-----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, UaciS87K2TJNQdDoPKTKWMAdNTme/GRc/obJFpfrh8OE4LBMfzE2S15KOMxmXf2F f4TJcg5i3+K4eS7rbl0axA== 0000950130-99-006073.txt : 19991029 0000950130-99-006073.hdr.sgml : 19991029 ACCESSION NUMBER: 0000950130-99-006073 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19991028 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH PIERCE FENNER & SMITH INC CENTRAL INDEX KEY: 0000728612 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-89355 FILM NUMBER: 99736589 BUSINESS ADDRESS: STREET 1: NORTH TOWER WORLD FINANCIAL CENTER STREET 2: NORTH TOWER WORLD FINANCIAL CENTER 5TH F CITY: NEW YORK STATE: NY ZIP: 10281-1323 BUSINESS PHONE: 2124496202 MAIL ADDRESS: STREET 1: WORLD FINANCIAL CENTER STREET 2: NORTH TOWER 23RD FL CITY: NEW YORK STATE: NY ZIP: 10281-1323 S-1/A 1 AMENDMENT NO.1 TO FORM S-1 As filed with the Securities and Exchange Commission on October 28, 1999 Registration No. 333-89355 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- AMENDMENT No. 1 TO FORM S-1 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ---------------- Merrill Lynch, Pierce, Fenner & Smith Incorporated Initial Depositor (Exact name of registrant as specified in charter) ---------------- Biotech HOLDRs(SM) Trust yet-to-be formed [Issuer with respect to the receipts] Delaware 6211 13-5674085 (Primary Standard (I.R.S. Employer (State or other Industrial Identification Number) jurisdiction Classification Code of incorporation or Number) organization) ---------------- 250 Vesey Street New York, New York 10281 (212) 449-1000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Andrea L. Dulberg, Esq. Copies to: Corporate Secretary Andrew B. Janszky Merrill Lynch, Pierce, Fenner & Smith Shearman & Sterling Incorporated 599 Lexington Avenue 250 Vesey Street New York, New York 10022 New York, New York 10281 (212) 848-4000 (212) 449-1000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434 under the Securities Act, please check the following box. [_] CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------
Title of Each Class of Proposed Maximum Proposed Maximum Securities to Be Amount to Be Offering Price Aggregate Offering Amount of Registered Registered Per Receipt(1) Price(1) Registration Fee(2)(3) - ------------------------------------------------------------------------------------------------- Biotech HOLDRs.......... 1,000,000,000 $100 $299,800,000 $83,345 receipts - ------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457 under the Securities Act. 2,000,000 receipts are estimated to be offered in the initial offering at $100 per receipt and 998,000,000 receipts are estimated to be offered continuously after the initial offering at $0.10 per receipt. (2) This Registration Statement also registers, where required, an indeterminate amount of securities to be sold by Merrill Lynch, Pierce, Fenner & Smith Incorporated in market-making transactions. (3) Merrill Lynch, Pierce, Fenner & Smith Incorporated previously paid on October 20, 1999, $2,780 of this registration fee for 100,000 shares based on a proposed maximum offering price of $100 per receipt. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The Information in this prospectus is not complete and may be changed. We + +have filed a registration statement relating to these receipts with the + +Securities and Exchange Commission. We cannot sell these receipts until the + +registration statement becomes effective. This prospectus is not an offer to + +sell these receipts and we are not soliciting offers to buy these receipts in + +any state where such offer or sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED OCTOBER 28, 1999 PROSPECTUS [LOGO] BIOTECH HOLDRS(SM) 1,000,000,000 Depositary Receipts Biotech HOLDRsSM Trust The Biotech HOLDRs(SM) Trust will issue Depositary Receipts called Biotech HOLDRs(SM) representing your undivided beneficial ownership in the common stock of a group of 20 specified companies that are involved in various segments of the biotechnology industry. The Bank of New York will be the trustee. You only may acquire, hold or transfer Biotech HOLDRs in a round-lot amount of 100 Biotech HOLDRs or round-lot multiples. Biotech HOLDRs are separate from the underlying deposited common stocks that are represented by the Biotech HOLDRs. For a list of the names and the number of shares of the companies that make up a Biotech HOLDRs, see "Highlights of Biotech HOLDRs--The Biotech HOLDRs" starting on page 8. The trust will issue the additional Biotech HOLDRs on a continuous basis after the initial distribution. Investing in Biotech HOLDRs involves significant risks. See "Risk factors" starting on page 4. The initial public offering price for a round-lot of 100 Biotech HOLDRs will equal the sum of the closing market price on the pricing date for each deposited share multiplied by the share amount specified in this prospectus, plus an underwriting fee. Biotech HOLDRs are neither interests in nor obligations of either the initial depositor, Merrill Lynch, Pierce, Fenner & Smith Incorporated, or The Bank of New York, as trustee. Prior to this issuance, there has been no public market for Biotech HOLDRs. Application has been made to list the Biotech HOLDRs on the American Stock Exchange under the symbol "BBH", subject to official notice of issuance. ----------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Initial Price to Underwriting Public* Fee -------- ------------ Per Biotech HOLDR................................. 2%
----- * Includes underwriting fee. For purchases of Biotech HOLDRs in excess of Biotech HOLDRs, the underwriting fee will be %. ----------- Merrill Lynch & Co. ----------- The date of this prospectus is , 1999. "HOLDRs" and "HOLding Company Depositary Receipts" are service marks of Merrill Lynch & Co., Inc. TABLE OF CONTENTS
Page ---- Summary.................................................................... 3 Risk factors............................................................... 4 Highlights of Biotech HOLDRs............................................... 8 The trust.................................................................. 14 Description of Biotech HOLDRs.............................................. 14 Description of the underlying securities................................... 15 Description of the depositary trust agreement.............................. 17 Federal income tax consequences............................................ 20 ERISA considerations....................................................... 21 Plan of distribution....................................................... 21 Year 2000.................................................................. 22 Legal matters.............................................................. 23 Where you can find more information........................................ 23
---------------- This prospectus contains information you should consider when making your investment decision. With respect to information about Biotech HOLDRs, you should rely only on the information contained in this prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell Biotech HOLDRs in any jurisdiction where the offer or sale is not permitted. 2 SUMMARY The Biotech HOLDRs trust will be formed under the depositary trust agreement, dated as of November , 1999 among The Bank of New York, as trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the owners of the Biotech HOLDRs. The trust is not a registered investment company under the Investment Company Act of 1940. The trust will hold shares of common stock issued by 20 specified companies generally considered to be involved in various segments of the biotechnology industry. The number of shares of each common stock held by the trust with respect to each round-lot of Biotech HOLDRs is specified under "Highlights of Biotech HOLDRs--The Biotech HOLDRs." This group of common stocks is referred to as the underlying securities. Except when a reconstitution event occurs, the underlying securities will not change. Under no circumstances will a new company be added to the group of issuers of underlying securities. The trust will issue Biotech HOLDRs that represent your undivided beneficial ownership interest in the shares of common stock held by the trust on your behalf. The Biotech HOLDRs are separate from the underlying common stocks that are represented by the Biotech HOLDRs. 3 RISK FACTORS An investment in Biotech HOLDRs involves risks similar to investing in each of the underlying securities outside of the Biotech HOLDRs, including the risks associated with concentrated investments in the biotechnology industry. General Risk Factors . Loss of investment. Because the value of Biotech HOLDRs directly relates to the value of the underlying securities, you may lose all or a substantial portion of your investment in the Biotech HOLDRs if the underlying securities decline in value. . Discount trading price. Biotech HOLDRs may trade at a discount to the aggregate value of the underlying securities. . Not necessarily representative of the biotechnology industry. While the underlying securities are common stocks of companies generally considered to be involved in various segments of the biotechnology industry, the underlying securities and the Biotech HOLDRs may not necessarily follow the price movements of the entire biotechnology industry generally. If the underlying securities decline in value, your investment in the Biotech HOLDRs will decline in value even if common stock prices in the biotechnology industry generally increase in value. Furthermore, after the initial deposit, one or more of the issuers of the underlying securities may no longer be involved in the biotechnology industry. In this case, the Biotech HOLDRs may no longer consist of securities issued only by companies involved in the biotechnology industry. . No investigation of underlying securities. The underlying securities included in the Biotech HOLDRs were selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated based on the market capitalization of issuers and the market liquidity of common stocks in the biotechnology industry, without regard for the value, price performance, volatility or investment merit of the underlying securities. The Biotech HOLDRs trust, the trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and their affiliates, have not performed any investigation or review of the selected companies, including the public filings by the companies. Investors and market participants should not conclude that the inclusion of a company is any form of investment recommendation by the trust, the trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, or their affiliates. . Loss of diversification. As a result of business developments, reorganizations, or market fluctuations affecting issuers of the underlying securities, Biotech HOLDRs may not necessarily continue to be a diversified investment in the biotechnology industry. As a result of market fluctuation and/or reconstitution events, Biotech HOLDRs may represent a concentrated investment in one or more of the underlying securities which would reduce investment diversification and increase your exposure to the risks of concentrated investments. . Conflicting investment choices. In order to sell one or more of the underlying securities individually or to participate in a tender offer relating to one or more of the underlying securities, you will be required to cancel your Biotech HOLDRs and receive delivery of each of the underlying securities. The cancellation of your Biotech HOLDRs will allow you to sell individual underlying securities or to deliver individual underlying securities in a tender offer. The cancellation of Biotech HOLDRs will involve payment of a cancellation fee to the trustee. . Trading halts. Trading in Biotech HOLDRs may be halted in the event trading in one or more of the underlying securities is halted. If so, you will not be able to trade Biotech 4 HOLDRs even though there is trading in some of the underlying securities; however, you will be able to cancel your Biotech HOLDRs to receive the underlying securities. . Delisting from the American Stock Exchange. If the number of companies whose common stock is held in the trust falls below nine, the American Stock Exchange may consider delisting the Biotech HOLDRs. If the Biotech HOLDRs are delisted by the American Stock Exchange, a termination event will result if the Biotech HOLDRs are not listed for trading on another national securities exchange or through NASDAQ within five business days from the date the Biotech HOLDRs are delisted. . Possible conflicts of interest. Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, has selected the underlying securities and may face possible conflicts of interest in connection with its activities. For example, Merrill Lynch, Pierce, Fenner & Smith Incorporated and its affiliates, collectively referred to as Merrill Lynch, may engage in investment banking and other activities, may provide services to issuers of the underlying securities in connection with its business, or may trade in the underlying securities for its own account. All of these activities may result in conflicts of interest with respect to the financial interest of Merrill Lynch, on the one hand, and, on the other hand, the initial selection of the underlying securities included in the Biotech HOLDRs, the selection of the biotechnology industry, Merrill Lynch's activity in the secondary market in the underlying securities, and the creation and cancellation of Biotech HOLDRs by Merrill Lynch. . Temporary price increases in the underlying securities. Purchasing activity in the secondary trading market associated with acquiring the underlying securities for deposit into the trust may affect the market price of the deposited shares. Large volumes of purchasing activity, which may occur in connection with the issuance of Biotech HOLDRs, particularly in connection with the initial issuance of Biotech HOLDRs, could temporarily increase the market price of the underlying securities, resulting in a higher price on that date. This purchasing activity could create a temporary imbalance between the supply and demand of the underlying securities, thereby limiting the liquidity of the underlying securities due to a temporary increased demand for underlying securities. Consequently, prices for the underlying securities may decline after these purchases as the volume of purchases subsides. This in turn is likely to have an immediate, adverse effect on the trading price of Biotech HOLDRs. Risk Factors Specific to the Biotechnology Industry . Biotechnology company stock prices have been and will likely continue to be extremely volatile. The trading prices of the stocks of biotechnology companies have been and are likely to be extremely volatile. Biotechnology companies' stock prices could be subject to wide fluctuations in response to a variety of factors, including: . announcements of technological innovations or new commercial products; . developments in patent or proprietary rights; . government regulatory initiatives; . public concern as to the safety or other implications of biotechnology products; . fluctuations in quarterly financial results; and . market conditions. . Biotechnology companies face uncertainty with respect to pricing and third party reimbursement. Biotechnology companies will continue to be affected by the efforts of governments and third party payors, such as government health organizations, private health 5 insurers and health maintenance organizations, to contain or reduce health care costs. For example, in certain foreign markets pricing or profitability of biotechnology products and technologies is subject to control. In the United States, there has been, and there will likely to continue to be, a number of federal and state proposals to implement similar government control. Also, an increasing emphasis on managed health care in the United States will continue to put pressure on the pricing of the products and technologies of biotechnology companies. The announcement or adoption of such proposals could have a material adverse affect on a biotechnology companies' business and financial condition. Further, the sales of the products of many biotechnology companies are often dependent, in part, on the availability of reimbursement from third party payors. Third party payors are increasingly challenging the prices charged for health care products and technologies and denying or limiting coverage for new products. Even if a biotechnology company can bring a product or technology to market, there can be no assurance that these products or technologies will be considered cost-effective by third party payors and that sufficient reimbursement will be available to consumers to allow for the sale of the products and services on a profitable basis. . Protection of patent and proprietary rights of biotechnology companies is difficult and costly. The success of many biotechnology companies is highly dependent on a biotechnology company's ability to obtain patents on current and future products and technologies, to defend its existing patents and trade secrets and operate in a manner that does not infringe on the proprietary rights of other biotechnology companies. Patent disputes are frequent and can preclude the successful commercial introduction of products and technologies. As a result, there is significant litigation in the biotechnology industry regarding patent and other intellectual property rights. Litigation is costly and could subject a biotechnology company to significant liabilities to third parties. In addition, a biotechnology company could be forced to obtain costly third-party licenses or cease using the technology or product in dispute. . Biotechnology companies are subject to extensive government regulation. Products and technologies offered by biotechnology companies are subject to strict regulation by the Food and Drug Administration in the United States and similar agencies in other countries. Many of the products will require extensive pre- clinical testing, clinical trials, other testing, government review and final approval before any marketing of the product will be permitted. This procedure could take a number of years and involves the expenditure of substantial resources. The success of a biotechnology company's current or future product will depend, in part, upon obtaining and maintaining regulatory approval to market products and, once approved, complying with the continued review by regulatory agencies. The failure to obtain necessary government approvals, the restriction of existing approvals, loss of or changes to previously obtained approvals or the failure to comply with regulatory requirements could result in fines, unanticipated expenditures, product delays, non-approval or recall, interruption of production and even criminal prosecution. . Biotechnology companies must keep pace with rapid technological change to remain competitive. The biotechnology industry is highly competitive and is subject to rapid and significant technological change. Biotechnology companies will face continued competition as new products enter the market and advanced technologies become available. The success of a biotechnology company will depend on its ability to develop products and technologies that are at least as clinically effective or cost-effective than its competitors' products and technologies or that would render its competitors' products and technologies obsolete or uncompetitive. . Results of research and development of new products and technologies are unpredictable. Successful product or technology development in the biotechnology industry is very uncertain and only a small number of research and development programs will result in the 6 marketing and sale of a new product or technology. Many products and technologies that appear promising may fail to reach the market for many reasons, including results indicating lack of effectiveness or harmful side effects in clinical or pre-clinical testing, failure to receive necessary regulatory approvals, uneconomical manufacturing costs or competing proprietary rights. In addition, there is no certainty that any product or technology in development will achieve market acceptance from the medical community, third party payors or individual users. . Biotechnology companies may be exposed to extensive product liability costs. The testing, manufacturing, marketing and sale of many of the products and technologies developed by biotechnology companies inherently expose biotechnology companies to potential product liability risks. Many biotechnology companies obtain limited product liability insurance; further, there can be no assurance that a biotechnology company will be able to maintain its product liability insurance, that it will continue to be able to obtain adequate product liability insurance on reasonable terms or that any product liability insurance obtained will provide adequate coverage against potential liabilities. . Biotechnology companies face challenges gaining governmental and consumer acceptance of genetically altered products. Biotechnology companies may be involved in the development of genetically engineered agricultural and food products. The commercial success of these products will depend, in part, on governmental and public acceptance of their cultivation, distribution and consumption. Public attitudes may be influenced by the media and by opponents who claim that genetically engineered products are unsafe for consumption, pose unknown health risks, risks to the environment or to social or economic practices. Biotechnology companies may continue to have to expend significant resources to foster governmental and consumer acceptance of genetically engineered agricultural and food products, particularly in Europe where securing governmental approvals for, and achieving consumer confidence in, these products continues to pose numerous challenges. The success of any genetically engineered agricultural and food products may be delayed or impaired in certain geographical areas due to the existing or future regulatory, legislative or public acceptance issues. Celera Genomics, one of the underlying securities of the Biotech HOLDRs, is involved in the development of genetically-based plant and animal breeding. Other companies representing underlying securities of the Biotech HOLDRs may become involved in the development of genetically engineered agricultural and food products. . Many Biotechnology companies are dependent on key personnel for success. The success of many biotechnology companies is highly dependent on the experience, abilities and continued services of key executive officers and key scientific personnel. If these companies lose the services of any of these officers or key scientific personnel, their future success could be undermined. The success of many biotechnology companies also depends upon their ability to attract and retain other highly qualified scientific, managerial sales and manufacturing personnel and their ability to develop and maintain relationships with qualified clinical researchers. Competition for such personnel and relationships is intense and many of these companies compete with each other and with universities and non-profit research organizations. There is no certainty that any of these biotechnology companies will be able to continue to attract and retain qualified personnel or develop and maintain relationships with clinical researchers. 7 HIGHLIGHTS OF BIOTECH HOLDRs This discussion highlights information regarding Biotech HOLDRs; we present certain information more fully in the rest of this prospectus. You should read the entire prospectus carefully before you purchase Biotech HOLDRs. Issuer....................... Biotech HOLDRs Trust. The trust.................... The Biotech HOLDRs Trust will be formed under the depositary trust agreement, dated as of November , 1999 among The Bank of New York, as trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the owners of the Biotech HOLDRs. The trust is not a registered investment company under the Investment Company Act of 1940. Initial depositor............ Merrill Lynch, Pierce, Fenner & Smith Incorporated. Trustee...................... The Bank of New York, a New York state- chartered banking organization, will be the trustee and receive compensation as set forth in the depositary trust agreement. Purpose of Biotech HOLDRs.... Biotech HOLDRs are designed to achieve the following: Diversification. Biotech HOLDRs are designed to allow you to diversify your investment in the biotechnology industry through a single, exchange-listed instrument representing your undivided beneficial ownership of the underlying securities. Flexibility. The beneficial owners of Biotech HOLDRs have undivided beneficial ownership interests in each of the underlying securities represented by the Biotech HOLDRs, and can cancel their Biotech HOLDRs to receive each of the underlying securities represented by the Biotech HOLDRs. Transaction costs. The expenses associated with trading Biotech HOLDRs are expected to be less than trading each of the underlying securities separately. Trust assets................. The trust will hold shares of common stock issued by 20 specified companies in the biotechnology industry. Except when a reconstitution event occurs, the group of companies will not change. Reconstitution events are described in this prospectus under the heading "Description of the depositary trust agreement-- Reconstitution events." Under no circumstances will the common stock of a new company be added to the common stocks underlying the Biotech HOLDRs. The trust's assets may increase or decrease as a result of in-kind deposits and withdrawals of the underlying securities during the life of the trust. The Biotech HOLDRs...... The trust will issue Biotech HOLDRs that represent your undivided beneficial ownership interest in the shares of common stock held by the trust on your behalf. The Biotech HOLDRs themselves are separate from the underlying securities that are represented by the Biotech HOLDRs. 8 The specific share amounts for each round-lot of 100 Biotech HOLDRs are set forth in the chart below and were determined on October 27, 1999 so that the initial weightings of each underlying security included in the Biotech HOLDRs approximated the relative market capitalizations of the specified companies, subject to a maximum weight of 20%. Because these weightings are a function of market prices, it is expected that these weightings will change substantially over time, including during the period between October 27, 1999 and the date the Biotech HOLDRs are first issued to the public. The share amounts set forth below will not change, except for changes due to corporate events such as stock splits or reverse stock splits on the underlying securities or reconstitution events. The following chart provides the . names of the 20 issuers of the underlying securities represented by an Biotech HOLDRs, . stock ticker symbols, . share amounts represented by a round-lot of 100 Biotech HOLDRs, . initial weightings as of October 27, 1999 and . the principal market on which the shares of common stock of the selected companies are traded.
Primary Name of Share Initial Trading Company Ticker Amounts Weighting Market ---------------------- ------ ------- --------- ------- Amgen Inc. AMGN 23 19.76% NASDAQ Genentech, Inc. DNA 11 18.29% NYSE Biogen, Inc. BGEN 13 9.92% NASDAQ Immunex Corporation IMNX 14 8.90% NASDAQ PE Corp-PE Biosystems Group PEB 9 6.67% NYSE MedImmune, Inc. MEDI 5 6.03% NASDAQ Chiron Corporation CHIR 16 4.78% NASDAQ Genzyme Corporation GENZ 7 2.99% NASDAQ Gilead Sciences, Inc. GILD 4 2.97% NASDAQ Sepracor Inc. SEPR 3 2.68% NASDAQ IDEC Pharmaceuticals Corporation IDPH 2 2.49% NASDAQ QLT Photo Therapeutics Inc. QLTI 5 2.42% NASDAQ Millennium Pharmaceuticals, Inc. MLNM 3 2.35% NASDAQ BioChem Pharma Inc. BCHE 9 2.20% NASDAQ Affymetrix, Inc. AFFX 2 2.02% NASDAQ Human Genome Sciences, Inc. HGSI 2 1.77% NASDAQ ICOS Corporation ICOS 4 1.29% NASDAQ Enzon, Inc. ENZN 3 0.93% NASDAQ Celera Genomics CRA 2 0.77% NYSE Alkermes, Inc. ALKS 2 0.76% NASDAQ
These companies generally are considered to be among the 20 largest and most liquid companies involved in the biotechnology industry as measured by market capitalization and trading volume on October 27, 1999. The market capitalization of a company is determined by multiplying the price of its common stock by the number of outstanding shares of its common stock. 9 The trust only will issue and cancel, and you only may obtain, hold, trade or surrender, Biotech HOLDRs in a round-lot of 100 Biotech HOLDRs and round-lot multiples. The trust will only issue Biotech HOLDRs upon the deposit of the whole shares represented by a round-lot of 100 Biotech HOLDRs. In the event that a fractional share comes to be represented by a round-lot of Biotech HOLDRs, the trust may require a minimum of more than one round-lot of 100 Biotech HOLDRs for an issuance so that the trust will always receive whole share amounts for issuance of Biotech HOLDRs. The number of outstanding Biotech HOLDRs will increase and decrease as a result of in-kind deposits and withdrawals of the underlying securities. The trust will stand ready to issue additional Biotech HOLDRs on a continuous basis when an investor deposits the required shares of common stock with the trustee. Public offering price........ The initial public offering price for 100 Biotech HOLDRs will equal the sum of the closing market price on the pricing date for each underlying security multiplied by the share amount appearing in the above table, plus an underwriting fee. Purchases.................... After the initial offering, you may acquire Biotech HOLDRs in two ways: . through an in-kind deposit of the required number of shares of common stock of the underlying issuers with the trustee, or . through a cash purchase in the secondary trading market. Underwriting fees............ If you purchase Biotech HOLDRs in the initial public offering, you will pay Merrill Lynch, Pierce, Fenner & Smith Incorporated, in its role as underwriter, an underwriting fee equal to: . For purchases of Biotech HOLDRs or fewer, 2%. . For purchases in excess of Biotech HOLDRs, %. You will not be charged any issuance fee or other sales commission in connection with purchases of Biotech HOLDRs made in the initial public offering. Issuance and cancellation fees........................ After the initial offering, if you wish to create Biotech HOLDRs by delivering to the trust the requisite shares of common stock represented by a round-lot of 100 Biotech HOLDRs, The Bank of New York as trustee will charge you an issuance fee of up to $10.00 for each round-lot of 100 Biotech HOLDRs. If you wish to cancel your Biotech HOLDRs and withdraw your underlying securities, The Bank of New York as trustee will charge you a cancellation fee of up to $10.00 for each round-lot of 100 Biotech HOLDRs. Commissions.................. If you choose to deposit underlying securities in order to receive Biotech HOLDRs after the conclusion of the initial public offering, you will not be charged the underwriting fee. However, in addition to the issuance fee charged by the trustee described above, you will be responsible for paying any sales commission associated with 10 your purchase of the underlying securities that is charged by your broker, whether it be Merrill Lynch, Pierce, Fenner & Smith Incorporated or another broker. Custody fees................. The Bank of New York, as trustee and as custodian, will charge you a quarterly custody fee of $2.00 for each round-lot of 100 Biotech HOLDRs to be deducted from any cash dividend or other cash distributions on underlying securities received by the trust. With respect to the aggregate custody fee payable in any calendar year for each Biotech HOLDR, the Trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions received, or to be received, and payable with respect to such calendar year. Rights relating to Biotech You have the right to withdraw the underlying HOLDRs................. securities upon request by delivering a round- lot or integral multiple of a round-lot of Biotech HOLDRs to the trustee, during the trustee's business hours, and paying the cancellation fees, taxes, and other charges. You should receive the underlying securities no later than the business day after the trustee receives a proper notice of cancellation. The trustee will not deliver fractional shares of underlying securities. To the extent that any cancellation of Biotech HOLDRs would otherwise require the delivery of a fractional share, the trustee will sell such share in the market and the trust, in turn, will deliver cash in lieu of such share. Except with respect to the right to vote for dissolution of the trust, the Biotech HOLDRs themselves will not have voting rights. Rights relating to the underlying securities....... You have the right to: . Receive all shareholder disclosure materials, including annual and quarterly reports, distributed by the issuers of the underlying securities. . Receive all proxy materials distributed by the issuers of the underlying securities and will have the right to instruct the trustee to vote the underlying securities or may attend shareholder meetings yourself. . Receive dividends and other distributions on the underlying securities, if any are declared and paid to the trustee by an issuer of the underlying securities, net of any applicable taxes or fees. If you wish to participate in a tender offer for underlying securities, you must obtain the underlying securities by surrendering your Biotech HOLDRs and receiving all of your underlying securities. For specific information about obtaining your underlying securities, you should read the discussion under the caption "Description of the depositary trust agreement." Reconstitution events........ A. If an issuer of underlying securities no longer has a class of common stock registered under section 12 of the Securities Exchange Act of 1934, then its securities will no longer be an 11 underlying security and the trustee will distribute the shares of that company to the owners of the Biotech HOLDRs. B. If the SEC finds that an issuer of underlying securities should be registered as an investment company under the Investment Company Act of 1940, and the trustee has actual knowledge of the SEC finding, then the trustee will distribute the shares of that company to the owners of the Biotech HOLDRs. C. If the underlying securities of an issuer cease to be outstanding as a result of a merger, consolidation or other corporate combination, the trustee will distribute the consideration paid by and received from the acquiring company to the beneficial owners of Biotech HOLDRs, unless the merger, consolidation or other corporate combination is between companies that are already included in the Biotech HOLDRs and the consideration paid is additional underlying securities. In this case, the additional underlying securities will be deposited into the trust. D. If an issuer's underlying securities are delisted from trading on a national securities exchange or NASDAQ and are not listed for trading on another national securities exchange or through NASDAQ within 5 business days from the date such securities are delisted. If a reconstitution event occurs, the trustee will deliver the underlying security to you as promptly as practicable after the date that the trustee has knowledge of the occurrence of a reconstitution event. Termination events.......... A. The Biotech HOLDRs are delisted from the American Stock Exchange and are not listed for trading on another national securities exchange or through NASDAQ within 5 business days from the date the Biotech HOLDRs are delisted. B. The trustee resigns and no successor trustee is appointed within 60 days from the date the trustee provides notice to the initial depositor of its intent to resign. C. 75% of beneficial owners of outstanding Biotech HOLDRs vote to dissolve and liquidate the trust. If a termination event occurs, the trustee will distribute the underlying securities to you as promptly as practicable after the termination event. Federal income tax consequences............... The federal income tax laws will treat a U.S. holder of Biotech HOLDRs as directly owning the underlying securities. The Biotech HOLDRs themselves will not result in any federal tax consequences separate from the tax consequences associated with ownership of the underlying securities. Listing..................... Application has been made to list the Biotech HOLDRs on the American Stock Exchange under the symbol "BBH". Trading will take place only in round-lots of 100 Biotech HOLDRs and round- 12 lot multiples. A minimum of 150,000 Biotech HOLDRs will be required to be outstanding when trading begins. Trading...................... Investors only will be able to acquire, hold, transfer and surrender a round-lot of 100 Biotech HOLDRs. Bid and ask prices, however, will be quoted per single Biotech HOLDRs. Clearance and settlement..... The trust will issue Biotech HOLDRs in book- entry form. Biotech HOLDRs will be evidenced by one or more global certificates that the trustee will deposit with The Depositary Trust Company, referred to as DTC. Transfers within DTC will be in accordance with DTC's usual rules and operating procedures. For further information see "Description of Biotech HOLDRs." 13 THE TRUST General. This discussion highlights information about the Biotech HOLDRs trust. You should read this information, information about the depositary trust agreement as well as the depositary trust agreement before you purchase Biotech HOLDRs. The material terms of the depositary trust agreement are described in this prospectus under the heading "Description of the depositary trust agreement." The Biotech HOLDRs trust. The trust will be formed pursuant to the depositary trust agreement, dated as of November , 1999. The Bank of New York will be the trustee. The Biotech HOLDRs trust is not a registered investment company under the Investment Company Act of 1940. The Biotech HOLDRs trust is intended to hold deposited shares for the benefit of owners of Biotech HOLDRs. The trustee will perform only administrative and ministerial acts. The property of the trust will consist of the underlying securities and all monies or other property, if any, received by the trustee. The trust will terminate on December 31, 2039 or earlier if a termination event occurs. DESCRIPTION OF BIOTECH HOLDRs The trust will issue Biotech HOLDRs under the depositary trust agreement described in this prospectus under the heading "Description of the depositary trust agreement." After the initial offering, the trust may issue additional Biotech HOLDRs on a continuous basis when an investor deposits the requisite underlying securities with the trustee. You may only acquire, hold, trade and surrender Biotech HOLDRs in a round-lot of 100 Biotech HOLDRs and round-lot multiples. The trust will only issue Biotech HOLDRs upon the deposit of the whole shares of underlying securities that are represented by a round-lot of 100 Biotech HOLDRs. In the event of a stock split, reverse stock split, or other distribution by the issuer of an underlying security that results in a fractional share becoming represented by a round-lot of Biotech HOLDRs, the trust may require a minimum of more than one round-lot of 100 Biotech HOLDRs for an issuance so that the trust will always receive whole share amounts for issuance of Biotech HOLDRs. Biotech HOLDRs will represent your individual and undivided beneficial ownership interest in the common stock of the specified underlying securities. The 20 companies selected as part of this receipt program are listed above in the section entitled "Highlights of Biotech HOLDRs--The Biotech HOLDRs." Beneficial owners of Biotech HOLDRs will have the same rights and privileges as they would have if they beneficially owned the underlying securities outside of the trust. These include the right of investors to instruct the trustee to vote the common stock, and to receive dividends and other distributions on the underlying securities, if any are declared and paid to the trustee by an issuer of an underlying security, as well as the right to cancel Biotech HOLDRs to receive the underlying securities. See "Description of the depositary trust agreement." Biotech HOLDRs are not intended to change your beneficial ownership in the underlying securities under federal securities laws, including Sections 13(d) and 16(a) of the Securities Exchange Act of 1934. The trust will not publish or otherwise calculate net asset value per receipt. Biotech HOLDRs may trade in the secondary market at prices that are lower than the aggregate value of the corresponding underlying securities. If, in such case, an owner of Biotech HOLDRs wishes to realize the dollar value of the underlying securities, that owner will have to cancel the Biotech HOLDRs. Such cancellation will require payment of fees and expenses as described in "Description of the depositary trust agreement--Withdrawal of underlying securities." Biotech HOLDRs will be evidenced by one or more global certificates that the trustee will deposit with DTC and register in the name of Cede & Co., as nominee for DTC. Biotech HOLDRs will be available 14 only in book-entry form. Owners of Biotech HOLDRs may hold their Biotech HOLDRs through DTC, if they are participants in DTC, or indirectly through entities that are participants in DTC. DESCRIPTION OF THE UNDERLYING SECURITIES Selection criteria. The underlying securities are the common stocks of a group of 20 specified companies involved in various segments of the biotechnology industry and whose common stock is registered under Section 12 of the Exchange Act. The issuers of the underlying securities are among the 20 largest capitalized, most liquid companies in the biotechnology industry as measured by market capitalization and trading volume. The following criteria were used in selecting the underlying securities on October 27, 1999: . Market capitalization equal to or greater than $840 million; . Average daily trading volume of at least 200,000 shares over the 60 trading days prior to and including October 27, 1999; . Average daily dollar volume (that is, the average daily trading volume multiplied by the closing price on October 27, 1999) of at least $7.5 million over the 60 trading days prior to and including October 27, 1999; and . A trading history of at least 90 calendar days. The market capitalization of a company is determined by multiplying the price of its common stock by the number of shares of its common stock that are held by stockholders. In determining whether a company was to be considered for inclusion in the Biotech HOLDRs, Merrill Lynch, Pierce, Fenner & Smith Incorporated examined available public information about the company, including analysts' reports and other independent market sources. The ultimate determination of the inclusion of the 20 specified companies, however, rested solely within the discretion of Merrill Lynch, Pierce, Fenner & Smith Incorporated. After the initial deposit, one or more of the issuers of the underlying securities may no longer be substantially involved in the biotechnology industry. In this case, the Biotech HOLDRs may no longer consist of securities issued by companies involved in the biotechnology industry. Merrill Lynch, Pierce, Fenner & Smith Incorporated will determine, in its sole discretion, whether the issuer of a particular underlying security remains in the biotechnology industry and will undertake to make adequate disclosure when necessary. Underlying securities. For a list of the underlying securities represented by Biotech HOLDRs, please refer to "Highlights of Biotech HOLDRs-- The Biotech HOLDRs." If the underlying securities change because of a reconstitution event, a revised list of underlying securities will be set forth in a prospectus supplement and will be available from the American Stock Exchange and through a widely-used electronic information dissemination system such as Bloomberg or Reuters. No investigation. In selecting the underlying securities, the trust, the trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and any affiliate of these entities, have not performed any investigation or review of the selected companies, including the public filings by the companies, other than to the extent required to determine whether the companies satisfied the stated selection criteria. Accordingly, before you acquire Biotech HOLDRs, you should consider publicly available financial and other information about the issuers of the underlying securities. See "Risk factors" and "Where you can find more information." Investors and market participants should not conclude that the inclusion of a company in the list is any form of investment recommendation of that company by the trust, the trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and any of their affiliates. General background and historical information. For a brief description of the business of each of the issuers of the underlying securities and monthly pricing information showing the historical performance of each underlying issuer's securities see "Annex A." 15 The following table and graph set forth the composite performance of all of the underlying securities represented by a single Biotech HOLDR, measured at the close of each business day from July 20, 1999, the first date when all of the underlying securities were publicly traded, to October 27, 1999. The performance table and graph data are adjusted for any splits that may have occurred over the measurement period. Past movements of the underlying securities are not necessarily indicative of future values.
Biotech 1999 HOLDRs - ---- ------- July 20......... 81.40 July 21......... 83.70 July 22......... 81.77 July 23......... 81.72 July 26......... 80.37 July 27......... 82.82 July 28......... 83.24 July 29......... 81.96 July 30......... 85.63
Biotech 1999 HOLDRs - ---- ------- August 2........ 87.65 August 3........ 86.96 August 4........ 86.38 August 5........ 86.25 August 6........ 85.57 August 9........ 86.82 August 10....... 85.87 August 11....... 89.16 August 12....... 91.51 August 13....... 95.50 August 16....... 96.40 August 17....... 94.22 August 18....... 94.10 August 19....... 92.46 August 20....... 94.40 August 23....... 100.08 August 24....... 99.68 August 25....... 100.62 August 26....... 98.35 August 27....... 97.77 August 30....... 97.41 August 31....... 97.77
Biotech 1999 HOLDRs - ---- ------- September 1..... 100.46 September 2..... 98.48 September 3..... 102.39 September 7..... 102.85 September 8..... 102.17 September 9..... 103.27 September 10.... 102.54 September 13.... 102.50 September 14.... 100.10 September 15.... 95.69 September 16.... 96.09 September 17.... 98.05 September 20.... 98.16 September 21.... 95.69 September 22.... 98.27 September 23.... 95.01 September 24 ... 92.33 September 27.... 92.88 September 28.... 91.02 September 29.... 91.34 September 30.... 89.88
Biotech 1999 HOLDRs - ---- ------- October 1....... 92.02 October 4....... 92.58 October 5....... 92.13 October 6....... 97.74 October 7....... 99.65 October 8....... 97.81 October 11...... 98.52 October 12...... 95.36 October 13...... 93.87 October 14...... 92.96 October 15...... 88.02 October 18...... 86.70 October 19...... 89.73 October 20...... 91.85 October 21...... 90.68 October 22...... 89.91 October 25...... 90.12 October 26...... 88.38 October 27...... 88.09
16 DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT General. The depositary trust agreement, dated as of November , 1999, among Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Bank of New York, as trustee, other depositors and the owners of the Biotech HOLDRs, provides that Biotech HOLDRs will represent an owner's undivided beneficial ownership interest in the common stock of the underlying companies. The trustee. The Bank of New York will serve as trustee. The Bank of New York, which was founded in 1784, was New York's first bank and is the oldest bank in the country still operating under its original name. The Bank is a state-chartered New York banking corporation and a member of the Federal Reserve System. The Bank conducts a national and international wholesale banking business and a retail banking business in the New York City, New Jersey and Connecticut areas, and provides a comprehensive range of corporate and personal trust, securities processing and investment services. Issuance, transfer and surrender of Biotech HOLDRs. You may create and cancel Biotech HOLDRs only in round-lots of 100 Biotech HOLDRs. You may create Biotech HOLDRs by delivering to the trustee the requisite underlying securities. The trust will only issue Biotech HOLDRs upon the deposit of the whole shares represented by a round-lot of 100 Biotech HOLDRs. In the event that an issuer of underlying securities distributes a fractional share that is represented in a round-lot of Biotech HOLDRs, the trust may require a minimum of more than one round-lot of 100 Biotech HOLDRs for an issuance so that the trust will always receive whole share amounts for issuance of Biotech HOLDRs. Similarly, you must surrender Biotech HOLDRs in integral multiples of 100 Biotech HOLDRs to withdraw deposited shares from the trust. The trustee will not deliver fractional shares of underlying securities, to the extent that any cancellation of Biotech HOLDRs would otherwise require the delivery of fractional shares, the trust will deliver cash in lieu of such shares. You may request withdrawal of your deposited shares during the trustee's normal business hours. The trustee expects that in most cases it will deliver your deposited shares within one business day of your withdrawal request. Voting rights. The trustee will deliver you proxy soliciting materials provided by issuers of the deposited shares so as to permit you to give the trustee instructions as to how to vote on matters to be considered at any annual or special meetings held by issuers of the underlying securities. Under the depositary trust agreement, the beneficial owners of Biotech HOLDRs, other than Merrill Lynch, Pierce, Fenner & Smith Incorporated owning Biotech HOLDRs for its own proprietary account as principal, will have the right to vote to dissolve and liquidate the trust. Distributions. You will be entitled to receive, net of trustee fees, distributions of cash, including dividends, securities or property, if any, made with respect to the underlying securities. The trustee will use its reasonable efforts to ensure that it distributes these distributions as promptly as practicable after the date on which it receives the distribution. Therefore, you may receive your distributions substantially later than you would have had you held the underlying securities directly. You will be obligated to pay any tax or other charge that may become due with respect to Biotech HOLDRs. The trustee may deduct the amount of any tax or other governmental charge from a distribution before making payment to you. In addition, the trustee will deduct its quarterly custody fee of $2.00 for each round-lot of 100 Biotech HOLDRs from quarterly dividends, if any, paid to the trustee by the issuers of the underlying securities. With respect to the aggregate custody fee payable in any calendar year for each Biotech HOLDR, the trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions received, or to be received, and payable with respect to such calendar year. Record dates. With respect to dividend payments and voting instructions, the trustee expects to fix the trust's record dates as close as possible to the record date fixed by the issuer of the underlying securities. 17 Shareholder communications. The trustee promptly will forward to you all shareholder communications that it receives from issuers of the underlying securities. Withdrawal of underlying securities. You may surrender your Biotech HOLDRs and receive underlying securities during the trustee's normal business hours and upon the payment of applicable fees, taxes or governmental charges, if any. You should receive your underlying securities no later than the business day after the trustee receives your request. If you surrender Biotech HOLDRs in order to receive underlying securities, you will pay to the trustee a cancellation fee of up to $10.00 per round-lot of 100 Biotech HOLDRs. Further issuances of Biotech HOLDRs. The depositary trust agreement provides for further issuances of Biotech HOLDRs on a continuous basis without your consent. Reconstitution events. The depositary trust agreement provides for the automatic distribution of underlying securities to you in four circumstances. A. If an issuer of underlying securities no longer has a class of common stock registered under section 12 of the Securities Exchange Act of 1934, then its securities will no longer be an underlying security and the trustee will distribute the shares of that company to the owners of the Biotech HOLDRs. B. If the SEC finds that an issuer of underlying securities should be registered as an investment company under the Investment Company Act of 1940, and the trustee has actual knowledge of the SEC finding, then the trustee will distribute the shares of that company to the owners of the Biotech HOLDRs. C. If the underlying securities of an issuer cease to be outstanding as a result of a merger, consolidation or other corporate combination, the trustee will distribute the consideration paid by and received from the acquiring company to the beneficial owners of Biotech HOLDRs, unless the merger, consolidation or other corporate combination is between companies that are already included in the Biotech HOLDRs and the consideration paid is additional underlying securities. In this case, the additional underlying securities will be deposited into the trust. D. If an issuer's underlying securities are delisted from trading on a national securities exchange or NASDAQ and are not listed for trading on another national securities exchange or through NASDAQ within 5 business days from the date such securities are delisted. If a reconstitution event occurs, the trustee will deliver the underlying security to you as promptly as practicable after the date that the trustee has knowledge of the occurrence of a reconstitution event. Termination of the trust. The trust will terminate if the trustee resigns and no successor trustee is appointed by the initial depositor within 60 days from the date the trustee provides notice to the initial depositor of its intent to resign. Upon termination, the beneficial owners of Biotech HOLDRs will surrender their Biotech HOLDRs as provided in the depositary trust agreement, including payment of any fees of the trustee or applicable taxes or governmental charges due in connection with delivery to the owners of the underlying securities. The trust also will terminate if Biotech HOLDRs are delisted from the American Stock Exchange and are not listed for trading on another national securities exchange or through NASDAQ within 5 business days from the date the Biotech HOLDRs are delisted. Finally, the trust will terminate if 75% of the owners of outstanding Biotech HOLDRs other than Merrill Lynch, Pierce, Fenner & Smith Incorporated vote to dissolve and liquidate the trust. If a termination event occurs, the trustee will distribute the underlying securities to you as promptly as practicable after the termination event occurs. 18 Amendment of the depositary trust agreement. The trustee and the initial depositor may amend any provisions of the depositary trust agreement without the consent of any other depositor or any of the owners of the Biotech HOLDRs. Promptly after the execution of any amendment to the agreement, the trustee must furnish or cause to be furnished written notification of the substance of the amendment to each owner of Biotech HOLDRs. Any amendment that imposes or increases any fees or charges, subject to exceptions, or that otherwise prejudices any substantial existing right of the owners of Biotech HOLDRs will not become effective until 30 days after notice of the amendment is given to the owners of Biotech HOLDRs. Issuance and cancellation fees. After the initial public offering, the trust expects to issue more Biotech HOLDRs. If you wish to create Biotech HOLDRs by delivering to the trust the requisite underlying securities, the trustee will charge you an issuance fee of up to $10.00 for each round-lot of 100 Biotech HOLDRs. If you wish to cancel your Biotech HOLDRs and withdraw your underlying securities, the trustee will charge you a cancellation fee of up to $10.00 for each round-lot of 100 Biotech HOLDRs issued. The trustee may negotiate either of these fees depending on the volume, frequency and size of the issuance or cancellation transactions. Commissions. If you choose to create Biotech HOLDRs after the conclusion of the initial public offering, you will not be charged the underwriting fee. However, in addition to the issuance and cancellation fees described above, you will be responsible for paying any sales commissions associated with your purchase of the underlying securities that is charged by your broker, whether it be Merrill Lynch, Pierce, Fenner & Smith Incorporated or another broker. Custody fees. The Bank of New York, as trustee and as custodian, will charge you a quarterly custody fee of $2.00 for each round-lot of 100 Biotech HOLDRs to be deducted from any dividend payments or other cash distributions on underlying securities received by the trustee. With respect to the aggregate custody fee payable in any calendar year for each Biotech HOLDR, the Trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions received, or to be received, and payable with respect to such calendar year. The trustee cannot recapture unpaid custody fees from prior years. Address of the trustee. The Bank of New York, ADR Department, 101 Barclay Street, New York, New York 10286. Governing law. The depositary trust agreement and Biotech HOLDRs will be governed by the laws of the State of New York. The trustee will provide the depositary trust agreement to any owner of the underlying securities free of charge upon written request. Duties and immunities of the trustee. The trustee will assume no responsibility or liability for, and makes no representations as to, the validity or sufficiency, or as to the accuracy of the recitals, if any, set forth in the Biotech HOLDRs. The trustee undertakes to perform only those duties as are specifically set forth in the depositary trust agreement. Subject to the preceding sentence, the trustee will be liable for its own negligence or misconduct except for good faith errors in judgment so long as the trustee was not negligent in ascertaining the relevant facts. 19 FEDERAL INCOME TAX CONSEQUENCES General The following is a summary of the U.S. federal income tax consequences relating to the Biotech HOLDRs for: . a citizen or resident of the United States, a corporation or partnership created or organized in the United States or under the laws of the United States, an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source, or a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust (a "U.S. receipt holder"), and . any person other than a U.S. receipt holder (a "Non-U.S. receipt holder"). This summary is based upon laws, regulations, rulings and decisions currently in effect, all of which are subject to change, possibly on a retroactive basis. The discussion does not deal with all U.S. federal income tax consequences applicable to all categories of investors, some of which may be subject to special rules. In addition, this summary generally is limited to investors who will hold the Biotech HOLDRs as "capital assets" (generally, property held for investment) within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended. We suggest that you consult with your own tax advisor. Taxation of the trust The trust will provide for flow through tax consequences as it will be treated as a grantor trust or custodial arrangement for United States federal income tax purposes. Taxation of Biotech HOLDRs A receipt holder purchasing and owning Biotech HOLDRs will be treated, for U.S. federal income tax purposes, as directly owning a proportionate share of the underlying securities represented by Biotech HOLDRs. Consequently, if there is a taxable cash distribution on an underlying security, a holder will recognize income with respect to the distribution at the time the distribution is received by the trustee, not at the time that the holder receives the cash distribution from the trustee. A receipt holder will determine its initial tax basis in each of the underlying securities by allocating the purchase price for the Biotech HOLDRs among the underlying securities based on their relative fair market values at the time of purchase. Similarly, when a holder sells a receipt, it will determine the amount realized with respect to each security by allocating the sales price among the underlying securities based on their relative fair market values at the time of sale. A holder's gain or loss with respect to each security will be computed by subtracting its basis in the security from the amount realized on the security. With respect to purchases of Biotech HOLDRs for cash in the secondary market, a receipt holder's aggregate tax basis in each of the underlying securities will be equal to the purchase price of the Biotech HOLDRs. Similarly, with respect to sales of Biotech HOLDRs for cash in the secondary market, the amount realized with respect to a sale of Biotech HOLDRs will be equal to the aggregate amount realized with respect to each of the underlying securities. The distribution of any securities by the trust upon the surrender of Biotech HOLDRs, the occurrence of a reconstitution event, or a termination event will not be a taxable event. The receipt holders holding period with respect to the distributed securities will include the period that the holder held the securities through the trust. 20 Brokerage fees and custodian fees The brokerage fee incurred in purchasing a receipt will be treated as part of the cost of the underlying securities. Accordingly, a holder includes this fee in its tax basis in the underlying securities. A holder will allocate the brokerage fee among the underlying securities using either a fair market value allocation or pro rata based on the number of shares of each underlying security. Similarly, the brokerage fee incurred in selling Biotech HOLDRs will reduce the amount realized with respect to the underlying securities. A holder will be required to include in its income the full amount of dividends paid on the underlying securities, even though the depositary trust agreement provides that the custodian fees will be deducted directly from any dividends paid. These custodian fees will be treated as an expense incurred in connection with a holder's investment in the underlying securities and may be deductible. If a holder is an individual, estate or trust, however, the deduction of its share of custodian fees will be a miscellaneous itemized deduction that may be disallowed in whole or in part. Non-U.S. receipt holders Non-U.S. receipt holders should consult their tax advisors regarding U.S. withholding and other taxes which may apply to an investment in the underlying securities. ERISA CONSIDERATIONS Any plan fiduciary which proposes to have a plan acquire Biotech HOLDRs should consult with its counsel with respect to the potential applicability of ERISA and the Code to this investment and whether any exemption would be applicable and determine on its own whether all conditions have been satisfied. Moreover, each plan fiduciary should determine whether, under the general fiduciary standards of investment prudence and diversification, an acquisition of Biotech HOLDRs is appropriate for the plan, taking into account the overall investment policy of the plan and the composition of the plan's investment portfolio. PLAN OF DISTRIBUTION In accordance with the depository trust agreement, the trust will issue to Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Merrill Lynch, Pierce, Fenner & Smith Incorporated will deposit the underlying securities to receive Biotech HOLDRs. Merrill Lynch & Co., as underwriter, proposes to offer the Biotech HOLDRs to the public at the offering price set forth on the cover page of this prospectus. Merrill Lynch expects the trust to deliver the initial distribution of Biotech HOLDRs against deposit of the underlying securities in New York, New York on November , 1999. After the initial offering, the public offering price, concession and discount may be changed. The trust will continue to issue Biotech HOLDRs, in connection with deposits of underlying securities. Merrill Lynch has from time to time provided investment banking and other financial services to certain of the issuers of the underlying securities and expects in the future to provide these services, for which it has received and will receive customary fees and commissions. It also may have served as counterparty in other transactions with certain of the issuers of the underlying securities. Merrill Lynch, Pierce, Fenner & Smith Incorporated may use this prospectus, as updated from time to time, in connection with offers and sales related to market-making transactions in the Biotech HOLDRs. Merrill Lynch, Pierce, Fenner & Smith Incorporated may act as principal or agent in such transactions. Market-making sales will be made at prices related to prevailing market prices at the time of sale. Merrill Lynch, Pierce, Fenner & Smith Incorporated has agreed to indemnify the trustee against certain civil liabilities related to acts performed or not performed by the trustee in accordance with the depositary trust 21 agreement or periodic reports filed or not filed with the SEC with respect to the Biotech HOLDRs. Should a court determine not to enforce the indemnification provision, Merrill Lynch, Pierce, Fenner & Smith Incorporated also has agreed to contribute to payments the trustee may be required to make with respect to such liabilities. YEAR 2000 The trustee's Year 2000 compliance program consists of updating major trustee-owned application systems, business-area supported systems, and the trustee's proprietary customer software and evaluating the Year 2000 compliance efforts of vendors of major vendor-supplied systems. The trustee's compliance efforts have also considered the Year 2000 readiness of its global sub- custodians, major service providers, correspondents, business partners, and borrowers. The current focus is to monitor continued preparedness and contingency planning. While contingency planning has been defined as part of the Year 2000 compliance program, all new measures have been incorporated into the trustee's existing Business Continuity Plans. The trustee divided its major proprietary applications systems into three business line groups. The applications in each group were subjected to a phased process of assessment, renovation, certification testing, and implementation. All critical systems have completed all phases. A program is in place to continue to monitor critical systems to prevent Y2K problems from being reintroduced. Major business-line products have been made available in isolated future-dated environments for selected customers to test their interfaces and to assure themselves of the trustee's compliance. The trustee is satisfied with the results of testing with customers and agencies. Continued participation at the request of the agencies and customers will continue as required. Remediation of the trustee's proprietary customer software has been completed. Installation on client desktop computers is substantially complete. Customers have been advised of their obligation to assure that their environments are compliant in order for the trustees's software to function correctly during and after the century date change. The trustee has substantially completed an evaluation of its significant business partners, including other financial services providers, correspondents, counterparties, sub-custodians, vendors and settlement agencies, for the purpose of assessing their Year 2000 compliance. The trustee is currently satisfied with the information it has received concerning the progress and Year 2000 readiness programs of each significant third party. The trustee will continue to monitor the readiness and progress of these parties throughout 1999. The trustee intends to replace service providers that are seen as not managing the Year 2000 issue adequately. The trustee considers Year 2000 readiness in its credit decisions and factors this into borrower ratings. Based on a review of significant obligors, the trustee believes that exposure to obligor Year 2000 problems does not present a material risk to the trustee. The trustee's personal computers considered to be critical to the trustee's operations have been upgraded. Upgrading of physical facilities that is considered critical to the trustee's operations to Year 2000 readiness is expected to be completed by the end of September 1999. The trustee's contingency plans relating to Year 2000 issues include the identification and assessment of the impact of various worst case scenarios on the critical operational components for each of the trustee's business units. The trustee has reviewed the applicability of its current contingency plans, which include creation of an information center, establishment of special rapid response technology teams, scheduling availability of key personnel, testing and simulation activities, offsite data center facilities, and emergency backup power. These plans, with minor modification, have been determined to be adequate to mitigate Year 2000 related risks. The information center, which has been established as a repository and focus for analysis of information, will publish the status of the organization internally and externally during critical periods. It is also authorized to requisition and deploy resources as needed to address unanticipated situations. 22 Overall the trustee's Year 2000 compliance program is on or ahead of schedule to meet the needs of its customers and compliance deadlines defined by its regulators. The estimated cost of the Year 2000 project is approximately $82 million. In the first half of 1999 the trustee spent $11 million on making computer systems Year 2000 compliant. Total expenses since 1997 have been $62 million. A material Year 2000 problem could result in an interruption in, or a failure of, certain normal business activities or operations. Such problems could materially and adversely affect the trustee's results of operations, liquidity and financial condition. Due to the general uncertainty inherent in the year 2000 problem, resulting in part from the uncertainty of the Year 2000 readiness of suppliers, customers and other business partners, as well as entities with which the trustee does not have direct business relations, the trustee is unable to determine at this time whether the consequences of the Year 2000 failures will have a material impact on the trustee's results of operations, liquidity or financial condition. The Year 2000 compliance program is intended to significantly reduce the trustee's level of uncertainty about the Year 2000 problem and, in particular, about the Year 2000 compliance and readiness of its material business partners. The trustee believes that, with completion of its Year 2000 compliance program as scheduled, the possibility of significant interruptions of normal operations should be reduced. However, because of the unprecedented nature of this issue, there can be no certainty as to its impact. LEGAL MATTERS Legal matters, including the validity of the Biotech HOLDRs have been passed upon for Merrill Lynch, Pierce, Fenner & Smith Incorporated, the initial depositor and the underwriter, by Shearman & Sterling, New York, New York. Shearman & Sterling, as special U.S. tax counsel to the trust, also has rendered an opinion regarding the material federal income tax consequences relating to the Biotech HOLDRs. WHERE YOU CAN FIND MORE INFORMATION Merrill Lynch, Pierce, Fenner & Smith Incorporated has filed a registration statement on Form S-1 with the SEC covering the Biotech HOLDRs. While this prospectus is a part of the registration statement, it does not contain all the exhibits filed as part of the registration statement. You should consider reviewing the full text of those exhibits. The registration statement is available over the Internet at the SEC's web site at http://www.sec.gov. You also may read and copy the registration statement at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for more information on the public reference rooms and their copy charges. Merrill Lynch, Pierce, Fenner & Smith Incorporated will not and the trust may not be subject to the requirements of the Exchange Act and accordingly may not file periodic reports. Because the common stock of the issuers of the underlying securities is registered under the Exchange Act, the issuers of the underlying securities are required to file periodically financial and other information specified by the SEC. For more information about the issuers of the underlying securities, information provided to or filed with the SEC by the issuers of the underlying securities with respect to their registered securities can be inspected at the SEC's public reference facilities or accessed through the SEC's web site referenced above. In addition, information regarding the issuers of the underlying securities may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated information. The trust and Merrill Lynch, Pierce, Fenner & Smith Incorporated and its affiliates are not affiliated with the issuers of the underlying securities, and the issuers of the underlying securities have no obligations with respect to Biotech HOLDRs. This prospectus relates only to Biotech HOLDRs and does not relate to the 23 common stock or other securities of the issuers of the underlying securities. The information in this prospectus regarding the issuers of the underlying securities has been derived from the publicly available documents described in the preceding paragraph. We have not participated in the preparation of these documents or made any due diligence inquiries with respect to the issuers of the underlying securities in connection with Biotech HOLDRs. We make no representation that these publicly available documents or any other publicly available information regarding the issuers of the underlying securities are accurate or complete. Furthermore, we cannot assure you that all events occurring prior to the date of this prospectus, including events that would affect the accuracy or completeness of the publicly available documents described in the preceding paragraph, that would affect the trading price of the common stock of the issuers of the underlying securities, and therefore the offering and trading prices of the Biotech HOLDRs, have been publicly disclosed. 24 ANNEX A This annex forms an integral part of the prospectus. The following tables provide a brief description of the business of each of the issuers of the underlying securities and set forth the split-adjusted closing market prices, as reported on the applicable primary trading market, of each of the underlying securities in each month during 1994, 1995, 1996, 1997, 1998 and 1999 through September 1999. All market prices in excess of one dollar are rounded to the nearest one sixty-fourth dollar. An asterisk (*) denotes that no shares of the issuer were outstanding during that month. The historical prices of the underlying securities should not be taken as an indication of future performance. ALKERMES, INC. Alkermes, Inc. develops products based on drug delivery technologies. Alkermes is focusing on controlled, sustained release of injectable drugs, as well as the delivery of drugs into the brain past the blood-brain barrier. Alkermes is also focusing on the oral delivery of drugs, and the development of pharmaceutical products based on pulmonary drug delivery technologies.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- -------- --------- -------- January 8 January 2 3/4 January 9 7/8 January 23 1/4 January 24 1/4 January 31 1/8 February 7 3/8 February 2 29/32 February 9 7/8 February 24 7/8 February 23 3/16 February 28 1/16 March 7 March 2 3/4 March 9 1/8 March 14 March 24 7/8 March 27 1/4 April 5 3/4 April 2 7/8 April 10 7/8 April 11 April 23 7/8 April 26 3/4 May 5 1/4 May 3 1/16 May 15 9/16 May 16 1/2 May 21 7/8 May 24 3/4 June 4 5/8 June 3 7/8 June 12 1/4 June 14 1/2 June 17 31/32 June 23 1/8 July 3 1/4 July 8 5/8 July 12 3/8 July 15 7/8 July 19 3/4 July 26 1/8 August 3 3/4 August 6 7/8 August 13 1/4 August 18 5/8 August 10 15/16 August 37 2/3 September 3 9/16 September 6 1/2 September 15 5/8 September 20 5/8 September 14 9/16 September 28 13/16 October 3 1/2 October 6 1/2 October 13 1/4 October 22 3/4 October 19 1/2 November 3 1/4 November 5 7/8 November 14 1/8 November 19 3/4 November 18 3/8 December 2 1/8 December 7 15/16 December 23 1/4 December 19 7/8 December 22 3/16
AFFYMETRIX, INC. Affymetrix, Inc. develops and manufactures DNA chip technology. Affymetrix's "GeneChip" system acquires, analyzes, and manages genetic information in order to improve the diagnosis, monitoring and treatment of disease. Affymetrix markets it products directly, and through an exclusive sales agent, to pharmaceutical and biotechnology companies, academic research centers and clinical reference laboratories.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- -------- --------- -------- January * January * January * January 29 1/4 January 27 13/16 January 41 1/2 February * February * February * February 28 February 31 3/8 February 38 3/4 March * March * March * March 27 March 34 13/16 March 34 13/16 April * April * April * April 25 April 31 1/2 April 40 7/8 May * May * May * May 30 3/4 May 26 7/8 May 35 1/8 June * June * June * June 34 3/4 June 24 1/16 June 49 3/8 July * July * July * July 32 5/8 July 26 7/8 July 72 3/4 August * August * August * August 33 1/2 August 16 1/2 August 85 5/8 September * September * September * September 46 September 25 3/4 September 98 7/16 October * October * October 18 1/4 October 36 5/8 October 24 1/2 November * November * November 19 1/2 November 34 3/8 November 25 December * December * December 20 3/16 December 31 1/8 December 24 3/8
The closing price on , 1999 was . A-1 AMGEN INC. Amgen Inc. discovers, develops, manufactures and markets human therapeutics based on advanced cellular and molecular biology. Amgen focuses its research on secreted protein and small molecule therapeutics, with particular emphasis on neuroscience and cancer. Amgen concentrates product development in the areas of hematology, cancer, infectious disease, endocrinology, neurobiology and inflammation. On October 19, 1999, Amgen declared a 2-for-1 stock split on its common stock, to be effected by means of a stock dividend to shareholders of record on November 5, 1999. The shares of common stock will begin trading on a split-adjusted basis on November 22, 1999.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- ------- --------- ------- --------- -------- --------- -------- --------- -------- --------- -------- January 12 3/16 January 15 29/32 January 30 1/16 January 28 3/16 January 25 January 63 29/32 February 10 7/16 February 17 / 1/4 February 29 7/8 February 30 9/16 February 26 9/16 February 62 7/16 March 9 9/16 March 16 27/32 March 29 1/16 March 27 15/16 March 30 7/16 March 74 7/8 April 10 1/8 April 18 11/64 April 28 3/4 April 29 7/16 April 29 13/16 April 61 7/16 May 11 41/64 May 18 / 1/8 May 29 3/4 May 33 7/16 May 30 1/4 May 63 1/4 June 10 23/32 June 20 7/64 June 27 June 29 1/16 June 32 11/16 June 60 7/8 July 12 27/64 July 21 9/32 July 27 5/16 July 29 12/32 July 36 23/32 July 76 7/8 August 13 3/16 August 23 15/16 August 29 1/8 August 24 25/32 August 30 7/16 August 83 3/16 September 13 5/16 September 24 15/16 September 31 9/16 September 23 31/32 September 37 25/32 September 81 1/2 October 13 15/16 October 24 October 30 21/32 October 24 5/8 October 39 9/32 November 14 19/32 November 24 13/16 November 30 7/16 November 25 9/16 November 37 5/8 December 14 3/4 December 29 11/16 December 27 3/16 December 27 1/16 December 52 9/32
The closing price on , 1999 was . BIOCHEM PHARMA INC. BioChem Pharma Inc. researches and develops products for the prevention, detection and treatment of human diseases. In particular, BioChem focuses its research and development in the antiviral, anticancer, pain control, vaccine and the diagnostic product areas. One of the significant products being developed by BioChem is to be used for the treatment of patients with the HIV infection and forms of hepatitus B. BioChem markets and sells its products through its own sales and marketing force and through co-promotion and licensing arrangements with third parties.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- January 6 15/32 January 7 25/64 January 21 7/8 January 27 29/32 January 20 25/64 January 28 11/16 February 5 17/32 February 6 27/32 February 23 February 26 23/64 February 22 5/16 February 24 9/16 March 4 31/32 March 7 61/64 March 20 25/64 March 21 3/8 March 24 3/64 March 21 5/16 April 4 17/32 April 7 61/64 April 22 5/8 April 17 57/64 April 25 19/64 April 20 3/4 May 4 17/32 May 8 57/64 May 22 7/8 May 24 39/64 May 26 7/64 May 19 1/8 June 4 9/32 June 10 7/8 June 18 61/64 June 22 1/8 June 26 1/2 June 18 3/4 July 4 13/32 July 12 5/16 July 14 55/64 July 28 23/32 July 23 15/16 July 21 5/8 August 5 7/32 August 14 63/64 August 17 9/32 August 25 51/64 August 15 5/16 August 25 59/64 September 5 5/32 September 15 27/32 September 19 61/64 September 31 21/64 September 18 3/8 September 23 15/16 October 5 15/32 October 19 1/64 October 21 3/16 October 24 59/64 October 21 11/16 November 5 29/32 November 19 9/64 November 21 19/64 November 25 23/64 November 24 3/8 December 6 7/32 December 19 61/64 December 24 63/64 December 20 49/64 December 28 5/8
The closing price on , 1999 was . A-2 BIOGEN, INC. Biogen, Inc. develops, manufactures and markets drugs for human health care. Biogen develops products used for the treatment of multiple sclerosis and kidney, inflammatory and cardiovascular diseases. Biogen's research is focused on molecular and cell biology, immunology and protein chemistry which can lead to developments in the understanding of disease processes and, as a result, the creation of new pharmaceuticals, developmental biology and gene therapy. Biogen sells "AVONEX" to treat relapsing forms of multiple sclerosis, hepatitis B vaccines and diagnostic equipment.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- January 13 1/32 January 9 3/32 January 17 9/16 January 23 3/8 January 20 9/16 January 49 1/8 February 10 31/32 February 10 5/16 February 16 11/32 February 24 5/8 February 22 1/16 February 48 1/16 March 8 11/16 March 9 15/16 March 14 7/8 March 18 11/16 March 24 3/32 March 57 5/32 April 8 15/16 April 9 13/16 April 16 15/32 April 16 April 22 3/16 April 47 17/32 May 8 3/8 May 10 3/8 May 15 1/8 May 16 19/32 May 22 May 54 9/16 June 7 5/32 June 11 1/8 June 13 23/32 June 16 15/16 June 24 1/2 June 64 5/16 July 10 7/8 July 11 1/2 July 15 9/32 July 19 1/4 July 27 13/16 July 68 13/16 August 12 19/32 August 13 11/16 August 17 7/16 August 19 11/16 August 23 1/8 August 76 3/4 September 13 5/8 September 15 September 19 September 16 7/32 September 32 29/32 September 78 13/16 October 12 1/4 October 15 5/16 October 18 5/8 October 16 3/4 October 34 3/4 November 9 11/16 November 13 5/8 November 19 1/8 November 17 1/2 November 37 15/16 December 10 7/16 December 15 3/8 December 19 3/8 December 18 3/16 December 41 1/2
The closing price on , 1999 was . CELERA GENOMICS Celera Genomics generates, sells, and supports information about genes and related information management and analysis software. Celera Genomics generates and commercializes genomic information to assist the understanding of biological processes and to assist pharmaceutical and biotechnology research entities in the drug development process and the interrelationship between genetic variability, disease and drug response. Currently, Celera Genomics' products include technologies that allow for the analysis of gene expression which can assist in the identification of genes that are affected by a disease or a particular treatment. Celera Genomics is also involved in the development of genotyping and genomic services for plant and animal breeding programs.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- January * January * January * January * January * January * February * February * February * February * February * February * March * March * March * March * March * March * April * April * April * April * April * April 26 3/8 May * May * May * May * May * May 16 3/4 June * June * June * June * June * June 15 7/8 July * July * July * July * July * July 26 1/4 August * August * August * August * August * August 28 7/16 September * September * September * September * September * September 40 October * October * October * October * October * November * November * November * November * November * December * December * December * December * December *
The closing price on , 1999 was . A-3 CHIRON CORPORATION Chiron Corporation is involved in biopharmaceuticals, vaccines and blood testing. Chiron's products include: "Proleukin," which is marketed as a treatment for metastatic renal cell carcinoma and metastatic melanoma; vaccines for, among other things, tetanus, meningococcus, flu and measles; tests used for screening and testing blood in blood banks; and treatment of diphtheria.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- -------- --------- -------- --------- -------- --------- ------- --------- -------- --------- -------- January 23 25/32 January 17 1/8 January 28 3/4 January 18 5/8 January 17 15/16 January 22 3/4 February 19 3/8 February 15 3/16 February 27 25/32 February 20 3/4 February 19 3/16 February 21 1/16 March 16 7/16 March 13 7/16 March 24 9/16 March 18 5/8 March 20 15/16 March 21 15/16 April 16 7/32 April 13 13/16 April 24 3/32 April 18 3/4 April 19 3/8 April 20 1/8 May 16 May 12 15/16 May 26 1/4 May 18 7/8 May 18 1/16 May 21 1/8 June 13 11/16 June 16 1/4 June 24 1/2 June 20 7/8 June 15 11/16 June 20 3/4 July 13 7/16 July 19 3/4 July 22 July 21 July 17 July 25 1/16 August 17 7/16 August 22 7/16 August 19 5/8 August 22 3/8 August 14 3/8 August 32 1/8 September 16 5/8 September 22 5/8 September 19 September 22 5/8 September 19 7/8 September 27 11/16 October 16 27/32 October 22 3/4 October 22 7/8 October 19 1/4 October 22 1/2 November 19 5/16 November 25 3/16 November 19 3/8 November 18 3/16 November 22 5/8 December 20 3/32 December 27 5/8 December 18 5/8 December 17 December 26 3/16
The closing price on , 1999 was . ENZON, INC. Enzon, Inc. develops, manufactures and markets enhanced therapeutics for life-threatening diseases. Enzon commercializes its technologies by developing and distributing products in cooperation with strategic partners. Enzon has developed products to treat children who are born without fully developed immune systems and that are used in the treatment of a certain form of leukemia.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- -------- January 4 7/8 January 2 January 3 11/16 January 2 61/64 January 5 1/2 January 14 3/8 February 4 7/8 February 2 1/2 February 4 3/4 February 2 3/4 February 5 5/8 February 13 7/8 March 4 5/16 March 2 1/4 March 4 1/4 March 2 9/16 March 6 7/8 March 14 3/4 April 3 1/4 April 2 April 4 3/8 April 2 7/8 April 6 April 13 May 3 May 2 3/8 May 4 May 2 1/2 May 5 3/8 May 14 3/8 June 2 3/4 June 2 3/8 June 3 1/2 June 2 1/4 June 6 3/8 June 20 11/16 July 2 9/16 July 3 3/8 July 2 11/16 July 2 3/4 July 6 9/16 July 24 1/8 August 2 7/16 August 3 1/4 August 2 3/8 August 3 13/16 August 4 1/16 August 33 3/4 September 3 1/8 September 3 3/4 September 2 3/8 September 4 7/8 September 6 5/8 September 30 1/2 October 2 1/4 October 2 5/8 October 2 1/2 October 6 1/8 October 6 November 2 1/8 November 2 3/16 November 2 7/16 November 5 15/16 November 12 December 1 3/4 December 2 1/8 December 2 15/16 December 5 1/2 December 13 9/16
The closing price on , 1999 was . A-4 GENENTECH, INC. Genentech, Inc. uses human genetic information to discover, develop, manufacture and market human pharmaceuticals. Genentech focuses on the cardiovascular area and on oncology. Genetech's products are used for, among other things, the treatment of certain forms of breast cancer, lymphoma, and to assist with the treatment of cystic fibrosis. Genentech markets biotechnology products on its own and through licensing agreements.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- -------- January * January * January * January * January * January * February * February * February * February * February * February * March * March * March * March * March * March * April * April * April * April * April * April * May * May * May * May * May * May * June * June * June * June * June * June * July * July * July * July * July * July 142 August * August * August * August * August * August 164 1/4 September * September * September * September * September * September 146 5/16 October * October * October * October * October * November * November * November * November * November * December * December * December * December * December *
The closing price on , 1999 was . GENZYME CORPORATION Genzyme Corporation develops and markets therapeutic and surgical products, as well as diagnostic services and products. Genzyme also develops and markets biological products and devices for the treatment of a genetic disorder called Gaucher disease, renal diseases, thyroid cancer and other conditions. Genzyme markets many of its products directly to physicians, hospitals and treatment centers around the world through its own sales force.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- -------- --------- -------- --------- -------- --------- -------- --------- --------- --------- -------- January 14 15/16 January 16 51/64 January 36 5/32 January 26 11/16 January 25 47/64 January 53 39/64 February 13 19/64 February 18 15/32 February 32 7/8 February 24 17/32 February 283 33/64 February 44 17/64 March 12 31/64 March 18 15/32 March 26 13/64 March 21 7/16 March 30 55/64 March 49 5/8 April 13 17/32 April 20 3/8 April 26 51/64 April 22 1/32 April 29 53/64 April 37 9/64 May 13 19/64 May 17 5/8 May 27 3/4 May 22 3/4 May 26 13/32 May 39 29/32 June 12 3/16 June 19 1/16 June 23 15/16 June 26 7/16 June 24 21/32 June 48 1/2 July 13 15/32 July 23 15/32 July 23 45/64 July 26 9/32 July 30 11/32 July 56 9/16 August 15 55/64 August 26 5/8 August 22 3/4 August 27 1/8 August 26 1/32 August 56 7/16 September 15 63/64 September 27 41/64 September 24 19/64 September 28 11/16 September 34 27/32 September 45 1/16 October 15 9/32 October 27 3/4 October 21 59/64 October 26 13/32 October 40 9/16 November 13 7/8 November 31 3/32 November 21 11/16 November 25 55/64 November 41 3/8 December 15 1/64 December 29 23/32 December 20 47/64 December 26 49/64 December 48 15/16
The closing price on , 1999 was . A-5 GILEAD SCIENCES, INC. Gilead Sciences, Inc. is a biopharmaceutical company that discovers, develops and commercializes therapeutics for viral diseases. Gilead developed and markets, in the United States, VISTIDE, which is used for the treatment of a sight-threatening viral infection in patients with acquired immune deficiency syndrome (AIDS). Gilead is also developing products to treat diseases caused by HIV, the hepatitis B virus and the influenza virus.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- ------- --------- ------- --------- -------- --------- ------- --------- -------- --------- -------- January 12 3/4 January 13 January 35 3/4 January 32 5/8 January 40 1/2 January 43 February 12 February 14 1/4 February 35 1/2 February 30 1/2 February 35 13/16 February 41 1/4 March 10 3/4 March 13 March 28 3/4 March 22 7/8 March 36 March 45 1/2 April 9 April 15 April 30 1/2 April 22 1/8 April 38 April 46 1/16 May 7 3/4 May 16 1/4 May 34 3/4 May 27 1/8 May 32 3/8 May 43 5/8 June 8 1/2 June 17 5/8 June 25 1/4 June 27 5/8 June 32 1/16 June 52 1/4 July 9 3/8 July 19 July 19 July 28 1/4 July 23 1/2 July 77 1/2 August 10 1/4 August 21 3/4 August 24 1/4 August 32 3/8 August 18 1/4 August 77 15/16 September 11 3/4 September 22 September 28 1/4 September 44 3/8 September 21 5/8 September 64 3/16 October 8 1/2 October 19 1/2 October 23 3/8 October 34 1/8 October 28 3/8 November 10 1/4 November 26 1/4 November 25 11/16 November 34 1/2 November 31 1/8 December 9 1/2 December 32 December 25 December 38 1/4 December 41 1/16
The closing price on , 1999 was . HUMAN GENOME SCIENCES, INC. Human Genome Sciences, Inc. researches and develops proprietary pharmaceutical and diagnostic products based on the discovery and understanding of the medical utility of genes. Human Genome Sciences researches and develops recombinant therapeutic proteins, which are proteins that can be produced on a large scale and used as drugs to treat diseases. Using automated, high- throughput gene sequencing technology, Human Genome Sciences also generates a collection of partial human gene sequences in database format.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- -------- --------- -------- January 20 January 14 1/8 January 43 1/2 January 46 January 37 7/8 January 33 3/8 February 16 February 12 1/2 February 41 5/8 February 38 February 42 1/2 February 29 7/8 March 16 1/4 March 12 5/8 March 38 1/2 March 32 1/2 March 39 13/16 March 34 11/16 April 17 1/2 April 12 5/8 April 39 3/4 April 31 3/8 April 36 3/8 April 37 May 19 1/2 May 15 May 36 5/8 May 38 3/4 May 36 1/2 May 42 1/4 June 19 1/4 June 16 3/4 June 36 3/4 June 33 1/4 June 35 11/16 June 39 1/2 July 16 July 24 July 30 3/4 July 32 3/8 July 37 1/2 July 52 1/16 August 16 1/2 August 22 August 34 1/8 August 37 1/4 August 24 3/4 August 68 1/16 September 16 1/2 September 21 3/4 September 37 3/4 September 43 1/16 September 30 September 73 3/4 October 17 1/2 October 19 5/8 October 36 1/2 October 41 October 34 5/8 November 17 1/2 November 27 November 37 1/4 November 41 November 31 1/4 December 14 3/4 December 38 1/4 December 40 3/4 December 39 3/4 December 35 9/16
The closing price on , 1999 was . A-6 ICOS CORPORATION ICOS Corporation develops proprietary biopharmaceuticals and small molecule pharmaceuticals for the treatment of inflammatory diseases and other special medical conditions. ICOS's products address opportunities in the treatment of chronic and acute diseases that have inflammatory components as well as certain cardiovascular diseases and cancer. ICOS is developing and globally commercializing some of its products through a joint venture with Eli Lily & Company.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- ------- --------- ------- --------- ------- --------- -------- --------- -------- --------- -------- January 5 7/8 January 4 3/8 January 8 5/8 January 8 January 16 1/16 January 26 3/4 February 5 1/2 February 4 1/2 February 8 1/2 February 8 1/2 February 14 1/16 February 24 1/2 March 5 March 4 3/8 March 9 3/8 March 7 5/16 March 15 1/4 March 33 3/4 April 4 3/8 April 4 5/8 April 8 13/16 April 6 15/16 April 14 3/4 April 39 3/4 May 4 7/8 May 5 1/8 May 8 7/8 May 8 1/16 May 21 1/16 May 43 13/16 June 4 3/8 June 5 3/4 June 8 3/4 June 8 1/4 June 19 1/8 June 40 13/16 July 3 7/8 July 6 3/8 July 6 5/8 July 8 5/8 July 23 1/2 July 37 3/8 August 4 1/2 August 6 7/8 August 7 7/8 August 9 5/8 August 14 7/8 August 31 13/16 September 4 3/4 September 6 7/8 September 8 3/4 September 12 5/8 September 17 3/4 September 29 1/2 October 4 1/4 October 5 3/4 October 7 1/2 October 14 October 18 1/2 November 4 1/4 November 7 November 7 5/8 November 13 13/16 November 21 11/16 December 3 11/16 December 7 3/8 December 7 5/8 December 18 5/16 December 29 3/4
The closing price on , 1999 was . IDEC PHARMACEUTICALS CORPORATION IDEC Pharmaceuticals Corporation is a biopharmaceutical company engaged primarily in the research, development and commercialization of targeted therapies for the treatment of cancer and autoimmune and inflammatory diseases. IDEC's first commercial product, "Rtuxan", treats certain B-cell non-Hodgkin's lymphomas, which is a type of cancer of the lymphatic system. IDEC also develops products for the treatment of certain solid tumor cancers and various autoimmune diseases.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- ------- --------- ------- --------- ------- --------- -------- --------- -------- --------- ------- January 6 1/2 January 2 9/16 January 21 1/2 January 23 1/4 January 41 3/4 January 50 1/2 February 5 1/4 February 3 3/4 February 20 1/4 February 24 7/8 February 45 3/8 February 43 5/16 March 3 7/8 March 3 3/4 March 22 1/4 March 23 13/16 March 44 1/4 March 51 3/8 April 3 5/8 April 4 April 28 7/8 April 17 3/4 April 36 April 50 3/4 May 3 3/4 May 4 1/2 May 25 3/4 May 22 1/2 May 31 1/2 May 50 7/16 June 2 7/16 June 5 5/8 June 23 1/8 June 24 1/4 June 23 9/16 June 77 1/16 July 2 3/4 July 6 3/4 July 15 1/2 July 27 1/4 July 23 11/16 July 99 1/8 August 2 3/4 August 6 7/8 August 23 3/8 August 30 3/8 August 18 August 12 1/16 September 2 3/8 September 7 7/8 September 24 September 41 7/8 September 23 3/4 September 94 1/32 October 2 7/8 October 11 7/8 October 21 5/8 October 38 1/8 October 29 7/8 November 2 1/2 November 13 1/4 November 24 1/4 November 34 15/16 November 33 5/8 December 2 1/8 December 19 1/2 December 23 3/4 December 34 3/8 December 47
The closing price on , 1999 was . A-7 IMMUNEX CORPORATION Immunex Corporation is a biopharmaceutical company that discovers, develops, manufactures and markets therapeutic products. Immunex's products are used to treat human diseases, including cancer, infectious diseases and immunological disorders such as rheumatoid arthritis. Immunex focuses on the discovery and development of molecules with potential applications for the treatment of asthma, cancer, multiple sclerosis, AIDS and certain inflammatory diseases.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- ------- --------- ------- --------- ------- --------- -------- --------- -------- --------- -------- January 4 13/16 January 3 13/16 January 4 3/32 January 5 3/64 January 13 47/64 January 39 1/32 February 3 15/16 February 4 3/16 February 4 February 7 1/16 February 14 25/32 February 35 3/8 March 3 1/2 March 4 5/16 March 4 1/32 March 6 5/8 March 16 27/32 March 41 5/8 April 3 11/32 April 3 April 3 29/32 April 6 31/32 April 17 5/32 April 47 1/4 May 3 7/16 May 3 1/4 May 3 7/8 May 7 27/32 May 15 7/16 May 65 1/16 June 3 3/16 June 3 1/4 June 3 13/32 June 9 1/16 June 16 9/16 June 63 23/32 July 3 1/4 July 3 1/2 July 3 5/32 July 9 9/16 July 17 11/16 July 56 7/16 August 3 13/16 August 3 7/8 August 3 9/32 August 10 15/16 August 12 21/32 August 67 5/16 September 3 7/16 September 3 9/16 September 3 1/4 September 16 13/16 September 13 27/32 September 43 3/8 October 3 3/8 October 3 3/16 October 3 3/8 October 16 October 17 17/64 November 4 1/16 November 4 9/64 November 3 3/8 November 14 9/32 November 23 1/32 December 3 23/32 December 4 1/8 December 4 7/8 December 13 1/2 December 31 29/64
The closing price on , 1999 was . A-8 MEDIMMUNE, INC. MedImmune, Inc. is a biotechnology company that focuses on using advances in immunology and other biological sciences to develop products that address medical needs in areas such as infectious diseases, transplantation medicine, autoimmune diseases and cancer. MedImmune markets three products through its hospital-based sales force and has five new product candidates in clinical trial. One of MedImmune's products, Synagis, is used to prevent respiratory syncytial virus in high-risk pediatric patients. Respiratory syncytial virus is the leading cause of pneumonia and bronchiolitis in infants and children.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- ------- --------- ------- --------- ------- --------- -------- --------- -------- --------- --------- January 6 7/16 January 3 9/16 January 9 1/8 January 7 15/16 January 22 15/16 January 49 1/2 February 6 1/4 February 3 1/2 February 9 3/8 February 7 1/4 February 25 15/16 February 55 March 5 3/16 March 3 3/16 March 7 7/8 March 6 7/8 March 27 9/16 March 59 3/16 April 4 13/16 April 3 3/4 April 8 1/4 April 6 1/2 April 26 3/8 April 55 1/8 May 4 1/8 May 4 3/8 May 9 5/16 May 7 3/4 May 24 15/16 May 63 5/8 June 4 3/8 June 7 3/16 June 8 1/2 June 9 1/4 June 31 13/16 June 67 3/4 July 2 7/16 July 4 1/2 July 6 7/8 July 11 7/8 July 29 25/64 July 79 7/8 August 2 3/8 August 6 3/16 August 7 August 13 1/4 August 24 1/8 August 103 3/16 September 2 5/16 September 5 9/16 September 7 1/8 September 18 3/8 September 32 3/8 September 99 21/32 October 2 3/16 October 5 7/16 October 7 3/4 October 19 15/16 October 33 5/8 November 2 3/16 November 6 3/8 November 7 5/8 November 19 1/8 November 33 7/16 December 1 3/4 December 10 December 8 1/2 December 21 7/16 December 49 23/32
The closing price on , 1999 was . MILLENNIUM PHARMACEUTICALS, INC. Millennium Pharmaceuticals, Inc. uses genetics, genomics (the study of genes and their function) and bioinformatics to identify the genes responsible for common, major diseases and to determine the gene's role in disease initiation and progression. Some of Millennium's disease targets include: obesity, type II diabetes, asthma & allergy, cardiovascular diseases, cancer, central nervous system disorders and osteoporosis.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- ------- --------- ------- --------- ------- --------- -------- --------- -------- --------- -------- January * January * January * January 19 3/8 January 18 13/16 January 37 31/32 February * February * February * February 16 3/4 February 20 1/8 February 31 1/16 March * March * March * March 13 5/8 March 18 5/8 March 31 1/4 April * April * April * April 14 3/4 April 19 April 37 3/16 May * May * May 20 1/4 May 17 1/2 May 17 5/8 May 37 7/8 June * June * June 15 1/2 June 16 1/8 June 14 1/8 June 36 July * July * July 15 1/2 July 14 5/8 July 15 July 62 1/2 August * August * August 18 1/4 August 13 1/2 August 11 1/2 August 58 15/16 September * September * September 18 1/4 September 19 1/2 September 17 3/8 September 65 October * October * October 20 3/8 October 19 15/16 October 18 3/8 November * November * November 17 3/4 November 20 November 20 3/8 December * December * December 17 3/8 December 19 December 25 7/8
The closing price on , 1999 was . A-9 PE CORP-PE BIOSYSTEMS GROUP PE Corp-PE Biosystems Group researches, develops, manufactures, sells and supports instrument systems, reagents and software for the pharmaceutical, biotechnology, environmental testing, food, human identification, agriculture and chemical manufacturing industries. PE Corp-PE Biosystems Group is also undertaking the sequencing of the human genome along with other model organisms. Building on the sequence data, it will seek to develop and compile biological and medical data to create an information portal for the life science and medical community.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- January 19 1/2 January 13 3/4 January 23 5/8 January 34 15/16 January 29 1/2 January 47 17/32 February 18 13/16 February 14 5/16 February 23 1/8 February 35 1/2 February 36 19/32 February 47 3/8 March 16 11/16 March 14 9/16 March 27 1/16 March 32 3/16 March 36 5/32 March 48 17/32 April 14 1/2 April 15 9/16 April 27 7/16 April 36 5/16 April 34 3/16 April 54 1/16 May 14 9/16 May 17 3/8 May 26 1/2 May 38 May 34 1/4 May 55 27/32 June 14 3/4 June 17 11/16 June 24 1/8 June 39 25/32 June 31 3/32 June 57 3/8 July 14 3/16 July 17 July 26 1/8 July 40 13/16 July 29 5/16 July 56 1/16 August 14 15/16 August 17 1/16 August 25 15/16 August 37 August 28 15/16 August 68 13/16 September 15 11/16 September 17 13/16 September 28 15/16 September 36 17/32 September 34 11/32 September 72 1/4 October 14 3/4 October 17 9/16 October 26 13/16 October 31 1/4 October 42 5/32 November 13 13/16 November 18 November 30 13/16 November 34 25/32 November 46 5/8 December 12 13/16 December 18 7/8 December 29 7/16 December 35 17/32 December 48 25/32
The closing price on , 1999 was . QLT PHOTOTHERAPEUTICS INC. QLT PhotoTherapeutics Inc. develops and commercializes proprietary pharmaceutical products for use in photodynamic therapy, a field of medicine that utilizes light-activated drugs in the treatment of disease. QLT currently provides "PHOTOFRIN," a photodynamic therapy drug used in the treatment of various cancers. QLT is also developing "Visudyne," a photosensitizer for the treatment of the wet form of age-related macular degeneration, the leading cause of severe vision loss in people over the age of 50. QLT has ongoing development programs to apply photodynamic therapy for the treatment of non- melanoma skin cancer and certain autoimmune and cardiovascular diseases.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- ------- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- January 7 1/8 January 5 7/8 January 9 January 23 1/4 January 13 7/8 January 40 5/16 February 6 1/4 February 5 1/2 February 12 February 26 15/16 February 14 3/8 February 39 March 6 1/4 March 5 March 13 March 20 3/4 March 17 3/8 March 40 3/4 April 7 1/8 April 5 3/8 April 20 1/2 April 23 1/8 April 17 3/8 April 45 11/16 May 7 1/8 May 5 13/32 May 21 3/8 May 22 5/8 May 19 1/2 May 43 3/4 June 5 1/2 June 5 3/8 June 18 1/2 June 21 June 16 3/4 June 55 July 6 1/2 July 7 July 14 11/16 July 20 3/8 July 16 July 64 August 7 1/8 August 6 3/8 August 16 3/4 August 19 1/8 August 12 1/2 August 81 7/8 September 6 3/4 September 7 September 18 7/32 September 16 7/16 September 11 3/4 September 76 7/16 October 6 11/16 October 6 October 17 7/8 October 17 3/8 October 15 15/32 November 6 5/8 November 7 5/8 November 19 3/8 November 12 November 15 13/16 December 5 5/8 December 10 1/8 December 20 1/8 December 11 1/8 December 22 3/4
The closing price on , 1999 was . A-10 SEPRACOR INC. Sepracor Inc. is a specialty pharmaceutical company that focuses on the development and commercialization of potentially improved versions of widely- prescribed drugs. Sepracor's Improved Chemical Entities pharmaceuticals are being developed as proprietary, single-isomer or active-metabolite versions of these drugs. These pharmaceuticals are designed to improve patient outcome through reduced side effects, increased therapeutic efficacy, or improved dosage forms. Sepracor's portfolio focuses on the allergy/asthma, urology/gastroenterology and psychiatry/neurology markets.
Closing Closing Closing Closing Closing Closing 1994 Price 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price - --------- ------- --------- ------- --------- ------- --------- -------- --------- ------- --------- ------- January 8 1/2 January 6 1/4 January 18 5/8 January 26 1/2 January 35 1/8 January 114 3/4 February 8 5/8 February 7 1/2 February 15 1/2 February 24 1/8 February 40 1/4 February 124 3/4 March 7 March 10 1/8 March 14 5/8 March 23 1/16 March 42 5/8 March 112 1/4 April 5 1/2 April 9 43/64 April 14 April 19 1/2 April 46 1/4 April 84 1/2 May 6 May 12 May 14 5/8 May 24 1/2 May 43 May 63 3/4 June 5 5/8 June 13 1/2 June 15 June 25 13/16 June 41 1/2 June 81 1/4 July 5 3/8 July 14 7/8 July 13 1/2 July 25 1/8 July 54 July 73 1/2 August 4 3/4 August 18 3/4 August 13 1/4 August 22 August 47 5/8 August 74 7/8 September 4 13/14 September 21 5/8 September 14 1/8 September 32 7/8 September 65 3/4 September 75 1/2 October 5 5/16 October 16 7/8 October 16 1/4 October 35 7/8 October 68 5/8 November 3 7/8 November 16 November 16 5/8 November 36 7/8 November 83 December 4 1/8 December 18 3/8 December 16 5/8 December 40 1/16 December 88 1/8
The closing price on , 1999 was . A-11 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [LOGO] BIOTECH HOLDRS(SM) 1,000,000,000 Depositary Receipts Biotech HOLDRsSM Trust ------------------- P R O S P E C T U S ------------------- Merrill Lynch & Co. , 1999 Until , 1999 (25 days after the date of this prospectus), all dealers effecting transactions in the offered Biotech HOLDRs, whether or not participating in this distribution, may be required to deliver a prospectus. This requirement is in addition to the obligations of dealers to deliver a prospectus when acting as underwriters and with respect to unsold allotments or subscriptions. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The expenses expected to be incurred in connection with the issuance and distribution of the securities being registered, other than underwriting compensation, are as set forth below. Except for the registration fee payable to the Securities and Exchange Commission, all such expenses are estimated: Securities and Exchange Commission registration fee........... $ 83,345 Printing and engraving expenses............................... 150,000 Legal fees and expenses....................................... 800,000 Rating agency fees............................................ 0 Miscellaneous................................................. 16,655 ---------- Total....................................................... $1,050,000
Item 15. Indemnification of Directors and Officers. Section 145 of the General Corporation Law of the State of Delaware, as amended, provides that under certain circumstances a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director, officer, employee or agent of the corporation or is or was serving at its request in such capacity in another corporation or business association, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. Article XIV, Section 2 of the Restated Certificate of Incorporation of Merrill Lynch, Pierce, Fenner & Smith Incorporated provides in effect that, subject to certain limited exceptions, Merrill Lynch, Pierce, Fenner & Smith Incorporated shall indemnify its directors and officers to the full extent authorized or permitted by law. The directors and officers of Merrill Lynch, Pierce, Fenner & Smith Incorporated are insured under policies of insurance maintained by Merrill Lynch, Pierce, Fenner & Smith Incorporated, subject to the limits of the policies, against certain losses arising from any claim made against them by reason of being or having been such directors or officers. In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated has entered into contracts with all of its directors providing for indemnification of such persons by Merrill Lynch, Pierce, Fenner & Smith Incorporated to the full extent authorized or permitted by law, subject to certain limited exceptions. Item 16. Exhibits. See Exhibit Index. Item 17. Undertakings. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: II-1 (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933. (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of the prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (5) For purposes of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (6) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to Item 15 of this registration statement, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant hereby certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, on October 28, 1999. Merrill Lynch, Pierce, Fenner & Smith Incorporated By: * ---------------------------------- Name:Ahmass L. Fakahany Title: Senior Vice President, Chief Financial Officer and Controller Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed by the following persons in the capacities and on October 28, 1999.
Signature Title --------- ----- * Director ___________________________________________ John L. Steffens * Director ___________________________________________ E. Stanley O'Neal * Director ___________________________________________ George A. Schieren * Senior Vice President, ___________________________________________ Chief Financial Officer
Ahmass L. Fakahany and Controller *By: /s/ Stephen G. Bodurtha Attorney-in-Fact --------------------------------- Stephen G. Bodurtha II-3 INDEX TO EXHIBITS
Exhibits -------- 4.1 Standard Terms for Depositary Trust Agreements between Merrill Lynch, Pierce, Fenner & Smith Incorporated and The Bank of New York, as Trustee dated as of September 2, 1999, and included as exhibits thereto, form of Depositary Trust Agreement and form of HOLDRs 5.1 Opinion of Shearman & Sterling regarding the validity of the Biotech HOLDRs 8.1 Opinion of Shearman & Sterling, as special U.S. tax counsel regarding the material federal income tax consequences *24.1 Power of Attorney (included in Part II of Registration Statement)
- -------- * Previously filed. II-4 EX-4.1 2 STANDARD TERMS FOR DEPOSITARY TRUST AGREEMENTS [Execution Copy] EXHIBIT 4.1 STANDARD TERMS FOR DEPOSITARY TRUST AGREEMENTS between MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and THE BANK OF NEW YORK, as Trustee Dated as of September 2, 1999
TABLE OF CONTENTS Page ---- ARTICLE 1 DEFINITIONS AND ASSUMPTIONS Section 1.1. Definitions ............................................................ 1 Section 1.2. Rules of Construction .................................................. 5 ARTICLE 2 FORM OF RECEIPTS, DEPOSIT OF SECURITIES, DELIVERY, REGISTRATION OF TRANSFER AND SURRENDER OF RECEIPTS Section 2.1. Depositary Trust Agreements ............................................ 6 Section 2.2. Creation and Declaration of Trusts; Deposit of Securities .............. 6 Section 2.3. Acceptance by Trustee .................................................. 8 Section 2.4. Form and Transferability of Receipts ................................... 8 Section 2.5. Delivery of Receipts ................................................... 10 Section 2.6. Registration; Registration of Transfer; Combination and Split-up of Certificates ....................................................... 11 Section 2.7. Surrender of Receipts and Withdrawal of Underlying Securities .......... 12 Section 2.8. Limitations on Delivery, Registration of Transfer and Surrender of Receipts ........................................................... 13 Section 2.9. Lost Certificates, Etc ................................................. 14 Section 2.10. Cancellation and Destruction of Surrendered Certificates ............... 14 Section 2.11. Reconstitution Events .................................................. 14 ARTICLE 3 CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS Section 3.1. Filing Proofs, Certificates and Other Information ...................... 16 Section 3.2. Liability of Owner for Taxes and Other Charges ......................... 16 Section 3.3. Warranties on Deposit of Shares ........................................ 17 ARTICLE 4 THE UNDERLYING SECURITIES Section 4.1. Cash Distributions ..................................................... 17 Section 4.2. Distributions Other Than Cash or Securities ............................ 17 Section 4.3. Distributions in Securities ............................................ 18 Section 4.4. Rights Offerings ....................................................... 19
-i-
Page ---- Section 4.5. Fixing of Record Date .................................................. 19 Section 4.6. Reports ................................................................ 20 Section 4.7. Voting Instructions for Underlying Securities .......................... 20 Section 4.8. Changes Affecting Underlying Securities ................................ 21 Section 4.9. Withholding ............................................................ 22 Section 4.10. Limitation on Distributions ............................................ 22 ARTICLE 5 THE TRUSTEE AND THE INITIAL DEPOSITOR Section 5.1. Maintenance of Office and Transfer Books by the Trustee ................ 22 Section 5.2. Prevention or Delay in Performance by the Initial Depositor or the Trustee ............................................................ 23 Section 5.3. Obligations of the Initial Depositor and the Trustee ................... 24 Section 5.4. Resignation or Removal of the Trustee; Appointment of Successor Trustee ............................................................ 26 Section 5.5. Indemnification ........................................................ 27 Section 5.6. Charges of Trustee ..................................................... 29 Section 5.7. Retention of Trust Documents ........................................... 30 Section 5.8. Federal Securities Law Filings ......................................... 30 Section 5.9. Prospectus Delivery .................................................... 30 ARTICLE 6 AMENDMENT AND TERMINATION Section 6.1. Amendment .............................................................. 31 Section 6.2. Early Termination ...................................................... 31 ARTICLE 7 MISCELLANEOUS Section 7.1. Counterparts ........................................................... 33 Section 7.2. Third-Party Beneficiaries .............................................. 33 Section 7.3. Severability ........................................................... 34 Section 7.4. Owners and Beneficial Owners as Parties; Binding Effect ................ 34 Section 7.5. Notices ................................................................ 34 Section 7.6. Governing Law .......................................................... 35
-ii- Page ---- EXHIBIT A FORM OF DEPOSITARY TRUST AGREEMENT ......................................... A-1 EXHIBIT B FORM OF CERTIFICATE EVIDENCING RECEIPTS .................................... B-1 -iii- STANDARD TERMS FOR DEPOSITARY TRUST AGREEMENTS agreed to as of September 2, 1999 (these "Standard Terms"), between MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, a Delaware corporation (the "Initial Depositor") and THE BANK OF NEW YORK, a New York banking corporation, as trustee (the "Trustee"). W I T N E S S E T H : WHEREAS, from time to time, the Initial Depositor and the Trustee may enter into one or more depositary trust agreements providing for the deposit with the Trustee of specified Securities (as hereinafter defined), the creation of Depositary Trust Receipts representing the Securities so deposited and the execution and delivery of certificates evidencing the Depositary Trust Receipts; and WHEREAS, the Initial Depositor and the Trustee wish to establish the general terms and conditions of such depositary trust agreements and the form of the certificates evidencing Depositary Trust Receipts; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in these Standard Terms, the parties hereby agree as follows: ARTICLE 1 DEFINITIONS AND ASSUMPTIONS Section 1.1. Definitions. Except as otherwise specified in these ----------- Standard Terms or in the applicable Depositary Trust Agreement or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of these Standard Terms and the applicable Depositary Trust Agreement. "Beneficial Owner" means any Person owning a beneficial interest in any Receipt. "Closing Date" means the day on which the initial deposit of Securities is to be made, which date may be specified in the applicable Depositary Trust Agreement. "Commission" means the Securities and Exchange Commission of the United States or any successor governmental agency in the United States. "Corporate Trust Office" means the office of the Trustee at which its depositary receipt business is administered which, at the date of these Standard Terms, is 101 Barclay Street, New York, New York 10286. "Deliver" means (a) when used with respect to Securities, either (i) one or more book-entry transfers of such Securities to an account at DTC designated by the Person entitled to such delivery for further credit as specified by such Person or (ii) in the case of Securities for which DTC book- entry settlement is not available, the delivery of certificates evidencing such Securities to the Person entitled to such delivery, duly endorsed for transfer or accompanied by proper instruments of transfer and (b) when used with respect to Receipts, either (i) one or more book-entry transfers of Receipts to an account at DTC designated by the Person entitled to such delivery for further credit as specified by such Person or (ii) in the event DTC ceases to make its book-entry settlement system available for the Receipts, execution and delivery at the Corporate Trust Office of the Trustee of one or more certificates evidencing such Receipts. "Depositary Trust Agreement" means a depositary trust agreement entered into by the Initial Depositor and the Trustee pursuant to these Standard Terms which incorporates by reference these Standard Terms. -2- "Depositor" means any Person who deposits Securities into the Trust, either for its own account or on behalf of another Person who is the owner or beneficial owner of such Securities. "Depositor Order" means a written order or request signed in the name of the Initial Depositor or any other Depositor, as applicable. "DTC" means The Depository Trust Company, its nominees and their respective successors. "Initial Depositor" means Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation, or its successor. "Issuance Denomination" is defined in Section 2.4, subject to increase as provided in Sections 4.3 and 4.8. "Owner" means the Person in whose name a Receipt is registered in the books of the Trustee maintained for that purpose. "Person" means any individual, limited liability company, corporation, partnership, joint venture, association, joint stock company, trust (including any trust beneficiary), unincorporated organization or government or any agency or political subdivision thereof. "Receipt" means a depositary trust receipt which is issued under the Depositary Trust Agreement and which represents the Owner's right to receive the Underlying Securities which must be deposited into the Trust for issuance of a Receipt -3- plus any other Underlying Securities received by the Trustee with respect to such Underlying Securities and held by the Trustee under the Depositary Trust Agreement at such time. The Trustee shall only accept for deposit whole Securities and shall not issue Receipts except to the extent such Receipts represent, in the aggregate, whole Underlying Securities. "Registrar" means any bank or trust company having an office in the Borough of Manhattan, The City of New York, which shall be appointed to register Receipts and transfers of Receipts as herein provided. "Restricted Securities" means Securities, or Receipts representing such Securities, which are acquired directly or indirectly from the issuer or its affiliates (as defined in Rule 144 under the Securities Act of 1933) in a transaction or chain of transactions not involving any public offering, or which are held by an officer or director (or person performing similar functions) or other affiliate of the issuer, or which would require registration under the Securities Act of 1933 in connection with the public offer and sale thereof in the United States, or which are subject to other restrictions on sale or deposit under the federal securities laws of the United States, a shareholder agreement or the corporate documents of the issuer. "Round Lot" means 100. "Securities" means any shares of a class of securities which must be deposited for issuance of Receipts. "Securities Issuer" means, as of any time, the issuer of a class of Securities. -4- "Securities Registrar" means the entity that presently carries out the duties of registrar for any Securities or any successor as registrar for any Securities and any other appointed agent of a Securities Issuer for the transfer and registration of Securities. "Surrender" means, when used with respect to Receipts, (a) one or more book-entry transfers of Receipts to the DTC account of the Trustee or (b) surrender to the Trustee at its Corporate Trust Office of one or more certificates evidencing such Receipts, in each case in a Round Lot or an integral multiple thereof. "Trust" means the trust entity created by the Depositary Trust Agreement. "Trustee" means The Bank of New York, a New York banking corporation, in its capacity as Trustee under the Depositary Trust Agreement, or any successor as Trustee thereunder. "Underlying Securities" means, as of any time, Securities of each of the classes and in the quantities required by the Depositary Trust Agreement to be deposited in the Trust for the issuance of Receipts and which are at such time deposited under the applicable Depositary Trust Agreement and any other securities, property or cash received by the Trustee in respect thereof and at such time held hereunder. Section 1.2. Rules of Construction. Unless the context otherwise --------------------- requires: (i) a term has the meaning assigned to it; -5- (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect in the United States from time to time; (iii) "or" is not exclusive; (iv) the words "herein", "hereof", "hereunder" and other words of similar import refer to these Standard Terms or the Depositary Trust Agreement as a whole and not to any particular Article, Section or other subdivision; (v) "including" means including without limitation; and (vi) words in the singular include the plural and words in the plural include the singular. ARTICLE 2 FORM OF RECEIPTS, DEPOSIT OF SECURITIES, DELIVERY, REGISTRATION OF TRANSFER AND SURRENDER OF RECEIPTS Section 2.1. Depositary Trust Agreements. Each Depositary Trust --------------------------- Agreement entered into between the Initial Depositor and the Trustee for the purposes set forth herein shall be in substantially the form of Exhibit A to these Standard Terms and shall provide that these Standard Terms shall be incorporated by reference into, and form a part of, such Depositary Trust Agreement. Section 2.2. Creation and Declaration of Trusts; Deposit of ---------------------------------------------- Securities. (a) The Initial Depositor, concurrently with the execution and - ---------- delivery of the Depositary Trust Agreement, does hereby agree to deposit with the Trustee under the Depositary -6- Trust Agreement all the right, title and interest of the Initial Depositor in, to and under Securities, of each of the classes and in the quantities necessary to create Receipts in accordance with Section 2 of the Depositary Trust Agreement in effect at the time of deposit. Unless otherwise specified in the Depositary Trust Agreement, such deposit shall include all cash dividends and distributions in respect of such Securities. (b) From time to time after the date of the Depositary Trust Agreement, a Depositor may deposit with the Trustee, in the manner specified in subsection (a), Securities, of each of the classes and in the quantities necessary to create Receipts in accordance with Section 2 of the Depositary Trust Agreement in effect at the time of deposit by Delivery of such Securities to the Trustee. (c) The Trustee shall only accept for deposit whole Securities and shall not issue Receipts except to the extent such Receipts represent, in the aggregate, whole Underlying Securities. (d) The Trust shall not engage in any business or activities other than those required or authorized by these Standard Terms or incidental and necessary to carry out the duties and responsibilities set forth in the Depositary Trust Agreement. Other than issuance of the Receipts, the Trust shall not issue or sell any certificates or other obligations or otherwise incur, assume or guarantee any indebtedness for money borrowed. (e) Anything herein to the contrary notwithstanding, the Trustee does not assume any of the duties, responsibilities, obligations or liabilities of the Initial Depositor or any other Depositor in respect of the Underlying Securities. -7- (f) Underlying Securities shall be held by the Trustee at such place and in such manner as the Trustee shall determine. Section 2.3. Acceptance by Trustee. The Trustee will hold the --------------------- Underlying Securities for the benefit of the Owners for the purposes, and subject to and limited by the terms and conditions, set forth in these Standard Terms and the applicable Depositary Trust Agreement. Section 2.4. Form and Transferability of Receipts. (a) The ------------------------------------ certificates evidencing Receipts shall be substantially in the form set forth in Exhibit B annexed to these Standard Terms, with appropriate insertions, modifications and omissions, as hereinafter provided or as may be provided in the Depositary Trust Agreement. The Issuance Denominations of a certificate shall be any integral multiple of a Round Lot of Receipts, subject to increase or decrease as provided in Sections 4.3 and 4.8. No Receipt shall be entitled to any benefits under the Depositary Trust Agreement or be valid or obligatory for any purpose unless a certificate evidencing such Receipt shall have been executed by the Trustee by the manual or facsimile signature of a duly authorized signatory of the Trustee and, if a Registrar (other than the Trustee) for the Receipts shall have been appointed, countersigned by the manual or facsimile signature of a duly authorized officer of the Registrar. The Trustee shall maintain books on which the registered ownership of each Receipt and transfers, if any, of such registered ownership shall be recorded. Certificates evidencing Receipts bearing the manual or facsimile signature of a duly authorized signatory of the Trustee and Registrar, if applicable, who was at the time such certificates were executed a proper signatory of the Trustee or Registrar, if applicable, shall bind the Trustee, notwithstanding that such signatory has ceased to hold such office prior to the delivery of such certificates. -8- (b) The certificates evidencing Receipts may be endorsed with or have incorporated in the text thereof such legends or recitals or modifications not inconsistent with the provisions of the Depositary Trust Agreement as may be required by the Trustee or required to comply with any applicable law or regulations thereunder or with the rules and regulations of any securities exchange upon which Receipts may be listed or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Receipts are subject by reason of the date of issuance of the Underlying Securities or otherwise. (c) The Initial Depositor and the Trustee will apply to DTC for acceptance of the Receipts in its book-entry settlement system. Receipts deposited with DTC shall be represented by one or more global certificates which shall be registered in the name of Cede & Co., as nominee for DTC, and shall bear the following legend: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE AGENT AUTHORIZED BY THE ISSUER FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. (d) So long as the Receipts are eligible for book-entry settlement with DTC and such settlement is available, unless otherwise required by law, notwithstanding anything to the contrary in the Depositary Trust Agreement, all Receipts shall be -9- evidenced by one or more global certificates registered in the name of a nominee of DTC and no person acquiring beneficial ownership of such Receipts shall receive or be entitled to receive physical delivery of Receipts. Ownership of beneficial interests in Receipts evidenced by such global certificate or certificates shall be shown on, and the transfer of such ownership shall be effected only through, records maintained by (i) DTC or (ii) institutions that have accounts with DTC. (e) If, at any time when Receipts are evidenced by a global certificate, DTC ceases to make its book-entry settlement system available for such Receipts, the Trustee shall issue separate certificates evidencing Receipts to the DTC book-entry settlement system participants entitled thereto, with such additions, deletions and modifications to the Depositary Trust Agreement and to the form of certificate evidencing Receipts as the Initial Depositor and the Trustee may, from time to time, agree. (f) Title to a certificate evidencing Receipts (and to the Receipts evidenced thereby), when properly endorsed or accompanied by proper instruments of transfer, shall be transferable by delivery with the same effect as in the case of a negotiable instrument under the laws of New York; provided, however, -------- ------- that the Trustee, notwithstanding any notice to the contrary, may treat the Owner of Receipts as the absolute owner thereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in the Depositary Trust Agreement and for all other purposes. Section 2.5. Delivery of Receipts. Upon receipt by the Trustee of -------------------- any deposit pursuant to Section 2.2, together with a Depositor Order and the other documents required as above specified, if any, the Trustee, subject to the terms and conditions of the applicable Depositary Trust Agreement, shall Deliver to or upon the written order of the Depositor the number of Receipts issuable in respect of such deposit, provided such -10- number is an integral multiple of an Issuance Denomination, but only upon payment to the Trustee of the fees and expenses of the Trustee as provided in Section 5.6 and of all taxes and governmental charges and fees payable in connection with such deposit and the transfer of the Underlying Securities. Section 2.6. Registration; Registration of Transfer; Combination and ------------------------------------------------------- Split-up of Certificates. (a) The Trustee shall keep or cause to be kept a - ------------------------ register of Owners of Receipts and shall provide for the registration of Receipts and the registration of transfers and exchanges of Receipts. (b) The Trustee, subject to the terms and conditions of these Standard Terms and the applicable Depositary Trust Agreement, shall register transfers of ownership of Receipts on its transfer books from time to time, upon any Surrender of a certificate evidencing such Receipts in any integral multiple of a Round Lot, by the Owner in person or by a duly authorized attorney, properly endorsed or accompanied by proper instruments of transfer, and duly stamped as may be required by the laws of the State of New York and of the United States of America. Thereupon the Trustee shall execute a new certificate or certificates evidencing such Receipts in any integral multiple of a Round Lot requested, and deliver the same to or upon the order of the Person entitled thereto. (c) The Trustee, subject to the terms and conditions of these Standard Terms and the applicable Depositary Trust Agreement, shall, upon Surrender of a certificate evidencing Receipts for the purposes of effecting a split-up or combination of such certificate or certificates, execute and deliver one or more new certificate or certificates evidencing such Receipts in any integral multiple of a Round Lot requested. -11- (d) The Trustee may appoint one or more co-transfer agents for the purpose of effecting transfers, combinations and split-ups of Receipts at designated transfer offices on behalf of the Trustee. In carrying out its functions, a co-transfer agent may require evidence of authority and compliance with applicable laws and other requirements by Owners or Persons entitled to Receipts and will be entitled to protection and indemnity to the same extent as the Trustee. Section 2.7. Surrender of Receipts and Withdrawal of Underlying -------------------------------------------------- Securities. (a) Upon Surrender at the Corporate Trust Office of the Trustee - ---------- of a Round Lot of Receipts or integral multiple thereof for the purpose of withdrawal of the Underlying Securities represented thereby, and upon payment of the fee of the Trustee in connection with the Surrender of Receipts as provided in Section 5.6 and payment of all taxes and charges payable in connection with such Surrender and withdrawal of the Underlying Securities, and subject to the terms and conditions of the applicable Depositary Trust Agreement, including, without limitation, Section 4.10, the Owner of such Receipts shall be entitled to Delivery of the amount of Underlying Securities at the time represented by such Receipts. Delivery of such Underlying Securities may be made by (i) Delivery of Securities to such Owner or as ordered by such Owner and (ii) any available form of delivery of any other securities, property and cash to which such Owner is then entitled to such Owner or as ordered by such Owner. The Trustee shall make such delivery as promptly as practicable. (b) A certificate evidencing Receipts Surrendered for such purposes may be required by the Trustee to be properly endorsed in blank or accompanied by proper instruments of transfer in blank, and if the Trustee so requires, the Owner thereof shall execute and deliver to the Trustee a written order directing the Trustee to cause the Underlying Securities being withdrawn to be delivered to or upon the written order of a Person or Persons designated in such order. Thereupon the Trustee shall Deliver through -12- the facilities of DTC or, if applicable, at its Corporate Trust office, subject to Sections 2.8, 3.1, 3.2 and 4.10 and to the other terms and conditions of the Depositary Trust Agreement, to or upon the written order of the Person or Persons designated in the order delivered to the Trustee as above provided, the amount of Underlying Securities represented by such Receipts. Section 2.8. Limitations on Delivery, Registration of Transfer and ----------------------------------------------------- Surrender of Receipts. (a) As a condition precedent to the Delivery, - --------------------- registration of transfer, split-up, combination or Surrender (including, for the avoidance of doubt, any Surrender in connection with an exchange) of any Receipt or withdrawal of any Underlying Securities, the Trustee or Registrar may require payment from the Depositor of Securities or the presentor of the Receipts of a sum sufficient to reimburse it for any tax or other charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Securities being deposited or withdrawn) and payment of any applicable fees as herein provided, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Trustee may establish consistent with the provisions of the Depositary Trust Agreement, including, without limitation, this Section 2.8. (b) The Delivery of Receipts against deposits of Securities, the registration of transfer of Receipts or the Surrender of Receipts for the purpose of withdrawal of Underlying Securities may be suspended, generally or in particular instances, during any period when the transfer books of the Trustee are closed or the transfer books of a Securities Issuer are closed or if any such action is deemed necessary or advisable by the Trustee at any time or from time to time, subject to the provisions of the following sentence. Notwithstanding any other provision of any applicable Depositary Trust Agreement or the Receipts, the Surrender of Receipts and withdrawal of -13- Underlying Securities may not be suspended except for (i) temporary delays caused by closing the transfer books of the Trustee or a Securities Issuer, (ii) the payment of fees, taxes and applicable charges, and (iii) compliance with any U.S. laws or governmental regulations relating to the Receipts or to the withdrawal of the Underlying Securities. Without limitation of the foregoing, the Trustee shall not knowingly accept for deposit under the Depositary Trust Agreement any Securities required to be registered under the provisions of the Securities Act of 1933, as amended, for the public offer and sale thereof in the United States unless a registration statement is in effect as to such Securities for such offer and sale. Section 2.9. Lost Certificates, Etc. In case any certificate ---------------------- evidencing Receipts shall be mutilated, destroyed, lost or stolen, the Trustee shall execute and deliver a new certificate of like tenor in exchange and substitution for such mutilated certificate upon cancellation thereof, or in lieu of and in substitution for such destroyed, lost or stolen certificate. Before the Trustee shall execute and deliver a new certificate in substitution for a destroyed, lost or stolen certificate, the Owner thereof shall have (a) filed with the Trustee (i) a request for such execution and delivery before the Trustee has notice that the Receipts have been acquired by a bona fide purchaser and (ii) a sufficient indemnity bond, and (b) satisfied any other reasonable requirements imposed by the Trustee. Section 2.10. Cancellation and Destruction of Surrendered ------------------------------------------- Certificates. All certificates evidencing Receipts Surrendered to the Trustee - ------------ shall be canceled by the Trustee. The Trustee is authorized to destroy certificates so canceled. Section 2.11. Reconstitution Events. (a) If any class of Securities --------------------- ceases to be outstanding as a result of a merger, consolidation or other corporate combination of the Securities Issuer and Section 4.8 does not apply, the Trustee shall, if it has actual -14- knowledge of such event, to the extent lawful and feasible and subject to Section 4.10, distribute any securities which shall be received by the Trustee in exchange for, in conversion of or in respect of Underlying Securities which are not Securities issued by a Securities Issuer to the Owners in proportion to their ownership of Receipts. Effective on the date that such Securities cease to be outstanding, such class of Securities shall cease to be part of the securities which must be deposited for issuance of Receipts. (b) If any class of Securities is delisted from trading on its primary exchange or market and is not listed for trading on another national securities exchange or through NASDAQ within five business days from the date of such delisting, the Trustee shall, if it has actual knowledge of such event, to the extent lawful and feasible and subject to Section 4.10, distribute the Underlying Securities of such class to the Owners in proportion to their ownership of Receipts. Effective on the date of such distribution, such class of Securities shall cease to be a part of the securities which must be deposited for issuance of Receipts. (c) In the event that any Securities Issuer no longer has a class of common stock registered under section 12 of the Securities Exchange Act of 1934, as amended, the Trustee shall, if it has actual knowledge of such event, to the extent lawful and feasible and subject to Section 4.10, distribute the Underlying Securities of such Securities Issuer to the Owners in proportion to their ownership of Receipts. Effective on the date of such distribution, such class of Securities shall cease to be part of the securities which must be deposited for issuance of Receipts. (d) If the Commission determines that a Securities Issuer is an investment company under the Investment Company Act of 1940, and the Trustee has actual knowledge of such Commission determination, then the Trustee shall, to the extent lawful and feasible and subject to Section 4.10, distribute the Underlying Securities of -15- such Securities Issuer to the Owners in proportion to their ownership of Receipts. Effective on the date of such distribution, such class of Securities shall cease to be part of the securities which must be deposited for issuance of Receipts. ARTICLE 3 CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS Section 3.1. Filing Proofs, Certificates and Other Information. Any ------------------------------------------------- Person presenting Securities for deposit or any Owner of Receipts may be required from time to time to file with the Trustee such proof of citizenship or residence, exchange control approval, or such information relating to the registration on the books of any Securities Issuer or Securities Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Trustee may require. The Trustee may withhold the Delivery or registration of transfer of any Receipts or the delivery of any Underlying Securities until such proof or other information is filed or such certificates are executed or such representations and warranties made. Section 3.2. Liability of Owner for Taxes and Other Charges. If any ---------------------------------------------- tax or other charge shall become payable with respect to any Receipts or any Underlying Securities represented thereby, such tax or other charge shall be payable by the Owner of such Receipts to the Trustee. The Trustee shall refuse to effect any registration of transfer of such Receipts or any withdrawal of Underlying Securities represented by such Receipt until such payment is made, and may withhold any dividends or other distributions, or may sell for the account of the Owner thereof Underlying Securities constituting any multiples of the securities which must be deposited for issuance of Receipts, and may apply such dividends or other distributions or the proceeds of any such sale in payment of such tax or other charge and the Owner of such Receipt shall remain liable for any deficiency. -16- Section 3.3. Warranties on Deposit of Shares. ------------------------------- Every Person depositing Securities under the Depositary Trust Agreement shall be deemed thereby to represent and warrant that such Securities and each certificate therefor are validly issued and fully paid, that the person making such deposit is duly authorized to do so and that at the time of delivery, such Securities are free and clear of any lien, pledge, encumbrance, right, charge or claim (other than the rights created by the Depositary Trust Agreement). Every such person shall also be deemed to represent that such Securities are not, and Receipts representing such Securities would not be, Restricted Securities. Such representations and warranties shall survive the deposit of Securities, issuance of Receipts or termination of the Depositary Trust Agreement. ARTICLE 4 THE UNDERLYING SECURITIES Section 4.1. Cash Distributions. Whenever the Trustee shall receive ------------------ any cash dividend or other cash distribution on any Underlying Securities, the Trustee shall distribute the amount thus received (net of the fees of the Trustee as provided in Section 5.6, if applicable) to the Owners entitled thereto, in proportion to the number of Receipts held by them respectively; provided, however, that in the event that the respective Securities Issuer or - -------- ------- the Trustee shall be required to withhold and does withhold from such cash dividend or such other cash distribution an amount on account of taxes, the amount distributed to the Owners shall be reduced accordingly. The Trustee shall distribute only such amount, however, as can be distributed without attributing to any Owner a fraction of one cent. Any such fractional amounts shall be rounded to the nearest whole cent and so distributed to Owners entitled thereto. Section 4.2. Distributions Other Than Cash or Securities. Subject to ------------------------------------------- the provisions of Sections 4.8 and 5.6, whenever the Trustee shall receive any distribution -17- other than a distribution described in Sections 4.1, 4.3 or 4.4 or any distribution which would otherwise be distributed hereunder except that the Trustee deems such distribution not to be lawful and feasible, the Trustee shall, subject to Section 4.10, cause the securities or property received by it to be distributed to the Owners entitled thereto, in proportion to the number of Receipts held by them respectively, in any manner that the Trustee may deem equitable and practicable for accomplishing such distribution; provided, -------- however, that if in the opinion of the Trustee such distribution cannot be made - ------- proportionately among the Owners entitled thereto, or if for any other reason (including, but not limited to, any requirement that a Securities Issuer or the Trustee withhold an amount on account of taxes or other governmental charges or that such securities must be registered under the Securities Act of 1933 in order to be distributed to Owners) the Trustee deems such distribution not to be feasible, the Trustee shall adopt such method as it deems equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of any such sale (net of the fees of the Trustee as provided in Section 5.6) shall be distributed by the Trustee to the Owners entitled thereto as in the case of a distribution received in cash. Section 4.3. Distributions in Securities. If any distribution upon --------------------------- any Underlying Securities consists of a dividend in, or free distribution of, Securities, the Trustee shall, to the extent lawful and feasible, retain such Securities under the Depositary Trust Agreement, and, in such case, the (i) the amount of such Securities so retained in respect of each Receipt shall be added to the classes and quantities of securities which must be deposited for issuance of Receipts and (ii) the number of Receipts in an Issuance Denomination may be increased or decreased by the Trustee to the lowest multiple of 100 Receipts such that no fractional shares are thereby represented in such Issuance Denomination. -18- Section 4.4. Rights Offerings. (a) If a Securities Issuer offers ---------------- or causes to be offered to the holders of any Underlying Securities any rights to subscribe for additional Securities or other securities, the Trustee shall have discretion in accordance with this Section 4.4 as to the procedure to be followed in making such rights available to any Owners or in disposing of such rights on behalf of Owners and making the net proceeds available to Owners or, if by the terms of such rights offering or for any other reason (including the absence of an effective registration statement covering the distribution of securities underlying the rights), the Trustee may not make such rights available to any Owners or dispose of such rights and make the net proceeds available to Owners, then the Trustee shall allow the rights to lapse. (b) The Trustee will not offer rights to Owners unless both the rights and the securities to which such rights relate are either exempt from registration under the Securities Act of 1933 with respect to a distribution to all Owners or are registered under the provisions of such Act. (c) The Trustee shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to Owners in general or any Owner in particular. Section 4.5. Fixing of Record Date. Whenever any cash dividend or --------------------- other cash distribution shall become payable or any distribution other than cash shall be made, or whenever the Trustee receives notice of any meeting of or solicitation of proxies from holders of any Underlying Securities, or whenever a fee shall be charged by the Trustee under Section 5.6, or whenever for any reason there is a reconstitution or other event under the Depositary Trust Agreement that causes a change in the composition of the securities which must be deposited for issuance of Receipts, or whenever the Trustee shall find it necessary or convenient in respect of any matter, the Trustee shall fix a record -19- date (a) for the determination of the Owners who shall be (i) entitled to receive such dividend or distribution or the net proceeds of the sale thereof, (ii) entitled to give instructions to the Trustee for the exercise of voting rights at any such meeting or solicitation or (iii) required to pay such fee, or (b) on or after which each Receipt will represent such changed group of Securities. In the case of subsections (a)(i) and (a)(ii) of this Section 4.5, the Trustee shall use its reasonable efforts to ensure that, to the extent practicable, the record date set hereunder will be the same as the record date set by the Securities Issuer. Subject to the terms and conditions of the Depositary Trust Agreement, the Owners on such record date shall be entitled, as the case may be, to receive the amount distributable by the Trustee with respect to such dividend or other distribution or the net proceeds of sale thereof, or to give voting instructions, or to act in respect of any other such matter, or shall be obligated to pay such fee. Section 4.6. Reports. The Trustee shall, to the extent lawful, ------- forward to Owners any reports and communications, including any proxy statement or other soliciting material, received from a Securities Issuer which are received by the Trustee as the holder of the Underlying Securities or its appointed agent, unless such reports and communications have been forwarded directly to Owners by such Securities Issuer or its appointed agent. Section 4.7. Voting Instructions for Underlying Securities. Upon --------------------------------------------- receipt by the Trustee or its appointed agent of notice of any meeting of, or solicitation of proxies from, holders of Underlying Securities, the Trustee shall, to the extent lawful, mail to the Owners a notice, the form of which notice shall be in the sole discretion of the Trustee, which shall contain (a) such information as is contained in such notice of meeting or solicitation, and (b) a statement that the Owners as of the close of business on a specified record date will be entitled, subject to applicable law and the provisions of the corporate documents of the Securities Issuer, to instruct the Trustee as to the exercise of the voting -20- rights, if any, or giving of proxies, as applicable, in respect of the amount of Underlying Securities represented by their respective Receipts and (c) a statement as to the manner in which such instructions may be given. Upon the written request of an Owner of a Receipt on such record date, received on or before the date established by the Trustee for such purpose, the Trustee shall endeavor, insofar as practicable, to vote or cause to be voted, or to give a proxy, as applicable, in respect of the amount of Underlying Securities represented by such Receipt in accordance with the instructions set forth in such request. The Trustee shall not vote or attempt to exercise the right to vote that attaches to, or give a proxy with respect to, Underlying Securities other than in accordance with such instructions. Section 4.8. Changes Affecting Underlying Securities. (a) In --------------------------------------- circumstances where the provisions of Sections 2.11, 4.2 and 4.3 do not apply, upon any change in nominal value, change in par value, split-up, consolidation or any other reclassification of any Underlying Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting the issuer of any Underlying Security, if the relevant Securities Issuer survives such event, the Trustee shall, to the extent lawful and feasible, retain such Securities under the Depositary Trust Agreement, and, in such case, (A) the amount of such Securities so retained in respect of each Receipt shall be added to the classes and quantities of securities which must be deposited for issuance of Receipts and (B) the number of Receipts in an Issuance Denomination may be increased or decreased by the Trustee to the lowest multiple of 100 Receipts such that no fractional shares are thereby represented in such Issuance Denomination. (b) Securities of any class which are surrendered by the Trustee in connection with any such conversion or exchange shall, effective on the date of such surrender, no longer be part of the securities which must be deposited for issuance of Receipts. In any such case, or in the case of an event to which Section 2.11 applies, the -21- Trustee may call for the Surrender of outstanding certificates evidencing Receipts to be exchanged for new certificates specifically describing any applicable change in the classes and quantities of securities which must be deposited for issuance of Receipts. Section 4.9. Withholding. In the event that the Trustee determines ----------- that any distribution in property (including Securities and rights to subscribe therefor) is subject to any tax or other charge which the Trustee is obligated to withhold, notwithstanding anything to the contrary in these Standard Terms or the applicable Depositary Trust Agreement, the Trustee may by public or private sale dispose of all or a portion of such property (including Securities and rights to subscribe therefor) in such amounts and in such manner as the Trustee deems necessary and practicable to pay any such taxes or charges and the Trustee shall distribute the net proceeds of any such sale after deduction of such taxes or charges to the Owners entitled thereto in proportion to the number of Receipts held by them respectively. Section 4.1. Limitation on Distributions. Notwithstanding any --------------------------- provision of the Depositary Trust Agreement which requires or permits the Trustee to distribute or Deliver any securities to Owners, the Trustee shall not distribute to any Owner any fraction of a share. Instead, the Trustee shall, to the extent lawful, sell the aggregate of such fractions and distribute the net proceeds to the Owners entitled thereto as in the case of a distribution received in cash. ARTICLE 5 THE TRUSTEE AND THE INITIAL DEPOSITOR Section 5.1. Maintenance of Office and Transfer Books by the Trustee. ------------------------------------------------------- (a) Until termination of this Depositary Trust Agreement in accordance with its terms, the Trustee shall maintain in the Borough of Manhattan, The City of New York, facilities -22- for the execution and Delivery, registration, registration of transfers and Surrender of Receipts in accordance with the provisions of these Standard Terms and the applicable Depositary Trust Agreement. (b) The Trustee shall keep books for the registration of Receipts and transfers of Receipts which at all reasonable times shall be open for inspection by the Owners. (c) The Trustee may close the transfer books at any time or from time to time. (d) If any Receipts evidenced thereby are listed on one or more stock exchanges in the United States, the Trustee shall act as Registrar or appoint a registrar or one or more co-registrars for registry of such receipts in accordance with any requirements of such exchange or exchanges. Section 5.2. Prevention or Delay in Performance by the Initial ------------------------------------------------- Depositor or the Trustee. Neither the Initial Depositor nor the Trustee nor any - ------------------------ of their respective directors, employees, agents or affiliates shall incur any liability to any Owner or Beneficial Owner of any Receipt, if by reason of any provision of any present or future law or regulation of the United States or any other country, or of any governmental or regulatory authority or stock exchange, or by reason of any provision, present or future, of the corporate documents of any Securities Issuer, or by reason of any provisions of any securities issued or distributed by any Securities Issuer, or any offering or distribution thereof, or by reason of any act of God or war or other circumstances beyond its control, the Initial Depositor or the Trustee shall be prevented or forbidden from, or be subject to any civil or criminal penalty on account of, doing or performing any act or thing which by the terms of these Standard Terms or the applicable Depositary Trust Agreement it is -23- provided shall be done or performed; nor shall the Initial Depositor or the Trustee incur any liability to any Owner or Beneficial Owner of any Receipt by reason of any non-performance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of these Standard Terms or the applicable Depositary Trust Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in these Standard Terms or the applicable Depositary Trust Agreement. Where, by the terms of an offering or distribution to which Sections 2.11, 4.2 or 4.4 applies, or for any other reason, it is not lawful and feasible to make such distribution or offering available to Owners, and the Trustee may not dispose of such distribution or offering on behalf of such Owners and make the net proceeds available to such Owners, then the Trustee shall not make such distribution or offering available to Owners and shall allow any rights, if applicable, to lapse. Section 5.3. Obligations of the Initial Depositor and the Trustee. ---------------------------------------------------- (a) Neither the Initial Depositor nor the Trustee assumes any obligation nor shall they be subject to any liability under these Standard Terms or the applicable Depositary Trust Agreement to any Owner or Beneficial Owner of any Receipt (including, without limitation, liability with respect to the validity or worth of the Underlying Securities), except that each agrees to perform its respective obligations specifically set forth in these Standard Terms and the applicable Depositary Trust Agreement without negligence or bad faith. (b) Neither the Initial Depositor nor the Trustee shall be under any obligation to prosecute any action, suit or other proceeding in respect of any Underlying Securities or in respect of the Receipts. (c) Neither the Initial Depositor nor the Trustee shall be liable for any action or non-action by it in reliance upon the advice of or information from legal -24- counsel, accountants, any person presenting Securities for deposit, any Owner or any other person believed by it in good faith to be competent to give such advice or information. (d) The Trustee shall not be liable for any acts or omissions made by a successor Trustee whether in connection with a previous act or omission of the Trustee or in connection with any matter arising wholly after the resignation of the Trustee, provided that in connection with the issue out of which such potential liability arises the Trustee performed its obligations without negligence or bad faith while it acted as Trustee. (e) The Trustee shall not be responsible for any failure to carry out any instructions to vote any of the Underlying Securities, or for the manner in which any such vote is cast or the effect of any such vote, provided that any such action or non-action is without negligence or bad faith. (f) Except as specifically provided in Section 4.6, the Trustee shall have no obligation to monitor or to obtain any information concerning the business or affairs of any Securities Issuer or to advise Owners or Beneficial Owners of any event or condition affecting any Securities Issuer. (g) The Trustee shall have no obligation to comply with any direction or instruction from any Owner or Beneficial Owner regarding Receipts except to the extent specifically provided in these Standard Terms or any applicable Depositary Trust Agreement. (h) The Trustee shall be a fiduciary under these Standard Terms and the applicable Depositary Trust Agreement; provided, however, that the fiduciary -------- ------- duties and responsibilities and liabilities of the Trustee shall be limited by, and shall be only -25- those specifically set forth in, these Standard Terms and the applicable Depositary Trust Agreement. Section 5.4. Resignation or Removal of the Trustee; Appointment of ----------------------------------------------------- Successor Trustee. (a) The Trustee may at any time resign as Trustee hereunder - ----------------- by written notice of its election so to do, delivered to the Initial Depositor, and such resignation shall take effect upon the appointment of a successor Trustee and its acceptance of such appointment as hereinafter provided. (b) If at any time the Trustee is in material breach of its obligations under the Depositary Trust Agreement and the Trustee fails to cure such breach within 30 days after receipt by the Trustee of written notice from the Initial Depositor or Owners of 25% or more of the outstanding Receipts specifying such default and requiring the Trustee to cure such default, the Initial Depositor, acting on behalf of the Owners, may remove the Trustee by written notice delivered to the Trustee in the manner provided in Section 7.5, and such removal shall take effect upon the appointment of the successor Trustee and its acceptance of such appointment as hereinafter provided. (c) In case at any time the Trustee acting hereunder shall resign or be removed, the Initial Depositor, acting on behalf of the Owners, shall use its reasonable efforts to appoint a successor Trustee, which shall be a bank or trust company having an office in the Borough of Manhattan, The City of New York. Every successor Trustee shall execute and deliver to its predecessor and to the Initial Depositor, acting on behalf of the Owners, an instrument in writing accepting its appointment hereunder, and thereupon such successor Trustee, without any further act or deed, shall become fully vested with all the rights, powers, duties and obligations of its predecessor; but such predecessor, nevertheless, upon payment of all sums due it and on the written request of the Initial Depositor, acting on behalf of the Owners, shall execute and deliver an -26- instrument transferring to such successor all rights and powers of such predecessor hereunder, shall duly assign, transfer and deliver all right, title and interest in the Underlying Securities to such successor, and shall deliver to such successor a list of the Owners of all outstanding Receipts. The Initial Depositor or any such successor Trustee shall promptly mail notice of the appointment of such successor Trustee to the Owners. (d) Any corporation into or with which the Trustee may be merged, consolidated or converted shall be the successor of such Trustee without the execution or filing of any document or any further act. Section 5.5. Indemnification. (a) The Initial Depositor shall indemnify --------------- the Trustee, its directors, employees, agents and affiliates against, and hold each of them harmless from, any loss, liability, cost, expense or judgment (including, but not limited to, the fees and expenses of counsel) (collectively "Indemnified Amounts") which is incurred by any of them and which arises out of acts performed or omitted pursuant to the provisions of these Standard Terms or any Depositary Trust Agreement, as the same may be amended, modified or supplemented from time to time, or any filings with or submissions to the Commission in connection with or with respect to such Receipts (which by way of illustration and not by way of limitation, include any registration statement and any amendments or supplements thereto filed with the Commission or any periodic reports or updates that may be filed under the Securities Exchange Act of 1934, as amended, or any failure to make any filings or submissions to the Commission which are required to be made in connection with or with respect to such Receipts), except that the Initial Depositor shall not have any obligations under this Section 5.5(a) to pay Indemnified Amounts incurred as a result of and attributable to (i) the negligence or bad faith of, or material breach of the terms of this Agreement by, the Trustee, (ii) written information regarding the name and address of the Trustee furnished in writing to the Initial Depositor (and not materially changed or altered) expressly for use in the -27- registration statement filed with the Commission relating to the Receipts, or (iii) any misrepresentations or omissions made by a Depositor (other than Initial Depositor) in connection with such Depositor's offer and sale of Receipts. (b) The Trustee shall indemnify the Initial Depositor, its directors, employees, agents and affiliates against, and hold each of them harmless from, any Indemnified Amounts (i) caused by the negligence or bad faith of the Trustee or (ii) arising out of any written information regarding the name and address of the Trustee furnished in writing to the Initial Depositor (and not materially changed or altered) expressly for use in the registration statement filed with the Commission relating to the Receipts. (c) If the indemnification provided for in this Section 5.5 is unavailable or insufficient to hold harmless the indemnified party under subsection (a) or (b) above, then the indemnifying party shall contribute to the Indemnified Amounts referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Initial Depositor on the one hand and the Trustee on the other hand from the offering of the Receipts which are the subject of the action or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Initial Depositor on the one hand and the Trustee on the other hand in connection with the action, statement or omission which resulted in such Indemnified Amount as well as any other relevant equitable considerations. The relative benefits received by the Initial Depositor on the one hand and the Trustee on the other shall be deemed to be in the same proportions as the total commissions from the offering of the Receipts which are the subject of the action (before deducting expenses) received by the Initial Depositor bear to the total fees received by the Trustee from the offering of such Receipts. The relative fault shall be determined by -28- reference to, among other things, whether any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact from which the action arises relates to information supplied by the Initial Depositor or the Trustee and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission or the act or omission from which the action arises. The amount of Indemnified Amounts referred to in the first sentence of this subsection (c) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (c). Section 5.6. Charges of Trustee. The following charges shall be ------------------ incurred by any party depositing or withdrawing Securities or by any party Surrendering Receipts or to whom Receipts are Delivered or any Owner, as applicable: (1) taxes and charges and other fees payable in respect of the Underlying Securities assessed by third-party custodians, depositories, depositary banks or transfer agents in the ordinary course of their respective businesses, (2) a fee of $10 or less per 100 Receipts for the execution and Delivery of Receipts pursuant to Section 2.5, and the Surrender of Receipts pursuant to Section 2.7, and (3) a fee which shall accrue on the first day of each calendar quarter at a rate of $.02 or less per Receipt per quarter for the Trustee's services as such under the Depositary Trust Agreement (which fee shall be assessed against Owners of record as of the date or dates set by the Trustee in accordance with Section 4.5 and shall be collected at the Trustee's discretion by deducting such fee from one or more cash dividends or other cash distributions); provided, however, that with respect to the aggregate fee -------- ------- accrued in any calendar year under this clause (3) with respect to each Receipt, the Trustee will waive that portion which exceeds the total cash dividends and other cash distributions the record date for which falls in such calendar year and payable with respect to such Receipt. -29- Section 5.7. Retention of Trust Documents. The Trustee is authorized ---------------------------- to destroy those documents, records, bills and other data compiled during the term of the Depositary Trust Agreement at the times permitted by the laws or regulations governing the Trustee. Section 5.8. Federal Securities Law Filings. The Initial Depositor ------------------------------ shall (i) prepare and file a registration statement with the Commission and take such action as is necessary from time to time to qualify the Receipts for offering and sale under the federal securities laws of the United States, including the preparation and filing of amendments and supplements to such registration statement, (ii) promptly notify the Trustee of any amendment or supplement to the registration statement or prospectus, of any order preventing or suspending the use of any prospectus, of any request for the amending or supplementing of the registration statement or prospectus or if any event or circumstance occurs which is known to the Initial Depositor as a result of which the registration statement or prospectus, as then amended or supplemented, would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (iii) provide the Trustee from time to time with copies, including copies in electronic form, of the prospectus, as amended and supplemented, in such quantities as the Trustee may reasonably request and (iv) prepare and file any periodic reports or updates that may be required under the Securities Exchange Act of 1934, as amended.. Section 5.9. Prospectus Delivery. The Trustee shall, if required by ------------------- the federal securities laws of the United States, in any manner permitted by such laws, deliver at the time of issuance of Receipts, a copy of the relevant prospectus, as amended and supplemented at such time, to each Person depositing Underlying Securities into the Trust for issuance of Receipts. -30- ARTICLE 6 AMENDMENT AND TERMINATION Section 6.1. Amendment. The Trustee and the Initial Depositor may --------- amend any provisions of the Depositary Trust Agreement without the consent of any Owner. Any amendment that imposes or increases any fees or charges (other than taxes and other charges, registration fees or other such expenses), or that otherwise prejudices any substantial existing right of the Owners will not become effective until 30 days after notice of such amendment is given to the Owners. Every Owner and Beneficial Owner, at the time any amendment so becomes effective, shall be deemed, by continuing to hold any Receipt or an interest therein, to consent and agree to such amendment and to be bound by the Depositary Trust Agreement as amended thereby. In no event shall any amendment impair the right of the Owner of any Receipt to Surrender such Receipt and receive therefor the Underlying Securities represented thereby, except in order to comply with mandatory provisions of applicable law. Section 6.2. Early Termination. (a) The Trust shall terminate by the ----------------- Trustee mailing notice of such termination to the Owners of all Receipts then outstanding at least 30 days prior to the date set for termination if any of the following occurs: (i) The Trustee is notified that the Receipts are delisted from a national securities exchange and are not approved for listing on another national securities exchange within 5 business days of their delisting; (ii) Owners of at least 75% of the outstanding Receipts notify the Trustee that they elect to terminate the Trust; or -31- (iii) 60 days shall have expired after the Trustee shall have delivered to the Initial Depositor and the Owners a written notice of its election to resign and a successor trustee shall not have been appointed and accepted its appointment as provided in Section 5.4. (b) On and after the date of termination, the Owner of a Receipt will, upon (i) Surrender of such Receipt at the Corporate Trust Office of the Trustee, (ii) payment of the fee of the Trustee for the Surrender of Receipts referred to in Section 2.7, and (iii) payment of any applicable taxes or charges, be entitled to Delivery, to him or upon his order, of the amount of Underlying Securities evidenced by such Receipt. If any Receipts shall remain outstanding after the date of termination, the Trustee thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends or other distribution to the Owners thereof, and shall not give any further notices or perform any further acts under these Standard Terms or the applicable Depositary Trust Agreement, except that the Trustee shall continue to collect dividends and other distributions pertaining to Underlying Securities and hold the same uninvested and without liability for interest, shall sell rights as provided in these Standard Terms or the applicable Depositary Trust Agreement, and shall continue to deliver Underlying Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts Surrendered to the Trustee (after deducting or upon payment of, in each case, the fee of the Trustee set forth in 5.6 for the Surrender of Receipts, any expenses for the account of the Owner of such Receipts in accordance with the terms and conditions of the Depositary Trust Agreement, and any applicable taxes or charges). At any time after the expiration of one year following the date of termination, the Trustee may sell the Underlying Securities then held hereunder and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of --- ---- -32- Receipts which have not theretofore been Surrendered, such Owners thereupon becoming general creditors of the Trustee with respect to such net proceeds. After making such sale, the Trustee shall be discharged from all obligations under these Standard Terms with respect to the Receipts and the applicable Depositary Trust Agreement, except to account for such net proceeds and other cash (after deducting, in each case, the fee of the Trustee for the Surrender of Receipts, any fees of the Trustee due and owing from the Owner of such Receipts pursuant to Section 5.6, any expenses for the account of the Owner of such Receipts in accordance with the terms and conditions of the Depositary Trust Agreement, and any applicable taxes or governmental charges). Upon the termination of the applicable Depositary Trust Agreement, the Initial Depositor shall be discharged from all obligations under such Depositary Trust Agreement except for its obligations to the Trustee under Section 5.5. ARTICLE 7 MISCELLANEOUS Section 7.1. Counterparts. These Standard Terms and each Depositary ------------ Trust Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of such counterparts shall constitute one and the same instrument. Copies of these Standard Terms and the applicable Depositary Trust Agreement shall be filed with the Trustee and shall be open to inspection by any Owner of a Receipt during business hours. Section 7.2. Third-Party Beneficiaries. These Standard Terms and ------------------------- each Depositary Trust Agreement are for the exclusive benefit of the respective parties hereto and thereto, and shall not be deemed to give any legal or equitable right, remedy or claim whatsoever to any other person. -33- Section 7.3. Severability. In case any one or more of the ------------ provisions contained in these Standard Terms or the applicable Depositary Trust Agreement or in the Receipts should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby. Section 7.4. Owners and Beneficial Owners as Parties; Binding ------------------------------------------------ Effect. The Owners, Beneficial Owners and Depositors from time to time shall be - ------ parties to the applicable Depositary Trust Agreement and shall be bound by all of the terms and conditions hereof and thereof and of the Receipts by their acceptance of Receipts or any interest therein or by their depositing Securities, as the case may be. Section 7.5. Notices. (a) Any and all notices to be given to the ------- Initial Depositor shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to Merrill Lynch, Pierce, Fenner & Smith Incorporated, World Financial Center, New York, New York 10281, Attention: Director, Customized Investments, or any other place to which the Initial Depositor may have transferred its principal office with notice to the Trustee. (b) Any and all notices to be given to the Trustee shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to The Bank of New York, 101 Barclay Street, 22-W, New York, New York 10286, Attention: ADR Administration, or any other place to which the Trustee may have transferred its Corporate Trust Office with notices to the Initial Depositor. (c) Any and all notices to be given to any Owner shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile -34- transmission confirmed by letter, addressed to such Owner at the address of such Owner as it appears on the transfer books of the Trustee, or, if such Owner shall have filed with the Trustee a written request that notices intended for such Owner be mailed to some other address, at the address designated in such request. (d) Delivery of a notice sent by mail or cable, telex or facsimile transmission shall be deemed to be effected at the time when a duly addressed letter containing the same (or a confirmation thereof in the case of a cable, telex or facsimile transmission) is deposited, postage prepaid, in a post-office letter box. The Trustee may, however, act upon any cable, telex or facsimile transmission received by them, notwithstanding that such cable, telex or facsimile transmission shall not subsequently be confirmed by letter as aforesaid. Section 7.6. Governing Law. This Depositary Trust Agreement and the ------------- Receipts shall be interpreted and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by the substantive laws (but not the choice of law rules) of the State of New York. -35- IN WITNESS WHEREOF, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and THE BANK OF NEW YORK have duly executed these Standard Terms as of the day and year first set forth above. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By:/S/ STEPHEN G. BODURTHA ___________________________ Stephen G. Bodurtha First Vice President THE BANK OF NEW YORK, as Trustee By:/S/ HERNAN F. RODRIGUEZ ___________________________ Hernan F. Rodriguez Vice President -36- EXHIBIT A [NAME OF TRUST] [FORM OF] DEPOSITARY TRUST AGREEMENT DEPOSITARY TRUST AGREEMENT dated as of __________ (this "Depositary Trust Agreement"), between MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, a Delaware corporation (the "Initial Depositor"), THE BANK OF NEW YORK, a New York banking corporation, as trustee (the "Trustee"), and all Holders and Beneficial Owners (each as hereinafter defined) from time to time of Depositary Trust Receipts issued hereunder and all Depositors (as hereinafter defined) from time to time. Section 1. Incorporation of Standard Terms. The Standard Terms for ------------------------------- Depositary Trust Agreements agreed to as of September 2, 1999 (the "Standard Terms"), between the Initial Depositor and the Trustee are hereby incorporated by reference into and made a part of this Depositary Trust Agreement. If there is any conflict between the provisions of this Depositary Trust Agreement and the Standard Terms, the provisions of this Depositary Trust Agreement shall control. Section 2. Securities to be Deposited. Initially, the securities -------------------------- which must be deposited for issuance of one Round Lot of Receipts and which shall be represented thereby shall be as follows: Quantity which must be deposited Issuer and Title of Security per Round Lot of Receipts ---------------------------- ------------------------- [Issuer and title of security] [Quantity] [Issuer and title of security] [Quantity] ; provided, however, that if an event to which Section 2.11 of the Standard -------- ------- Terms applies or an event described in Sections 4.3 or 4.8 of the Standard Terms occurs, the definition of the securities that must be deposited for issuance of one Round Lot of Receipts shall be changed as provided in such Sections, if applicable. Section 3. Creation and Declaration of Trust; Termination Date. The --------------------------------------------------- trust created hereby shall be known as [Name of Trust], for which the Trustee, ------------- or the Initial Depositor to the extent provided herein, may conduct the business of the Trust, make and execute contracts, and sue and be sued. [The termination date of the Trust will be December 31, 2039]. A-1 IN WITNESS WHEREOF, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and THE BANK OF NEW YORK have duly executed this agreement as of the day and year first set forth above. All Owners and Beneficial Owners shall become parties hereto upon acceptance by them of Receipts issued in accordance with the terms hereof or any interest therein, and all Depositors shall become parties hereto upon depositing any Securities hereunder. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By:____________________________ Name: Title: THE BANK OF NEW YORK, as Trustee By:____________________________ Name: Title: A-2 EXHIBIT B [Form of Receipt] THE RECEIPTS EVIDENCED HEREBY REPRESENT RIGHTS WITH RESPECT TO UNDERLYING SECURITIES (AS DEFINED IN THE DEPOSITARY TRUST AGREEMENT REFERRED TO HEREIN) HELD BY THE TRUST AND DO NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND ARE NOT GUARANTEED BY THE INITIAL DEPOSITOR OR THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE RECEIPTS NOR THE UNDERLYING SECURITIES ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR ANY OTHER PERSON. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRE SENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE AGENT AUTHORIZED BY THE ISSUER FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTA TIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. B-1 DEPOSITARY TRUST RECEIPTS ISSUED BY [NAME OF TRUST] REPRESENTING [COMMON STOCK] OF [LIST COMPANIES HERE] THE BANK OF NEW YORK, as Trustee No. CUSIP NO. THE BANK OF NEW YORK, as Trustee (hereinafter called the "Trustee"), hereby certifies that CEDE & CO., as nominee of the Depositary Trust Company, or registered assigns, IS THE OWNER OF " Depositary Trust Receipts issued by [Name of Trust], each representing the securities described in the within- ------------- mentioned Depositary Trust Agreement. At the date hereof, each Round Lot of Receipts represents the right to receive the following securities: ------------------------------------------- Quantity Initially Issuer and Title Represented by of Security Each Round Lot ----------- of Receipts ----------- ------------------------------------------- ------------------------------------------- ------------------------------------------- which are deposited under the Depositary Trust Agreement referred to herein at the Corporate Trust Office of the Trustee. The specification of the securities represented by each Round Lot of Receipts is subject to change as provided in the Depositary Trust Agreement. The Trustee's Corporate Trust Office is located at a different address than its principal executive office. Its Corporate Trust Office is located at 101 Barclay Street, New York, New York 10286, and its principal executive office is located at One Wall Street, New York, New York 10286. THE TRUSTEE'S CORPORATE TRUST OFFICE ADDRESS IS 101 BARCLAY STREET, NEW YORK, NEW YORK 10286 - ------------------------ * That number of Receipts held at The Depository Trust Company at any given point in time. B-2 (1) THE DEPOSITARY TRUST AGREEMENT. ------------------------------ This Receipt is issued upon the terms and conditions set forth in the Depositary Trust Agreement, dated as of _________, 1999 (the "Depositary Trust Agreement"), agreed to by and among the Initial Depositor, the Trustee, all Owners and Beneficial Owners from time to time of Receipts issued thereunder and all Depositors. By becoming an Owner or Beneficial Owner, or by depositing Securities, such Person agrees to become a party to the Depositary Trust Agreement and become bound by all the terms and conditions thereof. The Depositary Trust Agreement sets forth the rights of Owners and the rights and duties of the Trustee in respect of the Securities deposited thereunder and any and all other securities, property and cash from time to time received in respect of such Securities and held thereunder (such Securities, other securities, property, and cash are herein called "Underlying Securities"). Copies of the Depositary Trust Agreement are on file at the Trustee's Corporate Trust Office in New York City. The statements made on the face and reverse of this Receipt are summaries of certain provisions of the Depositary Trust Agreement and are qualified by and subject to the detailed provisions of the Depositary Trust Agreement, to which reference is hereby made. Capitalized terms not defined herein shall have the meanings set forth in the Depositary Trust Agreement. (2) SURRENDER OF RECEIPTS AND WITHDRAWAL OF SECURITIES. -------------------------------------------------- Upon Surrender at the Corporate Trust Office of the Trustee of a Round Lot of Receipts or integral multiples thereof for the purpose of withdrawal of the Underlying Securities represented thereby, and upon payment of the fee of the Trustee in connection with the Surrender of Receipts as provided in Section 5.6 of the Standard Terms and payment of all taxes and charges payable in connection with such Surrender and withdrawal of the Underlying Securities, and subject to the terms and conditions of the applicable Depositary Trust Agreement, including, without limitation, Section 4.10 thereof, the Owner of such Receipts shall be entitled to Delivery of the amount of Underlying Securities at the time represented by such Receipts. Delivery of such Underlying Securities may be made by (i) Delivery of Securities to such Owner or as ordered by such Owner and (ii) any available form of delivery of any other securities, property and cash to which such Owner is then entitled to such Owner or as ordered by such Owner. The Trustee shall only deliver whole Underlying Securities upon Surrender of Receipts representing such Underlying Securities. (3) REGISTRATION OF TRANSFERS, SPLIT-UPS AND COMBINATIONS OF CERTIFICATES; ---------------------------------------------------------------------- LIMITATIONS. ----------- The transfer of ownership of Receipts evidenced by this certificate is registrable on the books of the Trustee at its Corporate Trust Office by the Owner hereof in person or by a duly authorized attorney, upon Surrender of this certificate evidencing Receipts, properly endorsed or accompanied by proper instruments of transfer, and duly stamped as B-3 may be required by the laws of the State of New York and of the United States of America. This certificate evidencing Receipts may be split up into other such certificates, each evidencing any integral multiple of a Round Lot of Receipts, or may be combined with other certificates evidencing Receipts into one such certificate, in each case evidencing the same aggregate number of Receipts as the certificate or certificates Surrendered. As a condition precedent to the Delivery, registration of transfer, split- up, combination or Surrender (including, for the avoidance of doubt, any Surrender in connection with an exchange) of any Receipt or withdrawal of any Underlying Securities, the Trustee or Registrar may require payment from the Depositor of Securities or the presentor of the Receipts of a sum sufficient to reimburse it for any tax or other charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Securities being deposited or withdrawn) and payment of any applicable fees as herein provided, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Trustee may establish consistent with the provisions of the Depositary Trust Agreement, including, without limitation, Section 2.8 of the Standard Terms. The Delivery of Receipts against deposits of Securities, the registration of transfer of Receipts or the Surrender of Receipts for the purpose of withdrawal of Underlying Securities may be suspended, generally or in particular instances, during any period when the transfer books of the Trustee are closed or the transfer books of a Securities Issuer are closed or if any such action is deemed necessary or advisable by the Trustee at any time or from time to time for any reason, subject to the provisions of the following sentence. Notwithstanding any other provision of any applicable Depositary Trust Agreement or the Receipts, the Surrender of Receipts and withdrawal of Underlying Securities may not be suspended subject to only (i) temporary delays caused by closing the transfer books of the Trustee or a Securities Issuer, (ii) the payment of fees, taxes and similar charges, and (iii) compliance with any U.S. laws or governmental regulations relating to the Receipts or to the withdrawal of the Underlying Securities. Without limitation of the foregoing, the Trustee shall not knowingly accept for deposit under the Depositary Trust Agreement any Securities required to be registered under the provisions of the Securities Act of 1933, as amended, for the public offer and sale thereof in the United States unless a registration statement is in effect as to such Securities for such offer and sale. (4) RECONSTITUTION EVENTS --------------------- (a) If any class of Securities ceases to be outstanding as a result of a merger, consolidation or other corporate combination of the Securities Issuer and Section 4.8 of the Standard Terms does not apply, the Trustee shall, if it has actual knowledge of such B-4 event, to the extent lawful and feasible and subject to Section 4.10 of the Standard Terms, distribute any securities which shall be received by the Trustee in exchange for, in conversion of or in respect of Underlying Securities which are not Securities issued by a Securities Issuer to the Owners in proportion to their ownership of Receipts. Effective on the date that such Securities cease to be outstanding, such class of Securities shall cease to be part of the securities which must be deposited for issuance of Receipts. (b) If any class of Securities is delisted from trading on its primary exchange or market and is not listed for trading on another national securities exchange or through NASDAQ within five business days from the date of such delisting, the Trustee shall, if it has actual knowledge of such event, to the extent lawful and feasible and subject to Section 4.10 of the Standard Terms, distribute the Underlying Securities of such class to the Owners in proportion to their ownership of Receipts. Effective on the date of such distribution, such class of Securities shall cease to be a part of the securities which must be deposited for issuance of Receipts. (c) In the event that any Securities Issuer no longer has a class of common stock registered under section 12 of the Securities Exchange Act of 1934, as amended, the Trustee shall, if it has actual knowledge of such event, to the extent lawful and feasible and subject to Section 4.10 of the Standard Terms, distribute the Underlying Securities of such Securities Issuer to the Owners in proportion to their ownership of Receipts. Effective on the date of such distribution, such class of Securities shall cease to be part of the securities which must be deposited for issuance of Receipts. (d) If the Commission determines that a Securities Issuer is an investment company under the Investment Company Act of 1940, and the Trustee has actual knowledge of such Commission determination, then the Trustee shall, to the extent lawful and feasible and subject to Section 4.10 of the Standard Terms, distribute the Underlying Securities of such Securities Issuer to the Owners in proportion to their ownership of Receipts. Effective on the date of such distribution, such class of Securities shall cease to be part of the securities which must be deposited for issuance of Receipts. (5) LIABILITY OF OWNER FOR TAXES AND OTHER CHARGES. ---------------------------------------------- If any tax or other governmental charge shall become payable with respect to any Receipts or any Underlying Securities represented thereby, such tax or other governmental charge shall be payable by the Owner hereof to the Trustee. The Trustee shall refuse to effect any registration of transfer of such Receipts or any withdrawal of Underlying Securities represented by such Receipt until such payment is made, and may withhold any dividends or other distributions, or may sell for the account of the Owner hereof Underlying Securities constituting any multiples of the securities which must be deposited for issuance of Receipts, and may apply such dividends or other distributions of B-5 the proceeds of any such sale in payment of such tax or other charge and the Owner hereof shall remain liable for any deficiency. (6) WARRANTIES ON DEPOSIT OF SECURITIES. ----------------------------------- Every Person depositing Securities under the Depositary Trust Agreement shall be deemed thereby to represent and warrant that such Receipts and each certificate therefor are validly issued and fully paid, that the person making such deposit is duly authorized to do so and that at the time of delivery, such Securities are free and clear of any lien, pledge, encumbrance, right, charge or claim (other than the rights created by the Depositary Trust Agreement). Every such person shall also be deemed to represent that such Securities are not, and Receipts representing such Securities would not be, Restricted Securities. Such representations and warranties shall survive the deposit of Securities, issuance of Receipts or termination of the Depositary Trust Agreement. (7) FILING PROOFS, CERTIFICATES AND OTHER INFORMATION. ------------------------------------------------- Any person presenting Securities for deposit or any Owner of a Receipt may be required from time to time to file with the Trustee such proof of citizenship or residence, exchange control approval, or such information relating to the registration on the books of any Securities Issuer or Securities Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Trustee may require. The Trustee may withhold the Delivery or registration of transfer of any Receipts or the delivery of any Underlying Securities until such proof or other information is filed or such certificates are executed or such representations and warranties made. (8) CHARGES OF TRUSTEE. The following charges shall be incurred by any party ------------------ depositing or withdrawing Securities or by any party Surrendering Receipts or to whom Receipts are Delivered or any Owner, as applicable: (1) taxes and charges and other fees payable in respect of the Underlying Securities assessed by third-party custodians, depositories, depositary banks or transfer agents in the ordinary course of their respective businesses, (2) a fee of $10 or less per 100 Receipts for the execution and Delivery of Receipts pursuant to Section 2.5 of the Standard Terms, and the Surrender of Receipts pursuant to Section 2.7 Standard Terms, and (3) a fee which shall accrue on the first day of each calendar quarter at a rate of $.02 or less per Receipt per quarter for the Trustee's services as such under the Depositary Trust Agreement (which fee shall be assessed against Owners of record as of the date or dates set by the Trustee in accordance with Section 4.5 of the Standard Terms and shall be collected at the Trustee's discretion by deducting such fee from one or more cash dividends or other cash distributions); provided, however, that with respect to the -------- ------- aggregate fee accrued in any calendar year under this clause (3) with respect to each Receipt, the Trustee will waive that portion which exceeds the total cash dividends and other cash distributions the record date for which falls in such calendar year and payable with respect to such Receipt. B-6 (9) TITLE TO RECEIPTS. ----------------- It is a condition of the Receipts and every successive Owner of the Receipts by accepting or holding a certificate for Receipts consents and agrees, that title to such certificate (and the Receipts evidenced thereby), when properly endorsed or accompanied by proper instruments of transfer, is transferable by delivery with the same effect as in the case of a negotiable instrument under the laws of New York; provided, however, that the Trustee, -------- ------- notwithstanding any notice to the contrary, may treat the person in whose name Receipts are registered on the books of the Trustee as the absolute owner thereof for the purpose of determining the person entitled to distribution or dividends or other distributions or to any notice provided for in the Depositary Trust Agreement and for all other purposes. (10) VALIDITY OF RECEIPTS. -------------------- Receipts shall not be entitled to any benefits under the Depositary Trust Agreement or be valid or obligatory for any purpose, unless a certificate evidencing such Receipts shall have been executed by the Trustee by the manual or facsimile signature of a duly authorized signatory of the Trustee and, if a Registrar for the Receipts shall have been appointed, countersigned by the manual or facsimile signature of a duly authorized officer of the Registrar. (11) REPORTS; INSPECTION OF TRANSFER BOOKS. ------------------------------------- The issuer of each class of Securities is subject to the periodic reporting requirements of the Securities Exchange Act of 1934 and, accordingly, files certain reports with the Securities and Exchange Commission (herein called the "Commission"). Such reports will be available for inspection and copying at the public reference facilities maintained by the Commission located at 450 Fifth Street, NW, Washington, DC 20549. The Trustee shall, to the extent lawful, forward to Owners, any reports and communications, including any proxy statement or other soliciting material, received from a Securities Issuer which are received by the Trustee as the holder of the Underlying Securities, unless such reports and communications have been forwarded directly to Owners by such Securities Issuer. The Trustee shall keep books for the registration of Receipts and transfers of Receipts which at all reasonable times shall be open for inspection by the Owners. (12) DIVIDENDS AND DISTRIBUTIONS. --------------------------- Whenever the Trustee shall receive any cash dividend or other cash distribution on any Underlying Securities, the Trustee shall, subject to the Depositary Trust Agreement, distribute the amount thus received (net of the fees of the Trustee as provided in the Depositary Trust Agreement, if applicable) to the Owners of Receipts entitled thereto; provided, however, that in the event -------- ------- that the respective Securities Issuer or the B-7 Trustee shall be required to withhold and does withhold from such cash dividend or such other cash distribution in respect of any Underlying Securities an amount on account of taxes, the amount distributed to the Owners of the Receipts representing such Underlying Securities shall be reduced accordingly. Subject to the provisions of Sections 4.8 and 5.6 of the Standard Terms, whenever the Trustee shall receive any distribution other than a distribution described in Sections 4.1, 4.3 or 4.4 of the Standard Terms or a distribution which would otherwise be distributed under the Depositary Trust Agreement except that the Trustee deems such distribution not to be lawful and feasiable, the Trustee shall, subject to Section 4.10 of the Standard Terms, cause the securities or property received by it to be distributed to the Owners of Receipts entitled thereto, in any manner that the Trustee may deem equitable and practicable for accomplishing such distribution; provided, however, that if in -------- ------- the opinion of the Trustee such distribution cannot be made proportionately among the Owners of Receipts entitled thereto, or if for any other reason (including, but not limited to, any requirement that a Securities Issuer or the Trustee withhold an amount on account of taxes or other governmental charges or that such securities must be registered under the Securities Act of 1933 in order to be distributed to Owners) the Trustee deems such distribution not to be feasible, the Trustee shall adopt such method as it deems equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of such sale (net of the fees of the Trustee as provided in Section 5.6 of the Standard Terms) shall be distributed by the Trustee to the Owners entitled thereto as in the case of a distribution received in cash. If any distribution upon any Underlying Securities consists of a dividend in, or free distribution of, Securities, the Trustee shall, to the extent lawful and feasible, retain such Securities under the Depositary Trust Agreement, and, in such case, the (i) the amount of such Securities so retained in respect of each Receipt shall be added to the classes and quantities of securities which must be deposited for issuance of Receipts and (ii) the number of Receipts in an Issuance Denomination may be increased or decreased by the Trustee to the lowest multiple of 100 Receipts such that no fractional shares are thereby represented in such Issuance Denomination. In the event that the Trustee determines that any distribution in property (including Securities and rights to subscribe therefor) is subject to any tax or other charge which the Trustee is obligated to withhold, notwithstanding anything to the contrary in the Standard Terms or the applicable Depositary Trust Agreement, the Trustee may by public or private sale dispose of all or a portion of such property (including Securities and rights to subscribe therefor) in such amounts and in such manner as the Trustee deems necessary and practicable to pay any such taxes or charges and the Trustee shall distribute the net B-8 proceeds or any such sale after deduction of such taxes or charges to the Owners entitled thereto. (13) RIGHTS OFFERINGS. ---------------- (a) If a Securities Issuer offers or cause to be offered to the holders of any Underlying Securities any rights to subscribe for additional Securities or other securities, the Trustee shall have discretion in accordance with Section 4.4 of the Standard Terms as to the procedure to be followed in making such rights available to any Owners or in disposing of such rights on behalf of Owners and making the net proceeds available to Owners or, if by the terms of such rights offering or for any other reason (including the absence of an effective registration statement covering the distribution of securities underlying the rights), the Depositary may not make such rights available to any Owners or dispose of such rights and make the net proceeds available to Owners, then the Trustee shall allow the rights to lapse. (b) The Trustee will not offer rights to Owners unless both the rights and the securities to which such rights relate are either exempt from registration under the Securities Act of 1933 with respect to a distribution to all Owners or are registered under the provisions of such Act. (c) The Trustee shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to Owners in general or any Owner in particular. (14) RECORD DATES. ------------ Whenever any cash dividend or other cash distribution shall become payable or any distribution other than cash shall be made, or whenever the Trustee receives notice of a meeting of or solicitation of proxies from holders of any Underlying Securities, or whenever a fee shall be changed by the Trustee under Section 5.6 of the Standard Terms, or whenever for any reason there is a reconstitution or other event under the Depositary Trust Agreement that causes a change in the composition of the Securities which must be deposited for issuance of Receipts, or whenever the Trustee shall find it necessary or convenient in respect of any matter, the Trustee shall fix a record date (a) for the determination of the Owners who shall be (i) entitled to receive such dividend, distribution or rights or the net proceeds of the sale thereof or (ii) entitled to give instructions for the exercise of voting rights at any such meeting or solicitation, or (iii) required to pay such fee, or (b) on or after which each Receipt will represent such changed group of Securities, subject to the provisions of the Depositary Trust Agreement. In the case of subsections (a)(i) and (a)(ii) of this Article (13), the Trustee shall use its reasonable efforts to ensure that, to the extent practicable, the record date set under the Depositary Trust Agreement will be the same as the record date set by the Securities Issuer. B-9 (15) VOTING OF UNDERLYING SECURITIES. ------------------------------- Upon receipt by the Trustee or its appointed agent of notice of any meeting of, or solicitation of proxies from, holders of Underlying Securities, the Trustee shall, to the extent lawful, mail to the Owners a notice which shall contain (a) such information as is contained in such notice of meeting or solicitation, (b) a statement that the Owners of Receipts as of the close of business on a specified record date will be entitled, subject to applicable law and the provisions of the corporate documents of the Securities Issuer, to instruct the Trustee as to the exercise of the voting rights, if any, or giving of proxies, as applicable, in respect of the amount of Underlying Securities represented by their respective Receipts and (c) a statement as to the manner in which such instructions may be given. Upon the written request of an Owner of a Receipt on such record date, received on or before the date established by the Trustee, the Trustee shall endeavor, insofar as practicable, to vote or cause to be voted, or to give a proxy, as applicable, in respect of the amount of Underlying Securities represented by such Receipt in accordance with the instructions set forth in such request. The Trustee shall not vote or attempt to exercise the right to vote that attaches to, or give a proxy with respect to, Underlying Securities other than in accordance with such instructions. (16) CHANGES AFFECTING UNDERLYING SECURITIES. --------------------------------------- (a) In circumstances where the provisions of Sections 2.11, 4.2 and 4.3 of the Standard Terms do not apply, upon any change in nominal value, change in par value, split-up, consolidation or any other reclassification of any Underlying Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting the issuer of any Underlying Security, if the relevant Securities Issuer survives such event, the Trustee shall, to the extent lawful and feasible, retain such Securities under the Depositary Trust Agreement, and, in such case, the (A) the amount of such Securities so retained in respect of each Receipt shall be added to the classes and quantities of Securities which must be deposited for issuance of Receipts and (B) the number of Receipts in an Issuance Denomination may be increased or decreased by the Trustee to the lowest multiple of 100 Receipts such that no fractional shares are thereby represented in such Issuance Denomination. (b) Securities of any class which are surrendered by the Trustee in connection with any such conversion or exchange shall, effective on the date of such surrender, no longer be part of the securities which must be deposited for issuance of Receipts. In any such case, or in the case of an event to which Section 2.11 of the Standard Terms applies, the Trustee may call for the Surrender of outstanding certificates evidencing Receipts to be exchanged for new certificates specifically describing any applicable change in the classes and quantities of securities which must be deposited for issuance of Receipts. (17) LIABILITY OF THE INITIAL DEPOSITOR AND THE TRUSTEE. -------------------------------------------------- B-10 Neither the Initial Depositor nor the Trustee nor any of their respective directors, employees, agents or affiliates shall incur any liability to any Owner or Beneficial Owner of any Receipt, if by reason of any provision of any present or future law or regulation of the United States or any other country, or of any governmental or regulatory authority or stock exchange, or by reason of any act of God or war or other circumstances beyond its control, the Initial Depositor or the Trustee shall be prevented or forbidden from, or be subject to any civil or criminal penalty on account of, doing or performing any act or thing which by the terms of the Standard Terms or the applicable Depositary Trust Agreement it is provided shall be done or performed; nor shall the Initial Depositor or the Trustee incur any liability to any Owner or Beneficial Owner of any Receipt by reason of any non-performance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of the Standard Terms or the applicable Depositary Trust Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in the Standard Terms or the applicable Depositary Trust Agreement. Where, by the terms of an offering or distribution to which Sections 2.11, 4.2 or 4.4 of the Standard Terms applies, or for any other reason, it is not lawful and feasible to make such distribution or offering available to Owners, and the Trustee may not dispose of such distribution or offering on behalf of such Owners and make the net proceeds available to such Owners, then the Trustee shall not make such distribution or offering available to Owners and shall allow any rights, if applicable, to lapse. The Trustee shall not be subject to any liability with respect to the validity or worth of the Underlying Securities. Neither the Initial Depositor nor the Trustee shall be under any obligation to prosecute any action, suit or other proceeding in respect of any Underlying Securities or in respect of the Receipts. Neither the Initial Depositor nor the Trustee shall be liable for any action or non-action by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Securities for deposit, any Owner or Beneficial Owner, or any other person believed by it in good faith to be competent to give such advice or information. The Trustee shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Trustee or in connection with any matter arising wholly after the resignation of the Trustee, provided that in connection with the issue out of which such potential liability arises the Trustee performed its obligations without negligence or bad faith while it acted as Trustee. The Trustee shall not be responsible for any failure to carry out any instructions to vote any of the Underlying Securities, or for the manner in which any such vote is cast or the effect of any such vote, provided that any such action or non-action is without negligence or bad faith. Except as specifically provided in Section 4.6 of the Standard Terms, the Trustee shall have no obligation to monitor or to obtain any information concerning the business or affairs of any Securities Issuer or to advise Owners or Beneficial Owners of any event or condition affecting any Securities Issuer. The Trustee shall have no obligation to comply with any direction or instruction from any Owner or Beneficial Owner regarding Receipts except to the extent specifically provided in the Standard Terms or any applicable Depositary Trust Agreement. The Trustee shall B-11 be a fiduciary under the Standard Terms and the applicable Depositary Trust Agreement; provided, however, that the fiduciary duties and responsibilities and -------- ------- liabilities of the Trustee shall be limited by, and shall be only those specifically set forth in, the Standard Terms and the applicable Depositary Trust Agreement. No disclaimer of liability under the Securities Act of 1933 is intended by any provision of the Depositary Trust Agreement. (18) RESIGNATION OR REMOVAL OF THE TRUSTEE. ------------------------------------- (a) The Trustee may at any time resign as Trustee under the Depositary Trust Agreement by written notice of its election so to do, delivered to the Initial Depositor, and such resignation shall take effect upon the appointment of a successor Trustee and its acceptance of such appointment. (b) If at any time the Trustee is in material breach of its obligations under the Depositary Trust Agreement and the Trustee fails to cure such breach within 30 days after receipt by the Trustee of written notice from the Initial Depositor or the Owners of 25% or more of the outstanding Receipts specifying such default and requiring the Trustee to cure such default, the Initial Depositor, acting on behalf of the Owners, may remove the Trustee by written notice delivered to the Trustee, and such removal shall take effect upon the appointment of the successor Trustee and its acceptance of such appointment. (c) In case at any time the Trustee acting hereunder shall resign or be removed, the Initial Depositor, acting on behalf of the Owners, shall use its reasonable efforts to appoint a successor Trustee, which shall be a bank or trust company having an office in the Borough of Manhattan, The City of New York. (19) AMENDMENT. --------- The Trustee and the Initial Depositor may amend any provisions of the Depositary Trust Agreement without the consent of any Owner. Any amendment that imposes or increases any fees or charges (other than taxes and other charges, registration fees or other such expenses), or that otherwise prejudices any substantial existing right of the Owners will not become effective until 30 days after notice of such amendment is given to the Owners. Every Owner and Beneficial Owner, at the time any amendment so becomes effective, shall be deemed, by continuing to hold any Receipt or an interest therein, to consent and agree to such amendment and to be bound by the Depositary Trust Agreement as amended thereby. In no event shall any amendment impair the right of the Owner of any Receipt to Surrender such Receipt and receive therefor the Underlying Securities represented thereby, except in order to comply with mandatory provisions of applicable law. B-12 (20) EARLY TERMINATION OF DEPOSITARY TRUST AGREEMENT. ----------------------------------------------- (a) The Trust shall terminate by the Trustee mailing notice of such termination to the Owners of all Receipts then outstanding at least 30 days prior to the date set for termination if any of the following occurs: (i) The Trustee is notified that the Receipts are delisted from a national securities exchange and are not approved for listing on another national securities exchange within 5 business days of their delisting; (ii) Owners of at least 75% of the outstanding Receipts notify the Trustee that they elect to terminate the Trust; or (iii) 60 days shall have expired after the Trustee shall have delivered to the Initial Depositor and the Owners a written notice of its election to resign and a successor trustee shall not have been appointed and accepted its appointment. (b) On and after the date of termination, the Owner of a Receipt will, upon (a) Surrender of such Receipt at the Corporate Trust Office of the Trustee, (b) payment of the fee of the Trustee for the Surrender of Receipts referred to in Section 2.7 of the Standard Terms, and (c) payment of any applicable taxes or charges, be entitled to Delivery, to him or upon his order, of the amount of Underlying Securities evidenced by such Receipt. If any Receipts shall remain outstanding after the date of termination, the Trustee thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends or other distribution to the Owners thereof, and shall not give any further notices or perform any further acts under these Standard Terms or the applicable Depositary Trust Agreement, except that the Trustee shall continue to collect dividends and other distributions pertaining to Underlying Securities and hold the same uninvested and without liability for interest, shall sell rights as provided in these Standard Terms or the applicable Depositary Trust Agreement, and shall continue to deliver Underlying Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts Surrendered to the Trustee (after deducting or upon payment of, in each case, the fee of the Trustee set forth in 5.6 of the Standard Terms for the Surrender of Receipts, any expenses for the account of the Owner of such Receipts in accordance with the terms and conditions of the Depositary Trust Agreement, and any applicable taxes or charges). At any time after the expiration of one year following the date of termination, the Trustee may sell the Underlying Securities then held hereunder and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of Receipts which have not theretofore been - --- ---- Surrendered, such Owners thereupon becoming general creditors of the Trustee with respect to such net proceeds. After making such sale, the Trustee shall be discharged from all obligations under these B-13 Standard Terms with respect to the Receipts and the applicable Depositary Trust Agreement, except to account for such net proceeds and other cash (after deducting, in each case, the fee of the Trustee for the Surrender of Receipts, any fees of the Trustee due and owing from the Owner of such Receipts pursuant to Section 5.6 of the Standard Terms, any expenses for the account of the Owner of such Receipts in accordance with the terms and conditions of the Depositary Trust Agreement, and any applicable taxes or charges). Upon the termination of the applicable Depositary Trust Agreement, the Initial Depositor shall be discharged from all obligations under such Depositary Trust Agreement except for its obligations to the Trustee under Section 5.5 of the Standard Terms. B-14 EX-5.1 3 OPINION OF SHEARMAN & STERLING EXHIBIT 5.1 October 28, 1999 Merrill Lynch, Pierce, Fenner & Smith Incorporated 250 Vesey Street New York, New York 10281 Merrill Lynch, Pierce, Fenner & Smith Incorporated Biotech HOLDRs(SM) Trust Registration Statement on Form S-1 Registration No. 333-89355 ------------------------------------- Ladies and Gentlemen: We are acting as counsel to Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation (the "Initial Depositor"), and as special counsel to the Biotech HOLDRs(SM) Trust (the "Trust") in connection with the preparation and filing with the Securities and Exchange Commission (the "Commission") of the Registration Statement on Form S-1, as amended from time to time and filed by the Initial Depositor (the "Registration Statement"), of which the prospectus forms a part (the "Prospectus"), for the registration under the Securities Act of 1933, as amended (the "Securities Act"), of 1,000,000,000 Biotech HOLDRs(SM) (the "HOLDRs(SM)") to be issued by the Trust. In this capacity, we have examined (a) a signed copy of the Registration Statement and (b) a copy of the depositary trust agreement between The Bank of New York, as trustee (the "Trustee"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor (the "Depositary Trust Agreement"). We have also examined originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records of the Initial Depositor, such other certificates and advice of public officials and of officers of the Initial Depositor, and such other agreements, instruments and documents as we have deemed necessary as a basis for the opinions expressed below. In such examination we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity with the originals of all documents submitted to us as copies. As to questions of fact material to such opinions, we have relied upon such certificates and advice. The opinions set forth below are also based upon the assumptions that: (i) the Registration Statement, as finally amended (including any post-effective amendments), has become effective under the Securities Act; (ii) the amount, price, and other principal terms of the HOLDRs(SM) have been approved by the Board of Directors of the Initial Depositor or an authorized designee thereof; (iii) the Depositary Trust Agreement will be duly authorized, executed and delivered by the parties thereto substantially in the form filed as an exhibit to the Registration Statement; and (iv) the HOLDRs(SM) will be duly authenticated by the Trustee in accordance with the Depositary Trust Agreement and sold and delivered by the Initial Depositor against payment therefor. Our opinions expressed herein are limited to the laws of the State of New York, and the Federal law of the United States, and we do not express any opinion herein concerning any other law. Based upon and subject to the foregoing, and having regard for such legal considerations as we have deemed relevant, we are of the opinion that the HOLDRs(SM) will be legally issued, fully paid and nonassessable, will be legal, valid and binding obligations of the Trust, enforceable against the Trust in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity). We hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the use of our name under the heading "Legal Matters" in the Prospectus. In giving this consent, we do not thereby concede that we come within the category of persons whose consent is required by the Securities Act or the General Rules and Regulations promulgated thereunder. Very truly yours, /s/ Shearman & Sterling EX-8.1 4 OPINION OF SHEARMAN & STERLING EXHIBIT 8.1 October 28, 1999 Merrill Lynch, Pierce, Fenner & Smith Incorporated World Financial Center North Tower--4th Floor New York, New York 10281 Merrill Lynch, Pierce, Fenner & Smith Incorporated Biotech HOLDRs(SM) Trust Registration Statement on Form S-1 Registration No. 333-89355 ------------------------------------- Ladies and Gentlemen: We have acted as special Tax Counsel to Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), as Initial Depositor, and the Biotech HOLDRs(SM) Trust in connection with the preparation and filing of a Prospectus and Registration Statement on Form S-1, No. 333-89355, as amended from time to time and filed by the Initial Depositor (the "Registration Statement"), of which the prospectus forms a part (the "Prospectus"), for the registration under the Securities Act of 1933, as amended (the "Securities Act"), of 1,000,000,000 Biotech HOLDRs(SM) (the "HOLDRs(SM)") to be issued by the Trust. Capitalized terms used herein have the meaning ascribed to them in the Prospectus. The HOLDRs(SM) are being issued pursuant to the Depositary Trust Agreement between the Initial Depositor, The Bank of New York, as trustee (in such capacity, the "Trustee"), other depositors and owners of HOLDRs(SM) (the "Trust Agreement"). In connection with the preparation of this opinion, we have examined and relied on such documents as we have deemed appropriate, including, inter alia, (i) the Trust Agreement and (ii) the Prospectus. We have made such investigations of law as we have deemed appropriate as a basis for the opinion expressed below. Based on the foregoing, it is our opinion that the Trust will provide for flow through tax consequences since it will be treated as a grantor trust or custodial arrangement for United States Federal income tax purposes. Morever, the discussion set forth under the caption "Federal Income Tax Consequences" in the Prospectus represents our opinion of and, subject to the limitations contained therein, accurately describes, the principal United States Federal income tax consequences to a holder of HOLDRs(SM) receipts. The foregoing opinion is based upon provisions of the Internal Revenue Code of 1986, as amended, Treasury regulations and administration and judicial interpretations as of the date hereof (all of which are subject to change, possibly with retroactive effect, or different interpretations). We consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the Prospectus. Very truly yours, /s/ Shearman & Sterling -----END PRIVACY-ENHANCED MESSAGE-----