purchaser will be the purchase price, increased by the amount of OID accrued as income (taking into account the adjustment for premium or discount), and reduced by the amount of cash payments received. Secondary market purchasers should consult their individual tax advisors regarding the consequences of purchasing and holding ComPS. NON-UNITED STATES HOLDERS In the case of a holder of ComPS that is not a U.S. Holder, it is believed that payments made with respect to ComPS will not be subject to U.S. withholding tax; provided that such holder complies with applicable certification requirements (and does not directly or indirectly own 10% or more of the voting stock of J.P. Morgan). Any gain realized upon the redemption, sale or other disposition of ComPS by a holder that is S-43 45 not a U.S. Holder will generally not be subject to U.S. Federal income tax if (i) such gain is not effectively connected with a U.S. trade or business of such holder and (ii) in the case of an individual, such individual is not present in the United States for 183 days or more in the taxable year of the redemption, sale or other disposition or the gain is not attributable to a fixed place of business maintained by such individual in the United States. INFORMATION REPORTING TO HOLDERS Holders of ComPS that are not exempt from information reporting requirements will receive annually, on IRS Form 1099, information concerning OID determined for an Initial Holder and attributable to such holder's ComPS. For the reasons noted above, the information reported on such form may not be accurate for secondary market purchasers. BACKUP WITHHOLDING Payments made on, and proceeds from the sale of, the ComPS may be subject to a "backup" withholding tax of 31% unless the holder complies with certain identification requirements. Any withheld amounts will be allowed as a credit against the holder's U.S. Federal income tax, provided that the required information is provided to the IRS. THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE COMPS, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS. ERISA CONSIDERATIONS Each fiduciary of a pension, profit-sharing or other employee benefit plan (a "Plan") subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), should consider the fiduciary standards of ERISA in the context of the Plan's particular circumstances before authorizing an investment in the ComPS. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the Plan. Section 406 of ERISA and Section 4975 of the Code prohibits Plans, as well as individual retirement accounts and Keogh plans subject to Section 4975 of the Code (also "Plans"), from engaging in certain transactions involving "plan assets" with persons who are "parties in interest" under ERISA or "disqualified persons" under the Code ("Parties in Interest") with respect to such Plan. A violation of these "prohibited transaction" rules may result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for such persons, unless exemptive relief is available under an applicable statutory or administrative exemption. Employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA) and foreign plans (as described in Section 4(b)(5) of ERISA) are not subject to the requirements of ERISA or Section 4975 of the Code. Under a regulation (the "Plan Assets Regulation") issued by the U.S. Department of Labor (the "DOL"), the assets of the Trust would be deemed to be "plan assets" of a Plan for purposes of ERISA and Section 4975 of the Code if "plan assets" of the Plan were used to acquire an equity interest in the Trust and no exception were applicable under the Plan Assets Regulation. An "equity interest" is defined under the Plan Assets Regulation as any interest in an entity other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features. Pursuant to an exception contained in the Plan Assets Regulation, the assets of the Trust would not be deemed to be "plan assets" of investing Plans if the ComPS are (i) freely transferable, (ii) part of a class of securities that is owned by 100 or more investors independent of the issuer and of one another at the conclusion of the offering and (iii) either (a) part of a class of securities registered under Section 12(b) or S-44 46 12(g) of the Exchange Act, or (b) sold to a Plan as part of an offering of securities to the public pursuant to an effective registration statement under the Securities Act and the class of securities of which such security is a part is registered under the Exchange Act within 120 days (or such later time as may be allowed by the Commission) after the end of the fiscal year of the issuer during which the offering of such securities to the public occurred. There are no restrictions imposed on the transfer of ComPS and the ComPS will be sold as part of an offering registered under Section 12(b) of the Exchange Act. The Representative (as defined in "Underwriting") will notify the Trust as to whether or not the ComPS will be held by at least 100 separately named persons at the conclusion of the offering. The Trust will not determine whether the 100-investor requirement of the exception for publicly offered securities is satisfied as to the ComPS. Prospective purchasers may obtain a copy of the notification described in the second preceding sentence from the Trust at 60 Wall Street, New York, NY 10260-0060. In the event assets of the Trust were determined to constitute "plan assets", certain transactions involving the Trust could be deemed to constitute direct or indirect prohibited transactions under ERISA and Section 4975 of the Code with respect to a Plan. For example, if J.P. Morgan, Morgan Guaranty and/or any affiliates of either is a Party in Interest with respect to an investing Plan (either directly or by reason of its status as the sponsor of the Trust or of any of J.P. Morgan's or Morgan Guaranty's other subsidiaries), the extension of credit between the J.P. Morgan or Morgan Guaranty and/or any affiliates of either and the Trust (as represented by the Related Note, the Related Note Guarantee and the Guarantee) would likely be prohibited by Section 406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the Code, unless exemptive relief were available under an applicable administrative exemption (see below). The DOL has issued five prohibited transaction class exemptions ("PTCEs") that may provide exemptive relief for direct or indirect prohibited transactions resulting from the purchase or holding of the ComPS. Those class exemptions are PTCE 96-23 (for certain transactions determined by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company pooled separate accounts) and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). If the Representative does not notify the Trust, as described above, that the ComPS will be expected to be held by at least 100 separately named persons, the ComPS may not be purchased or held by any Plan, any entity whose underlying assets include "plan assets" by reason of any Plan's investment in the entity (a "Plan Asset Entity") or any person investing "plan assets" of any Plan, unless such purchaser or holder is eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14. In such event, any purchaser, transferee or holder of the ComPS or any interest therein will be deemed to have represented by its purchase, acquisition or holding thereof that (a) it is not a Plan or a Plan Asset Entity and is not purchasing such securities on behalf of or with "plan assets" of any Plan, (b) it is eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 with respect to such purchase or holding or (c) such purchase, aquisition or holding will not otherwise give rise to a prohibited transaction under ERISA or the Code for which a prohibited transaction is unavailable. See "Notice to Investors." In any case, J.P. Morgan, Morgan Guaranty and/or any affiliates of either may be considered a "party in interest" (within the meaning of ERISA) or a "disqualified person" (within the meaning of Section 4975 of the Code) with respect to certain Plans. The acquisition and ownership of ComPS by a Plan (or by an individual retirement arrangement or other plans described in Section 4975(e)(i) of the Code) with respect to which J.P. Morgan, Morgan Guaranty or any of its affiliates of either is considered a party in interest or a disqualified person may constitute or result in a prohibited transaction under ERISA or Section 4975 of the Code, unless such ComPS are acquired pursuant to and in accordance with an applicable exemption. As a result, Plans with respect to which J.P. Morgan, Morgan Guaranty or any affiliates of either is a party in interest or a disqualified person should not acquire ComPS unless a statutory or administrative exemption from the prohibited transaction provisions of ERISA or the Code applies. S-45 47 Due to the complexity of these rules and the penalties that may be imposed upon persons involved in nonexempt prohibited transactions, it is particularly important that fiduciaries or other persons considering purchasing the ComPS on behalf of or with "plan assets" of any Plan consult with their counsel regarding the potential consequences if the assets of the Trust were deemed to be "plan assets" and the availability of exemptive relief from the prohibited transaction provisions of ERISA and the Code. UNDERWRITING Subject to the terms and conditions set forth in an underwriting agreement dated the date hereof (the "Underwriting Agreement"), the Trust has agreed to sell to the underwriters named below (the "Underwriters") and the Underwriters have agreed to purchase, the respective number of ComPS set forth opposite their names below. In the Underwriting Agreement, the Underwriter has agreed, subject to the terms and conditions set forth therein, to purchase all the ComPS offered hereby if any of the ComPS are purchased. Under certain circumstances, the commitments of nondefaulting Underwriters may be increased as set forth in the Underwriting Agreement.
UNDERWRITER NUMBER OF COMPS J.P. Morgan Securities Inc. .............................. [ ] [ ]............................. [ ] [ ]............................. [ ] [ ]............................. [ ] [ ]............................. [ ] --------------- Total........................................... [ ]
The Underwriters initially propose to offer the ComPS, in part, directly to the public at the initial public offering price set forth on the cover page of this Prospectus Supplement, and, in part, to certain securities dealers at such price less a concession of $ per Series [B] Preferred Security. [The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per Series [B] Preferred Security to certain brokers and dealers.] After the initial offering, the public offering price and such concessions may be changed. In view of the fact that the proceeds of the sale of the ComPS will ultimately be used to purchase the Related Note of Morgan Guaranty, the Underwriting Agreement provides that Morgan Guaranty will pay as compensation ("Underwriters' Compensation") to the Underwriters $ per Series [B] Preferred Security (or $ in the aggregate) for the account of the Underwriters. The ComPS have been approved for listing on the Amex under the symbol ["JPO"], subject to official notice of issuance. Trading of the ComPS on the Amex is expected to commence within a 30-day period after the date of this Prospectus Supplement. Prior to this offering, there has been no market for the ComPS. The Trust and J.P. Morgan have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. This Prospectus Supplement and related the Prospectus may be used by direct or indirect wholly-owned subsidiaries of J.P. Morgan in connection with offers and sales related to secondary market transactions in the ComPS. Such subsidiaries may act as principal or agent in such transactions. Such sales will be made at prices related to prevailing market prices at the time of a sale. The Underwriters, certain agents and their associates may be customers of, engage in transactions with, and perform services for, J.P. Morgan in the ordinary course of business. S-46 48 The Representative is an indirect, wholly-owned subsidiary of J.P. Morgan. The participation of the Representative in the offer and sale of the ComPS complies with the requirements of Rule 2720 of the Rules of Conduct of the National Association of Securities Dealers, Inc. (the "NASD") regarding underwriting of securities of an affiliate and complies with any restrictions imposed on such Representative by the Board of Governors of the Federal Reserve System. Because the NASD is expected to view the Preferred Securities offered hereby as interests in a direct participation program, the offering is being made in compliance with Rule 2810 of the NASD's Rules of Conduct. Offers and sales of Preferred Securities will be made only to (i) "qualified institutional buyers", as defined in Rule 144A under the Act; (ii) institutional "accredited investors", as defined in Rule 501(a)(1)-(3) of Regulation D under the Act or (iii) investors for whom an investment in non-convertible investment grade commodity-indexed preferred securities is appropriate. The Underwriters may not confirm sales to any accounts over which they exercise discretionary authority without the prior written approval of the transaction by the customer. LEGAL MATTERS Certain matters of Delaware law relating to the validity of the Series [B] Securities will be passed upon by Morris, Nichols, Arsht & Tunnell, Wilmington, Delaware, special Delaware counsel to the Trust. The validity of the Series [B] Securities offered hereby will be passed upon by Gene A. Capello, Vice President and Assistant General Counsel of J.P. Morgan, and by Cravath, Swaine & Moore, New York, New York, counsel for the Representative. EXPERTS The audited financial statements contained in J.P. Morgan's Annual Report on Form 10-K for the year ended December 31, 1996 (included in J.P. Morgan's Annual Report to Stockholders), are incorporated by reference in this Prospectus Supplement in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. S-47 49 ANNEX I GLOSSARY OF TERMS The following are abbreviated definitions of certain capitalized terms used in the Prospectus Supplement. The Declaration, the Guarantee, the Related Note Guarantee and the Related Note may contain more complete definitions of certain of the terms defined herein, as well as definitions of certain other terms not defined herein, and reference should be made to the Declaration, the Guarantee, the Related Note Guarantee and the Related Note, as applicable, for complete definitions of such terms. AMEX....................the American Stock Exchange. APPLICABLE INDEX........the JPMCI Crude Oil Total Return Index. APPLICABLE INDEX COMMENCEMENT VALUE................... APPLICABLE INDEX SETTLEMENT VALUE........the arithmetic average of the values of the Applicable Index during the Determination Period; provided, however, that if the Applicable Index Settlement Value has been permanently determined prior to such time, the Applicable Index Settlement Value shall equal the value so determined. APPLICABLE INDEX EARLY SETTLEMENT VALUE........for each day of the Early Determination Period, the value of the Applicable Index for such day of the Early Determination Period; provided, however, that if the Applicable Index Settlement Value has been permanently determined prior to such time, the Applicable Index Early Settlement Value shall equal the value so determined. BENCHMARK CRUDE OIL CONTRACTS...............the crude oil futures contracts included from time to time in the JPM Indices, which shall initially be the NYMEX Light "Sweet" Crude Oil contract. BUSINESS DAY............any day other than a Saturday, Sunday or any other day on which banking institutions in The City of New York, New York, are permitted or required by any applicable law to close. CODE....................the Internal Revenue Code of 1986, as amended. COLLATERAL YIELD COMPONENT...............a component of the value of the Applicable Index, computed on the fluctuating index value of the Applicable Index at the most recent auction rate for 3-month U.S. Treasury Bills or any successor rate thereto with a maturity of 3 months or less or, if no such rate has been determined in the 13 days prior to the date of determination, as Morgan Guaranty may determine in its reasonable discretion. COMMISSION..............the Securities and Exchange Commission. COMMON SECURITIES.......the Series [B] Common Securities and any other common securities issued by the Trust (or its predecessor). COMPS EARLY REDEMPTION PRICE...................On any Early Redemption Date, an amount equal to (i) the Early Redemption Value per Series [B] Preferred Security plus (ii) accrued and unpaid dividends to but excluding the date of redemption. A-1 50 COMPS REDEMPTION PRICE...................at Stated Maturity, an amount equal to (i) the Redemption Value per Series [B] Preferred Security plus (ii) accrued and unpaid dividends to but excluding Stated Maturity. DECLARATION.............the amended and restated declaration of trust among J.P. Morgan & Co. Incorporated, as sponsor, and the trustees named therein dated as of October 10, 1997. DETERMINATION PERIOD....the 10 consecutive Trading Days on which no Market Disruption Event occurs immediately following the 20th Business Day prior to Stated Maturity. DIVIDENDS...............cumulative cash dividends of [2.5]% per annum on the Face Amount (calculated on the basis of a 360 day year of twelve 30-day months) accruing from the Issue Date and payable quarterly in arrears. DTC.....................the Depository Trust Company. EARLY DETERMINATION PERIOD..................the 10 consecutive Trading Days which are Business Days on which U.S. Treasury Bond markets are open and on which no Market Disruption Event occurs immediately following the 20th Business Day prior to the applicable Early Redemption Date. EARLY REDEMPTION VALUE...................the average for the 10 days of the Early Determination Period of the discounted present value of the future dividends and the indexed Principal Amount of the ComPS, as set forth in the accompanying Prospectus under "Description of ComPS--Early Redemption Upon the Occurrence of a Special Event or at the Election of the Holders of the ComPS". EARLY REDEMPTION DATE....................each Optional Redemption Date and the date of any Special Event Redemption or Liquidation Distribution. ERISA...................the Employee Retirement Income Security Act of 1974, as amended. EXCHANGE ACT............the Securities Exchange Act of 1934, as amended. FACE AMOUNT.............[$25]. FACTOR..................[0.15 (15 percent)], which is designed to offset the costs of issuing and hedging the indexation of the ComPS. GUARANTEE...............the Guarantee Agreement executed by J.P. Morgan on behalf of the holders of each series of Preferred Securities. GUARANTEE PAYMENTS......without duplication, (i)(A) any accrued and unpaid dividends that are required to be paid on the ComPS and (B) the ComPS Early Redemption Price or the ComPS Redemption Price, as applicable, but if and only to the extent that, in each of case, Morgan Guaranty has made a payment of interest or principal, as the case may be, on the Related Note and (ii) upon a Liquidation Event (other than in connection with the redemption of all the ComPS upon the maturity or redemption of the Related Note), the lesser of (A) the Liquidation Distribution to the extent the Trust, on behalf of holders of Series [B] Securities, has funds available therefor, and (B) the amount of assets of the Trust consisting of the Related Note and the proceeds A-2 51 thereof remaining available for distribution to holders of all Series [B] Preferred Securities upon such Liquidation Event. INITIAL HOLDERS.........holders who purchase any ComPS upon original issuance. INTEREST PAYMENT DATE...with respect to the Related Note, the last calendar day of each March, June, September and December, beginning , 199[ ]. INVESTMENT COMPANY EVENT...................the receipt by the Trust of an opinion of a nationally recognized independent counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation, a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority or the expiration or revocation of any applicable exemption obtained by the Trust (a "Change in 1940 Act Law"), there is more than an insubstantial risk that the Trust is or will be considered an "investment company" that is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of this Prospectus. IRS.....................Internal Revenue Service. ISSUE DATE.............. , 199[ ]. JPMCI...................The J.P. Morgan Commodity Index. LIQUIDATION DISTRIBUTION............in respect of any Liquidation Event, the sum of (a) the Early Redemption Value (treating the date of such distribution as the Early Redemption Date), plus (b) the amount of accrued and unpaid dividends on such Series [B] Preferred Security to but excluding the date of payment. LIQUIDATION EVENT.......any dissolution of the Trust, whether voluntary or involuntary. LME.....................the London Metals Exchange. MARKET DISRUPTION EVENT...................the occurrence of one or more of the following on any Trading Day with respect to any Benchmark Crude Oil Contract underlying the Applicable Index, or an exchange on which any Benchmark Crude Oil Contract is traded (a "Relevant Exchange"): (a) a day on which the fluctuation of the price of any Benchmark Crude Oil Contract underlying the Applicable Index is materially limited by the rules of a Relevant Exchange setting the maximum or minimum price for such day (a "Limit Price"); (b) a day on which the official settlement price (the "Settlement Price") on the Relevant Exchange of a Benchmark Crude Oil Contract underlying the Applicable Index is the Limit Price; (c) the failure of a Relevant Exchange to determine, announce or publish the Settlement Price with respect to a Benchmark Crude Oil Contract underlying the Applicable Index; (d) the material suspension of trading in any Benchmark Crude Oil Contract underlying the Applicable Index on a Relevant Exchange; (e) the failure of trading to commence, or the permanent discontinuation of trading, in any Benchmark Crude Oil Contract underlying the Applicable Index on any Relevant Exchange; and (f) the imposition of any material limitation on trading in any Benchmark Crude Oil Contract underlying the Applicable Index on any Relevant Exchange. NASDAQ..................The Nasdaq Stock Market. A-3 52 1940 ACT................the Investment Company Act of 1940, as amended. NOTE EVENT OF DEFAULT...(i) default for 30 days in the payment of interest on the Related Note; (ii) default in payment of principal amount at the Stated Maturity or any amount payable upon any redemption of the Related Note; (iii) failure by Morgan Guaranty for 90 days after receipt of notice to it to comply with any of its covenants or agreements contained in the Related Note; and (iv) certain events of bankruptcy, insolvency, receivership or reorganization involving Morgan Guaranty or certain affiliates. NYMEX...................the New York Mercantile Exchange. OPTIONAL REDEMPTION.....the redemption of ComPS by the holders thereof on any Optional Redemption Date for the ComPS Early Redemption Price. OPTIONAL REDEMPTION DATE....................each prior to Stated Maturity, subject to extension in the case of (i) delay in the provision by DTC of the Applicable Notice or (ii) the occurrence and continuance of a Market Disruption Event. PREFERRED SECURITIES....the ComPS and any other preferred securities issued by the Trust. PRINCIPAL AMOUNT........at any time, (i) in the case of ComPS, the Redemption Value or Early Redemption Value, as applicable, as if determined as of such time, and (ii) in the case of the Related Note, the principal amount thereof at such time determined pursuant to the terms thereof. REDEMPTION DATE.........either the Stated Maturity or an Early Redemption Date, as applicable. REDEMPTION VALUE........at Stated Maturity, the Face Amount per Series [B] Preferred Security multiplied by a fraction, the numerator of which is the Applicable Index Settlement Value and the denominator of which is the Applicable Index Commencement Value. RELATED NOTE............the [2.5]% unsecured, unsubordinated debt obligation of Morgan Guaranty due . ROLLOVER PERIOD.........the period during which each replacement of shorter-dated Benchmark Crude Oil Contracts with longer-dated Benchmark Crude Oil Contracts as the basis for the change in value of the Applicable Index occurs. SECURITIES..............the Series [B] Securities and any other securities issued by the Trust. SECURITIES ACT..........the Securities Act of 1933, as amended. SENIOR INDEBTEDNESS.....with respect to Morgan Guaranty, the principal of, premium, if any, and interest on (a) all indebtedness of Morgan Guaranty for money borrowed, whether outstanding as of the date hereof or hereafter created, issued or incurred (other than Morgan Guaranty's obligations to its depositors), except any indebtedness expressly subordinated to such Senior Indebtedness, and (b) any deferrals, renewals or extensions of any such Senior Indebtedness. SERIES [B] COMMON SECURITIES..............the common securities of the Trust representing an undivided beneficial interest in the Related Note (and the proceeds thereof), to be owned by J.P. Morgan. SERIES [B] SECURITIES...the ComPS and the Series [B] Common Securities. SPECIAL EVENT...........either a Tax Event or an Investment Company Event. A-4 53 SPECIAL REDEMPTION......upon the occurrence and during the continuation of a Special Event, Morgan Guaranty will have the right to redeem the Related Note in whole or in part for cash at the Related Note Redemption Price, with the result that the Trust will redeem on a pro rata basis ComPS and related Series [B] Common Securities in an equal Principal Amount for cash at the ComPS Early Redemption Price. SPECIAL REDEMPTION DATE....................any date in respect of which upon the occurrence and continuation of a Tax Event or an Investment Company Event Morgan Guaranty shall have called for redemption in whole or in part the Related Note, and the Trust shall have called for redemption on a pro rata basis an equal Principal Amount of the ComPS and related Series [B] Common Securities. STATED MATURITY......... , [2000]. TAX COUNSEL.............Cravath, Swaine & Moore, special tax counsel to J.P. Morgan and the Trust. TAX EVENT...............the receipt by the Trust of an opinion of nationally recognized independent tax counsel experienced in such matters (a "Tax Opinion") to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to, or change in, an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the theretofore generally accepted position or (d) any action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated, issued or announced or which interpretation or pronouncement is issued or announced or which action is taken, in each case on or after the date of this Prospectus Supplement, that there is more than an insubstantial risk that at such time or within 90 days of the date thereof (i) the Trust is or would be subject to United States Federal income tax with respect to income accrued or received on any Related Note, (ii) the interest payable on any Related Note is not or would not be deductible by Morgan Guaranty for United States Federal income tax purposes, (iii) the contingent principal in excess of the Face Amount of any series of Preferred Securities (if any) payable on any Related Note is not or would not be deductible by Morgan Guaranty for United States Federal income tax purposes or (iv) the Trust is or would be subject to more than a de minimis amount of other taxes, duties or other governmental charges. TRADING DAY.............any day on which open-outcry trading on either the NYMEX or the LME is scheduled to occur or occurs. TRUST INDENTURE ACT.....the Trust Indenture Act of 1939, as amended. UNUSED COSTS............[1.0]% ([one] percent). A-5 54 PROSPECTUS $650,000,000 J.P. MORGAN INDEX FUNDING COMPANY I Preferred Securities guaranteed to the extent set forth herein by J.P. MORGAN & CO. INCORPORATED ------------------------ J.P. Morgan Index Funding Company I (the "Trust"), a Delaware statutory business trust, may offer, from time to time, preferred securities of separate series representing undivided beneficial interests in certain assets of the Trust ("Preferred Securities"). The payment of periodic cash distributions ("distributions") with respect to Preferred Securities out of moneys held by the Trust and payments on liquidation, redemption or otherwise with respect to such Preferred Securities will be guaranteed on a subordinated basis by J.P. Morgan & Co. Incorporated, a Delaware corporation ("J.P. Morgan"), to the extent described herein (the "Guarantee"). See "Description of the Guarantee". The Trust, on behalf of holders of Securities (as defined below) of each series, will invest the proceeds from the issuance of Preferred Securities and related common securities (the "Common Securities" and, together with the Preferred Securities, the "Securities") in unsecured notes associated with each such series (each, a "Related Note") of Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), a trust company with full banking powers organized under the laws of the State of New York, and payments to the Trust on liquidation, redemption or otherwise with respect to the Related Notes will be guaranteed on a subordinated basis by J.P. Morgan to the extent described herein (the "Related Note Guarantee"). See "Description of the Related Note Guarantee". J.P. Morgan's obligations under the Guarantee and Related Note Guarantee are subordinate and junior in right of payment to all other liabilities of J.P. Morgan and rank pari passu with the most senior preferred stock outstanding as of the date hereof of J.P. Morgan. Related Notes associated with a series of Securities may be issued and sold from time to time by Morgan Guaranty to the Trust in connection with the investment of the proceeds from the offering of Preferred Securities and Common Securities of such series of the Trust. J.P. Morgan, through its obligations under the Guarantee, the Related Note Guarantee and the Amended and Restated Declaration of Trust, taken together, will provide a full and unconditional guarantee, on a subordinated basis, of payments due on the Preferred Securities. Specific terms of the Preferred Securities in respect of which this Prospectus is being delivered (the "Offered Securities") will be set forth in an accompanying Prospectus Supplement (the "Prospectus Supplement") with respect to such Offered Securities, which will describe, without limitation and where applicable, the following: (i) in the case of Preferred Securities, the designation, number of securities, liquidation preference per security (including, without limitation, a description of any indexation thereof), initial public offering price, any listing on a securities exchange, distribution rate (or method of calculation thereof), dates on which distributions shall be payable and dates from which distributions shall accrue, any voting rights, terms for any conversion or exchange into other securities, any redemption, exchange or sinking fund provisions, any other rights, preferences, privileges, limitations or restrictions relating to the Preferred Securities and the terms upon which the proceeds of the sale of the Preferred Securities shall be used to purchase a specific Related Note of Morgan Guaranty; (ii) in the case of the applicable Related Note, the specific designation, aggregate principal amount (including, without limitation, a description of any indexation thereof), denomination, maturity, premium, if any, any exchange, conversion, redemption or sinking fund provisions, if any, interest rate (which may be fixed or variable), if any, the time and method of calculating interest payments, if any, dates on which premium, if any, and interest, if any, will be payable, the right of Morgan Guaranty, if any, to defer payment of interest on the Related Note and the maximum length of such deferral period, and (iii) the initial public offering price, subordination terms, and other specific terms of the offering. The Offered Securities may be offered in amounts, at prices and on terms to be determined at the time of offering; provided, however, that the aggregate initial public offering price of all Offered Securities shall not exceed $650,000,000. Any Prospectus Supplement relating to any series of Offered Securities will contain information concerning certain United States Federal income tax considerations, if applicable, for purchasers and holders of the Offered Securities. SEE "RISK FACTORS WITH RESPECT TO ALL PREFERRED SECURITIES" ON PAGE 23 AND "RISK FACTORS WITH RESPECT TO COMPS" ON PAGE 24 FOR CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN ANY PREFERRED SECURITIES OR COMPS, AS APPLICABLE. AN INVESTOR IN COMPS COULD LOSE ITS ENTIRE INVESTMENT. The Trust may sell the Offered Securities directly, through agents designated from time to time or through underwriters or dealers. See "Plan of Distribution". If any agents of the Trust or any underwriters or dealers are involved in the sale of the Offered Securities, the names of such agents, underwriters or dealers and any applicable commissions and discounts will be set forth in any related Prospectus Supplement. No dealer, salesperson or any other individual has been authorized by the Trust or J.P. Morgan to give any information or to make any representation other than those contained or incorporated by reference in this Prospectus or any accompanying Prospectus Supplement and, if given or made, such information or representation must not be relied upon as having been authorized. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of J.P. Morgan, Morgan Guaranty or the Trust since the date hereof. THE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT. October [ ], 1997. 55 AVAILABLE INFORMATION This Prospectus constitutes a part of a Registration Statement on Form S-3 (together with all amendments and exhibits thereto, the "Registration Statement") filed by J.P. Morgan and the Trust with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Offered Securities. This Prospectus does not contain all of the information set forth in such Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. Reference is made to such Registration Statement and to the exhibits relating thereto for further information with respect to J.P. Morgan, the Trust and the Offered Securities. Any statements contained herein concerning the provisions of any document filed as an exhibit to the Registration Statement or otherwise filed with the Commission or incorporated by reference herein are not necessarily complete, and, in each instance, reference is made to the copy of such document so filed for a more complete description of the matter involved. Each such statement is qualified in its entirety by such reference. J.P. Morgan is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Commission. Reports, proxy statements and other information concerning J.P. Morgan can be inspected and copied at prescribed rates at the Commission's Public Reference Room, Judiciary Plaza, 450 Fifth Street, Northwest, Washington, D.C. 20549, as well as the following Regional Offices of the Commission: Seven World Trade Center, New York, New York 10048; and Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661-2511. Such reports, proxy statements and other information may also be inspected at the offices of the New York Stock Exchange, on which J.P. Morgan common stock is traded, at 20 Broad Street, New York, New York 10005. No separate financial statements of the Trust have been included herein. J.P. Morgan does not consider that such financial statements would be material to holders of the Preferred Securities because (i) all of the voting securities of the Trust will be owned by J.P. Morgan, a reporting company under the Exchange Act, (ii) the Trust has no independent operations and exists for the sole purpose of issuing securities and investing the proceeds thereof in Related Notes to be issued by Morgan Guaranty, and (iii) the obligations of the Trust under the Preferred Securities that may be issued from time to time are fully and unconditionally guaranteed, on a subordinated basis, by J.P. Morgan to the extent that the Trust has funds available to meet such obligations. See "Description of the Related Notes", "Description of the Guarantee" and "Description of the Related Note Guarantee". INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE J.P. Morgan hereby incorporates by reference in this Prospectus J.P. Morgan's Annual Report on Form 10-K for the year ended December 31, 1996 (included in its Annual Report to Stockholders), the Quarterly Reports of J.P. Morgan on Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997, and J.P. Morgan's Reports on Form 8-K dated January 13, 1997, January 30, 1997, April 10, 1997, July 10, 1997, July 30, 1997, September 11, 1997 and October 13, 1997 heretofore filed pursuant to Section 13 of the Exchange Act. In addition, all reports and definitive proxy or information statements filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Securities shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any subsequently filed document which also is or is deemed to be incorporated by reference herein or in the accompanying Prospectus Supplement modifies or supersedes such statement. Any such statement so 2 56 modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. J.P. MORGAN WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO SUCH DOCUMENTS). WRITTEN REQUESTS SHOULD BE DIRECTED TO THE OFFICE OF THE SECRETARY, J.P. MORGAN & CO. INCORPORATED, 60 WALL STREET, NEW YORK, NEW YORK 10260-0060. TELEPHONE REQUESTS MAY BE DIRECTED TO (212) 648-3380. J.P. MORGAN & CO. INCORPORATED J.P. Morgan, whose origins date to a merchant banking firm founded in London in 1838, is the holding company for subsidiaries engaged globally in providing a wide range of financial services to institutions, corporations, governments, and individuals. J.P. Morgan's activities are summarized below. BUSINESS ENVIRONMENT J.P. Morgan conducts its business in a global environment that is inherently unpredictable. Numerous variables may have a material effect on the firm's results or operations. These variables include, but are not limited to: economic and market conditions, including the liquidity of secondary markets, the volatility of market prices, rates and indices, the timing and volume of market activity, the availability of capital, and inflation; political events, including legislative, regulatory, and other developments, such as the anticipated formation of the European Monetary Union; competitive forces, including the ability to attract and retain highly skilled individuals, and the ability to cost-effectively develop and support technology and information systems critical to its businesses; and investor sentiment. As a result, revenues and net income in any particular period may not be indicative of full-year results; may vary from year to year; and may impact the firm's ability to achieve its strategic objectives. BUSINESS SECTORS The activities of J.P.Morgan are described using five business sectors, as discussed below. Three of these sectors -- Finance and Advisory, Market Making, and Asset Management and Servicing -- focus on services J.P. Morgan provides for clients, including positions taken to facilitate client transactions. Two sectors comprise proprietary activities that J.P. Morgan conducts exclusively for its own account; Equity Investments and Proprietary Investing and Trading. While presenting results in sector format helps simplify the complexity of J.P. Morgan's business, it is also important to understand the shared benefits of its strategy: focus on building long-term client relationships; the synergy J.P. Morgan creates by acting as one firm with singular dedication to clients, rather than as a collection of separate businesses; the global diversification of activities across a range of products and locations; and the integration of global capabilities to capitalize on opportunities. Finance and Advisory Finance and Advisory encompasses the sophisticated advisory, capital raising, and financing work that J.P. Morgan does for its broad base of clients around the world. These clients include financial institutions, corporations, governments, and municipalities. The expertise J.P. Morgan offers them is based on in-depth knowledge of their needs and the industries and financial markets in which they operate. J.P. Morgan's global network of senior client relationship managers markets the full spectrum of its capabilities and provides the link between a corporate client's need and J.P. Morgan's financing, advisory, asset management, and risk management products and services. In partnership with clients, J.P. Morgan's advisory professionals explore the risks and rewards of such strategic alternatives as mergers and acquisitions, divestitures, privatizations, and recapitalizations. 3 57 J.P. Morgan also advises clients on their capital structures, looking for ways to unlock value and capture opportunities. J.P. Morgan's debt and equities underwriting and credit businesses provide clients with the capabilities to raise the necessary capital and execute strategies. High-quality research is an integral part of this business. J.P. Morgan's credit capabilities include meeting clients' financing needs by underwriting, arranging and syndicating loans and other credit facilities. Market Making Market Making provides clients with around-the-clock access to global markets. J.P. Morgan makes markets in fixed income, equity, foreign exchange, and commodity instruments in both developed and emerging markets; serves as a counterparty to help clients manage risks; and provides research to help clients assess opportunities and track performance. J.P. Morgan takes positions to facilitate client transactions, to enable it to function effectively, and to benefit from its role as a market maker. J.P. Morgan's clients include corporations, central banks, governments and their agencies, financial institutions, pension funds, mutual funds, and leveraged funds. J.P. Morgan's fixed income activities encompass acting as a primary dealer in U.S. and foreign government securities; making markets in money market instruments, U.S. government agency securities, corporate debt securities, and options; and helping clients manage their exposure to fluctuating interest and foreign exchange rates by structuring, executing, and making markets in risk management products. J.P. Morgan's equities activities include providing clients with liquidity in the cash and derivatives secondary markets through its global sales and trading network. J.P. Morgan utilizes its expertise in the equities markets to structure equity derivatives for its clients. J.P. Morgan's foreign exchange capabilities include making markets in spot, options, and short-term interest rate products, including forwards and forward rate agreements in multiple currencies, to help clients manage their foreign currency exposures. In commodities, J.P. Morgan makes markets in metals and energy products and advises clients on developing hedging, investment, and commodity-linked financing strategies. J.P. Morgan also provides physical commodity services such as settlement of physical trades in the various metal and oil markets and metal borrowing and lending services. J.P. Morgan's emerging markets activities, while principally related to fixed income activities, cross all markets, and its worldwide network enables it to fulfill its role as a market maker and provide clients with a steady flow of market information. Asset Management and Servicing Asset Management and Servicing activities encompass designing and executing investment strategies and providing administrative and brokerage services. J.P. Morgan's clients include corporations, financial and governmental institutions, and high-net-worth individuals. J.P. Morgan tailors its asset management capabilities for both institutional and private clients. For institutional clients, J.P. Morgan offers a range of investment strategies and products worldwide to service the investment management needs of private and public sector retirement plans, governments, corporations, endowments, foundations, and trusts. J.P. Morgan's private client group helps high-net-worth individuals plan and execute their investment strategies with a broad range of capabilities, which include managed investment and trust portfolios, J.P. Morgan-advised mutual funds, and a full-service brokerage unit. Credit, deposit, trust, and estate services are also provided to private clients. J.P. Morgan's futures and options brokerage group provides institutional clients with worldwide access to major exchanges by acting as futures and options brokers in executing and clearing contracts. 4 58 J.P. Morgan operates under contract the Euroclear System, the world's largest clearance and settlement system for internationally traded securities and provides credit and deposit services to Euroclear participants. In addition, J.P. Morgan provides such operational services as the administration of depositary receipt programs and global trust and agency services, primarily in Europe. Equity Investments J.P. Morgan invests globally in privately held growth companies, management buyouts, privatizations, and recapitalizations. These investments are made and managed with the objective of maximizing total return, which is a measure of both long-term appreciation and net recognized gains. In addition, a number of J.P. Morgan's Equity Investment companies become clients of the firm. J.P. Morgan's broad global presence and expertise is an important advantage in sourcing, evaluating and managing investments. These activities are managed by a small group of professionals. J.P. Morgan's equity investment portfolio is diversified by industry, geographic area, and stage of investment. J.P. Morgan's goal is to maintain a diversified portfolio capable of generating significant returns over time. This is a high-risk, high-reward business, and J.P. Morgan operates under a variety of legal and regulatory restrictions in managing the portfolio. Investments are generally held for three to seven years, depending on J.P. Morgan's view of when a sale will produce optimal returns. Typically, investments are harvested through a public offering of securities or the sale of the investment. The process of assessing and managing the risks and rewards of new opportunities and existing investments continues throughout market cycles. Proprietary Investing and Trading J.P. Morgan actively takes market risk positions for its own account. These activities are managed by a small group of experienced market professionals who employ directional and relative value risk-taking strategies diversified across markets and instruments. Directional strategies anticipate changes in absolute rate and price levels, while relative value strategies anticipate changes in relationships between markets and classes of instruments. These strategies are conducted across many currencies and types of instruments, both on- and off-balance-sheet, where J.P. Morgan perceives opportunities exist to generate value for the firm. Instruments typically used in these positioning activities include fixed income securities, foreign exchange, equity securities, commodity products, and related derivative instruments. Positions may be held for short or long periods of time, depending on the strategy and actual market performance. Certain longer-term strategies are considered to be investment activities, and primarily utilize government and mortgage-backed fixed income securities and interest rate swaps. The securities and interest rate swaps used in these investment activities are classified as "available-for-sale" and "risk-adjusting" respectively. In addition to these risk-taking activities are the firm's capital and liquidity management activities. Liquidity management is the management of the firm's liquidity risk profile to ensure that J.P. Morgan has access to funding at a reasonable cost, even under adverse circumstances, to support all the business activities of the firm. A strong capital position is therefore an integral part of J.P. Morgan's liquidity management because it enables J.P. Morgan to raise funds as inexpensively as possible in a variety of international markets. REGULATION J.P. Morgan is subject to regulation under the Bank Holding Company Act of 1956 (the "Act"). Under the Act, J.P. Morgan is required to file certain reports with the Board of Governors of the Federal Reserve System (the "Board") and is subject to examination by the Board. The Act generally precludes J.P. Morgan and its subsidiaries from engaging in nonbanking activities, or from acquiring more than 5% of any class of voting securities of any company engaging in such activities, unless the Board has determined, by order 5 59 or regulation, that such proposed activities are closely related to banking. Federal law and Board interpretations limit the extent to which J.P. Morgan and its subsidiaries can engage in certain aspects of the securities business. The Glass-Steagall Act prohibits affiliates of banks that are members of the Federal Reserve System, including J.P. Morgan Securities Inc. ("JPMSI"), a Section 20 subsidiary, from being "engaged principally" in bank-ineligible underwriting and dealing activities (mainly corporate debt and equity securities). As interpreted by the Board, this prohibition has restricted JPMSI's gross revenues from such activities to a maximum of 10% of its total gross revenues. Effective March 6, 1997, the restriction was changed from 10% to 25% of total gross revenue. J.P. Morgan continues to seek ways to expand the limits on its securities activities, including the continued reform of the Glass-Steagall Act, necessary to achieve its strategic objectives. Morgan Guaranty, J.P. Morgan's largest subsidiary, is a member of the Federal Reserve System and a member of the Federal Deposit Insurance Corporation ("FDIC"). Its business is subject to both U.S. federal and state law and to examination and regulation by U.S. federal and state banking authorities. J.P. Morgan and its nonbank subsidiaries are affiliates of Morgan Guaranty within the meaning of the applicable federal statutes. Morgan Guaranty is subject to restrictions on loans and extensions of credit to J.P. Morgan and certain other affiliates and on certain other types of transactions with them or involving their securities. Among other wholly owned subsidiaries: JPMSI is a broker-dealer registered with the Securities and Exchange Commission and is a member of the National Association of Securities Dealers, the New York Stock Exchange, and other exchanges. J.P. Morgan Futures Inc. is subject to regulation by the Commodity Futures Trading Commission, the National Futures Association, and the commodity exchanges and clearinghouses of which it is a member. J.P. Morgan Investment Management Inc. is registered with the Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940, as amended. J.P. Morgan subsidiaries conducting business in other countries are also subject to regulations and restrictions imposed by those jurisdictions, including capital requirements. The principal executive office of J.P. Morgan is located at 60 Wall Street, New York, New York 10260-0060, and its telephone number is (212) 483-2323. As used in this Prospectus, unless the context otherwise requires, the term "J.P. Morgan" refers to J.P. Morgan & Co. Incorporated and its consolidated and unconsolidated subsidiaries. J.P. MORGAN INDEX FUNDING COMPANY I J.P. Morgan Index Funding Company I, is a statutory business trust formed on December 12, 1996 under the Delaware Business Trust Act (the "Business Trust Act") pursuant to (i) a declaration of trust among the Trustees and J.P. Morgan and (ii) the filing of a certificate of trust with the Secretary of State of the State of Delaware on December 12, 1996, which was restated pursuant to the filing of a restated certificate of trust with the Secretary of State of the State of Delaware on September 30, 1997. On October 10, 1997, J.P. Morgan, as sponsor, and the Trustees entered into an amended and restated declaration of trust, dated October 10, 1997 (the "Declaration"), filed as an exhibit to the Registration Statement of which this Prospectus form a part. The Declaration will be qualified under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). J.P. Morgan Index Funding Company LLC, a Delaware limited liability company (the "Company") has been merged into the Trust (the "Merger") pursuant to (i) an Agreement and Plan of Merger between the Trust and the Company and (ii) a Certificate of Merger merging the Company into the Trust filed with the Secretary of State of the State of 6 60 Delaware. By operation of law, the Trust has become the owner of all assets of the Company, including any outstanding Related Notes, and has succeeded to all the obligations of the Company, including any outstanding Preferred Securities, and Common Securities theretofore issued by the Company, including the 2.5% Series A Securities, and all the rights of the Company, including in respect of any related note guarantee executed in connection with such Securities. Following the effectiveness of the Merger, any such outstanding Preferred Securities and Common Securities represent an undivided beneficial interest in the corresponding Related Note. This description summarizes the material terms of the Declaration and is qualified in its entirety by reference to the form of Declaration, which has been filed as an exhibit to the Registration Statement of which this Prospectus is a part, and the Trust Indenture Act. SECURITIES Upon issuance of any Preferred Securities of any series, the holders thereof will own all of the issued and outstanding Preferred Securities of such series, and J.P. Morgan will own all of the issued and outstanding Common Securities of such series. The certificates for each series will represent a fractional undivided beneficial interest in certain assets of the Trust consisting of the corresponding Related Note of Morgan Guaranty and the proceeds thereof, all monies due and to become due under such Related Note, and the right to receive a portion of the payments of principal of and interest on such Related Note. J.P. Morgan will acquire the Common Securities of each series in a principal amount equal to 0.001% of the total principal amount of such series and will own all the issued and outstanding Common Securities of the Trust which will represent 0.001% of the total capital of the Trust. The Preferred Securities of any series and the Common Securities of such series will rank pari passu with each other and will have equivalent payment terms; provided that (i) if a Note Event of Default (as defined herein) under the Related Note of such series occurs and is continuing, the holders of Preferred Securities of such series will have a priority over holders of Common Securities of such series with respect to payments in respect of distributions and payments upon liquidation, redemption and maturity and (ii) holders of Common Securities have the exclusive right (subject to the terms of the Declaration) to appoint, remove or replace the Trustees and to increase or decrease the number of Trustees. A Note Event of Default under a Related Note of one series will not prohibit payments in respect of distributions and payments upon liquidation, redemption and maturity under a Related Note corresponding to any other series of Securities or under such Securities. No holder of Securities of any series shall have any claim on, or right to, any assets allocated to, or associated with, any other series (except if, and to the extent that, such holder is also a holder of Securities of such other series). The Trust exists for the exclusive purposes of (a) issuing its series of Securities, (b) investing the gross proceeds from the sale of the Securities in Related Notes of Morgan Guaranty and (c) engaging in only such other activities as are necessary, convenient or incidental thereto. The rights of the holders of any series of the Securities, including economic rights, rights to information and voting rights, are set forth in the Declaration (which term shall include any Declaration Supplement), the Business Trust Act and the Trust Indenture Act. POWERS OF DUTIES OF TRUSTEES The number of trustees (the "Trustees") of the Trust shall initially be five. Three of such Trustees (the "Regular Trustees") are individuals who are employees or officers of J.P. Morgan. The fourth such trustee will be First Trust of New York, National Association, which is unaffiliated with J.P. Morgan and which will serve as the property trustee (the "Property Trustee") and act as the indenture trustee for purposes of the Trust Indenture Act. The fifth such trustee is Wilmington Trust Company, which has its principal place of business in the State of Delaware (the "Delaware Trustee"). Pursuant to the Declaration, legal title to each Related Note will be held by the Property Trustee for the benefit of the holders of the corresponding series of the Securities, and the Property Trustee will have the power to exercise all rights, powers and privileges with respect to such Related Notes. In addition, the Property Trustee will maintain exclusive control of a separate segregated non-interest-bearing bank account for each series of Securities (the "Property Account") to hold all payments in respect of the corresponding Related Note for the benefit of the holders of each such series of Securities. The Property Trustee will promptly make distributions to 7 61 the holders of a series of Securities of the Trust out of funds from the corresponding Property Account. The Guarantee is separately qualified under the Trust Indenture Act and will be held by First Trust of New York, National Association, acting in its capacity as indenture trustee with respect thereto, for the benefit of the holders of the Preferred Securities. As used in this Prospectus and any accompanying Prospectus Supplement, the term "Property Trustee" with respect to the Trust refers to First Trust of New York, National Association acting either in its capacity as a Trustee under the Declaration and the holder of legal title to the Related Notes or in its capacity as indenture trustee under, and the holder of, the Guarantee, as the context may require. J.P. Morgan, as the owner of all the series of Common Securities, will have the exclusive right (subject to the terms of the Declaration) to appoint, remove or replace Trustees and to increase or decrease the number of Trustees, provided that the number of Trustees shall be at least five and the majority of Trustees shall be Regular Trustees. The Regular Trustees are authorized and directed to take such action as they deem reasonable in order that the Trust will not be deemed to be an "investment company" required to be registered under the 1940 Act or that the Trust will not be classified for United States Federal income tax purposes as an association taxable as a corporation or a partnership and will be treated as a grantor trust for United States Federal income tax purposes. In this connection, the Regular Trustees are authorized to take any action, not inconsistent with applicable law, the certificate of trust of the Trust or the Declaration, that the Regular Trustees determine in their discretion to be reasonable and necessary or desirable for such purposes, as long as such action does not adversely affect the interests of holders of the Securities. The term of the Trust will be until November 21, 2105, but the Trust may terminate earlier as provided in the Declaration. The duties and obligations of the Trustees of the Trust will be governed by the Declaration. Under the Declaration, the Trust (on behalf of a series of Securities or otherwise) shall not, and the Trustees of the Trust shall not cause the Trust (on behalf of a series of Securities or otherwise) to, engage in any activity other than in connection with the purposes of the Trust or other than as required or authorized by the Declaration. In particular, the Trust (on behalf of a series of Securities or otherwise) shall not, and the Trustees of the Trust shall cause the Trust (on behalf of a series of Securities or otherwise) not to, (a) invest any proceeds received by the Trust from holding the Related Notes, but shall promptly distribute from the applicable Property Account all such proceeds to holders of the corresponding series of its Securities pursuant to the terms of the Declaration and of such series of Securities; (b) acquire any assets other than as expressly provided in the Declaration; (c) possess Trust Property for other than a Trust purpose; (d) make any loans, other than loans represented by such Related Notes; (e) exercise any power or otherwise act in such a way as to vary the assets of the Trust or the terms of its Securities in any way whatsoever; (f) issue any securities or other evidences of beneficial ownership of, or beneficial interests in, the Trust other than its Securities; (g) incur any indebtedness for borrowed money or (h) (i) direct the time, method and place of exercising any trust or power conferred upon the Property Trustee of the Trust with respect to any series of its Securities, (ii) waive any past default that is waivable under the applicable Related Note or the Declaration, (iii) exercise any right to rescind or annul any declaration that the principal of all the Related Note associated with any series deposited in the Trust as trust assets shall be due and payable or (iv) consent to any amendment, modification or termination of any such Related Note or the Declaration, in each case where such consent shall be required, unless in the case of this clause (h) the Property Trustee shall have received (i) an unqualified opinion of nationally recognized independent tax counsel recognized as expert in such matters to the effect that such action will not cause the Trust to be classified for United States Federal income tax purposes as an association taxable as a corporation or a partnership and that the Trust will continue to be classified as a grantor trust for United States Federal income tax purposes and (ii) if required, the approval of the holders of the Securities for the taking of any action. See "J.P. Morgan Index Funding Company I -- Voting" and "Description of the ComPS -- Voting Rights". BOOKS AND RECORDS The books and records of the Trust will be maintained at the principal office of the Trust and will be open for inspection by a holder of Preferred Securities or such holder's representative for any purpose reasonably related to such holder's interest in the applicable Related Note held by the Trust during normal 8 62 business hours. Separate and distinct books and records will be maintained by the Trust for each series of Securities, and the assets associated with, or related to, any such series will be held and accounted for separately from the assets of the Trust generally or from the assets associated with, or related to, any other series of Securities. VOTING Except as set forth below and under "Description of the ComPS -- Voting Rights" and under "Events of Default" below and as provided under the Business Trust Act, the Declaration and the Trust Indenture Act, holders of Preferred Securities will have no voting rights. If any proposed amendment to the Declaration provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution or bankruptcy of the Trust, then the holders of outstanding Securities will be entitled to vote on such amendment or proposal as a class and such amendment or proposal shall not be effective except with the approval of the holders of Securities representing a majority in principal amount of such Securities; provided, however, that if any amendment or proposal referred to in clause (i) above would adversely affect only certain series of the Preferred Securities or certain series of the Common Securities, then only the affected series or class, as applicable, will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a majority in principal amount of such series or class, as applicable, of Securities. THE PROPERTY TRUSTEE The Property Trustee, for the benefit of the holders of the Securities, is authorized under the Declaration to exercise all rights with respect to each Related Note deposited in the Trust as trust assets, including its rights as the holder of any such Related Note to enforce the Trust's rights under such Related Note upon the occurrence of a Note Event of Default. The Property Trustee is also authorized to enforce the rights of the Trust under the Related Note Guarantee. Holders of at least a majority in principal amount of the Preferred Securities of all series or of the affected series, as applicable, of the Trust will have the right to direct the Property Trustee for the Trust with respect to certain matters under the Declaration and the Related Note Guarantee; provided that (a) such direction would not conflict with any applicable law or the Declaration and would not result in any personal liability or expense to the Property Trustee, (b) such direction would not cause the Trust not to be properly classified as a grantor trust for U.S. Federal income tax purposes and (c) the Property Trustee may take any other action deemed proper by the Property Trustee which is not inconsistent with such direction. The Declaration will provide that the Sponsor will pay the Property Trustee's fees and expenses and will indemnify the Property Trustee in respect of certain matters. The Property Trustee is a depository for funds and performs other services for, and transacts other banking business with, J.P. Morgan in the normal course of business. DISTRIBUTIONS Pursuant to the Declaration, distributions on any series of Securities must be paid on the dates payable to the extent that the Property Trustee has cash on hand in the Property Account relating to such series to permit such payment. The funds available for distribution to the holders of any series of Securities will be limited to payments received by the Property Trustee in respect of the Related Note of such series. If Morgan Guaranty does not make interest payments on the Related Note of any series, the Property Trustee will not make distributions on the corresponding series of Securities. Under the Declaration, except as set forth below, if and to the extent Morgan Guaranty does make interest payments on the Related Note of any series, the Property Trustee is obligated to make distributions on the corresponding series of Securities on a Pro Rata Basis (as defined below). The payment of distributions on each series of the Preferred Securities is guaranteed by J.P. Morgan on a subordinated basis as and to the extent set forth under 9 63 "Description of the Guarantee." The Guarantee, when taken together with J.P. Morgan's obligations under the Related Note Guarantee and its obligations under the Declaration, provides a full and unconditional guarantee from the time of issuance of each series of the Preferred Securities of amounts due on such Preferred Securities. Such Guarantee itself, however, covers distributions and other payments on such series of Preferred Securities only if and to the extent that Morgan Guaranty has made a payment to the Property Trustee of interest or principal on the Related Note of such series. As used in this Prospectus, the term "Pro Rata Basis" shall mean pro rata to each holder of any series of Securities according to the aggregate principal amount of all Securities of such series held by the relevant holder in relation to the aggregate principal amount of the Securities of such series outstanding unless, in relation to a payment, a Note Event of Default under the Related Note of such series has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each holder of the Preferred Securities of such series pro rata according to the aggregate principal amount of the Preferred Securities of such series held by the relevant holder in relation to the aggregate principal amount of all the Preferred Securities of such series outstanding, and only after satisfaction of all amounts owed to the holders of such Preferred Securities of such series to each holder of Common Securities of such series pro rata according to the aggregate principal amount of such Common Securities of such series held by the relevant holder in relation to the aggregate principal amount of all Common Securities of such series outstanding. EVENTS OF DEFAULT In the event that the Trust fails to pay dividends or other distributions on the Securities of any series for 30 days following the date on which such payment was due in accordance with the terms of such Securities or if a Note Event of Default occurs and is continuing with respect to the Related Note of any series (a "Note Event of Default"), an Event of Default under the Declaration will occur and be continuing with respect to any outstanding Securities of such series. In such event, the Declaration provides that holders of a majority in principal amount of Preferred Securities of such series, acting as a single class, may cause the Trust, on behalf of holders of Securities of such series, by written direction to the Property Trustee, to waive any such Note Event of Default or to enforce the Trust's rights, on behalf of holders of Securities of such series, under the applicable Related Note against Morgan Guaranty or under the Related Note Guarantee against J.P. Morgan or, in the case of any failure to pay dividends or other distributions, to cause the Trust to declare and pay such dividends or distributions; provided, that such payments shall be paid solely from the proceeds of interest or other payments made on the applicable Related Note and received by the Trust on behalf of such holders. Notwithstanding the foregoing, the right of any holder of Securities of any series to receive payments or distributions on such series of Securities in accordance with the terms of the Declaration or such Securities on or after the respective payment dates therefor, or to institute suit for the enforcement of any such payment on or after such payment dates, shall not be impaired without the consent of such holder. RECORD HOLDERS The Declaration provides that the Trustees of the Trust may treat the person in whose name a certificate representing Preferred Securities is registered on the books and records of the Trust as the sole holder thereof and of the Preferred Securities represented thereby for purposes of receiving distributions and for all other purposes and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such certificate or in the Preferred Securities represented thereby on the part of any person, whether or not the Trust shall have actual or other notice thereof. Preferred Securities will be issued in fully registered form and will be represented by a global certificate registered on the books and records of the Trust in the name of The Depositary Trust Company ("DTC") or its nominee. Under the Declaration: (i) the Trust and the Trustees shall be entitled to deal with DTC (or any successor) for all purposes, including the payment of distributions and receiving approvals, votes or consents under the Declaration and, except as set forth in the Declaration with respect to the Property Trustee, shall have no obligation to persons owning a beneficial interest in any Preferred Securities ("Preferred Security Beneficial Owners") registered in the name of and held by DTC or its nominee; and 10 64 (ii) the rights of Preferred Security Beneficial Owners shall be exercised only through DTC (or any successor) and shall be limited to those established by law and agreements between such Preferred Security Beneficial Owners and DTC and/or its participants. With respect to any Preferred Securities registered in the name of and held by DTC or its nominee, all notices and other communications required under the Declaration shall be given to, and all distributions on such Preferred Securities shall be given or made to, DTC (or its successor). The specific terms of the depositary arrangement with respect to the Preferred Securities of the Trust will be disclosed in the applicable Prospectus Supplement. DEBTS AND OBLIGATIONS The Declaration provides that any person or entity extending credit to, contracting with, or having any claim against, the Trust with respect to any series of Securities may look only to the assets of the Trust associated with such series to satisfy or enforce any debt, liability, obligation or expense incurred, contracted for or otherwise existing with respect to such series. In the Declaration, J.P. Morgan has agreed to pay for all debts and obligations (other than with respect to the Securities) and all costs and expenses of the Trust, including the fees and expenses of its Trustees and any taxes and all costs and expenses with respect thereto, to which the Trust may become subject, except for United States withholding taxes. The foregoing obligations of J.P. Morgan under the Declaration are for the benefit of, and shall be enforceable by, any person to whom any such debts, obligations, costs, expenses and taxes are owed a (a "Creditor"), whether or not such Creditor has received notice thereof. Any such Creditor may enforce such obligations of J.P. Morgan directly against J.P. Morgan and J.P. Morgan has irrevocably waived any right or remedy to require that any such Creditor take any action against the Trust or any other person before proceeding against J.P. Morgan. J.P. Morgan has agreed in the Declaration to execute such additional agreements as may be necessary or desirable in order to give full effect to the foregoing. The business address of the Trust is c/o J.P. Morgan & Co. Incorporated, 60 Wall Street, New York, New York 10260-0060, telephone number (212) 648-2323. 11 65 USE OF PROCEEDS The proceeds to the Trust from the sale of the Preferred Securities offered from time to time hereby and related Common Securities will be invested in one or more Related Notes of Morgan Guaranty, the proceeds of which will be used by Morgan Guaranty for general corporate purposes and for hedging its obligation under the relevant Related Note, except as may otherwise be set forth in the applicable Prospectus Supplement. CONSOLIDATED RATIOS OF J.P. MORGAN CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
------------------------------------------------------------------- Nine months ended Year ended December 31, September 30, ------------------------------------------------- 1997 1996 1995 1994 1993(a) 1992(b) ------------- ---- ---- ------- ------- ------- Excluding Interest on Deposits..... 1.31 1.35 1.35 1.40 1.70(a) 1.53(b) Including Interest on Deposits..... 1.23 1.26 1.24 1.28 1.46(a) 1.31(b)
- --------------- (a) For the year ended December 31, 1993, the ratio of earnings to fixed charges, including the cumulative effect of a change in the method of accounting for postretirement benefits other than pensions, was 1.64 excluding interest on deposits and 1.43 including interest on deposits. (b) For the year ended December 31, 1992, the ratio of earnings to fixed charges, including the cumulative effect of a change in the method of accounting for income taxes, was 1.67 excluding interest on deposits and 1.39 including interest on deposits. CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
------------------------------------------------------------------- Nine months ended Year ended December 31, September 30, ------------------------------------------------- 1997 1996 1995 1994 1993(a) 1992(b) ------------- ---- ---- ------- ------- ------- Excluding Interest on Deposits..... 1.30 1.34 1.34 1.39 1.69(a) 1.52(b) Including Interest on Deposits..... 1.22 1.25 1.23 1.27 1.46(a) 1.31(b)
- --------------- (a) For the year ended December 31, 1993, the ratio of earnings to combined fixed charges and preferred stock dividends, including the cumulative effect of a change in the method of accounting for postretirement benefits other than pensions, was 1.63 excluding interest on deposits and 1.42 including interest on deposits. (b) For the year ended December 31, 1992, the ratio of earnings to combined fixed charges and preferred stock dividends, including the cumulative effect of a change in the method of accounting for income taxes, was 1.65 excluding interest on deposits and 1.39 including interest on deposits. DESCRIPTION OF ALL SECURITIES The Trust is authorized by the Declaration to issue, from time to time, one or more series of Securities having terms described in the Prospectus Supplement relating to each. Each series of Securities will have such terms, including distributions, redemption, voting, liquidation rights and such other preferred or other special rights or such restrictions, as shall be set forth in the Prospectus Supplement relating to such Securities, including (i) the distinctive designation of such Securities, (ii) the number of Securities issued in such series, (iii) the annual distribution rate (or method of determining such rate) for such Securities and 12 66 the date or dates upon which such distributions shall be payable, (iv) whether distributions on such Securities shall be cumulative, and, in the case of Securities having such cumulative distribution rights, the date or dates or method of determining the date or dates from which distributions on such Securities shall be cumulative, (v) the amount or amounts (or the method for determining such amount or amounts) which shall be paid out of the assets of the Trust associated with such series of Securities to the holders of such Securities upon voluntary or involuntary dissolution of the Trust, (vi) the obligation, if any, of the Trust to purchase or redeem, and the option of the holders of Securities, if any, to redeem Securities issued by the Trust and the price or prices at which, the period or periods within which and the terms and conditions upon which such Securities shall be purchased or redeemed, in whole or in part, pursuant to such obligation, (vii) the voting rights, if any, of such Securities in addition to those required by law, including the number of votes per Security and any requirement for the approval by the holders of Securities as a condition to specified action or amendments to the Declaration, and (viii) any other relevant rights, preferences, privileges, limitations or restrictions of Securities consistent with the Declaration and with applicable law. All Preferred Securities offered hereby will be guaranteed, on a subordinated basis, by J.P. Morgan to the extent set forth below under "Description of the Guarantee". Certain United States federal income tax considerations applicable to any offering of Preferred Securities will be described in the Prospectus Supplement relating thereto. In connection with the issuance from time to time of Preferred Securities of any series, the Trust will issue related Common Securities. Upon an event of liquidation of the Trust, the rights of the holders of the Common Securities of such series to payments in respect of distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the Preferred Securities of such series. All of the Common Securities will be owned by J.P. Morgan, the sponsor of the Trust. Each series of Securities will be subject to redemption prior to the Stated Maturity thereof upon the occurrence of a Tax Event or an Investment Company Event (each, a "Special Event") upon the terms set forth in the applicable Prospectus Supplement. DESCRIPTION OF THE COMPS Among the types of Preferred Securities currently contemplated for issuance by the Trust are one or more series of Preferred Securities sharing the characteristics described below (each such series, "ComPS"). The following description is a general description of all series of ComPS, and prospective purchasers of any series of ComPS should consult the applicable Prospectus Supplement for such series and other documents referred to or incorporated by reference therein (including, without limitation, any public documents filed after the date hereof and any amendments to any document referred to herein). GENERAL The Principal Amount of each series of ComPS to be paid upon any amortization of principal and at the Stated Maturity of such series (the "Redemption Value") will be determined with reference to, and will fluctuate based on, the level of a commodity index (referred to herein as the "Applicable Index" or collectively as the "Applicable Indices"), as specified in the applicable Prospectus Supplement. The Applicable Index will be one of the following types: (i) an "excess return" index, the change in value of which will be calculated with reference to the changes in value of certain futures contracts on the relevant commodity (the "Benchmark Contracts"), which contracts are replaced regularly as the determinant of change in value of the Applicable Index according to the methodology used in calculating the JPM Indices as described herein (such index referred to herein as an "Excess Return Index"), (ii) a "total return" index, calculated in the same manner as an Excess Return Index but including an additional component of return (the "Collateral Return") arising from interest accrued on the fluctuating value of the Applicable Index (such index referred to herein as a "Total Return Index") or (iii) the price of the relevant commodity 13 67 as reported in the pricing source identified in the Prospectus Supplement, which may be the settlement prices for futures contracts on the underlying commodity or prices of the underlying commodity determined by the relevant market participants, reporting services or associations at the official price determination, in each case during the applicable distribution period, Early Determination Period or Determination Period (such index referred to herein as a "Price Reference Index"). ComPS for which the Applicable Index is a Price Reference Index in which all distributions and the Principal Amount are indexed to the value at any time in U.S. dollars (the "Dollar Equivalent Value") of bullion (i.e., gold, silver, platinum or palladium) will be referred to as "Bullion ComPS". For the purposes of this Prospectus, "Principal Amount" shall mean (a) in the case of Bullion ComPS, the applicable portion of the applicable fixing price of the applicable amount of the applicable bullion commodity at any time (the "Bullion ComPS Principal Amount"), (b) in the case of all other Preferred Securities, the Redemption Value, Early Redemption Value or stated liquidation preference thereof, as applicable, as if determined as of such time, and (c) in the case of any Related Note, the principal amount thereof at such time determined pursuant to the terms thereof. Each commodity underlying the Applicable Index will be one of the commodities included in the J.P. Morgan Commodity Index (the "JPMCI") (i.e., aluminum, copper, nickel, zinc, heating oil, natural gas, unleaded gasoline, crude oil, gold, silver and platinum), one of the JPMCI sub-indices, palladium or such other commodity as may be specified in the applicable Prospectus Supplement. As described herein, the JPMCI is computed on an excess return and a total return basis. The variations of the JPMCI, including the permutations of the JPMCI in the form of sub-indices, which may be based on one or more commodities (whether computed on an excess return or total return basis) and which have been or may be originated and calculated by Morgan Guaranty, are collectively referred to herein as the "JPM Indices". JPM Indices which are based upon only one underlying commodity (whether computed on an excess return or total return basis) are referred to as "JPM Individual Indices". ComPS are principal-at-risk securities linked directly to the performance of an Applicable Index. For Bullion ComPS, if the index rises from the starting value (which is set on the day of pricing), the Redemption Value of such ComPS will be greater than the original issue price. If the Applicable Index declines from the starting value, the Redemption Value of such ComPS will be less than the original issue price. For Excess Return or Total Return ComPS, if the Applicable Index decreases over the life of the ComPS, or if the percentage increase in the Applicable Index is less than the amount of the Factor, the Redemption Value of such ComPS will be less than the Issue Price. If the percentage increase in the Applicable Index is greater than the amount of the Factor, the Redemption Value will be greater than the Issue Price. In no circumstances will the Redemption Value of the ComPS be less than zero, but the Redemption Value could be more or less than the issue price. Because an investor's principal redemption is linked to the performance of an Applicable Index calculation, it is important to understand on what the Applicable Index calculation is based. Subject to the more specific discussion of each item elsewhere in this Prospectus and in the relevant Prospectus Supplement, following is a general summary of Bullion ComPS, Excess Return ComPS and Total Return ComPS: BULLION COMPS Bullion ComPS, which are linked to the cash price of bullion (i.e., gold, silver, platinum or palladium), pay both dividends and principal based on the price of the applicable bullion. The Principal Amount of a Bullion ComPS is the Dollar Equivalent Value of a certain number or fraction of ounces of the applicable bullion. Each dividend is calculated as a percentage rate of the Principal Amount (which will fluctuate) Each full dividend will be equal to the applicable fraction of the annual dividend rate times the Dollar Equivalent Value of the spot price of the applicable bullion at such time in the London bullion market multiplied by the fractional number of ounces to which each Bullion ComPS is linked. Thus, the amount of each dividend will vary. Upon redemption, the Redemption Value will be equal to the Dollar Equivalent Value of the 10-day average of the spot price of the applicable bullion in the London bullion market multiplied by the number or fraction of ounces of the applicable bullion to which each Bullion ComPS is linked. Therefore, both the dividend payments and the Redemption Value will fluctuate based on the spot price of the applicable bullion determined in the London bullion markets. Any events which adversely 14 68 affect the spot price of the applicable bullion will adversely affect both the dividend payments on and the Redemption Value of such Bullion ComPS. EXCESS RETURN COMPS ComPS which are linked to an Excess Return Index pay a fixed or floating dividend rate on the Face Amount of such ComPS (which will equal the initial price) and the Redemption Value of such ComPS is linked to the performance of the applicable Excess Return Index, reduced by the applicable Factor. At maturity, an investor will receive a principal amount determined by the following formula: Face Amount X (the 10-day average of the Applicable Index/the Applicable Index set on the day of pricing, minus the Factor). Thus, the Redemption Value is linked directly to the performance of the applicable Excess Return Index, reduced by the applicable Factor (e.g., if the ending average ending value of the Applicable Index is twice the beginning value, the Redemption Value will be twice the initial price, reduced by the applicable Factor). The Factor is a percentage which reduces the principal amount to account for the planned expenses to be incurred by the issuer in replicating the Applicable Index and issuing the ComPS. An Excess Return Index, which is described more fully herein under "The JPM Indices--Excess Return Methodology", represents the cumulative return of holding an unlevered position in the designated nearby commodity futures contracts underlying such Applicable Index. Generally, since each Excess Return Index is linked directly (i.e., on a one-to-one basis) to the underlying futures contracts, a 1% change on any day in the value of the specific underlying designated futures contract will create a 1% change in the value of the Applicable Index for such day. Because the designated futures contracts underlying the Excess Return indices have maturities (generally less than three months) which are shorter than the maturity of the ComPS, the index calculation methodology replaces the underlying contract used to determined the daily change in the value of the Applicable Index with the next designated contract of the same commodity on a periodic basis. This process of replacement is called "rolling", and the 5-day period during which the replacement occurs is called the "Rollover Period". For any month during which a roll occurs, the daily change in value of an Excess Return Index for all days prior to the Rollover Period is calculated as 100% of the daily change of the existing ("old") underlying designated contract. Beginning with the first day after the beginning of the Rollover Period, the daily change in an Excess Return Index is calculated based 80% on the percentage change of the old contract and 20% on the percentage change in the replacement ("new") designated contract. Similar 20% adjustments are made in the weights attributable to each contract's change such that, by the day after the Rollover Period ends and for all subsequent days until the next Rollover Period, 100% of the daily index change is attributable to the percentage change of the newly-designated contract. Therefore, ComPS linked to an Excess Return Index pay dividends which are a fixed or floating percentage of the Face Amount, and pay a principal amount upon redemption or at maturity which varies directly with the performance of an Excess Return Index, reduced by the applicable Factor. The change in an Excess Return Index is linked directly to the percentage change in the designated contracts underlying such index. Thus, any events which affect the designated contracts underlying such Excess Return Index may affect the Redemption Value of such ComPS. TOTAL RETURN COMPS ComPS which are linked to a Total Return Index will pay a fixed or floating dividend based on the Face Amount (i.e., the initial price) of such ComPS and the principal receivable upon redemption or at maturity is directly linked to the performance of a Total Return Index, reduced by the applicable Factor. At maturity, an investor in Total Return ComPS will receive a principal amount determined by the following formula: Face Amount X (the 10-day average of the Applicable Index/the Applicable Index set on the day of pricing, minus the Factor). The Factor is a percentage which reduces the principal amount to account for the planned expenses to be incurred by the issuer in replicating the Applicable Index and issuing the ComPS. Thus, the Redemption Value is linked directly to the performance of the applicable Total Return Index (e.g., if the average ending value of the Applicable Index is twice the beginning value, the Redemp- 15 69 tion Value will be twice the initial price reduced by the Factor). However, the Redemption Value may never be less than zero. A Total Return Index, which is described more fully herein under "The JPM Indices--Total Return Methodology", represents the cumulative return of holding an unlevered position in the designated nearby commodity futures contracts underlying such Total Return Index, plus a collateral yield on such fluctuating index value using the most recently auctioned 3-month rate for U.S. Treasury bills. Generally, since a Total Return Index is linked directly to the underlying futures contracts, a 1% change on any day in the specific underlying designated futures contract will result in a 1% change in the applicable Total Return Index for such day (not including any change in value resulting from the Collateral Yield). The designated futures contracts underlying Total Return Indices must also be "rolled" as described above under "Excess Return ComPS". Therefore, ComPS linked to a Total Return Index will bear dividends which are a fixed or floating percentage of the Face Amount, and the principal payable upon redemption or at maturity is linked directly to the performance of a Total Return Index (less the Factor). The change in each Total Return Index is linked directly to the percentage change in the designated contracts underlying such index, plus the collateral yield on the most recently auctioned 3-month U.S. Treasury bill rate. Thus, any events which affect the designated contracts underlying any Total Return Index may affect the Redemption Value of such ComPS. CALCULATION OF REDEMPTION VALUE The Redemption Value of any particular series of ComPS will be determined in accordance with one of the following methodologies (however, such Redemption Value will never be less than zero): Excess Return Index. In the case of ComPS for which the Applicable Index is an Excess Return Index, the Redemption Value payable in respect of the ComPS on the Settlement Date will be determined by the Calculation Agent based on the following formula: Applicable Index Settlement Value Redemption Value = FA X ( -------------------------------------- - Factor ) Applicable Index Commencement Value
where "FA" refers to the Face Amount of the ComPS, "Applicable Index Settlement Value" refers to the arithmetic average of the values of the Applicable Index for the 10 consecutive days on which open-outcry trading on either the New York Mercantile Exchange ("NYMEX") or the London Metal Exchange (the "LME") is scheduled to occur or occurs (each, a "Trading Day") and on which no Market Disruption Event occurs immediately following the 20th scheduled Business Day prior to Stated Maturity (such 10 days, the "Determination Period") (calculated in accordance with the methodology described below under the caption "The JPM Indices--Excess Return Index"); provided, that if a Market Disruption Event remains in effect for longer than 20 consecutive Trading Days (or such period as may be specified in the applicable Prospectus Supplement) falling within such Determination Period and in the reasonable judgment of Morgan Guaranty such Market Disruption Event is likely to remain in effect, then the Applicable Index Settlement Value for such days may be determined by Morgan Guaranty in good faith based on alternative pricing sources reasonably believed by it to be indicative of then-prevailing prices for transactions with a notional principal amount equal to the Principal Amount of the outstanding ComPS, although it will have no obligation to do so, and such value will be utilized in the calculation of the Redemption Value for such days; "Applicable Index Commencement Value" means the value of the Applicable Index determined on the date of issuance of such ComPS, as specified in the applicable Prospectus Supplement; and Factor shall be the amount provided in the Applicable Prospectus Supplement. In the case of any Prospectus Supplement providing for an early determination of Applicable Index Settlement Value, upon the occurrence of such an event, the Applicable Index Settlement Value shall have the value so determined. 16 70 Total Return Index. In the case of ComPS for which the Applicable Index is a Total Return Index, the Redemption Value payable in respect of such ComPS on the Settlement Date will be determined by the Calculation Agent based on the following formula: Applicable Index Settlement Value Redemption Value = FA X ( -------------------------------------- - Factor ) Applicable Index Commencement Value
where each of "FA", "Applicable Index Settlement Value" and "Applicable Index Commencement Value" refer to the respective definitions set forth above under Excess Return Index, except that in the case of the Applicable Index Settlement Value, such value shall be determined in accordance with the methodology described below under the caption "The JPM Indices--Total Return Index", and "Factor" shall be the amount provided in the applicable Prospectus Supplement. In the case of any Prospectus Supplement providing for an early determination of Applicable Index Settlement Value upon the occurrence of certain events, upon the occurrence of such an event, the Applicable Index Settlement Value shall have the value so determined. Price Reference Index. In the case of ComPS for which the Applicable Index is a Price Reference Index, the Redemption Value payable in respect of such ComPS on the Settlement Date will be determined by the Calculation Agent (i) in the case of Bullion ComPS, by taking the arithmetic average of the Dollar Equivalent Value of the applicable portion of the applicable fixing price for the applicable amount of the applicable bullion commodity during the Determination Period, and (ii) in the case of all other Price Reference Index ComPS, by multiplying (a) the Face Amount of such ComPS by (b) the quotient of (I) the arithmetic average of the closing prices of the underlying commodity as reported in the pricing source identified in the applicable Prospectus Supplement for each day of the Determination Period (i.e., the Applicable Index Settlement Value), divided by (II) the Applicable Index Commencement Value (as defined above). The Redemption Value calculations for Price Reference Index ComPS will also be subject to Market Disruption Events similar to those described above, as specified in the applicable Prospectus Supplements. The Calculation Agent in its sole discretion will be responsible for determining if a Market Disruption Event has occurred. In no event shall the Redemption Value payable in respect of any series of ComPS be less than zero, although the Redemption Value of any series of ComPS may be more or less than the Face Amount of such series. EARLY DETERMINATION OF APPLICABLE INDEX SETTLEMENT VALUE AND REDEMPTION VALUE Morgan Guaranty reserves the right at its discretion to make any modifications to the JPM Indices based on the recommendations of the JPMCI Policy Committee. The JPMCI Policy Committee advises Morgan Guaranty with respect to, among other things, the composition of the JPM Indices, the price sources upon which the JPM Indices are based (i.e., the Benchmark Contracts), and the weightings and calculation methodology of the JPM Indices, with a view toward maintaining the JPM Indices as appropriate commodity investment benchmarks that serve as a measure of performance of the commodity markets. Currently, the inclusion requirements for the futures contracts underlying the JPM Indices require that such contracts be sufficiently liquid and representative price sources. It is possible, however, that any such underlying contract could become less liquid or representative and, as a result, the JPMCI Policy Committee may recommend a modification in the calculation methodology or the contracts underlying the JPM Indices and, therefore, the Applicable Index. Any such replacement contract (i) will be required to satisfy the JPMCI Inclusion Criteria, as described below and under the caption "The JPMCI Policy Committee", (ii) must be traded in a market or with a self-regulator which has established either (a) a comprehensive information sharing agreement with the exchange, if any, on which the ComPS are then traded or (b) suitable alternative arrangements with the Commission and (iii) will be with respect to the same general commodity type as the contract being replaced (e.g., assuming the JPMCI Policy Committee recommends a modification and assuming the requirements of clauses (i) and (ii) are satisfied, a NYMEX crude oil futures contract may be replaced by an International Petroleum Exchange crude oil futures 17 71 contract). Under no circumstances will the general commodity type underlying the futures contract be changed (e.g., a crude oil futures contract may not be replaced by a gold futures contract). If at any time no contracts satisfying both clauses (i) and (ii) of the previous paragraph can be found to serve as a Benchmark Contract for any series of ComPS the Applicable Index for which is an Excess Return Index or a Total Return Index, the Applicable Index Settlement Value of such ComPS will be determined at such time (in accordance with the methodology set forth in the applicable Prospectus Supplement) as if the last date of the inclusion of the final Benchmark Contract with respect to such Applicable Index in the JPM Indices were the Stated Maturity. However, such ComPS will not be redeemed on such date; rather, such ComPS will remain outstanding to Stated Maturity thereof, will continue to be entitled to dividends and will be redeemed at Stated Maturity for a Redemption Value calculated using the Applicable Index Settlement Value determined at such time as no contract satisfying clauses (i) and (ii) of the previous paragraph was able to be found. Such ComPS will also be subject to redemption upon the occurrence of a Special Event and optional redemption on each Early Redemption Date if specified in the applicable Prospectus Supplement (treating the Applicable Index Settlement Value determined pursuant to the terms of this paragraph as the Applicable Index Early Settlement Value for any such Early Redemption Date). Additionally, if at any time the Benchmark Contracts then serving as the basis for calculating the Applicable Index with respect to any series of ComPS the Applicable Index for which is an Excess Return Index or a Total Return Index, or the trading thereof, become subject to any increased cost or additional tax, whether imposed by any exchange or otherwise, Morgan Guaranty reserves the right to (x) designate a replacement Benchmark Contract, satisfying both clauses (i) and (ii) of the second preceding paragraph, which contract is subject to an amount of cost or tax less than or equal to such increased amount or (y) if no contract satisfying clause (x) of this paragraph is designated by J.P. Morgan, to cause, at its option, the Applicable Index Settlement Value of such ComPS to be determined at such time (in accordance with the methodology set forth in the applicable Prospectus Supplement) as if the date of such increase in cost or tax (or, in Morgan Guaranty's discretion, the last calendar day of the month in which the determination of the Applicable Index Settlement Value is completed) were the Stated Maturity. However, such ComPS will not be redeemed on such date; rather, such ComPS will remain outstanding to Stated Maturity thereof, will continue to be entitled to dividends and will be redeemed at Stated Maturity for a Redemption Value calculated using the Applicable Index Settlement Value determined pursuant to the terms of this paragraph. Such ComPS will also be subject to redemption upon the occurrence of a Special Event and optional redemption on each Early Redemption Date if specified in the applicable Prospectus Supplement (treating the Applicable Index Settlement Value determined pursuant to the terms of this paragraph as the Applicable Index Early Settlement Value for any such Early Redemption Date). See "Risk Factors With Respect to ComPS--Potential Modifications to the JPM Indices and/or the Applicable Index." As discussed below, in order to satisfy the JPMCI Inclusion Criteria, a futures contract must (i) be priced in U.S. dollars, or if priced in a foreign currency, the exchange on which the contract is traded must publish an official exchange rate for conversion of the futures contract price into U.S. dollars and such currency must be freely convertible into U.S. dollars; (ii) be traded on a regulated futures exchange located in the United States, Canada, the United Kingdom, Japan, Singapore or any country which at such time is a member of the Organization of Economic Cooperation and Development (an "O.E.C.D. country") and (iii) have a minimum annual trading volume of 300,000 contracts or $500,000,000 for all contract months. EARLY REDEMPTION UPON THE OCCURRENCE OF A SPECIAL EVENT OR AT THE ELECTION OF THE HOLDERS OF THE COMPS The ComPS will be subject to redemption prior to their Stated Maturity upon the occurrence of a Special Event (a "Special Event Redemption") or, if so indicated in the applicable Prospectus Supplement, at the election of the holders of such series of ComPS (an "Optional Redemption") on any one of the dates set forth in the applicable Prospectus Supplement (each such date, an "Optional Redemption Date"; each such date and each date on which a Special Event Redemption or a Liquidation Distribution shall occur 18 72 being referred to herein as an "Early Redemption Date"). In order to effect an Optional Redemption, the holder of such ComPS will be required to provide notice to DTC (or, in the case of Preferred Securities which are not solely book-entry securities, the Trust's transfer agent) as specified in the applicable Prospectus Supplement. In the case of notice provided through DTC, the notice provided by DTC to the Trust or its transfer agent (the "Applicable Notice") shall be final and irrevocable upon receipt. The redemption value of ComPS redeemed prior to their Stated Maturity (the "Early Redemption Value") shall be determined during the 10 consecutive Trading Days which are Business Days on which U.S. Treasury bond markets are open and on which no Market Disruption Event occurs immediately following the 20th scheduled Business Day prior to the applicable Early Redemption Date (such ten days, the "Early Determination Period"), provided, however, that the Early Redemption Period will not begin until the day after the Trust has received the Applicable Notice. The Early Redemption Value shall be equal to the average for the 10 days of the Early Determination Period of the sum for each such day of the results of the following (to be calculated with respect to each portion of the Face Amount of such ComPS which must be redeemed on the same date): IESV ) FA X [(Dividend + Unused costs) X AF + ( ----- - Factor X PVF] ICV
Where "FA" means (i) in the case of Bullion ComPS, each portion of the Bullion ComPS Principal Amount thereof which must be redeemed on the same date and (ii) in the case of all other ComPS, each portion of the Face Amount of the ComPS which must be redeemed on the same date. In the case of ComPS for which the entire Face Amount matures on the same date, the average for each day of the Early Determination Period of such equation shall equal the Early Redemption Value. In the case of ComPS for which portions of the Face Amount must be redeemed on different dates, the Early Redemption Value shall equal the average over the Early Redemption Period of the sum of the results for each day of such equation for each such portion of the Face Amount. The Trust shall pay the Early Redemption Value, together with all accrued but unpaid dividends from quarterly periods prior to the Early Redemption Date, on the Early Redemption Date. The Early Redemption Value shall never be less than zero. Other terms used in the formula above shall have the meanings set forth below (with each Factor, yield, lease rate, rate and percentage rate expressed in decimal form (e.g., 3% equals 0.03)): For all ComPS "Dividend" means the per annum rate of dividends on the Face Amount (or, in the case of Bullion ComPS, the Principal Amount), as specified in the applicable Prospectus Supplement. "AF" means the Annuity Factor for the term remaining from the applicable Early Redemption Date until the mandatory redemption of such portion of the Face Amount (such remaining term being referred to herein as the "Remaining Maturity"), which shall be determined in accordance with the following formula: (1-V(N))/y where "V" is equal to (1/(1 + y/4)) and "y" is the yield which shall be equal to the Base Yield (as defined below) plus the Applicable Spread (as defined below), converted to an annualized quarterly compounded rate calculated on the basis of a 360-day year of twelve 30-day months. The "Base Yield" will equal (i) in the case of Bullion ComPS, the single lowest lease rate obtained by polling three dealers in such loans for a loan to Morgan Guaranty (or, in the case of a Liquidation Distribution, to a notional counterparty rated A or higher) of such bullion in the same notional Bullion ComPS Principal Amount, terms, amortization and maturity as such ComPS (which may be the same rate for all days and/or for each Remaining Maturity) or, if there is no such rate, as calculated by the Calculation Agent in good faith, and (ii) in the case of any other ComPS, the Constant Maturity Treasury Rate for the Remaining Maturity among the applicable Constant Maturity Treasury Rates set 19 73 forth in Statistical Release H.15(519) as such appears on Telerate Page 7051 under the heading "Daily Treasury Constant Maturities from the Economic Bulletin Board" (or its successor or such other pricing source as the Calculation Agent may reasonably select) for each date of the Early Determination Period. If the applicable rate for the Remaining Maturity is not published on such page, the applicable rate will be determined by calendar month weighted linear interpolation between one Constant Maturity Treasury rate with respect to a maturity up to or equal to the Remaining Maturity and the other Constant Maturity Treasury rate with respect to a maturity greater than the Remaining Maturity. If such information ceases to be provided or is not available for any day of the Early Determination Period by the end of the Business Day next succeeding the last day of the Early Determination Period, the Base Yield for such day will be calculated by the Calculation Agent by calendar month weighted linear interpolation among the rates it shall have obtained for such applicable date by polling three dealers of such instruments in New York, New York for the bid side yield to maturity of the most recently issued on-the-run direct non-callable fixed rate obligations of the United States Treasury ("U.S. Government Securities") with a maturity equal to the Remaining Maturity or, if no such maturity exists, by calendar month weighted linear interpolation among rates so obtained with a maturity up to or equal to the Remaining Maturity and a maturity greater than the Remaining Maturity. The "Applicable Spread" will equal (i) for all ComPS other than Bullion ComPS, (a) in the case of a Liquidation Distribution, the offer side U.S. dollar swap spread for the maturity closest to the Remaining Maturity as published by International Financing Review ("IFR") Corporate Eye on Telerate Page 42276 (or such successor as the Calculation Agent may reasonably determine) for each day of the Early Determination Period (except that, in the case of a determination for which the Remaining Maturity is one year or less, "Applicable Spread" will equal the difference between then-current yields on U.S. dollar LIBOR-based deposits and yields on Treasury Bills with maturities approximately equal to the Remaining Maturity as determined by the Calculation Agent) (the "Swap Spread") or (b) in the case of all other redemptions, the greater of the Swap Spread and the yield spread between (I) the average of quotations from three dealers in such instruments chosen in the discretion of the Calculation Agent for notional issuances of debt securities of Morgan Guaranty in a notional amount equal to the Face Amount of the ComPS being redeemed at such time (or, if such notional amount is smaller than commercially practicable, the smallest commercially practicable amount) and having a similar maturity and similar subordination provisions as those contained in the applicable Related Note and (II) U.S. Government Securities of approximately similar maturities, as such yield spread may be reasonably determined by the Calculation Agent (such yield spread, the "Funding Spread") or (ii) for Bullion ComPS, (x) in the case of a Liquidation Distribution, zero, and (y) in all other cases, the difference between the Funding Spread and the Swap Spread, but never less than zero. If the Telerate Page (or any successor) referred to in clause (a) of the preceding sentence is unavailable or ceases to report such swap spread, the Calculation Agent shall calculate such spread based on (i) a source supplying the equivalent information or (ii) if no such source is available, the average quotations from three dealers in U.S. dollar swaps chosen by the Calculation Agent in its reasonable discretion. As of the date of this Prospectus, J.P. Morgan is among the six dealers of such instruments currently polled for the purpose of calculating the swap spread published by IFR on Telerate Page 42276. "PVF" means the Present Value Factor for Remaining Maturity, which shall be determined as follows: (1/(1+y/4)(N)) where "y" has the meaning set forth above in the definition of Annuity Factor. 20 74 "ICV" means the Applicable Index Commencement Value, or the value of the Applicable Index determined on the date of issuance of the applicable series of ComPS, as specified in the applicable Prospectus Supplement. "N" means the number of full quarterly periods in the Remaining Maturity (e.g., one year = N = 4). For ComPS calculated based on a Price Reference Index: "Unused costs" means zero. "IESV" means the Applicable Index Early Settlement Value, which shall be equal to (i) in the case of Bullion ComPS, the ICV, and (ii) in the case of all other Price Reference Index ComPS, the Applicable Index for such day of the Early Determination Period. For ComPS calculated based on an Excess Return Index: "Unused costs" means the number specified as such in the applicable Prospectus Supplement. "IESV" means the Applicable Index Early Settlement Value, which shall be equal to the Applicable Index for such day of the Early Determination Period (which, if an Applicable Index Settlement Value has been permanently determined for such ComPS prior to such time, shall equal the value so determined). "Factor" means the number specified in the applicable Prospectus Supplement. For ComPS calculated based on a Total Return Index: "Unused costs" means the number specified as such in the applicable Prospectus Supplement. "IESV" means the product of Applicable Index for such day multiplied by (ii) the Future Value Factor (which, if an Applicable Index Settlement Value has been permanently determined for such ComPS prior to such time, shall equal the value so determined). "Future Value Factor" shall be determined with reference to the following formula: (1 + BY/4)(N) where BY is the Base Yield (as determined for such day), computed on an annualized, quarterly compounded basis, expressed in decimal form. "Factor" means the number specified in the applicable Prospectus Supplement. DETERMINATION PERIOD AND SETTLEMENT DATE Unless otherwise specified in the applicable Prospectus Supplement, the term "Determination Period" with respect to Excess Return, Total Return and Price Reference Indices shall mean the period of ten consecutive Trading Days on which no Market Disruption Event occurs commencing immediately following the twentieth scheduled Business Day prior to the Stated Maturity of such ComPS. The date on which the Early Redemption Value or Redemption Value, as applicable, will first be payable (the "Settlement Date") in respect of any series of ComPS will be the later of the date on which such ComPS are eligible for redemption (the "Redemption Date") or the fifth Business Day after the completion of the Early Determination Period or the Determination Period, as applicable. MARKET DISRUPTION EVENTS As determined by Morgan Guaranty, the occurrence of one or more of the following events on any Trading Day shall constitute a "Market Disruption Event" with respect to a relevant commodity (a "Relevant Commodity"), any benchmark contract underlying the Applicable Index (a "Relevant Contract"), the 21 75 market participants or association responsible for determining the price of a commodity (the "Fixing Association") which determines the price of a Relevant Commodity (a "Relevant Fixing Association") or an exchange on which a Relevant Contract is traded (a "Relevant Exchange"): (a) a day on which the fluctuation of the price of the applicable commodity or commodity futures contract is materially limited by the rules of the Relevant Exchange or Relevant Fixing Association setting the maximum or minimum price for such day (a "Limit Price"); (b) a day on which the Settlement Price is the Limit Price; (c) the failure of the Relevant Exchange or Relevant Fixing Association to determine, announce or publish the Settlement or Fixing price with respect to the Relevant Contract or commodity (as the case may be); (d) the material suspension of trading in the Relevant Commodity by members of the Relevant Fixing Association or otherwise or any Relevant Contract with respect to such commodity or in any other futures contract affecting the Relevant Contract with respect to such commodity on the Relevant Exchange; (e) the failure of trading to commence, or the permanent discontinuation of trading, in the Relevant Commodity by the members of the Relevant Fixing Association or otherwise or any Relevant Contract on the Relevant Exchange and (f) the imposition of any material limitation on trading in the Relevant Commodity by the members of the Relevant Fixing Association or otherwise or any Relevant Contract on the Relevant Exchange. If a Market Disruption Event occurs and is continuing during the Determination Period or any Early Determination Period with respect to any series of ComPS, the Determination Period or such Early Determination Period will be extended, with the result that the calculation of the Applicable Index Settlement Value and the settlement of such ComPS may be delayed for an indefinite period of time including, in the case of an extension of the Determination Period, an indefinite period of time after the Stated Maturity. With respect to ComPS for which the Applicable Index is either a Price Reference Index or an Excess Return Index, in the event that the payment of the Redemption Value is postponed beyond the Stated Maturity, no distributions or dividends will accrue or be payable with respect to such ComPS, but interest will accrue on the Face Amount from and including the Stated Maturity to but excluding the last day of the Determination Period at a rate equal to the day-weighted average of the Fed Effective Rate until the end of the Determination Period, as reported on Telerate Page 118 (or its successor or such other pricing source as the Calculation Agent may reasonably select), less in each case 0.25%, calculated on the basis of a year of 360 days and payable for the actual number of days elapsed. Payment of such interest amount and the Redemption Value will be made on the fifth Business Day following the last day of the Determination Period. With respect to ComPS for which the Applicable Index is a Total Return Index, in the event that the payment of the Redemption Value is postponed beyond the Stated Maturity, no distributions will be payable, and no interest or dividend in respect of such ComPS will accrue or be payable, after the Stated Maturity. With respect to all ComPS, in the event that the payment of the Early Redemption Value is postponed beyond the applicable Early Redemption Date, no distributions will be payable, and no interest or dividends in respect of such ComPS will accrue or be payable, after such Early Redemption Date. CALCULATIONS As discussed above, the Trust will appoint Morgan Guaranty as Calculation Agent for the purpose of determining the Applicable Index Settlement Value, as described herein, and calculating the Early Redemption Value and Redemption Value and, if applicable, the dividends payable in respect of any ComPS. The Calculation Agent will determine the Applicable Index Settlement Value and the Early Redemption Value and Redemption Value of any ComPS and, if applicable, dividends payable in good faith, which determination shall be final and binding on the Trust and the holders of such ComPS. Morgan Guaranty as Calculation Agent will also (i) determine when a Market Disruption Event on any Early Determination Day or Determination Day is sufficiently material to not use such day in the applicable calculation and (ii) be responsible for the choice of an alternative price source (if any) upon a Market Disruption Event of sufficient length, as described in the applicable Prospectus Supplement. Also, Morgan Guaranty and its affiliates may from time to time engage in transactions with and perform services for the Trust in the ordinary course of business. 22 76 LICENSE OF APPLICABLE INDEX Morgan Guaranty will enter into a license agreement (the "License Agreement") granting the Trust a non-exclusive license to use the Applicable Index in connection with each series of ComPS the Applicable Index for which is an Excess Return Index or a Total Return Index. The License Agreement will provide that, in the event that Morgan Guaranty fails to provide the Applicable Index to the Trust on a regular basis with the result that the Trust is unable to determine the Applicable Index Settlement Value and the Early Redemption Value and Redemption Value payable in respect of such ComPS, the Trust, its Calculation Agent or its authorized designee (which shall be a major accounting firm appointed by the Trust) shall be authorized to calculate the Applicable Index. In such event, Morgan Guaranty will provide the Trust, its Calculation Agent or such accounting firm with any and all information which may be necessary in order to enable the Trust, its Calculation Agent or such accounting firm to perform such calculations pursuant to the same methodology to be applied by Morgan Guaranty. Morgan Guaranty may also enter into license agreements with any or all of the exchanges on which any Benchmark Contract or commodity is traded with respect to the information provided by such exchanges. However, no such license agreement will contain any obligation or liability provisions with respect to provision of such information by the relevant exchange. Furthermore, no exchange on which any Benchmark Contract or commodity is traded is or will be an issuer, underwriter or guarantor of any Preferred Security, nor has any such exchange approved the Preferred Securities or any terms thereof, nor is any such exchange responsible for the calculation of any Applicable Index. However, any such exchange may from time to time change any rule or bylaw or take emergency action under its rules which could affect settlement prices of the futures contracts or commodities underlying an Applicable Index. Any such change which causes a decrease in such settlement prices could adversely effect the value of such Applicable Index. RISK FACTORS WITH RESPECT TO ALL PREFERRED SECURITIES LIMITATIONS ON RIGHTS UNDER THE GUARANTEE, THE RELATED NOTE GUARANTEE AND THE RELATED NOTE The Guarantee will be effective with respect to each series of Preferred Securities from the time of issuance of such Preferred Securities but will not apply to any payment of distributions or other amounts due in respect of such Preferred Securities to the extent Morgan Guaranty has failed to make a payment of principal or interest on the applicable Related Note. To the extent Morgan Guaranty were to default on its obligation to pay amounts payable on the applicable Related Note, the Trust, on behalf of holders of the Securities of the applicable series, would lack available funds for the payment of distributions on or amounts payable on redemption of such Preferred Securities and, in such event, holders of such Preferred Securities would not be able to rely on the Guarantee for payment of such amounts. Instead, holders of such Preferred Securities would rely on the enforcement by the Trust, on behalf of holders of the Securities of the applicable series, of its rights as holder of the applicable Related Note against Morgan Guaranty and of its rights under the Related Note Guarantee against J.P. Morgan. J.P. Morgan, through its obligations under the Guarantee, the Related Note Guarantee and the Declaration, taken together, will provide a full and unconditional guarantee, on a subordinated basis, of payments due on the Preferred Securities. See "Description of the Guarantee" and "Description of the Related Note Guarantee". SPECIAL EVENT REDEMPTION Upon the occurrence of a Special Event, unless waived by Morgan Guaranty or subject to cure as specified in the applicable Prospectus Supplement, Morgan Guaranty shall have the right to redeem any or all Related Notes, in whole or in part, in which event the Trust will redeem the related Preferred Securities and Common Securities on a pro rata basis to the same extent as the Principal Amount of the Related Notes is redeemed by Morgan Guaranty. 23 77 A Special Event is either (i) a Tax Event or (ii) an Investment Company Event. A Special Event may occur at any time. In the case of any series of ComPS, upon the occurrence of a Special Event it is possible that the market price of such ComPS in any existing secondary market will decline. LIMITED VOTING RIGHTS Holders of Preferred Securities will have certain voting rights relating to a payment default on or adverse change to the Preferred Securities, but will not be entitled to vote to appoint, remove or replace the Trustees of the Trust or to increase or decrease the number of Trustees, which voting rights are vested exclusively in the holders of the Common Securities. TRADING PRICE MAY NOT REFLECT ACTUAL ECONOMIC VALUE Preferred Securities are expected to trade at a price that takes into account the value, if any, of accrued and unpaid distributions; thus, purchasers will not pay and sellers will not receive any accrued and unpaid interest with respect to their pro rata interests in the applicable Related Note owned through the applicable Preferred Securities that is not already included in the trading price of the applicable Preferred Securities. POSSIBLE ILLIQUIDITY OF PREFERRED SECURITIES It is possible that no secondary market will develop and continue to exist with respect to any series of Preferred Securities. If no such market develops, the liquidity of such Preferred Securities may be adversely affected. Furthermore, there can be no assurance as to the market prices for any Preferred Securities in any secondary market which does develop. Accordingly, any Preferred Securities that an investor may purchase, whether pursuant to the offer made hereby or in any such secondary market, may trade at a discount to the price that the investor paid to purchase the Preferred Securities offered hereby. RIGHT TO INTEREST ON RELATED NOTE Because holders of Preferred Securities are essentially investing in a pro rata share of a Related Note, prospective purchasers of Preferred Securities are also making an investment decision with regard to such Related Note and should carefully review all the information regarding the Related Note contained herein and in the relevant Prospectus Supplement. Investors in Preferred Securities have a direct right to direct interest distributions on the applicable Related Note. IMPOSITION OF BANK REGULATORY RESTRICTIONS The Trust's ability on behalf of holders of Securities of any series to make distributions and other payments on the Preferred Securities is dependent upon Morgan Guaranty's making interest and other payments on each Related Note as and when required or collection with respect to such Related Note under the Related Note Guarantee. As noted herein, Morgan Guaranty is subject to examination and regulation by U.S. federal and state banking authorities, and although there is no current restriction on Morgan Guaranty's ability to make payments under any Related Note, certain other transactions with affiliates, including the Trust, are or may in the future become subject to restrictions imposed by bank regulatory authorities. RISK FACTORS WITH RESPECT TO COMPS INDEXATION OF PRINCIPAL AMOUNT The Principal Amount of each series of ComPS, which is initially equal to the Face Amount of such series, will vary until Stated Maturity of such ComPS in relation to an Applicable Index, reduced by the Factor. The Principal Amount repayable on any Optional Redemption Date, upon the occurrence of any Special Event Redemption or in connection with any Liquidation Distribution or at Stated Maturity of such ComPS will be determined, pursuant to the terms described in the applicable Prospectus Supplement, by 24 78 comparing the level of the Applicable Index at the date of issuance of such ComPS with the level determined pursuant to the terms thereof for any such date of redemption, reduced by the Factor. Accordingly, the Principal Amount of a series of ComPS to be received upon any date of redemption will fluctuate based on the Applicable Index for such series (reduced by the Factor) and may be lower than the Face Amount for such series. Thus, if the Applicable Index for a series of ComPS decreases over the life of such ComPS, or if the percentage increase in the Applicable Index for such series is less than the amount of the Factor for such series, the Redemption Value for such series will be less than the Face Amount for such series. If the percentage increase in the Applicable Index for such series is greater than the amount of the Factor for such series, the Redemption Value for such series will be greater than the Face Amount for such series. EFFECT OF TRADING IN THE FUTURES CONTRACTS AND RELATED COMMODITIES AND INSTRUMENTS Morgan Guaranty and other affiliates of J.P. Morgan are and will be actively involved in the trading of the futures contracts or the commodities underlying the Applicable Index and other instruments and derivative products based thereon. Morgan Guaranty, in particular, is an active participant in various commodity markets including the physical petroleum, precious and base metals and related derivatives markets. JPMSI and other affiliates may also issue or underwrite, or authorize unaffiliated entities to issue or underwrite, other securities or financial instruments with returns indexed to the Applicable Index or one or more of the JPM Indices. Morgan Guaranty has licensed, and may in the future license, the Applicable Index, the JPM Indices, and related indices and sub-indices for use by affiliated and unaffiliated parties, for publication in newspapers and periodicals, for distribution by information and data dissemination services and for other purposes. Morgan Guaranty currently intends to publish individual commodity sub-indices for each of the commodities included in the JPMCI using the same calculation methodology as that described below. The Applicable Index may be similar or identical to the sub-index having the same underlying commodity. Trading in the foregoing contracts and commodities by Morgan Guaranty, its affiliates (including JPMSI) and unaffiliated third parties could adversely affect the value of the Applicable Index, which could in turn adversely affect the return on and the value of the ComPS. See "The Applicable Index". Furthermore, additional issuances of securities linked or referenced to similar futures contracts or commodities could adversely affect the value of similar outstanding ComPS. POTENTIAL FOR ADVERSE INTERESTS As noted above, Morgan Guaranty, JPMSI and their affiliates expect to engage in trading activities related to the futures contracts or the commodities underlying the Applicable Index and other instruments or derivatives products on or related to the Applicable Index, for their accounts where permitted or for other accounts under their management. Morgan Guaranty, JPMSI and their affiliates, as well as unaffiliated third parties, may also engage in other activities related to the Applicable Index, as discussed above. Because Morgan Guaranty will issue the Related Notes to the Trust on behalf of holders of the Securities, all such activities could create interests of Morgan Guaranty adverse to those of the holders of ComPS. For example, the issuance of other securities indexed to the Applicable Index, i.e., the introduction of competing products into the marketplace, could adversely affect the value of the ComPS. To the extent that J.P. Morgan or its affiliates serve as issuer, or JPMSI or one of its affiliates serves as agent or underwriter, for such securities or other instruments, their interests with respect to such products may be adverse to those of the holders of the ComPS. Morgan Guaranty will serve as Calculation Agent with respect to the ComPS and, accordingly, will in good faith calculate the Applicable Index, which could present certain conflicts of interest (for example, in instances where the Calculation Agent is required to exercise discretion). RISK OF CARRYING AND ROLLING COMMODITY FUTURES As discussed above, if the Applicable Index is an Excess Return Index or a Total Return Index, the Redemption Value of the ComPS will be calculated with reference to the Applicable Index (less the 25 79 applicable Factor), the value of which is designed to replicate to the extent provided herein the cumulative return of holding a continuous investment in the futures contracts on the relevant commodity underlying the Applicable Index. At any given time, the Applicable Index will be calculated based on the change in value of certain futures contracts on the relevant commodity for delivery in the near term (the "shorter-dated contracts"). The Applicable Index will continue to be calculated based on the change in value of such shorter-dated contracts until they approach maturity, at which time the Applicable Index will, as described below, cease to be calculated based on the change in value of such shorter-dated contracts and begin to be calculated based on the change in value of the subsequent futures contract (the "longer-dated contracts") on a regular periodic basis so as to be continuously indexed to the change in value of the futures contracts on the relevant commodity. The period during which each such replacement of shorter-dated contracts with longer-dated contracts as the basis for the calculation of the change in value of the Applicable Index occurs is referred to herein as the "Rollover Period", as further defined below. If the market for the commodity futures contract underlying the Applicable Index is in "contango" (i.e., the prices of longer-dated contracts are above the prices of shorter-dated contracts), the return on the Applicable Index may be adversely affected. The Applicable Index would decline if (i) the price of the longer-dated contracts underlying the Applicable Index during the Rollover Period were more than the price of the shorter-dated contracts which they will replace and (ii) the price of the longer-dated contracts were to decline as such contracts approach maturity (i.e., the price of the longer-dated contracts were to converge toward the price of the replaced shorter-dated contracts) (only, in the case of a Total Return Index, if each declines by more than the amount of the Collateral Return Component). While many of the commodities included in the JPM Indices have historically exhibited periods of both "backwardation" (i.e., the prices of longer-dated contracts are below the prices of shorter-dated contracts) and contango, there can be no assurance that backwardation will exist at any or all times. If the Applicable Index is an Excess Return Index or a Total Return Index, the absence of backwardation in the market for the commodity underlying the Applicable Index could adversely affect the Applicable Index and, correspondingly, could adversely affect the value of the ComPS. Additionally, the issuance and/or the trading of the ComPS could adversely affect the market for the benchmark contracts underlying such Applicable Index and, accordingly, could adversely affect the value of such ComPS and could result in a substantial loss to the holders thereof. See "Description of the ComPS--Calculation of Redemption Value". VOLATILITY OF COMMODITY AND COMMODITY FUTURES PRICES Prices of commodities and commodity futures contracts are extremely volatile and can be affected by a variety of factors, including weather, governmental programs and policies, national and international political and economic events, changes in interest and exchange rates and trading activity in such commodities and commodity futures contracts. Volatility in the benchmark contracts underlying any Applicable Index will correlate directly to volatility in such Applicable Index. Such volatility could lead some investors in the futures market to withdraw from the applicable futures markets, which could adversely affect the liquidity of such markets and could adversely affect the value of such Applicable Index and, correspondingly, the value of the ComPS. EFFECT OF ADVERSE CHANGES IN COMMODITY PRICES The Applicable Index is designed to replicate, to the extent provided herein, the performance of investing in the markets for the underlying commodity or futures contracts on the underlying commodity over time. In the event of sudden disruptions in the supplies of the relevant constituent commodity for the Applicable Index, such as those caused by war, accidents, weather, or acts of terrorism, prices of the relevant constituent commodity, and, consequently, the value of the Applicable Index, could become extremely volatile and unpredictable. Also, sudden and dramatic declines in commodity and commodity futures contract prices as may occur, for example, upon a cessation of hostilities that may exist in countries producing the relevant commodity or upon the discovery of significant additional sources or reserves of the relevant commodity or the introduction of new or previously withheld supplies into the market or the introduction of substitute products or commodities, could have a significant adverse effect on the value of 26 80 the Applicable Index and on the value of any ComPS. In addition, the prices of certain commodities have on occasion been subject to very rapid short-term changes due to speculative activities which, if such activities result in a price decrease, may cause the value of ComPS referenced to such commodities or the related futures contracts to decrease. See "Calculation of Redemption Value". CHANGE OF EXCHANGE METHODOLOGY Any exchange on which any Benchmark Contract or commodity is traded or which provides information relevant to the calculation of an Applicable Index may from time to time change any rule or bylaw, or take emergency action under its rules, which could affect the settlement prices of the futures contracts or commodities underlying an Applicable Index. Any such change which causes a decrease in such settlement prices could adversely affect the value of such Applicable Index. SUSPENSION OR MATERIAL DISRUPTION OF COMPS, FUTURES OR COMMODITIES TRADING; TEMPORARY DISTORTIONS The futures markets and the markets for the commodities underlying the Applicable Index are subject to temporary distortions or other disruptions due to conditions of illiquidity in the markets, the participation of speculators, government regulation and intervention and the other factors referred to in the preceding paragraph. In addition, U.S. futures exchanges have regulations, and the LME and certain foreign exchanges on which replacement Benchmark Contracts, if any, may trade (which exchanges must have information-sharing arrangements with the Securities and Exchange Commission and be regulated exchanges located in the United States, Canada, the United Kingdom, Japan, Singapore or an O.E.C.D. country) may have regulations, which limit the amount of fluctuation of futures contracts prices which may occur during a single trading day or the settlement spread between adjoining contracts. Such price limits are generally referred to as "daily price fluctuation limits" or, more commonly, "daily limits", and such limitations on settlement spreads are generally referred to as "spread limits", and the maximum or minimum price of a contract on any given day, as a result of the effect of such limits, is referred to as a "limit price", as discussed below. In a particular futures contract, once the limit price has been reached in such a contract, no trades may be made on that day at a price above or below the limit price, as the case may be. Limit prices may have the effect of precluding trading in a particular contract for all or a portion of a trading day or forcing the liquidation of contracts at disadvantageous times or prices. Such circumstances, particularly if they occur during the Rollover Period for the Applicable Index (which is an Excess Return Index or a Total Return Index) or during the Early Determination Period or the Determination Period (as defined herein) for such ComPS, could adversely affect the value of the Applicable Index and/or could constitute a Market Disruption Event (as defined herein) and, therefore, could adversely affect the value of such ComPS. Additionally, because it is intended that each series of ComPS will be listed on a stock exchange, and because ComPS will likely trade as equity securities in any such secondary market, trading in ComPS may be subject to interruption or delay due to extreme volatility in the trading prices of equity securities generally in any such secondary market, notwithstanding the specific price movements of the ComPS. MARKET DISRUPTION EVENTS Depending on the period of time over which a Market Disruption Event continues, the correlation between changes in the value of the Applicable Index and changes in the general level of prices of the relevant commodities may be adversely affected. Under such circumstances, the value of the Applicable Index (if the Applicable Index is an Excess Return Index, a Total Return Index or a Price Reference Index the pricing source for which is one or more futures contract Settlement Prices), and the value of the ComPS, may be adversely affected. In the event of a Market Disruption Event during the Early Determination Period or the Determination Period, the Early Redemption Value or Redemption Value, as applicable, payable in respect of the ComPS will be calculated using the Applicable Index on the Trading Day or Days immediately following the 27 81 termination of such Market Disruption Event. However, if such Market Disruption Event remains in effect for longer than 20 consecutive Trading Days and, in the reasonable judgment of the Calculation Agent such Market Disruption Event is likely to remain in effect, then the Applicable Index Settlement Value for each day subject to a Market Disruption Event may be determined in good faith by the Calculation Agent based on alternative pricing sources reasonably believed by it to be indicative of then-prevailing prices for notional transactions in futures contracts or commodities equal in size to the Applicable Index Settlement Value. Because Morgan Guaranty's obligations under the related Related Note will also be based on the Applicable Index Settlement Value, Morgan Guaranty may have an adverse interest with respect to such determination. HISTORICAL CORRELATIONS MAY NOT PREVAIL IN THE FUTURE Although historically the JPMCI and many of the commodities underlying it have shown a positive correlation with inflation, some positive correlation with industrial growth and negative correlations with stock and bond returns (in each case for the United States), there can be no assurance that such correlations will prevail in the future. As a result, investors who invest in ComPS in reliance on these correlations should individually assess the likelihood of such correlations continuing. CHANGES IN LAWS OR REGULATIONS OR INTERPRETATIONS THEREOF Prices of commodities and commodity futures contracts may be adversely affected by the promulgation of new laws or regulations or by the reinterpretation of existing laws or regulations (including, without limitation, those relating to taxes and duties on commodities or commodity components) by one or more governments, governmental agencies or instrumentalities, courts or other official bodies. Any such event could adversely affect the value of the Applicable Index and, correspondingly, could adversely affect the value of the ComPS. EXTENSION OF SETTLEMENT DATE OR STATED MATURITY If any futures contract or constituent commodity included in the Applicable Index were to be affected by a Market Disruption Event during any Early Determination Period or the Determination Period, the applicable Settlement Date would be postponed until the fifth Business Day after the last day of the applicable Early Determination Period or the Determination Period. Such delay could be of indefinite duration, during which time a holder of ComPS will not receive the Early Redemption Value or Redemption Value thereof, as applicable. With respect to ComPS for which the Applicable Index is either a Price Reference Index or an Excess Return Index, in the event that payment of the Redemption Value is postponed beyond the Stated Maturity, interest will accrue on the Face Amount in the manner described herein, but no distributions will be payable on such ComPS after the Stated Maturity thereof. With respect to ComPS for which the Applicable Index is a Total Return Index, in the event that the payment of the Redemption Value is postponed beyond the Stated Maturity, no interest, dividends or distributions in respect of such ComPS will accrue or be payable after the Stated Maturity. With respect to all ComPS, no distributions will be payable, and no interest will accrue or be payable, if payment of the ComPS Early Redemption Price is postponed beyond any applicable Early Redemption Date. See "Market Disruption Event" above. DISCONTINUANCE OF PUBLISHING OF THE RELEVANT JPM INDEX In the event that Morgan Guaranty discontinues publication of the JPM Indices or the relevant sub-index, the Calculation Agent will continue to calculate in good faith the Applicable Index for each series of ComPS during the remaining term of such ComPS, based on the methodology described herein under "Description of the ComPS". However, such change of calculation methodology may result in a ComPS Redemption Price for such ComPS which is less than the ComPS Redemption Price for such ComPS had it been calculated on the basis of the JPM Indices or the relevant sub-index. 28 82 POTENTIAL MODIFICATIONS TO THE JPM INDICES AND/OR THE APPLICABLE INDEX Morgan Guaranty reserves the right at its discretion to make any modifications to the JPM Indices based on the recommendations of the JPMCI Policy Committee. As described above under "Description of the ComPS--Early Determination of Applicable Index Settlement Value and Redemption Value", if the Benchmark Contract for any series of ComPS becomes less liquid or representative, the JPMCI Policy Committee could recommend a replacement Benchmark Contract. Such a change from a less liquid to a more liquid contract may result in a lower Redemption Value for such ComPS than would have been the case if the less liquid contract had remained the benchmark. If at any time no replacement contracts can be found to serve as a Benchmark Contract with respect to the Applicable Index for any series of ComPS the Applicable Index for which is an Excess Return Index or a Total Return Index, the Applicable Index Settlement Value of such ComPS will be determined at such time as described above under "Description of the ComPS--Early Determination of Applicable Index Settlement Value and Redemption Value". Such an early determination of the Applicable Index Settlement Value with respect to any series of ComPS may result in the holders of such ComPS receiving an amount that is less than what indicative commodity and futures prices prevailing at any Early Redemption Date or at the Stated Maturity thereof would otherwise imply. Because Morgan Guaranty will be the Calculation Agent, such early determination may raise adverse interests. Additionally, if at any time the Benchmark Contracts then serving as the basis for calculating the Applicable Index with respect to any series of ComPS, or the trading thereof, become subject to any increased cost or additional tax, Morgan Guaranty reserves the right to designate a replacement Benchmark Contract or, if no such contract is designated, to cause, at its option, the Applicable Index Settlement Value of such ComPS to be determined at such time as described above under "Description of the ComPS-- Early Determination of Applicable Index Settlement Value and Redemption Value". Because Morgan Guaranty will, at the time any Benchmark Contract then serving as the basis for calculating any Applicable Index becomes subject to such increased cost or tax, in its discretion decide whether or not to cause an early determination of the Applicable Settlement Value of any such ComPS, exercise of such option may raise an adverse interest. Such a change in contracts due to the imposition of any increased cost or additional tax may result in a lower Redemption Value for such ComPS than would have been the case if the contract on which such increased cost or additional tax were imposed had remained the benchmark. Any early determination of the Applicable Index Settlement Value may cause the trading price of ComPS in any secondary market which then exists to decline. EARLY REDEMPTION All ComPS may be redeemed by the Trust prior to their Stated Maturity upon the occurrence of a Special Event or, if so specified in the applicable Prospectus Supplement, redeemed at the option of the holders thereof at certain times. In the case of a redemption upon the occurrence of a Special Event, the Early Redemption Value paid by the Trust at such time may be significantly less than the Redemption Value that would otherwise have been payable had such ComPS not been redeemed prior to their Stated Maturity and the occurrence of such Special Event may cause the market price of such ComPS in any existing secondary market to decline. In the case of an optional redemption by holders of any ComPS subject to such provisions, it is likely, under prevailing market conditions, that the Early Redemption Value paid by the Trust will be less than the amount such holder could have realized by selling such ComPS in an existing secondary market, if any. Delay in payment of the ComPS Early Redemption Price due to the occurrence of a Market Disruption Event will not entitle holders of such ComPS to additional distributions on such ComPS or the accrual of any interest on such ComPS Early Redemption Price. SECONDARY TRADING IN THE COMPS; POSSIBLE ILLIQUIDITY OF THE COMPS It is intended that each series of ComPS be listed on a stock exchange; however, it is not possible to predict whether the necessary number of holders will purchase and, for the remaining term of each series of ComPS, continue to hold such ComPS in order that a secondary market for each series of ComPS will 29 83 develop and remain in existence, or how any ComPS will trade in any such market which does develop. The Underwriters of any issuance of ComPS will not obligated to make a market for such ComPS; therefore, it is possible that no active secondary market for any ComPS will develop. VALUE OF THE COMPS The value of any series of ComPS at any time will depend upon the interaction of at least two key factors: (i) the value of the Applicable Index and (ii) the credit quality of Morgan Guaranty and J.P. Morgan. As discussed above under "Description of the ComPS", adverse changes in the Applicable Index will directly correlate to adverse changes in the value of the ComPS. A decline in the credit quality of Morgan Guaranty and J.P. Morgan could cause the trading price of any ComPS in any secondary market then existing to decline. Also, an increase in the prevailing interest rates could cause the trading price of Excess Return ComPS which pay a fixed rate dividend in any secondary market then existing to decline. CERTAIN CONSIDERATIONS REGARDING HEDGING Prospective purchasers of ComPS who intend to hedge against the risks associated with the market for commodity futures or commodities should recognize the complexities of utilizing ComPS in this manner. The formula under which the Principal Amount is calculated is not guaranteed to produce distributions to holders having readily definable relationships with other commodity futures and commodity instruments and products. As described above, in the case of ComPS for which the Applicable Index is an Excess Return Index or a Total Return Index, the value of such ComPS will reflect not only the price of the benchmark contracts or the relevant commodity but also, in the case of an Applicable Index based on futures contracts, the state of the market in which such futures contracts are traded (i.e., whether such market is in "backwardation" or "contango" over time), all reduced by the Factor. Also, under certain circumstances, amounts payable on the ComPS may be based on the good faith determination of Morgan Guaranty and not on the Applicable Index. For these reasons, investors should be cautious in using ComPS in a hedging program. The risks associated with utilizing the ComPS in a hedging program may be magnified in periods of substantial futures or commodities price volatility, since properly correlating such ComPS either as a hedge of other assets or correlating such ComPS to the hedge thereof may become more difficult. THE UNDERLYING MARKETS FUTURES MARKETS An exchange-traded futures contract is a bilateral agreement providing for the purchase and sale of a specified type and quantity of a commodity or financial instrument during a stated delivery month for a fixed price or, in the case of a futures contract on an index, providing for the payment and receipt of a cash settlement. By its terms, a futures contract provides for a specified settlement month in which the commodity or financial instrument is to be delivered by the seller (whose position is therefore described as "short") and acquired by the purchaser (whose position is therefore described as "long") or in which the cash settlement amount is required to be paid. Prior to the date on which delivery is to be made under a futures contract, the exchange clearing house will require the holders of short positions to state their intentions with respect to delivery and, to the extent that such holders elect to make delivery (as opposed to cash settlement), the clearing house will match them with holders of long positions, who will then be required to accept delivery. No purchase price is paid or received on the purchase or sale of a futures contract. Instead, an amount of cash or cash equivalents, which varies based on the requirements imposed by the exchange clearing houses, but which may be as low as 5% or less of the value of the contract, must be deposited with a broker as "initial margin". This margin deposit collateralizes the obligations of the parties to the futures contract to perform their obligations under such contract. Subsequent payments to and from the broker, referred to as "variation margin", are then normally made on a daily basis as the price of the futures contract fluctuates, thereby making existing positions in the futures contract more or less valuable, a process known 30 84 as "marking to the market". By depositing and/or receiving margin in the most advantageous form (which may vary depending on the exchange, clearing house or broker involved), a market participant may be able to earn interest on its margin funds, thereby increasing the potential total return which may be realized from an investment in futures contracts. Futures contracts are traded on organized exchanges, known as "contract markets" in the U.S., through the facilities of a centralized clearing house and a brokerage firm which is a member of the clearing house (a "clearing member"). The clearing house guarantees the performance of each clearing member which is a party to a futures contract by, in effect, taking the opposite side of the transaction. At any time prior to the expiration of a futures contract, subject to the availability of a liquid secondary market, a trader may elect to close out its position by taking an opposite position on the exchange on which the position entered into, which operates to terminate the position and fix the trader's profit or loss. U.S. contract markets, as well as brokers and market participants, are subject to regulation by the Commodity Futures Trading Commission. Futures markets outside the U.S. are generally subject to regulation by comparable regulatory authorities. The principal non-U.S. futures market on which the futures contracts which may underlie the Applicable Index are traded is the London Metal Exchange (the "LME"). The LME, which is subject to the regulation of the Securities and Investments Board and the Securities and Futures Authority (a self-regulatory organization), is a primary international exchange for futures contracts on aluminum, copper, nickel and zinc (which are included in the JPMCI) and for lead and tin. Unlike most other futures exchanges (including those in the U.S.), the LME is a "principal's market". This means that when a clearing member of the LME enters into a trade with a client or non-clearing member, there will not necessarily be an offsetting contract on the exchange. Rather, such clearing member remains liable on such trade, though it may then enter into an offsetting contract with another member having substantially similar, if not necessarily identical, terms. In addition, official LME trading is conducted by open outcry during two daily trading sessions of short duration rather than by means of continuous trading, as used on most exchanges. In addition to such open outcry trading, trading takes place during the rest of the day directly between members by means of a telephone trading system. Settlement prices for contracts with specified settlement dates are determined by a committee selected by the directors of the LME (the "Quotations Committee") promptly following the morning trading session, based on the last bid and offer prices for the relevant commodity at such trading session or, if the Quotations Committee determines there were no such prices, at such other level as the Quotations Committee may in its discretion determine at the end of each LME trading day. The Quotations Committee is similarly responsible for determining LME closing prices. If the Quotations Committee fails to determine such closing prices on any LME trading day, such closing prices shall be determined by the London Clearing House, which is the clearinghouse for the LME. United States commodity futures exchanges typically have similar procedures for determining end-of-day settlement prices, although each exchange or type of commodity may have slightly different procedures. All exchanges have quotations or settlement price committees which determine the settlement prices using prescribed formulaic methodologies. However, such committees may, if they believe the application of the formulaic methodology would yield a settlement price which is inappropriate, in their own discretion determine a settlement price which is appropriate. For precious metals futures contracts, exchanges typically determine the settlement price for the most active month contract as the average of the highest and lowest prices of trades reported in the closing period. All other contracts settlement prices are determined as a spread from this active contract using spreads determined in the closing range. For energy contracts, exchanges typically determine the settlement prices for the "more active contracts" (i.e., contracts which meet certain open interest percentage thresholds) as the average price of all outright transactions during the closing range for such contract. In all other contracts, the settlement prices are usually determined as spread relationships to the more active contracts. 31 85 PRECIOUS METALS SPOT MARKETS In the case of Bullion ComPS, it may be the case that the value of the Bullion ComPS Principal Amount and the Applicable Index (and thus the Redemption Value of and distributions on such ComPS) will be determined with reference to the Fixing Price of the relevant Fixing Association. The relevant Fixing Association for gold and silver is the London Bullion Market Association (the "LBMA"); in the case of platinum and palladium, the relevant Fixing Association is the London Platinum and Palladium Market (the "LPPM"). The Fixing Price represents the spot price for the relevant underlying commodity as determined in accordance with the procedures of the relevant Fixing Association. The fixing procedures for the LBMA and the LPPM are similar. Fixings occur twice each trading day for gold, platinum and palladium and once each trading day for silver. At the commencement of the fixing, an opening price is announced by the presiding official. This price is relayed to the dealing rooms of the members of the relevant Fixing Association. The price is in turn relayed to the customers of such members and on the basis of orders received, such members declare as a buyer or a seller. Provided that both buying and selling interests are declared, members are then asked to state the amount they wish to trade. If the amounts of buying and selling do not balance, the same procedure is followed again at higher or lower prices until a balance is achieved. The chairperson of the relevant Fixing Association may exercise some discretion in determining the final Fixing Price. Because members of the LBMA must submit fixed orders for silver (i.e., no additional attempts at buying or selling occur as described in the second preceding sentence), trade imbalances may arise from time to time in the determination of the Fixing Price for silver. The LBMA is regulated by the Bank of England in accordance with the provisions of the London Code of Conduct. The London Code of Conduct is issued by the Bank of England and sets out the standards that firms are expected to meet when trading in the London wholesale bullion and money markets. In addition, all market marking members of the LBMA, in common with all U.K.-based banks, are subject to capital adequacy and liquidity requirements and regular supervisory meetings to consider the adequacy of their management, systems and controls. The Bank of England takes an active role in the LBMA gold market, including holding certain gold for delivery in its vaults and holding gold in accounts. INVESTING IN THE COMMODITIES AND COMMODITY FUTURES MARKETS Investments in commodities and commodity futures markets offer potential returns from several sources and strategies, two of which are as follows: (i) the change in price of the underlying commodity or commodity futures contract ("Price Return") and (ii) the cumulative return created by a continuous investment in the same type of futures contract by buying, holding and then selling such contracts as they approach expiration and reinvesting the notional proceeds of such sale in the same type of contract with a more distant expiration date (such cumulative return, "Excess Return", is the sum of the price returns for all such contracts held during their holding period, and such Excess Return is often described or accounted for as the sum of Spot Return plus Roll Return). Price Return. Price Return is the return that arises from changes over time in prices of futures contracts or in the prices of the commodities themselves, as applicable. Thus, if on the first day of a given month the price of the futures contract is $15.00, and on the 30th day of such month the price of the futures contract is $15.50, the investor in such contract has earned a price return of 3.33% on the initial notional amount of $15.00. Excess Return. Excess Return is the cumulative return of holding a continuous investment in commodity futures contracts. Excess Return is just the cumulative return of the individual Price Returns of the contracts held during their holding period. Thus, Excess Return is calculated as the return of holding a certain contract and, as it nears expiration, selling such contract and reinvesting the notional proceeds of the sale into another contract with a more distant expiration date. Commodity market participants often describe Excess Return as the sum of Spot Return plus Roll Return. Describing Excess Return as Spot Return plus Roll Return helps describe the cumulative price returns of the contracts held in terms of (a) overall trends in the spot or nearby futures prices (Spot 32 86 Return) and (b) the average shape of the forward curve during the roll days over the holding period (Roll Return). "Spot Return" is defined as the change in the price of the nearest to expiration contract underlying the Excess Return calculation from the beginning of the calculation period to the end of the calculation period (without regard to the actual underlying contract referenced). "Roll Return" is the number that, when added to the Spot Return, gives the true Excess Return. Roll Return represents the portion of return on a continuous investment in nearby futures that one might attribute to the average shape over the holding period of the forward curve during the roll days (i.e., whether the forward contracts that were rolled into were so rolled at a premium or a discount to the nearer to expiration contracts). EXAMPLE The following table illustrates the calculation of the Excess Return of a continuous investment in nearby futures over a 2 period holding period and shows how Spot Return plus Roll Return are defined and calculated so that the sum thereof equals the actual Excess Return calculation.
END OF END OF DAY 1 PERIOD 1 PERIOD 2 TOTAL ------ -------- -------- ----- Futures #1......................................... $15.00 $ 15.00 Futures #2......................................... $14.75 $ 14.50 $ 15.00 Return on Futures #1............................... 0.00% Return on Futures #2............................... NA 3.45% Return on Excess Return............................ 0.00%(a) 3.45%(b) 3.45%
- --------------- (a) return on Futures #1 for first month holding period, rounded to two decimal places (b) return on Futures #2 for second month holding period, rounded to two decimal places In the preceding example, if the change in value of an index had been calculated entirely based on Futures #1 beginning on day 1, had ceased to be based on such contract at the end of Period 1 and had begun to be calculated entirely based on Futures #2 on such day, and had continued to be based entirely on such contract to expiration at the end of Period 2, the index would have appreciated by 3.45%, despite the fact that the price of Futures #1 on day 1 and the price of Futures #2 at the end of Period 2 were equal (i.e. Spot Return was 0.00%). Thus, while Futures #1 yielded no price return, Futures #2 yielded a price return of 3.45% during its holding period. Such a continuous investment in nearby futures contracts produced a return of 3.45% over the two period holding period, which can be accounted for as a Spot Return of 0.00% plus a Roll Return of 3.45%. Spot Return is (($15.00/$15.00) -1) or 0.00%, since the beginning price of Futures #1 is $15.00 and the ending price of Futures #2 is $15.00 over the total holding period. Because Roll Return is the number that, when added to the Spot Return calculation, gives the true Excess Return, and because Excess Return is 3.45% in the above example, Roll Return must be Excess Return minus Spot Return (3.45%-0.00%), or 3.45%. However, this is only one example of a possible futures market alignment; in any market, Excess Return, or the sum of Spot Return plus Roll Return, could be positive or negative over any given holding period. The price of the longer-dated position may be higher or lower than the price of the shorter-dated position based on a variety of factors, including the cost of borrowing, transportation, storage and insurance of commodities, the expectations of market participants with respect to future price trends and general inventory, supply and demand trends. Investors may also calculate the "total return" from an unlevered, continuous investment in nearby commodity futures contracts by adding to the futures return a component of return calculated based on the notional amount of their investment in commodity futures, as it changes from time to time, would earn if invested as cash. Such return (the "Collateral Return Component") can be added to (and thus reinvested in) the futures return component to calculate the "total return" from such an unlevered, continuous investment. 33 87 The following table illustrates a simplified calculation of the total return of a continuous investment in nearby commodity futures contracts over a 2 period holding period. The example uses the futures return from the table above and assumed Collateral Return Components: Total Return Example
PERIOD 1 PERIOD 2 TOTAL -------- -------- ----- Return attributable to change in value of futures contracts...... 0.00% 3.45% Return attributable to Collateral Yield Component................ 0.50% 0.55% Total Return..................................................... 0.50% 4.00% 4.52%*
- --------------- * 4.52% equals the total return from compounding: (1 + 0.005) X (1 + 0.04) - 1 In the above example, if the futures return had been as calculated in the Excess Return Example and the Collateral Yield Component was as specified, the total return over the two period holding period would be 4.52%. THE JPM INDICES The JPM Indices have been developed and are calculated by Morgan Guaranty as indices proprietary to J.P. Morgan. The JPMCI, the primary commodities index calculated by Morgan Guaranty, is the arithmetic weighted average of the cumulative returns afforded by notional investments in exchange-traded futures contracts on certain non-financial "hard" (i.e., industrial non-edible) commodities (including base metals, energy products and precious metals). Each of the JPM Indices is designed as a measure of the performance over time of the markets for the applicable commodities. Morgan Guaranty calculates two investable versions of the JPM Indices, the Excess Return Indices and the Total Return Indices. Subject to the specific terms of each methodology set forth below, each methodology represents a method for determining the cumulative change in value of notional positions in certain commodities or commodity futures contracts, and does not represent an actual investment in commodities or commodity futures contracts. Calculations for the JPM Indices are based on end-of-day futures settlement prices for energy and precious metal indices and on LME end-of-day closing prices for third Wednesday dates for base metal indices. JPM Indices which are based upon only one underlying commodity (whether computed on an excess return or total return basis) are referred to as "JPM Individual Indices". As long as any series of ComPS is outstanding, Morgan Guaranty will cause the Applicable Index relating to such series of ComPS to be published by one or more public reporting entities as a JPM Individual Index. At the date of this Prospectus, such information is available on both Reuters and Bloomberg. EXCESS RETURN METHODOLOGY The actual methodology applied by Morgan Guaranty in calculating Excess Return JPM Individual Indices is set forth below. If the Applicable Index of any series of ComPS is an Excess Return Index, the following methodology will be applied by the Calculation Agent in calculating the Applicable Index: The value of the relevant Excess Return Index on any Trading Day not subject to a Market Disruption Event will be determined with reference to the following formula: I(t) = I(t-1) + Change(t) Where "I(t)" is the value of the relevant Excess Return Index on the date of determination (such date being referred to as "(t)"); "I(t-1)" is the value of the relevant Excess Return Index on the Trading Day not subject to a Market Disruption Event immediately preceding the date of determination (such date being referred to as "(t-1)"); and "Change(t)" is equal to the product of (i) I(t-1) and (ii) the sum of the weighted percentage changes on the date of determination of the U.S. dollar prices of the futures contracts underlying the Applicable Index. Each such weighted percentage change shall be equal to the product of (a) the U.S. dollar percentage gain or 34 88 loss on such underlying contracts to the date of determination from the immediately preceding Trading Day that is not subject to a Market Disruption Event multiplied by (b) the applicable futures contract's weight in the Applicable Index for such date of determination. The methodology behind the weighting of the futures contracts is set forth under the caption "Rebalance of JPM Indices". For example, to calculate the value of an Excess Return Index (I(t)) on a Trading Day not subject to a Market Disruption Event for which I(t-1) equals 100 and on which the only Benchmark Contract moves in value from $14.50 to $15.00 (resulting in an Index change of 3.4482759%), I(t) = 100 + (100 X 0.034482759) I(t) = 100 + 3.4482759 I(t) = 103.4482759 TOTAL RETURN METHODOLOGY The methodology applied by Morgan Guaranty in calculating Total Return JPM Individual Indices is set forth below. If the Applicable Index of any series of ComPS is a Total Return Index, the following methodology will be applied by the Calculation Agent in calculating the Applicable Index: The value of the relevant Total Return Index for any Trading Day not subject to a Market Disruption Event will be determined with reference to the following formula: I(t) = I(t-1) + Change(t) + R(t) Where "I(t)" is the value of the relevant Total Return Index on the date of determination (such date being referred to as "(t)"); "I(t-1)" is the value of the relevant Total Return Index on the Trading Day not subject to a Market Disruption Event immediately preceding the date of determination (such date being referred to as "(t-1)"); and "Change(t)" is equal to the product of (i) I(t-1) and (ii) the sum of the weighted percentage changes on the date of determination of the U.S. dollar prices of the futures contracts underlying the Applicable Index. Each such weighted percentage change shall be equal to the product of (a) the U.S. dollar percentage gain or loss on such underlying contracts to the date of determination from the immediately preceding Trading Day that is not subject to a Market Disruption Event multiplied by (b) the applicable futures contract's weight in the Applicable Index for such date of determination. Also, "R(t)" is the return arising for the period from (t-1) to (t) from interest payable on the nominal value of the Applicable Index, which shall be based on the rate determined with reference to the following formula: R(t) = I(t-1) X Y(t) Where "I(t-1)" has the meaning set forth in the preceding paragraph and Y(t) = [1/(1-Q)](Days/91) - 1 Where "Q" equals the most recently available noncompetitive discount rate on 13-week U.S. Treasury Bills (updated on weekly auction), as found in the H.15(519) report published by the Board of Governors of the Federal Reserve System (or, if unavailable, a successor rate with a maturity equal to or less than three months, as Morgan Guaranty may determine in its reasonable discretion), multiplied by the quotient of 91/360, and "Days" equals the number of calendar days from Trading Day (t-1) to (t). 35 89 For example, to calculate the value of a Total Return Index for any Trading Day not subject to a Market Disruption Event for which I(t-1) equals 100, on which the only Benchmark Contract moves from $14.50 to $15.00, on which the Q (the applicable discount rate (5.00%) multiplied by 91/360) equals 1.26388889% and for which "Days" equals 1, I(t) = 100 + (100 X 0.0344827586) + 100 X [(1/(1-0.0126388889)](1/91) - 1) I(t) = 100 + 3.44827586 + (100 X 0.0001397838) I(t) = 100 + 3.44827586 + .01397838 I(t) = 103.46225424 REBALANCE OF JPM INDICES Because the JPM Indices are measures of a continuous investment in commodity futures contracts, and because most futures contracts have maturities (generally from one to three months) which are shorter than the life of any ComPS, the futures contracts serving as bases from which to calculate the change in value of the JPM Indices must be replaced on a periodic basis during the applicable Rollover Period (as defined below) for each. If the Applicable Index for any series of ComPS is an Excess Return Index or Total Return Index, the futures contracts on the commodity underlying the Applicable Index will similarly be replaced during the Rollover Period. The "Rollover Period" is the period of five consecutive Trading Days commencing on the fifth Trading Day of the month in which such replacement occurs. During each day of the Rollover Period, a portion of change in value of the Applicable Index ceases as of the end of such day to be based on the change in value of existing contracts (the "Old Contracts") and begins as of the beginning of the next day to be based on the change in value of the New Contracts. The "New Contracts" are those contracts which are the nearest designated futures contract which (i) have a termination of trading at least ten Trading Days into the month following the Rollover Period and (ii) have a first "notice day" at least ten Trading Days into the month following the Rollover Period. The "notice day" is the first day on which persons holding a short position on such futures contract must inform the exchange on which such contract is traded that they will deliver under such contract. 36 90 In the case of energy products for which there exist designated futures contracts for delivery in each month of the year, the New Contracts will be different from the Old Contracts. As indicated in the table below, which lists each of the designated contracts, the rebalancing procedure will occur on a less frequent basis for precious metals and base metals, and as a result the New Contracts and Old Contracts for any Rollover Period may be the same. - -------------------------------------------------------------------------------- Table: Benchmark Contracts Underlying Excess Return and Total Return Indices
Applicable No. Commodity Name/Units Delivery Exchange Units per Contract Designated Contract - ------------------------------------------------------------------------------------------------------------------ 1 Aluminum $/MT (Metric Tonne) LME Warehouses LME 25 tonnes Third Wednesday of every March, (High Grade Primary Aluminum) Worldwide June, September, December(1) 2 Copper $/MT LME Warehouses LME 25 tonnes Third Wednesday of every March, (Copper Grade A) Worldwide June, September, December 3 Nickel $/MT LME Warehouses LME 6 tonnes Third Wednesday of every March, (Primary Nickel) Worldwide June, September, December 4 Zinc $/MT LME Warehouses LME 25 tonnes Third Wednesday of every March, (Special High Grade Zinc) Worldwide June, September, December 5 Heating Oil #2, c/gal New York Harbor NYMEX 42,000 gallons Every month 6 Natural Gas $/MM BTU Henry Hub, NYMEX 10,000 MM BTU Every month Louisiana 7 Unleaded Gasoline, c/gal New York Harbor NYMEX 42,000 gallons Every month 8 Light "Sweet" Crude Oil $/BBL Cushing, NYMEX 1,000 bbl Every month Oklahoma 9 Gold $/troy oz COMEX- approved COMEX 100 troy oz February, April, June, August, (.995 fineness) vaults December 10 Silver c/troy oz COMEX- approved COMEX 5,000 troy oz March, May, July, September, (.999 fineness) vaults December 11 Platinum $/troy oz NYMEX-approved NYMEX 50 troy oz January, April, July, October vaults
Additional underlying futures contracts may from time to time be added to the JPM Indices and may thereafter serve as Applicable Indices. Information substantially similar to that disclosed in the preceding table will be disclosed in any Prospectus Supplement relating to such additional Applicable Indices. As discussed above, for JPM Individual Indices and for the Applicable Indices, the replacement of the contracts serving as the basis for the calculation of index change will be effected on a proportionate basis over the five day Rollover Period in order to avoid the risks of effecting such replacement entirely on a single day (e.g., a day on which the applicable market displays unusual volatility). As a result of such process of replacement, the weighting of contracts in the Applicable Indices shall be such that for the Trading Days in any month up to and including the first day of the Rollover Period for such month, the Change(t) (as described above) will be calculated as 100% of the daily change of the underlying Old Contracts. The Change(t) for the second Trading Day of the Rollover Period (assuming no Market Disruption Event) shall be calculated based 80% on the change attributable to the Old Contracts plus 20% on the change for the New Contacts, with similar adjustments made for each day of the Rollover Period. - --------------- (1) The LME trades contracts on every business day for three months and monthly contracts maturing on the third Wednesday of each of the next 12 or more months. The most actively traded contracts are the 3-month forward, the cash, and the contract maturing the third Wednesday of each month. 37 91 Accordingly, the relative weights of the Old Contracts and the New Contacts during any given day of a calendar month for calculation of the Change(t) on such day will be as follows: - -------------------------------------------------------------------------------- Standard Rollover Period
Trading Day Old Contract New Contract of Month Weight % Weight % ---------------------------------------------------------------- ------------ ------------ Roll-over Period 1-4........................................................ 100 0 5.......................................................... 100 0 6.......................................................... 80 20 7.......................................................... 60 40 8.......................................................... 40 60 9.......................................................... 20 80 10........................................................... 0 100 11-month end................................................. 0 100
The occurrence of a Rollover Period does not, by itself, create a change in the value of the Applicable Index. The occurrence of a Rollover Period merely causes the index change calculation, over the course of the Rollover Period, to be calculated using a new underlying futures contract. For example, assuming a constant Old Contract value of $15.00 and a constant New Contract value of $14.00 throughout the Rollover Period (and thus a daily percentage change for each day of 0%) and a starting Applicable Index value of 100, the following indicates the change in the futures-related portion of the value of the Applicable Index (I(t)) during such Rollover Period: - --------------------------------------------------------------------------------
Old Contract New Contract --------------------- --------------------- Index Trading Day Weight % % Change Weight % % Change Change(t)* - ----------- -------- -------- -------- -------- ---------- 5................................. 100 0 0 0 0 6................................. 80 0 20 0 0 7................................. 60 0 40 0 0 8................................. 40 0 60 0 0 9................................. 20 0 80 0 0 10................................. 0 0 100 0 0
* Index change(t) is zero for each day because the percentage price change of the underlying futures contracts is zero for each day However, if a Market Disruption Event occurs during a Rollover Period (i.e., on any day on which a replacement is otherwise scheduled to take place), such replacement will be postponed until the next Trading Day of the Rollover Period on which the Market Disruption Event ceases to be in effect. On the Trading Day such Market Disruption Event ceases to be in effect, the replacement for that day and for all preceding days during which such Market Disruption Event was continuing will be effected. The Change(t) for all Trading Days from the day first subject to a Market Disruption Event to the first Trading Day not subject to a Market Disruption Event shall use the contract weights for the Trading Day on which the Market Disruption Event began. If the Market Disruption Event remains in effect for the remainder of the Rollover Period, the Old Contract will be replaced by the New Contract to the full extent not previously replaced at the end of the next succeeding Trading Day on which such Market Disruption Event ceases to be in effect. The following chart illustrates the replacement process for a Rollover Period including the occurrence of a Market Disruption Event (indicated as an "MDE") on the seventh Trading Day of the month: 38 92 - -------------------------------------------------------------------------------- Example of Rollover Period with Market Disruption Event
Trading Day Old Contract New Contract of Month Weight % Weight % ------------ ------------ ------------ 1-4......................................................... 100 0 5........................................................... 100 0 6........................................................... 80 20 7 (MDE)..................................................... 60 40 8........................................................... 60 40 9........................................................... 20 80 10........................................................... 0 100 11-month end................................................. 0 100
For an Applicable Index which is an Excess Return Index or a Total Return Index, because of the occurrence of the Market Disruption Event on Trading Day 7, the Index would not be officially calculated and no roll would occur. Since no Market Disruption Event occurs on Trading Day 8, an index value is determined for Trading Day 8, and the Change(t) is calculated using the relative contract weights applicable to the Trading Day first subject to the Market Disruption Event (in this example, Trading Day 7) using the index level on Trading Day 6 (the immediately preceding Trading Day not subject to a Market Disruption Event) as I(t-1). THE JPMCI POLICY COMMITTEE Morgan Guaranty has established the JPMCI Policy Committee to advise and make recommendations with respect to the determination of the JPM Indices and, to the extent appropriate, the Applicable Indices. The JPMCI Policy Committee meets on an ad hoc basis at the request of Morgan Guaranty in order to discuss policy matters relating to the operation of the JPM Indices and, to the extent appropriate, the Applicable Indices. The JPMCI Policy Committee will advise Morgan Guaranty with respect to, among other things, the effectiveness of the JPMCI as an appropriate commodity investment benchmark; the effectiveness of the JPMCI as a measure of commodity market performance; the need for changes in the weights, composition, price sources or calculation methodology of the JPMCI or the Applicable Indices; the need for creation or elimination of sub-indices of the JPMCI or other commodity indices, drawing either from the existing components of the JPMCI or new commodity components and the treatment of issues relating to market disruptions issues. Morgan Guaranty may at any time act at its discretion to make any modifications to the JPMCI based on recommendations of the JPMCI Policy Committee. Membership of the JPMCI Policy Committee will be subject to change from time to time, and no member will be permitted to purchase or hold any ComPS during his or her term on the Committee. At the time of this Prospectus, the JPMCI Policy Committee consists of the following members: 39 93 JPMCI POLICY COMMITTEE
NAME TITLE FUNCTION - ------------------------------ -------------------------- -------------------------- Stephen Sinacore (Chairman)... Managing Director, J.P. Head of Global Commodities Morgan Victor S. Filatov............. President, Smith Barney Chief Investment Officer Global Capital Management Inc. Martin B. Greenberg........... Chairman of the Board and Former Chairman of the President of Sterling Commodities Exchange, Inc Commodities Philip K. Verleger, Jr........ Vice President, Charles Economic Consultant and River Associates former Visiting Fellow, Institute of International Economics Jeanne Feldhusen.............. Managing Director, J.P. Head of Fixed Income Morgan Research
Each of the futures contracts included in the JPM Indices must satisfy each of the following JPMCI Inclusion Criteria: the futures contracts must (i) be priced in U.S. dollars, or if priced in a foreign currency, the exchange on which the contract is traded must publish an official exchange rate for conversion of the futures price into U.S. dollars and such currency must be freely convertible into U.S. dollars; (ii) be traded on a regulated futures exchange located in the United States, Canada, the United Kingdom, Japan, Singapore or an O.E.C.D. country and (iii) have a minimum annual trading volume of 300,000 contracts or $500,000,000 for all contract months. If a contract included in the JPM Indices ceases to satisfy the JPMCI Inclusion Criteria, the JPMCI Policy Committee shall meet to consider the substitution of a replacement futures contract for such contract. If no appropriate replacement contract can be found, the JPMCI Policy Committee may recommend the removal of such contract from the JPM Indices. Morgan Guaranty reserves the right to act at its discretion to make any modifications to the JPM Indices based on the recommendations of the JPMCI Policy Committee. CHANGES IN JPM INDICES DESIGNATED CONTRACTS Before implementing a change in definition or price sources for a designated contract in the JPM Indices, the JPMCI Policy Committee shall consider the following: (i) the effectiveness of the JPMCI and JPM Indices as appropriate commodity investment benchmarks, (ii) the effectiveness of the JPMCI and JPM Indices as a measure of commodity market performance and (iii) the respective contract volumes, U.S. dollar volumes, open interest, liquidity and transaction costs of the proposed replacement and existing benchmark contracts. The JPMCI Policy Committee may recommend a change in one or more of the benchmark contracts underlying the JPM Indices if, in the majority opinion of the committee members, the proposed replacement benchmark contract better meets the objectives set forth in clauses (i) and (ii) above and has higher annual contract volumes or U.S. dollar volumes. However, as noted above, Morgan Guaranty may cause a change in one or more of such contracts if any increased cost or tax is imposed on holding or trading such contracts if such contract meets the applicable inclusion rules even though such contract does not have higher annual contract volumes or U.S. dollar volumes. After consideration of the above (and other) issues the JPMCI Policy Committee may recommend to Morgan Guaranty a change in the composition of the JPM Indices. Morgan Guaranty reserves the right to act at its discretion to make any modifications to the JPMCI based on recommendations of the policy committee. Such changes, including the implementation date and details, shall be published and disseminated by Morgan Guaranty through its usual research distribution network. 40 94 THE APPLICABLE INDEX The Prospectus Supplement for any series of ComPS will specify and provide details with respect to the Applicable Index and the commodity underlying the Applicable Index. As discussed above, the Applicable Index will be an Excess Return Index calculated in the same manner as those of the Excess Return JPM Indices, a Total Return Index calculated in the same manner as those of the Total Return JPM Indices or a Price Reference Index. Each such Prospectus Supplement will also contain information with regard to the historical performance of the Applicable Index. DESCRIPTION OF THE RELATED NOTES The Related Notes may be issued from time to time in respect of one or more series of Securities. The following description sets forth certain general terms and provisions of each Related Note to which any series of Securities may relate. The particular terms of the Related Note included in any Prospectus Supplement and the extent, if any, to which such general provisions may apply to such Related Note will be described in the Prospectus Supplement relating to the Securities of such series. The following description does not purport to be complete and is subject to, and is qualified in its entirety by reference to, any Prospectus Supplement relating to any Related Note and the other documents incorporated by reference herein. Certain capitalized terms are used herein as defined in the relevant Related Note. GENERAL Each Related Note will be an unsecured, unsubordinated obligation of Morgan Guaranty. No Related Note will limit the principal amount of Related Notes that may be issued by Morgan Guaranty. The financial terms of the Related Notes, including, among other things, the maturity and principal of and interest and any premium on any Related Note (or the method of calculating any of the foregoing), will be set forth in the Prospectus Supplement related thereto and will mirror the aggregate financial terms of the related series of Securities, including as to timing and amount of payments. References made herein to the Related Note refer to each Related Note that may be issued from time to time. No Related Note will contain any provisions that would limit the ability of Morgan Guaranty to incur indebtedness. Reference is made to any Prospectus Supplement relating to the Related Note offered thereby for information with respect to any deletions from, modifications of or additions to the events of default or covenants of Morgan Guaranty applicable to the Related Note that is referred to therein. Under terms of each Related Note, Morgan Guaranty will have the ability to issue Related Notes with terms different from those of Related Notes previously issued without the consent of the holders of previously issued Related Notes, in an aggregate principal amount determined by Morgan Guaranty. SUBORDINATION The Related Notes will be subordinated and junior in right of payment to certain other indebtedness of subsidiaries of Morgan Guaranty to the extent set forth in each Prospectus Supplement that will accompany this Prospectus. NOTE EVENTS OF DEFAULT If any Note Event of Default shall occur with respect to any Related Note and be continuing, the Property Trustee on behalf of holders of Securities of the applicable series will have the right to declare the principal of and the interest on such Related Note and any other amounts payable under the applicable Related Note to be forthwith due and payable and to enforce its other rights as a creditor with respect to such Related Note as applicable. A "Note Event of Default" with respect to any Related Note is defined as: (i) default for 30 days in the payment of interest on such Related Note; (ii) default in payment of the principal amount at Stated Maturity or any amount payable upon any redemption of such Related Note; (iii) failure by Morgan Guaranty for 90 days after receipt of notice to it by the Trust to comply with any of its covenants or agreements contained in the relevant Related Note; and (iv) certain events of bankruptcy, 41 95 insolvency, receivership or reorganization involving Morgan Guaranty or certain affiliates. If any Note Event of Default described in clause (i), (ii) or (iii) above occurs and is continuing, the Property Trustee, on behalf of holders of Securities of the applicable series, may declare the relevant Related Note to be due and payable and, upon any such declaration, the relevant Related Note shall become immediately due and payable along with any accrued and unpaid interest. If any Note Event of Default described in clause (iv) above occurs and is continuing, all Related Notes shall become immediately due and payable along with any accrued and unpaid interest. Under certain conditions the Property Trustee, on behalf of holders of Securities of the applicable series, may waive certain past defaults and their consequences with respect to such Related Note. Pursuant to the Declaration, the holders of Preferred Securities in certain circumstances have the right to direct the Property Trustee to exercise on their behalf certain of its rights as the holder of the relevant Related Note. A default or event of default under a Related Note corresponding to one series of Securities will not constitute a default or event of default under a Related Note corresponding to any other series of Securities. MODIFICATION OF ANY RELATED NOTE Morgan Guaranty and the Property Trustee may, without the consent of the holders of any Securities, enter into senior notes supplemental to any Related Note for, among others, one or more of the following purposes: (i) to evidence the succession of another person to, and the assumption by such successor of, Morgan Guaranty's obligations under such Related Note; (ii) to add covenants of Morgan Guaranty, or surrender any rights of Morgan Guaranty, for the benefit of the Property Trustee; and (iii) to cure any ambiguity, or correct any inconsistency in, such Related Note. Each Related Note will contain provisions permitting Morgan Guaranty and the Property Trustee, with the consent of the holders of the not less than a majority in Principal Amount of the outstanding Preferred Securities relating to such Related Note, to modify such Related Note; provided that no such modification may, without the consent of the holders of all outstanding Preferred Securities affected thereby, (i) reduce the amount of Preferred Securities of such series the holders of which must consent to any amendment, supplement or waiver of such Related Note; (ii) reduce the rate of or extend the time for the payment of interest on the Related Note; (iii) alter the method of calculation of, or reduce, the amount paid at Stated Maturity or extend the Stated Maturity of such Related Note (other than pursuant to the terms of such Related Note) or (iv) make any Related Note payable in money or property other than that stated in the Related Note. GOVERNING LAW Each Related Note will be construed in accordance with the laws of the State of New York. MISCELLANEOUS Related Notes will not be deposits or other obligations of a bank and will not be insured by the Federal Deposit Insurance Corporation or any other federal agency. DESCRIPTION OF THE GUARANTEE Set forth below is a summary of information concerning the Guarantee that will be executed and delivered by J.P. Morgan for the benefit of the holders, from time to time, of Preferred Securities. The terms of the Guarantee will be those set forth in the Guarantee. The summary set forth herein does not purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the form of Guarantee, which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part. The Guarantee will be separately qualified under the Trust Indenture Act and will be held by First Trust of New York, National Association, acting in its capacity as indenture trustee with respect thereto. 42 96 GENERAL Pursuant to the Guarantee, J.P. Morgan will irrevocably and unconditionally agree, on a subordinated basis to the extent set forth therein, to pay in full to the holders of the applicable Preferred Securities the Guarantee Payments (as defined herein), without duplication of amounts paid by the Trust, as and when due, regardless of any defense, right of set-off or counterclaim that the Trust may have or assert. The following payments with respect to each series of Preferred Securities (the "Guarantee Payments"), to the extent not paid by the Trust, will be subject to the Guarantee (without duplication): (i)(A) any accrued and unpaid distributions that are required to be paid on such Preferred Securities and (B) in the case of ComPS, the ComPS Early Redemption Price or the ComPS Redemption Price, as applicable, and in the case of all other Preferred Securities, the Preferred Redemption Price, in each case including all accrued and unpaid distributions, but if and only if to the extent that, in each case, Morgan Guaranty has made payment to the Trust, on behalf of holders of Securities of such series, of interest or principal on the Related Note associated with such Preferred Securities, and (ii) upon a voluntary or involuntary dissolution of the Trust (other than in connection with the redemption of all of the Preferred Securities upon maturity or redemption of the applicable Related Note) the lesser of (A) the Liquidation Distribution with respect to such Preferred Securities to the extent the Trust has funds available therefor and (B) the amount of assets of the Trust consisting of the Related Note associated with such Preferred Securities and the proceeds thereof remaining available for distribution to holders of such Preferred Securities upon such dissolution of the Trust. J.P. Morgan's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by J.P. Morgan to the holders of Preferred Securities or by causing the Trust to pay such amounts to such holders. The Guarantee will be a guarantee with respect to the Preferred Securities of each series issued by the Trust from the time of issuance of such Preferred Securities, but will not apply to any payment of distributions except to the extent Morgan Guaranty has made the related payment on the Related Note underlying such Preferred Securities. If Morgan Guaranty does not make interest payments on the applicable Related Note, the Trust will not pay distributions on the related Preferred Securities and will not have funds available therefor. See "Description of the Related Notes". So long as any Preferred Securities remain outstanding, J.P. Morgan will not declare or pay dividends on, or redeem, purchase, acquire or make a distribution or liquidation payment with respect to, any of its common stock or preferred stock or make any Guarantee Payment with respect thereto if at such time (i) J.P. Morgan shall be in default with respect to its Guarantee Payments or other payment obligations under the Guarantee or (ii) there shall have occurred any event of default under the Declaration; provided, however, that the foregoing restrictions shall not apply to (a) dividends, redemptions, purchases, acquisitions, distributions or payments made by J.P. Morgan by way of issuance of shares of its capital stock, (b) payments of accrued dividends by J.P. Morgan upon the redemption, exchange or conversion of any preferred stock of J.P. Morgan as may be outstanding from time to time in accordance with the terms of such preferred stock, (c) cash payments made by J.P. Morgan in lieu of delivering fractional shares upon the redemption, exchange or conversion of any preferred stock of J.P. Morgan as may be outstanding from time to time in accordance with the terms of such preferred stock, (d) repurchases, redemptions or other acquisitions of shares of capital stock of J.P. Morgan in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors of consultants, or (e) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of such rights pursuant thereto. MODIFICATION OF THE GUARANTEE; ASSIGNMENT Except with respect to any changes that do not adversely affect the rights of holders of Preferred Securities (in which case no consent will be required), the Guarantee may be amended by J.P. Morgan and the Property Trustee only with the prior approval of the holders of not less than a majority in aggregate Principal Amount at such time of the holders of each series of affected Preferred Securities, voting as a single class. The manner of obtaining any such approval of holders of such Preferred Securities will be set 43 97 forth in an accompanying Prospectus Supplement. All guarantees and agreements contained in the Guarantee shall bind the successors, assignees, receivers, trustees and representatives of J.P. Morgan and shall inure to the benefit of the holders of the applicable Preferred Securities then outstanding. REMEDIES OF HOLDERS The Guarantee will be deposited with First Trust of New York, National Association, as indenture trustee, to be held for the benefit of holders of the Preferred Securities. First Trust of New York, National Association shall enforce such Guarantee on behalf of the holders of the Preferred Securities. The holders of not less than a majority in aggregate principal amount of the Preferred Securities of each affected series have the right to direct the time, method and place of conducting any proceeding for any remedy available in respect of the Guarantee, including the giving of directions to First Trust of New York, National Association. If First Trust of New York, National Association fails to enforce the Guarantee as above provided, any holder of Preferred Securities may institute a legal proceeding directly against J.P. Morgan to enforce its rights under such Guarantee, without first instituting a legal proceeding against the Trust or any other person or entity. Subject to the award by a court of competent jurisdiction of legal fees in connection with any such legal proceeding, each holder will be required to bear its own costs in connection with instituting a legal proceeding directly against J.P. Morgan, which cost may be significant. TERMINATION OF THE GUARANTEE The Guarantee will terminate as to the applicable Preferred Securities upon full payment of the ComPS Early Redemption Price, the ComPS Redemption Price, the Preferred Redemption Price of all such Preferred Securities or upon full payment of the amounts payable upon liquidation of the Trust, as applicable. The Guarantee will continue to be effective or will be reinstated as to any Preferred Securities, as the case may be, if at any time any holder of the applicable Preferred Securities must restore payment of any sums paid under such Preferred Securities or the Guarantee (e.g., upon a subsequent bankruptcy of Morgan Guaranty or J.P. Morgan). STATUS OF THE GUARANTEE The Guarantee will constitute an unsecured obligation of J.P. Morgan and will rank (i) subordinate and junior in right of payment to all other liabilities of J.P. Morgan, (ii) pari passu with the most senior preferred or preference stock outstanding as of the date hereof of J.P. Morgan and with respect to obligations under other guarantee agreements which J.P. Morgan may enter into from time to time to the extent that such agreements provide for comparable guarantees by J.P. Morgan of payment on other preferred securities issued by the predecessor of the Trust or by other trusts sponsored by J.P. Morgan and (iii) senior to J.P. Morgan's common stock. The terms of the Preferred Securities provide that each holder of Preferred Securities by acceptance thereof agrees to the subordination provisions and other terms of the applicable Guarantee. The Guarantee will constitute a guarantee of payment and not of collection (that is, the guaranteed party may institute a legal proceeding directly against the guarantor to enforce its rights under the Guarantee without instituting a legal proceeding against any other person or entity). GOVERNING LAW The Guarantee will be governed by and construed and interpreted in accordance with the laws of the State of New York. DESCRIPTION OF THE RELATED NOTE GUARANTEE Set forth below is a summary of information concerning the Related Note Guarantee that will be executed and delivered by J.P. Morgan in respect of each Related Note for the benefit of the Property Trustee, for the benefit of holders of Securities of various series. The terms of the Related Note Guarantee will be those set 44 98 forth in the Related Note Guarantee. The summary set forth herein does not purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the form of the Related Note Guarantee, which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part. The Related Note Guarantee will be held by the Property Trustee for the benefit of holders of the Securities. GENERAL Pursuant to the Related Note Guarantee, J.P. Morgan will irrevocably and unconditionally agree, on a subordinated basis to the extent set forth therein, to pay in full to the Property Trustee, for the benefit of holders of Securities, as the holder of each Related Note, the Related Note Guarantee Payments (as defined herein), without duplication of amounts paid by Morgan Guaranty, as and when due, regardless of any defense, right of set-off or counterclaim that Morgan Guaranty may have or assert with respect to the obligation to make such Related Note Guarantee Payments. The following payments with respect to the applicable Related Note (the "Related Note Guarantee Payments"), to the extent not paid by Morgan Guaranty, will be subject to the Related Note Guarantee (without duplication): (i) any accrued and unpaid distributions that are required to be paid on such Related Note and (ii) any principal payable by Morgan Guaranty, as and when payable by Morgan Guaranty. J.P. Morgan's obligation to make a Related Note Guarantee Payment may be satisfied by direct payment of the required amounts by J.P. Morgan to the Property Trustee, for the benefit of holders of Securities, or by causing Morgan Guaranty to pay such amounts to the Property Trustee, for the benefit of holders of Securities. The Related Note Guarantee will be a full and unconditional guarantee with respect to each Related Note issued by Morgan Guaranty from the time of issuance of such Related Note. MODIFICATION OF THE RELATED NOTE GUARANTEE; ASSIGNMENT The Related Note Guarantee may be amended only with the prior approval of the Property Trustee; provided that no such amendment shall adversely affect the holders of the Preferred Securities without the consent of a majority in aggregate Principal Amount at such time of the holders of Preferred Securities of each affected series, voting as a single class. All guarantees and agreements contained in the Related Note Guarantee shall bind the successors, assignees, receivers, trustees and representatives of J.P. Morgan and shall inure to the benefit of the Property Trustee, for the benefit of holders of Securities of each series, as the holder of each Related Note then outstanding. REMEDIES OF THE TRUST AND HOLDERS OF COMPS The Trust has the sole right to direct the time, method and place of conducting any proceeding providing for any remedy available to it in respect of the Related Note Guarantee. Pursuant to the Declaration, the holders of Preferred Securities in certain circumstances (including a payment default under the Related Note Guarantee by J.P. Morgan) have the right to direct the Trust, through the Property Trustee, to exercise certain of its rights as the holder of the Related Note Guarantee. TERMINATION OF THE RELATED NOTE GUARANTEE The Related Note Guarantee will terminate as to any Related Note upon full payment of the Related Note Redemption Price (as defined below) of such Related Note. The Related Note Guarantee will continue to be effective or will be reinstated with respect to any Related Note, as the case may be, if at any time the Property Trustee, on behalf of holders of Securities of each applicable series, must restore payment of any sums paid under the Related Note or under the Related Note Guarantee with respect to such Related Note (e.g., upon a subsequent bankruptcy of J.P. Morgan). STATUS OF THE RELATED NOTE GUARANTEE The Related Note Guarantee will constitute an unsecured obligation of J.P. Morgan and will rank (i) subordinate and junior in right of payment to all other liabilities of J.P. Morgan, (ii) pari passu with the 45 99 most senior preferred or preference stock outstanding as of the date hereof of J.P. Morgan, and (iii) senior to J.P. Morgan's common stock. The terms of the Preferred Securities provide that each holder of Preferred Securities by acceptance thereof agrees to the subordination provisions and other terms of the Related Note Guarantee. The Related Note Guarantee will constitute a guarantee of payment and not of collection (that is, the Property Trustee may institute a legal proceeding directly against J.P. Morgan to enforce its rights under the Related Note Guarantee without instituting a legal proceeding against Morgan Guaranty). GOVERNING LAW The Related Note Guarantee will be governed by and construed and interpreted in accordance with the laws of the State of New York. PLAN OF DISTRIBUTION The Trust may sell the Preferred Securities in one or more of the following ways from time to time: (i) to or through underwriters or dealers, (ii) directly to purchasers or (iii) through agents. The Prospectus Supplement with respect to any Offered Securities will set forth (a) the terms of the offering of the Offered Securities, including the name or names of any underwriters, dealers or agents, (b) the purchase price of the Offered Securities and the proceeds to the Trust from such sale, (c) any underwriting discounts and commissions or agency fees and other items constituting underwriters' or agents' compensation, (d) any initial public offering prices, (e) any discounts or concessions allowed or paid to dealers and (f) any securities exchange on which such Offered Securities may be listed. Any initial public offering price, discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. If underwriters are used in the sale, the Offered Securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The Offered Securities may be offered to the public either through underwriting syndicates represented by one or more managing underwriters or directly by one or more firms acting as underwriters. The underwriter or underwriters with respect to a particular underwritten offering of Offered Securities will be named in the Prospectus Supplement relating to such offering and, if an underwriting syndicate is used, the managing underwriter or underwriters will be set forth on the cover of such Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement relating thereto, the obligations of the underwriters to purchase the Offered Securities will be subject to certain conditions precedent, and the underwriters will be obligated to purchase all the Offered Securities if any are purchased. If dealers are utilized in the sale of Offered Securities, the Trust will sell such Offered Securities to the dealers as principals. The dealers may then resell such Offered Securities to the public at varying prices to be determined by such dealers at the time of resale. The names of the dealers and the terms of the transaction will be set forth in the Prospectus Supplement relating thereto. Any series of Preferred Securities may be sold from time to time either directly by the Trust or by agents of the Trust designated by the Trust. Any agent involved in the offer or sale of the Offered Securities with respect to which this Prospectus is delivered will be named, and any commissions payable by the Trust to such agent will be set forth, in the applicable Prospectus Supplement relating thereto. Unless otherwise indicated in the applicable Prospectus Supplement, any such agent will be acting on a best efforts basis for the period of its appointment. The Preferred Securities may be sold directly by the Trust to institutional investors or others who may be deemed to be underwriters within the meaning of the Securities Act with respect to any resale thereof. The terms of any such sales will be described in the Prospectus Supplement relating thereto. If so indicated in the Prospectus Supplement, the Trust will authorize agents, underwriters or dealers to solicit offers from certain types of institutions to purchase Offered Securities from the Trust at the public 46 100 offering price set forth in the Prospectus Supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. Such contracts will be subject only to those conditions set forth in the Prospectus Supplement, and the Prospectus Supplement will set forth the commission payable for solicitation of such contracts. Agents, dealers and underwriters may be entitled under agreements with J.P. Morgan or the Trust to indemnification by J.P. Morgan or the Trust against certain civil liabilities, including liabilities under the Securities Act, or to contribution with respect to payments that such agents, dealers or underwriters may be required to make in respect thereof. Agents, dealers and underwriters may be customers of, engage in transactions with, or perform services for J.P. Morgan or the Trust in the ordinary course of business. Each series of Offered Securities will be a new issue of securities and will have no established trading market. Any underwriters to whom Offered Securities are sold for public offering and sale may make a market in such Offered Securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. The Offered Securities may or may not be listed on a national securities exchange. No assurance can be given that there will be a market for the Offered Securities. This Prospectus and the related Prospectus Supplement may be used by direct or indirect wholly-owned subsidiaries of J.P. Morgan in connection with offers and sales related to secondary market transactions in the ComPS. Such subsidiaries may act as principal or agent in such transactions. Such sales will be made at prices related to prevailing market prices at the time of a sale. LEGAL MATTERS Certain matters of Delaware law relating to the validity of the Securities will be passed upon by Morris, Nichols, Arsht & Tunnell, Wilmington, Delaware, special Delaware counsel to the Trust. The validity of the Securities offered hereby will be passed upon by Gene A. Capello, Vice President and Assistant General Counsel of J.P. Morgan, and by Cravath, Swaine & Moore, New York, New York, counsel for any underwriters, selling agents and certain other purchasers. EXPERTS The audited financial statements contained in J.P. Morgan's Annual Report on Form 10-K for the year ended December 31, 1996 (included in J.P. Morgan's Annual Report to Stockholders), are incorporated by reference in this Prospectus in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 47 101 ANNEX I GLOSSARY OF TERMS The following are abbreviated definitions of certain capitalized terms used in the Prospectus Supplement. The Declaration, the Guarantee, the Related Note Guarantee and any Related Note may contain more complete definitions of certain of the terms defined herein, as well as definitions of certain other terms not defined herein, and reference should be made to the Declaration, the Guarantee, the Related Note Guarantee and the relevant Related Note, as applicable, for complete definitions of such terms. BENCHMARK CONTRACTS.....with respect to any Applicable Index, the futures contracts on the relevant commodity the change in value of which serve as the basis for calculating the change in value of such Applicable Index. BULLION COMPS...........ComPS for which the Applicable Index is a Price Reference Index in which all distributions and the Bullion ComPS Principal Amount are indexed to the value at such time in U.S. dollars (the "Dollar Equivalent Value") of bullion (i.e., gold, silver, platinum or palladium). BULLION COMPS PRINCIPAL AMOUNT........the Dollar Equivalent Value of the applicable portion of the applicable fixing price for the applicable amount of the applicable bullion commodity at such time. BUSINESS DAY............any day other than a Saturday, Sunday or any other day on which banking institutions in New York, New York, are permitted or required by any applicable law to close. CODE....................the Internal Revenue Code of 1986, as amended. COLLATERAL RETURN COMPONENT...............with respect to any Total Return ComPS, a component of the value of the Applicable Index computed on the fluctuating index value of the Applicable Index at the most recent auction rate for 3-month U.S. Treasury Bills or any successor rate thereto with a maturity of 3 months or less or, if no such rate has been determined in the 13 days prior to the date of determination, as Morgan Guaranty may determine in its reasonable discretion. COMMISSION..............the Securities and Exchange Commission. COMMON SECURITIES.......the common securities of any series of the Trust representing an undivided beneficial interest in the corresponding series Related Note, to be owned by J.P. Morgan. DECLARATION.............the Amended and Restated Declaration of Trust among J.P. Morgan, as sponsor, and the trustees named therein dated as of October 10, 1997. DISTRIBUTIONS...........if any, as specified in the applicable Prospectus Supplement. DTC.....................the Depository Trust Company. EARLY REDEMPTION VALUE...................The average for the 10 days of the Early Determination Period of the discounted present value of the indexed Principal Amount of the ComPS, as set forth under "Description of ComPS--Early Redemption Upon the Occurrence of a Special Event or at the Election of the Holders of the ComPS". ERISA...................the Employee Retirement Income Security Act of 1974, as amended. A-1 102 EXCHANGE ACT............the Securities Exchange Act of 1934, as amended. FACE AMOUNT.............as set forth in the applicable Prospectus Supplement. FACTOR..................as specified in the applicable Prospectus Supplement, the amount by which the Redemption Value is reduced to account for certain costs of issuing Excess Return or Total Return ComPS. GUARANTEE...............the Guarantee Agreement executed by J.P. Morgan on behalf of the holders of each series of Preferred Securities. GUARANTEE PAYMENTS......without duplication, (i)(A) any accrued and unpaid distributions that are required to be paid on the Preferred Securities and (B) the Preferred Redemption Price, but if and only to the extent that, in each of case, Morgan Guaranty has made a payment of interest or principal, as the case may be, on the Related Note and (ii) upon a Liquidation Event (other than in connection with the redemption of all the Preferred Securities upon the maturity or redemption of the applicable Related Note), the lesser of (A) the Liquidation Distribution to the extent the Trust has funds available therefor, and (B) the amount of assets of the Trust remaining available for distribution to holders of the Preferred Securities upon such Liquidation Event. INITIAL HOLDERS.........holders who purchase any Preferred Securities upon original issuance. INTEREST PAYMENT DATE...with respect to any Related Note, as specified in the applicable Prospectus Supplement. INVESTMENT COMPANY EVENT...................the receipt by the Trust of an opinion of a nationally recognized independent counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation, a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority or the expiration or revocation of any applicable exemption obtained by the Trust (a "Change in 1940 Act Law"), there is more than an insubstantial risk that the Trust is or will be considered an "investment company" that is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of this Prospectus. IRS.....................Internal Revenue Service. ISSUE DATE..............as set forth in the applicable Prospectus Supplement. LIQUIDATION DISTRIBUTION............in respect of any Liquidation Event, the sum of (a) the Early Redemption Value or stated liquidation preference, as applicable, plus (b) the amount of accrued and unpaid distributions on such Preferred Security to but excluding the date of payment. LIQUIDATION EVENT.......any dissolution of the Trust, whether voluntary or involuntary. NASDAQ..................The Nasdaq Stock Market. 1940 ACT................the Investment Company Act of 1940, as amended. NOTE EVENT OF DEFAULT.................(i) default for 30 days in the payment of interest on the applicable Related Note; (ii) default in payment of principal amount at the Stated Maturity or any amount payable upon any redemption of the applicable Related Note; A-2 103 (iii) failure by Morgan Guaranty for 90 days after receipt of notice to it to comply with any of its covenants or agreements contained in the applicable Related Note; and (iv) certain events of bankruptcy, insolvency, receivership or reorganization involving Morgan Guaranty or certain affiliates. PREFERRED REDEMPTION PRICE...................On any date of redemption, an amount equal to (i) the Principal Amount per Preferred Security plus (ii) accrued and unpaid distributions to but excluding the date of redemption. PREFERRED SECURITIES....Preferred Securities of any series of the Trust, representing an undivided beneficial interest in the corresponding series Related Note. PRINCIPAL AMOUNT........at any time, (i) in the case of any Preferred Security, the Bullion ComPS Principal Amount, Redemption Value, Early Redemption Value or stated liquidation preference thereof, as applicable, as if determined as of such time, and (ii) in the case of any Related Note, the principal amount thereof at such time determined pursuant to the terms thereof. REDEMPTION DATE.........either the Stated Maturity or an Early Redemption Date, as applicable. REDEMPTION VALUE........with respect to any series of ComPS, the average for the Determination Period of the Principal Amount thereof, as described under "Description of ComPS--Calculation of Redemption Value". RELATED NOTE............an unsecured, unsubordinated debt obligation of Morgan Guaranty, as described in the applicable Prospectus Supplement. SECURITIES..............the Common Securities and the Preferred Securities. SECURITIES ACT..........the Securities Act of 1933, as amended. SENIOR INDEBTEDNESS.....with respect to Morgan Guaranty, as specified in the applicable Prospectus Supplement. SPECIAL EVENT...........either a Tax Event or an Investment Company Event. SPECIAL REDEMPTION......if specified in the applicable Prospectus Supplement, upon the occurrence and during the continuation of a Special Event, Morgan Guaranty will have the right to redeem the applicable Related Note for cash at the Related Note Redemption Price, with the result that the Trust will redeem Preferred Securities and Common Securities of the applicable series on a Pro Rata Basis for cash at the Preferred Redemption Price. SPECIAL REDEMPTION DATE....................any date in respect of which upon the occurrence and continuation of a Tax Event or an Investment Company Event, Morgan Guaranty shall have called for redemption in whole or in part the Related Notes, and the Trust shall have called for redemption in whole or in part the Preferred Securities and Common Securities of the applicable series. STATED MATURITY.........with respect to any series of Preferred Securities, as set forth in the applicable Prospectus Supplement. TAX COUNSEL.............Cravath, Swaine & Moore, special tax counsel to J.P. Morgan and the Trust. TAX EVENT...............the receipt by the Trust of an opinion of nationally recognized independent tax counsel experienced in such matters (a "Tax Opinion") to the effect A-3 104 that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to, or change in, an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the theretofore generally accepted position or (d) any action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated, issued or announced or which interpretation or pronouncement is issued or announced or which action is taken, in each case on or after the date of this Prospectus Supplement, that there is more than an insubstantial risk that at such time or within 90 days of the date thereof (i) the Trust is or would be subject to United States Federal income tax with respect to income accrued or received on any Related Note, (ii) the interest payable on any Related Note is not or would not be deductible by Morgan Guaranty for United States Federal income tax purposes, (iii) the contingent principal in excess of the Face Amount of any series of Preferred Securities (if any) payable on any Related Note is not or would not be deductible by Morgan Guaranty for United States Federal income tax purposes or (iv) the Trust is or would be subject to more than a de minimis amount of other taxes, duties or other governmental charges. TRADING DAY.............any day on which open-outcry trading on either the NYMEX or the LME is scheduled to occur or occurs. TRUST...................J.P. Morgan Index Funding Company I. TRUST INDENTURE ACT.....the Trust Indenture Act of 1939, as amended. A-4 105 ====================================================== NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY J.P. MORGAN, THE TRUST OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF J.P. MORGAN, OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. ------------------------ TABLE OF CONTENTS PROSPECTUS SUPPLEMENT
PAGE ----- Summary of the Offering........................ S-4 The Offering................................... S-5 Risk Factors................................... S-10 J.P. Morgan & Co. Incorporated................. S-19 J.P. Morgan Index Funding Company I............ S-19 Use of Proceeds................................ S-24 Description of the ComPS....................... S-25 Description of the Related Note................ S-34 Description of the Guarantee................... S-36 Description of the Related Note Guarantee...... S-38 Effect of Obligations Under the Guarantee, the Related Note Guarantee and the Related Note......................................... S-40 United States Federal Income Taxation.......... S-41 ERISA Considerations........................... S-44 Underwriting................................... S-46 Legal Matters.................................. S-47 Experts........................................ S-47
ANNEX I Glossary of Terms.............................. A-1
PROSPECTUS Available Information.......................... 2 Incorporation of Certain Documents by Reference.................................... 2 J.P. Morgan & Co. Incorporated................. 3 J.P. Morgan Index Funding Company I............ 6 Use of Proceeds................................ 12 Consolidated Ratios of J.P. Morgan............. 12 Description of All Securities.................. 12 Description of the ComPS....................... 13 Risk Factors with Respect to All Preferred Securities................................... 23 Risk Factors with Respect to ComPS............. 24 The Underlying Markets......................... 30 The JPM Indices................................ 34 Description of the Related Notes............... 41 Description of the Guarantee................... 42 Description of the Related Note Guarantee...... 44 Plan of Distribution........................... 46 Legal Matters.................................. 47 Experts........................................ 47
ANNEX I Glossary of Terms.............................. A-1
====================================================== ====================================================== SERIES [B] COMMODITY-INDEXED PREFERRED SECURITIES INDEXED TO THE JPMCI CRUDE OIL TOTAL RETURN INDEX J.P. MORGAN INDEX FUNDING COMPANY I GUARANTEED TO THE EXTENT SET FORTH HEREIN BY J.P. MORGAN & CO. INCORPORATED PROSPECTUS SUPPLEMENT [ ] , 1997 ====================================================== 106 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS] SUBJECT TO COMPLETION, DATED OCTOBER [ ], 1997 PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED OCTOBER [ ], 1997) COMMODITY-INDEXED PREFERRED SECURITIES (COMPS(SM)), SERIES [B] J.P. MORGAN INDEX FUNDING COMPANY I [2.5]% SERIES [B] PREFERRED SECURITIES INDEXED TO THE JPMCI CRUDE OIL TOTAL RETURN INDEX GUARANTEED TO THE EXTENT SET FORTH HEREIN BY J.P. MORGAN & CO. INCORPORATED ------------------------ The [2.5]% Series [B] Preferred Securities (each, a "Series [B] Preferred Security", and collectively, the "ComPS") offered hereby are being issued by J.P. Morgan Index Funding Company I, a statutory business trust formed under the laws of the State of Delaware (the "Trust"). The ComPS represent undivided beneficial preferred interests in certain assets of the Trust consisting of the Related Note (as defined below) and the proceeds thereof. Each Series [B] Preferred Security will have an initial principal amount of [$25] (the "Face Amount"), and thereafter, the change in value of the principal amount per Series [B] Preferred Security will be indexed to the change in value of the JPMCI Crude Oil Total Return Index (the "Applicable Index"), which is calculated based on the change in value of certain crude oil futures contracts included from time to time in the JPM Indices (such contracts, from time to time, the "Benchmark Crude Oil Contracts") plus a component of collateral yield computed on such fluctuating index value at the most recent auction rate for 3-month U.S. Treasury Bills or certain successor rates thereto (the "Collateral Yield Component"), reduced by a factor designed to offset the costs of issuing and hedging the indexation of the ComPS (the "Factor"). J.P. Morgan & Co. Incorporated, a Delaware corporation ("J.P. Morgan"), will own all the common securities (the "Series [B] Common Securities" and, together with the ComPS, the Series [B] Securities) representing undivided beneficial interests in certain assets of the Trust consisting of the Related Note and the proceeds thereof. The Trust exists for the sole purpose of issuing the Series [B] Securities and investing the proceeds thereof in a [2.5]% Related Note Due , [2000] (the "Related Note") of Morgan Guaranty Trust Company of New York, a trust company with full banking powers organized under the laws of the State of New York and a wholly-owned subsidiary of J.P. Morgan ("Morgan Guaranty"), and issuing similar preferred securities (the "Preferred Securities") and common securities (the "Common Securities" and, together with the Preferred Securities, the "Securities") of separate series and investing the proceeds thereof in similar notes in the future. SEE "RISK FACTORS" ON PAGE S-10 FOR CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE COMPS. THE COMPS ARE NOT FUTURES CONTRACTS AND DO NOT REPRESENT AN ACTUAL INVESTMENT IN FUTURES CONTRACTS. THE REDEMPTION VALUE (AS DEFINED BELOW) OF THE COMPS IS DIRECTLY LINKED TO THE PERFORMANCE OF THE JPMCI CRUDE OIL TOTAL RETURN INDEX, REDUCED BY THE FACTOR. AS A RESULT, THE REDEMPTION VALUE PER SERIES [B] PREFERRED SECURITY MAY BE MORE OR LESS THAN THE FACE AMOUNT AND MAY BE MORE OR LESS THAN THE RETURN FROM AN ACTUAL INVESTMENT IN THE BENCHMARK CRUDE OIL CONTRACTS. SEE "DESCRIPTION OF THE COMPS". "ComPS", "JPMCI" and the "J.P. Morgan Commodity Index" are service marks of J.P. Morgan & Co. Incorporated. The ComPS have been approved for listing on the American Stock Exchange (the "Amex") under the symbol ["JPO"], subject to official notice of issuance. Trading of the ComPS on the Amex is expected to commence within a 30-day period after the date of this Prospectus Supplement. See "Underwriting". THE SERIES [B] SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL AGENCY. THESE SERIES [B] SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Price $[25] per Series [B] Preferred Security plus accrued dividends, if any.
- ---------------------------------------------------------------------------------------------------------------- INITIAL PUBLIC UNDERWRITING PROCEEDS TO OFFERING PRICE(1) COMMISSIONS(2) THE TRUST(3)(4) - ---------------------------------------------------------------------------------------------------------------- Per Series [B] Preferred Security.......... $ (3) $ - ---------------------------------------------------------------------------------------------------------------- Total...................................... $ (3) $ - ----------------------------------------------------------------------------------------------------------------
(1) Plus accrued dividends, if any, from the Issue Date (as defined herein). (2) The Trust and J.P. Morgan have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting". (3) Because the proceeds of the sale of the ComPS will be invested in the Related Note, Morgan Guaranty has agreed to pay to the Underwriters a commission of $ per Series [B] Preferred Security (or $ in the aggregate). See "Underwriting". (4) Expenses of the offering which are payable by the Trust and J.P. Morgan are estimated to be $ . ------------------------ The ComPS offered hereby are offered by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that delivery of the ComPS will be made on or about , 1997, through the book-entry facilities of The Depository Trust Company, against payment therefor in same-day funds. J.P. MORGAN SECURITIES LTD. [ ], 1997. 107 [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS] Due to the complexity of these rules and the penalties that may be imposed upon persons involved in nonexempt prohibited transactions, it is particularly important that fiduciaries or other persons considering purchasing the ComPS on behalf of or with "plan assets" of any Plan consult with their counsel regarding the potential consequences if the assets of the Trust were deemed to be "plan assets" and the availability of exemptive relief from the prohibited transaction provisions of ERISA and the Code. UNDERWRITING Subject to the terms and conditions set forth in an underwriting agreement dated the date hereof (the "Underwriting Agreement"), the Trust has agreed to sell to the underwriters named below (the "Underwriters") and the Underwriters have agreed to purchase, the respective number of ComPS set forth opposite their names below. In the Underwriting Agreement, the Underwriter has agreed, subject to the terms and conditions set forth therein, to purchase all the ComPS offered hereby if any of the ComPS are purchased. Under certain circumstances, the commitments of nondefaulting Underwriters may be increased as set forth in the Underwriting Agreement. [J.P. Morgan Securities Ltd. is acting as a securities dealer and will not purchase any ComPS directly from the Trust.]
UNDERWRITER NUMBER OF COMPS --------------- J.P. Morgan Securities Inc. .............................. [ ] [ ]............................. [ ] [ ]............................. [ ] [ ]............................. [ ] [ ]............................. [ ] --------------- Total........................................... [ ]
The Underwriters initially propose to offer the ComPS, in part, directly to the public at the initial public offering price set forth on the cover page of this Prospectus Supplement, and, in part, to certain securities dealers at such price less a concession of $ per Series [B] Preferred Security. [The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per Series [B] Preferred Security to certain brokers and dealers.] After the initial offering, the public offering price and such concessions may be changed. In view of the fact that the proceeds of the sale of the ComPS will ultimately be used to purchase the Related Note of Morgan Guaranty, the Underwriting Agreement provides that Morgan Guaranty will pay as compensation ("Underwriters' Compensation") to the Underwriters $ per Series [B] Preferred Security (or $ in the aggregate) for the account of the Underwriters. The ComPS have been approved for listing on the Amex under the symbol ["JPO"], subject to official notice of issuance. Trading of the ComPS on the Amex is expected to commence within a 30-day period after the date of this Prospectus Supplement. Prior to this offering, there has been no market for the ComPS. The Trust and J.P. Morgan have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. This Prospectus Supplement and related the Prospectus may be used by direct or indirect wholly-owned subsidiaries of J.P. Morgan in connection with offers and sales related to secondary market transactions in the ComPS. Such subsidiaries may act as principal or agent in such transactions. Such sales will be made at prices related to prevailing market prices at the time of a sale. The Underwriters, certain agents and their associates may be customers of, engage in transactions with, and perform services for, J.P. Morgan in the ordinary course of business. S-46 108 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The expenses in connection with the issuance and distribution of securities being registered, other than underwriting compensation and related hedging costs, are as follows: Securities and Exchange Commission Registration Fee............................. $ 241,379 Legal Fees and Expenses......................................................... 250,000* American Stock Exchange Listing Fees............................................ 50,000* Accounting Fees and Expenses.................................................... 25,000* Trustee's Fees and Expenses (including counsel fees)............................ 31,500* Rating Agency Fees.............................................................. 400,000* Printing and Engraving Fees..................................................... 50,000* Miscellaneous................................................................... 25,000 ---------- Total................................................................. $1,072,879* ==========
- --------------- * Estimated ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Article Seventh of the Restated Certificate of Incorporation of J.P. Morgan & Co. Incorporated (the "Registrant") provides, in effect, that, to the extent and under the circumstances permitted by Section 145 of the General Corporation Law of Delaware, the Registrant shall indemnify directors, officers, employees and agents of the Registrant, or persons serving at the written request of the Registrant as directors, officers, employees or agents of another corporation or enterprise, including Morgan Guaranty, against loss and expenses. Subsection (a) of Section 145 of the General Corporation Law of Delaware empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Subsection (b) of Section 145 empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have II-1 109 been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine that despite the adjudication of liability such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. Section 145 further provides that to the extent a director, officer, employee or agent of a corporation has been successful in the defense of any action, suit or proceeding referred to in subsections (a) and (b) or in the defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. It also provides that indemnification provided for by Section 145 shall not be deemed exclusive of any other rights to which the indemnified party may be entitled under any by-law, agreement, vote of shareholders or disinterested directors or otherwise, and it empowers the corporation to purchase and maintain insurance in such amounts as the Board of Directors deems appropriate on behalf of a director, officer, employee or agent of the corporation against any liability asserted against him or incurred by him in any such capacity or arising out of his status as such whether or not the corporation would have the power to indemnify him against such liabilities under Section 145. The indemnification permitted by Article Seventh of the Restated Certificate of Incorporation of the Registrant has been extended to all officers and directors of the Registrant's wholly owned direct and indirect subsidiaries, and to such officers and directors in their respective capacities as directors and officers of other corporations 25% or more of the voting securities of which is owned, directly or indirectly, by the Registrant. The Registrant has purchased liability insurance of the type referred to in Section 145. Subject to a $250,000 deductible for each loss, the policy covers the Registrant with respect to its obligation to indemnify directors and officers of the Registrant and its wholly owned direct and indirect subsidiaries. In addition, the policy covers directors and officers of the Registrant and its wholly owned direct and indirect subsidiaries with respect to certain liabilities which are not reimbursable by the Registrant. Subject to certain exclusions from the coverage, the insurance provides for payment of loss in excess of the applicable deductible to an aggregate limit of $90,000,000 for the three-year policy term. Insurance coverage does not extend to certain claims, including claims based upon or attributable to the insured's gaining personal profit or advantage in which he is not legally entitled, claims brought about or contributed to by the dishonesty of the insured, and claims under Section 16(b) of the Securities Exchange Act of 1934 for an accounting of profits resulting from the purchase or sale by the insured of the Registrant's securities. In addition, the Registrant has purchased catastrophic loss insurance which provides, among other things, excess insurance coverage over the $90,000,000 officer and director policy. Subject to certain exclusions from the coverage, the insurance provides for payment of loss, in the case of the officer and director excess coverage, to an aggregate limit of $400,000,000 for the three-year policy term. II-2 110 ITEM 16. EXHIBITS. 1(a)(1) -- Form of Underwriting Agreement for Preferred Securities 3(a)(1) -- Certificate of Trust of J.P. Morgan Index Funding Company I 3(a)(2) -- Restated Certificate of Trust of J.P. Morgan Index Funding Company I 3(b)(1) -- Declaration of Trust of J.P. Morgan Index Funding Company I 3(b)(2) -- Amended and Restated Declaration of Trust of J.P. Morgan Index Funding Company I 3(c) -- Restated Certificate of Incorporation of J.P. Morgan & Co. Incorporated, as amended+ 3(d) -- By-Laws of J.P. Morgan & Co. Incorporated as amended through December 11, 1991 (incorporated by reference to J.P. Morgan's Current Report on Form 8-K dated April 11, 1996) 4(a)(1) -- Form of Certificate for Securities for Preferred Securities (included in Exhibit 3(b)(2)) 4(b)(1) -- Form of Amended and Restated Guarantee Agreement with respect to Preferred Securities issued by the Predecessor of J.P. Morgan Index Funding Company I 4(b)(2) -- Form of Guarantee Agreement with respect to Preferred Securities issued by J.P. Morgan Index Funding Company I 4(c) -- Form of Related Note Guarantee Agreement 4(d) -- Form of Related Note 4(e)(1) -- Declaration of Trust of J.P. Morgan Index Funding Company I (included in Exhibit 3(b)(1)) 4(e)(2) -- Amended and Restated Declaration of Trust of J.P. Morgan Index Funding Company I (included in Exhibit 3(b)(2)) 4(f) -- Form of License Agreement between Morgan Guaranty and J.P. Morgan Index Funding Company I 4(g) -- Form of Certificate for Securities for Preferred Securities (included in Exhibit 3(b)(2)) 5(a) -- Opinion of Gene A. Capello 5(b) -- Opinion of Morris, Nichols, Arsht & Tunnell, Delaware counsel 5(c) -- Opinion of Cravath, Swaine & Moore 12 -- Computation of Consolidated Ratio of Earnings to Fixed Charges and Consolidated Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (incorporated by reference to J.P. Morgan's Annual Report on Form 10-K for the year ended December 31, 1996 and J.P. Morgan's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and J.P. Morgan's Current Report on Form 8-K dated October 13, 1997) 23(a) -- Consent of Price Waterhouse LLP 23(b) -- Consent of Gene A. Capello (included in Exhibit 5(a)) 23(c) -- Consent of Morris, Nichols, Arsht & Tunnell (included in Exhibit 5(b)) 23(d) -- Consent of Cravath, Swaine & Moore (included in Exhibit 5(c)) 24 -- Powers of Attorney 25 -- Statement of Eligibility of Property Trustee on Form T-1
- --------------- + Previously filed as an exhibit to Registration Statement No. 33-55851 and incorporated by reference herein. ITEM 17. UNDERTAKING. The Registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, as amended (the "Securities Act"), each filing of J.P. Morgan's Annual Report pursuant to II-3 111 Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (and where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The Registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) that, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (iii) to include any material information with respect to the Plan of Distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that the undertakings set forth in paragraphs (i) and (ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by J.P. Morgan pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-4 112 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK, ON THIS 24TH DAY OF OCTOBER, 1997. J.P. MORGAN & CO. INCORPORATED By ------------------------------------------------------------------------------ (GENE A. CAPELLO, VICE PRESIDENT AND ASSISTANT GENERAL COUNSEL) PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ---------------------------- --------------------- /s/ DOUGLAS A WARNER III* Chairman of the Board, October 24, 1997 - ------------------------------------------ President and Director, (DOUGLAS A. WARNER III) (Principal Executive Officer) /s/ PAUL A. ALLAIRE* Director October 24, 1997 - ------------------------------------------ (PAUL A. ALLAIRE) /s/ RILEY P. BECHTEL* Director October 24, 1997 - ------------------------------------------ (RILEY P. BECHTEL) /s/ MARTIN FELDSTEIN* Director October 24, 1997 - ------------------------------------------ (MARTIN FELDSTEIN) /s/ ELLEN V. FUTTER* Director October 24, 1997 - ------------------------------------------ (ELLEN V. FUTTER) /s/ HANNA H. GRAY* Director October 24, 1997 - ------------------------------------------ (HANNA H. GRAY) /s/ JAMES R. HOUGHTON* Director October 24, 1997 - ------------------------------------------ (JAMES R. HOUGHTON) /s/ JAMES L. KETELSEN* Director October 24, 1997 - ------------------------------------------ (JAMES L. KETELSEN)
113
SIGNATURE TITLE DATE - ------------------------------------------ ---------------------------- --------------------- /s/ JOHN A. KROL* Director October 24, 1997 - ------------------------------------------ (JOHN A. KROL) /s/ ROBERTO G. MENDOZA* Vice Chairman of the Board October 24, 1997 - ------------------------------------------ and Director (ROBERTO G. MENDOZA) /s/ MICHAEL E. PATTERSON* Vice Chairman of the Board October 24, 1997 - ------------------------------------------ and Director (MICHAEL E. PATTERSON) /s/ LEE R. RAYMOND* Director October 24, 1997 - ------------------------------------------ (LEE R. RAYMOND) /s/ RICHARD D. SIMMONS* Director October 24, 1997 - ------------------------------------------ (RICHARD D. SIMMONS) /s/ KURT F. VIERMETZ* Vice Chairman of the Board October 24, 1997 - ------------------------------------------ and Director (KURT F. VIERMETZ) /s/ DENNIS WEATHERSTONE* Retired Chairman of the October 24, 1997 - ------------------------------------------ Board and Director (DENNIS WEATHERSTONE) /s/ DOUGLAS C. YEARLY* Director October 24, 1997 - ------------------------------------------ (DOUGLAS C. YEARLY) /s/ JOHN A. MAYER* Chief Financial Officer October 24, 1997 - ------------------------------------------ (Principal Financial (JOHN A. MAYER) Officer) /s/ DAVID H. SIDWELL* Managing Director and October 24, 1997 - ------------------------------------------ Controller (Principal (DAVID H. SIDWELL) Accounting Officer) *By: /s/ GENE A. CAPELLO - ------------------------------------------ (GENE A. CAPELLO, ATTORNEY-IN-FACT)
114 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, J.P. MORGAN INDEX FUNDING COMPANY I CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK, ON THIS 24TH DAY OF OCTOBER, 1997. J.P. MORGAN INDEX FUNDING COMPANY I, By J.P. MORGAN & CO. INCORPORATED, as Sponsor By ------------------------------------------------------------------------------ (GENE A. CAPELLO, VICE PRESIDENT AND ASSISTANT GENERAL COUNSEL) 115 EXHIBIT INDEX. 1(a)(1) -- Form of Underwriting Agreement for Preferred Securities 3(a)(1) -- Certificate of Trust of J.P. Morgan Index Funding Company I 3(a)(2) -- Restated Certificate of Trust of J.P. Morgan Index Funding Company I 3(b)(1) -- Declaration of Trust of J.P. Morgan Index Funding Company I 3(b)(2) -- Amended and Restated Declaration of Trust of J.P. Morgan Index Funding Company I 3(c) -- Restated Certificate of Incorporation of J.P. Morgan & Co. Incorporated, as amended+ 3(d) -- By-Laws of J.P. Morgan & Co. Incorporated as amended through December 11, 1991 (incorporated by reference to J.P. Morgan's Current Report on Form 8-K dated April 11, 1996) 4(a)(1) -- Form of Certificate for Securities for Preferred Securities (included in Exhibit 3(b)(2)) 4(b)(1) -- Form of Amended and Restated Guarantee Agreement with respect to Preferred Securities issued by the Predecessor of J.P. Morgan Index Funding Company I 4(b)(2) -- Form of Guarantee Agreement with respect to Preferred Securities issued by J.P. Morgan Index Funding Company I 4(c) -- Form of Related Note Guarantee Agreement 4(d) -- Form of Related Note 4(e)(1) -- Declaration of Trust of J.P. Morgan Index Funding Company I (included in Exhibit 3(b)(1)) 4(e)(2) -- Amended and Restated Declaration of Trust of J.P. Morgan Index Funding Company I (included in Exhibit 3(b)(2)) 4(f) -- Form of License Agreement between Morgan Guaranty and J.P. Morgan Index Funding Company I 4(g) -- Form of Certificate for Securities for Preferred Securities (included in Exhibit 3(b)(2)) 5(a) -- Opinion of Gene A. Capello 5(b) -- Opinion of Morris, Nichols, Arsht & Tunnell, Delaware counsel 5(c) -- Opinion of Cravath, Swaine & Moore 12 -- Computation of Consolidated Ratio of Earnings to Fixed Charges and Consolidated Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (incorporated by reference to J.P. Morgan's Annual Report on Form 10-K for the year ended December 31, 1996 and J.P. Morgan's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997) and J.P. Morgan's Current Report on Form 8-K dated October 13, 1997 23(a) -- Consent of Price Waterhouse LLP 23(b) -- Consent of Gene A. Capello (included in Exhibit 5(a)) 23(c) -- Consent of Morris, Nichols, Arsht & Tunnell (included in Exhibit 5(b)) 23(d) -- Consent of Cravath, Swaine & Moore (included in Exhibit 5(c)) 24 -- Powers of Attorney 25 -- Statement of Eligibility of Property Trustee on Form T-1
- --------------- + Previously filed as an exhibit to Registration Statement No. 33-55851 and incorporated by reference herein. EX-1.A.1 2 UNDERWRITING AGREEMENT 1 EXHIBIT 1(a)(1) J.P. MORGAN INDEX FUNDING COMPANY I $[ ] Commodity-Indexed Preferred Securities (ComPS), Series [ ] fully and unconditionally guaranteed, as described herein, by J.P. MORGAN & CO. INCORPORATED UNDERWRITING AGREEMENT New York, New York [ ], 199[ ] J.P. Morgan Securities Inc. 60 Wall Street New York, New York 10260 Ladies and Gentlemen: J.P. Morgan Index Funding Company I, a Delaware statutory business trust (the "Trust"), and J.P. Morgan & Co. Incorporated, a Delaware corporation (the "Company"), as sponsor of the Trust and as guarantor, propose to issue and sell to the underwriters named in Schedule I (the "Underwriters"), for whom you (the "Representative") are acting as representative, [ ] of its Commodity-Indexed Preferred Securities (ComPS), Series [ ] (the "Preferred Securities" and, together with the Guarantee (as defined) and the Related Note Guarantee (as defined), the "Securities"). The Preferred Securities will represent undivided beneficial ownership interests in the assets of the Trust consisting of the Related Note (as defined below) and the proceeds thereof, will be guaranteed by the Company as to the payment of distributions, and as to payments on liquidation or redemption, to the extent set forth in a guarantee agreement (the "Guarantee") dated as of [ ], 199[ ] between the Company and First Trust of New York, National Association, as trustee (the "Guarantee Trustee"). The Securities are to be issued pursuant to the Amended and Restated Declaration of Trust (the "Declaration") dated as of October 10, 1997. The proceeds of the sale by the Trust of the Securities and its related Common Securities, Series [ ] (the "Common 2 2 Securities"), are to be loaned to Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), such loan to be evidenced by a note (the "Related Note") to be issued by Morgan Guaranty to the Trust having an aggregate principal amount equal to the aggregate initial public offering price of the Securities and the Common Securities. Payments of accrued and unpaid distributions that are required to be paid by Morgan Guaranty under the Related Note and principal payable by Morgan Guaranty under the Related Note will be guaranteed by J.P. Morgan to the extent set forth in a related note guarantee agreement (the "Related Note Guarantee") dated as of [ ], 199[ ] by J.P. Morgan in favor of the Trust, as holder of the Related Note. 1. Representations and Warranties. Each of the Trust and the Company represents and warrants to the Underwriters as set forth below in this Section 1. (a) If the offering of the Securities is a Delayed Offering (as specified in Schedule I hereto), paragraph (i) below is applicable and, if the offering of the Securities is a Non-Delayed Offering (as so specified), paragraph (ii) below is applicable. (i) The Company and the Trust have complied with the requirements for the use of Form S-3 under the Securities Act of 1933 (the "Act") and have filed with the Securities and Exchange Commission (the "Commission") a registration statement (file numbers 333-01121 and 333-01121-01) on such Form, including a basic prospectus, for registration under the Act of the offering and sale of the Securities. The Company and the Trust may have filed one or more amendments thereto, and may have used a Preliminary Final Prospectus, each of which has previously been furnished to you. Such registration statement, as so amended, has become effective. The offering of the Securities is a Delayed Offering and, although the Basic Prospectus may not include all the information with respect to the Securities and the offering thereof required by the Act and the rules thereunder to be included in the Final Prospectus, the Basic Prospectus includes all such information required by the Act and the rules thereunder to be included therein as of the Effective Date. The Company and the Trust will next file with the Commission pursuant to Rules 415 and 424(b)(2) or 3 3 (5) a final supplement to the form of prospectus included in such registration statement relating to the Securities and the offering thereof. As filed, such final prospectus supplement shall include all required information with respect to the Securities and the offering thereof and, except to the extent the Representative shall agree in writing to a modification, shall be in all substantive respects in the form furnished to you prior to the Execution Time or, to the extent not completed at the Execution Time, shall contain only such specific additional information and other changes (beyond that contained in the Basic Prospectus and any Preliminary Final Prospectus) as the Company has advised you, prior to the Execution Time, will be included or made therein. (ii) The Company and the Trust have complied with the requirements for the use of Form S-3 under the Act and have filed with the Commission a registration statement (file number 333-01121 and 333-01121-01) on such Form, including a basic prospectus, for registration under the Act of the offering and sale of the Securities. The Company and the Trust may have filed one or more amendments thereto, including a Preliminary Final Prospectus, each of which has previously been furnished to you. The Company and the Trust will next file with the Commission either (x) a final prospectus supplement relating to the Securities in accordance with Rules 430A and 424(b)(1) or (4), or (y) prior to the effectiveness of such registration statement, an amendment to such registration statement, including the form of final prospectus supplement. In the case of clause (x), the Company has included in such registration statement, as amended at the Effective Date, all information (other than Rule 430A Information) required by the Act and the rules thereunder to be included in the Final Prospectus with respect to the Securities and the offering thereof. As filed, such final prospectus supple- ment or such amendment and form of final prospectus supplement shall contain all Rule 430A Information, together with all other such required information, with respect to the Securities and the offering thereof. 4 4 (b) On the Effective Date, the Registration Statement did or will, and when the Final Prospectus is first filed (if required) in accordance with Rule 424(b) and on the Closing Date, the Final Pro- spectus (and any supplement thereto) will, comply in all material respects with the applicable requirements of the Act, the Securities Exchange Act of 1934 (the "Exchange Act") with respect to the documents incorporated by reference and the Trust Indenture Act of 1939 (the "Trust Indenture Act") and the respective rules thereunder; on the Effective Date, the Registration Statement did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; on the Effective Date and on the Closing Date the Indenture did or will comply in all material respects with the requirements of the Trust Indenture Act and the rules thereunder; and, on the Effective Date, the Final Prospectus, if not filed pursuant to Rule 424(b), did not or will not, and on the date of any filing pursuant to Rule 424(b) and on the Closing Date, the Final Prospectus (together with any supplement thereto) will not, include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that neither the Company nor the Trust makes any representations or warranties as to (i) that part of the Registration Statement which shall constitute the Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of the Trustee or (ii) the information contained in or omitted from the Registration Statement or the Final Prospectus (or any supplement thereto) in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter through the Representa- tive specifically for inclusion in the Registration Statement or the Final Prospectus (or any supplement thereto). (c) The terms which follow, when used in this Agreement, shall have the meanings indicated. The term "the Effective Date" shall mean each date that the Registration Statement and any post-effective amendment or amendments thereto became or become effective and 5 5 each date after the date hereof on which a document incorporated by reference in the Registration Statement is filed. "Execution Time" shall mean the date and time that this Agreement is executed and delivered by the parties hereto. "Basic Prospectus" shall mean the prospectus referred to in paragraph (a) above contained in the Registration Statement at the Effective Date including, in the case of a Non-Delayed Offering, any Preliminary Final Prospectus. "Preliminary Final Prospectus" shall mean any preliminary prospectus supplement to the Basic Prospectus which describes the Securities and the offering thereof and is used prior to filing of the Final Prospectus. "Final Prospectus" shall mean the prospectus supplement relating to the Securities that is first filed pursuant to Rule 424(b) after the Execution Time, together with the Basic Prospectus or, if, in the case of a Non-Delayed Offering, no filing pursuant to Rule 424(b) is required, shall mean the form of final prospectus relating to the Securities, including the Basic Prospectus, included in the Registration Statement at the Effective Date. "Registration Statement" shall mean the registration statement referred to in paragraph (a) above, including incorporated documents, exhibits and financial statements, as amended at the Execution Time (or, if not effective at the Execution Time, in the form in which it shall become effective) and, in the event any post-effective amendment thereto becomes effective prior to the Closing Date (as hereinafter defined), shall also mean such registration statement as so amended. Such term shall include any Rule 430A Information deemed to be included therein at the Effective Date as provided by Rule 430A. "Rule 415", "Rule 424", "Rule 430A" and "Regulation S-K" refer to such rules or regulation under the Act. "Rule 430A Information" means information with respect to the Securities and the offering thereof permitted to be omitted from the Registration Statement when it becomes effective pursuant to Rule 430A. Any reference herein to the Registration Statement, the Basic Prospectus, any Preliminary Final Prospectus or the Final Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Exchange Act on or before the Effective Date of the Registration Statement or the issue date of the Basic Prospectus, any Preliminary Final Prospectus or the Final Prospectus, as the case may be; and any reference 6 6 herein to the terms "amend", "amendment" or "supplement" with respect to the Registration Statement, the Basic Prospectus, any Preliminary Final Prospectus or the Final Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the Effective Date of the Registration Statement or the issue date of the Basic Prospectus, any Preliminary Final Prospectus or the Final Prospectus, as the case may be, deemed to be incorporated therein by reference. A "Non-Delayed Offering" shall mean an offering of securities which is intended to commence promptly after the effective date of a registration statement, with the result that, pursuant to Rules 415 and 430A, all information (other than Rule 430A Information) with respect to the securities so offered must be included in such registration statement at the effective date thereof. A "Delayed Offering" shall mean an offering of securities pursuant to Rule 415 which does not commence promptly after the effective date of a registration statement, with the result that only information required pursuant to Rule 415 need be included in such registration statement at the effective date thereof with respect to the securities so offered. Whether the offering of the Securities is a Non-Delayed Offering or a Delayed Offering shall be set forth in Schedule I hereto. 2. Purchase and Sale. (a) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Trust and the Company agree that the Trust will sell to each Underwriter, and each Underwriter agrees to purchase from the Trust, at a purchase price of $[ ] per Security, plus accrued distributions, if any, from [ ], 199[ ] to the Closing Date, the number of Securities set forth opposite such Underwriter's name in Schedule I hereto. As compensation for the commitments of the Underwriters contained in this Section 2, Morgan Guaranty hereby agrees to pay to the Underwriters an amount equal to $[ ] per Security times the total number of Securities purchased by the Underwriters on the Closing Date as commissions for the sale of such Securities under this Agreement. Such payment will be made on the Closing Date with respect to the Securities. 3. Delivery and Payment. Delivery of and payment for the Securities shall be made at [ ] AM, New York City 7 7 time, on [ ], 199[ ], or such later date (not later than [ ], 199[ ]) as the Representative shall designate, which date and time may be postponed by agreement among the Representative, the Trust and the Company (such date and time of delivery and payment for the Securities being herein called the "Closing Date"). Delivery of the Securities shall be made to the Representative against payment by the Representative of the purchase price thereof to or upon the order of the Trust by wire transfer drawn and payable in same day funds or such other manner of payment as may be agreed by the Company, the Trust and the Representative. Delivery of the Securities shall be made at such location as the Representative shall reasonably designate at least one business day in advance of the Closing Date and payment for the Securities shall be made at the office of the Company, 60 Wall Street, New York, New York. Certificates for the Securities shall be registered in such names and in such denominations as the Representative may request not less than three full business days in advance of the Closing Date. The Company agrees to have the Securities available for inspection, checking and packaging by the Representative in New York, New York, not later than 1:00 PM on the business day prior to the Closing Date. 4. Agreements. Each of the Trust and the Company agrees with the several Underwriters that: 8 8 (a) The Company and the Trust will use their best efforts to cause the Registration Statement, if not effective at the Execution Time, and any amendment thereto, to become effective. Prior to the termination of the offering of the Securities, neither the Company nor the Trust will file any amendment of the Registration Statement or supplement (including the Final Prospectus or any Preliminary Final Prospectus) to the Basic Prospectus unless the Company has furnished you a copy for your review and given a reasonable opportunity to comment on any such proposed amendment or supplement. Subject to the foregoing sentence, the Company and the Trust will cause the Final Prospectus, properly completed, and any supplement thereto to be filed with the Commission pursuant to the applicable paragraph of Rule 424(b) within the time period prescribed and will provide evidence satisfactory to the Representative of such timely filing. The Company will promptly advise the Representative (i) when the Registration Statement, if not effective at the Execution Time, and any amendment thereto, shall have become effective, (ii) when the Final Prospectus, and any supplement thereto, shall have been filed with the Commission pursuant to Rule 424(b), (iii) when, prior to termination of the offering of the Securities, any amendment to the Registration Statement shall have been filed or become effective, (iv) of any request by the Commission for any amendment of the Registration Statement or supplement to the Final Prospectus or for any additional information, (v) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or threatening of any proceeding for that purpose and (vi) of the receipt by the Company or the Trust of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. The Company or the Trust will use their best efforts to prevent the issuance of any such stop order and, if issued, to obtain as soon as possible the withdrawal thereof. (b) If, at any time when a prospectus relating to the Securities is required to be delivered under the Act, any event occurs as a result of which the Final Prospectus as then supplemented would include any untrue statement of a material fact or omit to state 9 9 any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it shall be necessary to amend the Registration Statement or supplement the Final Prospectus to comply with the Act or the Exchange Act or the respective rules thereunder, the Company and the Trust promptly will (i) prepare and file with the Commission, subject to the second sentence of paragraph (a) of this Section 4, an amendment or supplement which will correct such statement or omission or effect such compliance and (ii) supply any supplemented Prospectus to you in such quantities as you may reasonably request. (c) As soon as practicable, the Company will make generally available to its security holders and to the Representative an earnings statement or statements of the Company and its subsidiaries which will satisfy the provisions of Section 11(a) of the Act and Rule 158 under the Act. (d) The Company will furnish to the Representative and counsel for the Underwriters, without charge, copies of the Registration Statement (including exhibits thereto) and, so long as delivery of a prospectus by an Underwriter or dealer may be required by the Act, as many copies of any Preliminary Final Prospectus and the Final Prospectus and any supplement thereto as the Representative may reasonably request. The Company will pay the expenses of printing or other production of all documents relating to the offering. (e) The Company will arrange for the qualification of the Securities for sale under the laws of such jurisdictions as the Representative may designate, will maintain such qualifications in effect so long as required for the distribution of the Securities (provided that the Company shall not be required in connection therewith to qualify as a foreign corporation or to execute a general consent to service of process in any state) and will arrange for the determination of the legality of the Securities for purchase by institutional investors. 10 10 5. Conditions to the Obligations of the Underwriters. The obligations of the Underwriters to purchase the Underwriters' Securities shall be subject to the accuracy of the representations and warranties on the part of the Company and the Trust contained herein as of the Execution Time and the Closing Date, to the accuracy of the statements of the Company and the Trust made in any certificates pursuant to the provisions hereof, to the performance by the Company and the Trust of their obligations hereunder and to the following additional conditions: (a) If the Registration Statement has not become effective prior to the Execution Time, unless the Representative agree in writing to a later time, the Registration Statement will become effective not later than (i) 6:00 PM New York City time, on the date of determination of the public offering price, if such determination occurred at or prior to 3:00 PM New York City time on such date or (ii) 12:00 Noon on the business day following the day on which the public offering price was determined, if such determination occurred after 3:00 PM New York City time on such date; if filing of the Final Prospectus, or any supplement thereto, is required pursuant to Rule 424(b), the Final Prospectus, and any such supplement, shall have been filed in the manner and within the time period required by Rule 424(b); and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or threatened. (b) The Trust and the Company shall have furnished to the Underwriters the opinion of Gene A. Capello, Esq., Vice President and Assistant General Counsel of the Company, counsel to the Trust and the Company, in form and scope satisfactory to the Representative. (c) The Trust and the Company shall have furnished to the Underwriters the opinion of Cravath, Swaine & Moore, special tax counsel to the Trust and the Company, dated the Closing Date, to the effect that the statements set forth under the heading "Certain United States Federal Income Consequences" in the Prospectus, insofar as such statements purport to summarize the United States federal income tax consequences of the purchase, ownership and disposition 11 11 of the Securities, provide a fair summary of such consequences. (d) First Trust of New York, National Association shall have furnished to the Underwriters the opinion of their counsel, dated the Closing Date, to the effect that: (i) First Trust of New York, National Association has been duly incorporated and is validly existing as a National Association; (ii) each of the Declaration and the Guarantee has been duly authorized, executed and delivered by the Property Trustee and the Guarantee Trustee, respectively, and constitutes a legal, valid and binding instrument enforceable against the Property Trustee and the Guarantee Trustee in accordance with its respective terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect); (iii) no consent, approval, authorization or order of any federal banking authority is required for the consummation of the transactions contemplated by the Declaration or the Guarantee by the Property Trustee or the Guarantee Trustee, respectively; and (iv) neither the execution and delivery of the Declaration or the Guarantee, the consummation of any other of the transactions herein or therein contemplated nor the fulfillment of the terms hereof or thereof will conflict with, result in a breach or violation of, or constitute a default under any law or the charter or by-laws of First Trust of New York, National Association or the terms of any indenture or other agreement or instrument known to such counsel and to which First Trust of New York, National Association is a party or bound or any judgment, order or decree known to such counsel to be applicable to First Trust of New York, National Association of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over First Trust of New York, National Association. 12 12 (e) Wilmington Trust Company shall have furnished to the Underwriters the opinion of Morris, Nichols, Arsht & Tunnell, special counsel to Wilmington Trust Company, dated the Closing Date, to the effect that Wilmington Trust Company has been duly incorporated and is validly existing as a banking corporation in good standing under the laws of the State of Delaware; and has full corporate power and authority to act as trustee of a statutory business trust under the laws of the State of Delaware. (f) The Underwriters shall have received from Cravath, Swaine & Moore, special counsel to the Underwriters, such opinion or opinions, dated the Closing Date, with respect to the issuance and sale of the Securities, and other related matters as the Underwriters may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (g) Each of the Company and the Trust shall have furnished to the Underwriters a certificate of the Company and the Trust, as applicable, signed by an officer of the Company and the Trust, as applicable, dated the Closing Date, to the effect that the signers of such certificate have carefully examined the Prospectus, any amendment or supplement to the Prospectus and this Agreement and that: (i) the representations and warranties of the Company and the Trust, as applicable, in this Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date, and the Company and the Trust, as applicable, has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; and (ii) in the case of the certificate of the Company, since the date of the most recent financial statements included in the Prospectus, there has been no material adverse change in the financial or business condition or earnings of the Company and its subsidiaries, considered as a 13 13 whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated by the Prospectus (exclusive of any amendment or supplement thereto). (h) At the Closing Date, Price Waterhouse LLP shall have furnished to the Underwriters a letter or letters, dated as of the Closing Date, in form and substance satisfactory to the Representative. (i) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Prospectus, there shall not have been any change, or any development involving a prospective change, in or affecting the business or properties of the Company and its subsidiaries the effect of which, is, in the judgment of the Representative, so material and adverse as to make it impractical or inadvisable to market the Securities as contemplated by the Prospectus. (j) Prior to the Closing Date, the Trust and the Company shall have furnished to the Underwriters such further information, certificates and documents as the Underwriters may reasonably request. If any of the conditions specified in this Section 5 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Representative and Cravath, Swaine & Moore, counsel to the Underwriters, this Agreement and all obligations of the Underwriters hereunder may be canceled at, or at any time prior to, the Closing Date by the Representative. Notice of such cancellation shall be given to the Trust and the Company in writing or by telephone or telegraph confirmed in writing. The documents required to be delivered by this Section 5 will be delivered at the offices of the Company, at 60 Wall Street, New York, New York, on the Closing Date. 6. Reimbursement of Expenses. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Underwriters set forth in Section 5 hereof is not satisfied, because of any 14 14 termination pursuant to Section 8 hereof or because of any refusal, inability or failure on the part of the Company or the Trust to perform any agreement herein or comply with any provision hereof other than by reason of a default by the Underwriters in payment for the Securities on the Closing Date, the Company will reimburse the Underwriters upon demand for all reasonable out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by it in connection with the proposed purchase and sale of the Securities. 7. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls each Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including without limitation the legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter through the Representative expressly for use therein. (b) Each Underwriter severally agrees to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and each person who controls the Company within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company to each Underwriter, but only with reference to information relating to each Underwriter furnished to the Company in writing by such Underwriter expressly for use in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any preliminary prospectus. (c) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in 15 15 respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such person (the "Indemnified Person") shall promptly notify the person against whom such indemnity may be sought (the "Indemnifying Person") in writing, and the Indemnifying Person, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Indemnifying Person may designate in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary, (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons. Any such separate firm for an Underwriter and such control persons of an Underwriter shall be designated in writing by such Underwriter and any such separate firm for the Company, its directors, its officers who sign the Registration Statement and such control persons of the Company shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in paragraphs (a) or (b) this Section 7 is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to herein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the 16 16 one hand and the Underwriters on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other in connection with the offering of such Securities shall be deemed to be in the same respective proportion as the net proceeds from the offering of such Securities (before deducting expenses) received by the Company and the total discounts and commissions received by the Underwriters in respect thereof bear to the aggregate offering price of such Securities. The relative fault of the Company on the one hand and of the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged statement of a material fact or the omission or alleged untrue statement of a material fact relates to information supplied by the Company on the one hand or by the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to above in this Section 7 shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall any Underwriter be required to contribute any amount in excess of the amount by which the total price at which the Securities referred to in Section 7(d) that were sold by or through such Underwriter exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such 17 17 fraudulent misrepresentation. The obligation of each Underwriter to contribute pursuant to this subsection 7(d) is several in proportion to the respective principal amounts of the Securities purchased by each of the Underwriters and is not joint. 8. Default by an Underwriter. If any one or more Underwriters shall fail to purchase and pay for any of the Securities agreed to be purchased by such Underwriter or Underwriters hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Underwriters shall be obligated severally to take up and pay for (in the respective proportions which the amount of Securities set forth opposite their names in Schedule I hereto bears to the aggregate amount of Securities set forth opposite the names of all the remaining Underwriters) the Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase; provided, however, that in the event that the aggregate amount of Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of the aggregate amount of Securities set forth in Schedule I hereto, the remaining Underwriters shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Securities, and if such nondefaulting Underwriters do not purchase all the Securities, this Agreement will terminate without liability to any nondefaulting Underwriter or the Company. In the event of a default by any Underwriter as set forth in this Section 8, the Closing Date shall be postponed for such period, not exceeding seven days, as the Representative shall determine in order that the required changes in the Registration Statement and the Final Prospectus or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Underwriter of its liability, if any, to the Company and any nondefaulting Underwriter for damages occasioned by its default hereunder. 9. Termination. This Agreement shall be subject to termination in the absolute discretion of the Representative, by notice given to the Company, prior to delivery of and payment for the Securities, if prior to such time (i) trading in any of the Company's securities shall have been suspended by the Commission or the New York Stock Exchange or trading in securities generally on the New York Stock Exchange shall have been suspended or limited or minimum prices shall have been established on the New York Stock Exchange, (ii) a banking moratorium shall have been declared either by Federal or New York State authorities or (iii) there shall have occurred any outbreak or escalation 18 18 of hostilities involving the United States or the declaration by the United States of a national emergency or war or crisis the effect of which on the financial markets of the United States is such as to make it, in the reasonable judgment of the Representative, impracticable to proceed with the offering or delivery of the Securities, or in the reasonable judgment of the Company, impracticable to issue such Securities as contemplated by the Prospectus. 10. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company or the Trust or its officers or Trustees and of the Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or the Trust or any of the officers, directors, trustees or controlling persons referred to in Section 7 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 6 and 7 hereof shall survive the termination or cancellation of this Agreement. 11. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Representative, will be mailed, delivered or telegraphed and confirmed to it, at 60 Wall Street, New York, New York 10260; or, if sent to the Company or the Trust, will be mailed, delivered or telegraphed and confirmed to them at 60 Wall Street, New York, New York 10260. 12. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers, directors, trustees and controlling persons referred to in Section 7 hereof, and no other person will have any right or obligation hereunder. 13. Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York. 14. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original, but all such counterparts will together constitute one and the same instrument. 19 19 If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this Agreement and your acceptance shall represent a binding agreement between the Trust, the Company and the Underwriters. Very truly yours, J.P. MORGAN INDEX FUNDING COMPANY I, by the undersigned, solely in [his/her] capacity as Regular Trustee, By: --------------------------------- Name: Title: Regular Trustee By: --------------------------------- Name: Title: Regular Trustee J.P. MORGAN & CO. INCORPORATED By: --------------------------------- Name: Title: The foregoing Agreement is hereby confirmed and accepted as of the date first above written: By: J.P. Morgan Securities Inc. By: --------------------------------- Name: Title: For itself and the other several Underwriters named in Schedule I 20 SCHEDULE I
Number of Securities Underwriter to be Purchased ----------- --------------- J.P. Morgan Securities Inc. ........................ [ ] ---------------- Total ..................................... [ ]
This is a Delayed Offering. EX-3.A.1 3 CERTIFICATE OF TRUST 1 EXHIBIT 3(a)(1) CERTIFICATE OF TRUST OF J.P. MORGAN INDEX FUNDING COMPANY I This Certificate of Trust is being executed as of December 12, 1996 for the purpose of creating a business trust pursuant to the Delaware Business Trust Act, 12 Del. C. Sections 3801 et seq. (the "Act"). The undersigned hereby certify as follows: 1. Name. The name of the business trust is "J.P. Morgan Index Funding Company I" (the "Trust"). 2. Delaware Trustee. The name and business address of the Delaware resident trustee of the Trust meeting the requirements of Section 3807 of the Act are as follows: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 3. Effective Date. This Certificate of Trust shall be effective immediately upon filing in the office of the Secretary of the State of the State of Delaware. 4. Counterparts. This Certificate of Trust may be executed in one or more counterparts. IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the Trust, have executed this Certificate of Trust as of the day and year first above written. WILMINGTON TRUST COMPANY, as Delaware Trustee, by /s/ Emmet R. Harmon ---------------------------------- Name: Emmet R. Harmon Title: Vice President 2 /s/ H. Christian Raymond ---------------------------------- H. Christian Raymond Trustee /s/ Andrew G. Kerber ---------------------------------- Andrew G. Kerber Trustee /s/ Susan L. McCullin ---------------------------------- Susan L. McCullin Trustee EX-3.A.2 4 RESTATED CERTIFICATE OF TRUST 1 EXHIBIT 3(a)(2) RESTATED CERTIFICATE OF TRUST OF J.P. MORGAN INDEX FUNDING COMPANY I This Restated Certificate of Trust is being executed as of September 25, 1997 for the purpose restating the certificate of trust of J.P. Morgan Index Funding Company I (which certificate of trust was filed in the office of the Secretary of State of the State of Delaware on December 12, 1996) pursuant to Section 3810(c) of the Delaware Business Trust Act, 12 Del. Code Section 3801 et seq. (the "Act"). The undersigned hereby certify as follows: 1. Name. The name of the business trust is "J.P. Morgan Index Funding Company I" (the "Trust"). 2. Delaware Trustee. The name and business address of the Delaware resident trustee of the Trust meeting the requirements of Section 3807 of the Act are as follows: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 3. Effective Date. This Restated Certificate of Trust shall be effective as of its filing in the office of the Secretary of State of the State of Delaware. 4. Notice of Limitation of Liabilities of Series. Notice is hereby given that the Trust is a series trust. Pursuant to Section 3804(a) of the Act, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to any particular series shall be enforceable against the assets of, or associated with, such series only, and not against the assets of the Trust generally or against the assets of, or associated with, any other series. 2 3 5. Counterparts. This Restated Certificate of Trust may be executed in one or more counterparts. IN WITNESS WHEREOF, the undersigned, being all the trustees of the Trust, have executed this Restated Certificate of Trust as of the date first above written. WILMINGTON TRUST COMPANY, as Delaware Trustee, by /s/ Norma P. Close ----------------------------------- Name: Norma P. Close Title: Vice President /s/ H. Christian Raymond ----------------------------------- H. Christian Raymond Trustee /s/ Andrew G. Kerber ----------------------------------- Andrew G. Kerber Trustee /s/ Susan L. McCullin ----------------------------------- Susan L. McCullin Trustee EX-3.B.1 5 DECLARATION OF TRUST 1 EXHIBIT 3(b)(1) DECLARATION OF TRUST DECLARATION OF TRUST, dated as of December 12, 1996, between J.P. Morgan & Co. Incorporated, a Delaware corporation, as Sponsor, Wilmington Trust Company, a Delaware banking corporation, as Delaware Trustee, and H. Christian Raymond, Andrew G. Kerber and Susan L. McCullin, as Regular Trustees (collectively with the Delaware Trustee, the "Trustees"). The Sponsor and the Trustees hereby agree as follows: 1. The trust created hereby (the "Trust") shall be known as "J.P. Morgan Index Funding Company I", in which name the Trustees, or the Sponsor to the extent provided herein, may conduct the business of the Trust, make and execute contracts, and sue and be sued. 2. The Sponsor hereby assigns, transfers, conveys and sets over to the Trustees the sum of $10. The Trustees hereby acknowledge receipt of such amount in trust from the Sponsor, which amount shall constitute the initial trust estate. The Trustees hereby declare that they will hold the trust estate in trust for the Sponsor. It is the intention of the parties hereto that the Trust created hereby constitute a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Sections 3801 et seq. (the "Business Trust Act"), and that this document constitute the governing instrument of the Trust. The Trustees are hereby authorized and directed to execute and file a certificate of trust in the office of the Secretary of State of the State of Delaware in the form attached hereto. The Trust is hereby established by the Sponsor and the Trustees for the purposes of (i) issuing preferred securities representing undivided beneficial interests in the assets of the Trust ("Preferred Securities") in exchange for cash and investing the proceeds thereof in debt instruments of the Sponsor or a wholly-owned subsidiary thereof, (ii) issuing and selling common securities representing undivided beneficial interests in the assets of - 1 - 2 the Trust ("Common Securities" and, together with the Preferred Securities, "Trust Securities") to the Sponsor in exchange for cash and investing the proceeds thereof in such debt instruments, (iii) effectuating a merger of any other entity with and into the Trust, with the Trust being the surviving business trust, and (iv) engaging in such other activities as are necessary, convenient or incidental thereto. 3. Concurrent with the first issuance of any Trust Securities by the Trust, the Sponsor and the Trustees intend to enter into an amended and restated Declaration of Trust, satisfactory to each such party and substantially in the form included as an exhibit to the 1933 Act Registration Statement referred to below at the time such registration statement becomes effective under the Securities Act of 1933, as amended (the "Securities Act"), to provide for the contemplated operation of the Trust created hereby and the issuance of the Preferred Securities and the Common Securities referred to therein. Prior to the execution and delivery of such amended and restated Declaration of Trust, the Trustees shall not have any duty or obligation hereunder or with respect to the trust estate, except as otherwise required by applicable law or as may be necessary to obtain, prior to such execution and delivery, any licenses, consents or approvals required by applicable law or otherwise. 4. The Sponsor and the Trustees hereby authorize and direct the Sponsor, as the sponsor of the Trust, to (i) prepare and file with the Securities and Exchange Commission (the "Commission") and execute, in each case on behalf of the Trust, an application for an exemption from the provisions of the Investment Company Act of 1940, (ii) negotiate, prepare, execute and, as applicable, file all agreements, certificates, documents and applications necessary to effectuate a merger of any other entity with and into the Trust, with the Trust being the surviving business trust, and to effectuate any amendment to the Declaration of Trust of the Trust in effect at such time or to adopt a new Declaration of Trust at such time, in accordance with Section 3815(f) of the Business Trust Act, (iii) prepare and file with the Commission and execute, in each case on behalf of the Trust, (a) a Registration Statement on Form S-3 (the "1933 Act Registration Statement"), including by way of an amendment of a Registration Statement of any other entity that has merged with and into the Trust, and including any pre-effective or post-effective amendments to such Registration Statement, relating to the registration of the Preferred Securities under the Securities Act and (b) a Registration Statement on Form 8-A (the "1934 Act Registration - 2 - 3 Statement") (including any pre-effective or post-effective amendments thereto) relating to the registration of the Preferred Securities under Section 12(b) of the Securities Exchange Act of 1934, as amended; (iv) prepare and file with the New York Stock Exchange and execute, in each case on behalf of the Trust, a listing application and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Preferred Securities to be listed on the New York Stock Exchange; (v) prepare and file and execute, in each case on behalf of the Trust, such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as shall be necessary or desirable to register the Preferred Securities under the securities or "blue sky" laws of such jurisdictions as the Sponsor, on behalf of the Trust, may deem necessary or desirable; and (vi) negotiate the terms of, and execute on behalf of the Trust, an underwriting agreement among the Trust, the Sponsor and any underwriter, dealer or agent relating to the Preferred Securities, substantially in the form included as an exhibit to the 1933 Act Registration Statement at the time it becomes effective under the Securities Act. It is hereby acknowledged and agreed that in connection with any execution, filing or document referred to in clauses (i)-(vi) above, (A) any Regular Trustee (or his attorneys-in-fact and agents or the Sponsor as permitted herein) is authorized on behalf of the Trust to file and execute such document on behalf of the Trust and (B) the Delaware Trustee shall not be required to join in any such filing or execute on behalf of the Trust any such document unless required by the rules and regulations of the Commission or the New York Stock Exchange or state securities or blue sky laws, and in such case only to the extent so required. In connection with all of the foregoing, the Sponsor and each Regular Trustee, solely in its capacity as Trustee of the Trust, hereby constitutes and appoints Gene A. Capello and James C.P. Berry, and each of them, his, her or its, as the case may be, true and lawful attorneys-in-fact, and agents, with full power of substitution and resubstitution, for the Sponsor or such Trustee and in the Sponsor's or such Trustee's name, place and stead, in any and all capacities, to sign and file (i) the 1933 Act Registration Statement and the 1934 Act Registration Statement and any and all amendments (including post-effective amendments) thereto, with all exhibits thereto, and other documents in connection therewith, and (ii) a registration statement and any and all amendments thereto filed pursuant to Rule 462(b) under the Securities Act with the Commission, granting unto said attorneys-in-fact and - 3 - 4 agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as the Sponsor or such Trustee might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, shall do or cause to be done by virtue hereof. 5. This Declaration of Trust may be executed in one or more counterparts. 6. The number of Trustees initially shall be four (4) and thereafter the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by the Sponsor which may increase or decrease the number of Trustees; provided, however, that the number of Trustees shall in no event be less than four (4); and provided, further, however, that to the extent required by the Business Trust Act, one Trustee shall either be a natural person who is a resident of the State of Delaware or, if not a natural person, an entity that has its principal place of business in the State of Delaware and meets any other requirements imposed by applicable law. Subject to the foregoing, the Sponsor is entitled to appoint or remove without cause any Trustee at any time. Any Trustee may resign upon thirty days prior notice to the Sponsor; provided, however, that the Delaware Trustee may resign immediately upon notice to the Sponsor if the Delaware Trustee is required to join in any filing or execute on behalf of the Trust any document pursuant to the provisions of paragraph 4 hereof and, upon giving such notice, the Delaware Trustee shall not be required to join in any such filing or execute on behalf of the Trust any such document; provided, further, however, that no resignation of the Delaware Trustee shall be effective until a successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee. 7. To the fullest extent permitted by applicable law, the Sponsor agrees to indemnify (i) the Delaware Trustee, (ii) any affiliate of the Delaware Trustee, and (iii) any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Delaware Trustee (each of the persons or entities in (i) through (iii) being referred to as an "Indemnified Person") for, and to hold each Indemnified Person harmless against, any - 4 - 5 loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this paragraph 7 shall survive the termination of this Declaration. 8. The Trust may terminate without issuing any Trust Securities at the election of the Sponsor. IN WITNESS WHEREOF, the parties hereto have caused this Declaration of Trust to be duly executed as of the day and year first above written. J.P. MORGAN & CO. INCORPORATED, as Sponsor By: /s/ James CP Berry ------------------------------------- Name: James CP Berry Title: Vice President, Assistant General Counsel and Assistant Secretary WILMINGTON TRUST COMPANY, as Delaware Trustee By: /s/ Emmett R. Harmon ------------------------------------- Name: Emmett R. Harmon Title: Vice President /s/ H. Christian Raymond ---------------------------------- H. Christian Raymond, as Trustee /s/ Andrew G. Kerber ---------------------------------- Andrew G. Kerber, as Trustee - 5 - 6 /s/ Susan L. McCullin ---------------------------------- Susan L. McCullin, as Trustee - 6 - EX-3.B.2 6 AMENDED AND RESTATED DECLARATION OF TRUST 1 EXHIBIT 3(b)(2) AMENDED AND RESTATED DECLARATION OF TRUST OF J.P. MORGAN INDEX FUNDING COMPANY I ----------------- DATED AS OF OCTOBER 10, 1997 2 TABLE OF CONTENTS* Page PARTIES..................................................................... 1 RECITALS.................................................................... 1 ARTICLE I Definitions SECTION 1.01 Certain terms defined; other terms defined in the Trust Indenture Act of 1939, as amended, or by reference therein in the Securities Act of 1933, as amended, to have the meanings assigned therein.................. 2 Affiliate....................................... 2 Book Entry Interest............................. 3 Business Day.................................... 3 Business Trust Act.............................. 3 Certificate..................................... 3 Certificate of Trust............................ 3 Clearing Agency................................. 3 Clearing Agency Participant..................... 3 Code............................................ 3 Commission...................................... 3 Common Securities............................... 3 Common Security Certificate..................... 4 Covered Person.................................. 4 Declaration Supplement.......................... 4 Definitive Preferred Security Certificates............................... 4 Delaware Trustee................................ 4 Depositary Agreement............................ 4 - -------- * This Table of Contents does not constitute part of the Amended and Restated Declaration of Trust and should not have any bearing upon the interpretation of any of its terms or provisions. 3 Distribution.................................... 4 DTC............................................. 4 Early Redemption Value.......................... 4 Event of Default................................ 4 Exchange Act.................................... 4 Face Amount..................................... 4 Fiscal Year..................................... 5 Global Certificate.............................. 5 Holder.......................................... 5 Indemnified Person.............................. 5 Indexed Security................................ 5 Investment Company.............................. 5 Investment Company Act.......................... 5 Legal Action.................................... 5 Liquidation Distribution........................ 5 Majority in Principal Amount.................... 5 Ministerial Action.............................. 6 Morgan Guaranty................................. 6 Note............................................ 6 Note Event of Default........................... 6 Note Guarantee.................................. 6 Option Closing Date............................. 6 Original Declaration............................ 6 Paying Agent.................................... 6 Person.......................................... 6 Preferred Guarantee............................. 6 Preferred Securities............................ 6 Preferred Security Beneficial Owner............. 7 Preferred Security Certificate.................. 7 Principal Amount................................ 7 Property Account................................ 7 Property Trustee................................ 7 Quorum.......................................... 7 Redemption Value................................ 7 Regular Trustee................................. 7 Resignation Request............................. 7 Responsible Officer............................. 7 Securities...................................... 8 Securities Act.................................. 8 Series of Securities............................ 8 Special Event................................... 8 Sponsor or JPM.................................. 8 Successor Delaware Trustee...................... 8 Successor Property Trustee...................... 8 10% in Principal Amount......................... 8 Treasury Regulations............................ 8 Trust Indenture Act............................. 9 Trustee or Trustees............................. 9 Underwriting Agreement.......................... 9 4 ARTICLE II Trust Indenture Act SECTION 2.01 Trust Indenture Act; Application................ 9 SECTION 2.02 Lists of Holders of Preferred Securities................................. 9 SECTION 2.03 Reports by the Property Trustee................. 10 SECTION 2.04 Periodic Reports to Property Trustee............ 10 SECTION 2.05 Evidence of Compliance with Conditions Precedent.................................. 10 SECTION 2.06 Voting Rights of Holders........................ 10 SECTION 2.07 Disclosure of Information....................... 15 ARTICLE III Organization SECTION 3.01 Name............................................ 15 SECTION 3.02 Office.......................................... 15 SECTION 3.03 Issuance of the Trust Securities................ 16 SECTION 3.04 Purchase of Notes............................... 17 SECTION 3.05 Purpose......................................... 18 SECTION 3.06 Authority....................................... 18 SECTION 3.07 Title to Property of the Trust.................. 19 SECTION 3.08 Powers and Duties of the Regular Trustees................................... 19 SECTION 3.09 Prohibition of Actions by Trust and Trustees................................... 22 SECTION 3.10 Powers and Duties of the Property Trustee.................................... 23 SECTION 3.11 Delaware Trustee................................ 26 SECTION 3.12 Certain Rights and Duties of the Property Trustee........................... 26 SECTION 3.13 Registration Statement and Related Matters.................................... 29 SECTION 3.14 Filing of Amendments to Certificate of Trust...................................... 31 SECTION 3.15 Execution of Documents by Regular Trustees................................... 31 SECTION 3.16 Trustees Not Responsible for Recitals or Issuance of Securities................. 31 SECTION 3.17 Duration of Trust............................... 31 SECTION 3.18 Assets and Liabilities Associated with Series of Securities; Recordkeeping 32 of Series of Securities.................... 5 ARTICLE IV Sponsor SECTION 4.01 Purchase of Common Securities by Sponsor.................................... 33 SECTION 4.02 Expenses........................................ 33 ARTICLE V Trustees SECTION 5.01 Number of Trustees; Qualifications.............. 34 SECTION 5.02 Appointment, Removal and Resignation of Trustees................................ 36 SECTION 5.03 Vacancies Among Trustees........................ 38 SECTION 5.04 Effect of Vacancies............................. 38 SECTION 5.05 Meetings........................................ 39 SECTION 5.06 Delegation of Power............................. 39 ARTICLE VI Distributions SECTION 6.01 Distributions................................... 40 ARTICLE VII Issuance of Securities SECTION 7.01 General Provisions Regarding Securities................................. 40 ARTICLE VIII Dissolution and Termination of Trust SECTION 8.01 Dissolution and Termination of Trust............ 42 6 ARTICLE IX Transfer of Interests SECTION 9.01 Transfer of Securities.......................... 43 SECTION 9.02 Transfer of Certificates........................ 43 SECTION 9.03 Deemed Security Holders......................... 44 SECTION 9.04 Book Entry Interests............................ 44 SECTION 9.05 Notices to Holders of Certificates.............. 45 SECTION 9.06 Appointment of Successor Clearing Agency..................................... 45 SECTION 9.07 Definitive Preferred Securities Certificates............................... 46 SECTION 9.08 Mutilated, Destroyed, Lost or Stolen Certificates............................... 46 ARTICLE X Limitation of Liability Indemnification SECTION 10.01 Exculpation..................................... 47 SECTION 10.02 Indemnification and Compensation................ 47 SECTION 10.03 Outside Businesses.............................. 48 ARTICLE XI Accounting SECTION 11.01 Fiscal Year..................................... 49 SECTION 11.02 Certain Accounting Matters...................... 49 SECTION 11.03 Banking......................................... 50 SECTION 11.04 Withholding..................................... 50 ARTICLE XII Amendments and Meetings SECTION 12.01 Amendments...................................... 51 SECTION 12.02 Meetings of the Holders of Securities; Action by Written Consent.................. 52 7 ARTICLE XIII Representations of Property Trustee and Delaware Trustee SECTION 13.01 Representations and Warranties of Property Trustee........................... 54 ARTICLE XIV Miscellaneous SECTION 14.01 Notices......................................... 55 SECTION 14.02 Undertaking for Costs........................... 57 SECTION 14.03 Governing Law................................... 57 SECTION 14.04 Headings........................................ 58 SECTION 14.05 Partial Enforceability.......................... 58 SECTION 14.06 Counterparts.................................... 58 SECTION 14.07 Intention of the Parties........................ 58 SECTION 14.08 Successors and Assigns.......................... 58 SECTION 14.09 Effect of Declaration Supplements............... 59 SECTION 14.10 Merger.......................................... 59 SIGNATURES AND SEALS........................................................ 59 EXHIBIT A CERTIFICATE OF TRUST EXHIBIT B FORM OF DECLARATION SUPPLEMENT - TERMS OF SECURITIES 8 AMENDED AND RESTATED DECLARATION OF TRUST OF J.P. MORGAN INDEX FUNDING COMPANY I OCTOBER 10, 1997 AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration"), dated and effective as of October 10, 1997, by the undersigned trustees (together with all other Persons from time to time duly appointed and serving as trustees in accordance with the provisions of this Declaration, the "Trustees"), J.P. Morgan & Co. Incorporated, a Delaware corporation, as trust sponsor ("JPM" or the "Sponsor"), and the holders, from time to time, of undivided beneficial interests in the assets of the J.P. Morgan Index Funding Company I to be issued pursuant to this Declaration. WHEREAS the Sponsor and the Trustees entered into a Declaration of Trust dated as of December 12, 1996 (the "Original Declaration") in order to establish J.P. Morgan Index Funding Company I, a statutory business trust (the "Trust") under the Business Trust Act (as defined herein); WHEREAS the Certificate of Trust (the "Certificate of Trust") of the Trust was filed with the office of the Secretary of State of the State of Delaware on December 12, 1996 and a Restated Certificate of Trust was filed with the office of the Secretary of State of the State of Delaware on September 30, 1997; 9 2 WHEREAS the Trustees and the Sponsor desire to continue the Trust pursuant to the Business Trust Act for the purpose of, as described more fully in Sections 3.03, 3.04 and 3.05 hereof, (i) issuing and selling for cash Securities (as defined herein) of one or more Series of Securities (as defined herein) representing preferred undivided beneficial interests in the assets of the Trust associated with such Series of Securities (and the proceeds thereof) and investing the proceeds of the Securities of each Series of Securities in a Note issued by Morgan Guaranty (as defined herein) that, together with any proceeds thereof, will constitute the assets of the Trust associated with such series and will be held as an asset of the Trust for the benefit of the holders of such Securities and (ii) engaging in such other activities as are necessary, convenient or incidental thereto; and NOW, THEREFORE, it being the intention of the parties hereto that the Trust constitute a business trust under the Business Trust Act, that the Original Declaration be amended and restated in its entirety as provided herein and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets referred to in clause (i) of the previous Whereas clause purchased by the Trust will be held in trust for the benefit of the Holders (as defined herein) from time to time of the Certificates (as defined herein) issued hereunder representing undivided beneficial interests in the related assets of the Trust, subject to the provisions of this Declaration. 10 3 ARTICLE I Definitions SECTION 1.01. Definitions. (a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.01; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Amended and Restated Declaration of Trust (including Exhibits A and B hereto (the "Exhibits")) as modified, supplemented or amended from time to time including pursuant to a Declaration Supplement (as defined herein); (d) all references in this Declaration to Articles and Sections and Exhibits are to Articles and Sections of and Exhibits to this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; (f) a reference to the singular includes the plural and vice versa; (g) the words "include", "including" and similar terms shall be construed as if followed by the phrase "without limitation"; and (h) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Declaration as a whole and not to any particular Article, Section or other subdivision. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder. "Book Entry Interest" means a beneficial interest in a Global Certificate registered in the name of a Clearing Agency or a nominee thereof, ownership and transfers of which shall be maintained and made through book entries by such Clearing Agency as described in Section 9.04. "Business Day" means any day other than a Saturday, Sunday or any other day on which banking institutions in New York, New York are authorized or required by law to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time to time. "Certificate" means a Common Security Certificate or a Preferred Security Certificate. "Certificate of Trust" has the meaning set forth in the second Whereas clause above. 11 4 "Clearing Agency" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depository for the Preferred Securities and in whose name, or in the name of a nominee of that organization, shall be registered a Global Certificate and which shall undertake to effect book entry transfers and pledges of the Preferred Securities. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. A reference to a specific section of the Code refers not only to such specific section but also to any corresponding provision of any Federal tax statute enacted after the date of this Declaration, as such specific section or corresponding provision is in effect on the date of application of the provisions of this Declaration containing such reference. "Commission" means the Securities and Exchange Commission. "Common Securities" has the meaning specified in Section 7.01(b). "Common Security Certificate" means a definitive certificate in fully registered form representing a Common Security of any Series of Securities substantially in the form of Annex II to Exhibit B. "Covered Person" means (i) any officer, director, shareholder, partner, member, representative, employee or agent of the Trust or its Affiliates, (ii) any officer, director, shareholder, employee, representative or agent of JPM or any of its Affiliates and (iii) the Holders from time to time of the Securities. "Declaration Supplement" means a supplement to this Declaration executed by the Sponsor and two Regular Trustees that provides for the issuance of a particular Series of Securities and Certificates. "Definitive Preferred Security Certificates" has the meaning set forth in Section 9.04. "Delaware Trustee" has the meaning set forth in Section 5.01(a)(3). 12 5 "Depositary Agreement" means an agreement among the Trust, the Property Trustee and DTC, as the same may be amended or supplemented from time to time. "Distribution" means a distribution payable to Holders of the Securities of the applicable Series of Securities in accordance with Section 6.01. "DTC" means The Depository Trust Company, the initial Clearing Agency. "Early Redemption Value", with respect to any Series of Securities that are Indexed Securities, shall have the meaning, if any, set forth in the Declaration Supplement establishing such Series of Securities. "Event of Default" means, with respect to any Series of Securities, a Note Event of Default has occurred and is continuing under the Note associated with such Series of Securities. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation. "Face Amount" means, with respect to any Security, the initial stated principal amount thereof. "Fiscal Year" has the meaning specified in Section 11.01. "Global Certificate" has the meaning set forth in Section 9.04. "Holder" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. "Indemnified Person" means any Trustee, any Affiliate of any Trustee, any officer, director, shareholder, member, partner, employee, representative or agent of any Trustee, or any employee or agent of the Trust or any of its Affiliates. "Indexed Security" means any Security the stated liquidation preference or redemption value, as applicable, which varies or may vary from the Face Amount thereof. "Investment Company" means an investment company as defined in the Investment Company Act. 13 6 "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation. "Legal Action" has the meaning specified in Section 3.08(g). "Liquidation Distribution" has the meaning set forth in the terms of the Securities as set forth in Exhibit B hereto. "Majority in Principal Amount" means, except as otherwise required by the Trust Indenture Act and except as provided in paragraph (d) of paragraph 6 of Exhibit B hereto, with respect to any Series of Securities, Holder(s) of outstanding Securities of such series voting together as a single class or, as the context may require, Holder(s) of outstanding Preferred Securities of such series or Common Securities of such series voting as separate classes, who are the record owners of the relevant series or class of Securities whose Principal Amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) represents more than 50% of the Principal Amount of all outstanding Securities of such series or class. "Ministerial Action" means filing a form or making an election, or pursuing some other similar reasonable measure that has no adverse effect on the Trust, JPM or any Holder of any Security. "Morgan Guaranty" means Morgan Guaranty Trust Company of New York, a trust company with full banking powers organized under the laws of the State of New York and a wholly owned subsidiary of JPM. "Note" means a Note associated with a particular Series of Securities evidencing a loan from the Trust to Morgan Guaranty of the proceeds of the issuances of the Securities of such series. "Note Event of Default" means an event or condition defined as an "Event of Default" with respect to a Note associated with a particular Series of Securities has occurred and is continuing. "Note Guarantee" means a Note Guarantee Agreement of JPM for the benefit of the Property Trustee, for the benefit of the Holders of Securities of a particular Series of Securities, with respect to a Note associated with such Series of Securities. 14 7 "Option Closing Date" means the Option Closing Date as specified in any Underwriting Agreement. "Original Declaration" has the meaning set forth in the first Whereas clause above. "Paying Agent" has the meaning specified in Section 3.10(i). "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Guarantee" means a Guarantee Agreement of JPM for the benefit of the Holders of Preferred Securities of a Series of Securities with respect to such Preferred Securities. "Preferred Securities" has the meaning specified in Section 7.01(b). "Preferred Security Beneficial Owner" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "Preferred Security Certificate" means a definitive certificate in fully registered form representing a Preferred Security of any Series of Securities substantially in the form of Annex I to Exhibit B. "Principal Amount" means, at any time with respect to any Indexed Security, the Redemption Value, the applicable Early Redemption Value or the stated liquidation preference, as applicable, of such Indexed Security, as if determined as of such time pursuant to the terms of such Indexed Security. "Property Account" has the meaning specified in Section 3.10(c)(i). "Property Trustee" means the Trustee meeting the eligibility requirements set forth in Section 5.01(c) and having the duties set forth for the Property Trustee herein. 15 8 "Quorum" means a majority of the Regular Trustees or, if there are only two Regular Trustees, both such Regular Trustees. "Redemption Value", with respect to any Series of Securities that are Indexed Securities, has the meaning, if any, set forth in the Declaration Supplement establishing such Series of Securities. "Regular Trustee" means any Trustee other than the Property Trustee or the Delaware Trustee. "Resignation Request" has the meaning specified in Section 5.02(d). "Responsible Officer" means, with respect to the Property Trustee, any officer of the Property Trustee with responsibility for the administration of this Declaration and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of, and familiarity with, the particular subject. "Securities" means the Common Securities and the Preferred Securities. "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation. "Series of Securities" mean any series of Preferred Securities and related Common Securities issued hereunder or pursuant to a Declaration Supplement. "Special Event" has the meaning set forth in Section 5(b) of the terms of the Securities as set forth in Exhibit B hereto. "Sponsor" or "JPM" means J.P. Morgan & Co. Incorporated, a Delaware corporation, or any successor entity in a merger, consolidation or other business combination transaction in its capacity as sponsor of the Trust. "Successor Delaware Trustee" has the meaning specified in Section 5.02(b)(ii). "Successor Property Trustee" means a successor Trustee possessing the qualifications to act as Property Trustee under Section 5.02(b)(i). "10% in Principal Amount" means, except as otherwise required by the Trust Indenture Act and except as provided in paragraph (d) of paragraph 6 of Exhibit B 16 9 hereto, with respect to any Series of Securities, Holder(s) of outstanding Securities of such series voting together as a single class or, as the context may require, Holder(s) of outstanding Preferred Securities of such series or Common Securities of such series, voting as separate classes, who are the record owners of the relevant series or class of Securities whose Principal Amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) represents 10% or more of the Principal Amount of all outstanding Securities of such series or class. "Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation. "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as a Trustee in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "Underwriting Agreement" means any Underwriting Agreement among the Trust, the Sponsor and J.P. Morgan Securities, Inc. or J.P. Morgan Securities, Ltd., as representative of the several underwriters or managers, as applicable, named therein, relating to the issuance of the Preferred Securities of any Series of Securities. 17 10 ARTICLE II Trust Indenture Act SECTION 2.01. Trust Indenture Act; Application. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration and shall, to the extent applicable, be governed by such provisions; (b) if and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control; (c) for purposes of this Declaration, the Property Trustee, to the extent permitted by applicable law and/or the rules and regulations of the Commission, shall be the only Trustee which is a trustee for the purposes of the Trust Indenture Act; and (d) the application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 2.02. Lists of Holders of Preferred Securities. (a) Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide the Property Trustee with such information as is required under Section 312(a) of the Trust Indenture Act at the times and in the manner provided in Section 312(a); and (b) the Property Trustee shall comply with its obligations under Sections 310(b), 311 and 312(b) of the Trust Indenture Act. SECTION 2.03. Reports by the Property Trustee. Within 60 days after May 15 of each year, the Property Trustee shall provide to the Holders of the Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form, in the manner and at the times provided by Section 313 of the Trust Indenture Act. The Property Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.04. Periodic Reports to Property Trustee. Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee, the Commission and the Holders of the Securities, as applicable, such documents, reports and information as required by Section 314(a)(1)-(3) (if any) of the Trust Indenture Act and the compliance certificates required by Section 314(a)(4) and (c) of the Trust Indenture Act, any such certificates to be provided in the form, in the manner and at the times required by Section 314(a)(4) and (c) of the Trust Indenture Act (provided that any certificate to be provided pursuant to Section 314(a)(4) of the Trust Indenture Act shall be provided within 120 days of the end of each Fiscal Year). 18 11 SECTION 2.05. Evidence of Compliance with Conditions Precedent. Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration which relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given pursuant to Section 314(c) shall comply with Section 314(e) of the Trust Indenture Act. SECTION 2.06. Voting Rights of Holders. (a) Except as shall be otherwise established herein or in the Declaration Supplement(s) providing for the issue of any Series of Securities and except as otherwise required by the Business Trust Act, (i) Holders of Preferred Securities of any series shall have, with respect to such Preferred Securities, no right or power to vote on any question or matter or in any proceeding or to be represented at, or to receive notice of, any meeting of Holders and (ii) all voting rights of the Trust shall be vested exclusively in the Holder of Common Securities. The Holder of the Common Securities shall determine the manner in which the Common Securities are voted in all matters upon which the Holder of Common Securities has the right to vote. The Holder of Common Securities shall have the right to vote separately as a class on any matter on which the Holder of Common Securities has the right to vote regardless of the voting rights of any other Holder. (b) Subject to Section 2.06(f), if (i) the Trust fails to pay dividends or other distributions in full on the Preferred Securities of any Series of Securities for 30 days following the date on which such payment was due in accordance with the terms of such Preferred Securities; or (ii) an Event of Default (as defined in any Note associated with any Series of Securities) occurs and is continuing with respect to such Note, then the Holders holding a Majority in Principal Amount of the outstanding Preferred Securities of such series, acting as a single class, will be entitled to cause the Trust, by written direction to the Property Trustee, (A) to waive any such Event of Default and its consequences or to enforce the Trust's rights under the applicable Note or Notes against Morgan Guaranty, (B) in the case of clause (i) above, to declare and pay dividends or other distributions on the Preferred Securities of such series; provided that any such payments or other distributions shall be paid solely from the proceeds of interest or other payments made on the applicable Note and received by the Trust on behalf of the Holders of the Securities of such series and (C) in the case of clause (ii) above, to waive any such Event of Default and its consequences or to enforce the Trust's rights under the Note Guarantee with respect to the Preferred Securities of such 19 12 series. For purposes of determining whether the Trust has failed to pay dividends in full within 30 days of the applicable payment date, dividends or other distributions shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative dividends or other distributions have been or contemporaneously are declared and paid with respect to all dividend or other distribution periods terminating on or prior to the date of payment of such full cumulative dividends or other distributions. Not later than 30 days after the right to vote arises, the Property Trustee will solicit such vote. If the Property Trustee fails to solicit such vote within such 30-day period, the Holders holding 10% in Principal Amount of the outstanding Preferred Securities of the series with respect to which dividends or other distributions have not been paid, acting as a single class, will be entitled to convene such meeting. Any such voting rights shall cease immediately if, in the case of clause (i) above, the Trust shall have paid in full all accumulated and unpaid dividends or other distributions on the Securities of such Series of Securities with respect to which dividends or other distributions have not been paid or if, in the case of clause (ii) above, such default of Morgan Guaranty shall have been cured or waived. Subject to Section 2.06(f), Holders of Preferred Securities of a Series of Securities may, by vote of at least a Majority in Principal Amount of Preferred Securities of such series, in accordance with the terms of such Preferred Securities, direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee. (c) If any resolution is proposed to be adopted by the Holders providing for, or the Regular Trustees propose to take, any action to effect: (i) any variation or abrogation of the powers, preferences and special rights of any Series of Securities by way of amendment of this Declaration or otherwise, which variation or abrogation adversely affects the Holders of the Securities of such series, (ii) the dissolution of the Trust, or (iii) the commencement of any bankruptcy, insolvency, reorganization or other similar proceeding involving the Trust, then, in the case of any resolution or action described in clause (i) above, the Holders holding the outstanding Securities of such series the powers, preferences or special rights of which are proposed to be amended and, in the case of any resolution or action described in clause (ii) or 20 13 (iii) above, the Holders holding any outstanding Securities will be entitled to vote together as a class on such resolution or action of the Sponsor (but not any other resolution or action) and such resolution or action shall not be effective except with the approval of the Holders holding a Majority in Principal Amount of such outstanding Securities or all Series of Securities, as applicable; provided that no such resolution or action shall, without the consent of each Holder of Securities of any Series of Securities affected thereby, (1) change the terms of such Holder's Securities established pursuant to Section 3.03(iii), (iv), (v), (vi), (vii), (viii) or (xi) in a manner adverse to such Holder, (2) reduce the above-stated percentage of Principal Amount necessary to approve such resolution or action, (3) amend the provisions of this Section 2.06(c) or (4) cause the Trust to be treated as anything other than a grantor trust for United States federal income tax purposes; provided further, however, that no such approval shall be required under clauses (i) and (ii) if the dissolution of the Trust is proposed or initiated upon the occurrence of any of the events specified in Section 8.01. The powers, preferences or special rights of any Series of Securities will be deemed not to be varied by the creation or issuance of, and no vote will be required for the creation or issuance of, any other Series of Securities. (d) Notwithstanding any provision to the contrary herein, the first sentence of Section 9.01(c) of this Declaration may only be amended with the consent of each Holder of Securities. (e) Notwithstanding that Holders of Preferred Securities of any series are entitled to vote or consent under any circumstances described in this Declaration, any Preferred Securities of any series that are owned by JPM or by any entity directly or indirectly controlling or controlled by or under direct or indirect common control with JPM shall not be entitled to vote or consent and shall, for the purposes of such vote or consent, be treated as if they were not outstanding. (f) The right of any Holder of Securities of any Series of Securities to receive payment of Distributions on such Securities in accordance with this Declaration and the terms of such Securities set forth in the applicable Declaration Supplement on or after the respective payment dates therefor, or to institute suit for the enforcement of any such payment on or after such payment dates, shall not be impaired without the consent of such Holder. (g) As provided in the terms of any Series of Securities set forth in the applicable Declaration 21 14 Supplement, a waiver of a Note Event of Default relating to a Note associated with any Series of Securities by the Property Trustee at the written direction of the Holders of the Preferred Securities of such series constitutes a waiver of the corresponding Event of Default under this Declaration in respect of such Series of Securities; provided that if the Note Event of Default is not waivable under the applicable Note, the Event of Default under this Declaration shall also be not waivable. (h)(i) Morgan Guaranty and the Property Trustee may, without the consent of the Holders of any Preferred Securities, enter into senior notes supplemental to any Note relating to any Series of Securities for, among others, one or more of the following purposes: (x) to evidence the succession of another person to, and the assumption by such successor of, Morgan Guaranty's obligations under such Note; (y) to add covenants of Morgan Guaranty, or surrender any rights of Morgan Guaranty, for the benefit of the Property Trustee; and (z) to cure any ambiguity, or correct any inconsistency in, such Note. Morgan Guaranty and the Property Trustee, with the consent of the Holders of not less than a Majority in Principal Amount of the outstanding Preferred Securities of any series may modify the Note relating to such Series of Securities, provided that no such modification may, without the consent of the Holders of all outstanding Preferred Securities affected thereby, (w) reduce the amount of Preferred Securities of such series the Holders of which must consent to any amendment, supplement or waiver of such Note; (x) reduce the rate of or extend the time for the payment of interest on the Note; (y) alter the method of calculation of, or reduce, the amount paid at stated maturity or extend the stated maturity of such Note (other than pursuant to the terms of such Note) or (z) make such Note payable in money or property other than that stated in such Note. (ii) The Note Guarantee with respect to a Series of Securities may be amended only with the prior approval of the Property Trustee acting on behalf of the Holders of the Securities of such Series of Securities; provided that no such amendment shall adversely affect the Holders of the Preferred Securities of any Series of Securities without the consent of a Majority in Principal Amount of the Preferred Securities of such affected Series of Securities, with Holders of Preferred Securities of each such affected series voting as a single and separate class. All guarantees and agreements contained in the Note Guarantee shall bind the 22 15 successors, assignees, receivers, trustees and representatives of JPM and shall inure to the benefit of the Property Trustee, for the benefit of the Holders of the Securities of each Series of Securities, as the holder of each Note then outstanding. (iii) Except with respect of any changes that do not adversely affect the rights of Holders of the Preferred Securities of any Series of Securities (in which case no vote will be required), the Preferred Guarantee may be amended only with the prior approval of the Holders of not less than a Majority in Principal Amount of the outstanding Preferred Securities of each affected series, with Holders of Preferred Securities of each such affected series voting as a single and separate class. All guarantees and agreements contained in any Preferred Guarantee shall bind the successors, assignees, receivers, trustees and representatives of JPM and shall inure to the benefit of the Holders of the Preferred Securities of the applicable series then outstanding. (iv) The procedures and mechanisms for implementing any such modification to any Note, Note Guarantee or Preferred Guarantee shall be identical to the procedures and mechanisms set forth in paragraph (b) above or in Section 12.02. (i) A Note Event of Default under a Note associated with any particular Series of Securities or an Event of Default under this Declaration in respect of such Series of Securities shall not constitute a Note Event of Default under a Note associated with any other Series of Securities or an Event of Default under this Declaration in respect of any other Series of Securities and shall not prohibit payments in respect of such other Series of Securities. Payments in respect of principal of or interest on a Note, the Note Guarantee or the Preferred Guarantee, in each case associated with a particular Series of Securities shall be for the sole benefit of the Holders of Securities of such Series of Securities. SECTION 2.07. Disclosure of Information. The disclosure of information as to the names and addresses of the Holders of the Securities in accordance with Section 312 of the Trust Indenture Act, regardless of the source from which such information was derived, shall not be deemed to be a violation of any existing law or any law hereafter enacted which does not specifically refer to Section 312 of the Trust Indenture Act, nor shall the Property Trustee be held accountable by reason of mailing any material pursuant to a request made under Section 312(b) of the Trust Indenture Act. 23 16 ARTICLE III Organization SECTION 3.01. Name. The Trust continued by this Declaration is named "J.P. Morgan Index Funding Company I" as such name may be modified from time to time by the Regular Trustees following written notice to the Holders of Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION 3.02. Office. The address of the principal office of the Trust is c/o J.P. Morgan & Co. Incorporated, 60 Wall Street, New York, New York 10260-0060. Upon ten days' written notice to the Holders (a copy of such notice to be sent to the Property Trustee and the Delaware Trustee), the Regular Trustees may change the location of the Trust's principal office. The name of the registered agent and office of the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890. At any time, the Regular Trustees may designate another registered agent and/or registered office. SECTION 3.03. Issuance of the Trust Securities. The Sponsor and the Regular Trustees are hereby authorized, on behalf of the Trust from time to time to authorize the issuance of Securities of one or more Series of Securities, and with respect to the Securities of each such series to establish by a Declaration Supplement or Declaration Supplements providing for the issuance of such Securities: (i) the maximum number of Preferred Securities and Common Securities to constitute such series, the aggregate initial principal amount, the Face Amount (if any) and the distinctive designation thereof; (ii) whether the Preferred Securities of such series shall have voting rights in addition to those set forth in this Declaration and, if so, the terms of such voting rights; (iii) the periodic dividend or other distribution rate (or method of calculation thereof), if any, on the Securities of such series, the conditions and dates upon which such dividends or other distributions shall be payable and the ability of the Trust, if any, to extend the dividend or other distribution payment period for the Securities of such series, the dates from which such dividends or other distributions shall accrue, and whether such dividends or other distributions shall be cumulative or noncumulative; 24 17 (iv) whether the Securities of such series shall be subject to redemption by the Holders thereof or the Trust, and, if made subject to redemption, the times and other terms and conditions of such redemption (including the amount and kind of consideration to be received upon such redemption, or the method of calculation thereof); (v) any rights in addition to those set forth in this Declaration of the Holders of the Securities of such series upon the dissolution of the Trust; (vi) whether or not the Securities of such series shall be subject to the operation of a retirement or sinking fund and, if so, the extent to and manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the Securities of such series for retirement and the terms and provisions relative to the operation thereof; (vii) whether or not the Securities of such series shall be convertible into, or exchangeable for, interests of any other class or classes, or of any Securities of any other series, or securities of any other kind, including those issued by the Sponsor or any of its Affiliates, and if so convertible or exchangeable, the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same; (viii) any limitations and restrictions in addition to those set forth in this Declaration to be effective while the Securities of such series are outstanding upon the payment of periodic dividends or other distributions on, and upon the purchase, redemption or other acquisition by the Trust of, Securities of any other series; (ix) any conditions or restrictions in addition to those set forth in this Declaration upon the issue of any additional Securities of such series or any other series ranking on a parity with or prior to such Securities as to periodic dividends or distribution of assets on dissolution; (x) the times, prices and other terms and conditions for the offering of the Securities of such series; (xi) the Principal Amount (or the method of calculation thereof) of the Securities of such series to be paid upon Stated Maturity (if any) thereof; and 25 18 (xii) any other relative rights, powers and duties as shall not be inconsistent with this Section 3.03. The Sponsor and the Regular Trustees are hereby authorized, on behalf of the Trust, to execute and deliver any Declaration Supplement, any Underwriting Agreement and any other agreement, document, instrument or certificate in connection with any issuances of Securities of a Series of Securities. SECTION 3.04. Purchase of Notes. On any date, in connection with the issuance of Securities of a Series of Securities, the Regular Trustees, on behalf of the Trust, shall purchase from Morgan Guaranty with the proceeds received by the Trust from the sale of such Securities on such date pursuant to Section 3.03, at a purchase price of 100% of the principal amount thereof, a Note relating to and associated with such series, registered in the name of the Property Trustee and having an aggregate principal amount equal to the sum of the aggregate initial Principal Amount of the Preferred Securities and Common Securities of such Series of Securities, and, in satisfaction of the purchase price for such Note, the Regular Trustee, on behalf of the Trust, shall deliver or cause to be delivered to Morgan Guaranty such sum. SECTION 3.05. Purpose. The exclusive purposes and functions of the Trust are: (a)(i) to issue and sell Preferred Securities of one or more Series of Securities for cash and to issue and sell related Common Securities of such series to JPM for cash and use the proceeds of such sales to acquire a Note of a corresponding series of Morgan Guaranty having an aggregate principal amount equal to the sum of the aggregate Principal Amount of the Preferred Securities and Common Securities of such corresponding series so issued and sold; and (ii) to enter into such agreements and arrangements as may be necessary in connection with the sale of Securities of any Series of Securities to the initial purchasers thereof and to take all actions and exercise such discretion as may be necessary or desirable in connection therewith and to file such registration statements or make such other filings under the Securities Act, the Exchange Act or state securities or "Blue Sky" laws as may be necessary or desirable in connection therewith and the issuance of Securities of such Series of Securities; and (b) except as otherwise limited herein, to engage in such other activities as are necessary, convenient or incidental thereto. The Trust, either on its own behalf or on behalf of the Holders of any Series of Securities, shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets or, at any time while any Securities are outstanding, otherwise undertake (or 26 19 permit to be undertaken) an activity that would result in or cause the Trust to be treated as anything other than a grantor trust for United States federal income tax purposes. SECTION 3.06. Authority. Subject to the limitations provided in this Declaration and to the specific duties of the Property Trustee, the Regular Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Regular Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and the Holders of Securities of any applicable Series of Securities and an action taken by the Property Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust and the Holders of Securities of any applicable Series of Securities. In dealing with the Trustees acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustees to bind the Trust or the Holders of any Securities. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. SECTION 3.07. Title to Property of the Trust. Except as provided in Section 3.10 with respect to the Notes and the Property Accounts or unless otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an individual undivided beneficial interest in the assets of the Trust consisting of the Note associated with the Series of Securities corresponding to the Securities held by such Holder and the proceeds thereof. SECTION 3.08. Powers and Duties of the Regular Trustees. The Regular Trustees shall have the exclusive power, authority and duty to cause the Trust, and shall cause the Trust, to engage in the following activities: (a) to issue Securities of one or more Series of Securities, in accordance with this Declaration; provided, however, that there shall be no interests in the Trust other than the interests in one or more separate Series of Securities; (b) in connection with the issuance of Securities of any Series of Securities, at the direction of the Sponsor, to effect or cause to be effected the filings, and to execute or cause to be executed the documents, set forth in Section 3.13 and to execute, deliver and perform on behalf of the Trust the Depositary Agreement; 27 20 (c) to acquire as trust assets series of Notes with the proceeds of the sale of the Securities of the associated Series of Securities; provided, however, that the Regular Trustees shall cause each Note to be held of record in the name of the Property Trustee for the benefit of the Holders of the Securities of the associated Series of Securities; (d) to cause the Trust to enter into such agreements and arrangements as may be necessary or desirable in connection with the sale of Securities of any Series of Securities to the initial purchasers thereof and the consummation thereof, and to take all action, and exercise all discretion, as may be necessary or desirable in connection with the consummation thereof; (e) to give the Sponsor and the Property Trustee prompt written notice of the occurrence of a Special Event; provided that the Regular Trustees shall notify the Sponsor and the Property Trustee before taking or refraining to take any Ministerial Action in relation to a Special Event; (f) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including for the purposes of Section 316(c) of the Trust Indenture Act and with respect to Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to Holders of the applicable Securities as to such actions and applicable record dates; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless, pursuant to Section 3.10(e), the Property Trustee has the exclusive power to bring such Legal Action; (h) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors and consultants and pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; (j) to give the certificate to the Property Trustee required by Section 314(a)(4) of the Trust Indenture Act, which certificate may be executed by any Regular Trustee; 28 21 (k) to incur expenses which are necessary or incidental to carrying out any of the purposes of the Trust; (l) to act as, or appoint another Person to act as, registrar and transfer agent for Securities of any Series of Securities, the Regular Trustees hereby initially appointing the Property Trustee for such purposes; (m) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to the terms of the Securities of the applicable Series of Securities set forth in the Declaration Supplement relating to such Series of Securities; (n) to execute all documents or instruments, perform all duties and powers and do all things for and on behalf of the Trust in all matters necessary, convenient or incidental to the foregoing; (o) to take all action which may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of Securities of any Series of Securities or to enable the Trust to effect the purposes for which the Trust has been created; (p) to take all action, not inconsistent with this Declaration or with applicable law, which the Regular Trustees determine in their discretion to be reasonable and necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.08, in order that: (i) the Trust will not be deemed to be an Investment Company required to be registered under the Investment Company Act; (ii) the Trust will not be classified for United States Federal income tax purposes as an association taxable as a corporation or a partnership and will be treated as a grantor trust for United States Federal income tax purposes; and (iii) the Trust will comply with any requirements imposed by any taxing authority on Holders of instruments treated as indebtedness for United States Federal income tax purposes; 29 22 provided that such action does not adversely affect the interests of Holders of Securities of any series; (q) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of the Trust; and (r) subject to the requirements of Section 317(b) of the Trust Indenture Act, to appoint one or more Paying Agents in addition to the Property Trustee. The Regular Trustees must exercise the powers set forth in this Section 3.08 in a manner which is consistent with the purposes and functions of the Trust set out in Section 3.05 and the Regular Trustees shall not take any action which is inconsistent with the purposes and functions of the Trust set forth in Section 3.05. Subject to this Section 3.08, the Regular Trustees shall have none of the powers nor any of the authority of the Property Trustee set forth in Section 3.10. SECTION 3.09. Prohibition of Actions by Trust and Trustees. The Trust shall not, and the Trustees (including the Property Trustee) shall not cause the Trust to, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not, and the Trustees (including the Property Trustee) shall not cause the Trust to: (a) invest any proceeds received by the Trust from holding any Note associated with any Series of Securities, but shall promptly distribute all such proceeds to Holders of the Securities of the associated series pursuant to the terms of this Declaration and of such Series of Securities; (b) acquire any assets other than as expressly provided herein; (c) possess Trust property for other than a Trust purpose; (d) make any loans, other than loans represented by the Notes; (e) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of any Series of Securities in any way whatsoever; (f) issue any securities or other evidences of beneficial ownership of, or beneficial interests in, 30 23 the Trust other than the Securities of the Series of Securities; (g) incur any indebtedness for borrowed money; or (h) (i) direct the time, method and place of exercising any trust or power conferred upon the Holders with respect to any Note associated with any Series of Securities or the Note Guarantee or the Preferred Guarantee, (ii) waive any past default that is waivable under any Note associated with any Series of Securities, (iii) exercise any right to rescind or annul any declaration that the principal of the Note associated with any Series of Securities shall be due and payable or (iv) consent to any amendment, modification or termination of the Note associated with any Series of Securities or the Note Guarantee or the Preferred Guarantee, where such consent shall be required, unless in the case of this clause (h) the Property Trustee shall have received an unqualified opinion of nationally recognized independent tax counsel recognized as expert in such matters to the effect that such action will not cause the Trust to be classified for United States Federal income tax purposes as an association taxable as a corporation or partnership and that the Trust will continue to be classified as a grantor trust for United States federal income tax purposes. SECTION 3.10. Powers and Duties of the Property Trustee. (a) The Note associated with any Series of Securities shall be held of record in the name of the Property Trustee in trust for the benefit of the Holders of the Securities of such series. The right, title and interest of the Property Trustee to the Note associated with each Series of Securities shall vest automatically in each Person who may hereafter be appointed as Property Trustee in accordance with Article V. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered. (b) The Property Trustee shall not transfer its right, title and interest in the Note associated with of any Series of Securities to the Regular Trustees or, if the Property Trustee does not also act as the Delaware Trustee, the Delaware Trustee. (c) The Property Trustee shall: 31 24 (i) establish and maintain separate segregated non-interest bearing bank accounts (each a "Property Account") in the name of and under the exclusive control of the Property Trustee on behalf of the Holders of Securities of each Series of Securities and on the receipt of payments of funds made in respect of a Note associated with any series held by the Property Trustee or the Note Guarantee in respect of such Note, deposit such funds into the Property Account maintained for such Series of Securities and Note associated therewith and, without any further acts of the Property Trustee or the Regular Trustees, promptly make payments to the Holders of Securities of the corresponding Series of Securities from the Property Account in accordance with Section 6.01. Funds in each Property Account shall be held uninvested, and without liability for interest thereon, until disbursed in accordance with this Declaration. Each Property Account shall be an account which is maintained with a banking institution whose long term unsecured indebtedness is rated by a "nationally recognized statistical rating organization", as such term is defined for purposes of Rule 436(g)(2) under the Securities Act, at least equal to (but in no event less than "A" or the equivalent) the rating assigned to the Preferred Securities of the corresponding series by a nationally recognized statistical rating organization; (ii) engage in such ministerial activities as shall be necessary or appropriate to effect promptly the redemption of Securities of any series to the extent the Note associated with such series is redeemed or matures; and (iii) have the legal power, in accordance with the instructions of Holders of a Majority in Principal Amount of the outstanding Preferred Securities of any series if applicable, to exercise all of the rights, powers and privileges of a Holder of the corresponding series of Notes and the Note Guarantee and, if an Event of Default occurs and is continuing, the Property Trustee, subject to Section 2.06(b), shall, for the benefit of the Holders of Securities of the applicable series, enforce its rights as Holder of the Note relating to such series or the Note Guarantee, subject to the rights of the Holders of such Securities pursuant to the terms of this Declaration, the Business Trust Act and the Trust Indenture Act. (d) The Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of any Series of 32 25 Securities set forth in the Declaration Supplement establishing such Series of Securities. (e) The Property Trustee shall take any Legal Action which arises out of or in connection with an Event of Default or the Property Trustee's duties and obligations under this Declaration, the Business Trust Act or the Trust Indenture Act. (f) All moneys deposited in any Property Account, and all Notes held by the Property Trustee for the benefit of the Holders of the Securities, will not be subject to any right, charge, security interest, lien or claim of any kind in favor of, or for the benefit of, the Property Trustee or its agents or their creditors. (g) The Property Trustee shall, within 30 days after the occurrence of a default with respect to any Series of Securities, transmit by mail, first class postage prepaid, to the Holders of Securities of such series, as their names and addresses appear upon the register, notice of all defaults with respect to such Series of Securities known to the Property Trustee, unless such defaults shall have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 3.10(g) being hereby defined to be a Note Event of Default under the Note associated with such Series of Securities, not including any periods of grace provided for in such Note and irrespective of the giving of any notice provided therein); provided that, except in the case of default in the payment of the principal of (or premium, if any) or interest on any Note associated with any Series of Securities, the Property Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Property Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the corresponding Securities. The Property Trustee shall not be deemed to have knowledge of any default, except (i) a default in the payment of principal of (or premium, if any) or interest on any Note associated with any Series of Securities, or (ii) any default as to which the Property Trustee shall have received written notice or a Responsible Officer charged with the administration of this Declaration shall have obtained written notice. (h) The Property Trustee shall not resign as a Trustee unless either: (i) the Trust has been completely liquidated and the proceeds thereof distributed to the Holders of each Series of Securities pursuant to the terms of each such Series of Securities; or 33 26 (ii) a Successor Property Trustee has been appointed and accepted that appointment in accordance with Article V. (i) The Property Trustee shall act as paying agent in respect of each Series of Securities and, subject to Section 3.08(r), may authorize one or more Persons (each, a "Paying Agent") to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to Securities of such series. Any such Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the Property Trustee, after consultation with the Regular Trustees, at any time and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Property Trustee, subject to Section 3.08(r). (j) Subject to this Section 3.10, the Property Trustee shall have none of the powers or the authority of the Regular Trustees set forth in Section 3.08. (k) The Property Trustee shall exercise the powers, duties and rights set forth in this Section 3.10 and Section 3.12 in a manner which is consistent with the purposes and functions of the Trust set out in Section 3.05, and the Property Trustee shall not take any action which is inconsistent with the purposes and functions of the Trust set forth in Section 3.05. SECTION 3.11. Delaware Trustee. Notwithstanding any other provision of this Declaration other than Section 5.01(a)(3), the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Regular Trustees or the Property Trustee described in this Declaration. Except as set forth in Section 5.01(a)(3), the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Business Trust Act. No implied covenants or obligations shall be read into this Declaration against the Delaware Trustee. SECTION 3.12. Certain Rights and Duties of the Property Trustee. (a) The Property Trustee, before the occurrence of an Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration, and no implied covenants shall be read into this Declaration against the Property Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.06), the Property Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent 34 27 person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) No provision of this Declaration shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Declaration, and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Property Trustee; and (B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders as provided herein relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee hereunder or under any Note associated with any Series of Securities, or exercising any trust or power conferred upon the Property Trustee under this Declaration; and 35 28 (iv) no provision of this Declaration shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or adequate indemnity against such risk or liability is not reasonably assured to it. (c) Subject to the provisions of Section 3.12(a) and (b): (i) whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part request and rely upon a certificate, which shall comply with the provisions of Section 314(e) of the Trust Indenture Act, signed by any two of the Regular Trustees or by an authorized officer of the Sponsor, as the case may be; (ii) the Property Trustee (A) may consult with counsel (which may be counsel to the Sponsor or any of its Affiliates and may include any of its employees) selected by it in good faith and with due care and the written advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice and opinion and (B) shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (iii) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed by it in good faith and with due care; (iv) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holders, unless such Holders shall have offered to the Property Trustee reasonable 36 29 security and indemnity against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction; provided that nothing contained in this clause (iv) shall relieve the Property Trustee of the obligation, upon the occurrence of an Event of Default (which has not been cured or waived) to exercise such of the rights and powers vested in it by this Declaration, and to use the same degree of care and skill in this exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs; (v) any action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders of Securities of the applicable Series of Securities and the signature of the Property Trustee or its agents alone shall be sufficient and effective to perform any such action; and no third party shall be required to inquire as to the authority of the Property Trustee to so act, or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action; (vi) the Property Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, security or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; and (vii) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, security or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. SECTION 3.13. Registration Statement and Related Matters. In accordance with the Original Declaration, JPM, the Regular Trustees and the Delaware Trustee have authorized and directed, and hereby confirm the authorization of, JPM, as the sponsor of the Trust (with appropriate changes relating to the listing of the Preferred Securities on the American Stock Exchange instead of the New York Stock Exchange), (i) to file with the Commission and execute, in each case on behalf of the Trust, (a) a 37 30 Registration Statement on Form S-3 (File Nos. 333-01121 and 333-01121-01) (the "1933 Act Registration Statement") including any amendments thereto and any further pre-effective or post-effective amendments to such Registration Statement, relating to the registration under the Securities Act of, among other things, the Preferred Securities and the related guarantees of such Preferred Securities by the Sponsor and (b) a Registration Statement on Form 8-A or other appropriate form (the "1934 Act Registration Statement") (including all pre-effective and post-effective amendments thereto) relating to the registration of the Preferred Securities of any series and the related guarantees of such Preferred Securities by the Sponsor under Section 12(b) of the Exchange Act; (ii) to file with the American Stock Exchange and execute on behalf of the Trust a listing application and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Preferred Securities of any series to be listed on the American Stock Exchange; (iii) to file and execute on behalf of the Trust such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as shall be necessary or desirable to register the Preferred Securities under the securities or "Blue Sky" laws of such jurisdictions as JPM, on behalf of the Trust, may deem necessary or desirable and (iv) to negotiate and execute on behalf of the Trust any Underwriting Agreement. In the event that any filing referred to in clauses (i)-(iii) above is required by the rules and regulations of the Commission, the American Stock Exchange or state securities or blue sky laws, to be executed on behalf of the Trust by the Trustees, the Regular Trustees, in their capacities as Trustees of the Trust, are hereby authorized and directed to join in any such filing and to execute on behalf of the Trust any and all of the foregoing, it being understood that the Property Trustee and the Delaware Trustee, in their capacities as Trustees of the Trust, shall not be required to join in any such filing or execute on behalf of the Trust any such document unless required by the rules and regulations of the Commission, the American Stock Exchange or state securities or blue sky laws. In connection with all of the foregoing, JPM and each Trustee, solely in its capacity as a Trustee of the Trust, have constituted and appointed, and hereby confirm the appointment of Gene A. Capello and James C.P. Berry, and each of them, as his, her or its, as the case may be, true and lawful attorneys-in-fact, and agents, with full power of substitution and resubstitution, for JPM or such Trustee or in JPM's or such Trustee's name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to the 1933 Act Registration Statement and the 1934 Act Registration Statement and to file the same, with all exhibits thereto, and other 38 31 documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as JPM or such Trustee might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, shall do or cause to be done by virtue hereof. SECTION 3.14. Filing of Amendments to Certificate of Trust. The Certificate of Trust as filed with the Secretary of State of the State of Delaware on December 12, 1996 is attached hereto as Exhibit A. On or after the date of execution of this Declaration, the Trustees shall cause the filing with the Secretary of State of the State of Delaware of such amendments to the Certificate of Trust as the Trustees shall deem necessary or desirable. SECTION 3.15. Execution of Documents by Regular Trustees. Unless otherwise determined by the Regular Trustees and except as otherwise required by the Business Trust Act with respect to the Certificate of Trust or otherwise, a majority of, or if there are only two, both of, the Regular Trustees are authorized to execute and deliver on behalf of the Trust (including on behalf of the Holders of any Securities) any documents which the Regular Trustees have the power and authority to execute or deliver pursuant to this Declaration. SECTION 3.16. Trustees Not Responsible for Recitals or Issuance of Securities. The recitals contained in this Declaration and any of the Securities shall be taken as the statements of the Sponsor and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or any of the Securities. SECTION 3.17. Duration of Trust. The Trust, absent termination pursuant to the provisions of Article VIII hereof, shall have existence until November 21, 2105. SECTION 3.18. Assets and Liabilities Associated with Series of Securities; Recordkeeping of Series of Securities. (a) All proceeds received by the Trust with respect to a Note associated with a particular Series of Securities, together with such Note, shall be deemed to be "assets associated with" the Series of Securities relating to or associated with such Note for all purposes and shall 39 32 not be deemed to be "assets associated with" any other Series of Securities and such assets shall be subject only to the rights of the creditors with respect to such series. In addition, any assets, income, fees, earnings, profits or funds, or payments and proceeds with respect thereto, that are not readily identifiable as being associated with any Series of Securities relating to a particular Note shall be allocated by the Property Trustee between and among one or more Series of Securities in such manner as the Property Trustee, in its reasonable discretion, deems fair and equitable, and such assets, income, fees, earnings, profits or funds, or payments and proceeds with respect thereto shall be assets associated with such series. The assets associated with a particular Series of Securities shall be so recorded upon the books of the Trust, and shall be held in trust for the benefit of the Holders of Securities of such series. The assets associated with each particular Series of Securities shall be charged with the liabilities associated with that series and with all other expenses, costs, charges and reserves attributable to that series. Any general liabilities, expenses, costs, charges or reserves of the Trust that are not readily identifiable as being associated with any Series of Securities relating to a particular Note shall be allocated and charged by the Property Trustee between or among any one or more of the Series of Securities in such manner as the Property Trustee, in its reasonable discretion, deems fair and equitable. Without limitation of the foregoing provisions of this Section 3.18, but subject to the right of the Property Trustee in its reasonable discretion to allocate general liabilities, expenses, costs, charges or reserves as herein provided, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular Series of Securities shall be enforceable against the assets associated with such series only, and not against the assets of the Trust generally or the assets associated with any other Series of Securities. Notice of this contractual limitation on inter-series liabilities shall be set forth in the Certificate (whether originally or by amendment), and upon the giving of such notice in the Certificate the statutory provisions of Section 3804 of the Business Trust Act relating to the limitations on inter-series liabilities (and the statutory effect under such section of the setting forth of such notice in the Certificate) shall become applicable to the Trust and each Series of Securities. Any Person extending credit to, contracting with, or having any claim against any Series of Securities may look only to the assets associated with that series to satisfy or enforce any debt, liability, obligation or expense incurred, contracted for or otherwise existing with respect to that series. No Holder or former Holder of Securities of any Series of Securities shall have any claim on or right to any assets allocated or associated with any 40 33 other Series of Securities (except if, and to the extent that, such Holder is also a Holder of Securities of such other series). (b) Separate and distinct books and records shall be maintained by the Trust for each Series of Securities and the assets associated with any such series shall be held and accounted for separately from the assets of the Trust or the assets associated with any other series. ARTICLE IV Sponsor SECTION 4.01. Purchase of Common Securities by Sponsor. On any date, including on any Option Closing Date, the Sponsor shall purchase all of the Common Securities of any series issued by the Trust at the same time as the Preferred Securities of the corresponding series to be issued on such date are issued, such purchase to be in such amount so that the Common Securities at all times represent 0.001% of the total capital of the Trust and of each Series of Securities. SECTION 4.02. Expenses. (a) In connection with the purchase of the Note associated with any Series of Securities by the Trust on behalf of the Holders of Securities of such series, the Sponsor, in its capacity as Sponsor and not as a Holder, shall be responsible for and shall pay for all debts and obligations (other than with respect to such Series of Securities) and all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization of the Trust, the issuance of the Preferred Securities of such series to initial purchasers thereof, the fees and expenses (including reasonable counsel fees and expenses) of the Trustees (including any amounts payable under Article X), the costs and expenses relating to the operation of the Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, Paying Agent(s), registrars, transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the disposition of Trust assets). (b) In connection with the purchase by the Trust of the Note associated with any Series of Securities, the Sponsor, in its capacity as Sponsor and not as a Holder, will pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) 41 34 and all liabilities, costs and expenses with respect to such taxes of the Trust. (c) The Sponsor's obligations under this Section 4.02 shall be for the benefit of, and shall be enforceable by, any Person to whom any such debts, obligations, costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor has received notice hereof. Any such Creditor may enforce the Sponsor's obligations under this Section 4.02 directly against the Sponsor and the Sponsor irrevocably waives any right or remedy to require that any such Creditor take any action against the Trust or any other Person before proceeding against the Sponsor. The Sponsor agrees to execute such additional agreements as may be necessary or desirable in order to give full effect to the provisions of this Section 4.02. ARTICLE V Trustees SECTION 5.01. Number of Trustees; Qualifications. (a) Except as provided in (1) below, the number of Trustees initially shall be five (5). At any time (i) before the issuance of Securities of any Series of Securities, the Sponsor may, by written instrument, increase or decrease the number of, and appoint, remove and replace the, Trustees, and (ii) after the issuance of Securities of any Series of Securities the number of Trustees may be increased or decreased solely by, and Trustees may be appointed, removed or replaced solely by, vote of Holders of Common Securities of all series representing a Majority in Principal Amount of the Common Securities of all series voting as a class; provided that in any case: (1) the number of Trustees shall be at least five (5) unless the Trustee that acts as the Property Trustee also acts as the Delaware Trustee, in which case the number of Trustees shall be at least three (3); (2) at least a majority of the Trustees shall at all times be officers or employees of JPM; (3) if required by the Business Trust Act, one Trustee (the "Delaware Trustee") shall be either a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware and otherwise is permitted to act as a Trustee hereunder under the laws of the State of Delaware, 42 35 except that if the Property Trustee has its principal place of business in the State of Delaware and otherwise is permitted to act as a Trustee hereunder under the laws of the State of Delaware, then the Property Trustee shall also be the Delaware Trustee and Section 3.09 shall have no application; and (4) there shall at all times be a Property Trustee hereunder which shall satisfy the requirements of Section 5.01(c). Each Trustee shall be either a natural person at least 21 years of age or a legal entity which shall act through one or more duly appointed representatives. (b) The initial Regular Trustees shall be: H. Christian Raymond Andrew G. Kerber Susan L. McCullin In care of J.P. Morgan & Co. Incorporated 60 Wall Street New York, New York 10260-0060 (c) There shall at all times be one Trustee which shall act as Property Trustee. In order to act as Property Trustee hereunder, such Trustee shall: (i) not be an Affiliate of the Sponsor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.01(c)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Property Trustee shall cease to satisfy the requirements of clauses (i)-(iii) above, the Property Trustee shall immediately resign in the manner and 43 36 with the effect set out in Section 5.02(d). If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Property Trustee and the Holders of the Common Securities of each series (as if such Holders were the obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. The Preferred Guarantee shall be deemed to be specifically described in this Declaration for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. The initial Trustee which shall serve as the Property Trustee is First Trust of New York, National Association, whose address is as set forth in Section 14.01(b). (d) The initial Trustee which shall serve as the Delaware Trustee is Wilmington Trust Company, a Delaware banking corporation, whose address is as set forth in Section 14.01(c). (e) Any action taken by Holders of Common Securities pursuant to this Article V shall be taken at a meeting of Holders of Common Securities convened for such purpose or by written consent as provided in Section 12.02. (f) No amendment may be made to this Section 5.01 which would change any rights with respect to the number, existence or appointment and removal of Trustees, except with the consent of each Holder of the Common Securities of each series. SECTION 5.02. Appointment, Removal and Resignation of Trustees. (a) Subject to Section 5.02(b), Trustees may be appointed or removed without cause at any time: (i) until the issuance of Securities of any Series of Securities, by written instrument executed by the Sponsor; and (ii) after the issuance of Securities of any Series of Securities by vote of the Holders of a Majority in Principal Amount of Common Securities of each series voting as a class. (b)(i) The Trustee that acts as Property Trustee shall not be removed in accordance with Section 5.02(a) until a Successor Property Trustee possessing the qualifications to act as Property Trustee under Section 5.01(c) (a "Successor Property Trustee") has been appointed and has accepted such appointment by 44 37 written instrument executed by such Successor Property Trustee and delivered to the Regular Trustees, the Sponsor and the Property Trustee being removed; and (ii) the Trustee that acts as Delaware Trustee shall not be removed in accordance with Section 5.02(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Section 5.01(a)(3) (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees, the Sponsor and the Delaware Trustee being removed. (c) A Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, removal or resignation. (d) Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument (a "Resignation Request") in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: (i) no such resignation of the Trustee that acts as the Property Trustee shall be effective until a Successor Property Trustee possessing the qualifications to act as Property Trustee under Section 5.01(c) has been appointed and has accepted such appointment by instrument executed by such Successor Property Trustee and delivered to the Trust, the Sponsor and the resigning Property Trustee; or (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee. (e) If no Successor Property Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.02 within 60 days after delivery to the Sponsor and the Trust of a Resignation Request, the resigning Property Trustee or Delaware Trustee may petition any court of competent jurisdiction for appointment of a Successor Property Trustee or Successor Delaware Trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a Successor Property 45 38 Trustee or Successor Delaware Trustee, as the case may be. (f) The Sponsor shall provide notice to the Property Trustee of any resignation or removal of a Regular Trustee. SECTION 5.03. Vacancies Among Trustees. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.01 or if the number of Trustees is increased pursuant to Section 5.01, a vacancy shall occur. A resolution certifying the existence of such vacancy by a majority of the Regular Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with the requirements of this Article V. SECTION 5.04. Effect of Vacancies. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee, or any one of them, shall not operate to annul the Trust. Whenever a vacancy in the number of Regular Trustees shall occur until such vacancy is filled as provided in this Article V, the Regular Trustees in office, regardless of their number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration. SECTION 5.05. Meetings. Meetings of the Regular Trustees shall be held from time to time upon the call of any Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in-person meeting of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meeting of the Regular Trustees or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before such meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at a meeting by vote of a majority of the Regular Trustees present (whether in person 46 39 or by telephone) and eligible to vote with respect to such matter; provided that a Quorum is present, or without a meeting by the unanimous written consent of the Regular Trustees. SECTION 5.06. Delegation of Power. (a) Any Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any registration statement or amendment thereto or other document or schedule filed with the Commission or making any other governmental filing (including, without limitation the filings referred to in Section 3.13). (b) The Regular Trustees shall have the power to delegate from time to time to such of their number or to officers of the Trust or to officers of JPM the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. ARTICLE VI Distributions SECTION 6.01. Distributions. Holders of Securities shall receive periodic distributions, redemption payments and liquidation distributions in accordance with the applicable terms of the relevant Series of Securities ("Distributions"). Distributions shall be made to the Holders of Securities in accordance with the terms of the applicable Securities as set forth in the Declaration Supplement(s) relating to the applicable Series of Securities. If and to the extent that Morgan Guaranty makes a payment of interest, premium or principal on the Note relating to any Series of Securities held by the Property Trustee (the amount of any such payment being a "Payment Amount"), the Property Trustee shall and is directed to promptly make a Distribution of the Payment Amount to Holders of Securities of the corresponding series in accordance with the terms of such Securities as set forth in the Declaration Supplement(s) relating to such Series of Securities. 47 40 ARTICLE VII Issuance of Securities SECTION 7.01. General Provisions Regarding Securities. (a) The Regular Trustees shall issue on behalf of the Trust Securities of one or more separate Series of Securities in fully registered form representing undivided beneficial interests in the Note associated with such Series of Securities held by the Property Trustee for the benefit of Holders of Securities of such Series of Securities in accordance with Section 7.01(b) and for the consideration specified in Section 3.03. (b) The Regular Trustees shall (i) issue on behalf of the Trust Preferred Securities of a Series of Securities representing undivided beneficial interests in the Note associated with such Series of Securities held by the Property Trustee for the benefit of Holders of Securities of such Series of Securities having such terms as are set forth in the Declaration Supplement relating to such Series of Securities (the "Preferred Securities") which terms shall be deemed incorporated by reference in, and made a part of, this Declaration as if specifically set forth herein, and Common Securities of a Series of Securities representing undivided beneficial interests in the Note associated with such Series of Securities held by the Property Trustee for the benefit of Holders of Securities of such Series of Securities having such terms as are set forth in the Declaration Supplement relating to such Series of Securities (the "Common Securities") which terms shall be deemed incorporated by reference in, and made a part of, this Declaration as if specifically set forth herein and (ii) notify the Property Trustee of the terms of any Declaration Supplement and the planned issuance of the Securities created thereunder at least three Business Days prior to such issuance. The Trust shall have no securities or other interests in the assets of the Trust other than the Securities of each Series of Securities. (c) The Certificates shall be signed on behalf of the Trust by the Regular Trustees (or if there are more than two Regular Trustees by any two of the Regular Trustees). Such signatures may be the manual or facsimile signatures of the present or any future Regular Trustee. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect the validity of any Certificate. In case any Regular Trustee of the Trust who shall have signed any of the Certificates shall cease to be such Regular Trustee before the Certificate so signed shall be delivered by the Trust, such Certificate nevertheless may be delivered as though the person who signed such Certificate had not ceased to be such Regular Trustee; and 48 41 any Certificate may be signed on behalf of the Trust by such persons as, at the actual date of the execution of such Certificate, shall be the Regular Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such a Regular Trustee. Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Securities may be listed, or to conform to usage. Pending the preparation of definitive Certificates, the Regular Trustees on behalf of the Trust may execute temporary Certificates (printed, lithographed or typewritten), in substantially the form of the definitive Certificates in lieu of which they are issued, but with such omissions, insertions and variations as may be appropriate for temporary Certificates, all as may be determined by the Regular Trustees. Each temporary Certificate shall be executed by the Regular Trustees on behalf of the Trust upon the same conditions and in substantially the same manner, and with like effect, as definitive Certificates. Without unnecessary delay, the Regular Trustees on behalf of the Trust will execute and furnish definitive Certificates and thereupon any or all temporary Certificates may be surrendered to the transfer agent and registrar in exchange therefor (without charge to the Holders). Each Certificate whether in temporary or definitive form shall be countersigned by the manual or facsimile signature of an authorized signatory of the Person acting as registrar and transfer agent for the Securities, which shall initially be the Property Trustee. (d) The consideration received by the Trust on behalf of the Holders of Securities of a Series of Securities for the issuance of Securities of such series shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (e) Upon issuance of Securities of any series as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and non-assessable. (f) Every Person, by virtue of having become a Holder or a Preferred Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration. 49 42 (g) Upon issuance of Securities of any series as provided in this Declaration, the Regular Trustees on behalf of the Trust shall return to JPM the $10 constituting initial trust assets as set forth in the Original Declaration. ARTICLE VIII Dissolution and Termination of Trust SECTION 8.01. Dissolution and Termination of Trust. The Trust shall dissolve when: (i) the Securities of all of the Series of Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders of the Securities of each such series in accordance with the terms of the Securities of each such series; or (ii) upon the expiration of the term of the Trust as set forth in Section 3.17, and thereafter the Trustees shall, after satisfaction of all obligations of the Trust, file a certificate of cancelation with the Secretary of State of the State of Delaware and the Trust shall terminate. The Trustees shall so file such a certificate as soon as practicable after the occurrence of an event referred to in this Section 8.01. The provisions of Sections 3.12 and 4.02 and Article X shall survive the termination of the Trust. ARTICLE IX Transfer of Interests SECTION 9.01. Transfer of Securities. (a) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration. Any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void. (b) Subject to this Article IX, Preferred Securities shall be freely transferable. (c) Notwithstanding anything to the contrary in this Declaration, Common Securities shall be non-assignable 50 43 and non-transferable, and may only be issued to, and held by, the Sponsor. SECTION 9.02. Transfer of Certificates. The Regular Trustees shall cause to be kept at an office or agency to be maintained by the Trust a register in which, subject to such reasonable regulations as it may prescribe, the Trust shall provide for the registration of Certificates and of transfers of Certificates, which will be effected without charge but only upon payment (with such indemnity as the Trust may require) in respect of any tax or other government charges which may be imposed in relation to it. The Property Trustee will be the initial registrar and transfer agent (the "Registrar") for the purpose of registering Certificates and transfers of Certificates as provided herein. Upon surrender for registration of transfer of any Certificate at the office or agency of the Registrar, the Regular Trustees shall execute and the Registrar shall countersign in accordance with section 7.01(c) one or more new Certificates of any authorized denominations and of a like aggregate Principal Amount to be issued in the name of the designated transferee or transferees. Every Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Trust duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Certificate surrendered for registration of transfer shall be canceled by the Regular Trustees. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration. SECTION 9.03. Deemed Security Holders. The Trustees may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole Holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions in respect of such Securities and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trustees shall have actual or other notice thereof. SECTION 9.04. Book Entry Interests. Unless otherwise specified in the terms of any Series of Securities, (a) the Common Securities Certificates of any such series will be issued in the form of one or more, fully 51 44 registered, global Common Security Certificates of such series to be delivered to and in the name of J.P. Morgan & Co. Incorporated by, or on behalf of, the Trust and (b) the Preferred Securities Certificates of such series, on original issuance (including Preferred Securities of such series, if any, issued on any Option Closing Date pursuant to the exercise of the overallotment option set forth in any Underwriting Agreement), will be issued in the form of one or more, fully registered, global Preferred Security Certificates of such series (each a "Global Certificate"), to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Trust. Such Global Certificates shall initially be registered on the books and records of the Trust in the name of Cede & Co., the nominee of DTC, and no Preferred Security Beneficial Owner of Preferred Securities of any series will receive a definitive Preferred Security Certificate of such series representing such Preferred Security Beneficial Owner's interests in such Global Certificates, except as provided in Section 9.07. Unless and until definitive, fully registered Preferred Security Certificates of a series (the "Definitive Preferred Security Certificates") have been issued to the Preferred Security Beneficial Owners of such series pursuant to Section 9.07: (i) the provisions of this Section 9.04 shall be in full force and effect; (ii) the Trust and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration (including the payment of Distributions on the Global Certificates of such series and receiving approvals, votes or consents hereunder) as the Holder of the Preferred Securities of such series and the sole Holder of such Global Certificates and shall have no obligation to such Preferred Security Beneficial Owners; (iii) to the extent that the provisions of this Section 9.04 conflict with any other provisions of this Declaration, the provisions of this Section 9.04 shall control; and (iv) the rights of the Preferred Security Beneficial Owners of such series shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Preferred Security Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants. DTC will make book entry transfers among the Clearing Agency Participants and receive and transmit payments of Distributions on the Global Certificates of such series to such Clearing Agency Participants. 52 45 SECTION 9.05. Notices to Holders of Certificates. Whenever a notice or other communication to the Holders of Securities of any Series of Securities is required to be given under this Declaration, unless and until Definitive Preferred Security Certificates of such series shall have been issued pursuant to Section 9.07, the relevant Trustees shall give all such notices and communications, specified herein to be given to Preferred Securities Holders of such series, to the Clearing Agency and, with respect to any Preferred Security Certificate of such series registered in the name of a Clearing Agency or the nominee of a Clearing Agency, the Trustees shall, except as set forth herein have no notice obligations to the Preferred Security Beneficial Owners of such series. SECTION 9.06. Appointment of Successor Clearing Agency. If any Clearing Agency elects to discontinue its services as securities depository with respect to the Preferred Securities of any series, the Regular Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to the Preferred Securities of such series. SECTION 9.07. Definitive Preferred Securities Certificates. If (i) a Clearing Agency elects to discontinue its services as securities depository with respect to the Preferred Securities of any series and a successor Clearing Agency is not appointed within 90 days after such discontinuance pursuant to Section 9.06 or (ii) the Regular Trustees elect after consultation with the Sponsor to terminate the book entry system through the Clearing Agency with respect to the Preferred Securities of any series, then (x) Definitive Preferred Security Certificates of such series shall be prepared by the Regular Trustees on behalf of the Trust with respect to such Preferred Securities and (y) upon surrender of the Global Certificates of such series by the Clearing Agency, accompanied by registration instructions, the Regular Trustees shall cause definitive Preferred Security Certificates of such series to be delivered to Preferred Security Beneficial Owners of such series in accordance with the instructions of the Clearing Agency. Neither the Trustees nor the Trust shall be liable for any delay in delivery of such instructions and each of them may conclusively rely on, and shall be protected in relying on, such instructions. SECTION 9.08. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificates should be surrendered to the Regular Trustees, or if the Regular Trustees shall receive evidence to their satisfaction of the destruction, loss or theft of any Certificate and (b) there shall be delivered to the Regular 53 46 Trustees such security or indemnity as may be required by them to keep each of them harmless, then in the absence of notice that such Certificate shall have been acquired by a bona fide purchaser, any two Regular Trustees on behalf of the Trust shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 9.08, the Regular Trustees may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. ARTICLE X Limitation of Liability; Indemnification SECTION 10.01 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities of any Series of Securities might properly be paid. (c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of Securities of any Series of Securities, 54 47 in their capacities as Holders, shall be entitled to the same limitation of personal liability that is extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION 10.02. Indemnification and Compensation. (a) To the fullest extent permitted by applicable law, the Sponsor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. (b) To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Sponsor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Sponsor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 10.02(a). (c) The Sponsor agrees to pay the Property Trustee and the Delaware Trustee from time to time such compensation for all services rendered by the Property Trustee and the Delaware Trustee hereunder as may be mutually agreed upon in writing by the Sponsor and the Property Trustee or the Delaware Trustee, as the case may be, and, except as otherwise expressly provided herein, to reimburse the Property Trustee and the Delaware Trustee upon its or their request for all reasonable expenses, disbursements and advances incurred or made by the Property Trustee or the Delaware Trustee, as the case may be, in accordance with the provisions of this Declaration, except any such expense, disbursement or advance as may be attributable to its or their negligence or bad faith. SECTION 10.03. Outside Businesses. Any Covered Person, the Sponsor, JPM, the Delaware Trustee and the Property Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of 55 48 Securities of any Series of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. None of the Covered Persons, the Sponsor, JPM, the Delaware Trustee or the Property Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, JPM, the Delaware Trustee and the Property Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of Holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE XI Accounting SECTION 11.01. Fiscal Year. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION 11.02. Certain Accounting Matters. (a) At all times during the existence of the Trust, the Regular Trustees shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles consistently applied. The Trust shall use the accrual method of accounting for United States Federal income tax purposes. The books and records of the Trust, together with a copy of this Declaration and a certified copy of the Certificate of Trust, or any amendment thereto, shall at all times be maintained at the principal office of the Trust and shall be open for inspection for any examination by any Holder or its duly authorized representative for any purpose reasonably related to its interest in the Trust during normal business hours. (b) The Property Trustee shall prepare and mail to each Holder of Securities an annual United States Federal income tax information statement, on such form as is required by the Code, containing such information with 56 49 regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Property Trustee shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust. The Property Trustee shall deliver to the Regular Trustees records of payments made to Holders of Securities within 20 days after the end of each Fiscal Year of the Trust. (c) The Regular Trustees shall cause to be prepared and filed with the appropriate taxing authority an annual United States Federal income tax return, on such form as is required by the Code, and any other annual income tax returns required to be filed by the Regular Trustees on behalf of the Trust with any state or local taxing authority, such returns to be filed as soon as practicable after the end of each Fiscal Year of the Trust. SECTION 11.03. Banking. The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of any Note relating to any Series of Securities held by the Property Trustee shall be made directly to the Property Account for such Series of Securities and no other funds from the Trust shall be deposited in the Property Account for such Series of Securities. The sole signatories for such accounts shall be designated by the Regular Trustees; provided, however, that the Property Trustee shall designate the sole signatories for the Property Account. SECTION 11.04. Withholding. The Trust and the Trustees shall comply with all withholding requirements under United States Federal, state and local law. The Regular Trustees (or their counsel) shall notify the Property Trustee of any withholding requirements under local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Property Trustee shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, the Property Trustee shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Holder. In the event of any 57 50 claimed overwithholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount to be withheld was not withheld from a Distribution in respect of any Series of Securities, the Property Trustee may reduce subsequent Distributions in respect of such Series of Securities by the amount of such withholding. 58 51 ARTICLE XII Amendments and Meetings SECTION 12.01. Amendments. (a) Except as otherwise provided in this Declaration or by any applicable terms of any Series of Securities, this Declaration may be amended by, and only by, a written instrument executed by a majority of the Regular Trustees (or, if there are only two Regular Trustees, both Regular Trustees); provided, however, that (i) no amendment to this Declaration shall be made unless the Regular Trustees shall have obtained (A) either a ruling from the Internal Revenue Service or a written unqualified opinion of nationally recognized independent tax counsel experienced in such matters to the effect that such amendment will not cause the Trust to be classified for United States Federal income tax purposes as an association taxable as a corporation or a partnership and to the effect that the Trust will continue to be treated as a grantor trust for purposes of United States Federal income taxation and (B) a written unqualified opinion of nationally recognized independent counsel experienced in such matters to the effect that such amendment will not cause the Trust to be an Investment Company which is required to be registered under the Investment Company Act, (ii) if Securities of any Series of Securities are outstanding, any amendment which would adversely affect the rights, privileges or preferences of any Holder of such Securities may be effected only after satisfaction of such additional requirements as may be set forth in the terms of such Securities, (iii) Section 4.02, Section 9.01(c) and this Section 12.01 shall not be amended without the consent of all Holders of the Securities, (iv) no amendment which adversely affects the rights, powers and privileges of the Property Trustee or the Delaware Trustee shall be made without the consent of the Property Trustee or the Delaware Trustee, as the case may be, (v) Article IV shall not be amended without the consent of the Sponsor, and (vi) the rights of Holders of Common Securities under Article V to increase or decrease the number of, and to appoint, replace or remove, Trustees shall not be amended without the consent of each Holder of Common Securities. The Regular Trustees shall deliver to the Property Trustee written notice of any proposed amendment to this Declaration containing the form, or describing the terms, of such amendment no less than three Business Days prior to the effectiveness of such amendment. (b) Notwithstanding Section 12.02(a)(ii), this Declaration may be amended without the consent of the Holders of Securities of any series to (i) cure any ambiguity, (ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration, (iii) to add to the 59 52 covenants, restrictions or obligations of the Sponsor, and (iv) to conform to any changes in the Investment Company Act or the trust exemption thereunder or any change in interpretation or application of the Investment Company Act or the trust exemption thereunder by the Commission, so long as such amendment does not adversely affect the rights, preferences or privileges of the Holders of Securities of any series. (c) The Regular Trustees shall promptly furnish to each of the Property Trustee and the Delaware Trustee a copy of each amendment to this Declaration and each Declaration Supplement. SECTION 12.02. Meetings of the Holders of Securities; Action by Written Consent. (a) Meetings of the Holders of Preferred Securities of any series and/or Common Securities of any series may be called at any time by the Regular Trustees (or as provided in the terms of such Securities) to consider and act on any matter on which Holders of such series or class of Securities are entitled to act under the terms of this Declaration, the terms of such Securities or the rules of any stock exchange on which such Preferred Securities are listed or admitted for trading. The Regular Trustees shall call a meeting of Holders of Preferred Securities of any series or Common Securities of any series if directed to do so by Holders of at least 10% in Principal Amount of Securities of such series or class. Such direction shall be given by delivering to the Regular Trustees one or more notices in writing stating that the signing Holders of Securities of such series or class wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of Securities of such series or class calling a meeting shall specify in writing the Certificates held by the Holders of Securities of such series or class exercising the right to call a meeting and only those specified Certificates shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. (b) Except to the extent otherwise provided in the terms of any Series of Securities, the following provision shall apply to meetings of Holders of Securities of such series: (i) Notice of any such meeting shall be given by mail to each Trustee and all the Holders of Securities of such series having a right to vote thereat not less than seven days nor more than 60 days prior to the date of such meeting. Whenever a vote, consent or approval of the Holders of Securities of any Series of Securities is permitted or required under this Declaration or the rules of any stock exchange on which 60 53 any Preferred Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the Holders of Securities of any series. Any action that may be taken at a meeting of the Holders of Securities of any series may be taken without a meeting if a consent in writing setting forth the action so taken is signed by Holders of such Securities owning not less than the minimum aggregate Principal Amount of Securities that would be necessary to authorize or take such action at a meeting at which all Holders of such Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of such Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the Holders of such Securities for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees. (ii) Each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of a Security is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of Security executing it. Except as otherwise provided herein or in the terms of any Series of Securities, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies and judicial interpretations thereunder as if the Trust were a Delaware corporation and the Holders of Securities of such Series of Securities were stockholders of a Delaware corporation. (iii) Each meeting of the Holders of Securities of any Series of Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate. (iv) Unless otherwise provided in the Business Trust Act, this Declaration or the rules of any stock exchange on which any Preferred Securities of any series are then listed or admitted for trading, the Regular Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities of such series, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of such Securities, waiver of any such notice, action by 61 54 consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. ARTICLE XIII Representations of Property Trustee and Delaware Trustee SECTION 13.01. Representations and Warranties of Property Trustee. (a) The Trustee which acts as initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee that: (i) The Property Trustee is a banking corporation with trust powers, duly organized, validly existing and in good standing under the laws of the State of its incorporation, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration. (ii) The execution, delivery and performance by the Property Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Property Trustee. The Declaration has been duly executed and delivered by the Property Trustee, and constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). (iii) The execution, delivery and performance of this Declaration by the Property Trustee does not conflict with or constitute a breach of the charter or By-laws of the Property Trustee. (iv) No consent, approval or authorization of, or registration with or notice to, any banking authority which supervises or regulates the Property Trustee is required for the execution, delivery or performance by the Property Trustee of this Declaration (including any Declaration Supplement). 62 55 (v) The Property Trustee satisfies the qualifications set forth in Section 5.01(c). (b) The Trustee which acts as initial Delaware Trustee represents and warrants to the Trust and the Sponsor at the date of this Declaration and each Declaration Supplement, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee, that it satisfies, or will satisfy, as applicable, the qualifications set forth in Section 5.01(a)(3). ARTICLE XIV Miscellaneous SECTION 14.01. Notices. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows: (a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Regular Trustees on behalf of the Trust may give notice of to the Property Trustee, the Delaware Trustee and the Holders of Securities of any Series of Securities): J.P. Morgan Index Funding Company I In care of J.P. Morgan & Co. Incorporated 60 Wall Street New York, New York 10260-0060 Attention of H. Christian Raymond Andrew G. Kerber Susan L. McCullin Trustees Facsimile No: (212) 648-5175 (b) if given to the Property Trustee, at the mailing address of the Property Trustee set forth below (or such other address as the Property Trustee may give notice of to the Trust and the Holders of Securities of any Series of Securities): First Trust of New York, National Association 100 Wall Street, Suite 1600 New York, New York 10005 Attention of Corporate Trust Administration Facsimile No: (212) 809-5459 63 56 (c) if given to the Delaware Trustee, at the mailing address of the Delaware Trustee set forth below (or such other address as the Delaware Trustee may give notice of to the Trust and the Holders of Securities of any Series of Securities): Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention of Corporate Trust Administration Facsimile No: (302) 651-8882 (d) if given to the Holder of Common Securities of any series, at the mailing address of the Sponsor set forth below (or such other address as the Holder of such Common Securities may give notice to the Property Trustee, the Delaware Trustee and the Trust): J.P. Morgan & Co. Incorporated 60 Wall Street New York, New York 10260-0060 Attention of Assistant Secretary Facsimile No: (212) 648-5175 (e) if given to any other Holder, at the address set forth on the books and records of the Trust. A copy of any notice to the Property Trustee or the Delaware Trustee shall also be sent to the Trust. All notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 14.02. Undertaking for Costs. All parties to this Declaration agree, and each Holder of Securities of any Series of Securities by his or her acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Declaration, or in any suit against the Property Trustee for any action taken or omitted by it as Property Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions 64 57 of this Section 14.02 shall not apply to any suit instituted by the Property Trustee, to any suit instituted by any Holder of Preferred Securities of any series, or group of Holders of Preferred Securities of any series, holding more than 10% in aggregate Principal Amount of such outstanding Preferred Securities, or to any suit instituted by any Holder of Preferred Securities of any series for the enforcement of the payment of the principal of (or premium, if any) or interest on the Note associated with such Preferred Securities, on or after the respective due dates expressed in such Note. SECTION 14.03. Governing Law. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to the principles of conflict of laws of the State of Delaware or any other jurisdiction that would call for the application of the law of any jurisdiction other than the State of Delaware; provided, however, that there shall not be applicable to the Trust, the Trustees or this Declaration any provision of the laws (statutory or common) of the State of Delaware pertaining to trusts that relate to or regulate, in a manner inconsistent with the terms hereof (a) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee fees and charges, (b) affirmative requirements to post bonds for trustees, officers, agents or employees of a trust, (c) the necessity for obtaining court or other governmental approval concerning the acquisition, holding or disposition of real or personal property, (d) fees or other sums payable to trustees, officers, agents or employees of a trust, (e) the allocation of receipts and expenditures to income or principal, (f) restrictions or limitations on the permissible nature, amount or concentration of trust investments or requirements relating to the titling, storage or other manner of holding or investing trust assets or (g) the establishment of fiduciary or other standards of responsibility or limitations on the acts or powers of trustees that are inconsistent with the limitations or liabilities or authorities and powers of the Trustees as set forth or referenced in this Declaration. Section 3540 of Title 12 of the Delaware Code shall not apply to the Trust. SECTION 14.04. Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 14.05. Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the 65 58 application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 14.06. Counterparts. This Declaration may contain more than one counterpart of the signature pages and this Declaration may be executed by the affixing of the signature of the Sponsor and each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. SECTION 14.07. Intention of the Parties. It is the intention of the parties hereto that the Trust not be classified for United States Federal income tax purposes as an association taxable as a corporation or partnership but that the Trust be treated as a grantor trust for United States Federal income tax purposes. The provisions of this Declaration shall be interpreted to further this intention of the parties. 66 59 SECTION 14.08. Successors and Assigns. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 14.09. Effect of Declaration Supplements. Upon the execution of any Declaration Supplement, such Declaration Supplement shall form a part of this Declaration for all purposes, and every Holder of Certificates thereafter authenticated and delivered hereunder or thereunder shall be bound hereby. SECTION 14.10. Merger. Notwithstanding anything contained herein to the contrary, the parties hereto hereby acknowledge that J.P. Morgan Index Funding Company, LLC (the "LLC"), a limited liability company formed under the laws of the State of Delaware, will be merged into the Trust, and the Trust will be the surviving entity of such merger. The parties hereto hereby consent to such merger. The securities issued by the LLC prior to the consummation of the merger are the Series A Securities of the LLC. Upon the effectiveness of the merger, such Series A Securities shall constitute a Series of Securities hereunder, shall be designated as Series A Securities of the Trust and shall be entitled to the benefits of the provisions contained in this Declaration, including Section 3.18. The Note issued by Morgan Guaranty to the LLC in connection with the issuance of the Series A Securities of the LLC together all proceeds thereof shall be deemed to be assets associated with the Series A Securities of the Trust. IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written. J.P. MORGAN & CO. INCORPORATED, as Sponsor, by /s/ Gene A. Capello Name: Gene A. Capello Title: Vice President and Assistant General Counsel H. Christian Raymond, as Trustee, 67 60 by /s/ H. Christian Raymond ------------------------------ H. Christian Raymond Andrew G. Kerber, as Trustee, by /s/ Andrew G. Kerber ------------------------------ Andrew G. Kerber Susan L. McCullin, as Trustee, by /s/ Susan L. McCullin ------------------------------ Susan L. McCullin FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION, as Property Trustee, by /s/ Catherine F. Donohue ------------------------------ Name: Catherine F. Donohue Title: Vice President WILMINGTON TRUST COMPANY, as Delaware Trustee, by /s/ Debra Eberly ------------------------------ Name: Debra Eberly Title: Administrative Account Manager 68 STATE OF , ) ) ss. COUNTY OF , ) BEFORE ME, the undersigned authority, on this __ day of October, 1997, personally appeared (on behalf of J.P. Morgan & Co. Incorporated), H. Christian Raymond, Andrew G. Kerber and Susan McCullin, each known to me (or proved to me by introduction upon the oath of a person known to me) to be the person and officer, as the case may be, whose name is subscribed to the foregoing instrument, and each acknowledged to me that he executed the same as the act of such trust for the purposes and consideration herein expressed and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL THIS day of OCTOBER, 1997. ------------------------------ NOTARY PUBLIC, STATE OF NEW YORK Print Name: Commission Expires: 69 STATE OF NEW YORK, ) ) ss. COUNTY OF NEW YORK, ) BEFORE ME, the undersigned authority, on this ___day of October, 1997, personally appeared of J.P. Morgan & Co. Incorporated, known to me (or proved to me by introduction upon the oath of a person known to me) to be the person and officer, as the case may be, whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same as the act of such trust for the purposes and consideration herein expressed and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL THIS day of OCTOBER, 1997. ------------------------------ NOTARY PUBLIC, STATE OF NEW YORK Print Name: Commission Expires: 70 STATE OF NEW YORK, ) ) ss. COUNTY OF NEW YORK, ) BEFORE ME, the undersigned authority, on this ____ day of October, 1997, personally appeared _______ of First Trust of New York, National Association known to me (or proved to me by introduction upon the oath of a person known to me) to be the person and officer whose names are subscribed to the foregoing instrument, and acknowledged to me that she executed the same as the act of such trust for the purposes and consideration herein expressed and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL THIS day of OCTOBER, 1997. (SEAL) ------------------------------ NOTARY PUBLIC, STATE OF NEW YORK Print Name: Commission Expires: 71 STATE OF DELAWARE, ) ) ss. COUNTY OF , ) BEFORE ME, the undersigned authority, on this ___ day of October, 1997, personally appeared ________ of Wilmington Trust Company known to me (or proved to me by introduction upon the oath of a person known to me) to be the person and officer whose names are subscribed to the foregoing instrument, and acknowledged to me that she executed the same as the act of such trust for the purposes and consideration herein expressed and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL THIS day of OCTOBER, 1997. (SEAL) ------------------------------ NOTARY PUBLIC, STATE OF DELAWARE Print Name: Commission Expires: 72 EXHIBIT A CERTIFICATE OF TRUST OF J.P. MORGAN INDEX FUNDING COMPANY I This Certificate of Trust is being executed as of December 12, 1996 for the purpose of creating a business trust pursuant to the Delaware Business Trust Act, 12 Del. C. Sections 3801 et seq. (the "Act"). The undersigned hereby certify as follows: 1. Name. The name of the business trust is "J.P. Morgan Index Funding Company I" (the "Trust"). 2. Delaware Trustee. The name and business address of the Delaware resident trustee of the Trust meeting the requirements of Section 3807 of the Act are as follows: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 3. Effective Date. This Certificate of Trust shall be effective immediately upon filing in the office of the Secretary of State of the State of Delaware. 4. Counterparts. This Certificate of Trust may be executed in one or more counterparts. IN WITNESS WHEREOF, the undersigned, being all of the trustees of the Trust, have executed this Certificate of Trust as of the day and year first above written. WILMINGTON TRUST COMPANY, as Delaware Trustee, by ______________________ Name: Title: 73 -------------------------------------- H. Christian Raymond Trustee -------------------------------------- Andrew G. Kerber Trustee -------------------------------------- Susan L. McCullin Trustee 74 EXHIBIT B DECLARATION SUPPLEMENT DATED [ ], 199[ ] TERMS OF SECURITIES Pursuant to Section 3.03 of the Amended and Restated Declaration of Trust of J.P. Morgan Index Funding Company I (the "Trust") dated as of October 10, 1997 (as amended from time to time, the "Declaration"), the undersigned, as Sponsor of the Trust, and the undersigned Regular Trustees hereby authorizes the issuance of, and establishes the designations, rights, privileges, restrictions, preferences and other terms and provisions of a Series of Securities as set forth below (each capitalized term used but not defined herein having the meaning set forth in the Declaration): 1. Definitions. All capitalized terms used but not defined herein shall have the meanings assigned to them in the Declaration. The following additional terms have the respective meanings specified below: "Business Day" means any day other than a day on which banking institutions in The City of New York are permitted or required by applicable law to close. "Guarantee" means the Guarantee Agreement dated as of [ ], 199 , executed and delivered by JPM for the benefit of the Holders from time to time of the Series [ ] Preferred Securities, as amended from time to time. "Note Guarantee" means the Note Guarantee Agreement dated as of [ ], 199_, executed and delivered by JPM for the benefit of the Property Trustee for the benefit of the Holders from time to time of the Series [ ] Securities, as amended from time to time. "Principal Amount" means, initially, the face amount of the Series [ ] Securities, and, at any time during the life of the Series [ ] Securities, the product of (a) the face amount of the Series [ ] Securities and (b) (i) a fraction the numerator of which shall equal the average of the [ ] Total Return Index for the 10 consecutive trading days prior to such time and the denominator of which shall equal the [ ] Total Return Index on the date the Series [ ] Securities are issued minus (ii) the 75 2 applicable factor, which is designed to offset the costs of issuing and hedging the indexation of the Series [ ] Securities. "Redemption Price" means, with respect to any date fixed for redemption (whether pursuant to optional redemption by the Holders thereof or otherwise) of any Series [ ] Security, the Principal Amount of such Series [ ] Security, plus accumulated and unpaid dividends (whether or not declared) to such date. "Series [ ] Common Securities" has the meaning assigned to such term in paragraph 2 hereof. "Series [ ] Note" means the $[ ] initial principal amount (or up to [ ] initial principal amount if and to the extent the over-allotment option granted by the Trust to the Underwriters of the Series [ ] Preferred Securities is exercised) Series [ ] Note due [ ] of Morgan Guaranty and any other Notes issued in exchange for such Series [ ] Note upon the terms and subject to the conditions set forth in Section 7(e) hereof. "Series [ ] Preferred Securities" has the meaning assigned to such term in paragraph 2 hereof. "Series [ ] Securities" means the Series [ ] Preferred Securities and the Series [ ] Common Securities. 2. Authorization and Designation. A Series of Securities, "Series [ ] Securities", is hereby created, and (a) [ ] Preferred Securities of Series [ ] Securities (or up to [ ] Preferred Securities of Series [ ]Securities if and to the extent the over-allotment option granted by the Trust to the underwriters of the Series [ ] Preferred Securities is exercised) with a Face Amount of $[ ] per Preferred Security are hereby authorized and designated as "Preferred Securities, Series[ ]" (hereinafter called the "Series [ ] Preferred Securities"), and (b) [ ] Common Securities of Series [ ] Securities with Face Amount of $[ ] per Common Security and designated as "Common Securities, Series [ ]" (hereinafter called the "Series [ ] Common Securities"). The Preferred Security Certificates evidencing the Series [ ] Preferred Securities shall be substantially in the form attached hereto as Annex I, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of any stock exchange on which the Series [ ] Preferred Securities are listed, and the Common Security 76 3 Certificates evidencing the Series [ ] Common Securities shall be substantially in the form attached hereto as Annex II, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. The Series [ ] Common Securities are to be issued and sold to J.P. Morgan & Co. Incorporated ("JPM") in consideration of $[ ] in cash. In connection with the issuance and sale of the Series [ ] Securities, the Trust, on behalf of the Holders of the Series [ ] Securities, will purchase, as trust assets, the Series [ ] Note having an aggregate principal amount equal to the sum of the aggregate initial Principal Amount of the Series [ ] Preferred Securities and the aggregate Principal Amount of the Series [ ] Common Securities so issued and bearing interest at an annual rate equal to the annual Distribution rate on the Series [ ] Securities and having payment and redemption provisions which correspond to the payment and redemption provisions of the Series [ ] Securities. The Series [ ] Note and the proceeds thereof shall be deemed to be "associated with" the Series [ ] Securities. 3. Distributions. (a) Distributions payable on each Series [ ] Security will be [describe method of determination thereof] [fixed at a rate per annum of [ ]% (the "Coupon Rate")] of the [Face Amount] [Principal Amount] of the Series [ ] Securities. The term "Distributions" as used in these terms means such periodic cash distributions and any such interest payable unless otherwise stated. A Distribution on the Series [ ] Securities will be made by the Property Trustee only to the extent that interest payments are made in respect of the Series [ ] Notes held by the Property Trustee. The amount of dividends payable for any full quarterly dividend period shall be computed on the basis of a 360-day year of twelve 30-day months and, for any period shorter than a full quarterly dividend period, shall be computed on the basis of a 360-day year of twelve 30-day months and on the basis of the actual number of days elapsed (but never greater than 30) in any period shorter than a month. (b) Distributions on the Series [ ] Preferred Securities will be [noncumulative] [cumulative], will accrue from [ ] and will be payable quarterly in arrears, on the last calendar day of each March, June, September and December of each year commencing on [ ], except as otherwise described below, but only if and to the extent that interest payments are made in respect of the Series [ ] Notes held by the Property Trustee. (c) Distributions on the Series [ ] Securities will be payable promptly by the Property Trustee (or other Paying Agent) upon receipt of immediately available funds to 77 4 the Holders thereof as they appear on the books and records of the Trust on the relevant record dates. While the Series [ ] Preferred Securities remain in book-entry only form, the relevant record dates shall be one Business Day prior to the relevant Distribution date, and if the Series [ ] Preferred Securities are no longer in book-entry only form, the relevant record dates will be selected by the [Sponsor] [Regular Trustee] but shall be at least one Business Day prior to the relevant Distribution date, which record and payment dates correspond to the record and payment dates for the Series [ ] Note. Distributions payable on the Series [ ] Securities that are not punctually paid on any Distribution payment date as a result of Morgan Guaranty having failed to make the corresponding interest payment on the Series [ ] Note will forthwith cease to be payable to the Person in whose name such Series [ ] Security is registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Series [ ] Security is registered on the special record date established by the Regular Trustees, which record date shall correspond to the special record date. Subject to any applicable laws and regulations and the provisions of the Declaration, each payment in respect of the Series [ ] Securities will be made as described in paragraph 10 hereof. If any date on which Distributions are payable on the Series [ ] Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. (d) All Distributions paid with respect to the Series [ ] Preferred Securities and the Series [ ] Common Securities will be paid pro rata to the Holders thereof entitled thereto. If an Event of Default has occurred and is continuing, the Series [ ] Preferred Securities shall have a priority over the Series [ ] Common Securities with respect to Distributions. (e) In the event that there is any money or other property held by or for the Trust on behalf of the Holders of the Series [ ] Securities that is not accounted for under the Declaration, such money or property shall be distributed pro rata among the Holders of the Series [ ] Preferred Securities and the Series [ ] Common Securities. 4. Ranking; Liquidation. (a) Subject to the last paragraph of this paragraph 4, the Series [ ] Preferred Securities shall, with respect to dividend rights 78 5 and rights on dissolution of the Trust, rank pari passu with the Series [ ] Common Securities. (b) In the event of any voluntary or involuntary dissolution of the Trust, the Holders of the Series [ ] Preferred Securities and the Series [ ] Common Securities at the date of the dissolution will be entitled to receive pro rata solely out of the assets of the Trust available for distribution to Holders of Series [ ] Preferred Securities and Series [ ] Common Securities which assets shall consist solely of the Series [ ] Note and the proceeds thereof, after paying or making reasonable provision to pay all claims and obligations of the Trust associated with the Series [ ] Securities in accordance with Section 3808(e) of the Business Trust Act, an amount equal to the aggregate of the Principal Amount of such Series [ ] Preferred Security and Series [ ] Common Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). No Holder of any Security of any Series of Securities other than the Series [ ] Securities shall have any rights to the Series [ ] Note or the proceeds thereof or any payments relating to the Series [ ] Note. The Holders of the Series [ ] Securities shall have rights to no asset of the Trust other than the Series [ ] Note and the proceeds thereof and shall receive Distributions on the Series [ ] Securities only to the extent that payments on the Series [ ] Note have been made by Morgan Guaranty. If, upon any such dissolution, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Series [ ] Preferred Securities and the Series [ ] Common Securities shall be paid, subject to the next paragraph, on a pro rata basis. Holders of Series [ ] Common Securities will be entitled to receive dividends or Liquidation Distributions upon any such payment or dissolution pro rata with Holders of Series [ ] Preferred Securities, except that, if an Event of Default has occurred and is continuing, the Series [ ] Preferred Securities shall have a priority over the Series [ ] Common Securities with respect to such dividends or Liquidation Distribution. 5. Redemption or Exchange. (a) The Series [ ] Securities shall be redeemable at the option of the Holders thereof, in whole or in part on each [anniversary of Stated Maturity] prior to the stated maturity thereof, beginning [ ], 199 , upon not less than 22 Business Days but no more than 32 Business Days notice to DTC (which shall notify the Trust which shall promptly notify the Property Trustee), 79 6 at the Redemption Price. The Series [ ] Preferred Securities and the Series [ ] Common Securities shall be redeemed on a pro-rata basis as described in paragraph 5(d) hereof. (b) If there shall have occurred after [ ], 199 , a change in any applicable U.S. law or regulation or in the interpretation thereof (including but not limited to the enactment or imminent enactment of any legislation, the publication of any judicial decisions, regulatory rulings, regulatory procedures, or notices or announcements (including notices or announcements of intent to adopt such procedures or regulations), or a change in the official position or in the interpretation of any law or regulation by any legislative body, court, governmental authority or regulatory body, irrespective of the manner in which such change is made known) (any such change relating to taxes, a "Tax Event" and, any such change relating to the Investment Company Act, an "Investment Company Event" and, together with a Tax Event, a "Special Event"), and the Trust and JPM shall have been advised by legal counsel (which counsel shall not be an employee of JPM or the Trust) that, as a result of such change, there exists more than an insubstantial risk that (i) (A) Morgan Guaranty will be precluded from deducting the interest paid on the Series [ ] Note for federal income tax purposes, (B) the Trust will be subject to federal income tax with respect to the interest received on the Series [ ] Note, (C) the contingent principal in excess of the Face Amount of the Series [ ] Preferred Securities (if any) payable on Series [ ] Note is not or would not be deductible by Morgan Guaranty for federal income tax purposes or (D) the Trust is or would be subject to more than a de minimis amount of other taxes, duties or other governmental charges or (ii) the Trust is or will be considered an "investment company" that is required to be registered under the Investment Company Act, then within 90 days following the occurrence and during the continuance of any such Special Event, JPM shall have the right to direct Morgan Guaranty to redeem the Series [ ] Note in whole or in an amount sufficient to cause the discontinuance of such Special Event, in either case in cash, or, in the case of a Tax Event, to allow the Series [ ] Note to remain outstanding and to indemnify the Trust for any taxes payable by the Trust as a result of such Tax Event. In the event that Morgan Guaranty shall redeem the Series [ ] Note, the Trust will redeem at the Redemption Price a principal amount of the Series [ ] Preferred Securities and the related Series [ ] Common Securities equal to the principal amount of the Series [ ] Note so redeemed. If a Tax Event shall have occurred and be continuing and JPM shall have elected to allow the Series [ ] Note to remain outstanding and provided that the Trust shall received indemnification by JPM for all taxes payable 80 7 by the Trust as a result of such Tax Event, then the Trust may allow the Series [ ] Preferred Securities and the related Series [ ] Common Securities to remain outstanding. (c) The Series [ ] Securities shall be redeemed at the Redemption Price with the proceeds from the repayment by Morgan Guaranty when due of the Series [ ] Note or upon any redemption by Morgan Guaranty of such Series [ ] Note pursuant to the terms thereof. (d) If fewer than all the outstanding Series [ ] Preferred Securities and Series [ ] Common Securities are to be so redeemed, the Series [ ] Preferred Securities and the Series [ ] Common Securities will be redeemed pro rata, it being understood that Series [ ] Preferred Securities held of record by a Clearing Agency or nominee will be redeemed as described in paragraph 5(f)(ii) below. If a partial redemption would result in the delisting of the Series [ ] Preferred Securities by any national securities exchange or other organization on which the Series [ ] Preferred Securities are then listed, the Trust will only redeem the Series [ ] Securities in whole. (e) The Trust may not redeem fewer than all the outstanding Series [ ] Securities unless all accrued and unpaid Distributions have been paid on all Series [ ] Securities for all quarterly distribution periods terminating on or prior to the date of redemption. (f)(i) Notice of any redemption of the Series [ ] Securities (a "Redemption/Distribution Notice") will be given by the Regular Trustees on behalf of the Trust by mail to each Holder of Series [ ] Securities to be redeemed or exchanged not less than 30 nor more than 60 days prior to the date fixed for redemption or exchange thereof. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this paragraph (f)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of Series [ ] Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of Series [ ] Securities at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/ Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (ii) In the event that fewer than all the outstanding Series [ ] Securities are to be redeemed, the Series [ ] Securities to be redeemed will be redeemed pro rata from each Holder of Series [ ] Securities (subject to 81 8 adjustment to eliminate fractional Securities), it being understood that, in respect of Series [ ] Preferred Securities registered in the name of and held of record by DTC (or a successor Clearing Agency) or any other nominee, the Series [ ] Preferred Securities will be redeemed from, and the distribution of the proceeds of such redemption will be made to, each Clearing Agency Participant (or person on whose behalf such nominee holds such securities) in accordance with the procedures applied by such agency or nominee. (iii) If the Trust gives or any Holder of Series [ ] Securities gives the Regular Trustees, on behalf of the Trust, a Redemption/Distribution Notice in respect of a redemption of Series [ ] Securities as provided in this paragraph 5 (which notice will be irrevocable) then (A) while the Series [ ] Preferred Securities are in book-entry only form, by 12:00 noon, New York City time, on the redemption date, provided that Morgan Guaranty has paid the Property Trustee in immediately available funds a sufficient amount of cash in connection with the related redemption or maturity of the Series [ ] Note, the Property Trustee will deposit irrevocably with DTC (or any successor Clearing Agency) funds sufficient to pay the applicable Redemption Price with respect to the Series [ ] Preferred Securities and will give DTC (or any successor Clearing Agency) irrevocable instructions and authority to pay the Redemption Price to the Holders of the Series [ ] Preferred Securities and (B) if the Series [ ] Preferred Securities are issued in definitive form and, in any event with respect to the Series [ ] Common Securities, and in either case provided that Morgan Guaranty has paid the Property Trustee in immediately available funds a sufficient amount of cash in connection with the related redemption or maturity of the Series [ ] Note, the Property Trustee will pay the relevant Redemption Price to the Holders of such Series [ ] Securities by check mailed to the address of the relevant Holder appearing on the books and records of the Trust on the redemption date. If a Redemption/Distribution Notice shall have been given and funds deposited as required, if applicable, then immediately prior to the close of business on the redemption date, Distributions will cease to accrue on the Series [ ] Securities called for redemption, such Series [ ] Securities will no longer be deemed to be outstanding and all rights of Holders of such Series [ ] Securities so called for redemption will cease, except the right of the Holders of such Series [ ] Securities to receive the Redemption Price, but without interest on such Redemption Price. Neither the Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Series [ ] Securities which have been so called for redemption. If any date fixed for redemption of Series [ ] Securities is not a Business Day, then payment of the 82 9 Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the Redemption Price in respect of Series [ ] Securities is improperly withheld or refused and not paid either by the Property Trustee or, in the case of the Series [ ] Preferred Securities, pursuant to the Guarantee, by JPM, Distributions on such Series [ ] Securities will continue to accrue at the Coupon Rate, from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. (iv) Redemption/Distribution Notices shall be sent by the Regular Trustees on behalf of the Trust (x) in the case of the Series [ ] Preferred Securities, to DTC or its nominee (or any successor Clearing Agency or its nominee) if the Global Certificates have been issued or, if Definitive Preferred Security Certificates have been issued, to the Holders of the Series [ ] Preferred Securities and (y) in the case of the Series [ ] Common Securities, to the Holders of the Series [ ] Common Securities. (v) Subject to the foregoing and applicable law (including, without limitation, United States Federal securities laws), JPM or any of its subsidiaries may at any time and from time to time purchase outstanding Series [ ] Preferred Securities by tender, in the open market or by private agreement. 6. Voting Rights. (a) Except as shall be otherwise established herein and except as otherwise required by the Business Trust Act, (i) the Holders of the Series [ ] Preferred Securities shall have, with respect to such Series [ ]Preferred Securities, no right or power to vote on any question or matter or in any proceeding or to be represented at, or to receive notice of, any meeting of Holders and (ii) all voting rights of the Trust shall be vested exclusively in the Holders of the Series [ ] Common Securities. The Series [ ] Common Securities shall entitle the Holders of Series [ ] Common Securities to vote in proportion to their percentage ownership interest in the Trust upon all matters upon which Series [ ] Common Members have the right to vote. All Holders of Series [ ] Common Securities shall have the right to vote separately as a class on any matter on which the Holders of Series [ ] Common Securities have the right to vote regardless of the voting rights of any other Holder. 83 10 (b) Subject to paragraph 5(e), if (i) the Trust fails to pay dividends or other distributions in full on the Series [ ] Securities for 30 days following the date on which such payment was due in accordance with the terms of the Series [ ] Securities; or (ii) an Event of Default (as defined in the Series [ ] Note) occurs and is continuing with respect to such Note, then the Holders holding a Majority in Principal Amount of the outstanding Series [ ] Preferred Securities, acting as a single class, will be entitled to cause the Trust, by written direction to the Property Trustee, (A) to waive any such Event of Default and its consequences or to enforce the Trust's rights under the Series [ ] Note against Morgan Guaranty, (B) in the case of clause (i) above, declare and pay dividends or other distributions on the Series [ ] Securities; provided that any such payments or other distributions shall be paid solely from the proceeds of dividend or other payments made on the Series [ ] Note and received by the Trust on behalf of the Holders of the Series [ ] Securities and (C) in the case of clause (ii) above, to waive any such Event of Default and its consequences or to enforce the Trust's rights under the Note Guarantee with respect to the Series [ ] Securities. For purposes of determining whether the Trust has failed to pay dividends in full within 30 days of the applicable payment date, dividends or other distributions shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative dividends or other distributions have been or contemporaneously are declared and paid with respect to all dividend or other distribution periods terminating on or prior to the date of payment of such full cumulative dividends or other distributions. Not later than 30 days after the right to vote arises, the Property Trustee will solicit such vote. If the Property Trustee fails to solicit such vote within such 30-day period, the Holders holding 10% in Principal Amount of the outstanding Series [ ] Preferred Securities, acting as a single class, will be entitled to convene such meeting. Any such voting rights shall cease immediately if, in the case of clause (i) above, the Trust shall have paid in full all accumulated and unpaid dividends or other distributions on the Series [ ] Securities or if, in the case of clause (ii) above, such default of Morgan Guaranty shall have been cured or waived. Subject to paragraph 5(e), Holders of the Series [ ] Preferred Securities may, by vote of at least a Majority in Principal Amount of the Series [ ] Preferred Securities direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee. (c) If any resolution is proposed to be adopted by the Holders providing for, or the Regular Trustees propose to take, any action to effect: 84 11 (i) any variation or abrogation of the powers, preferences and special rights of the Series [ ] Securities by way of amendment of this Declaration or otherwise, which variation or abrogation adversely affects the Holders of Series [ ] Securities, (ii) the dissolution of the Trust, or (iii) the commencement of any bankruptcy, insolvency, reorganization or other similar proceeding involving the Trust, then, in the case of any resolution or action described in clause (i) above, the Holders holding outstanding Series [ ] Securities and, in the case of any resolution or action described in clause (ii) or (iii) above, the Holders holding any outstanding Series of Securities will be entitled to vote together as a class on such resolution or action of the Sponsor (but not any other resolution or action) and such resolution or action shall not be effective except with the approval of the Holders holding a Majority in Principal Amount of all outstanding Securities or the Series [ ] Securities, as applicable; provided that no such resolution or action shall, without the consent of each Holder of Securities of any series affected thereby, (1) change the terms of the Securities established pursuant to paragraphs 2, 3, 4, 5 or 14 hereof in a manner adverse to such Holder, (2) reduce the stated percentage of Principal Amount necessary to approve such resolution or action or (3) amend the provisions of this paragraph 5(c); provided further, however, that no such approval shall be required under clauses (i) and (ii) if the dissolution of the Trust is proposed or initiated upon the occurrence of any of the events specified in Section 8.01 of the Declaration. The powers, preferences or special rights of the Series [ ] Securities will be deemed not to be varied by the creation or issuance of, and no vote will be required for the creation or issuance of, any Securities of any other series. (d) Notwithstanding that Holders of the Series [ ] Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Series [ ] Preferred Securities that are owned by JPM or by any entity directly or indirectly controlling or controlled by or under indirect or direct common control with JPM, shall not be entitled to vote or consent and shall, for the purposes of such vote or consent, be treated as if they were not outstanding. (e) The right of any Holder of the Series [ ] Securities to receive payment of Distributions on the Series [ ] Securities in accordance with this Declaration 85 12 Supplement and the Declaration on or after the respective payment dates therefor, or to institute suit for the enforcement of any such payment on or after such payment dates, shall not be impaired without the consent of such Holder. (f) A waiver of a Series [ ] Note Event of Default by the Property Trustee at the written direction of the Holders of the Series [ ] Securities constitutes a waiver of the corresponding Event of Default in respect of the Series [ ] Securities; provided that if the Series [ ] Note Event of Default is not waivable under the Series [ ] Note, then the Event of Default in respect of the Series [ ] Securities shall also not be waivable. (g)(i) Morgan Guaranty and the Property Trustee may, without the consent of the Holders of any Preferred Securities, enter into senior notes supplemental to any Note relating to any Series of Securities for, among others, one or more of the following purposes: (x) to evidence the succession of another person to, and the assumption by such successor of, Morgan Guaranty's obligations under such Note; (y) to add covenants of Morgan Guaranty, or surrender any rights of Morgan Guaranty, for the benefit of the Property Trustee; and (z) to cure any ambiguity, or correct any inconsistency in, such Note. Morgan Guaranty and the Trust, with the consent of the Holders of not less than a Majority in Principal Amount of the outstanding Preferred Securities of any series may modify the Note relating to such Series of Securities, provided that no such modification may, without the consent of the Holders of all outstanding Preferred Securities affected thereby, (w) reduce the amount of Preferred Securities of such series the Holders of which must consent to any amendment, supplement or waiver of such Note; (x) reduce the rate of or extend the time for the payment of interest on the Note; (y) alter the method of calculation of, or reduce, the amount paid at stated maturity or extend the stated maturity of such Note (other than pursuant to the terms of such Note) or (z) make such Note payable in money or property other than that stated in such Note. (ii) The Note Guarantee with respect to a Series of Securities may be amended only with the prior approval of the Property Trustee acting on behalf of the Holders of the Securities of such Series of Securities; provided that no such amendment shall adversely affect the Holders of the Preferred Securities of any Series of Securities without the consent of a Majority in Principal Amount of the Preferred Securities of such affected Series of 86 13 Securities, with Holders of Preferred Securities of each such affected series voting as a single and separate class. All guarantees and agreements contained in the Note Guarantee shall bind the successors, assignees, receivers, trustees and representatives of JPM and shall inure to the benefit of the Property Trustee, for the benefit of Holders of the Securities of each Series of Securities, as the holder of each Note then outstanding. (iii) Except with respect of any changes that do not adversely affect the rights of Holders of the Preferred Securities of any series (in which case no vote will be required), the Preferred Guarantee may be amended only with the prior approval of the Holders of not less than a Majority in Principal Amount of the outstanding Preferred Securities of each affected series, with Holders of Preferred Securities of each such affected series voting as a single and separate class. All guarantees and agreements contained in any Preferred Guarantee shall bind the successors, assignees, receivers, trustees and representatives of JPM and shall inure to the benefit of the Holders of the Preferred Securities of the applicable series then outstanding. (iv) The procedures and mechanisms for implementing any such modification to any Note, Note Guarantee or Preferred Guarantee shall be identical to the procedures and mechanisms set forth in paragraph (b) above and in the following paragraph. Any required approval or direction of Holders of any class of Series [ ] Securities may be given at a separate meeting of Holders of such class of Series [ ] Securities convened for such purpose, at a meeting of all of the Holders of Securities or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of any class of Series [ ] Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of such class of Series [ ] Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of Series [ ] Securities will be required for the Trust to redeem and 87 14 cancel Series [ ] Securities in accordance with the Declaration. (h) A Note Event of Default under a Note associated with any particular Series of Securities or an Event of Default under the Declaration in respect of such Series of Securities shall not constitute a Note Event of Default under a Note associated with any other Series of Securities or an Event of Default under the Declaration in respect of any other Series of Securities and shall not prohibit payments in respect of such other Series of Securities. Payments in respect of principal of or interest on a Note, the Note Guarantee or the Guarantee, in each case associated with a particular Series of Securities shall be for the sole benefit of the Holders of Securities of such Series of Securities. Except as provided in this paragraph 6, Holders of the Series [ ] Preferred Securities will have no rights to increase or decrease the number of Trustees or to appoint, remove or replace a Trustee, which voting rights are vested solely in the Holders of the Series [ ] Common Securities. 7. Pro Rata Treatment. A reference in these terms of the Series [ ] Securities to any payment, distribution or treatment as being "pro rata" shall mean pro rata to each Holder of Series [ ] Securities according to the aggregate Principal Amount of the Series [ ] Preferred Securities or the Series [ ] Common Securities, as the case may be, held by the relevant Holder in relation to the aggregate Principal Amount of all Series [ ] Common Securities and all Series [ ] Preferred Securities outstanding unless, in relation to a payment, an Event of Default has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Series [ ] Preferred Securities pro rata according to the aggregate Principal Amount of Series [ ] Preferred Securities held by the relevant Holder relative to the aggregate Principal Amount of all Series [ ] Preferred Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Series [ ] Preferred Securities, to each Holder of Series [ ] Common Securities pro rata according to the aggregate Principal Amount of Series [ ] Common Securities held by the relevant Holder relative to the aggregate Principal Amount of all Series [ ] Common Securities outstanding. 8. Ranking. The Series [ ] Preferred Securities rank pari passu and payment thereon will be made pro rata with the Series [ ] Common Securities except that where an Event of Default occurs and is continuing, the rights of Holders of Series [ ] Preferred Securities to payment in respect of Distributions and payments upon liquidation, 88 15 redemption or otherwise rank prior to the rights of Holders of the Series [ ] Common Securities to such payments 9. Mergers, Consolidations or Amalgamations. The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or sell, transfer or lease all or substantially all its properties and assets to, any Person. 10. Transfer, Exchange, Method of Payments. Payment of Distributions and payments on redemption of the Series [ ] Securities will be payable, the transfer of the Series [ ] Preferred Securities will be registrable, and Series [ ] Securities will be exchangeable for Series [ ] Securities of other denominations of the applicable class and of a like aggregate Principal Amount at the principal corporate trust office of the Property Trustee in The City of New York; provided that payment of Distributions may be made at the option of the Regular Trustees on behalf of the Trust on behalf of the Holders of Series [ ] Securities by check mailed to the address of the Persons entitled thereto and that the payment on redemption of any Series [ ] Security will be made only upon surrender of such Series [ ] Security to the Property Trustee. Notwithstanding anything to the contrary set forth herein, the Series [ ] Common Securities shall not be transferable or assignable by the Holders thereof. 11. Acceptance of Agreements. Each Holder of Series [ ] Securities, by the acceptance thereof, agrees to the provisions of the Note Guarantee, including the subordination provisions therein, and the Series [ ] Note and in the case of Holders of Series [ ] Preferred Securities, the Guarantee, including the subordination provisions therein. 12. No Preemptive Rights. The Holders of Series [ ] Securities shall have no preemptive rights to subscribe to any additional Series [ ] Securities or any Securities of any other series. 13. Miscellaneous. These terms shall constitute a part of the Declaration. The Trust will provide a copy of the Declaration and the Series [ ] Note to a Holder without charge on written request to the Trust at its principal place of business. 14. Sinking Fund. The Series [ ] Securities [shall] [shall not] be subject to the operation of a retirement or sinking fund. 15. Guarantee of Liabilities. It shall be a condition precedent to the issuance of the Series [ ] Securities that JPM execute the Guarantee. 89 16 16. Authorization of Agreements. The Sponsor, on behalf of the Trust, may enter into and perform the Underwriting Agreement without any further act, vote or approval of any Holder. 17. Registrar and Transfer Agent. The Sponsor hereby appoints First Trust of New York, National Association as its initial registrar, transfer agent and Paying Agent for the Series [ ] Securities. 18. Governing Law. This Declaration Supplement shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to the principles of conflict of laws thereof. IN WITNESS WHEREOF, the undersigned Sponsor of the Trust has hereto set its hands as of the day and year first above written. J.P. MORGAN & CO. INCORPORATED, as Sponsor, By:______________________ Name: Title: Regular Trustee By:______________________ Name: Title: Regular Trustee By:______________________ Name: Title: Regular Trustee 90 ANNEX I IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT--THIS PREFERRED SECURITY IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS PREFERRED SECURITY IS EXCHANGEABLE FOR PREFERRED SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO TRANSFER OF THIS PREFERRED SECURITY (OTHER THAN A TRANSFER OF THIS PREFERRED SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY PREFERRED SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC OR ANY SUCCESSOR DEPOSITARY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC OR ANY SUCCESSOR DEPOSITARY, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL, SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. Preferred Securities _______________ Number ________________ CUSIP NO. _____________ 91 Certificate Evidencing Preferred Securities of J.P. Morgan Index Funding Company I [ ]% Series [ ] Preferred Securities J.P. Morgan Index Funding Company I, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that [ ] (the "Holder") is the registered owner of [ ] preferred securities of the Trust representing undivided beneficial interests in certain assets of the Trust designated the [ ]% Preferred Securities, Series [ ] (the "Preferred Securities"). The transfer of Preferred Securities is registrable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for registration of transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Declaration of Trust of the Trust dated as of October 10, 1997, as the same may be amended from time to time or supplemented by a Declaration Supplement (the "Declaration"), including the designation of the terms of Preferred Securities as set forth in a Declaration Supplement. The Preferred Securities and the related Common Securities issued by the Trust pursuant to the Declaration represent undivided beneficial interests in certain assets of the Trust, specifically (a) the Note associated with the Preferred Securities and the related Common Securities (the "Note") issued by Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), a trust company with full banking powers organized under the laws of the State of New York and a wholly owned subsidiary of J.P. Morgan & Co. Incorporated, a Delaware corporation ("JPM"), to the Property Trustee for the benefit of the Holders of the Preferred Securities and the related Common Securities and (b) the proceeds of the Note. The Holder is entitled to the benefits of the Guarantee Agreement of JPM dated as of [ ], 199_ (the "Guarantee"), to the extent provided therein and is 92 2 entitled to direct the Property Trustee (as defined in the Declaration) to enforce its rights under the Note to the extent provided therein. The Trust will furnish a copy of the Declaration, the Guarantee and the Note Guarantee (as defined below) to the Holder without charge, upon written request to the Trust, at its principal place of business or registered office. The Holder of this Certificate, by accepting this Certificate, is deemed to have agreed to the terms of (i) the Note related to the Preferred Securities and (ii) the Guarantee and the Note Guarantee Agreement dated as of [ ], 199_, executed and delivered by JPM for the benefit of the Property Trustee for the benefit of the Holders of the Preferred Securities and the related Common Securities (the "Note Guarantee"), including that each of the Guarantee and the Note Guarantee is subordinate and junior in right of payment to all other indebtedness, liabilities and obligations of JPM and pari passu with the most senior preferred or preference stock of any series now or hereafter issued by JPM and pari passu with any guarantee now or hereafter entered into by JPM in respect of any preferred or preference stock or interest of any affiliate of JPM, as and to the extent provided in the Guarantee or the Note Guarantee, as applicable. 93 3 Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. IN WITNESS WHEREOF, the Trustees of the Trust have executed this certificate this day of , 199 . ----- ---------- J.P. MORGAN INDEX FUNDING COMPANY I, by ----------------------------------- Name: Title: Trustee by ------------------------------------ Name: Title: Trustee Dated: Countersigned and Registered: First Trust of New York, National Association, as Transfer Agent and Registrar By: -------------------------- Authorized Officer 94 4 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security to: (Insert assignee's social security or tax identification number) (Insert address and zip code of assignee) and irrevocably appoints agent to transfer this Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: Signature: NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. 95 Annex II THIS CERTIFICATE MAY NOT BE TRANSFERRED Certificate Number of Common Securities Certificate Evidencing Common Securities of J.P. Morgan Index Funding Company I [ ]% Series [ ] Common Securities J.P. Morgan Index Funding Company I, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that J.P. Morgan & Co. Incorporated (the "Holder") is the registered owner of [ ] common securities of the Trust representing undivided beneficial interests in certain assets of the Trust designated the "[ ]% Common Securities" (the "Common Securities"). The transfer of Common Securities is registrable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for registration of transfer and satisfaction of the other conditions set forth in the Declaration (as defined below) including, without limitation, Section 9.01(c) thereof. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities are set forth in, and this certificate and the Common Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Declaration of Trust of the Trust dated as of October 10, 1997, as the same may be amended from time to time or supplemented by a Declaration Supplement (the "Declaration"), including the designation of the terms of Common Securities as set forth in a Declaration Supplement. The Common Securities and the related Preferred Securities issued by the Trust pursuant to the Declaration represent undivided beneficial interests in certain assets of the Trust, specifically (a) the Note associated with the Common 96 2 Securities and the related Preferred Securities (the "Note") issued by Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), a trust company with full banking powers organized under the laws of the State of New York and a wholly owned subsidiary of J.P. Morgan & Co. Incorporated, a Delaware corporation ("JPM"), to the Property Trustee for the benefit of the Holders of the Common Securities and the related Preferred Securities and (b) the proceeds of the Note. The Trust will furnish a copy of the Declaration and the Note Guarantee (as defined below) to the Holder without charge upon written request to the Trust at its principal place of business or registered office. The Holder of this Certificate, by accepting this Certificate, is deemed to have agreed to the terms of the (i) Note related to the Common Securities and (ii) the Note Guarantee Agreement dated as of [ ], 199_, executed and delivered by JPM for the benefit of the Property Trustee for the benefit of the Holders of the Common Securities and the related Preferred Securities (the "Note Guarantee"), including that the Note Guarantee is subordinate and junior in right of payment of all other indebtedness, liabilities and obligations of JPM and pari passu with the most senior preferred or preference stock of any series now or hereafter issued by JPM and pari passu with any guarantee now or hereafter entered into by JPM in respect of any Preferred or preference stock or interest of any affiliate of JPM, as and to the extent provided in the Note Guarantee. 97 3 Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. IN WITNESS WHEREOF, the Trustees of the Trust have executed this certificate this [ ] day of [ ] 199_. J.P. MORGAN INDEX FUNDING COMPANY I, by_________________________, Name: Title: Trustee by_________________________, Name: Title: Trustee Dated: Countersigned and Registered: First Trust of New York, National Association Transfer Agent and Registrar by_____________________________ Authorized Officer 98 4 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to: ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ (Insert assignee's social security or tax identification number) ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: _____________________ Signature: _________________________ (Sign exactly as your name appears on the other side of this Common Security Certificate) EX-4.B.1 7 AMENDED AND RESTATED GUARANTEE AGREEMENT 1 EXHIBIT 4(b)(1) [FORM OF] AMENDED AND RESTATED GUARANTEE AGREEMENT [FORM OF] AMENDED AND RESTATED GUARANTE AGREEMENT (this "Guarantee Agreement"), dated as of , 199[ ], executed and delivered by J.P. Morgan & Co. Incorporated, a Delaware corporatio ("J.P. Morgan") and First Trust of New York, National Association, as the initial Guarantee Trustee (as defined below) for the benefit of the Holders (as defined below) from time to time of the Preferred Securities (as defined below) of J.P. Morgan Index Funding Company I, a Delaware statutory busines trust (the "Trust"), successor by merge to J.P. Morgan Index Funding Company, LLC, a Delaware limited liability company (the "Company"). WHEREAS, the Company issued its common limited liability company interests, Series [A] (the "Common Securities") to and received related capital contributions from J.P. Morgan and J.P. Morgan Ventures Corporation ("JPM Ventures"), and issued and sold preferred limited liability company interests, Series [A] (the "Preferred Securities"; the Preferred Securities and the Common Securities collectively referred to herein as the "Series [A] Securities") with such rights, preferences, privileges, limitations and restrictions as were set forth in a written resolution or resolutions (a "Written Action") by the managing members of the Company providing for the issue of such series; WHEREAS, the Company purchased a Related Note (as defined below) from Morgan Guaranty Trust Company of New York, a trust company with full banking powers organized under the laws of the State of New York ("Morgan Guaranty") with the proceeds from such issuance and sale of the Preferred Securities and the Common Securities; and WHEREAS, J.P. Morgan irrevocably and unconditionally agreed to the extent set forth in the Guarantee Agreement dated as [ ], 199[ ] (the "Original Guarantee Agreement") to pay to the Holders of the Preferred Securities the Guarantee Payments (as defined therein) and to make certain other payments on the terms and conditions set forth therein. 2 2 WHEREAS, pursuant to an Agreement and Plan of Merger dated as of [ ], 199[ ], the Company has been merged into the Trust; WHEREAS, J.P. Morgan desires to amend and restate the Original Guarantee Agreement in order to subject it to the provisions of the Trust Indenture Act (as defined below), including to appoint an indenture trustee (hereunder, and pursuant to Section 5.02 of the Original Guarantee Agreement, such amendment may be effectuated without the consent of the Holders of the Series [A] Securities; NOW, THEREFORE, J.P. Morgan executes and delivers this Guarantee Agreement for the benefit of the Holders. ARTICLE I Definitions (a) Capitalized terms used in this Guarantee Agreement but not defined in the preamble above have the respective meanings assigned to them in this Article I. (b) A term defined anywhere in this Guarantee Agreement has the same meaning throughout. (c) All references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time. (d) All references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified. (e) A term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires. (f) A reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder. "Commission" means the Securities and Exchange Commission. 3 3 "Common Securities" means the securities representing undivided beneficial interests in the Related Note held by the Property Trustee for the benefit of the Holders of the Series [A] Securities, and having the terms set forth in the Written Action. "Covered Person" means any Holder of Preferred Securities. "Declaration" means the Amended and Restated Declaration of Trust dated as of October 10, 1997 among J.P. Morgan, as Sponsor, and the trustees of the Trust. "Distributions" means the periodic distributions and other payments payable to Holders of Preferred Securities in accordance with the terms of the Preferred Securities set forth in the Written Action. "Event of Default" means a default by J.P. Morgan on any of its payment or other obligations under this Guarantee Agreement. "Guarantee Payments" means, with respect to the Preferred Securities, the following payments, without duplication, to the extent not paid by the Trust: (i) any accumulated and unpaid distributions which have been theretofore declared on the Preferred Securities, to the extent Morgan Guaranty has made a corresponding payment on the Related Note, out of funds legally available therefor, (ii) the Preferred Redemption Price (including all accumulated and unpaid distributions), to the extent Morgan Guaranty has made a corresponding payment on the Related Note, payable out of funds legally available therefor with respect to any Preferred Securities called for redemption upon redemption thereof and (iii) upon the liquidation of the Trust, the lesser of (a) the Liquidation Distribution (as defined below) with respect to such series and (b) the amount of the assets of the Trust consisting of the Related Note and the proceeds thereof, legally available for distribution to Holders of Preferred Securities of such series in liquidation. "Guarantee Trustee" means First Trust of New York, National Association until a Successor Guarantee Trustee has been appointed and accepted such appointment pursuant to the terms of this Guarantee Agreement and thereafter means each such Successor Guarantee Trustee. 4 4 "Holder" means any Person from time to time holding any Preferred Securities; provided, however, that in determining whether the Holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include J.P. Morgan or any entity directly or indirectly controlling or controlled by or under direct or indirect common control with J.P. Morgan. "Indemnified Person" means the Guarantee Trustee, any Affiliate of the Guarantee Trustee, and any officers, directors, shareholders, members, partners, employees, representatives or agents of the Guarantee Trustee. "Liquidation Distribution" means, with respect to the Preferred Securities, the aggregate Principal Amount of the Preferred Securities and all accumulated and unpaid distributions (whether or not declared) with respect to the Preferred Securities to but excluding the date of payment. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Redemption Price" means, with respect to the Preferred Securities, the aggregate Principal Amount of all the Preferred Securities plus accumulated and unpaid distributions (whether or not declared) with respect to the Preferred Securities to but excluding the date of redemption. "Preferred Securities" has the meaning set forth in the first WHEREAS clause above. "Principal Amount" means, at any time with respect to any Preferred Security, the Redemption Value, the applicable Early Redemption Value or the stated liquidation preference thereof, as applicable, as determined in accordance with the Written Consent. "Property Trustee" means the Person acting as Property Trustee under the Declaration. "Related Note" means the obligation of Morgan Guaranty in which the proceeds from the issuance of the 5 5 Preferred Securities and the related Common Securities were invested. The Related Note shall be deemed to be "associated with" the Series [A] Securities. "Responsible Officer" means, with respect to the Guarantee Trustee, the chairman of the board of directors, the president, any vice-president, any assistant vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Series of Securities" means any series of Preferred Securities and the related series of Common Securities including the Series [A] Securities. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as a Guarantee Trustee under Section 4.01. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. ARTICLE II Trust Indenture Act SECTION 2.01. Trust Indenture Act; Application. (a) This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions. (b) If and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. (c) The application of the Trust Indenture Act to this Guarantee Agreement shall not affect the nature of the Preferred Securities as equity securities representing 6 6 undivided beneficial interests in the relevant Related Note held by the Trust. SECTION 2.02. Lists of Holders of Preferred Securities. (a) J.P. Morgan shall provide the Guarantee Trustee with such information as is required under Section 312(a) of the Trust Indenture Act at the times and in the manner provided in Section 312(a). (b) The Guarantee Trustee shall comply with its obligations under Sections 310(b), 311 and 312(b) of the Trust Indenture Act. SECTION 2.03. Reports by the Guarantee Trustee. Within 60 days after May 15 of each year, the Guarantee Trustee shall provide to the Holders of the Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form, in the manner and at the times provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.04. Periodic Reports to the Guarantee Trustee. J.P. Morgan shall provide to the Guarantee Trustee, the Commission and the Holders of the Preferred Securities, as applicable, such documents, reports and information as required by Section 314(a)(1)-(3) (if any) of the Trust Indenture Act and the compliance certificates required by Section 314(a)(4) and (c) of the Trust Indenture Act, any such certificates to be provided in the form, in the manner and at the times required by Section 314(a)(4) and (c) of the Trust Indenture Act (provided that any certificate to be provided pursuant to Section 314(a)(4) of the Trust Indenture Act shall be provided within 120 days of the end of each fiscal year of the Trust). SECTION 2.05. Evidence of Compliance with Conditions Precedent. J.P. Morgan shall provide the Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Guarantee Agreement which relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given pursuant to Section 314(c) shall comply with Section 314(e) of the Trust Indenture Act. SECTION 2.06. Events of Default; Waiver. (a) Subject to Section 2.06(b), Holders of Preferred 7 7 Securities may by vote of at least a majority in Principal Amount of the Preferred Securities, (A) direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon by the Guarantee Trustee, in either case with respect to the Series [A] Securities or (B) on behalf of the Holders of all Preferred Securities waive any past Event of Default with respect to the Series [A] Securities and its consequences. Upon such waiver, any such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default (with respect to the Series [A] Securities or any other series of securities) or impair any right consequent thereon. (b) The right of any Holder of Preferred Securities to receive payment of the Guarantee Payments in accordance with this Guarantee Agreement, or to institute suit for the enforcement of any such payment, shall not be impaired without the consent of each such Holder. SECTION 2.07. Disclosure of Information. The disclosure of information as to the names and addresses of the Holders of the Preferred Securities in accordance with Section 312 of the Trust Indenture Act, regardless of the source from which such information was derived, shall not be deemed to be a violation of any existing law, or any law hereafter enacted which does not specifically refer to Section 312 of the Trust Indenture Act, nor shall the Guarantee Trustee be held accountable by reason of mailing any material pursuant to a request made under Section 312(b) of the Trust Indenture Act. SECTION 2.08. Conflicting Interest. The Declaration shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. 8 8 ARTICLE III Powers, Duties and Rights of Guarantee Trustee SECTION 3.01. Powers and Duties of the Guarantee Trustee. (a) This Guarantee Agreement shall be held by the Guarantee Trustee in trust for the benefit of the Holders of the Preferred Securities. The Guarantee Trustee shall not transfer its right, title and interest in this Guarantee Agreement to any Person except a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Guarantee Trustee or to a Holder of Preferred Securities exercising his or her rights pursuant to Section 5.04. The right, title and interest of the Guarantee Trustee to this Guarantee Agreement shall vest automatically in each Person who may hereafter be appointed as Guarantee Trustee in accordance with Article IV. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered. (b) If an Event of Default with respect to the Preferred Securities occurs and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders of the Preferred Securities. (c) This Guarantee Agreement and all moneys received by the Property Trustee hereunder in respect of the Guarantee Payments will not be subject to any right, charge, security interest, lien or claim of any kind in favor of, or for the benefit of the Guarantee Trustee or its agents or their creditors. (d) The Guarantee Trustee shall, within 30 days after the occurrence of an Event of Default with respect to the Preferred Securities, transmit by mail, first class postage prepaid, to the Holders of the Preferred Securities, as their names and addresses appear upon the register, notice of all Events of Default known to the Guarantee Trustee, unless such defaults shall have been cured before the giving of such notice; provided, that, the Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers, of the Guarantee Trustee in good faith determine that the withholding of such notice is in the interests of the Holders of the Preferred Securities. The Guarantee Trustee shall not be deemed to have knowledge of any default except any default as to which the Guarantee Trustee shall 9 9 have received written notice or a Responsible Officer charged with the administration of the Guarantee Agreement shall have obtained written notice. (e) The Guarantee Trustee shall not resign as a Trustee unless a Successor Guarantee Trustee has been appointed and accepted that appointment in accordance with Article IV. SECTION 3.02. Certain Rights and Duties of the Guarantee Trustee. (a) The Guarantee Trustee, before the occurrence of an Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.06(a)), the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in this conduct of his or her own affairs. (b) No provision of this Guarantee Agreement shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred; (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement, and no implied covenants or obligations shall be read into this Guarantee Agreement against the Guarantee Trustee; and (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions 10 10 expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee Agreement; (ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts; (iii) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of Preferred Securities as provided herein relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) no provision of this Guarantee Agreement shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties or in the exercise of any of its rights or powers, if it shall have reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. 11 11 (c) Subject to the provisions of Section 3.02(a) and (b): (i) whenever in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon a certificate, which shall comply with the provisions of Section 314(e) of the Trust Indenture Act, signed by any authorized officer of J.P. Morgan; (ii) the Guarantee Trustee (A) may consult with counsel of its choice (which may be counsel to J.P. Morgan or any of its Affiliates and may include any of its employees) selected by it in good faith and with due care and the written advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice and opinion and (B) shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction; (iii) the Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed by it in good faith and with due care; (iv) the Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holders of Preferred Securities, unless such Holders shall have offered to the Guarantee Trustee reasonable security and indemnity against the costs, expenses (including its attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction; provided that nothing contained in this clause (iv) shall relieve the Guarantee Trustee of the obligation, upon the occurrence of an Event of Default (which has not 12 12 been cured or waived) to exercise such of the rights and powers vested in it by this Guarantee Agreement, and to use the same degree of care and skill in this exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs; and (v) any action taken by the Guarantee Trustee or its agents hereunder shall bind the Holders of any affected series of Preferred Securities and the signature of the Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action; and no third party shall be required to inquire as to the authority of the Guarantee Trustee to so act, or as to its compliance with any of the terms and provisions of this Guarantee Agreement, both of which shall be conclusively evidenced by the Guarantee Trustee's or its agent's taking such action. SECTION 3.03. Not Responsible for Recitals or Issuance of Guarantee Agreement. The recitals contained in this Guarantee Agreement shall be taken as the statements of J.P. Morgan and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representations as to the validity or sufficiency of this Guarantee Agreement. ARTICLE IV Guarantee Trustee SECTION 4.01. Qualifications. (a) There shall at all times be a Guarantee Trustee which shall: (i) not be an Affiliate of J.P. Morgan; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at 13 13 least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 4.01(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Guarantee Trustee shall cease to satisfy the requirements of clauses (i)-(ii) above, the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.02. If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and J.P. Morgan shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.02. Appointment, Removal and Resignation of Guarantee Trustee. (a) Subject to Section 4.02(b), the Guarantee Trustee may be appointed or removed without cause at any time by J.P. Morgan. (b) The Guarantee Trustee shall not be removed in accordance with Section 4.02(a) until a Successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.01(a) has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to J.P. Morgan and the Guarantee Trustee being removed. (c) The Guarantee Trustee appointed to office shall hold office until his successor shall have been appointed or until its removal or resignation. (d) The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument (a "Resignation Request") in writing signed by the Guarantee Trustee and delivered to J.P. Morgan, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that no such resignation of the Guarantee Trustee shall be effective until a Successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.01(a) has been appointed and has accepted such appointment by instrument executed by such Successor Guarantee Trustee and delivered to J.P. Morgan and the resigning Guarantee Trustee. 14 14 (e) If no Successor Guarantee Trustee shall have been appointed and accepted appointed as provided in this Section 4.02 within 60 days after delivery to J.P. Morgan of a Resignation Request, the resigning Guarantee Trustee may petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a Successor Guarantee Trustee. ARTICLE V Guarantee SECTION 5.01. Guarantee. J.P. Morgan irrevocably and unconditionally agrees, to the extent set forth herein, to pay in full to the Holders of the Preferred Securities the Guarantee Payments with respect to the Preferred Securities, as and when due (except to the extent paid by the Trust), regardless of any defense, right of set-off or counterclaim which the Trust may have or assert. This Guarantee Agreement is continuing, irrevocable, unconditional and absolute. SECTION 5.02. Waiver of Notice. J.P. Morgan hereby waives notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.03. Obligations Not Affected. The obligations, covenants, agreements and duties of J.P. Morgan under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Trust of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Trust; (b) the extension of time for the payment by the Trust of all or any portion of the distributions, Preferred Redemption Price, liquidation distributions 15 15 or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities; (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Trust granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Trust or any of the assets of the Trust; (e) any invalidity of, or defect or deficiency in, any of the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstances whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.03 that the obligations of J.P. Morgan hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, J.P. Morgan with respect to the happening of any of the foregoing. SECTION 5.04. Enforcement of Guarantee Agreement. J.P. Morgan and the Guarantee Trustee expressly acknowledge that (i) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (iii) Holders representing not less than a majority in Principal Amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available in respect of this Guarantee Agreement with respect to the Preferred Securities including the giving of directions to the Guarantee Trustee, or exercising any trust 16 16 or other power conferred upon the Guarantee Trustee under this Guarantee Agreement, and (iv) if the Guarantee Trustee fails to enforce this Guarantee Agreement with respect to the Preferred Securities, any Holder of the Preferred Securities may institute a legal proceeding directly against J.P. Morgan to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Trust, the Guarantee Trustee, or any other Person. SECTION 5.05. Guarantee of Payment. This is a guarantee of payment and not of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by the Trust). SECTION 5.06. Subrogation. J.P. Morgan shall be subrogated to all (if any) rights of the Holders against the Trust in respect of any amounts paid to the Holders by J.P. Morgan under this Guarantee Agreement and the Trust shall not be required to make payment to the Holders of any amount of Guarantee Payments in respect of which payment has theretofore been made by J.P. Morgan pursuant to Section 5.01 hereof; provided, however, that J.P. Morgan shall not (except to the extent required by mandatory provisions of law) exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of a payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to J.P. Morgan in violation of the preceding sentence, J.P. Morgan agrees to pay over such amount to the Holders for application to the Guarantee Payments then due hereunder, if any, or to offset payments due to the Holders by the Trust. SECTION 5.07. Independent Obligations. J.P. Morgan acknowledges that its obligations hereunder are independent of the obligations of the Trust with respect to the Preferred Securities and that J.P. Morgan shall be liable as principal and sole debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof. ARTICLE VI 17 17 Limitation of Transactions; Subordination SECTION 6.01. Limitation of Transactions. So long as any Preferred Securities remain outstanding, J.P. Morgan shall: (i) not cause or permit any Common Securities to be transferred; (ii) maintain 100% ownership of all outstanding securities of each series of the Trust other than the Preferred Securities of any series; (iii) not voluntarily dissolve, wind up, liquidate or terminate the Trust; (iv) not incur or permit to exist any indebtedness of the Trust; and (v) not take any actions inconsistent with the treatment of the Trust as a grantor trust for United States Federal income tax purposes. So long as any Preferred Securities remain outstanding, J.P. Morgan will not declare or pay dividends on, or redeem, purchase, acquire or make a distribution or liquidation payment with respect to, any of its common stock or preferred stock or make any Guarantee Payment with respect thereto if at such time (i) J.P. Morgan shall be in default with respect to its Guarantee Payments or other payment obligations hereunder or (ii) there shall have occurred any event of default under the Declaration; provided, however, that the foregoing restrictions shall not apply to (a) dividends, redemptions, purchases, acquisitions, distributions or payments made by J.P. Morgan by way of issuance of shares of its capital stock, (b) payments of accrued dividends by J.P. Morgan upon the redemption, exchange or conversion of any preferred stock of J.P. Morgan as may be outstanding from time to time in accordance with the terms of such preferred stock, (c) cash payments made by J.P. Morgan in lieu of delivering fractional shares upon the redemption, exchange or conversion of any preferred stock of J.P. Morgan as may be outstanding from time to time in accordance with the terms of such preferred stock, (d) repurchases, redemptions or other acquisitions of shares of capital stock of J.P. Morgan in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors of consultants, or (e) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of such rights pursuant thereto. SECTION 6.02. Subordination. This Guarantee Agreement will constitute an unsecured obligation of J.P. Morgan and will rank (i) subordinate and junior in right of payment to all other liabilities of J.P. Morgan, (ii) pari 18 18 passu with the most senior preferred stock outstanding as of the date hereof of J.P. Morgan and (iii) senior to J.P. Morgan's common stock. J.P. Morgan's obligations under this Guarantee Agreement will rank pari passu with respect to obligations under other guarantee agreements which it may enter into from time to time to the extent that such agreements shall be entered into in substantially the form hereof and provided for comparable guarantees by J.P. Morgan of payment on other preferred securities issued by the Trust or any similar trust sponsored by J.P. Morgan. ARTICLE VII Termination SECTION 7.01. This Guarantee Agreement shall terminate and be of no further force and effect as to the Preferred Securities upon full payment of the Preferred Redemption Price of the Preferred Securities, and shall terminate completely upon full payment of the amounts payable to Holders upon liquidation of the Trust; provided, however, that this Guarantee Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid under the Preferred Securities or under this Guarantee Agreement for any reason whatsoever. J.P. Morgan agrees to indemnify each Holder and hold it harmless against any loss it may suffer in such circumstances. ARTICLE VIII Limitation of Liability; Indemnification SECTION 8.01. Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to J.P. Morgan or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee Agreement or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or wilful misconduct with respect to such acts or omissions. 19 19 (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of J.P. Morgan and upon such information, opinions, reports or statements presented to J.P. Morgan by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of J.P. Morgan, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amounts of assets from which Distributions to Holders of Preferred Securities might properly be paid. SECTION 8.02. Indemnification. (a) To the fullest extent permitted by applicable law, J.P. Morgan shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Guarantee Agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of negligence or wilful misconduct with respect to such acts or omissions. (b) To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by J.P. Morgan prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by J.P. Morgan of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 8.02(a). 20 20 ARTICLE IX Miscellaneous SECTION 9.01. Successors and Assigns. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of J.P. Morgan and shall inure to the benefit of the Holders. J.P. Morgan shall not assign its obligations hereunder without the prior approval of Holders of not less than a majority in Principal Amount of all Preferred Securities of all series then outstanding voting as a single class. SECTION 9.02. Amendments. Except with respect to any changes or waivers which do not adversely affect the rights of Holders (in which case no vote will be required), this Guarantee Agreement may only be amended or waived by instrument in writing signed by J.P. Morgan and the Guarantee Trustee with the prior approval of the Holders of not less than a majority in Principal Amount of all Preferred Securities then outstanding. The provisions of Section 12.02 of the Declaration concerning meetings of Holders shall apply to the giving of such approval. SECTION 9.03. Notices. Any notice, request or other communication required or permitted to be given hereunder to J.P. Morgan shall be given in writing by mail or by facsimile transmission (followed by mail), addressed to J.P. Morgan, as follows: (a) if given to J.P. Morgan, to the address set forth below or such other address as J.P. Morgan may give notice of to the Holders: J.P. Morgan & Co. Incorporated 60 Wall Street New York, New York 10260-0060 Facsimile No.: (212) 648-5175 Attention: Assistant Secretary 21 21 (b) if given to the Guarantee Trustee, to the address set forth below or such other address as the Guarantee Trustee may give notice to the Holders: First Trust of New York, National Association 100 Wall Street Suite 1600 New York, New York 10005 Facsimile No.: (212) 809-5459 Attention: Corporate Trust Administration (c) if given to any Holder of Preferred Securities, at the address set forth on the books and records of the Trust relating to such series. All notices hereunder shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.04. Genders. The masculine, feminine and neuter genders used herein shall include the masculine, feminine and neuter genders. SECTION 9.05. Benefit. This Guarantee Agreement is solely for the benefit of the Holders and, subject to Section 3.01(a), is not separately transferable from the Preferred Securities. 22 22 SECTION 9.06. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS). SECTION 9.07. Counterparts. This Guarantee Agreement may be executed in counterparts, each of which shall be an original; but such counterparts shall together constitute one and the same instrument. [SECTION 9.08. Exercise of Overallotment Option. If and to the extent that any Preferred Securities are issued by the Trust upon exercise of the overallotment option referred to the third WHEREAS clause, J.P. Morgan agrees to give prompt notice thereof to the Guarantee Trustee but the failure to give such notice shall not relieve J.P. Morgan of any of its obligations hereunder.] IN WITNESS WHEREOF, this Guarantee Agreement is executed as of the day and year first above written. J.P. MORGAN & CO. INCORPORATED, By _________________________ Name: Title: FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION, as Guarantee Trustee, By _________________________ Name: Title: 23 STATE OF NEW YORK ) ) COUNTY OF NEW YORK ) BEFORE ME, the undersigned authority, on this [ ] day of [ ], 199_, personally appeared of J.P. Morgan & Co. Incorporated, known to me (or proved to me by introduction upon the oath of a person known to me) to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the same as the act of such trust for the purposes and consideration herein expressed and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL THIS [ ] DAY OF [ ], 199_. {SEAL} -------------------------------- NOTARY PUBLIC, STATE OF NEW YORK Print Name: -------------------- Commission Expires: ------------- 24 STATE OF NEW YORK ) ) COUNTY OF NEW YORK ) BEFORE ME, the undersigned authority, on this [ ] day of [ ], 199_ , personally appeared [ ] of First Trust of New York, National Association, known to me (or proved to me by introduction upon the oath of a person known to me) to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the same as the act of such trust for the purposes and consideration herein expressed and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL THIS [ ] DAY OF [ ], 199_. {SEAL} -------------------------------- NOTARY PUBLIC, STATE OF NEW YORK Print Name: -------------------- Commission Expires: ------------ EX-4.B.2 8 GUARANTEE AGREEMENT 1 EXHIBIT 4(b)(2) [FORM OF] GUARANTEE AGREEMENT [FORM OF] GUARANTEE AGREEMENT (this "Guarantee Agreement"), dated as of [ ], 199[ ], executed and delivered by J.P. Morgan & Co. Incorporated, a Delaware corporation ("J.P. Morgan") and First Trust of New York, National Association, as the initial Guarantee Trustee (as defined below) for the benefit of the Holders (as defined below) from time to time of the Preferred Securities (as defined below) of J.P. Morgan Index Funding Company I, a Delaware statutory business trust (the "Trust"). WHEREAS, pursuant to an Amended and Restated Declaration of Trust (as amended from time to time, the "Declaration") dated as of October 10, 1997 among the trustees of the Trust, J.P. Morgan, as sponsor (the "Sponsor"), and the Holders from time to time of undivided beneficial interests in certain assets of the Trust, the Trust intends to issue and sell from time to time, in one or more series, up to $700,000,000 aggregate principal amount of its Commodity-Indexed Preferred Securities (the "Preferred Securities") and related common securities (the "Common Securities"), in each case representing undivided beneficial interests in a Related Note (as defined below) associated with such series and having such rights, preferences, privileges, limitations and restrictions as are set forth in a declaration supplement (a "Declaration Supplement") by the Sponsor in the form of Exhibit B to the Declaration providing for the issue of such series; WHEREAS, the Trust, on behalf of each Series of Securities (as defined below), will purchase Related Notes (as defined below) from Morgan Guaranty Trust Company of New York, a trust company with full banking powers organized under the laws of the State of New York ("Morgan Guaranty"), with the proceeds from the issuance and sale of each series of Preferred Securities and related Common Securities; and WHEREAS, J.P. Morgan desires hereby to irrevocably and unconditionally agree to the extent set forth herein to pay to the Holders the Guarantee Payments (as defined below) 2 2 and to make certain other payments on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the purchase by each Holder of the Preferred Securities, which purchase J.P. Morgan hereby agrees shall benefit J.P. Morgan and which purchase J.P. Morgan acknowledges will be made in reliance upon the execution and delivery of this guarantee, J.P. Morgan executes and delivers this Guarantee Agreement for the benefit of the Holders. ARTICLE I Definitions (a) Capitalized terms used in this Guarantee Agreement but not defined in the preamble above have the respective meanings assigned to them in this Article I. (b) A term defined anywhere in this Guarantee Agreement has the same meaning throughout. (c) All references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time. (d) All references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified. (e) A term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires. (f) A reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder. "Commission" means the Securities and Exchange Commission. "Common Securities" means, with respect to a Series of Securities, the securities representing undivided beneficial interests in a Related Note associated with such Series of Securities and held by the Property Trustee for 3 3 the benefit of the Holders of such Series of Securities, and having the terms set forth in a Declaration Supplement in the form of Exhibit B to the Declaration. "Covered Person" means any Holder of Preferred Securities. "Distributions" means the periodic distributions and other payments payable to Holders of Preferred Securities in accordance with the terms of the Preferred Securities set forth in a Declaration Supplement in the form of Exhibit B to the Declaration. "Event of Default" means a default by J.P. Morgan on any of its payment or other obligations under this Guarantee Agreement. "Guarantee Payments" means, with respect to Preferred Securities of any series, the following payments, without duplication, to the extent not paid by the Trust: (i) any accumulated and unpaid distributions which have been theretofore declared on the Preferred Securities of such series, to the extent Morgan Guaranty has made a corresponding payment on the relevant Related Note, out of funds legally available therefor, (ii) the Preferred Redemption Price (including all accumulated and unpaid distributions), to the extent Morgan Guaranty has made a corresponding payment on the relevant Related Note, payable out of funds legally available therefor with respect to any Preferred Securities of such series called for redemption upon redemption thereof and (iii) upon the liquidation of the Trust, the lesser of (a) the Liquidation Distribution (as defined below) with respect to such series and (b) the amount of the assets of the Trust consisting of the relevant Related Note and the proceeds thereof, legally available for distribution to Holders of Preferred Securities of such series in liquidation. "Guarantee Trustee" means First Trust of New York, National Association until a Successor Guarantee Trustee has been appointed and accepted such appointment pursuant to the terms of this Guarantee Agreement and thereafter means each such Successor Guarantee Trustee. "Holder" means any Person from time to time holding any Preferred Securities of any series; provided, however, that in determining whether the Holders of the requisite percentage of Preferred Securities have given any 4 4 request, notice, consent or waiver hereunder, "Holder" shall not include J.P. Morgan or any entity directly or indirectly controlling or controlled by or under direct or indirect common control with J.P. Morgan. "Indemnified Person" means the Guarantee Trustee, any Affiliate of the Guarantee Trustee, and any officers, directors, shareholders, members, partners, employees, representatives or agents of the Guarantee Trustee. "Liquidation Distribution" means, with respect to Preferred Securities of any series, the aggregate Principal Amount of Preferred Securities of such series and all accumulated and unpaid distributions (whether or not declared) with respect to such Preferred Securities to but excluding the date of payment. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Redemption Price" means, with respect to Preferred Securities of any series, the aggregate Principal Amount of all Preferred Securities of such series plus accumulated and unpaid distributions (whether or not declared) with respect to such series to but excluding the date of redemption. "Preferred Securities" has the meaning set forth in the first WHEREAS clause above. "Principal Amount" means, at any time with respect to any Preferred Security of any series, the Redemption Value, the applicable Early Redemption Value or the stated liquidation preference thereof, as applicable, as determined in accordance with the Declaration Supplement creating such Preferred Securities. "Property Trustee" means the Person acting as Property Trustee under the Declaration. "Related Note" means any obligation or obligations of Morgan Guaranty in which the proceeds from the issuance of Preferred Securities of any series and related Common Securities of such series are invested. 5 5 "Responsible Officer" means, with respect to the Guarantee Trustee, the chairman of the board of directors, the president, any vice-president, any assistant vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Series of Securities" means any series of Preferred Securities and related Common Securities issued under the Declaration or a Declaration Supplement. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as a Guarantee Trustee under Section 4.01. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. ARTICLE II Trust Indenture Act SECTION 2.01. Trust Indenture Act; Application. (a) This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions. (b) If and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. (c) The application of the Trust Indenture Act to this Guarantee Agreement shall not affect the nature of the Preferred Securities as equity securities representing undivided beneficial interests in the relevant Related Note held by the Trust. 6 6 SECTION 2.02. Lists of Holders of Preferred Securities. (a) J.P. Morgan shall provide the Guarantee Trustee with such information as is required under Section 312(a) of the Trust Indenture Act at the times and in the manner provided in Section 312(a). (b) The Guarantee Trustee shall comply with its obligations under Sections 310(b), 311 and 312(b) of the Trust Indenture Act. SECTION 2.03. Reports by the Guarantee Trustee. Within 60 days after May 15 of each year, the Guarantee Trustee shall provide to the Holders of the Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form, in the manner and at the times provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.04. Periodic Reports to the Guarantee Trustee. J.P. Morgan shall provide to the Guarantee Trustee, the Commission and the Holders of the Preferred Securities, as applicable, such documents, reports and information as required by Section 314(a)(1)-(3) (if any) of the Trust Indenture Act and the compliance certificates required by Section 314(a)(4) and (c) of the Trust Indenture Act, any such certificates to be provided in the form, in the manner and at the times required by Section 314(a)(4) and (c) of the Trust Indenture Act (provided that any certificate to be provided pursuant to Section 314(a)(4) of the Trust Indenture Act shall be provided within 120 days of the end of each fiscal year of the Trust). SECTION 2.05. Evidence of Compliance with Conditions Precedent. J.P. Morgan shall provide the Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Guarantee Agreement which relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given pursuant to Section 314(c) shall comply with Section 314(e) of the Trust Indenture Act. SECTION 2.06. Events of Default; Waiver. (a) Subject to Section 2.06(b), Holders of Preferred Securities of any series may by vote of at least a majority in Principal Amount of the Preferred Securities of such series, (A) direct the time, method and place of conducting 7 7 any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon by the Guarantee Trustee, in either case with respect to such series or (B) on behalf of the Holders of all Preferred Securities of such series waive any past Event of Default with respect to such series and its consequences. Upon such waiver, any such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default (with respect to such series or any other series) or impair any right consequent thereon. (b) The right of any Holder of Preferred Securities to receive payment of the Guarantee Payments in accordance with this Guarantee Agreement, or to institute suit for the enforcement of any such payment, shall not be impaired without the consent of each such Holder. SECTION 2.07. Disclosure of Information. The disclosure of information as to the names and addresses of the Holders of the Preferred Securities in accordance with Section 312 of the Trust Indenture Act, regardless of the source from which such information was derived, shall not be deemed to be a violation of any existing law, or any law hereafter enacted which does not specifically refer to Section 312 of the Trust Indenture Act, nor shall the Guarantee Trustee be held accountable by reason of mailing any material pursuant to a request made under Section 312(b) of the Trust Indenture Act. SECTION 2.08. Conflicting Interest. The Declaration shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. 8 8 ARTICLE III Powers, Duties and Rights of Guarantee Trustee SECTION 3.01. Powers and Duties of the Guarantee Trustee. (a) This Guarantee Agreement shall be held by the Guarantee Trustee in trust for the benefit of the Holders of the Preferred Securities. The Guarantee Trustee shall not transfer its right, title and interest in this Guarantee Agreement to any Person except a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Guarantee Trustee or to a Holder of Preferred Securities exercising his or her rights pursuant to Section 5.04. The right, title and interest of the Guarantee Trustee to this Guarantee Agreement shall vest automatically in each Person who may hereafter be appointed as Guarantee Trustee in accordance with Article IV. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered. (b) If an Event of Default with respect to Preferred Securities of any series occurs and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders of such Preferred Securities. (c) This Guarantee Agreement and all moneys received by the Property Trustee hereunder in respect of the Guarantee Payments will not be subject to any right, charge, security interest, lien or claim of any kind in favor of, or for the benefit of the Guarantee Trustee or its agents or their creditors. (d) The Guarantee Trustee shall, within 30 days after the occurrence of an Event of Default with respect to Preferred Securities of any series, transmit by mail, first class postage prepaid, to the holders of such Preferred Securities, as their names and addresses appear upon the register, notice of all Events of Default known to the Guarantee Trustee, unless such defaults shall have been cured before the giving of such notice; provided, that, the Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers, of the Guarantee Trustee in good faith determine that the withholding of such notice is in the interests of the Holders of such Preferred Securities. The Guarantee Trustee shall not be deemed to have knowledge of any default except any default as to which 9 9 the Guarantee Trustee shall have received written notice or a Responsible Officer charged with the administration of the Guarantee Agreement shall have obtained written notice. (e) The Guarantee Trustee shall not resign as a Trustee unless a Successor Guarantee Trustee has been appointed and accepted that appointment in accordance with Article IV. SECTION 3.02. Certain Rights and Duties of the Guarantee Trustee. (a) The Guarantee Trustee, before the occurrence of an Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.06(a)), the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in this conduct of his or her own affairs. (b) No provision of this Guarantee Agreement shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred; (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement, and no implied covenants or obligations shall be read into this Guarantee Agreement against the Guarantee Trustee; and (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions 10 10 expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee Agreement; (ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts; (iii) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of Preferred Securities as provided herein relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) no provision of this Guarantee Agreement shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties or in the exercise of any of its rights or powers, if it shall have reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. 11 11 (c) Subject to the provisions of Section 3.02(a) and (b): (i) whenever in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon a certificate, which shall comply with the provisions of Section 314(e) of the Trust Indenture Act, signed by any authorized officer of J.P. Morgan; (ii) the Guarantee Trustee (A) may consult with counsel of its choice (which may be counsel to J.P. Morgan or any of its Affiliates and may include any of its employees) selected by it in good faith and with due care and the written advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice and opinion and (B) shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction; (iii) the Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed by it in good faith and with due care; (iv) the Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holders of Preferred Securities, unless such Holders shall have offered to the Guarantee Trustee reasonable security and indemnity against the costs, expenses (including its attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction; provided that nothing contained in this clause (iv) shall relieve the Guarantee Trustee of the obligation, upon the occurrence of an Event of Default (which has not 12 12 been cured or waived) to exercise such of the rights and powers vested in it by this Guarantee Agreement, and to use the same degree of care and skill in this exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs; and (v) any action taken by the Guarantee Trustee or its agents hereunder shall bind the Holders of any affected series of Preferred Securities and the signature of the Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action; and no third party shall be required to inquire as to the authority of the Guarantee Trustee to so act, or as to its compliance with any of the terms and provisions of this Guarantee Agreement, both of which shall be conclusively evidenced by the Guarantee Trustee's or its agent's taking such action. SECTION 3.03. Not Responsible for Recitals or Issuance of Guarantee Agreement. The recitals contained in this Guarantee Agreement shall be taken as the statements of J.P. Morgan and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representations as to the validity or sufficiency of this Guarantee Agreement. ARTICLE IV Guarantee Trustee SECTION 4.01. Qualifications. (a) There shall at all times be a Guarantee Trustee which shall: (i) not be an Affiliate of J.P. Morgan; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at 13 13 least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 4.01(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Guarantee Trustee shall cease to satisfy the requirements of clauses (i)-(ii) above, the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.02. If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and J.P. Morgan shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.02. Appointment, Removal and Resignation of Guarantee Trustee. (a) Subject to Section 4.02(b), the Guarantee Trustee may be appointed or removed without cause at any time by J.P. Morgan. (b) The Guarantee Trustee shall not be removed in accordance with Section 4.02(a) until a Successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.01(a) has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to J.P. Morgan and the Guarantee Trustee being removed. (c) The Guarantee Trustee appointed to office shall hold office until his successor shall have been appointed or until its removal or resignation. (d) The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument (a "Resignation Request") in writing signed by the Guarantee Trustee and delivered to J.P. Morgan, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that no such resignation of the Guarantee Trustee shall be effective until a Successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.01(a) has been appointed and has accepted such appointment by instrument executed by such Successor Guarantee Trustee and delivered to J.P. Morgan and the resigning Guarantee Trustee. 14 14 (e) If no Successor Guarantee Trustee shall have been appointed and accepted appointed as provided in this Section 4.02 within 60 days after delivery to J.P. Morgan of a Resignation Request, the resigning Guarantee Trustee may petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a Successor Guarantee Trustee. ARTICLE V Guarantee SECTION 5.01. Guarantee. J.P. Morgan irrevocably and unconditionally agrees, to the extent set forth herein, to pay in full to the Holders of Preferred Securities of each series the Guarantee Payments with respect to such Preferred Securities, as and when due (except to the extent paid by the Trust), regardless of any defense, right of set-off or counterclaim which the Trust may have or assert. This Guarantee Agreement is continuing, irrevocable, unconditional and absolute. SECTION 5.02. Waiver of Notice. J.P. Morgan hereby waives notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.03. Obligations Not Affected. The obligations, covenants, agreements and duties of J.P. Morgan under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Trust of any express or implied agreement, covenant, term or condition relating to the Preferred Securities of any series to be performed or observed by the Trust; (b) the extension of time for the payment by the Trust of all or any portion of the distributions, Preferred Redemption Price, liquidation distributions 15 15 or any other sums payable under the terms of the Preferred Securities of any series or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities of any series; (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities of any series, or any action on the part of the Trust granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Trust or any of the assets of the Trust; (e) any invalidity of, or defect or deficiency in, the Preferred Securities of any series; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstances whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.03 that the obligations of J.P. Morgan hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, J.P. Morgan with respect to the happening of any of the foregoing. SECTION 5.04. Enforcement of Guarantee Agreement. J.P. Morgan and the Guarantee Trustee expressly acknowledge that (i) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (iii) Holders representing not less than a majority in Principal Amount of the Preferred Securities of any series have the right to direct the time, method and place of conducting any proceeding for any remedy available in respect of this 16 16 Guarantee Agreement with respect to such Preferred Securities including the giving of directions to the Guarantee Trustee, or exercising any trust or other power conferred upon the Guarantee Trustee under this Guarantee Agreement, and (iv) if the Guarantee Trustee fails to enforce this Guarantee Agreement with respect to Preferred Securities of any series, any Holder of such Preferred Securities may institute a legal proceeding directly against J.P. Morgan to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Trust, the Guarantee Trustee, or any other Person. SECTION 5.05. Guarantee of Payment. This is a guarantee of payment and not merely of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by the Trust). SECTION 5.06. Subrogation. J.P. Morgan shall be subrogated to all (if any) rights of the Holders against the Trust in respect of any amounts paid to the Holders by J.P. Morgan under this Guarantee Agreement and the Trust shall not be required to make payment to the Holders of any amount of Guarantee Payments in respect of which payment has theretofore been made by J.P. Morgan pursuant to Section 5.01 hereof; provided, however, that J.P. Morgan shall not (except to the extent required by mandatory provisions of law) exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of a payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to J.P. Morgan in violation of the preceding sentence, J.P. Morgan agrees to pay over such amount to the Holders for application to the Guarantee Payments then due hereunder, if any, or to offset payments due to the Holders by the Trust. SECTION 5.07. Independent Obligations. J.P. Morgan acknowledges that its obligations hereunder are independent of the obligations of the Trust with respect to the Preferred Securities and that J.P. Morgan shall be liable as principal and sole debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof. 17 17 ARTICLE VI Limitation of Transactions; Subordination SECTION 6.01. Limitation of Transactions. So long as any Preferred Securities of any series remain outstanding, J.P. Morgan shall: (i) not cause or permit any Common Securities to be transferred; (ii) maintain 100% ownership of all outstanding securities of each series of the Trust other than the Preferred Securities of any series; (iii) not voluntarily dissolve, wind up, liquidate or terminate the Trust; (iv) not incur or permit to exist any indebtedness of the Trust; and (v) not take any actions inconsistent with the treatment of the Trust as a grantor trust for United States Federal income tax purposes. So long as any Preferred Securities remain outstanding, J.P. Morgan will not declare or pay dividends on, or redeem, purchase, acquire or make a distribution or liquidation payment with respect to, any of its common stock or preferred stock or make any Guarantee Payment with respect thereto if at such time (i) J.P. Morgan shall be in default with respect to its Guarantee Payments or other payment obligations hereunder or (ii) there shall have occurred any event of default under the Declaration; provided, however, that the foregoing restrictions shall not apply to (a) dividends, redemptions, purchases, acquisitions, distributions or payments made by J.P. Morgan by way of issuance of shares of its capital stock, (b) payments of accrued dividends by J.P. Morgan upon the redemption, exchange or conversion of any preferred stock of J.P. Morgan as may be outstanding from time to time in accordance with the terms of such preferred stock, (c) cash payments made by J.P. Morgan in lieu of delivering fractional shares upon the redemption, exchange or conversion of any preferred stock of J.P. Morgan as may be outstanding from time to time in accordance with the terms of such preferred stock, (d) repurchases, redemptions or other acquisitions of shares of capital stock of J.P. Morgan in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors of consultants, or (e) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of such rights pursuant thereto. 18 18 SECTION 6.02. Subordination. This Guarantee Agreement will constitute an unsecured obligation of J.P. Morgan and will rank (i) subordinate and junior in right of payment to all other liabilities of J.P. Morgan, (ii) pari passu with the most senior preferred stock outstanding as of the date hereof of J.P. Morgan and (iii) senior to J.P. Morgan's common stock. J.P. Morgan's obligations under this Guarantee Agreement will rank pari passu with respect to obligations under other guarantee agreements which it may enter into from time to time to the extent that such agreements shall be entered into in substantially the form hereof and provided for comparable guarantees by J.P. Morgan of payment on other preferred securities issued by the Trust or any similar trust sponsored by J.P. Morgan. ARTICLE VII Termination SECTION 7.01. This Guarantee Agreement shall terminate and be of no further force and effect as to Preferred Securities of any series upon full payment of the Preferred Redemption Price of such series, and shall terminate completely upon full payment of the amounts payable to Holders upon liquidation of the Trust; provided, however, that this Guarantee Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid under the Preferred Securities of such series or under this Guarantee Agreement for any reason whatsoever. J.P. Morgan agrees to indemnify each Holder and hold it harmless against any loss it may suffer in such circumstances. ARTICLE VIII Limitation of Liability; Indemnification SECTION 8.01. Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to J.P. Morgan or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee Agreement or by law, except that an Indemnified Person shall 19 19 be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or wilful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of J.P. Morgan and upon such information, opinions, reports or statements presented to J.P. Morgan by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of J.P. Morgan, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amounts of assets from which Distributions to Holders of Preferred Securities might properly be paid. SECTION 8.02. Indemnification. (a) To the fullest extent permitted by applicable law, J.P. Morgan shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Guarantee Agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of negligence or wilful misconduct with respect to such acts or omissions. (b) To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by J.P. Morgan prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by J.P. Morgan of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 8.02(a). ARTICLE IX Miscellaneous 20 20 SECTION 9.01. Successors and Assigns. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of J.P. Morgan and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. J.P. Morgan shall not assign its obligations hereunder without the prior approval of Holders of not less than a majority in Principal Amount of all Preferred Securities of all series then outstanding voting as a single class. SECTION 9.02. Amendments. Except with respect to any changes or waivers which do not adversely affect the rights of Holders (in which case no vote will be required), this Guarantee Agreement may only be amended or waived by instrument in writing signed by J.P. Morgan and the Guarantee Trustee with the prior approval of the Holders of not less than a majority in Principal Amount of all Preferred Securities of each affected series then outstanding voting as a single class. The provisions of Section 12.02 of the Declaration concerning meetings of Holders shall apply to the giving of such approval. SECTION 9.03. Notices. Any notice, request or other communication required or permitted to be given hereunder to J.P. Morgan shall be given in writing by mail or by facsimile transmission (followed by mail), addressed to J.P. Morgan, as follows: (a) if given to J.P. Morgan, to the address set forth below or such other address as J.P. Morgan may give notice of to the Holders: J.P. Morgan & Co. Incorporated 60 Wall Street New York, New York 10260-0060 Facsimile No.: (212) 648-5175 Attention: Assistant Secretary 21 21 (b) if given to the Guarantee Trustee, to the address set forth below or such other address as the Guarantee Trustee may give notice to the Holders: First Trust of New York, National Association 100 Wall Street Suite 1600 New York, New York 10005 Facsimile No.: (212) 809-5459 Attention: Corporate Trust Administration (c) if given to any Holder of Preferred Securities of any series, at the address set forth on the books and records of the Trust relating to such series. All notices hereunder shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.04. Genders. The masculine, feminine and neuter genders used herein shall include the masculine, feminine and neuter genders. SECTION 9.05. Benefit. This Guarantee Agreement is solely for the benefit of the Holders and, subject to Section 3.01(a), is not separately transferable from the Preferred Securities. 22 22 SECTION 9.06. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS). SECTION 9.07. Counterparts. This Guarantee Agreement may be executed in counterparts, each of which shall be an original; but such counterparts shall together constitute one and the same instrument. [SECTION 9.08. Exercise of Overallotment Option. If and to the extent that any Preferred Securities are issued by the Trust upon exercise of the overallotment option referred to the third WHEREAS clause, J.P. Morgan agrees to give prompt notice thereof to the Guarantee Trustee but the failure to give such notice shall not relieve J.P. Morgan of any of its obligations hereunder.] IN WITNESS WHEREOF, this Guarantee Agreement is executed as of the day and year first above written. J.P. MORGAN & CO. INCORPORATED, By ------------------------------------- Name: Title: FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION, as Guarantee Trustee, By ------------------------------------- Name: Title: 23 STATE OF NEW YORK ) ) COUNTY OF NEW YORK ) BEFORE ME, the undersigned authority, on this [ ] day of [ ], 199_, personally appeared of J.P. Morgan & Co. Incorporated, known to me (or proved to me by introduction upon the oath of a person known to me) to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the same as the act of such trust for the purposes and consideration herein expressed and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL THIS DAY OF [ ], 199_. {SEAL} ________________________________ NOTARY PUBLIC, STATE OF NEW YORK Print Name: ____________________ Commission Expires: ____________ 24 STATE OF NEW YORK ) ) COUNTY OF NEW YORK ) BEFORE ME, the undersigned authority, on this [ ] day of [ ], 199_ , personally appeared [ ] of First Trust of New York, National Association, known to me (or proved to me by introduction upon the oath of a person known to me) to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the same as the act of such trust for the purposes and consideration herein expressed and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL THIS 31st DAY OF [ ], 199_. {SEAL} ________________________________ NOTARY PUBLIC, STATE OF NEW YORK Print Name: ____________________ Commission Expires: ____________ EX-4.C 9 RELATED NOTE GUARANTEE AGREEMENT 1 EXHIBIT 4(c) [FORM OF] RELATED NOTE GUARANTEE AGREEMENT (the "Related Note Guarantee"), dated as of , 199[ ], executed and delivered by J.P. MORGAN & CO. INCORPORATED, a Delaware corporation ("J.P. Morgan"), for the benefit of FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION, as Property Trustee (the "Property Trustee") of J.P. MORGAN INDEX FUNDING COMPANY I, a Delaware statutory business trust (the "Trust") and as the holder from time to time of the Related Notes (as defined below). WHEREAS, the Trust intends to issue from time to time, in one or more series, its common trust securities (the "Common Securities") to and receive related capital contributions from J.P. Morgan, and to issue and sell from time to time, in one or more series, related preferred trust securities (the "Preferred Securities") with such rights, preferences, privileges, limitations and restrictions as are set forth in a declaration supplement or supplements (each, a "Declaration Supplement") to the Declaration (as defined below) providing for the issuance of such series; WHEREAS, the Trust, on behalf of the holders from time to time of each series of Preferred Securities and related Common Securities, will purchase from Morgan Guaranty Trust Company of New York, a trust company with full banking powers organized under the laws of the State of New York and a wholly-owned subsidiary of J.P. Morgan ("Morgan Guaranty"), one or more related notes (the "Related Notes") with the proceeds from the issuance and sale of each series of Preferred Securities and related Common Securities, the distribution and principal repayment terms of which Related Note shall mirror the related series of securities; and WHEREAS, J.P. Morgan desires hereby to irrevocably and unconditionally agree to the extent set forth herein to pay to the Property Trustee the Related Note Guarantee Payments (as defined below) and to make certain other payments on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the purchase by the Trust of the Related Notes, which purchase J.P. Morgan hereby agrees shall benefit J.P. Morgan and which 2 2 purchase J.P. Morgan acknowledges will be made in reliance upon the execution and delivery of this Related Note Guarantee, J.P. Morgan executes and delivers this Related Note Guarantee for the benefit of the Property Trustee for the benefit of the holders from time to time of the Preferred Securities and the related Common Securities. ARTICLE I As used in this Related Note Guarantee, the terms set forth below shall have the following meanings: "Related Note Guarantee Payments" shall mean, with respect to any Related Note, the following payments, without duplication, to the extent not paid by Morgan Guaranty: (i) any accrued and unpaid interest on such Related Note and (ii) the Related Note Redemption Price (including all accrued and unpaid interest) payable with respect to such Related Note to be redeemed, in whole or in part, upon redemption thereof. "Declaration" shall mean the Trust's Amended and Restated Declaration of Trust dated as of October 10, 1997, among the Sponsor, the Regular Trustees, the Property Trustee, the Delaware Trustee (each as defined therein) and the holders from time to time of securities of the Trust, as amended from time to time. "Principal Amount" shall mean, at any time with respect to any Preferred Security of any series and, if applicable, the related Common Securities, the Redemption Value, the applicable Early Redemption Value or stated liquidation preference thereof, as applicable, determined in accordance with the Declaration Supplement creating such series of Preferred Securities. "Related Note Redemption Price" shall mean, with respect to any Related Note at any time, an amount equal to the aggregate Principal Amount of all Preferred Securities of the related series and related Common Securities to be redeemed at such time, plus accrued and unpaid interest with respect to such Related Note to but excluding the date of redemption. ARTICLE II 3 3 SECTION 2.01. J.P. Morgan irrevocably and unconditionally agrees, to the extent set forth herein, to pay in full, to the Property Trustee, for the benefit of the holders from time to time of the Preferred Securities and related Common Securities associated with any Related Note, the Related Note Guarantee Payments with respect to such Related Note, as and when due (except to the extent paid by Morgan Guaranty), regardless of any defense, right of set-off or counterclaim which the Morgan Guaranty may have or assert. This Related Note Guarantee is continuing, irrevocable, unconditional and absolute. SECTION 2.02. J.P. Morgan hereby waives notice of acceptance of this Related Note Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 2.03. The obligations, covenants, agreements and duties of J.P. Morgan under this Related Note Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by Morgan Guaranty of any express or implied agreement, covenant, term or condition relating to the Related Notes to be performed or observed by Morgan Guaranty; (b) the extension of time for the payment by Morgan Guaranty of all or any portion of the interest payments, the Related Note Redemption Price or any other sums payable under the terms of the Related Notes or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Related Notes; (c) any failure, omission, delay or lack of diligence on the part of the Property Trustee or the Trust to enforce, assert or exercise any right, privilege, power or remedy conferred on the Property Trustee or the Trust pursuant to the terms of the Related Notes, or any action on the part of Morgan Guaranty granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, 4 4 insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, Morgan Guaranty or any of the assets of Morgan Guaranty; (e) any invalidity of, or defect or deficiency in, any of the Related Notes; or (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred. There shall be no obligation of the Property Trustee or the Trust to give notice to, or obtain consent of, J.P. Morgan with respect to the happening of any of the foregoing. SECTION 2.04. This is a guarantee of payment and not of collection. The Property Trustee may enforce this Guarantee directly against J.P. Morgan, and J.P. Morgan waives any right or remedy to require that any action be brought against Morgan Guaranty or any other person or entity before proceeding against J.P. Morgan. Subject to Section 2.05 hereof, all waivers herein contained shall be without prejudice to the Property Trustee's right to proceed against Morgan Guaranty, whether by separate action or by joinder. SECTION 2.05 J.P. Morgan shall be subrogated to all (if any) rights of the Property Trustee against Morgan Guaranty in respect of any amounts paid to the Property Trustee by J.P. Morgan under this Related Note Guarantee and Morgan Guaranty shall not be required to make payment to the Property Trustee of any amount of Related Note Guarantee Payments in respect of which payment has theretofore been made by J.P. Morgan pursuant to Section 2.01 hereof; provided, however, that J.P. Morgan shall not (except to the extent required by mandatory provisions of law) exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of a payment under this Related Note Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Related Note Guarantee. If any amount shall be paid to J.P. Morgan in violation of the preceding sentence, J.P. Morgan agrees to pay over such amount to the Property Trustee for application to the Related Note Guarantee Payments then due hereunder, if any, or to amounts due the Trust from Morgan Guaranty under the relevant Related Note. 5 5 SECTION 2.06. J.P. Morgan acknowledges that its obligations hereunder are independent of the obligations of Morgan Guaranty with respect to the Related Notes and that J.P. Morgan shall be liable as principal and sole debtor hereunder to make Related Note Guarantee Payments pursuant to the terms of this Related Note Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (f), inclusive, of Section 2.03 hereof. ARTICLE III The Related Note Guarantee will constitute an unsecured obligation of J.P. Morgan and will rank (i) subordinate and junior in right of payment to all other liabilities of J.P. Morgan, (ii) pari passu with the most senior preferred stock outstanding as of the date hereof of J.P. Morgan and (iii) senior to J.P. Morgan's common stock. ARTICLE IV This Related Note Guarantee shall terminate and be of no further force and effect as to any Related Note upon full payment of the Related Note Redemption Price with respect to such Related Note; provided, however, that this Related Note Guarantee shall continue to be effective or shall be reinstated, as the case may be, if at any time the Property Trustee must restore payment of any sums paid under such Related Note or under this Related Note Guarantee for any reason whatsoever. J.P. Morgan agrees to indemnify the Property Trustee and hold it harmless against any loss it may suffer in such circumstances. ARTICLE V SECTION 5.01. All guarantees and agreements contained in this Related Note Guarantee shall bind the successors, assigns, receivers, trustees and representatives of J.P. Morgan and shall inure to the benefit of the Property Trustee and its successors. J.P. Morgan shall not assign its obligations hereunder without the prior approval of the Property Trustee. SECTION 5.02. This Related Note Guarantee may be amended or waived only with the prior approval of the 6 6 Property Trustee; provided that no such amendment or waiver shall adversely affect the holders of the Preferred Securities without the consent of at least a majority in Principal Amount of all Preferred Securities of each affected series then outstanding, voting as a single class. SECTION 5.03. Any notice, request or other communication required or permitted to be given hereunder to J.P. Morgan shall be given in writing by mail or by facsimile transmission (followed by mail), addressed to J.P. Morgan, as follows: J.P. Morgan & Co. Incorporated 60 Wall Street New York, NY 10260-0060 Facsimile No.: (212) 648-5175 Attention: Assistant Secretary Any notice, request or other communication required or permitted to be given hereunder to the Property Trustee shall be given by J.P. Morgan in the same manner as set forth in Section 14.01 of the Declaration. SECTION 5.04. This Related Note Guarantee is solely for the benefit of the Property Trustee and is not separately transferable from the Related Notes. SECTION 5.05. Pursuant to the Declaration, under certain circumstances, holders of not less than a majority in Principal Amount of Preferred Securities of any series voting as a separate class shall have the right to direct the Property Trustee to enforce its rights under this Related Note Guarantee. SECTION 5.06. THIS RELATED NOTE GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, this Related Note Guarantee is executed as of the day and year first above written. J.P. MORGAN & CO. INCORPORATED, 7 7 By ------------------------------------- Name: Title: EX-4.D 10 NOTE AGREEMENT 1 EXHIBIT 4(d) [FORM OF] NOTE AGREEMENT (this "Note") made as of , 199[ ], between MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a trust company with full banking powers organized under the laws of the State of New York (the "Bank") and FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION, as Property Trustee (the "Property Trustee") of J.P. MORGAN INDEX FUNDING COMPANY I, a Delaware statutory business trust (the "Trust"). WHEREAS, the Trust has issued and sold certain of its common trust securities (the "Common Securities") and certain of its preferred trust securities (the "Preferred Securities") having an aggregate initial principal amount of [ ] and bearing interest at a rate of [ %] per annum, and with such rights, preferences, privileges, limitations and restrictions as are set forth in a declaration supplement dated , 199 (the "Declaration Supplement") to that certain Amended and Restated Declaration of Trust dated as of October 10, 1997 (as amended, the "Declaration") among the Sponsor, the Regular Trustees, the Property Trustee, the Delaware Trustee and the holders from time to time of securities of the Trust, providing for the issuance of such series of Preferred Securities and related Common Securities; and WHEREAS, the Trust desires to loan the proceeds of such issuance and sale of Preferred Securities and Common Securities (collectively, the "Related Securities") to the Bank on the terms and conditions set forth herein, which terms and conditions shall substantially mirror the Trust's obligations under the Related Securities. NOW, THEREFORE, in consideration of the loan of such proceeds, which the Bank hereby acknowledges to be adequate and sufficient, the Bank executes and delivers this Note for the benefit of the Property Trustee on behalf of the holders from time to time of the Related Securities. 1. General. (a) This Note is a duly authorized debt security of the Bank, designated as its [ ]% Note Due [ , ] (the "Stated Maturity") in an initial principal amount of $[ ]. 2 2 (b) THIS NOTE IS NOT A DEPOSIT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY. (c) This Note is non-transferable and shall be registered in the name of First Trust of New York, National Association, as Property Trustee, for the benefit of the holders from time to time of the Related Securities. The Property Trustee may (to the fullest extent permitted by applicable laws) be treated at all times, by all persons and for all purposes as the absolute owner of this Note regardless of any notice of ownership, theft or loss or of any writing thereon. 2. Payments and Paying Agencies. (a) The amount of principal payable at any time upon any redemption or at the Stated Maturity of this Note, as applicable, shall be the aggregate outstanding principal amount payable at the applicable time with respect to all Related Securities the proceeds of the sale of which were loaned to the Bank in consideration of this Note, determined in accordance with the Declaration Supplement relating thereto, attached hereto as Annex I. (b) Interest shall accrue on this Note at a rate of [ ]% per annum and shall be payable at the dates (each such date, an "Interest Payment Date") and times set forth in the Declaration Supplement attached hereto as Annex I, subject to the terms and conditions contained therein. (c) The Bank hereby promises to pay all amounts referred to in paragraphs (a) and (b) of this Section 2 when and as the corresponding amounts are due and payable by the Trust to the holders of Related Securities pursuant to the terms thereof. Principal of this Note will be payable against surrender of this Note, and interest will be payable at the office of the Paying Agent (as defined in the Declaration) located at 100 Wall Street, New York, New York 10005, Attention: Corporate Trust Administration. 3. Redemption. This Note matures on the Stated Maturity and will be subject to redemption prior to maturity as described below. The Trust shall have the right to put the principal amount of this Note for redemption prior to each [ ] of each year prior to the Stated Maturity in an aggregate principal amount sufficient to allow the Trust to pay to any or all of the holders of the Preferred Securities who have exercised their right to redeem the Preferred Securities and, if applicable, a pro rata portion of the 3 3 related Common Securities, an amount equal to the Early Redemption Value (as defined in the Prospectus Supplement described below) plus accrued and unpaid dividends on such Related Securities to but excluding the date of redemption. In addition, within 90 days following the occurrence and during the continuance of certain tax-related events (a "Tax Event") or events related to the Investment Company Act of 1940, as amended (an "Investment Company Event", and together with a Tax Event, a "Special Event"), the Bank shall have the right to redeem this Note in whole or in an amount sufficient to cause the discontinuance of such Special Event, in either case in cash, or, in the case of a Tax Event, to allow this Note to remain outstanding and to indemnify the Trust for any taxes payable by the Trust as a result of such Tax Event. In the event that the Bank shall redeem this Note in whole or in part, the Trust will redeem a principal amount of the Preferred Securities and the related Common Securities equal to the principal amount of this Note so redeemed. If a Tax Event shall have occurred and be continuing and J.P. Morgan & Co. Incorporated ("J.P. Morgan") shall have elected to direct the Bank to allow this Note to remain outstanding and provided that the Trust shall received indemnification by J.P. Morgan for all taxes payable by the Trust as a result of such Tax Event, then the Trust may allow the Preferred Securities and the related Common Securities to remain outstanding. Notwithstanding the foregoing, if there is available to the Trust the opportunity to eliminate, within such 90-day period, the Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure, that has no adverse effect on the Trust, J.P. Morgan, the Bank or the holders of the Preferred Securities, the Trust will pursue such measure in lieu of redemption; provided that the Bank shall have no right to redeem this Note while the Trust is pursuing any such ministerial action or reasonable measure unless the Special Event shall not have been so eliminated by the 85th day following the occurrence thereof, in which case J.P. Morgan shall be permitted to direct the Bank to provide, and the Bank shall be permitted to so provide, notice to the Trust of the redemption of this Note. The parties hereto agree that the terms Tax Event and Investment Company Event shall have the meanings assigned to such terms in the Prospectus Supplement dated [ ], 199[ ] (the "Prospectus Supplement") relating to the Preferred Securities and filed with the Securities and Exchange Commission (the "SEC") to the Prospectus dated [ ], 199[ ] and filed with the SEC (Registration Nos. 333-01121 and 333-01121-01) and that such definitions are hereby 4 4 incorporated herein by reference and made a part of this Note. In the event of a Market Disruption Event (as defined in the Prospectus Supplement and incorporated herein by reference), under certain circumstances, payment of the Redemption Value (as defined in the Prospectus Supplement) to the holder of the Preferred Securities could be delayed for an indefinite period, in which case no interest or dividends on the Preferred Securities will accrue or be payable thereon beyond the Stated Maturity. If such circumstances occur, the Stated Maturity of this Note would be similarly delayed and no interest will be payable on this Note beyond the Stated Maturity. 4. The indebtedness evidenced by this Note, including the principal and interest, is pari passu with all unsecured, unsubordinated creditors of the Bank. The holder of this Note by its acceptance hereof agrees to and shall be bound by the provisions of this paragraph 4. 5. Events of Default. The occurrence of any of the following events shall constitute an event of default (herein referred to as an "Event of Default") hereunder with respect to this Note: (a) default in the payment of any interest on this Note as and when the same shall become due and payable, which default continues for a period of 30 days; or (b) default in the due and punctual payment of the principal of this Note as and when the same shall become due and payable; or (c) default on the part of the Bank in the performance of any other of the covenants or agreements on its part in this Note or in the Fiscal and Paying Agency Agreement dated April 22, 1991, which default continues for a period of 90 days after the date on which written notice, by registered or certified mail, of such failure requiring the Bank to remedy the same shall have been received by the Bank from the Trust specifying such failure and requiring the same to be remedied and stating that such is a "notice of default" hereunder; or (d) decree or order of a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator or 5 5 receiver or liquidator in any insolvency proceedings, readjustment of debt, marshalling of assets and liabilities or similar proceedings of the Bank or of all or substantially all of its property, or for the winding-up or liquidation of its affairs, shall have been entered, and such decree or order shall have remained in force undischarged or unstayed for a period of 60 days; or (e) the Bank shall have consented to the appointment of a conservator or receiver or liquidator, in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of the Bank or of all or substantially all of its property; or (f) the Bank shall have filed a petition to take advantage of any applicable insolvency or reorganization statute or voluntarily generally suspended payment of its obligations. In case one or more of the Events of Default specified above shall have occurred and be continuing with respect to this Note, then and in each and every such case, unless all the principal of this Note is due and payable immediately, upon the declaration of the Trust the same shall become and shall be immediately due and payable, anything contained in this Note to the contrary notwithstanding. In case the Trust shall have proceeded to enforce any right as set forth herein and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trust, then and in every such case the Bank and the Trust shall be restored to their respective several positions and rights hereunder, and all rights, remedies and powers of the Bank and the Trust shall continue as though no such proceeding had been taken. The Trust shall be entitled to file such proof of claim, claim, petition or other document as may be necessary or advisable in order to have the claims of such holder allowed in any insolvency proceedings, receivership, conservatorship, reorganization, readjustment of debt, marshalling of assets and liabilities, liquidation, winding-up or other similar proceedings of the Bank as a whole or affecting its property. 6. Certain Covenants of the Bank. The Bank hereby agrees that, for so long as this Note shall remain outstanding: 6 6 (a) The Bank will maintain an office or agency in the Borough of Manhattan, The City of New York, where this Note may be presented for payment and notices and demands to or upon the Bank in respect of this Note may be served; and (b) The Bank will not merge or consolidate with or sell or convey all or substantially all of its assets as an entirety to any other corporation or association, unless (i) either (A) the Bank shall be the surviving corporation in the case of a merger or (B) the surviving, resulting or transferee corporation or association (the "successor corporation") shall expressly assume the due and punctual payment of the principal of and interest on this Note, according to its tenor and the due and punctual performance of all of the covenants and obligations of the Bank under this Note and (ii) the Bank or such successor corporation, as the case may be, shall not, immediately after such merger, consolidation, sale or conveyance, be in default in the performance of any covenants or obligations of the Bank under this Note. Upon any merger, consolidation, sale or conveyance as provided above, the successor corporation shall succeed to and be substituted for, and may exercise every right and power of and be subject to all the obligations of the Bank under this Note with the same effect as if the successor corporation had been named as the Bank herein and, in the case of any such sale or conveyance of assets, the Bank shall be released from its liability as obligor under this Note. 7. Replacement of Note. (a) In case this Note shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Bank shall execute and the office of the Paying Agent shall authenticate and deliver a new Note in exchange and substitution for the mutilated or defaced Note, or in lieu and in substitution for the apparently destroyed, lost or stolen Note. In every such case the Trust shall furnish to the Paying Agent such security or indemnity as may be required by them to indemnify and defend and to save each of them and any agent of the Paying Agent harmless and, in every case of destruction, loss or theft evidence to their satisfaction of the apparent destruction, loss or theft of such Note and of the ownership thereof. Upon the issuance of any substitute Note, Paying Agent may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. 7 7 8. Modifications and Amendments; Waiver. Modifications and amendments to these Terms and Conditions may be made without the consent of the holders of the Preferred Securities, to: (1) evidence succession of another corporation or association to the Bank and the assumption by such a party of the obligations of the Bank under this Note in the event in the event of a merger, consolidation or sale of assets in accordance with the terms hereof; (2) add further covenants, restrictions or conditions for the protection of holders of this Note; (3) reduce or increase the principal amount hereof solely with respect to the portion of this Note relating to the Common Securities of the Trust; or (4) cure ambiguities or correct this Note in case of defects or inconsistencies in the provisions hereof or supplement this Note with other provisions, so long as any such cure, correction or supplement does not adversely affect the interest of the holder of this Note in any material respect. The Bank and the Property Trustee may, with the consent of the holders of not less than a majority in principal amount of the outstanding Preferred Securities, enter into written modifications to this Note; provided, that no such amendment may, without the consent of the all holders of all Preferred Securities, (1) reduce the amount of Preferred Securities the holders of which must consent to any amendment, supplement or waiver of this Note, (2) extend the final maturity of this Note, or reduce the rate or extend the time of payment of interest hereon, or reduce the principal amount hereof (except as provided in the previous sentence), (3) alter the method of calculation of the amount paid at final maturity hereof or (4) make the principal hereof or interest hereon payable in any coin or currency other than that provided in this Note. Any modifications or amendments to these Terms and Conditions as provided in the clauses above will be conclusive and binding on the holder of this Note, whether or not its has given consent. No provision of this Note shall alter or impair the obligation of the Bank, which is absolute and unconditional, to pay the principal of and interest on this Note at the places, at the respective times, at the rate and in the coin or currency herein prescribed. 9. Non-business Days; Calculation of Interest. (a) In any case where the date of maturity of the principal of or payment of interest on this Note shall be, in the Borough of Manhattan, The City of New York, a Saturday, a Sunday, a legal holiday or a day on which banking institutions are authorized or obligated by law to close, then payment of principal or interest on this Note need not be made on such date at such place but may be made on the next succeeding day which, in the Borough of Manhattan, The 8 8 City of New York, is not a Saturday, a Sunday, a legal holiday or a day on which banking institutions are authorized or obligated by law to close, with the same force and effect as if made on the date of maturity of the principal of, or any applicable Interest Payment Date with respect to, this Note, and no interest shall accrue for the period after such date. (b) Interest shall be calculated on the basis of 360-day year of twelve 30-day months. 10. Governing Law. This Note shall be construed in accordance with and governed by the laws of the State of New York. 11. Descriptive Headings. The descriptive headings appearing in these Terms and Conditions are for the convenience of reference only and shall not alter, limit or define the provisions hereof. IN WITNESS WHEREOF, this Note Agreement is executed and delivered as of the date first above written. MORGAN GUARANTY TRUST COMPANY OF NEW YORK, by:______________________ Name: Title: FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION, as Property Trustee, by:______________________ Name: Title: EX-4.F 11 COMMODITY INDEX LICENSE AGREEMENT 1 EXHIBIT 4(f) J.P. MORGAN COMMODITY INDEX LICENSE AGREEMENT THIS AGREEMENT made of this [ ] day of [ ], 199[ ], by and between Morgan Guaranty Trust Company of New York ("Morgan") and J.P. Morgan Index Funding Company I (the "Trust"). Morgan and the Trust agree as follows: WHEREAS, Morgan generates commodity indices and commodity sub-indices relating to the commodities markets, such indices and sub-indices collectively known as the J.P. Morgan Commodity Index (such indices and all sub-indices relating thereto being collectively referred to herein as the "Index"); WHEREAS, the Trust may issue one or more series of "ComPS" preferred securities, the redemption value of which shall be, and the dividend rate on which may be, determined with reference to the Index (the "Securities"); NOW, THEREFORE, the parties hereto agree as follows: 1. LICENSE. Morgan hereby grants to the Trust, and the Trust hereby accepts,a non-exclusive, non-transferable license to use and refer to the Index in connection with the registration, listing, marketing and distribution of the Securities and all activities reasonably incidental thereto. Morgan represents that it has all such rights in, and licenses to, the Index as may be required in order to permit it to grant to the Trust the license granted hereby. 2. TERM. The term of this Agreement shall continue indefinitely. Either party may terminate this Agreement, for any reason whatsoever, upon providing to the other party at least 90 days' prior written notice. 3. CONFIDENTIALITY. Except for use of and reference to the Index in accordance with the terms and conditions herein, the Trust recognizes that the Index is the sole and exclusive property of Morgan and shall use utmost care in protecting the proprietary and confidential nature of the Index. 4. ALTERNATIVE DETERMINATION. In the event that Morgan shall fail to provide the Index to the Trust on a regular basis, Morgan shall provide the Trust or its authorized designee (which shall be a major accounting firm appointed by the Trust) with any and all information which may be necessary in order to allow the Trust or such designee to calculate the redemption value and/or dividend rate of any series of ComPS. 5. WARRANTY DISCLAIMER. Morgan makes no express or implied warranties relating to the Index or any alternative information, including but not limited to warranties of merchantability of fitness for a particular purpose, or as to any results to be obtained by the Trust, any holder of Securities or others from the use of the Index, such alternative information or information derived from the Index. 6. LIMITATION OF LIABILITY. Morgan does not guarantee the sequence, timeliness, accuracy or completeness of the Index or any alternative information. Morgan shall not be liable in any way to the Trust, to any of its clients, to any holder of Securities or to any person whosoever, for any delays, inaccuracies, errors in, or omissions of, the Index, any alternative information or any information contained therein or in the transmission thereof, or for any damages arising therefrom or occasioned thereby, whether or not resulting from negligence on Morgan's part. 7. INDEMNIFICATION. The Trust shall indemnify Morgan for any claim, liability, loss, injury, damage, cost or expense (including attorney's fees) incurred by Morgan to any third party arising from any use by the Trust of the Index, any alternative information or any information contained therein supplied pursuant to this Agreement. 8. TAXES. The Trust shall be liable for, and shall pay, any taxes, however designated, based upon the use of or reference to the Index or any alternative information by the Trust (but not including taxes on income earned by Morgan), including, but not limited to, any sales, use, or other tax that may be imposed by any governmental body. 9. GENERAL. a) If any term or provision of this Agreement should be declared invalid by a qualified legal counsel approved by both parties or by a court of competent jurisdiction, (i) the remaining terms and provisions of 2 this Agreement shall be unimpaired and (ii) the invalid term or provision shall be replaced by such valid term or provision as comes closest to the intention underlying the invalid term or provision. (b) This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes in all respects all prior proposals, negotiations, conversations, discussions and agreements between the parties concerning the subject matter hereof and no subsequent alterations, amendments, changes or additions hereto shall be binding and valid unless reduced to writing and signed by each party. (c) Neither this Agreement nor any rights or obligations under this Agreement shall be assigned or otherwise transferred by either party without the prior written consent of the other party. (d) This Agreement and any modification thereto shall be governed and construed under the laws of the State of New York. (e) Any notice to either party shall be deemed given when mailed by either party to the other party's address herein. Any notice to Morgan shall be deemed given when mailed by certified mail, return receipt requested, by the Trust to: Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, N.Y., 10260, Attention: Commodity Derivatives Desk. Any notice to the Trust shall be deemed given when mailed by certified mail, return receipt requested by Morgan to: J.P. Morgan Index Funding Company I, c/o J.P. Morgan & Co. Incorporated, 60 Wall Street, New York, NY 10260, Attention: Commodity Derivatives Desk. (f) In the event of a conflict between the provisions of any exhibit hereto and the provisions set forth in the body of this Agreement, the provisions of such exhibit shall govern. (g) No amendment, modification, termination or waiver of any provision of this Agreement, nor consent to any departure by either party therefrom, shall in any event be effective unless the same shall be in writing and signed by the other party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (h) Except to the extent contemplated by this Agreement, neither party shall furnish the name of the other party or any affiliate or subsidiary of the other party as a reference or utilize the name of the other party or any affiliate of the other party in any advertising or promotional materials without the prior written consent of the other party or the affiliate whose name is desired to be furnished or used. IN WITNESS WHEREOF, the parties hereto, through their duly authorized officers, have executed this Agreement. J.P. MORGAN INDEX FUNDING MORGAN GUARANTY TRUST COMPANY COMPANY I OF NEW YORK by [ ], as Regular Trustee, - ------------------------------------- ----------------------------------- By: By: Title: Title: Date: Date: by [ ], as Regular Trustee, - ------------------------------------- By: Title: Date: EX-5.A 12 CONSENT OF COUNSEL 1 EXHIBIT 5(a) [Letterhead of J.P. Morgan & Co. Incorporated] October 24, 1997 Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549 RE: J.P. Morgan & Co. Incorporated J.P. Morgan Index Funding Company I Registration Statement on Form S-3 Dear Sir or Madame: I am a Vice President and Assistant General Counsel of J.P. Morgan & Co. Incorporated, a Delaware corporation ("J.P. Morgan") and in such capacity am acting as counsel in connection with J.P. Morgan's and J.P. Morgan Index Funding Company I's (the "Trust") Registration Statement on Form S-3 (the "Registration Statement") being filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act") with respect to $650,000,000 aggregate amount of Commodity-Indexed Preferred Securities to be issued by the Trust (the "Preferred Securities") along with Guarantees to be issued in connection with Preferred Securities (the "Registration Statement"). Capitalized terms not defined herein have the meaning given to them in the Registration Statement. I have examined such documents and made such other investigations as I have deemed necessary or advisable for purposes of this opinion. Based thereon, I am of the opinion that: 1. J.P. Morgan is a corporation duly organized and validly existing under the laws of the State of Delaware. 2 2. The Guarantees of the Preferred Securities, when such Preferred Securities have been duly authorized, executed, authenticated and delivered against payment therefor, will be legally issued and will constitute binding obligations of J.P. Morgan in accordance with their terms. I hereby consent to the filing of their opinion as an exhibit to the Registration Statement. I also consent to the use of my name under the caption "Legal Opinions" in the Prospectus contained in the Registration Statement. Very truly yours, /s/ Gene A. Capello ----------------------------------- Name: Gene A. Capello Title: Vice President and Assistant General Counsel EX-5.B 13 CONSENT OF COUNSEL 1 EXHIBIT 5(b) [Letterhead of Morris, Nichols, Arsht & Tunnell] October 24, 1997 J.P. Morgan Index Funding Company I c/o J.P. Morgan & Co. Incorporated 60 Wall Street New York, New York 10260 Re: J.P. Morgan Index Funding Company I Ladies and Gentlemen: We have acted as special Delaware counsel to J.P. Morgan Index Funding Company I, a Delaware statutory business trust (the "Trust"), in connection with certain matters relating to the creation of the Trust and the proposed issuance of Preferred Securities of separate Series of Securities of the Trust to beneficial owners pursuant to and as described in Registration Statement (and the Prospectus forming a part thereof) on Form S-3 filed with the Securities and Exchange Commission on the date hereof (the "Registration Statement"). Capitalized terms used herein and not otherwise herein defined are used as defined in the Amended and Restated Declaration of Trust of the Trust in the form attached as an exhibit to the Registration Statement (the "Governing Instrument"). In rendering this opinion, we have examined copies of the following documents in the forms provided to us: the Certificate of Trust of the Trust as filed in the Office of the Secretary of State of the State of Delaware (the "State Office") on December 12, 1996 (the "Certificate"); the 2 2 Restated Certificate of Trust of the Trust as filed in the State Office on September 30, 1997; the Declaration of Trust of the Trust dated as of December 12, 1996 (the "Original Governing Instrument"); the Governing Instrument; the form of Preferred Guarantee to be made by J.P. Morgan & Co. Incorporated; the Registration Statement; and a certification of good standing of the Trust obtained as of a recent date from the State Office. In such examinations, we have assumed the genuineness of all signatures, the conformity to original documents of all documents submitted to us as drafts or copies or forms of documents to be executed and the legal capacity of natural persons to complete the execution of documents. We have further assumed for purposes of this opinion: (i) the due formation or organization, valid existence and good standing of each entity (other than the Trust) that is a party to any of the documents reviewed by us under the laws of the jurisdiction of its respective formation or organization; (ii) the due authorization, execution and delivery by, or on behalf of, each of the parties thereto of the above-referenced documents (including, without limitation, the due authorization, execution and delivery of the Governing Instrument prior to the first issuance of Preferred Securities of any Series of Securities of the Trust); (iii) that J.P. Morgan & Co. Incorporated, as Sponsor, and each applicable Trustee, will duly authorize, execute and deliver a declaration supplement for each Series of Securities of the Trust in the form of the Declaration Supplement attached as an exhibit to the Governing Instrument and all other documents contemplated thereby or by the Registration Statement or the Governing Instrument to be executed in connection with the creation of each such Series of Securities and the issuance by the Trust of Preferred Securities of such Series of Securities, in each case prior to the first issuance of such Preferred Securities; (iv) that the Preferred Securities of each Series of Securities of the Trust will be offered and sold pursuant to the Registration Statement and a prospectus supplement that will be consistent with (a) the terms of the applicable Declaration Supplement relating to each such Series of Securities, and (b) accurately describe, the terms of the Governing Instrument and the Preferred Guarantee and all other relevant documents; (v) that no event has occurred or will occur subsequent to the filing of the Certificate that would cause a dissolution or liquidation of the Trust under the Original Governing Instrument or the Governing Instrument (or, as applicable, any applicable Declaration Supplement); (vi) that the activities of the Trust have been 3 3 and will be conducted in accordance with the Original Governing Instrument or the Governing Instrument (and any applicable Declaration Supplement), as applicable, and the Delaware Business Trust Act, 12 Del. C. Sections 3801 et seq. (the "Delaware Act"); (vii) that each Holder of Preferred Securities of any Series of Securities of the Trust will make payment of the required consideration therefor and receive a Preferred Securities Certificate in consideration thereof in accordance with the terms and conditions of the Registration Statement and the Prospectus forming a part thereof, the Governing Instrument and the applicable prospectus supplement and Declaration Supplement, and that the Preferred Securities of each Series of Securities are otherwise issued and sold to the Preferred Securities Holders of such Series of Securities in accordance with the terms, conditions, requirements and procedures set forth in the Registration Statement and the Prospectus forming a part thereof, the Governing Instrument and the applicable prospectus supplement and Declaration Supplement; and (viii) that the documents examined by us, or contemplated hereby, express the entire understanding of the parties thereto with respect to the subject matter thereof and have not been, and, prior to the issuance of Preferred Securities of any Series of Securities of the Trust, will not be, modified, supplemented or otherwise amended, except as herein referenced. No opinion is expressed with respect to the requirements of, or compliance with, federal or state securities or blue sky laws. Further, we express no opinion with respect to the Registration Statement or any other offering materials relating to the Preferred Securities of any Series of Securities and we assume no responsibility for their contents. As to any fact material to our opinion, other than those assumed, we have relied without independent investigation on the above-referenced documents and on the accuracy, as of the date hereof, of the matters therein contained. Based on and subject to the foregoing, and limited in all respects to matters of Delaware law, it is our opinion that: 1. The Trust is a duly created and validly existing business trust in good standing under the laws of the State of Delaware. 2. Upon issuance, the Preferred Securities of any Series of Securities of the Trust will constitute validly-issued and, subject to 4 4 the terms of the Governing Instrument and the applicable Declaration Supplement, fully-paid and non-assessable beneficial interests in the assets of the Trust consisting of the related Note of Morgan Guaranty associated with the Preferred Securities of the applicable Series of Securities. We note that, pursuant to Section 11.04 of the Governing Instrument, the Trust may withhold amounts otherwise distributable to a Holder and pay over such amounts to the applicable jurisdictions in accordance with federal, state and local law and any amount withheld will be deemed to have been distributed to such Holder and that, pursuant to the Governing Instrument (and, as applicable, the applicable Declaration Supplement), Preferred Security Holders may be obligated to make payments or provide indemnity or security under the circumstances set forth therein. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the heading "Legal Matters" in the Prospectus forming a part thereof. In giving this consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. This opinion speaks only as of the date hereof and is based on our understandings and assumptions as to present facts, and on our review of the above-referenced documents and the application of Delaware law as the same exist as of the date hereof, and we undertake no obligation to update or supplement this opinion after the date hereof for the benefit of any person or entity with respect to any facts or circumstances that may hereafter come to our attention or any changes in facts or law that may hereafter occur or take effect. This opinion is intended solely for the benefit of the addressee hereof in connection with the matters contemplated hereby and may not be relied on by any other person or entity or for any other purpose without our prior written consent. Very truly yours, MORRIS, NICHOLS, ARSHT & TUNNELL /s/ MORRIS, NICHOLS, ARSCHT & TUNNELL EX-5.C 14 COUNSEL OF COUNSEL 1 EXHIBIT 5(c) [LETTERHEAD OF CRAVATH, SWAINE & MOORE] October 24, 1997 J.P. Morgan & Co. Incorporated J.P. Morgan Index Funding Company I Commodity-Indexed Preferred Securities Dear Sirs: We have acted as special Federal tax counsel to J.P. Morgan & Co. Incorporated, a Delaware corporation, and J.P. Morgan Index Funding Company I, a Delaware trust (collectively, the "Registrants"), in connection with the filing by the Registrants with the Securities and Exchange Commission of a Registration Statement on Form S-3 (the "Registration Statement") registering Guarantees of J.P. Morgan & Co. Incorporated and Preferred Securities of J.P. Morgan Index Funding Company I (the "Securities"). We hereby confirm that the statements set forth in the form of prospectus supplement (the "Prospectus Supplement") forming a part of the Registration Statement under the heading "United States Federal Income Taxation", accurately describe the material Federal income tax consequences to holders of the Preferred Securities issued pursuant to the Prospectus Supplement. We know that we are referred to under the headings "United States Federal Income Taxation" in the Prospectus Supplement forming a part of the Registration Statement, and we hereby consent to such use of our name therein and to the use of this opinion for filing with the Registration Statement as Exhibits 5(c) and 23(d) thereto. Very truly yours, /s/ Cravath, Swaine & Moore J.P. Morgan & Co. Incorporated 60 Wall Street New York, NY 10260-0260 2 J.P. Morgan Index Funding Company I c/o J.P. Morgan & Co. Incorporated 60 Wall Street New York, NY 10260-0260 120A 0 EX-23.A 15 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23(a) [Letterhead of Price Waterhouse] CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus Supplement constituting part of the Registration Statement on Form S-3 of J.P. Morgan & Co. Incorporated of our report dated January 8, 1997, which appears on page 34 of J.P. Morgan & Co. Incorporated's 1996 Annual Report on Form 10-K for the year ended December 31, 1996 (included in J.P. Morgan & Co. Incorporated's Annual Report to Stockholders). We also consent to the reference to us under the heading "Experts" in such Prospectus Supplement. /s/ Price Waterhouse LLP Price Waterhouse LLP New York, New York October 24, 1997 EX-24 16 POWER OF ATTORNEY 1 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ Hanna H. Gray - --------------------------- 2 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ James R. Houghton - --------------------------- 3 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ James L. Ketelsen - --------------------------- 4 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ John A. Krol - --------------------------- 5 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ Douglas A. Warner - --------------------------- 6 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ Paul A. Allaire - --------------------------- 7 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ Riley P. Bechtel - --------------------------- 8 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ Martin Feldstein - --------------------------- 9 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ Ellen V. Futter - --------------------------- 10 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ Roberto G. Mendoza - --------------------------- 11 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ Michael E. Patterson - --------------------------- 12 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ Lee R. Raymond - --------------------------- 13 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ Richard D. Simmons - --------------------------- 14 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ Kurt F. Viermetz - --------------------------- 15 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ Dennis Weatherstone - --------------------------- 16 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ Douglas C. Yearley - --------------------------- 17 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ John A. Mayer, Jr. - --------------------------- 18 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Douglas A. Warner III, Roberto G. Mendoza, Kurt F. Viermetz, Michael E. Patterson, Rachel F. Robbins, James C. P. Berry and Gene A. Capello and each of them, with full power to act without the others, as the undersigned's true and lawful attorney-in-fact and agent, with full and several power of substitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign any and all Registration Statements under the Securities Act of 1933 as amended, for the purpose of registering the offering of (i) securities of J.P. Morgan & Co. Incorporated in connection with any public offering of such securities or (ii) securities under, and interests in, any plan established by J.P. Morgan & Co. Incorporated or Morgan Guaranty Trust Company of New York for the benefit of their employees or employees of affiliated companies; to sign any and all amendments (including post-effective amendments) to such Registration Statements; and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 20th day of October, 1997. /s/ David H. Sidwell - --------------------------- EX-25 17 FORM T-1 1 EXHIBIT 25 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) _________ FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) 13-3781471 (I.R.S. Employer Identification No.) 100 Wall Street, New York, NY 10005 (Address of principal executive offices) (Zip Code) FOR INFORMATION, CONTACT: Dennis Calabrese, President First Trust of New York, National Association 100 Wall Street, 16th Floor New York, NY 10005 Telephone: (212) 361-2506 J.P. MORGAN & CO. INCORPORATED (Exact name of obligor as specified in its charter) Delaware 13-2625764 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) J.P. MORGAN INDEX FUNDING COMPANY I (Exact name of obligor as specified in its charter) Delaware 13-3964134 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 60 Wall Street New York, New York 10260-0060 (Address of principal executive offices) (Zip Code) PREFERRED SECURITIES, GUARANTEES 2 Item 1. GENERAL INFORMATION. Furnish the following information as to the trustee - - (a) Name and address of each examining or supervising authority to which it is subject. Name Address ---- ------- Comptroller of the Currency Washington, D. C. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. AFFILIATIONS WITH THE OBLIGOR. If the obligor is an affiliate of the trustee, describe each such affiliation. None. Item 16. LIST OF EXHIBITS. Exhibit 1. Articles of Association of First Trust of New York, National Association, incorporated herein by reference to Exhibit 1 of Form T-1, Registration No. 33-83774. Exhibit 2. Certificate of Authority to Commence Business for First Trust of New York, National Association, incorporated herein by reference to Exhibit 2 of Form T-1, Registration No. 33-83774. Exhibit 3. Authorization of the Trustee to exercise corporate trust powers for First Trust of New York, National Association, incorporated herein by reference to Exhibit 3 of Form T-1, Registration No. 33-83774. Exhibit 4. By-Laws of First Trust of New York, National Association. Exhibit 5. Not applicable. Exhibit 6. Consent of First Trust of New York, National Association, required by Section 321(b) of the Act, incorporated herein by reference to Exhibit 6 of Form T-1, Registration No. 33-83774. Exhibit 7. Report of Condition of First Trust of New York, National Association, as of the close of business on June 30, 1997, published pursuant to law or the requirements of its supervising or examining authority. 3 Exhibit 8. Not applicable. Exhibit 9. Not applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, First Trust of New York, National Association, a national banking association organized and existing under the laws of the United States, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 20th day of October, 1997. FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION By: ------------------------------ Catherine F. Donohue Vice President 4 Exhibit 4 to Exhibit 25 FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION BYLAWS ARTICLE I Meetings of Shareholders Section 1.1. Annual Meeting. The annual meeting of the shareholders, for the election of directors and the transaction of other business, shall be held at a time and place as the Chairman or President may designate. Notice of such meeting shall be given at least ten days prior to the date thereof, to each shareholder of the Association. If, for any reason, an election of directors is not made on the designated day, the election shall be held on some subsequent day, as soon thereafter as practicable, with prior notice thereof. Section 1.2. Special Meetings. Except as otherwise specially provided by law, special meetings of the shareholders may be called for any purpose, at any time by a majority of the board of directors, or by any shareholder or group of shareholders owning at least ten percent of the outstanding stock. Every such special meeting, unless otherwise provided by law, shall be called upon not less than ten days prior notice stating the purpose of the meeting. Section 1.3. Nominations for Directors. Nominations for election to the board of directors may be made by the board of directors or by any shareholder. Section 1.4. Proxies. Shareholders may vote at any meeting of the shareholders by proxies duly authorized in writing. Proxies shall be valid only for one meeting and any adjournments of such meeting and shall be filed with the records of the meeting. Section 1.5. Quorum. A majority of the outstanding capital stock, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, unless otherwise provided by law. A majority of the votes cast shall decide every question or matter submitted to the shareholders at any meeting, unless otherwise provided by law or by the Articles of Association. -1- 5 ARTICLE II Directors Section 2.1. Board of Directors. The board of directors (hereinafter referred to as the "board"), shall have power to manage and administer the business and affairs of the Association. All authorized corporate powers of the Association shall be vested in and may be exercised by the board. Section 2.2. Powers. In addition to the foregoing, the board of directors shall have and may exercise all of the powers granted to or conferred upon it by the Articles of Association, the Bylaws and by law. Section 2.3. Number. The board shall consist of a number of members to be fixed and determined from time to time by resolution of the board or the shareholders at any meeting thereof, in accordance with the Articles of Association. Section 2.4. Organization Meeting. The newly elected board shall meet for the purpose of organizing the new board and electing and appointing such officers of the Association as may be appropriate. Such meeting shall be held on the day of the election or as soon thereafter as practicable, and, in any event, within thirty days thereafter. If, at the time fixed for such meeting, there shall not be a quorum present, the directors present may adjourn the meeting until a quorum is obtained. Section 2.5. Regular Meetings. The regular meetings of the board shall be held, without notice, as the Chairman or President may designate and deem suitable. Section 2.6. Special Meetings. Special meetings of the board may be called by the Chairman or the President of the Association, or at the request of two or more directors. Each member of the board shall be given notice stating the time and place of each such meeting. Section 2.7. Quorum. A majority of the directors shall constitute a quorum at any meeting, except when otherwise provided by law; but fewer may adjourn any meeting. Unless otherwise provided, once a quorum is established, any act by a majority of those constituting the quorum shall be the act of the board. Section 2.8. Vacancies. When any vacancy occurs among the directors, the remaining members of the board may appoint a director to fill such vacancy at any regular meeting of the board, or at a special meeting called for that purpose. -2- 6 ARTICLE III Committees Section 3.1. Advisory Board of Directors. The board may appoint persons, who need not be directors, to serve as advisory directors on an advisory board of directors established with respect to the business affairs of either this Association alone or the business affairs of a group of affiliated organizations of which this Association is one. Advisory directors, shall have such powers and duties as may be determined by the board, provided, that the board's responsibility for the business and affairs of this Association shall in no respect be delegated or diminished. Section 3.2. Audit Committee. The board shall appoint an Audit Committee which shall consist of at least two Directors of the Association or of an affiliate of the Association. If legally permissible, the Board may determine to name itself as the Audit Committee. The Audit Committee shall direct and review audits of the Association's fiduciary activities. The members of the Audit Committee shall be appointed each year and shall continue to act until their successors are named. The Audit Committee shall have power to adopt its own rules and procedures and to do those things which in the judgment of such Committee are necessary or helpful with respect to the exercise of its functions or the satisfaction of its responsibilities. Section 3.3. Executive Committee. The board may appoint an Executive Committee which shall consist of at least three directors and which shall have, and may exercise, all the powers of the board between meetings of the board or otherwise when the board is not meeting. Section 3.4. Other Committees. The board may appoint, from time to time, committees of one or more persons who need not be directors, for such purposes and with such powers as the board may determine. In addition, either the Chairman or the President may appoint, from time to time, committees of one or more officers, employees, agents or other persons, for such purposes and with such powers as either the Chairman or the President deems appropriate and proper. Whether appointed by the board, the Chairman, or the President, any such Committee shall at all times be subject to the direction and control of the board. Section 3.5. Meetings. Minutes and Rules. An advisory board of directors and/or committee shall meet as necessary in consideration of the purpose of the advisory board of directors or committee, and shall maintain minutes in sufficient detail to indicate actions taken or recommendations made; unless required by the members, discussions, -3- 7 votes or other specific details need not be reported. An advisory board of directors or a committee may, in consideration of its purpose, adopt its own rules for the exercise of any of its functions or authority. ARTICLE IV Officers and Employees Section 4.1. Chairman of the Board. The board may appoint one of its members to be Chairman of the board to serve at the pleasure of the board. The Chairman shall supervise the carrying out of the policies adopted or approved by the board; shall have general executive powers, as well as the specific powers conferred by these Bylaws; shall also have and may exercise such powers and duties as from time to time may be conferred upon or assigned by the board. Section 4.2. President. The board may appoint one of its members to be President of the Association. In the absence of the Chairman, the President shall preside at any meeting of the board . The President shall have general executive powers, and shall have and may exercise any and all other powers and duties pertaining by law, regulation or practice, to the Office of President, or imposed by these Bylaws. The President shall also have and may exercise such powers and duties as from time to time may be conferred or assigned by the Board. Section 4.3. Vice President. The board may appoint one or more Vice Presidents who shall have such powers and duties as may be assigned by the board and to perform the duties of the President on those occasions when the President is absent, including presiding at any meeting of the board in the absence of both the Chairman and President. Section 4.4. Secretary. The board shall appoint a Secretary, or other designated officer who shall be Secretary of the board and of the Association, and shall keep accurate minutes of all meetings. The Secretary shall attend to the giving of all notices required by these Bylaws to be given; shall be custodian of the corporate seal, records, document and papers of the Association; shall provide for the keeping of proper records of all transactions of the Association; shall have and may exercise any and all other powers and duties pertaining by law, regulation or practice, to the Secretary, or imposed by these Bylaws; and shall also perform such other duties as may be assigned from time to time, by the Board . Section 4.5. Other Officers. The board may appoint, and may authorize the Chairman or the President to appoint, any officer as from time to time may appear to the board, the Chairman or the President to be required or desirable to transact the business of the Association. Such officers shall exercise such powers and perform such duties as pertain to their several offices, or as may be conferred upon or assigned to them by these Bylaws, the board, the Chairman or the President. -4- 8 Section 4.6. Tenure of Office. The Chairman or the President and all other officers shall hold office for the current year for which the board was elected, unless they shall resign, become disqualified, or be removed. Any vacancy occurring in the Office of Chairman or President shall be filled promptly by the board. Any officer elected by the board or appointed by the Chairman or the President may be removed at any time, with or without cause, by the affirmative vote of a majority of the board or, if such officer was appointed by the Chairman or the President, by the Chairman or the President, respectively. ARTICLE V Stock Section 5.1. Shares of stock shall be transferable on the books of the Association, and a transfer book shall be kept in which all transfers of stock shall be recorded. Every person becoming a shareholder by such transfer shall, in proportion to such person's shares, succeed to all rights of the prior holder of such shares. Each certificate of stock shall recite on its face that the stock represented thereby is transferable only upon the books of the Association properly endorsed. ARTICLE VI Corporate Seal Section 6.1. The Chairman, the President, the Secretary, any Assistant Secretary or other officer designated by the board, the Chairman, or the President, shall have authority to affix the corporate seal to any document requiring such seal, and to attest the same. Such seal shall be substantially in the following form: ARTICLE VII Miscellaneous Provisions Section 7.1. Execution of Instruments. All agreements, checks, drafts, orders, indentures, notes, mortgages, deeds, conveyances, transfers, endorsements, assignments, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, guarantees, proxies and other instruments or documents may be signed, countersigned, executed, acknowledged, endorsed, verified, delivered or accepted on behalf of the Association, whether in a fiduciary capacity or otherwise, by any officer of the Association, or such employee or agent as may be designated from time to time by the board by resolution, or by the Chairman or the President by written instrument, which resolution or instrument shall be certified as in effect by the Secretary or an Assistant Secretary of the -5- 9 Association. The provisions of this section are supplementary to any other provision of the Articles of Association or Bylaws. Section 7.2. Records. The Articles of Association, the Bylaws and the proceedings of all meetings of the shareholders, the board, and standing committees of the board, shall be recorded in appropriate minute books provided for the purpose. The minutes or each meeting shall be signed by the Secretary, or other officer appointed to act as Secretary of the meeting. Section 7.3. Trust Files. There shall be maintained in the Association files all fiduciary records necessary to assure that its fiduciary responsibilities have been properly undertaken and discharged. Section 7.4. Trust Investments. Funds held in a fiduciary capacity shall be invested according to the instrument establishing the fiduciary relationship and according to law. Where such instrument does not specify the character and class of investments to be made and does not vest in the Association a discretion in the matter, funds held pursuant to such instrument shall be invested in investments in which corporate fiduciaries may invest under law. Section 7.5. Notice. Whenever notice is required by the Articles of Association, the Bylaws or law, such notice shall be by mail, postage prepaid, telegram, in person, or by any other means by which such notice can reasonably be expected to be received, using the address of the person to receive such notice, or such other personal data, as may appear on the records of the Association. Prior notice shall be proper if given not more than 30 days nor less than 10 days prior to the event for which notice is given. ARTICLE VIII Indemnification Section 8.1. The association shall indemnify to the full extent permitted by, and in the manner permissible under, the Articles of Association and the laws of the United States of America, as applicable and as amended from time to time, any person made, or threatened to be made, a party to any action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person is or was a director, advisory director, officer or employee of the Association, or any predecessor of the Association, or served any other enterprise as a director or officer at the request of the Association or any predecessor of the Association. Section 8.2. The board in its discretion may, on behalf of the Association, indemnify any person, other than a director, advisory director, officer or employee, made a party to any action, suit or proceeding by reason of the fact that such person is or was an agent of the Association or any predecessor of the Association serving in such capacity at the request of the Association or any predecessor of the Association. -6- 10 ARTICLE IX Bylaws: Interpretation and Amendment Section 9.1. These Bylaws shall be interpreted in accordance with and subject to appropriate provisions of law, and may be amended, altered or repealed, at any regular or special meeting of the board. Section 9.2. A copy of the Bylaws, with all amendments, shall at all times be kept in a convenient place at the main office of the Association, and shall be open for inspection to all shareholders during Association hours. I, Catherine F. Donohue, hereby certify that: (i) I am a duly constituted Assistant Secretary of FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION (the "Association") and (ii) the foregoing bylaws are the bylaws of the Association, and all of them are now lawfully in force and effect. I have hereunto affixed my official signature and the seal of the Association, in the City of New York, on the 20th day of October, 1997. By: /S/ Catherine F. Donohue --------------------------- Name: Catherine F. Donohue Title: Assistant Secretary -7- 11 ARTICLE IX Bylaws: Interpretation and Amendment Section 9.1. These Bylaws shall be interpreted in accordance with and subject to appropriate provisions of law, and may be amended, altered or repealed, at any regular or special meeting of the board. Section 9.2. A copy of the Bylaws, with all amendments, shall at all times be kept in a convenient place at the main office of the Association, and shall be open for inspection to all shareholders during Association hours. I, Catherine F. Donohue, hereby certify that: (i) I am a duly constituted Assistant Secretary of FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION (the "Association") and (ii) the foregoing bylaws are the bylaws of the Association, and all of them are now lawfully in force and effect. I have hereunto affixed my official signature and the seal of the Association, in the City of New York, on the 20th day of October, 1997. By: /s/ Chtherine F. Donohue ------------------------- Name: Catherine F. Donohue Title: Assistant Secretary -8- 12 Exhibit 7 to Exhibit 25 FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION STATEMENT OF FINANCIAL CONDITION AS OF 6/30/97 ($000'S)
6/30/97 ASSETS Cash and Due From Depository Institutions $ 35,121 Federal Reserve Stock 3,490 Fixed Assets 802 Intangible Assets 77,269 Other Assets 5,921 TOTAL ASSETS $ 122,603 LIABILITIES Other Liabilities 7,037 TOTAL LIABILITIES 703 EQUITY Common and Preferred Stock 1,000 Surplus 120,932 Undivided Profits (6,367) TOTAL EQUITY CAPITAL 115,565 TOTAL LIABILITIES AND EQUITY CAPITAL $ 122,603
To the best of the undersigned's determination, as of this date the above financial information is true and correct. First Trust of New York, National Association By: /S/ Catherine F. Donohue --------------------------------- Vice President Date: October 20, 1997 -----END PRIVACY-ENHANCED MESSAGE-----