-----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, HL3hugVYtBdYjquyxreBLO4rY+0/TOJPYuhg+jofDjSR5U6qXlN1LuzAj+Qm9DoQ /vmsVpyKSOsRN4yrEIXgXg== 0000950130-00-002635.txt : 20000509 0000950130-00-002635.hdr.sgml : 20000509 ACCESSION NUMBER: 0000950130-00-002635 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20000508 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 SEC ACT: SEC FILE NUMBER: 333-36490 FILM NUMBER: 621373 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 1 INITIAL FORM S-1 As filed with the Securities and Exchange Commission on May 8, 2000 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- 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) --------------- Utilities HOLDRS/SM/ Trust yet-to-be formed [Issuer with respect to the receipts] Delaware 6211 13-5674085 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or organization) Classification Code Number) Identification Number) --------------- 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 & Shearman & Sterling Smith 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. [_] 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 effective 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 ============================================================================================================= Proposed Maximum Proposed Maximum Title of Each Class of Amount to Be Offering Price Aggregate Offering Amount of Securities to Be Registered Registered Per Receipt(1) Price(1) Registration Fee(2) - ------------------------------------------------------------------------------------------------------------- Utilities HOLDRS 1,000,000,000 $100 $349,750,000 $92,334 receipts =============================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457 under the Securities Act. 2,500,000 receipts are estimated to be offered in the initial offering at $100 per receipt and 997,500,000 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. 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. PROSPECTUS - ---------- Subject to Completion Preliminary Prospectus dated _____, 2000 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. LOGO 1,000,000,000 Depositary Receipts Utilities HOLDRS/SM/ Trust The Utilities HOLDRS/SM/ Trust will issue Depositary Receipts called Utilities HOLDRS/SM/ representing your undivided beneficial ownership in the U.S.-traded common stock of a group of twenty specified companies that are involved in various segments of the utilities industry. The Bank of New York will be the trustee. You only may acquire, hold or transfer Utilities HOLDRS in a round-lot amount of 100 Utilities HOLDRS or round-lot multiples. Utilities HOLDRS are separate from the underlying deposited common stocks that are represented by the Utilities HOLDRS. For a list of the names and the number of shares of the banks that make up a Utilities HOLDR, see "Highlights of Utilities HOLDRS--The Utilities HOLDRS" starting on page 9. The trust will issue the additional Utilities HOLDRS on a continuous basis. Investing in Utilities HOLDRS involves significant risks. See "Risk factors" starting on page 4. The initial public offering price for a round-lot of 100 Utilities HOLDRS will equal the sum of the closing market price on the primary trading market on the pricing date for each deposited share multiplied by the share amount specified in this prospectus, plus an underwriting fee. Utilities 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. Before this issuance, there has been no public market for Utilities HOLDRS. Application has been made to list the Utilities HOLDRS on the American Stock Exchange under the symbol "UTH". ---------------------------- 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 Underwriting to Public* Fee ------------- ------------- Per Utilities HOLDR........................ 2% - --------------------- * Includes underwriting fee. For purchases of Utilities Utilities HOLDRS, the HOLDRS in excess of underwriting fee will be %. Merrill Lynch & Co. A.G. Edwards & Sons, Inc. First Union Securities, Inc. The date of this prospectus is _______, 2000. "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 Utilities HOLDRS .............. 9 The Trust ................................... 15 Description of Utilities HOLDRS ............. 15 Description of the Underlying Securities .... 16 Description of the Depositary Trust Agreement 18 Federal Income Tax Consequences ............. 21 ERISA Considerations ........................ 22 Plan of Distribution ........................ 22 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 Utilities 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 Utilities HOLDRS in any jurisdiction where the offer or sale is not permitted. The Utilities HOLDRS are not registered for public sale outside of the United States. Non-U.S. receipt holders should consult their tax advisors regarding U.S. withholding and other taxes which may apply to ownership of the Utilities HOLDRS or of the underlying securities through an investment in the Utilities HOLDRS. SUMMARY The Utilities HOLDRS trust will be formed under the depositary trust agreement, dated as of __________, 2000 among The Bank of New York, as trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the owners of the Utilities 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 utilities industry. The number of shares of each common stock held by the trust with respect to each round-lot of Utilities HOLDRS is specified under "Highlights of Utilities HOLDRS--The Utilities 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 Utilities HOLDRS that represent your undivided beneficial ownership interest in the shares of common stock held by the trust on your behalf. The Utilities HOLDRS are separate from the underlying common stocks that are represented by the Utilities HOLDRS. 3 RISK FACTORS An investment in Utilities HOLDRS involves risks similar to investing in each of the underlying securities outside of the Utilities HOLDRS, including the risks associated with concentrated investments in utilities. General Risk Factors . Loss of investment. Because the value of Utilities HOLDRS directly relates to the value of the underlying securities, you may lose all or a substantial portion of your investment in the Utilities HOLDRS if the underlying securities decline in value. . Discount trading price. Utilities HOLDRS may trade at a discount to the aggregate value of the underlying securities. . Not necessarily representative of the utilities industry. While the underlying securities are common stocks of companies generally considered to be involved in various aspects of the utilities industry, the underlying securities and the Utilities HOLDRS may not necessarily follow the price movements of the entire utilities industry generally. If the underlying the securities decline in value, your investment in the utilities HOLDRS will decline in value even if common stock prices of companies involved in the utilities 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 utilities industry. In this case, the Utilities HOLDRS may no longer consist of securities issued only by companies involved in the utilities industry. . No investigation of underlying securities. The underlying securities included in the Utilities 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 utilities industry, without regard for the value, price performance, volatility or investment merit of the underlying securities. Consequently, the Utilities 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 industry developments, reorganizations, or market fluctuations affecting issuers of the underlying securities, Utilities HOLDRS may not necessarily continue to be a diversified investment in the utilities industry. As a result of market fluctuation and/or reconstitution events, Utilities 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 Utilities HOLDRS and receive delivery of each of the underlying securities. The cancellation of your Utilities HOLDRS will allow you to sell individual underlying securities or to deliver individual underlying securities in a tender offer. The cancellation of Utilities HOLDRS will involve payment of a cancellation fee to the trustee. . Trading halts. Trading in Utilities HOLDRS may be halted if trading in one or more of the underlying securities is halted. If so, you will not be able to trade Utilities HOLDRS even though there is trading in some of the underlying securities; however, you will be able to cancel your Utilities HOLDRS to receive the underlying securities. 4 . 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 Utilities HOLDRS. If the Utilities HOLDRS are delisted by the American Stock Exchange, a termination event will result unless the Utilities HOLDRS are listed for trading on another national securities exchange or through NASDAQ within five business days from the date the Utilities 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 make purchases or sales, including establishing long or short positions, in the underlying securities for its own account. In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, will purchase, in the secondary market, the underlying securities that will be deposited into the trust. Merrill Lynch may make these purchases before the deposit into the trust, or it may borrow securities for the deposit and subsequently purchase the securities to repay to the lenders the securities previously borrowed. In either event, the purchases of the underlying securities will be made at various prices. As the initial offering price for the Utilities HOLDRS will be based on the closing market price of each of the underlying securities on the pricing date, Merrill Lynch may recognize a gain on its purchases of the underlying securities. Specifically, if the closing market price for the underlying securities on the pricing date is higher than the price at which Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, purchases the underlying securities then it will recognize a gain in connection with such purchases. Merrill Lynch may recognize this gain on any of the underlying securities that comprise the Utilities HOLDRS or on all of the underlying securities in the aggregate. The potential profit of Merrill Lynch also is affected by any hedging activities that it may engage in while it purchases the underlying securities in the secondary market for deposit into the trust. 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 Utilities HOLDRS, the selection of the utilities industry, Merrill Lynch's activity in the secondary market in the underlying securities, and the creation and cancellation of Utilities 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 temporarily increase the market price of the deposited shares, which will result in a higher initial offering price for the Utilities HOLDRS. Large volumes of purchasing activity, which may occur in connection with the issuance of Utilities HOLDRS, particularly in connection with the initial issuance of Utilities 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. Temporary increases in the market price of the underlying securities may also occur as a result of the purchasing activity of other market participants. Other market participants may attempt to benefit from increases in the market price of the underlying securities that may occur as result of the increased purchasing activity in the underlying securities resulting from the issuance of the Utilities HOLDRS. Consequently, prices for the underlying securities may decline immediately after the pricing date. If the trading prices for the underlying securities decline, the trading price of Utilities HOLDRS will also decline. Risk Factors Specific to Companies Involved in the Utilities Industry . The utilities industry is extremely competitive and failure of a utilities company to maintain a customer base will adversely affect its operating results. The operations of many utilities companies, which have traditionally been subject to limited competitive pressures, are now subject to increased pressures with others in the industry in supplying the energy needs of consumers. Many utilities 5 companies may not successfully develop and maintain a loyal customer base and failure to do so could have a material adverse effect on their business. . Utilities companies are subject to extensive regulation by various federal, state and local governmental agencies in the conduct of their business. The sale, marketing and distribution of a utilities companies services are subject to regulation by all levels of governmental agencies including regulations on rate and marketing practices, environmental and development restrictions and regulations with respect to securities offerings. Competitive pressures by new market participants and changing consumer demands have resulted in additional changes in the regulatory environment, such as new regulations allowing consumers a broader choice to select their utility provider. The failure to obtain necessary government approvals, the restrictions contained in existing approvals, loss of or changes to previously obtained approvals or the failure to comply with regulatory requirements could result in fines, unanticipated expenditures, interruption of service and even criminal prosecution. The success of a utilities company will depend, in part, upon obtaining and maintaining regulatory approval to offer its products and services and, once approved, complying with the continued review by regulatory agencies. . Many utilities companies are subject to laws relating to the protection of the environment. The operations of many utilities companies are subject to extensive federal, state and local laws and regulations relating to the protection of the environment. Many utilities companies are exposed to significant environmental costs and liabilities inherent in the industry of a utility company and there can be no assurance that significant costs and liabilities will not be incurred, including those relating to claims for damages to property and persons resulting from operations. In addition, increasingly stringent federal, state or local environmental laws and regulations and enforcement policies will result in increased costs and liabilities. . The international operations of some utilities companies expose them to risks associated with instability and changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations and other risks inherent to international business. Many utilities companies have international development and exploration operations necessary to their businesses. The risks of international business that the companies are exposed to include the following: . general economic, social and political conditions; . the difficulty of enforcing intellectual property rights, agreements and collecting receivables through certain foreign legal systems; . differing tax rates, tariffs, exchange controls or other similar restrictions; . currency fluctuations; . changes in, and compliance with, domestic and foreign laws and regulations which impose a range of restrictions on operations, trade practices, foreign trade and international investment decisions; and . reduction in the number or capacity of personnel in international markets. . Many utilities companies are holding companies that rely on dividends from their subsidiaries as a substantial portion of their income and the right to receive dividends may be subordinate to the interests of third parties. Many of the utilities companies are separate and distinct entities from their subsidiaries that are operating utilities companies and they receive a large portion of their revenue in dividends from these subsidiaries. The payment of dividends by these subsidiaries is subject to federal law restrictions as well as the laws of the respective state of incorporation. In addition, the right of a parent utility company to participate in any distribution of assets upon a subsidiary's liquidation 6 or reorganization is subject to the prior claims of the subsidiary's creditors. The ability of a utility company to receive dividends or other distributions may be unpredictable, and fluctuations in income may adversely affect your investment in the Utilities HOLDRS. . Some of the companies involved in the utilities industry are also engaged in other lines of business unrelated to the utilities industry, and they may experience problems with these lines of business which could adversely affect their operating results. Some of the companies which comprise the Utilities HOLDRS have lines of business that do not relate to utilities activities and which may present additional risks not mentioned in this prospectus. The operating results of these utilities companies may fluctuate as a result of these additional risks and events in the other lines of business which may cause unusual volatility in the stock prices of these companies as compared to other utilities companies. Despite a company's possible success in the utilities business, there can be no assurance that the other lines of business in which these companies are engaged will not have an adverse effect on a company's business or financial condition. . Failure to integrate acquisitions could disrupt operations and prevent the realization of intended benefits. Many utilities companies are active acquirers of other companies as part of their business plans. There can be no assurance that many utilities companies will be able to integrate these acquired companies, which may result in failure to realize expected cost savings, increases in revenue and other projected benefits from such integration. There can also be no assurance that these companies will be able to attract and retain qualified personnel from acquired businesses or be successful in integrating such personnel. Furthermore, utilities companies may suffer material adverse short and long-term effects on operating results and financial condition as a result of such acquisitions. 7 HIGHLIGHTS OF UTILITIES HOLDRS This discussion highlights information regarding Utilities HOLDRS; we present certain information more fully in the rest of this prospectus. You should read the entire prospectus carefully before you purchase Utilities HOLDRS. Issuer..................Utilities HOLDRS Trust. The trust...............The Utilities HOLDRS Trust will be formed under the depositary trust agreement, dated as of ___, 2000 among The Bank of New York, as trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, other depositors and the owners of the Utilities 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 Utilities HOLDRS................Utilities HOLDRS are designed to achieve the following: Diversification. Utilities HOLDRS are designed to allow you to diversify your investment in the utilities industry through a single, exchange-listed instrument representing your undivided beneficial ownership of the underlying securities. Flexibility. The beneficial owners of Utilities HOLDRS have undivided beneficial ownership interests in each of the underlying securities represented by the Utilities HOLDRS, and can cancel their Utilities HOLDRS to receive each of the underlying securities represented by the Utilities HOLDRS. Transaction costs. The expenses associated with trading Utilities 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 specified companies involved in the utilities 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 Utilities 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. 8 The Utilities HOLDRS......The trust will issue Utilities HOLDRS that represent your undivided beneficial ownership interest in the shares of U.S.- traded common stock held by the trust on your behalf. The Utilities HOLDRS themselves are separate from the underlying securities that are represented by the Utilities HOLDRS. The specific share amounts for each round-lot of 100 Utilities HOLDRS will be determined on the pricing date so that the initial issue price will be approximately $90-$100 per Utilities HOLDR and the initial weightings of each underlying security included in the Utilities HOLDRS approximates the relative market capitalizations of the specified companies (based on the closing market prices of the underlying securities on the trading day immediately preceding the pricing date), subject to a maximum weight of 10%. For purposes of this preliminary prospectus, the indicative share amounts and the indicative weightings of each underlying security, based on market capitalizations as of May 2, 2000, are set forth in the table below; however, such share amounts and weightings are expected to change during the period between May 2, 2000, and the pricing date. After the pricing date, the share amounts 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. However, the weightings are expected to change substantially over time because of price fluctuations. The following chart provides the . names of the 20 issuers of the underlying securities represented by the Utilities HOLDRS, . stock ticker symbols, . indicative share amounts represented by a round-lot of 100 Utilities HOLDRS as of May 2, 2000, . indicative weightings as of May 2, 2000, and . principal market on which the shares of common stock of the selected companies are traded. Indicative Primary Share Indicative Trading Name of Company Ticker Amounts Weightings Market - ---------------------- ------ ------- ----------- ------ Enron Corporation ENE 12 9.82% NYSE Duke Energy Corporation DUK 16 9.78% NYSE The Williams Companies, Inc. WMB 21 8.85% NYSE The Southern Company SO 32 8.42% NYSE PG&E Corporation PCG 19 5.30% NYSE 9 Indicative Primary Share Indicative Trading Name of Company Ticker Amounts Weightings Market - ---------------------- ------ ------- ----------- ------ El Paso Energy Corporation EPG 11 5.04% NYSE Texas Utilities Company TXU 13 4.71% NYSE Unicom Corporation UCM 11 4.63% NYSE FPL Group, Inc. FPL 9 4.38% NYSE Dominion Resources, Inc. D 9 4.19% NYSE Peco Energy Company PE 9 3.94% NYSE Reliant Energy Resources Corp. REI 14 3.90% NYSE Public Service Enterprise Group, Inc. PEG 10 3.75% NYSE Consolidated Edison, Inc. ED 10 3.63% NYSE Edison International EIX 17 3.47% NYSE American Electric Power AEP 9 3.45% NYSE Company, Inc. Dynegy, Inc. DYN 5 3.41% NYSE Entergy Corporation ETR 12 3.28% NYSE Carolina Power & Light CPL 8 3.09% NYSE Company FirstEnergy Corporation FE 11 2.97% NYSE The actual share amounts and weightings will be determined on the pricing date and will appear in the final prospectus delivered in connection with sales of the Utilities HOLDRS. These companies generally are considered to be 20 of the largest and most liquid companies with U.S.-traded common stock involved in the utilities industry as measured by market capitalization and trading volume on May 2, 2000 The market capitalization of a company is determined by multiplying the price of its common stock by the number of outstanding shares of its common stock. The trust only will issue and cancel, and you only may obtain, hold, trade or surrender, Utilities HOLDRS in a round-lot of 100 Utilities HOLDRS and round-lot multiples. The trust will only issue Utilities HOLDRS upon the deposit of the whole shares represented by a round-lot of 100 Utilities HOLDRS. In the event that a fractional share comes to be represented by a round-lot of Utilities HOLDRS, the trust may require a minimum of more than one round-lot of 100 Utilities HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of Utilities HOLDRS. The number of outstanding Utilities 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 Utilities 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 Utilities HOLDRS will equal the sum of the closing market price on the primary trading market on the pricing date for each underlying security multiplied by the share amount to be determined on 10 the pricing date, plus an underwriting fee. It is expected that the initial public offering price will be approximately $90-$100 per Utilities HOLDR. Purchases...................After the initial offering, you may acquire Utilities 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 Utilities HOLDRS in the initial public offering, you will pay an underwriting fee equal to: . For purchases of ____ Utilities HOLDRS or fewer, 2%. . For purchases in excess of Utilities HOLDRS, %. You will not be charged any issuance fee or other sales commission in connection with purchases of Utilities HOLDRS made in the initial public offering. Issuance and cancellation fees......................After the initial offering, if you wish to create Utilities HOLDRS by delivering to the trust the requisite shares of common stock represented by a round-lot of 100 Utilities 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 Utilities HOLDRS. If you wish to cancel your Utilities 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 Utilities HOLDRS. Commissions.................If you choose to deposit underlying securities in order to receive Utilities HOLDRS after the conclusion of the initial public offering, you will not be charged the underwriting fee. However, in addition to the issuance fee charged by the trustee described above, you will be responsible for paying any sales commission associated with your purchase of the underlying securities that is charged by your broker, whether it be Merrill Lynch, Pierce, Fenner & Smith, A.G. Edwards & Sons, Inc. or First Union Securities, Inc., collectively, the selling group, 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 Utilities 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 Utilities 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 Utilities HOLDRS...........You have the right to withdraw the underlying securities upon request by delivering a round-lot or integral multiple of a round-lot of Utilities HOLDRS to the trustee, during the trustee's business hours, and paying the 11 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 Utilities 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 Utilities 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 Utilities HOLDRS and receiving all of your underlying securities. For specific information about obtaining your underlying securities, you should read the discussion under the caption "Description of the depositary trust agreement." Reconstitution events.......A. If an issuer of underlying securities no longer has a class of common stock registered under section 12 of the Securities Exchange Act of 1934, then its securities will no longer be an underlying security and the trustee will distribute the shares of that company to the owners of the Utilities 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 Utilities 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 Utilities HOLDRS, unless the merger, consolidation or other corporate combination is between companies that are already included in the Utilities HOLDRS and the consideration paid is additional 12 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 five 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 Utilities HOLDRS are delisted from the American Stock Exchange and are not listed for trading on another national securities exchange or through NASDAQ within five business days from the date the Utilities HOLDRS are delisted. B. The trustee resigns and no successor trustee is appointed within 60 days from the date the trustee provides notice to Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, of its intent to resign. C. 75% of beneficial owners of outstanding Utilities 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 Utilities HOLDRS as directly owning the underlying securities. The Utilities 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 Utilities HOLDRS on the American Stock Exchange under the symbol "UTH". Trading will take place only in round-lots of 100 Utilities HOLDRS and round-lot multiples. A minimum of 150,000 Utilities 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 Utilities HOLDRS. Bid and ask prices, however, will be quoted per single Utilities HOLDRS. Clearance and settlement....The trust will issue Utilities HOLDRS in book-entry form. Utilities HOLDRS will be evidenced by one or more global certificates that the trustee will deposit with The Depository 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 Utilities HOLDRS." 13 THE TRUST General. This discussion highlights information about the Utilities HOLDRS trust. You should read this information, information about the depositary trust agreement as well as the depositary trust agreement before you purchase Utilities HOLDRS. The material terms of the depositary trust agreement are described in this prospectus under the heading "Description of the depositary trust agreement." The Utilities HOLDRS trust. The trust will be formed pursuant to the depositary trust agreement, dated as of , 2000. The Bank of New York will be the trustee. The Utilities HOLDRS trust is not a registered investment company under the Investment Company Act of 1940. The Utilities HOLDRS trust is intended to hold deposited shares for the benefit of owners of Utilities HOLDRS. The trustee will perform only administrative and ministerial acts. The property of the trust will consist of the underlying securities and all monies or other property, if any, received by the trustee. The trust will terminate on December 31, 2040, or earlier if a termination event occurs. DESCRIPTION OF UTILITIES HOLDRS The trust will issue Utilities 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 Utilities HOLDRS on a continuous basis when an investor deposits the requisite underlying securities with the trustee. You may only acquire, hold, trade and surrender Utilities HOLDRS in a round-lot of 100 Utilities HOLDRS and round-lot multiples. The trust will only issue Utilities HOLDRS upon the deposit of the whole shares of underlying securities that are represented by a round-lot of 100 Utilities 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 Utilities HOLDRS, the trust may require a minimum of more than one round-lot of 100 Utilities HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of Utilities HOLDRS. Utilities 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 Utilities HOLDRS--The Utilities HOLDRS." Beneficial owners of Utilities 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 Utilities HOLDRS to receive the underlying securities. See "Description of the depositary trust agreement." Utilities 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 the aggregate value of the underlying securities represented by a receipt. Utilities 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 Utilities HOLDRS wishes to realize the dollar value of the underlying securities, that owner will have to cancel the Utilities HOLDRS. Such cancellation will require payment of fees and expenses as described in "Description of the depositary trust agreement--Withdrawal of underlying securities." Utilities 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. Utilities HOLDRS will be available only in book-entry form. 14 Owners of Utilities HOLDRS may hold their Utilities 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 aspects of the utilities industry on a regional level and whose common stock is registered under Section 12 of the Exchange Act. The issuers of the underlying securities are considered to be 20 of the largest capitalized, most liquid companies involved in the utilities industry as measured by market capitalization and trading volume. The following criteria were used in selecting the underlying securities on May 2, 2000: . Market capitalization equal to or greater than $2 billion; . Average daily trading volume of at least 500,000 shares over the 60 trading days before May 2, 2000; . Average daily dollar volume (that is, the average daily trading volume multiplied by the average closing price over the 60 day period prior to May 2, 2000) of at least $10 million over the 60 trading days before May 2, 2000; 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 Utilities 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 utilities industry. In this case, the Utilities HOLDRS may no longer consist of securities issued by companies involved in the utilities industry. Merrill Lynch, Pierce, Fenner & Smith Incorporated will determine, in its sole discretion, whether the issuer of a particular underlying security remains in the utilities industry and will undertake to make adequate disclosure when necessary. Underlying securities. For a list of the underlying securities represented by Utilities HOLDRS, please refer to "Highlights of Utilities HOLDRS--The Utilities HOLDRS." If the underlying securities change because of a reconstitution event, a revised list of underlying securities will be set forth in a prospectus supplement and will be available from the American Stock Exchange and through a widely-used electronic information dissemination system such as Bloomberg or Reuters. No investigation. In selecting the underlying securities, the trust, the trustee, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and any affiliate of these entities, have not performed any investigation or review of the selected companies, including the public filings by the companies, other than to the extent required to determine whether the companies satisfied the program's stated selection criteria. Accordingly, before you acquire Utilities 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, the selling group or any of their affiliates. 15 General background and historical information. For a brief description of the business of each of the issuers of the underlying securities and monthly pricing information showing the historical performance of each underlying issuer's securities see "Annex A." The following table and graph set forth the composite performance of all of the underlying securities represented by a single Utilities HOLDR based upon the indicative share amounts set forth in the table on page 10 of this preliminary prospectus, measured at the close of each month from January 1995 to April 2000. 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. The actual share amounts will be determined on the pricing date and may differ from the indicative share amounts. --------- --------- --------- --------- --------- --------- Utilities Utilities Utilities 1995 HOLDRS 1996 HOLDRS 1997 HOLDRS --------- --------- --------- --------- --------- --------- January 62.43 January 75.31 January 72.71 February 61.66 February 72.40 February 72.42 March 59.76 March 71.49 March 69.43 April 61.81 April 69.09 April 68.04 May 65.87 May 69.76 May 70.17 June 65.36 June 73.13 June 71.74 July 65.22 July 68.24 July 73.57 August 64.45 August 68.79 August 71.57 September 68.29 September 69.09 September 74.76 October 69.74 October 72.13 October 76.23 November 69.45 November 72.74 November 81.12 December 73.09 December 72.40 December 86.89 --------- --------- --------- --------- --------- --------- Utilities Utilities Utilities 1998 HOLDRS 1999 HOLDRS 2000 HOLDRS --------- --------- --------- --------- --------- --------- January 4.25 January 93.99 January 89.91 February 86.49 February 90.50 February 83.14 March 92.17 March 89.42 March 85.90 April 90.04 April 96.41 April 93.07 May 89.82 May 102.37 June 92.79 June 95.74 July 88.16 July 94.80 August 89.56 August 94.80 September 96.67 September 89.71 October 94.62 October 91.24 November 95.33 November 82.55 December 97.79 December 81.53 [GRAPH] 16 DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT General. The depositary trust agreement, dated as of , 2000, among Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Bank of New York, as trustee, other depositors and the owners of the Utilities HOLDRS, provides that Utilities 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 Utilities HOLDRS. You may create and cancel Utilities HOLDRS only in round-lots of 100 Utilities HOLDRS. You may create Utilities HOLDRS by delivering to the trustee the requisite underlying securities. The trust will only issue Utilities HOLDRS upon the deposit of the whole shares represented by a round-lot of 100 Utilities HOLDRS. In the event that a fractional share comes to be represented by a round-lot of Utilities HOLDRS, the trust may require a minimum of more than one round-lot of 100 Utilities HOLDRS for an issuance so that the trust will always receive whole share amounts for issuance of Utilities HOLDRS. Similarly, you must surrender Utilities HOLDRS in integral multiples of 100 Utilities 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 Utilities 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, any beneficial owner of Utilities HOLDRS, other than Merrill Lynch, Pierce, Fenner & Smith Incorporated owning Utilities 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 Utilities 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 Utilities 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 Utilities 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. 17 Record dates. With respect to dividend payments and voting instructions, the trustee expects to fix the trust's record dates as close as possible to the record date fixed by the issuer of the underlying securities. Shareholder communications. The trustee promptly will forward to you all shareholder communications that it receives from issuers of the underlying securities. Withdrawal of underlying securities. You may surrender your Utilities 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 Utilities 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 Utilities HOLDRS. Further issuances of Utilities HOLDRS. The depositary trust agreement provides for further issuances of Utilities 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 Utilities 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 Utilities 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 Utilities HOLDRS, unless the merger, consolidation or other corporate combination is between companies that are already included in the Utilities 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 Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, within 60 days from the date the trustee provides notice to Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor, of its intent to resign. Upon termination, the beneficial owners of Utilities HOLDRS will surrender their Utilities 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 Utilities 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 Utilities HOLDRS are delisted. Finally, the trust will terminate if 75% of the owners of outstanding Utilities HOLDRS other than Merrill Lynch, Pierce, Fenner & Smith Incorporated vote to dissolve and liquidate the trust. 18 If a termination event occurs, the trustee will distribute the underlying securities to you as promptly as practicable after the termination event occurs. Amendment of the depositary trust agreement. The trustee and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as 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 Utilities 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 Utilities 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 Utilities HOLDRS will not become effective until 30 days after notice of the amendment is given to the owners of Utilities HOLDRS. Issuance and cancellation fees. After the initial public offering, the trust expects to issue more Utilities HOLDRS. If you wish to create Utilities 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 Utilities HOLDRS. If you wish to cancel your Utilities 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 Utilities 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 Utilities 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 a member of the selling group 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 Utilities 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 Utilities 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 Utilities 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 Utilities 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 Utilities 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 (each of the above, 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 Utilities 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 Utilities HOLDRS A receipt holder purchasing and owning Utilities HOLDRS will be treated, for U.S. federal income tax purposes, as directly owning a proportionate share of the underlying securities represented by Utilities 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 Utilities 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 Utilities 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 Utilities HOLDRS. Similarly, with respect to sales of Utilities HOLDRS for cash in the secondary market, the amount realized with respect to a sale of Utilities HOLDRS will be equal to the aggregate amount realized with respect to each of the underlying securities. 20 The distribution of any securities by the trust upon the surrender of Utilities 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. 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 Utilities 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 ownership of the Utilities HOLDRS or of the underlying securities through an investment in the Utilities HOLDRS. ERISA CONSIDERATIONS Any plan fiduciary which proposes to have a plan acquire Utilities HOLDRS should consult with its counsel with respect to the potential applicability of ERISA and the Internal Revenue 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 Utilities 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 depositary 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 Utilities HOLDRS. The selling group proposes to offer the Utilities HOLDRS to the public at the offering price set forth on the cover page of this prospectus, which includes an underwriting fee of 2%. Merrill Lynch, Pierce, Fenner & Smith Incorporated will provide Utilities HOLDRS to A.G. Edwards & Sons, Inc. and First Union Securities, Inc. at the public offering price, as set forth on the cover page of this prospectus, less a concession that is not in excess of 1.5%. We expect the trust to deliver the initial distribution of Utilities HOLDRS against deposit of the underlying securities in New York, New York on , 2000. After the initial offering, the public offering price, concession and discount may be changed. The trust will continue to issue Utilities HOLDRS, in connection with deposits of underlying securities. This offering is being made in compliance with Conduct Rule 2810 of the National Association of Securities Dealers, Inc. Accordingly, sales will not be made to a discretionary account without the prior written approval of a purchaser of Utilities HOLDRS. 21 Members of the selling group have from time to time provided investment banking and other financial services to certain of the issuers of the underlying securities and expect in the future to provide these services, for which they have received and will receive customary fees and commissions. They also may have served as counterparties 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 Utilities 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 agreement or periodic reports filed or not filed with the SEC with respect to the Utilities 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. LEGAL MATTERS Legal matters, including the validity of the Utilities HOLDRS will be passed upon for Merrill Lynch, Pierce, Fenner & Smith Incorporated, the initial depositor and the underwriters, by Shearman & Sterling, New York, New York. Shearman & Sterling, as special U.S. tax counsel to the trust, also will render an opinion regarding the material federal income tax consequences relating to the Utilities 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 Utilities 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 the selling group 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 Utilities HOLDRS. This prospectus relates only to Utilities HOLDRS and does not relate to the common stock or other securities of the issuers of the underlying securities. The information in this prospectus regarding the issuers of the underlying securities has been derived from the publicly available documents described in the preceding paragraph. We have not participated in the preparation of these documents or made any due diligence inquiries with respect to the issuers of the underlying securities in connection with Utilities HOLDRS. We make no representation that these publicly available documents or any other publicly available 22 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 Utilities HOLDRS, have been publicly disclosed. 23 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 1995, 1996, 1997, 1998, 1999 and 2000 through April 2000. All market prices in excess of one dollar are rounded to the nearest one sixty-fourth of a dollar. The historical prices of the underlying securities should not be taken as an indication of future performance. AMERICAN ELECTRIC POWER COMPANY, INC. (AEP) American Electric Power Company, Inc. is a public utility holding company engaged in the generation, purchase, transmission and distribution of electric power. American Electric's service areas cover portions of the states of Indiana, Kentucky, Michigan, Ohio, Tennessee, Virginia and West Virginia. American Electric also provides energy consulting, engineering and technical services.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 35 January 44 1/4 January 41 3/8 January 49 5/16 January 43 13/16 January 33 1/2 February 33 7/8 February 42 7/8 February 41 3/4 February 48 February 41 5/8 February 28 1/8 March 31 3/4 March 41 3/4 March 41 3/4 March 50 1/4 March 39 11/16 March 29 13/16 April 32 3/4 April 40 5/8 April 40 1/2 April 47 3/4 April 41 7/16 April 36 5/18 May 34 1/4 May 40 1/8 May 40 5/8 May 45 3/8 May 43 3/8 June 35 1/8 June 42 5/8 June 41 15/16 June 45 3/8 June 37 9/16 July 34 1/2 July 41 1/2 July 44 3/4 July 42 15/16 July 35 3/8 August 34 1/8 August 41 1/2 August 43 11/16 August 45 1/4 August 36 5/16 September 36 3/8 September 40 5/8 September 45 1/2 September 48 13/16 September 34 1/8 October 38 1/8 October 41 5/8 October 47 1/4 October 48 15/16 October 34 1/2 November 37 3/4 November 41 1/2 November 49 9/16 November 46 3/8 November 31 3/8 December 40 1/2 December 41 1/8 December 51 5/8 December 47 1/16 December 32 1/8
The closing price on , 2000 was . A-1 CAROLINA POWER & LIGHT COMPANY (CPL) Carolina Power & Light Company is a energy provider engaged in the generation, transmission, distribution and sale of electricity in portions of North and South Carolina and the transmission, distribution and sale of natural gas in portions of North Carolina. Carolina Power & Light also provides telecommunication and energy management services and is also engaged in propane and miscellaneous non-regulated activities.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 28 3/8 January 37 January 37 5/8 January 40 5/8 January 41 5/8 January 32 1/4 February 27 1/2 February 36 1/2 February 37 1/8 February 41 3/4 February 39 7/8 February 29 3/4 March 27 1/8 March 37 1/4 March 36 1/4 March 45 1/4 March 37 13/16 March 32 7/16 April 27 1/2 April 36 April 34 April 43 1/16 April 40 3/8 April 36 9/16 May 29 7/8 May 36 1/8 May 34 3/4 May 41 May 43 3/4 June 30 1/4 June 38 June 35 7/8 June 43 3/8 June 42 13/16 July 30 3/8 July 36 July 35 5/8 July 40 5/8 July 41 1/8 August 30 5/8 August 34 7/8 August 33 3/4 August 43 1/16 August 36 3/8 September 33 5/8 September 34 1/2 September 36 September 43 3/16 September 35 3/8 October 32 3/4 October 36 1/8 October 35 3/4 October 45 7/8 October 34 1/2 November 32 7/8 November 36 5/8 November 37 3/8 November 46 3/8 November 30 1/8 December 34 1/2 December 36 1/2 December 42 3/8 December 47 1/16 December 30 7/16
The closing price on , 2000 was . A-2 CONSOLIDATED EDISON, INC. (ED) Consolidated Edison, Inc. is a public utility holding company which provides electric, gas and steam transmission and distribution services in portions of New York and northern New Jersey and northeastern Pennsylvania. In addition, Consolidated Edison operates a telecommunications infrastructure company, a retail energy supply company, a wholesale energy supply company and an infrastructure development company.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 28 1/4 January 33 3/4 January 31 January 41 5/16 January 49 7/16 January 32 11/16 February 27 5/8 February 32 3/8 February 30 7/8 February 42 1/2 February 46 3/4 February 27 9/16 March 27 1/4 March 31 7/8 March 30 March 46 3/4 March 45 5/16 March 29 1/8 April 27 3/4 April 29 3/8 April 27 3/4 April 45 1/4 April 45 7/16 April 35 3/16 May 29 7/8 May 27 7/8 May 29 1/8 May 42 13/16 May 48 9/16 June 29 1/2 June 29 1/4 June 29 7/16 June 46 1/16 June 45 1/4 July 29 July 27 July 31 5/8 July 42 5/16 July 43 1/2 August 28 1/14 August 26 1/8 August 30 5/8 August 47 5/16 August 44 September 30 3/8 September 27 3/4 September 34 September 52 September 41 1/2 October 30 3/8 October 29 1/4 October 34 1/4 October 50 1/8 October 38 3/16 November 28 3/4 November 29 November 37 15/16 November 50 13/16 November 34 1/2 December 31 3/4 December 29 1/8 December 41 December 52 7/8 December 34 1/2
The closing price on , 2000 was . A-3 DOMINION RESOURCES, INC. (D) Dominion Resources, Inc. is a diversified utility holding company whose subsidiaries are public utilities engaged in the generation, transmission, distribution and sale of electric energy. These electric power subsidiaries operate in Virginia and northeastern North Carolina. It also produces, transports, distributes and markets natural gas to customers in Pennsylvania, Ohio, Virginia, West Virginia, New York and other cities in the mid-Atlantic and northeastern United States.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 38 1/8 January 42 7/8 January 39 5/8 January 39 15/16 January 44 3/4 January 41 3/4 February 38 February 39 1/2 February 40 1/4 February 39 7/8 February 38 5/8 February 36 11/16 March 36 March 39 1/2 March 36 3/8 March 41 13/16 March 36 15/16 March 38 7/16 April 36 1/2 April 38 1/2 April 34 3/8 April 39 9/16 April 41 1/8 April 45 May 37 1/8 May 37 7/8 May 34 5/8 May 39 11/16 May 43 3/16 June 36 1/2 June 40 June 36 5/8 June 40 3/4 June 43 5/16 July 35 5/8 July 37 5/8 July 36 3/4 July 40 3/4 July 44 1/16 August 36 1/8 August 37 3/8 August 36 August 41 11/16 August 46 1/4 September 37 5/8 September 37 3/4 September 37 7/8 September 44 5/8 September 45 1/8 October 39 3/4 October 37 3/4 October 37 3/16 October 46 1/8 October 48 1/8 November 39 5/8 November 38 1/8 November 38 7/8 November 46 3/16 November 45 3/8 December 41 1/4 December 38 1/2 December 42 9/16 December 46 3/4 December 39 1/4
The closing price on ,2000 was . A-4 DUKE ENERGY CORPORATION (DUK) Duke Energy Corporation generates, transmits, distributes and sells electricity in central and western North Carolina and the western portion of South Carolina. Its natural gas operations provide interstate transportation and storage of natural gas for customers primarily in the mid-Atlantic and New England states and gathers, processes, transports and markets natural gas and produces, transports and markets natural gas liquids. Duke Energy also develops, owns and operates energy-related facilities throughout the world.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 40 3/8 January 49 3/4 January 46 7/8 January 54 3/16 January 61 13/16 January 57 3/4 February 39 1/4 February 48 7/8 February 44 1/4 February 55 9/16 February 56 7/8 February 48 1/2 March 38 1/4 March 50 1/2 March 44 1/8 March 59 9/16 March 54 13/16 March 52 1/2 April 39 1/2 April 47 April 43 7/8 April 57 7/8 April 56 April 57 1/2 May 41 3/4 May 48 1/4 May 45 1/8 May 57 5/8 May 60 5/16 June 41 1/2 June 51 1/4 June 47 15/16 June 59 1/4 June 54 7/16 July 41 1/2 July 47 7/8 July 50 11/16 July 57 1/8 July 52 15/16 August 40 5/8 August 46 3/4 August 48 7/16 August 62 3/8 August 57 1/2 September 43 3/8 September 46 5/8 September 49 7/16 September 66 3/16 September 55 1/8 October 44 3/4 October 48 7/8 October 48 1/2 October 64 11/16 October 56 9/16 November 44 7/8 November 46 3/8 November 52 November 62 9/16 November 50 11/16 December 47 3/8 December 46 1/4 December 55 3/8 December 64 1/16 December 50 1/8
The closing price on , 2000 was . A-5 DYNEGY, INC. (DYN) Dynegy, Inc. is a holding company whose subsidiaries provide energy products and services in North America and the United Kingdom. Dynegy markets products through its wholesale marketing operations which include natural gas, electricity, coal, natural gas liquids, crude oil, liquid petroleum gas and related services. These operations are supported by subsidiaries that provide power generation, gas and liquids storage capacity and transportation. Dynegy operates an electric and natural gas utility engaged in the transmission, distribution and sale of electricity and natural gas.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 10 5/8 January 10 1/4 January 21 1/2 January 16 January 10 5/8 January 31 February 10 1/2 February 11 3/8 February 19 3/4 February 15 1/2 February 12 February 46 7/8 March 9 1/8 March 12 3/4 March 15 3/4 March 14 5/8 March 14 1/16 March 62 47/64 April 9 5/8 April 15 April 17 5/64 April 14 3/4 April 17 3/8 April 65 7/16 May 8 3/4 May 15 1/2 May 18 May 15 3/16 May 17 1/8 June 10 1/4 June 15 June 15 1/2 June 12 1/2 June 20 3/8 July 10 July 16 1/4 July 16 3/16 July 13 7/8 July 24 August 9 1/2 August 15 1/8 August 16 3/8 August 99 /16 August 23 1/2 September 9 September 15 5/8 September 17 3/4 September 13 7/16 September 20 11/16 October 9 October 18 October 19 October 15 October 22 7/8 November 8 7/8 November 21 3/4 November 16 1/2 November 13 November 22 1/2 December 8 7/8 December 23 1/4 December 17 1/2 December 10 15/16 December 24 5/16
The closing price on , 2000 was . A-6 EDISON INTERNATIONAL (EIX) Edison International is the parent holding company of a public utility company as well as other non-utility companies. Edison's non-utility companies are engaged in developing, acquiring, owning and operating electric power generation facilities throughout the world. They also provide capital and financial services for energy and infrastructure projects, manage and sell real estate projects and provide energy services, utility outsourcing and consumer products and services.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 16 1/4 January 18 1/2 January 21 3/8 January 26 7/8 January 27 13/16 January 29 1/8 February 16 3/8 February 17 1/2 February 21 1/2 February 27 5/8 February 25 1/2 February 26 1/4 March 15 5/8 March 17 1/8 March 22 1/2 March 29 3/8 March 22 1/4 March 16 9/16 April 16 3/4 April 16 April 21 April 29 13/16 April 24 1/2 April 19 1/16 May 17 3/8 May 16 1/2 May 23 3/8 May 29 3/8 May 27 1/2 June 17 1/8 June 17 5/8 June 24 7/8 June 29 9/16 June 26 3/4 July 17 1/8 July 15 3/8 July 25 1/4 July 27 3/4 July 25 5/16 August 16 5/8 August 17 3/8 August 24 1/8 August 28 7/16 August 25 3/8 September 17 3/4 September 17 7/8 September 25 1/4 September 25 11/16 September 24 5/16 October 17 October 19 5/8 October 25 5/8 October 26 3/8 October 29 5/8 November 15 3/4 November 19 7/8 November 26 13/16 November 27 1/2 November 26 1/2 December 17 5/8 December 19 7/8 December 27 3/16 December 27 7/8 December 26 3/16
The closing price on , 2000 was . A-7 EL PASO ENERGY CORPORATION (EPG) El Paso Energy Corporation's principal operations include the transportation, gathering, processing, and storage of natural gas and the marketing of natural gas, power, and other energy-related commodities. El Paso Energy also assists in the development and operation of energy infrastructure facilities worldwide and the domestic exploration and production of natural gas and oil. On January 18, 2000, Coastal Corporation and El Paso Energy announced the execution of a definitive merger agreement. The merger will be submitted for approval to the joint shareholders of the companies on May 5, 2000. This transaction remains subject to this shareholder approval and other customary closing conditions.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 15 January 161/8 January 26 15/16 January 32 January 33 January 32 1/4 February 15 3/8 February 167/8 February 26 13/16 February 33 3/16 February 36 7/16 February 37 1/16 March 14 5/16 March 181/2 March 28 5/16 March 35 5/16 March 32 11/16 March 40 3/8 April 14 5/8 April 181/2 April 29 April 36 15/16 April 36 3/4 April 42 3/8 May 14 May 181/8 May 29 5/8 May 38 5/8 May 36 1/16 June 14 1/4 June 191/4 June 27 1/2 June 38 1/4 June 35 3/16 July 12 11/16 July 191/2 July 28 29/32 July 34 July 36 August 14 1/16 August 2013/16 August 28 1/8 August 25 August 36 9/16 September 13 3/4 September 22 September 30 9/32 September 32 7/16 September 40 1/4 October 13 1/2 October 241/4 October 29 31/32 October 35 7/16 October 41 November 15 3/8 November 25 November 30 11/16 November 34 1/8 November 38 1/2 December 14 3/8 December 251/4 December 33 1/4 December 34 13/16 December 38 13/16
The closing price on , 2000 was . A-8 ENRON CORPORATION (ENE) Enron Corporation, through its subsidiaries, is principally engaged in the generation, transmission and distribution of electricity to markets in the northwestern United States and the transportation of natural gas through pipelines to markets throughout the United States. Enron also markets natural gas, electricity and other commodities and assists in the development, construction and operation of power plants, pipelines and other energy related assets throughout the world.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 14 9/16 January 18 1/2 January 20 5/8 January 20 23/32 January 33 January 677/8 February 16 1/2 February 18 5/16 February 19 15/16 February 23 1/2 February 321/2 February 683/4 March 16 1/2 March 18 7/16 March 19 1/16 March 23 3/16 March 321/8 March 747/8 April 17 April 20 1/8 April 18 13/16 April 24 19/32 April 375/8 April 6911/16 May 18 1/4 May 20 May 20 3/8 May 25 1/16 May 3511/16 June 17 9/16 June 20 7/16 June 20 13/32 June 27 1/32 June 407/8 July 17 3/8 July 19 11/16 July 18 15/16 July 26 15/32 July 4219/32 August 16 13/16 August 20 1/16 August 19 1/4 August 21 5/32 August 417/8 September 16 3/4 September 20 3/8 September 19 1/4 September 26 3/4 September 411/16 October 17 3/16 October 23 1/4 October 19 October 26 3/8 October 3915/16 November 18 3/4 November 22 15/16 November 19 11/32 November 26 1/4 November 381/16 December 19 1/16 December 21 9/16 December 20 25/32 December 28 17/32 December 443/8
The closing price on , 2000 was . A-9 ENTERGY CORPORATION (ETR) Entergy Corporation is a registered public utility holding company primarily engaged, through its subsidiaries, in domestic utility operations, power marketing and trading, global power development and domestic non-utility nuclear operations. Entergy's major customers include the chemical, petroleum refining, paper and food products industries. Entergy's utility services are primarily provided in Arkansas, Louisiana, Mississippi and Texas.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 24 3/8 January 29 5/8 January 27 1/4 January 28 5/8 January 29 7/16 January 24 15/6 February 22 3/8 February 28 3/8 February 26 3/8 February 28 15/16 February 28 1/4 February 20 1/4 March 20 7/8 March 28 March 24 1/2 March 29 3/4 March 27 1/2 March 20 3/16 April 21 3/4 April 26 3/8 April 23 3/8 April 24 7/8 April 31 1/4 April 25 7/16 May 24 3/4 May 26 1/4 May 26 3/8 May 26 5/16 May 32 7/16 June 24 1/8 June 28 3/8 June 27 1/2 June 28 3/4 June 31 1/4 July 23 3/4 July 25 1/2 July 27 5/16 July 27 3/8 July 30 5/16 August 24 1/8 August 25 3/8 August 24 13/16 August 28 13/16 August 29 13/16 September 26 1/8 September 27 September 26 1/16 September 30 3/4 September 28 15/16 October 28 1/2 October 28 October 24 3/8 October 28 3/4 October 29 15/16 November 27 7/8 November 27 1/8 November 26 November 29 5/16 November 27 9/16 December 29 1/4 December 27 5/8 December 29 15/16 December 31 1/8 December 25 3/4
The closing price on ,2000 was . A-10 FIRSTENERGY CORPORATION (FE) FirstEnergy Corporation is a holding company of four principal electric utility operating subsidiaries. FirstEnergy's subsidiaries furnish electric service and provide transmission services and electric energy to municipalities primarily in Pennsylvania and Ohio. Its other subsidiaries provide energy- related products and services. It also engages in the sale, purchase and interchange of electric energy with other electric companies.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 21 1/8 January 23 7/8 January 23 1/8 January 29 January 31 1/16 January 22 3/4 February 20 7/8 February 23 3/4 February 22 1/2 February 28 15/16 February 29 1/4 February 18 1/2 March 20 March 22 5/8 March 21 March 30 13/16 March 28 March 20 5/8 April 20 1/8 April 20 7/8 April 20 April 30 1/4 April 29 11/16 April 25 7/16 May 21 7/8 May 21 7/8 May 21 1/4 May 29 11/16 May 31 13/16 June 22 5/8 June 21 7/8 June 21 3/4 June 30 3/4 June 31 July 22 July 21 July 22 1/4 July 27 9/16 July 28 9/16 August 21 5/8 August 21 August 22 August 28 7/8 August 28 9/16 September 22 3/4 September 19 3/8 September 23 7/16 September 31 1/16 September 25 5/16 October 22 7/8 October 20 7/8 October 24 3/4 October 30 October 26 1/16 November 22 3/4 November 23 November 27 November 30 15/16 November 23 5/16 December 23 1/2 December 22 3/4 December 29 December 32 9/16 December 22 11/16
The closing price , 2000 was . A-11 FPL GROUP, INC. (FPL) FPL Group, Inc. is a public utility holding company engaged in the generation, transmission, distribution and sale of electric energy throughout most of the east and southwestern coasts of Florida. FPL is also involved in producing electrcity from renewable fuels and in non-utilities related businesses, such as the sale and marketing of fiber-optic network capacity.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 36 5/8 January 46 3/8 January 44 1/4 January 57 3/8 January 54 7/8 January 42 3/16 February 35 7/8 February 44 5/8 February 45 1/2 February 58 1/16 February 51 7/16 February 38 5/8 March 36 3/8 March 45 1/4 March 44 1/8 March 64 1/4 March 53 1/4 March 46 1/16 April 36 3/4 April 43 1/8 April 44 5/8 April 62 1/16 April 56 3/8 April 45 1/4 May 39 1/4 May 42 3/4 May 46 3/8 May 61 7/16 May 58 3/16 June 38 5/8 June 46 June 46 1/16 June 63 June 54 5/8 July 38 1/4 July 45 3/8 July 47 7/8 July 60 13/16 July 53 15/16 August 38 7/8 August 44 1/4 August 46 5/16 August 66 9/16 August 54 September 40 7/8 September 43 1/4 September 51 5/16 September 69 11/16 September 50 3/8 October 41 7/8 October 45 7/8 October 51 11/16 October 62 9/16 October 50 5/16 November 43 3/8 November 46 1/8 November 55 15/16 November 61 1/4 November 43 3/4 December 46 3/8 December 46 December 59 3/16 December 61 5/8 December 42 13/16
The closing price on , 2000 was . A-12 PECO ENERGY COMPANY (PE) PECO Energy Company is a public transmitting utility and electric utility. PECO is principally engaged in the production, purchase, transmission, distribution and sale of electricity to residential, commercial, industrial and wholesale customers. PECO also distributes and sells natural gas to residential, commercial and industrial customers.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 26 3/4 January 30 3/4 January 23 January 18 15/16 January 38 3/16 January 41 3/4 February 26 3/4 February 28 1/4 February 22 1/2 February 19 13/16 February 35 5/8 February 37 5/16 March 25 1/8 March 26 5/8 March 20 3/8 March 22 1/8 March 46 1/4 March 36 7/8 April 25 3/4 April 24 3/4 April 19 3/4 April 23 13/16 April 47 7/16 April 41 11/16 May 28 1/8 May 24 5/8 May 19 May 28 1/4 May 48 15/16 June 27 5/8 June 26 June 21 June 29 3/16 June 41 7/8 July 28 5/8 July 23 1/2 July 23 1/2 July 29 15/16 July 42 3/8 August 26 5/8 August 23 1/2 August 23 13/16 August 34 1/4 August 40 5/8 September 28 5/8 September 23 3/4 September 23 7/16 September 36 3/4 September 37 1/2 October 29 1/4 October 25 1/4 October 22 3/4 October 38 3/4 October 38 3/16 November 29 November 25 1/2 November 24 5/16 November 40 1/8 November 32 15/16 December 30 1/8 December 25 1/4 December 24 1/4 December 41 3/4 December 34 3/4
closing price on , 2000 was . A-13 PG&E CORPORATION (PCG) PG&E Corporation is an energy-based holding company whose subsidiaries operate public utilities engaged principally in providing electricity and natural gas distribution and transmission services throughout most of northern and central California. PG&E also provides energy products and services throughout North America including the development, construction and operation of independent power generation facilities that serve wholesale and industrial customers. Through its subsidiaries, PG&E also owns and operates natural gas pipelines and storage facilities, buys and sells energy commodities, provides risk management services and provides electricity, natural gas, and related services to industrial, commercial and institutional customers.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 25 1/4 January 27 3/4 January 22 7/8 January 29 13/16 January 31 15/16 January 21 15/16 February 25 5/8 February 25 5/8 February 23 February 30 1/8 February 31 1/2 February 20 5/8 March 24 7/8 March 22 3/8 March 23 1/2 March 33 March 31 1/16 March 21 April 26 7/8 April 22 3/4 April 24 April 32 3/8 April 31 1/16 April 25 15/16 May 29 May 23 1/4 May 23 1/8 May 31 1/2 May 33 3/4 June 29 June 23 1/4 June 24 1/4 June 31 9/16 June 32 7/16 July 29 1/2 July 19 3/4 July 24 13/16 July 30 7/16 July 31 5/8 August 28 3/4 August 22 5/8 August 23 1/8 August 32 1/8 August 30 5/16 September 30 September 21 3/4 September 23 3/16 September 31 7/8 September 25 7/8 October 29 3/8 October 23 3/8 October 25 9/16 October 30 7/16 October 22 15/16 November 27 1/2 November 24 1/8 November 28 1/4 November 30 15/16 November 22 3/8 December 28 3/8 December 21 December 30 5/16 December 31 1/2 December 20 1/2
The closing price on , 2000 was . A-14 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED (PEG) Public Service Enterprise Group Incorporated. is a public utility holding company engaged primarily in the generation, transmission, distribution and sale of electric energy and gas services. Public Service Enterprise primarily operates in New Jersey and also markets electricity, natural gas, capacity and related services throughout the eastern United States. Public Service Enterprise also develops, acquires and operates electric generation and distribution facilities and engages in wholesale and retail sales in selected domestic and international markets.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 28 3/4 January 31 1/4 January 27 3/8 January 31 January 39 9/16 January 34 3/8 February 29 1/8 February 28 1/8 February 28 1/4 February 32 1/4 February 38 February 29 March 27 3/8 March 27 3/8 March 26 1/4 March 37 3/4 March 38 3/16 March 29 5/8 April 27 1/2 April 26 1/8 April 24 1/8 April 33 9/16 April 40 April 35 7/8 May 29 3/4 May 26 1/2 May 24 3/4 May 33 1/8 May 41 15/16 June 27 3/4 June 27 1/2 June 25 June 34 7/16 June 40 13/16 July 27 3/4 July 26 July 24 3/4 July 32 11/16 July 40 5/16 August 27 1/2 August 27 1/8 August 24 13/16 August 36 1/2 August 41 September 29 3/4 September 26 3/4 September 25 3/4 September 39 5/16 September 38 5/8 October 29 3/8 October 26 7/8 October 25 15/16 October 38 October 39 9/16 November 29 5/8 November 28 5/8 November 29 3/16 November 39 November 35 December 30 5/8 December 27 1/4 December 31 13/16 December 40 December 34 13/16
The closing price on , 2000 was . A-15 RELIANT ENERGY RESOURCES CORP. (REI) Reliant Energy Resources Corp. is an international energy services company that provides energy and energy services in North America, western Europe and Latin America. Reliant's services include electric operations and natural gas distribution. Reliant also acquires, develops and operates unregulated power generation facilities which sell capacity, energy and related services.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 19 15/16 January 24 January 22 5/8 January 26 1/8 January 30 1/4 January 22 13/16 February 19 1/8 February 22 5/8 February 23 1/4 February 25 7/8 February 26 13/16 February 20 9/16 March 19 1/16 March 21 5/8 March 20 7/8 March 28 3/4 March 26 1/16 March 23 9/16 April 19 11/16 April 21 3/8 April 20 April 29 1/16 April 28 5/16 April 26 5/8 May 21 1/2 May 21 7/8 May 20 3/4 May 28 5/8 May 30 1/2 June 21 1/16 June 24 5/8 June 21 7/16 June 30 13/16 June 27 5/8 July 21 7/8 July 22 5/8 July 20 15/16 July 27 15/16 July 27 5/16 August 21 1/4 August 21 3/4 August 20 1/4 August 28 13/16 August 27 11/16 September 22 1/16 September 22 1/8 September 21 3/4 September 31 1/8 September 27 1/16 October 23 3/16 October 22 7/8 October 21 3/4 October 31 1/16 October 27 1/4 November 22 7/8 November 22 November 23 11/16 November 31 5/8 November 24 13/16 December 24 1/4 December 22 5/8 December 26 3/4 December 32 1/16 December 22 7/8
The closing price on , 2000 was . A-16 THE SOUTHERN COMPANY (SO) The Southern Company acquires, develops, builds and operates power production and delivery facilities primarily in the southeastern United States. The Southern Company also provides a range of energy-related services to utilities and industrial companies in countries throughout the world. Its businesses include independent power projects, integrated utilities, a distribution company, and energy trading and marketing businesses. The Southern Company's subsidiaries market and provide digital wireless communications services to the public and to utilities companies within the southeastern United States.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 20 7/8 January 25 3/8 January 21 7/8 January 24 5/16 January 26 15/16 January 25 11/16 February 20 5/8 February 23 7/8 February 21 3/4 February 24 11/16 February 25 1/16 February 22 3/16 March 20 3/8 March 23 7/8 March 21 1/8 March 27 11/16 March 23 5/16 March 21 3/4 April 20 5/8 April 22 April 20 3/8 April 26 1/2 April 27 1/16 April 24 15/16 May 22 1/8 May 23 1/8 May 21 1/8 May 26 9/16 May 28 3/8 June 22 3/8 June 24 5/8 June 21 7/8 June 27 11/16 June 26 1/2 July 22 July 22 5/8 July 21 15/16 July 25 1/2 July 26 3/8 August 21 1/8 August 22 1/2 August 21 1/16 August 28 1/8 August 27 1/16 September 23 1/2 September 22 1/2 September 22 9/16 September 29 7/16 September 25 3/4 October 23 7/8 October 22 1/8 October 22 15/16 October 28 3/16 October 26 9/16 November 22 7/8 November 22 1/4 November 24 November 29 1/2 November 23 3/8 December 24 5/8 December 22 5/8 December 25 7/8 December 29 1/16 December 23 1/2
The closing price on , 2000 was . A-17 TEXAS UTILITIES COMPANY (TXU) Texas Utilities Company is primarily engaged in the generation, purchase, transmission, distribution and sale of electricity and the gathering, processing, transmission and distribution of natural gas. Its utilities operations are located primarily in Texas. Its energy marketing division is a wholesale and retail marketer of natural gas and electricity throughout the United States. Texas Utilities is also engaged in the purchase, transmission, distribution and sale of telecommunications, retail energy and power development.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 34 3/4 January 40 3/4 January 40 1/2 January 41 1/8 January 43 15/16 January 35 3/8 February 32 3/4 February 40 3/4 February 40 3/8 February 40 7/16 February 42 7/16 February 32 5/8 March 31 3/4 March 41 3/8 March 34 1/4 March 39 5/16 March 42 March 29 11/16 April 32 5/8 April 40 1/4 April 33 1/4 April 40 April 39 7/8 April 33 11/16 May 36 1/8 May 40 7/8 May 34 1/4 May 39 1/2 May 45 1/4 June 34 3/8 June 42 3/4 June 34 7/16 June 41 5/8 June 41 7/16 July 33 7/8 July 42 July 35 7/16 July 40 1/16 July 42 1/2 August 34 5/8 August 41 August 34 7/8 August 42 1/2 August 40 7/16 September 34 7/8 September 39 3/4 September 36 September 46 9/16 September 37 5/16 October 36 3/4 October 40 1/2 October 35 7/8 October 43 3/4 October 38 3/4 November 38 1/2 November 39 1/2 November 40 November 44 9/16 November 35 13/16 December 41 December 40 3/4 December 41 1/2 December 46 11/16 December 35 9/16
The closing price on , 2000 was . A-18 UNICOM CORPORATION (UCM) Unicom Corporation is involved in the production, purchase, transmission, distribution and sale of energy only related services. Unicom's subsidiary is ComEd which is engaged principally in the production, purchase, transmission, distribution and sale of electricity to residential, commercial, industrial and wholesale customers. Through other subsidiaries, Unicom is also engaged in providing energy services, including gas services, energy management systems and retail gas services. Unicom also designs, installs and services heating, ventilation and air conditioning facilities for commercial and industrial customers. Unicom primarily operates in the midwestern United States.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 26 January 33 5/8 January 23 5/8 January 31 January 35 5/8 January 39 1/8 February 25 3/8 February 32 February 22 1/4 February 32 1/16 February 35 9/16 February 37 13/16 March 23 3/4 March 27 March 19 1/2 March 35 March 36 9/16 March 36 1/2 April 26 1/4 April 27 1/2 April 21 3/4 April 34 3/4 April 38 13/16 April 39 3/4 May 27 1/8 May 27 5/8 May 22 3/4 May 34 3/8 May 42 5/16 June 26 5/8 June 27 3/8 June 22 1/4 June 35 1/16 June 38 9/16 July 27 3/4 July 23 1/2 July 22 11/16 July 34 9/16 July 39 1/4 August 28 August 23 August 23 5/8 August 35 5/8 August 38 5/8 September 30 1/4 September 25 1/8 September 23 3/8 September 37 7/8 September 36 15/16 October 32 3/4 October 26 October 28 October 37 11/16 October 38 5/16 November 32 November 26 5/8 November 29 1/8 November 37 11/16 November 31 15/16 December 32 3/4 December 27 1/8 December 30 3/4 December 38 9/16 December 33 1/2
The closing price on , 2000 was . A-19 THE WILLIAMS COMPANIES, INC. (WMB) The Williams Companies, Inc. owns and operates oil and natural gas pipelines and engages in transportation and storage activities and engages in the exploration and production of oil and gas and natural gas gathering and processing. Williams also engages in communications-related activities such as operating a telecommunications fiber optic network and providing data, voice and video transmission and other multimedia services for the broadcast industry. Williams also invests in energy and telecommunications projects primarily in Canada, South America, Australia and Lithuania.
Closing Closing Closing Closing Closing Closing 1995 Price 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----- January 9 January 15 45/64 January 20 January 28 1/2 January 33 January 38 1/16 February 9 37/64 February 15 53/64 February 21 15/16 February 32 13/16 February 37 February 41 13/16 March 10 13/64 March 16 51/64 March 22 5/16 March 32 March 39 1/2 March 43 15/16 April 10 61/64 April 17 3/64 April 22 April 31 13/16 April 47 1/4 April 37 1/2 May 11 21/64 May 16 3/4 May 22 1/16 May 32 7/16 May 51 13/16 June 11 5/8 June 16 1/2 June 21 7/8 June 33 3/4 June 42 9/16 July 12 21/64 July 15 1/4 July 22 7/8 July 32 1/8 July 42 1/16 August 12 1/4 August 16 5/8 August 23 11/32 August 23 August 41 1/4 September 13 September 17 September 23 13/32 September 28 3/4 September 37 5/8 October 12 7/8 October 17 27/64 October 25 15/32 October 27 3/8 October 37 1/2 November 14 November 18 45/64 November 26 23/32 November 28 13/16 November 33 3/4 December 14 5/8 December 18 3/4 December 28 1/2 December 31 3/16 December 30 9/16
closing price on , 2000 was . A-20 LOGO 1,000,000,000 Depositary Receipts Utilities HOLDRS /SM/ Trust ----------------------------------------------- P R O S P E C T U S ----------------------------------------------- Merrill Lynch & Co. A.G. Edwards & Sons, Inc. First Union Securities, Inc. , 2000 Until , 2000 (25 days after the date of this prospectus), all dealers effecting transactions in the offered Utilities 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....$92,334 Printing and engraving expenses........................ Legal fees and expenses................................ Rating agency fees..................................... Miscellaneous.......................................... --------- Total................................................$
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: II-1 (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933. (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of the prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (5) For purposes of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (6) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to Item 15 of this registration statement, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-2 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 Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, on May 8, 2000. Merrill Lynch, Pierce, Fenner & Smith Incorporated By: /s/ AHMASS L. FAKAHANY ------------------------- Ahmass L. Fakahany Senior Vice President and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below constitutes and appoints Joseph Moglia and Stephen G. Bodurtha and each of them, with full power to act without the other, his true and lawful attorneys- in-fact and agents with full and several power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, and supplements to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on May 8, 2000. Signature Title --------- ----- /s/ JOHN L. STEFFENS - --------------------------- John L. Steffens Chief Executive Officer, Chairman of the Board and Director /s/ STANLEY O'NEAL - --------------------------- E. Stanley O'Neal Director /s/ GEORGE A SCHIEREN - --------------------------- George A. Schieren Director /s/ THOMAS H PATRICK - -------------------------- Thomas H. Patrick Director /s/ AHMASS L. FAKAHANY - -------------------------- Ahmass L. Fakahany Senior Vice President and Chief Financial Officer 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 Utilities HOLDRS Receipts 8.1 Opinion of Shearman & Sterling, as special U.S. tax counsel regarding the material federal income tax consequences 24.1 Power of Attorney (included in Part II of Registration Statement) EX-4.1 2 DEPOSITORY TRUST AGREEMENT S&C Draft of 8/31/99 Exhibit 4.1 STANDARD TERMS FOR DEPOSITARY TRUST AGREEMENTS between MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and THE BANK OF NEW YORK, as Trustee Dated as of ______________, 1999 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..............................................................16 Section 3.3. Warranties on Deposit of Shares...........................................................17 ARTICLE 4 THE UNDERLYING SECURITIES Section 4.1. Cash Distributions........................................................................17 Section 4.2. Distributions Other Than Cash or Securities...............................................17 Section 4.3. Distributions in Securities...............................................................18 Section 4.4. Rights Offerings..........................................................................19 Section 4.5. Fixing of Record Date.....................................................................19 Section 4.6. Reports...................................................................................20 Section 4.7. Voting Instructions for Underlying Securities.............................................20 Section 4.8. Changes Affecting Underlying Securities...................................................21 Section 4.9. Withholding...............................................................................22 Section 4.10. Limitation on Distributions..............................................................22
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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
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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 _______________, 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. -2- "Depositary Trust Agreement" means a depositary trust agreement entered into by the Initial Depositor and the Trustee pursuant to these Standard Terms which incorporates by reference these Standard Terms. "Depositor" means any Person who deposits Securities into the Trust, either for its own account or on behalf of another Person who is the owner or beneficial owner of such Securities. "Depositor Order" means a written order or request signed in the name of the Initial Depositor or any other Depositor, as applicable. "DTC" means The Depository Trust Company, its nominees and their respective successors. "Initial Depositor" means Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation, or its successor. "Issuance Denomination" is defined in Section 2.4, subject to increase as provided in Sections 4.3 and 4.8. "Owner" means the Person in whose name a Receipt is registered in the books of the Trustee maintained for that purpose. "Person" means any individual, limited liability company, corporation, partnership, joint venture, association, joint stock company, trust (including any trust beneficiary), unincorporated organization or government or any agency or political subdivision thereof. -3- "Receipt" means a depositary trust receipt which is issued under the Depositary Trust Agreement and which represents the Owner's right to receive the Underlying Securities which must be deposited into the Trust for issuance of a Receipt plus any other Underlying Securities received by the Trustee with respect to such Underlying Securities and held by the Trustee under the Depositary Trust Agreement at such time. The Trustee shall only accept for deposit whole Securities and shall not issue Receipts except to the extent such Receipts represent, in the aggregate, whole Underlying Securities. "Registrar" means any bank or trust company having an office in the Borough of Manhattan, The City of New York, which shall be appointed to register Receipts and transfers of Receipts as herein provided. "Restricted Securities" means Securities, or Receipts representing such Securities, which are acquired directly or indirectly from the issuer or its affiliates (as defined in Rule 144 under the Securities Act of 1933) in a transaction or chain of transactions not involving any public offering, or which are held by an officer or director (or person performing similar functions) or other affiliate of the issuer, or which would require registration under the Securities Act of 1933 in connection with the public offer and sale thereof in the United States, or which are subject to other restrictions on sale or deposit under the federal securities laws of the United States, a shareholder agreement or the corporate documents of the issuer. "Round Lot" means 100. -4- "Securities" means any shares of a class of securities which must be deposited for issuance of Receipts. "Securities Issuer" means, as of any time, the issuer of a class of Securities. "Securities Registrar" means the entity that presently carries out the duties of registrar for any Securities or any successor as registrar for any Securities and any other appointed agent of a Securities Issuer for the transfer and registration of Securities. "Surrender" means, when used with respect to Receipts, (a) one or more book-entry transfers of Receipts to the DTC account of the Trustee or (b) surrender to the Trustee at its Corporate Trust Office of one or more certificates evidencing such Receipts, in each case in a Round Lot or an integral multiple thereof. "Trust" means the trust entity created by the Depositary Trust Agreement. "Trustee" means The Bank of New York, a New York banking corporation, in its capacity as Trustee under the Depositary Trust Agreement, or any successor as Trustee thereunder. "Underlying Securities" means, as of any time, Securities of each of the classes and in the quantities required by the Depositary Trust Agreement to be deposited in the Trust for the issuance of Receipts and which are at such time deposited under the applicable Depositary Trust Agreement and any other securities, property or cash received by the Trustee in respect thereof and at such time held hereunder. -5- Section 1.2. Rules of Construction. Unless the context otherwise --------------------- requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect in the United States from time to time; (iii) "or" is not exclusive; (iv) the words "herein", "hereof", "hereunder" and other words of similar import refer to these Standard Terms or the Depositary Trust Agreement as a whole and not to any particular Article, Section or other subdivision; (v) "including" means including without limitation; and (vi) words in the singular include the plural and words in the plural include the singular. ARTICLE 2 FORM OF RECEIPTS, DEPOSIT OF SECURITIES, DELIVERY, REGISTRATION OF TRANSFER AND SURRENDER OF RECEIPTS Section 2.1. Depositary Trust Agreements. Each Depositary Trust --------------------------- Agreement entered into between the Initial Depositor and the Trustee for the purposes set -6- forth herein shall be in substantially the form of Exhibit A to these Standard Terms and shall provide that these Standard Terms shall be incorporated by reference into, and form a part of, such Depositary Trust Agreement. Section 2.2. Creation and Declaration of Trusts; Deposit of ---------------------------------------------- Securities. (a) The Initial Depositor, concurrently with the execution and - ---------- delivery of the Depositary Trust Agreement, does hereby agree to deposit with the Trustee under the Depositary Trust Agreement all the right, title and interest of the Initial Depositor in, to and under Securities, of each of the classes and in the quantities necessary to create Receipts in accordance with Section 2 of the Depositary Trust Agreement in effect at the time of deposit. Unless otherwise specified in the Depositary Trust Agreement, such deposit shall include all cash dividends and distributions in respect of such Securities. The Initial Depositor shall make such deposit on or prior to the Closing Date. (b) From time to time after the date of the Depositary Trust Agreement, a Depositor may deposit with the Trustee, in the manner specified in subsection (a), Securities, of each of the classes and in the quantities necessary to create Receipts in accordance with Section 2 of the Depositary Trust Agreement in effect at the time of deposit by Delivery of such Securities to the Trustee. (c) The Trustee shall only accept for deposit whole Securities and shall not issue Receipts except to the extent such Receipts represent, in the aggregate, whole Underlying Securities. (d) The Trust shall not engage in any business or activities other than those required or authorized by these Standard Terms or incidental and necessary to carry out the duties and responsibilities set forth in the Depositary Trust -7- Agreement. Other than issuance of the Receipts, the Trust shall not issue or sell any certificates or other obligations or otherwise incur, assume or guarantee any indebtedness for money borrowed. (e) Anything herein to the contrary notwithstanding, the Trustee does not assume any of the duties, responsibilities, obligations or liabilities of the Initial Depositor or any other Depositor in respect of the Underlying Securities. (f) Underlying Securities shall be held by the Trustee at such place and in such manner as the Trustee shall determine. Section 2.3. Acceptance by Trustee. The Trustee will hold the --------------------- Underlying Securities for the benefit of the Owners for the purposes, and subject to and limited by the terms and conditions, set forth in these Standard Terms and the applicable Depositary Trust Agreement. Section 2.4. Form and Transferability of Receipts. (a) The ------------------------------------ certificates evidencing Receipts shall be substantially in the form set forth in Exhibit B annexed to these Standard Terms, with appropriate insertions, modifications and omissions, as hereinafter provided or as may be provided in the Depositary Trust Agreement. The Issuance Denominations of a certificate shall be any integral multiple of a Round Lot of Receipts, subject to increase or decrease as provided in Sections 4.3 and 4.8. No Receipt shall be entitled to any benefits under the Depositary Trust Agreement or be valid or obligatory for any purpose unless a certificate evidencing such Receipt shall have been executed by the Trustee by the manual or facsimile signature -8- of a duly authorized signatory of the Trustee and, if a Registrar (other than the Trustee) for the Receipts shall have been appointed, countersigned by the manual or facsimile signature of a duly authorized officer of the Registrar. The Trustee shall maintain books on which the registered ownership of each Receipt and transfers, if any, of such registered ownership shall be recorded. Certificates evidencing Receipts bearing the manual or facsimile signature of a duly authorized signatory of the Trustee and Registrar, if applicable, who was at the time such certificates were executed a proper signatory of the Trustee or Registrar, if applicable, shall bind the Trustee, notwithstanding that such signatory has ceased to hold such office prior to the delivery of such certificates. (b) The certificates evidencing Receipts may be endorsed with or have incorporated in the text thereof such legends or recitals or modifications not inconsistent with the provisions of the Depositary Trust Agreement as may be required by the Trustee or required to comply with any applicable law or regulations thereunder or with the rules and regulations of any securities exchange upon which Receipts may be listed or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Receipts are subject by reason of the date of issuance of the Underlying Securities or otherwise. (c) The Initial Depositor and the Trustee will apply to DTC for acceptance of the Receipts in its book-entry settlement system. Receipts deposited with DTC shall be represented by one or more global certificates which shall be registered in the name of Cede & Co., as nominee for DTC, and shall bear the following legend: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE AGENT AUTHORIZED BY THE ISSUER FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF -9- DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. (d) So long as the Receipts are eligible for book-entry settlement with DTC and such settlement is available, unless otherwise required by law, notwithstanding anything to the contrary in the Depositary Trust Agreement, all Receipts shall be evidenced by one or more global certificates registered in the name of a nominee of DTC and no person acquiring beneficial ownership of such Receipts shall receive or be entitled to receive physical delivery of Receipts. Ownership of beneficial interests in Receipts evidenced by such global certificate or certificates shall be shown on, and the transfer of such ownership shall be effected only through, records maintained by (i) DTC or (ii) institutions that have accounts with DTC. (e) If, at any time when Receipts are evidenced by a global certificate, DTC ceases to make its book-entry settlement system available for such Receipts, the Trustee shall issue separate certificates evidencing Receipts to the DTC book-entry settlement system participants entitled thereto, with such additions, deletions and modifications to the Depositary Trust Agreement and to the form of certificate evidencing Receipts as the Initial Depositor and the Trustee may, from time to time, agree. (f) Title to a certificate evidencing Receipts (and to the Receipts evidenced thereby), when properly endorsed or accompanied by proper instruments of transfer, shall be transferable by delivery with the same effect as in the case of a negotiable instrument under the laws of New York; provided, -------- however, that the Trustee, notwithstanding any notice to the contrary, may treat - ------- the Owner of Receipts as the -10- absolute owner thereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in the Depositary Trust Agreement and for all other purposes. Section 2.5. Delivery of Receipts. Upon receipt by the Trustee of --------------------- any deposit pursuant to Section 2.2, together with a Depositor Order and the other documents required as above specified, if any, the Trustee, subject to the terms and conditions of the applicable Depositary Trust Agreement, shall Deliver to or upon the written order of the Depositor the number of Receipts issuable in respect of such deposit, provided such number is an integral multiple of an Issuance Denomination, but only upon payment to the Trustee of the fees and expenses of the Trustee as provided in Section 5.6 and of all taxes and governmental charges and fees payable in connection with such deposit and the transfer of the Underlying Securities. Section 2.6. Registration; Registration of Transfer; Combination and ------------------------------------------------------- Split-up of Certificates. (a) The Trustee shall keep or cause to be kept a - ------------------------- register of Owners of Receipts and shall provide for the registration of Receipts and the registration of transfers and exchanges of Receipts. (b) The Trustee, subject to the terms and conditions of these Standard Terms and the applicable Depositary Trust Agreement, shall register transfers of ownership of Receipts on its transfer books from time to time, upon any Surrender of a certificate evidencing such Receipts in any integral multiple of a Round Lot, by the Owner in person or by a duly authorized attorney, properly endorsed or accompanied by proper instruments of transfer, and duly stamped as may be required by the laws of the State of New York and of the United States of America. Thereupon the Trustee shall execute a new certificate or certificates evidencing such Receipts in any integral multiple -11- of a Round Lot requested, and deliver the same to or upon the order of the Person entitled thereto. (c) The Trustee, subject to the terms and conditions of these Standard Terms and the applicable Depositary Trust Agreement, shall, upon Surrender of a certificate evidencing Receipts for the purposes of effecting a split-up or combination of such certificate or certificates, execute and deliver one or more new certificate or certificates evidencing such Receipts in any integral multiple of a Round Lot requested. (d) The Trustee may appoint one or more co-transfer agents for the purpose of effecting transfers, combinations and split-ups of Receipts at designated transfer offices on behalf of the Trustee. In carrying out its functions, a co-transfer agent may require evidence of authority and compliance with applicable laws and other requirements by Owners or Persons entitled to Receipts and will be entitled to protection and indemnity to the same extent as the Trustee. Section 2.7. Surrender of Receipts and Withdrawal of Underlying -------------------------------------------------- Securities. (a) Upon Surrender at the Corporate Trust Office of the Trustee - ---------- of a Round Lot of Receipts or integral multiple thereof for the purpose of withdrawal of the Underlying Securities represented thereby, and upon payment of the fee of the Trustee in connection with the Surrender of Receipts as provided in Section 5.6 and payment of all taxes and charges payable in connection with such Surrender and withdrawal of the Underlying Securities, and subject to the terms and conditions of the applicable Depositary Trust Agreement, including, without limitation, Section 4.10, the Owner of such Receipts shall be entitled to Delivery of the amount of Underlying Securities at the time represented by such Receipts. Delivery of such Underlying Securities may be made by (i) Delivery of Securities to such Owner or as ordered by such Owner and (ii) any -12- available form of delivery of any other securities, property and cash to which such Owner is then entitled to such Owner or as ordered by such Owner. The Trustee shall make such delivery as promptly as practicable. (b) A certificate evidencing Receipts Surrendered for such purposes may be required by the Trustee to be properly endorsed in blank or accompanied by proper instruments of transfer in blank, and if the Trustee so requires, the Owner thereof shall execute and deliver to the Trustee a written order directing the Trustee to cause the Underlying Securities being withdrawn to be delivered to or upon the written order of a Person or Persons designated in such order. Thereupon the Trustee shall Deliver through the facilities of DTC or, if applicable, at its Corporate Trust office, subject to Sections 2.8, 3.1, 3.2 and 4.10 and to the other terms and conditions of the Depositary Trust Agreement, to or upon the written order of the Person or Persons designated in the order delivered to the Trustee as above provided, the amount of Underlying Securities represented by such Receipts. Section 2.8. Limitations on Delivery, Registration of Transfer and ----------------------------------------------------- Surrender of Receipts. (a) As a condition precedent to the Delivery, - --------------------- registration of transfer, split-up, combination or Surrender (including, for the avoidance of doubt, any Surrender in connection with an exchange) of any Receipt or withdrawal of any Underlying Securities, the Trustee or Registrar may require payment from the Depositor of Securities or the presentor of the Receipts of a sum sufficient to reimburse it for any tax or other charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Securities being deposited or withdrawn) and payment of any applicable fees as herein provided, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Trustee may establish -13- consistent with the provisions of the Depositary Trust Agreement, including, without limitation, this Section 2.8. (b) The Delivery of Receipts against deposits of Securities, the registration of transfer of Receipts or the Surrender of Receipts for the purpose of withdrawal of Underlying Securities may be suspended, generally or in particular instances, during any period when the transfer books of the Trustee are closed or the transfer books of a Securities Issuer are closed or if any such action is deemed necessary or advisable by the Trustee at any time or from time to time, subject to the provisions of the following sentence. Notwithstanding any other provision of any applicable Depositary Trust Agreement or the Receipts, the Surrender of Receipts and withdrawal of Underlying Securities may not be suspended except for (i) temporary delays caused by closing the transfer books of the Trustee or a Securities Issuer, (ii) the payment of fees, taxes and applicable charges, and (iii) compliance with any U.S. laws or governmental regulations relating to the Receipts or to the withdrawal of the Underlying Securities. Without limitation of the foregoing, the Trustee shall not knowingly accept for deposit under the Depositary Trust Agreement any Securities required to be registered under the provisions of the Securities Act of 1933, as amended, for the public offer and sale thereof in the United States unless a registration statement is in effect as to such Securities for such offer and sale. Section 2.9. Lost Certificates, Etc. In case any certificate ---------------------- evidencing Receipts shall be mutilated, destroyed, lost or stolen, the Trustee shall execute and deliver a new certificate of like tenor in exchange and substitution for such mutilated certificate upon cancellation thereof, or in lieu of and in substitution for such destroyed, lost or stolen certificate. Before the Trustee shall execute and deliver a new certificate in substitution for a destroyed, lost or stolen certificate, the Owner thereof shall have (a) -14- filed with the Trustee (i) a request for such execution and delivery before the Trustee has notice that the Receipts have been acquired by a bona fide purchaser and (ii) a sufficient indemnity bond, and (b) satisfied any other reasonable requirements imposed by the Trustee. Section 2.10. Cancellation and Destruction of Surrendered ------------------------------------------- Certificates. All certificates evidencing Receipts Surrendered to the Trustee - ------------ shall be canceled by the Trustee. The Trustee is authorized to destroy certificates so canceled. Section 2.11. Reconstitution Events. (a) If any class of Securities --------------------- ceases to be outstanding as a result of a merger, consolidation or other corporate combination of the Securities Issuer and Section 4.8 does not apply, the Trustee shall, if it has actual knowledge of such event, to the extent lawful and feasible and subject to Section 4.10, distribute any securities which shall be received by the Trustee in exchange for or in conversion of or in respect of Underlying Securities which are not Securities issued by a Securities Issuer to the Owners in proportion to their ownership of Receipts. Effective on the date that such Securities cease to be outstanding, such class of Securities shall cease to be part of the Securities which must be deposited for issuance of Receipts. (b) If any class of Securities is delisted from trading on its primary exchange or market and is not listed for trading on another national securities exchange or through NASDAQ within five business days from the date of such delisting, the Trustee shall, if it has actual knowledge of such event, to the extent lawful and feasible and subject to Section 4.10, distribute the Underlying Securities of such class to the Owners in proportion to their ownership of Receipts. Effective on the date of such distribution, -15- such class of Securities shall cease to be a part of the securities which must be deposited for issuance of Receipts. (c) In the event that any Securities Issuer no longer has a class of common stock registered under section 12 of the Securities Exchange Act of 1934, as amended, the Trustee shall, if it has actual knowledge of such event, to the extent lawful and feasible and subject to Section 4.10, distribute the Underlying Securities of such Securities Issuer to the Owners in proportion to their ownership of Receipts. Effective on the date of such distribution, such class of Securities shall cease to be part of the securities which must be deposited for issuance of Receipts. (d) If the Commission determines that a Securities Issuer is an investment company under the Investment Company Act of 1940, and the Trustee has actual knowledge of such Commission determination, then the Trustee shall, to the extent lawful and feasible and subject to Section 4.10, distribute the Underlying Securities of such Securities Issuer to the Owners in proportion to their ownership of Receipts. Effective on the date of such distribution, such class of Securities shall cease to be part of the securities which must be deposited for issuance of Receipts. -16- ARTICLE 3 CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS Section 3.1. Filing Proofs, Certificates and Other Information. Any ------------------------------------------------- Person presenting Securities for deposit or any Owner of Receipts may be required from time to time to file with the Trustee such proof of citizenship or residence, exchange control approval, or such information relating to the registration on the books of any Securities Issuer or Securities Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Trustee may require. The Trustee may withhold the Delivery or registration of transfer of any Receipts or the delivery of any Underlying Securities until such proof or other information is filed or such certificates are executed or such representations and warranties made. Section 3.2. Liability of Owner for Taxes. If any tax or other ---------------------------- charge shall become payable with respect to any Receipts or any Underlying Securities represented thereby, such tax or other charge shall be payable by the Owner of such Receipts to the Trustee. The Trustee shall refuse to effect any registration of transfer of such Receipts or any withdrawal of Underlying Securities represented by such Receipt until such payment is made, and may withhold any dividends or other distributions, or may sell for the account of the Owner thereof Underlying Securities constituting any multiples of the securities which must be deposited for issuance of Receipts, and may apply such dividends or other distributions or the proceeds of any such sale in payment of such tax or other charge and the Owner of such Receipt shall remain liable for any deficiency. Section 3.3. Warranties on Deposit of Shares. ------------------------------- -17- Every Person depositing Securities under the Depositary Trust Agreement shall be deemed thereby to represent and warrant that such Securities and each certificate therefor are validly issued and fully paid, that the person making such deposit is duly authorized to do so and that at the time of delivery, such Securities are free and clear of any lien, pledge, encumbrance, right, charge or claim (other than the rights created by the Depositary Trust Agreement). Every such person shall also be deemed to represent that such Securities are not, and Receipts representing such Securities would not be, Restricted Securities. Such representations and warranties shall survive the deposit of Securities, issuance of Receipts or termination of the Depositary Trust Agreement. ARTICLE 4 THE UNDERLYING SECURITIES Section 4.1. Cash Distributions. Whenever the Trustee shall receive ------------------ any cash dividend or other cash distribution on any Underlying Securities, the Trustee shall distribute the amount thus received (net of the fees of the Trustee as provided in Section 5.6, if applicable) to the Owners entitled thereto, in proportion to the number of Receipts held by them respectively; provided, however, that in the event that the respective Securities Issuer or - -------- ------- the Trustee shall be required to withhold and does withhold from such cash dividend or such other cash distribution an amount on account of taxes, the amount distributed to the Owners shall be reduced accordingly. The Trustee shall distribute only such amount, however, as can be distributed without attributing to any Owner a fraction of one cent. Any such fractional amounts shall be rounded to the nearest whole cent and so distributed to Owners entitled thereto. Section 4.2. Distributions Other Than Cash or Securities. Subject to ------------------------------------------- the provisions of Sections 4.8 and 5.6, whenever the Trustee shall receive any distribution other than a distribution described in Sections 4.1, 4.3 or 4.4 or any distribution -18- 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. -19- 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 -20- shall find it necessary or convenient in respect of any matter, the Trustee shall fix a record date (a) for the determination of the Owners who shall be (i) entitled to receive such dividend or distribution or the net proceeds of the sale thereof, (ii) entitled to give instructions to the Trustee for the exercise of voting rights at any such meeting or solicitation or (iii) required to pay such fee, or (b) on or after which each Receipt will represent such changed group of Securities. In the case of subsections (a)(i) and (a)(ii) of this Section 4.5, the Trustee shall use its reasonable efforts to ensure that, to the extent practicable, the record date set hereunder will be the same as the record date set by the Securities Issuer. Subject to the terms and conditions of the Depositary Trust Agreement, the Owners on such record date shall be entitled, as the case may be, to receive the amount distributable by the Trustee with respect to such dividend or other distribution or the net proceeds of sale thereof, or to give voting instructions, or to act in respect of any other such matter, or shall be obligated to pay such fee. Section 4.6. Reports. The Trustee shall, to the extent lawful, ------- forward to Owners any reports and communications, including any proxy statement or other soliciting material, received from a Securities Issuer which are received by the Trustee as the holder of the Underlying Securities or its appointed agent, unless such reports and communications have been forwarded directly to Owners by such Securities Issuer or its appointed agent. Section 4.7. Voting Instructions for Underlying Securities. Upon --------------------------------------------- receipt by the Trustee or its appointed agent of notice of any meeting of, or solicitation of proxies from, holders of Underlying Securities, the Trustee shall, to the extent lawful, mail to the Owners a notice, the form of which notice shall be in the sole discretion of the Trustee, which shall contain (a) such information as is contained in such notice of meeting or solicitation, and (b) a statement that the Owners as of the close of business on a specified -21- record date will be entitled, subject to applicable law and the provisions of the corporate documents of the Securities Issuer, to instruct the Trustee as to the exercise of the voting rights, if any, or giving of proxies, as applicable, in respect of the amount of Underlying Securities represented by their respective Receipts and (c) a statement as to the manner in which such instructions may be given. Upon the written request of an Owner of a Receipt on such record date, received on or before the date established by the Trustee for such purpose, the Trustee shall endeavor, insofar as practicable, to vote or cause to be voted, or to give a proxy, as applicable, in respect of the amount of Underlying Securities represented by such Receipt in accordance with the instructions set forth in such request. The Trustee shall not vote or attempt to exercise the right to vote that attaches to, or give a proxy with respect to, Underlying Securities other than in accordance with such instructions. Section 4.8. Changes Affecting Underlying Securities. (a) In --------------------------------------- circumstances where the provisions of Sections 2.11 and 4.3 do not apply, upon any change in nominal value, change in par value, split-up, consolidation or any other reclassification of any Underlying Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting the issuer of any Underlying Security, if the relevant Securities Issuer survives such event, the Trustee shall, to the extent lawful and feasible, retain such Securities under the Depositary Trust Agreement, and, in such case, the (A) the amount of such Securities so retained in respect of each Receipt shall be added to the classes and quantities of securities which must be deposited for issuance of Receipts and (B) the number of Receipts in an Issuance Denomination may be increased or decreased by the Trustee to the lowest multiple of 100 Receipts such that no fractional shares are thereby represented in such Issuance Denomination. -22- (b) Securities of any class which are surrendered by the Trustee in connection with any such conversion or exchange shall, effective on the date of such surrender, no longer be part of the securities which must be deposited for issuance of Receipts. In any such case, or in the case of an event to which Section 2.11 applies, the Trustee may call for the Surrender of outstanding certificates evidencing Receipts to be exchanged for new certificates specifically describing any applicable change in the classes and quantities of securities which must be deposited for issuance of Receipts. Section 4.9. Withholding. In the event that the Trustee determines ----------- that any distribution in property (including Securities and rights to subscribe therefor) is subject to any tax or other charge which the Trustee is obligated to withhold, notwithstanding anything to the contrary in these Standard Terms or the applicable Depositary Trust Agreement, the Trustee may by public or private sale dispose of all or a portion of such property (including Securities and rights to subscribe therefor) in such amounts and in such manner as the Trustee deems necessary and practicable to pay any such taxes or charges and the Trustee shall distribute the net proceeds of any such sale after deduction of such taxes or charges to the Owners entitled thereto in proportion to the number of Receipts held by them respectively. Section 4.10. Limitation on Distributions. Notwithstanding any --------------------------- provision of the Depositary Trust Agreement which requires or permits the Trustee to distribute or Deliver any securities to Owners, the Trustee shall not distribute to any Owner any fraction of a share. Instead, the Trustee shall, to the extent lawful, sell the aggregate of such fractions and distribute the net proceeds to the Owners entitled thereto as in the case of a distribution received in cash. -23- ARTICLE 5 THE TRUSTEE AND THE INITIAL DEPOSITOR Section 5.1. Maintenance of Office and Transfer Books by the Trustee. ------------------------------------------------------- (a) Until termination of this Depositary Trust Agreement in accordance with its terms, the Trustee shall maintain in the Borough of Manhattan, The City of New York, facilities for the execution and Delivery, registration, registration of transfers and Surrender of Receipts in accordance with the provisions of these Standard Terms and the applicable Depositary Trust Agreement. (b) The Trustee shall keep books for the registration of Receipts and transfers of Receipts which at all reasonable times shall be open for inspection by the Owners. (c) The Trustee may close the transfer books at any time or from time to time. (d) If any Receipts evidenced thereby are listed on one or more stock exchanges in the United States, the Trustee shall act as Registrar or appoint a registrar or one or more co-registrars for registry of such receipts in accordance with any requirements of such exchange or exchanges. Section 5.2. Prevention or Delay in Performance by the Initial ------------------------------------------------- Depositor or the Trustee. Neither the Initial Depositor nor the Trustee nor any - ------------------------ of their respective directors, employees, agents or affiliates shall incur any liability to any Owner or Beneficial Owner of any Receipt, if by reason of any provision of any present or future -24- law or regulation of the United States or any other country, or of any governmental or regulatory authority or stock exchange, or by reason of any provision, present or future, of the corporate documents of any Securities Issuer, or by reason of any provisions of any securities issued or distributed by any Securities Issuer, or any offering or distribution thereof, or by reason of any act of God or war or other circumstances beyond its control, the Initial Depositor or the Trustee shall be prevented or forbidden from, or be subject to any civil or criminal penalty on account of, doing or performing any act or thing which by the terms of these Standard Terms or the applicable Depositary Trust Agreement it is provided shall be done or performed; nor shall the Initial Depositor or the Trustee incur any liability to any Owner or Beneficial Owner of any Receipt by reason of any non-performance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of these Standard Terms or the applicable Depositary Trust Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in these Standard Terms or the applicable Depositary Trust Agreement. Where, by the terms of an offering or distribution to which Sections 2.11, 4.2 or 4.4 applies, or for any other reason, it is not lawful and feasible to make such distribution or offering available to Owners, and the Trustee may not dispose of such distribution or offering on behalf of such Owners and make the net proceeds available to such Owners, then the Trustee shall not make such distribution or offering available to Owners and shall allow any rights, if applicable, to lapse. Section 5.3. Obligations of the Initial Depositor and the Trustee. ---------------------------------------------------- (a) Neither the Initial Depositor nor the Trustee assumes any obligation nor shall they be subject to any liability under these Standard Terms or the applicable Depositary Trust Agreement to any Owner or Beneficial Owner of any Receipt (including, without limitation, liability with respect to the validity or worth of the Underlying Securities), -25- except that each agrees to perform its respective obligations specifically set forth in these Standard Terms and the applicable Depositary Trust Agreement without negligence or bad faith. (b) Neither the Initial Depositor nor the Trustee shall be under any obligation to prosecute any action, suit or other proceeding in respect of any Underlying Securities or in respect of the Receipts. (c) Neither the Initial Depositor nor the Trustee shall be liable for any action or non-action by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Securities for deposit, any Owner or any other person believed by it in good faith to be competent to give such advice or information. (d) The Trustee shall not be liable for any acts or omissions made by a successor Trustee whether in connection with a previous act or omission of the Trustee or in connection with any matter arising wholly after the resignation of the Trustee, provided that in connection with the issue out of which such potential liability arises the Trustee performed its obligations without negligence or bad faith while it acted as Trustee. (e) The Trustee shall not be responsible for any failure to carry out any instructions to vote any of the Underlying Securities, or for the manner in which any such vote is cast or the effect of any such vote, provided that any such action or non-action is without negligence or bad faith. (f) Except as specifically provided in Section 4.6, the Trustee shall have no obligation to monitor or to obtain any information concerning the business or -26- affairs of any Securities Issuer or to advise Owners or Beneficial Owners of any event or condition affecting any Securities Issuer. (g) The Trustee shall have no obligation to comply with any direction or instruction from any Owner or Beneficial Owner regarding Receipts except to the extent specifically provided in these Standard Terms or any applicable Depositary Trust Agreement. (h) The Trustee shall be a fiduciary under these Standard Terms and the applicable Depositary Trust Agreement; provided, however, that the fiduciary -------- ------- duties and responsibilities and liabilities of the Trustee shall be limited by, and shall be only those specifically set forth in, these Standard Terms and the applicable Depositary Trust Agreement. Section 5.4. Resignation or Removal of the Trustee; Appointment of ----------------------------------------------------- Successor Trustee. (a) The Trustee may at any time resign as Trustee hereunder - ----------------- by written notice of its election so to do, delivered to the Initial Depositor, and such resignation shall take effect upon the appointment of a successor Trustee and its acceptance of such appointment as hereinafter provided. (b) If at any time the Trustee is in material breach of its obligations under the Depositary Trust Agreement and the Trustee fails to cure such breach within 30 days after receipt by the Trustee of written notice from the Initial Depositor or Owners of 25% or more of the outstanding Receipts specifying such default and requiring the Trustee to cure such default, the Initial Depositor, acting on behalf of the Owners, may remove the Trustee by written notice delivered to the Trustee in the manner provided -27- in Section 7.5, and such removal shall take effect upon the appointment of the successor Trustee and its acceptance of such appointment as hereinafter provided. (c) In case at any time the Trustee acting hereunder shall resign or be removed, the Initial Depositor, acting on behalf of the Owners, shall use its reasonable efforts to appoint a successor Trustee, which shall be a bank or trust company having an office in the Borough of Manhattan, The City of New York. Every successor Trustee shall execute and deliver to its predecessor and to the Initial Depositor, acting on behalf of the Owners, an instrument in writing accepting its appointment hereunder, and thereupon such successor Trustee, without any further act or deed, shall become fully vested with all the rights, powers, duties and obligations of its predecessor; but such predecessor, nevertheless, upon payment of all sums due it and on the written request of the Initial Depositor, acting on behalf of the Owners, shall execute and deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder, shall duly assign, transfer and deliver all right, title and interest in the Underlying Securities to such successor, and shall deliver to such successor a list of the Owners of all outstanding Receipts. The Initial Depositor or any such successor Trustee shall promptly mail notice of the appointment of such successor Trustee to the Owners. (d) Any corporation into or with which the Trustee may be merged, consolidated or converted shall be the successor of such Trustee without the execution or filing of any document or any further act. Section 5.5. Indemnification. (a) The Initial Depositor shall indemnify --------------- the Trustee, its directors, employees, agents and affiliates against, and hold each of them harmless from, any loss, liability, cost, expense or judgment (including, but not limited to, the fees and expenses of counsel) (collectively "Indemnified Amounts") which is -28- incurred by any of them and which arises out of acts performed or omitted pursuant to the provisions of these Standard Terms or any Depositary Trust Agreement, as the same may be amended, modified or supplemented from time to time, or any filings with or submissions to the Commission in connection with or with respect to such Receipts (which by way of illustration and not by way of limitation, include any registration statement and any amendments or supplements thereto filed with the Commission or any periodic reports or updates that may be filed under the Securities Exchange Act of 1934, as amended, or any failure to make any filings or submissions to the Commission which are required to be made in connection with or with respect to such Receipts), except that the Initial Depositor shall not have any obligations under this Section 5.5(a) to pay Indemnified Amounts incurred as a result of and attributable to (i) the negligence or bad faith of, or material breach of the terms of this Agreement by, the Trustee, (ii) written information regarding the name and address of the Trustee furnished in writing to the Initial Depositor (and not materially changed or altered) expressly for use in the registration statement filed with the Commission relating to the Receipts, or (iii) any misrepresentations or omissions made by a Depositor (other than Initial Depositor) in connection with such Depositor's offer and sale of Receipts. (b) The Trustee shall indemnify the Initial Depositor, its directors, employees, agents and affiliates against, and hold each of them harmless from, any Indemnified Amounts (i) caused by the negligence or bad faith of the Trustee or (ii) arising out of any written information regarding the name and address of the Trustee furnished in writing to the Initial Depositor (and not materially changed or altered) expressly for use in the registration statement filed with the Commission relating to the Receipts. -29- [(c) If the indemnification provided for in this Section 5.5 is unavailable or insufficient to hold harmless the indemnified party under subsection (a) or (b) above, then the indemnifying party shall contribute to the Indemnified Amounts referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Initial Depositor on the one hand and the Trustee on the other hand from the offering of the Receipts which are the subject of the action or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Initial Depositor on the one hand and the Trustee on the other hand in connection with the action, statement or omission which resulted in such Indemnified Amount as well as any other relevant equitable considerations. The relative benefits received by the Initial Depositor on the one hand and the Trustee on the other shall be deemed to be in the same proportions as the total commissions from the offering of the Receipts which are the subject of the action (before deducting expenses) received by the Initial Depositor bear to the total fees received by the Trustee from the offering of such Receipts. The relative fault shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact which from which the action arises relates to information supplied by the Initial Depositor or the Trustee and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission or the act or omission from which the action arises. The amount of Indemnified Amounts referred to in the first sentence of this subsection (c) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (c).] -30- Section 5.6. Charges of Trustee. The following charges shall be ------------------ incurred by any party depositing or withdrawing Securities or by any party Surrendering Receipts or to whom Receipts are Delivered or any Owner, as applicable: (1) taxes and charges and other fees payable in respect of the Underlying Securities assessed by third-party custodians, depositories, transfer agents, and other service providers in the ordinary course of their respective businesses (whether in connection with the deposit of Securities or withdrawal of Underlying Securities or otherwise), (2) a fee of $10 or less per 100 Receipts for the execution and Delivery of Receipts pursuant to Section 2.5, and the Surrender of Receipts pursuant to Section 2.7, and (3) a fee which shall accrue on the first day of each calendar quarter at a rate of $.02 or less per Receipt per quarter for the Trustee's services as such under the Depositary Trust Agreement (which fee shall be assessed against Owners of record as of the date or dates set by the Trustee in accordance with Section 4.5 and shall be collected at the Trustee's discretion by deducting such fee from one or more cash dividends or other cash distributions); provided, however, that with -------- ------- respect to the aggregate fee accrued in any calendar year under this clause (3) with respect to each Receipt, the Trustee will waive that portion which exceeds the total cash dividends and other cash distributions the record date for which falls in such calendar year and payable with respect to such Receipt. Section 5.7. Retention of Trust Documents. The Trustee is authorized ---------------------------- to destroy those documents, records, bills and other data compiled during the term of the Depositary Trust Agreement at the times permitted by the laws or regulations governing the Trustee. -31- Section 5.8. Federal Securities Law Filings. The Initial ------------------------------ Depositor shall (i) prepare and file a registration statement with the Commission and take such action as is necessary from time to time to qualify the Receipts for offering and sale under the federal securities laws of the United States, including the preparation and filing of amendments and supplements to such registration statement, (ii) promptly notify the Trustee of any amendment or supplement to the registration statement or prospectus, of any order preventing or suspending the use of any prospectus, of any request for the amending or supplementing of the registration statement or prospectus or if any event or circumstance occurs as a result of which the registration statement or prospectus, as then amended or supplemented, would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (iii) provide the Trustee from time to time with copies, including copies in electronic form, of the prospectus, as amended and supplemented, in such quantities as the Trustee may request and (iv) prepare and file any periodic reports or updates that may be required under the Securities Exchange Act of 1934, as amended. Section 5.9. Prospectus Delivery. The Trustee shall, if required by ------------------- the federal securities laws of the United States, in any manner permitted by such laws, deliver at the time of issuance of Receipts, a copy of the relevant prospectus, as amended and supplemented at such time, to each Person depositing Underlying Securities into the Trust for issuance of Receipts. ARTICLE 6 AMENDMENT AND TERMINATION -32- Section 6.1. Amendment. The Trustee and the Initial Depositor may --------- amend any provisions of the Depositary Trust Agreement without the consent of any Owner. Any amendment that imposes or increases any fees or charges (other than taxes and other charges, registration fees or other such expenses), or that otherwise prejudices any substantial existing right of the Owners will not become effective until 30 days after notice of such amendment is given to the Owners. Every Owner and Beneficial Owner, at the time any amendment so becomes effective, shall be deemed, by continuing to hold any Receipt or an interest therein, to consent and agree to such amendment and to be bound by the Depositary Trust Agreement as amended thereby. In no event shall any amendment impair the right of the Owner of any Receipt to Surrender such Receipt and receive therefor the Underlying Securities represented thereby, except in order to comply with mandatory provisions of applicable law. Section 6.2. Early Termination. (a) The Trust shall terminate by ----------------- the Trustee mailing notice of such termination to the Owners of all Receipts then outstanding at least 30 days prior to the date set for termination if any of the following occurs: (i) The Trustee is notified that the Receipts are delisted from a national securities exchange and are not approved for listing on another national securities exchange within 5 business days of their delisting; (ii) Owners of at least 75% of the outstanding Receipts notify the Trustee that they elect to terminate the Trust; or (iii) 60 days shall have expired after the Trustee shall have delivered to the Initial Depositor and the Owners a written notice of its election to resign and a -33- successor trustee shall not have been appointed and accepted its appointment as provided in Section 5.4. (b) On and after the date of termination, the Owner of a Receipt will, upon (i) Surrender of such Receipt at the Corporate Trust Office of the Trustee, (ii) payment of the fee of the Trustee for the Surrender of Receipts referred to in Section 2.7, and (iii) payment of any applicable taxes or charges, be entitled to Delivery, to him or upon his order, of the amount of Underlying Securities evidenced by such Receipt. If any Receipts shall remain outstanding after the date of termination, the Trustee thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends or other distribution to the Owners thereof, and shall not give any further notices or perform any further acts under these Standard Terms or the applicable Depositary Trust Agreement, except that the Trustee shall continue to collect dividends and other distributions pertaining to Underlying Securities and hold the same uninvested and without liability for interest, shall sell rights as provided in these Standard Terms or the applicable Depositary Trust Agreement, and shall continue to deliver Underlying Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts Surrendered to the Trustee (after deducting or upon payment of, in each case, the fee of the Trustee set forth in 5.6 for the Surrender of Receipts, any expenses for the account of the Owner of such Receipts in accordance with the terms and conditions of the Depositary Trust Agreement, and any applicable taxes or charges). At any time after the expiration of one year following the date of termination, the Trustee may sell the Underlying Securities then held hereunder and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of Receipts which --- ---- have not theretofore been Surrendered, such Owners thereupon becoming -34- 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. -35- Section 7.3. Severability. In case any one or more of the ------------ provisions contained in these Standard Terms or the applicable Depositary Trust Agreement or in the Receipts should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby. Section 7.4. Owners and Beneficial Owners as Parties; Binding ------------------------------------------------ Effect. The Owners, Beneficial Owners and Depositors from time to time shall be parties to the applicable Depositary Trust Agreement and shall be bound by all of the terms and conditions hereof and thereof and of the Receipts by their acceptance of Receipts or any interest therein or by their depositing Securities, as the case may be. Section 7.5. Notices. (a) Any and all notices to be given to the ------- Initial Depositor shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to Merrill Lynch, Pierce, Fenner & Smith Incorporated, World Financial Center, New York, New York 10281, Attention: Director, Customized Investments, or any other place to which the Initial Depositor may have transferred its principal office with notice to the Trustee. (b) Any and all notices to be given to the Trustee shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to The Bank of New York, 101 Barclay Street, 22-W, New York, New York 10286, Attention: ADR Administration, or any other place to which the Trustee may have transferred its Corporate Trust Office with notices to the Initial Depositor. -36- (c) Any and all notices to be given to any Owner shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to such Owner at the address of such Owner as it appears on the transfer books of the Trustee, or, if such Owner shall have filed with the Trustee a written request that notices intended for such Owner be mailed to some other address, at the address designated in such request. (d) Delivery of a notice sent by mail or cable, telex or facsimile transmission shall be deemed to be effected at the time when a duly addressed letter containing the same (or a confirmation thereof in the case of a cable, telex or facsimile transmission) is deposited, postage prepaid, in a post-office letter box. The Trustee may, however, act upon any cable, telex or facsimile transmission received by them, notwithstanding that such cable, telex or facsimile transmission shall not subsequently be confirmed by letter as aforesaid. Section 7.6. Governing Law. This Depositary Trust Agreement and the ------------- Receipts shall be interpreted and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by the substantive laws (but not the choice of law rules) of the State of New York. -37- IN WITNESS WHEREOF, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and THE BANK OF NEW YORK have duly executed these Standard Terms as of the day and year first set forth above. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: -------------------------------- Steven G. Budurtha First Vice President THE BANK OF NEW YORK, as Trustee By: -------------------------------- Name: Title: -38- EXHIBIT A [NAME OF TRUST] [FORM OF] DEPOSITARY TRUST AGREEMENT DEPOSITARY TRUST AGREEMENT dated as of __________ (this "Depositary Trust Agreement"), between MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, a Delaware corporation (the "Initial Depositor"), THE BANK OF NEW YORK, a New York banking corporation, as trustee (the "Trustee"), and all Holders and Beneficial Owners (each as hereinafter defined) from time to time of Depositary Trust Receipts issued hereunder and all Depositors (as hereinafter defined) from time to time. Section 1. Incorporation of Standard Terms. The Standard Terms for ------------------------------- Depositary Trust Agreements agreed to as of ____________, 1999 (the "Standard Terms"), between the Initial Depositor and the Trustee are hereby incorporated by reference into and made a part of this Depositary Trust Agreement. If there is any conflict between the provisions of this Depositary Trust Agreement and the Standard Terms, the provisions of this Depositary Trust Agreement shall control. Section 2. Securities to be Deposited. Initially, the securities -------------------------- which must be deposited for issuance of one Receipt and which shall be represented thereby shall be as follows: Quantity which must be deposited Issuer and Title of Security per Receipt ---------------------------- --------------------- [Issuer and title of security] [Quantity] [Issuer and title of security] [Quantity] ; provided, however, that if an event to which Section 2.11 of the Standard -------- ------- Terms applies or an event described in Sections 4.3 or 4.8 of the Standard Terms occurs, the definition of the securities that must be deposited for issuance of one Receipt shall be changed as provided in such Sections, if applicable. Section 3. Creation and Declaration of Trust; Termination Date. The --------------------------------------------------- trust created hereby shall be known as [Name of Trust], for which the Trustee, ------------- or the Initial Depositor to the extent provided herein, may conduct the business of the Trust, make and A-1 execute contracts, and sue and be sued. [The termination date of the Trust will be December 31, 2039]. Section 4. Closing. The "Closing Date" shall be [specify date]. ------- ------------ IN WITNESS WHEREOF, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and THE BANK OF NEW YORK have duly executed this agreement as of the day and year first set forth above. All Owners and Beneficial Owners shall become parties hereto upon acceptance by them of Receipts issued in accordance with the terms hereof or any interest therein, and all Depositors shall become parties hereto upon depositing any Securities hereunder. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: --------------------------------- Name: Title: THE BANK OF NEW YORK, as Trustee By: --------------------------------- Name: Title: A-2 EXHIBIT B [Form of Receipt] THE RECEIPTS EVIDENCED HEREBY REPRESENT RIGHTS WITH RESPECT TO UNDERLYING SECURITIES (AS DEFINED IN THE DEPOSITARY TRUST AGREEMENT REFERRED TO HEREIN) HELD BY THE TRUST AND DO NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND ARE NOT GUARANTEED BY THE INITIAL DEPOSITOR OR THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE RECEIPTS NOR THE UNDERLYING SECURITIES ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR ANY OTHER PERSON. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE AGENT AUTHORIZED BY THE ISSUER FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. B-1 DEPOSITARY TRUST RECEIPTS ISSUED BY [NAME OF TRUST] REPRESENTING [COMMON STOCK] OF [LIST COMPANIES HERE] THE BANK OF NEW YORK, as Trustee No. CUSIP NO. THE BANK OF NEW YORK, as Trustee (hereinafter called the "Trustee"), hereby certifies that CEDE & CO., as nominee of the Depositary Trust Company, or registered assigns, IS THE OWNER OF * Depositary Trust Receipts issued by [Name of Trust], each representing the securities described in the within- - -------------- mentioned Depositary Trust Agreement. At the date hereof, each Receipt represents the right to receive the following securities: Quantity Initially Issuer and Title Represented by of Security Each Receipt ------------------------------------------ ------------------------------------------ ------------------------------------------ ------------------------------------------ which are deposited under the Depositary Trust Agreement referred to herein at the Corporate Trust Office of the Trustee. The specification of the securities represented by each Receipt is subject to change as provided in the Depositary Trust Agreement. The Trustee's Corporate Trust Office is located at a different address than its principal executive office. Its Corporate Trust Office is located at 101 Barclay Street, New York, New York 10286, and its principal executive office is located at One Wall Street, New York, New York 10286. THE TRUSTEE'S CORPORATE TRUST OFFICE ADDRESS IS 101 BARCLAY STREET, NEW YORK, NEW YORK 10286 - ------------------ * That number of Receipts held at The Depository Trust Company at any given point in time. B-2 (1) THE DEPOSITARY TRUST AGREEMENT. ------------------------------ This Receipt is issued upon the terms and conditions set forth in the Depositary Trust Agreement, dated as of _________, 1999 (the "Depositary Trust Agreement"), agreed to by and among the Initial Depositor, the Trustee, all Owners and Beneficial Owners from time to time of Receipts issued thereunder and all Depositors. By becoming an Owner or Beneficial Owner, or by depositing Securities, such Person agrees to become a party to the Depositary Trust Agreement and become bound by all the terms and conditions thereof. The Depositary Trust Agreement sets forth the rights of Owners and the rights and duties of the Trustee in respect of the Securities deposited thereunder and any and all other securities, property and cash from time to time received in respect of such Securities and held thereunder (such Securities, other securities, property, and cash are herein called "Underlying Securities"). Copies of the Depositary Trust Agreement are on file at the Trustee's Corporate Trust Office in New York City. The statements made on the face and reverse of this Receipt are summaries of certain provisions of the Depositary Trust Agreement and are qualified by and subject to the detailed provisions of the Depositary Trust Agreement, to which reference is hereby made. Capitalized terms not defined herein shall have the meanings set forth in the Depositary Trust Agreement. (2) SURRENDER OF RECEIPTS AND WITHDRAWAL OF SECURITIES. -------------------------------------------------- Upon Surrender at the Corporate Trust Office of the Trustee of a Round Lot of Receipts or integral multiples thereof for the purpose of withdrawal of the Underlying Securities represented thereby, and upon payment of the fee of the Trustee in connection with the Surrender of Receipts as provided in Section 5.6 of the Standard Terms and payment of all taxes and charges payable in connection with such Surrender and withdrawal of the Underlying Securities, and subject to the terms and conditions of the applicable Depositary Trust Agreement, including, without limitation, Section 4.10 thereof, the Owner of such Receipts shall be entitled to Delivery of the amount of Underlying Securities at the time represented by such Receipts. Delivery of such Underlying Securities may be made by (i) Delivery of Securities to such Owner or as ordered by such Owner and (ii) any available form of delivery of any other securities, property and cash to which such Owner is then entitled to such Owner or as ordered by such Owner. The Trustee shall only deliver whole Underlying Securities upon Surrender of Receipts representing such Underlying Securities. (3) REGISTRATION OF TRANSFERS, SPLIT-UPS AND COMBINATIONS OF CERTIFICATES; ---------------------------------------------------------------------- LIMITATIONS. ----------- The transfer of ownership of Receipts evidenced by this certificate is registrable on the books of the Trustee at its Corporate Trust Office by the Owner hereof in person or by a duly authorized attorney, upon Surrender of this certificate evidencing Receipts, B-3 properly endorsed or accompanied by proper instruments of transfer, and duly stamped as may be required by the laws of the State of New York and of the United States of America. This certificate evidencing Receipts may be split up into other such certificates, each evidencing any integral multiple of a Round Lot of Receipts, or may be combined with other certificates evidencing Receipts into one such certificate, in each case evidencing the same aggregate number of Receipts as the certificate or certificates Surrendered. As a condition precedent to the Delivery, registration of transfer, split- up, combination or Surrender (including, for the avoidance of doubt, any Surrender in connection with an exchange) of any Receipt or withdrawal of any Underlying Securities, the Trustee or Registrar may require payment from the Depositor of Securities or the presentor of the Receipts of a sum sufficient to reimburse it for any tax or other charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Securities being deposited or withdrawn) and payment of any applicable fees as herein provided, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Trustee may establish consistent with the provisions of the Depositary Trust Agreement, including, without limitation, Section 2.8 of the Standard Terms. The Delivery of Receipts against deposits of Securities, the registration of transfer of Receipts or the Surrender of Receipts for the purpose of withdrawal of Underlying Securities may be suspended, generally or in particular instances, during any period when the transfer books of the Trustee are closed or the transfer books of a Securities Issuer are closed or if any such action is deemed necessary or advisable by the Trustee at any time or from time to time for any reason, subject to the provisions of the following sentence. Notwithstanding any other provision of any applicable Depositary Trust Agreement or the Receipts, the Surrender of Receipts and withdrawal of Underlying Securities may not be suspended subject to only (i) temporary delays caused by closing the transfer books of the Trustee or a Securities Issuer, (ii) the payment of fees, taxes and similar charges, and (iii) compliance with any U.S. laws or governmental regulations relating to the Receipts or to the withdrawal of the Underlying Securities. Without limitation of the foregoing, the Trustee shall not knowingly accept for deposit under the Depositary Trust Agreement any Securities required to be registered under the provisions of the Securities Act of 1933, as amended, for the public offer and sale thereof in the United States unless a registration statement is in effect as to such Securities for such offer and sale. (4) RECONSTITUTION EVENTS --------------------- B-4 If any class of Securities ceases to be outstanding as a result of a merger, consolidation or other corporate combination of the Securities Issuer and Section 4.8 of the Standard Terms does not apply, the Trustee shall, if it has actual knowledge of such event, to the extent lawful and feasible and subject to Section 4.10 of the Standard Terms, distribute any securities which shall be received by the Trustee in exchange for or in conversion of or in respect of Underlying Securities which are not Securities issued by a Securities Issuer to the Owners in proportion to their ownership of Receipts. Effective on the date that such Securities cease to be outstanding, such class of Securities shall cease to be part of the securities which must be deposited for issuance of Receipts. (b) If any class of Securities is delisted from trading on its primary exchange or market and is not listed for trading on another national securities exchange or through NASDAQ within five business days from the date of such delisting, the Trustee shall, if it has actual knowledge of such event, to the extent lawful and feasible and subject to Section 4.10 of the Standard Terms, distribute the Underlying Securities of such class to the Owners in proportion to their ownership of Receipts. Effective on the date of such distribution, such class of Securities shall cease to be a part of the securities which must be deposited for issuance of Receipts. (c) In the event that any Securities Issuer no longer has a class of common stock registered under section 12 of the Securities Exchange Act of 1934, as amended, the Trustee shall, if it has actual knowledge of such event, to the extent lawful and feasible and subject to Section 4.10 of the Standard Terms, distribute the Underlying Securities of such Securities Issuer to the Owners in proportion to their ownership of Receipts. Effective on the date of such distribution, such class of Securities shall cease to be part of the securities which must be deposited for issuance of Receipts. (d) If the Commission determines that a Securities Issuer is an investment company under the Investment Company Act of 1940, and the Trustee has actual knowledge of such Commission determination, then the Trustee shall, to the extent lawful and feasible and subject to Section 4.10 of the Standard Terms, distribute the Underlying Securities of such Securities Issuer to the Owners in proportion to their ownership of Receipts. Effective on the date of such distribution, such class of Securities shall cease to be part of the securities which must be deposited for issuance of Receipts. (5) LIABILITY OF OWNER FOR TAXES. ---------------------------- If any tax or other governmental charge shall become payable with respect to any Receipts or any Underlying Securities represented thereby, such tax or other governmental charge shall be payable by the Owner hereof to the Trustee. The Trustee B-5 shall refuse to effect any registration of transfer of such Receipts or any withdrawal of Underlying Securities represented by such Receipt until such payment is made, and may withhold any dividends or other distributions, or may sell for the account of the Owner hereof Underlying Securities constituting any multiples of the securities which must be deposited for issuance of Receipts, and may apply such dividends or other distributions of the proceeds of any such sale in payment of such tax or other charge and the Owner hereof shall remain liable for any deficiency. (6) WARRANTIES ON DEPOSIT OF SECURITIES. ----------------------------------- Every Person depositing Securities under the Depositary Trust Agreement shall be deemed thereby to represent and warrant that such Receipts and each certificate therefor are validly issued and fully paid, that the person making such deposit is duly authorized to do so and that at the time of delivery, such Securities are free and clear of any lien, pledge, encumbrance, right, charge or claim (other than the rights created by the Depositary Trust Agreement). Every such person shall also be deemed to represent that such Securities are not, and Receipts representing such Securities would not be, Restricted Securities. Such representations and warranties shall survive the deposit of Securities, issuance of Receipts or termination of the Depositary Trust Agreement. (7) FILING PROOFS, CERTIFICATES AND OTHER INFORMATION. ------------------------------------------------- Any person presenting Securities for deposit or any Owner of a Receipt may be required from time to time to file with the Trustee such proof of citizenship or residence, exchange control approval, or such information relating to the registration on the books of any Securities Issuer or Securities Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Trustee may require. The Trustee may withhold the Delivery or registration of transfer of any Receipts or the delivery of any Underlying Securities until such proof or other information is filed or such certificates are executed or such representations and warranties made. (8) CHARGES OF TRUSTEE. The following charges shall be incurred by any party ------------------ depositing or withdrawing Securities or by any party Surrendering Receipts or to whom Receipts are Delivered or any Owner, as applicable: (1) taxes and charges and other fees payable in respect of the Underlying Securities assessed by third-party custodians, depositories, transfer agents, and other service providers in the ordinary course of their respective businesses (whether in connection with the deposit of Securities or withdrawal of Underlying Securities or otherwise), (2) a fee of $10 or less per 100 Receipts for the execution and Delivery of Receipts pursuant to Section 2.5 of the Standard Terms, and the Surrender of Receipts pursuant to Section 2.7 Standard Terms, and (3) a fee which shall accrue on the first day of each calendar quarter at a rate of $.02 or less per Receipt per quarter for the Trustee's services as such under the Depositary Trust Agreement (which fee shall be assessed against Owners of B-6 record as of the date or dates set by the Trustee in accordance with Section 4.5 of the Standard Terms and shall be collected at the Trustee's discretion by deducting such fee from one or more cash dividends or other cash distributions); provided, however, that with respect to the aggregate -------- ------- fee accrued in any calendar year under this clause (3) with respect to each Receipt, the Trustee will waive that portion which exceeds the total cash dividends and other cash distributions the record date for which falls in such calendar year and payable with respect to such Receipt. (9) TITLE TO RECEIPTS. ----------------- It is a condition of the Receipts and every successive Owner of the Receipts by accepting or holding a certificate for Receipts consents and agrees, that title to such certificate (and the Receipts evidenced thereby) , when properly endorsed or accompanied by proper instruments of transfer, is transferable by delivery with the same effect as in the case of a negotiable instrument under the laws of New York; provided, however, that the Trustee, -------- ------- notwithstanding any notice to the contrary, may treat the person in whose name Receipts are registered on the books of the Trustee as the absolute owner thereof for the purpose of determining the person entitled to distribution or dividends or other distributions or to any notice provided for in the Depositary Trust Agreement and for all other purposes. (10) VALIDITY OF RECEIPTS. -------------------- Receipts shall not be entitled to any benefits under the Depositary Trust Agreement or be valid or obligatory for any purpose, unless a certificate evidencing such Receipts shall have been executed by the Trustee by the manual or facsimile signature of a duly authorized signatory of the Trustee and, if a Registrar for the Receipts shall have been appointed, countersigned by the manual or facsimile signature of a duly authorized officer of the Registrar. (11) REPORTS; INSPECTION OF TRANSFER BOOKS. ------------------------------------- The issuer of each class of Securities is subject to the periodic reporting requirements of the Securities Exchange Act of 1934 and, accordingly, files certain reports with the Securities and Exchange Commission (herein called the "Commission"). Such reports will be available for inspection and copying at the public reference facilities maintained by the Commission located at 450 Fifth Street, NW, Washington, DC 20549. The Trustee shall, to the extent lawful, forward to Owners, any reports and communications, including any proxy statement or other soliciting material, received from a Securities Issuer which are received by the Trustee as the holder of the Underlying Securities, unless such reports and communications have been forwarded directly to Owners by such Securities Issuer. B-7 The Trustee shall keep books for the registration of Receipts and transfers of Receipts which at all reasonable times shall be open for inspection by the Owners. (12) DIVIDENDS AND DISTRIBUTIONS. --------------------------- Whenever the Trustee shall receive any cash dividend or other cash distribution on any Underlying Securities, the Trustee shall, subject to the Depositary Trust Agreement, distribute the amount thus received (net of the fees of the Trustee as provided in the Depositary Trust Agreement, if applicable) to the Owners of Receipts entitled thereto; provided, however, that in the event -------- ------- that the respective Securities Issuer or the Trustee shall be required to withhold and does withhold from such cash dividend or such other cash distribution in respect of any Underlying Securities an amount on account of taxes, the amount distributed to the Owners of the Receipts representing such Underlying Securities shall be reduced accordingly. Subject to the provisions of Sections 4.8 and 5.6 of the Standard Terms, whenever the Trustee shall receive any distribution other than a distribution described in Sections 4.1, 4.3 or 4.4 of the Standard Terms or a distribution which would otherwise be distributed under the Depositary Trust Agreement except that the Trustee deems such distribution not to be lawful and feasiable, the Trustee shall, subject to Section 4.10 of the Standard Terms, cause the securities or property received by it to be distributed to the Owners of Receipts entitled thereto, in any manner that the Trustee may deem equitable and practicable for accomplishing such distribution; provided, however, that if -------- ------- in the opinion of the Trustee such distribution cannot be made proportionately among the Owners of Receipts entitled thereto, or if for any other reason (including, but not limited to, any requirement that a Securities Issuer or the Trustee withhold an amount on account of taxes or other governmental charges or that such securities must be registered under the Securities Act of 1933 in order to be distributed to Owners) the Trustee deems such distribution not to be feasible, the Trustee shall adopt such method as it deems equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of such sale (net of the fees of the Trustee as provided in Section 5.6 of the Standard Terms) shall be distributed by the Trustee to the Owners entitled thereto as in the case of a distribution received in cash. If any distribution upon any Underlying Securities consists of a dividend in, or free distribution of, Securities, the Trustee shall, to the extent lawful and feasible, retain such Securities under the Depositary Trust Agreement, and, in such case, the (i) the amount of such Securities so retained in respect of each Receipt shall be added to the classes and quantities of securities which must be deposited for issuance of Receipts and (ii) the number of Receipts in an Issuance Denomination may be increased B-8 or decreased by the Trustee to the lowest multiple of 100 Receipts such that no fractional shares are thereby represented in such Issuance Denomination. In the event that the Trustee determines that any distribution in property (including Securities and rights to subscribe therefor) is subject to any tax or other charge which the Trustee is obligated to withhold, notwithstanding anything to the contrary in the Standard Terms or the applicable Depositary Trust Agreement, the Trustee may by public or private sale dispose of all or a portion of such property (including Securities and rights to subscribe therefor) in such amounts and in such manner as the Trustee deems necessary and practicable to pay any such taxes or charges and the Trustee shall distribute the net proceeds or any such sale after deduction of such taxes or charges to the Owners entitled thereto. (13) RIGHTS OFFERINGS. ---------------- (a) If a Securities Issuer offers or cause to be offered to the holders of any Underlying Securities any rights to subscribe for additional Securities or other securities, the Trustee shall have discretion in accordance with Section 4.4 of the Standard Terms as to the procedure to be followed in making such rights available to any Owners or in disposing of such rights on behalf of Owners and making the net proceeds available to Owners or, if by the terms of such rights offering or for any other reason (including the absence of an effective registration statement covering the distribution of securities underlying the rights), the Depositary may not make such rights available to any Owners or dispose of such rights and make the net proceeds available to Owners, then the Trustee shall allow the rights to lapse. (b) The Trustee will not offer rights to Owners unless both the rights and the securities to which such rights relate are either exempt from registration under the Securities Act of 1933 with respect to a distribution to all Owners or are registered under the provisions of such Act. (c) The Trustee shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to Owners in general or any Owner in particular. (14) RECORD DATES. ------------ Whenever any cash dividend or other cash distribution shall become payable or any distribution other than cash shall be made, or whenever the Trustee receives notice of a meeting of or solicitation of proxies from holders of any Underlying Securities, or whenever a fee shall be changed by the Trustee under Section 5.6 of the Standard Terms, or whenever for any reason there is a reconstitution or other event under the Depositary Trust Agreement that causes a change in the composition of the Securities which must be B-9 deposited for issuance of Receipts, or whenever the Trustee shall find it necessary or convenient in respect of any matter, the Trustee shall fix a record date (a) for the determination of the Owners who shall be (i) entitled to receive such dividend, distribution or rights or the net proceeds of the sale thereof or (ii) entitled to give instructions for the exercise of voting rights at any such meeting or solicitation, or (iii) required to pay such fee, or (b) on or after which each Receipt will represent such changed group of Securities, subject to the provisions of the Depositary Trust Agreement. In the case of subsections (a)(i) and (a)(ii) of this Article (13), the Trustee shall use its reasonable efforts to ensure that, to the extent practicable, the record date set under the Depositary Trust Agreement will be the same as the record date set by the Securities Issuer. (15) VOTING OF UNDERLYING SECURITIES. ------------------------------- Upon receipt by the Trustee or its appointed agent of notice of any meeting of, or solicitation of proxies from, holders of Underlying Securities, the Trustee shall, to the extent lawful, mail to the Owners a notice which shall contain (a) such information as is contained in such notice of meeting or solicitation, (b) a statement that the Owners of Receipts as of the close of business on a specified record date will be entitled, subject to applicable law and the provisions of the corporate documents of the Securities Issuer, to instruct the Trustee as to the exercise of the voting rights, if any, or giving of proxies, as applicable, in respect of the amount of Underlying Securities represented by their respective Receipts and (c) a statement as to the manner in which such instructions may be given. Upon the written request of an Owner of a Receipt on such record date, received on or before the date established by the Trustee, the Trustee shall endeavor, insofar as practicable, to vote or cause to be voted, or to give a proxy, as applicable, in respect of the amount of Underlying Securities represented by such Receipt in accordance with the instructions set forth in such request. The Trustee shall not vote or attempt to exercise the right to vote that attaches to, or give a proxy with respect to, Underlying Securities other than in accordance with such instructions. (16) CHANGES AFFECTING UNDERLYING SECURITIES. --------------------------------------- (a) In circumstances where the provisions of Sections 2.11 and 4.3 of the Standard Terms do not apply, upon any change in nominal value, change in par value, split-up, consolidation or any other reclassification of any Underlying Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting the issuer of any Underlying Security, if the relevant Securities Issuer survives such event, the Trustee shall, to the extent lawful and feasible, retain such Securities under the Depositary Trust Agreement, and, in such case, the (A) the amount of such Securities so retained in respect of each Receipt shall be added to the classes and quantities of Securities which must be deposited for issuance of Receipts and (B) the number of Receipts in an Issuance Denomination may be increased or decreased B-10 by the Trustee to the lowest multiple of 100 Receipts such that no fractional shares are thereby represented in such Issuance Denomination. (b) Securities of any class which are surrendered by the Trustee in connection with any such conversion or exchange shall, effective on the date of such surrender, no longer be part of the securities which must be deposited for issuance of Receipts. In any such case, or in the case of an event to which Section 2.11 of the Standard Terms applies, the Trustee may call for the Surrender of outstanding certificates evidencing Receipts to be exchanged for new certificates specifically describing any applicable change in the classes and quantities of securities which must be deposited for issuance of Receipts. (17) LIABILITY OF THE INITIAL DEPOSITOR AND THE TRUSTEE. -------------------------------------------------- Neither the Initial Depositor nor the Trustee nor any of their respective directors, employees, agents or affiliates shall incur any liability to any Owner or Beneficial Owner of any Receipt, if by reason of any provision of any present or future law or regulation of the United States or any other country, or of any governmental or regulatory authority or stock exchange, or by reason of any act of God or war or other circumstances beyond its control, the Initial Depositor or the Trustee shall be prevented or forbidden from, or be subject to any civil or criminal penalty on account of, doing or performing any act or thing which by the terms of the Standard Terms or the applicable Depositary Trust Agreement it is provided shall be done or performed; nor shall the Initial Depositor or the Trustee incur any liability to any Owner or Beneficial Owner of any Receipt by reason of any non-performance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of the Standard Terms or the applicable Depositary Trust Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in the Standard Terms or the applicable Depositary Trust Agreement. Where, by the terms of an offering or distribution to which Sections 2.11, 4.2 or 4.4 of the Standard Terms applies, or for any other reason, it is not lawful and feasible to make such distribution or offering available to Owners, and the Trustee may not dispose of such distribution or offering on behalf of such Owners and make the net proceeds available to such Owners, then the Trustee shall not make such distribution or offering available to Owners and shall allow any rights, if applicable, to lapse. The Trustee shall not be subject to any liability with respect to the validity or worth of the Underlying Securities. Neither the Initial Depositor nor the Trustee shall be under any obligation to prosecute any action, suit or other proceeding in respect of any Underlying Securities or in respect of the Receipts. Neither the Initial Depositor nor the Trustee shall be liable for any action or non-action by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Securities for deposit, any Owner or Beneficial Owner, or any other person believed by it in good faith to be competent to give such advice or information. B-11 The Trustee shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Trustee or in connection with any matter arising wholly after the resignation of the Trustee, provided that in connection with the issue out of which such potential liability arises the Trustee performed its obligations without negligence or bad faith while it acted as Trustee. The Trustee shall not be responsible for any failure to carry out any instructions to vote any of the Underlying Securities, or for the manner in which any such vote is cast or the effect of any such vote, provided that any such action or non-action is without negligence or bad faith. Except as specifically provided in Section 4.6 of the Standard Terms, the Trustee shall have no obligation to monitor or to obtain any information concerning the business or affairs of any Securities Issuer or to advise Owners or Beneficial Owners of any event or condition affecting any Securities Issuer. The Trustee shall have no obligation to comply with any direction or instruction from any Owner or Beneficial Owner regarding Receipts except to the extent specifically provided in the Standard Terms or any applicable Depositary Trust Agreement. The Trustee shall be a fiduciary under the Standard Terms and the applicable Depositary Trust Agreement; provided, however, that the fiduciary duties and responsibilities and liabilities of the Trustee shall be limited by, and shall be only those specifically set forth in, the Standard Terms and the applicable Depositary Trust Agreement. No disclaimer of liability under the Securities Act of 1933 is intended by any provision of the Depositary Trust Agreement. (18) RESIGNATION OR REMOVAL OF THE TRUSTEE. ------------------------------------- (a) The Trustee may at any time resign as Trustee under the Depositary Trust Agreement by written notice of its election so to do, delivered to the Initial Depositor, and such resignation shall take effect upon the appointment of a successor Trustee and its acceptance of such appointment. (b) If at any time the Trustee is in material breach of its obligations under the Depositary Trust Agreement and the Trustee fails to cure such breach within 30 days after receipt by the Trustee of written notice from the Initial Depositor or the Owners of 25% or more of the outstanding Receipts specifying such default and requiring the Trustee to cure such default, the Initial Depositor, acting on behalf of the Owners, may remove the Trustee by written notice delivered to the Trustee, and such removal shall take effect upon the appointment of the successor Trustee and its acceptance of such appointment. (c) In case at any time the Trustee acting hereunder shall resign or be removed, the Initial Depositor, acting on behalf of the Owners, shall use its reasonable efforts to appoint a successor Trustee, which shall be a bank or trust company having an office in the Borough of Manhattan, The City of New York. B-12 (19) AMENDMENT. --------- The Trustee and the Initial Depositor may amend any provisions of the Depositary Trust Agreement without the consent of any Owner. Any amendment that imposes or increases any fees or charges (other than taxes and other charges, registration fees or other such expenses), or that otherwise prejudices any substantial existing right of the Owners will not become effective until 30 days after notice of such amendment is given to the Owners. Every Owner and Beneficial Owner, at the time any amendment so becomes effective, shall be deemed, by continuing to hold any Receipt or an interest therein, to consent and agree to such amendment and to be bound by the Depositary Trust Agreement as amended thereby. In no event shall any amendment impair the right of the Owner of any Receipt to Surrender such Receipt and receive therefor the Underlying Securities represented thereby, except in order to comply with mandatory provisions of applicable law. B-13 (20) EARLY TERMINATION OF DEPOSITARY TRUST AGREEMENT. ----------------------------------------------- (a) The Trust shall terminate by the Trustee mailing notice of such termination to the Owners of all Receipts then outstanding at least 30 days prior to the date set for termination if any of the following occurs: (i) The Trustee is notified that the Receipts are delisted from a national securities exchange and are not approved for listing on another national securities exchange within 5 business days of their delisting; (ii) Owners of at least 75% of the outstanding Receipts notify the Trustee that they elect to terminate the Trust; or (iii) 60 days shall have expired after the Trustee shall have delivered to the Initial Depositor and the Owners a written notice of its election to resign and a successor trustee shall not have been appointed and accepted its appointment. (b) On and after the date of termination, the Owner of a Receipt will, upon (a) Surrender of such Receipt at the Corporate Trust Office of the Trustee, (b) payment of the fee of the Trustee for the Surrender of Receipts referred to in Section 2.7 of the Standard Terms, and (c) payment of any applicable taxes or charges, be entitled to Delivery, to him or upon his order, of the amount of Underlying Securities evidenced by such Receipt. If any Receipts shall remain outstanding after the date of termination, the Trustee thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends or other distribution to the Owners thereof, and shall not give any further notices or perform any further acts under these Standard Terms or the applicable Depositary Trust Agreement, except that the Trustee shall continue to collect dividends and other distributions pertaining to Underlying Securities and hold the same uninvested and without liability for interest, shall sell rights as provided in these Standard Terms or the applicable Depositary Trust Agreement, and shall continue to deliver Underlying Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts Surrendered to the Trustee (after deducting or upon payment of, in each case, the fee of the Trustee set forth in 5.6 of the Standard Terms for the Surrender of Receipts, any expenses for the account of the Owner of such Receipts in accordance with the terms and conditions of the Depositary Trust Agreement, and any applicable taxes or charges). At any time after the expiration of one year following the date of termination, the Trustee may sell the Underlying Securities then held hereunder and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of Receipts which have not theretofore been - --- ---- Surrendered, such Owners thereupon becoming general creditors of the Trustee with respect to such net proceeds. B-14 After making such sale, the Trustee shall be discharged from all obligations under these Standard Terms with respect to the Receipts and the applicable Depositary Trust Agreement, except to account for such net proceeds and other cash (after deducting, in each case, the fee of the Trustee for the Surrender of Receipts, any fees of the Trustee due and owing from the Owner of such Receipts pursuant to Section 5.6 of the Standard Terms, any expenses for the account of the Owner of such Receipts in accordance with the terms and conditions of the Depositary Trust Agreement, and any applicable taxes or charges). Upon the termination of the applicable Depositary Trust Agreement, the Initial Depositor shall be discharged from all obligations under such Depositary Trust Agreement except for its obligations to the Trustee under Section 5.5 of the Standard Terms. B-15 EX-5.1 3 OPINION OF SHEARMAN & STERLING VALID RECEIPTS EXHIBIT 5.1 May 5, 2000 Merrill Lynch, Pierce, Fenner & Smith Incorporated 250 Vesey Street New York, New York 10281 Merrill Lynch, Pierce, Fenner & Smith Incorporated Utilities HOLDRSSM Trust Registration Statement on Form S-1 ------------------------------------- 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 Utilities HOLDRSSM Trust (the "Trust") in connection with the preparation and filing with the Securities and Exchange Commission (the "Commission") of the Registration Statement on Form S-1, as amended from time to time and filed by the Initial Depositor (the "Registration Statement"), of which the prospectus forms a part (the "Prospectus"), for the registration under the Securities Act of 1933, as amended (the "Securities Act"), of 1,000,000,000 Utilities HOLDRSSM (the "HOLDRSSM") to be issued by the Trust. In this capacity, we have examined (a) a signed copy of the Registration Statement and (b) a copy of the depositary trust agreement between The Bank of New York, as trustee (the "Trustee"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial depositor (the "Depositary Trust Agreement"). We have also examined originals, or copies certified or otherwise identified to our satisfaction, of such other corporate records of the Initial Depositor, such other certificates and advice of public officials and of officers of the Initial Depositor, and such other agreements, instruments and documents as we have deemed necessary as a basis for the opinions expressed below. In such examination we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity with the originals of all documents submitted to us as copies. As to questions of fact material to such opinions, we have relied upon such certificates and advice. The opinions set forth below are also based upon the assumptions that: (i) the Registration Statement, as finally amended (including any post-effective amendments), has become effective under the Securities Act; (ii) the amount, price, and other principal terms of the HOLDRSSM have been approved by the Board of Directors of the Initial Depositor or an authorized designee thereof; (iii) the Depositary Trust Agreement will be duly authorized, executed and delivered by the parties thereto substantially in the form filed as an exhibit to the Registration Statement; and (iv) the HOLDRSSM will be duly authenticated by the Trustee in accordance with the Depositary Trust Agreement and sold and delivered by the Initial Depositor against payment therefor. Our opinions expressed herein are limited to the laws of the State of New York and to the extent relevant, the General Law of the State of Delaware, and the Federal law of the United States, and we do not express any opinion herein concerning any other law. Based upon and subject to the foregoing, and having regard for such legal considerations as we have deemed relevant, we are of the opinion that the HOLDRSSM will be legally issued, fully paid and nonassessable, will be legal, valid and binding obligations of the Trust, enforceable against the Trust in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting the enforcement 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 REGARDING TAX EXHIBIT 8.1 May 5, 2000 Merrill Lynch, Pierce, Fenner & Smith Incorporated World Financial Center North Tower--4th Floor New York, New York 10281 Merrill Lynch, Pierce, Fenner & Smith Incorporated Utilities HOLDRSSM Trust Registration Statement on Form S-1 ------------------------------------- Ladies and Gentlemen: We have acted as special Tax Counsel to Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), as Initial Depositor, and the Utilities HOLDRSSM Trust in connection with the preparation and filing of a Prospectus and 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 Utilities HOLDRSSM (the "HOLDRSSM") to be issued by the Trust. Capitalized terms used herein have the meaning ascribed to them in the Prospectus. The HOLDRSSM are being issued pursuant to the Depositary Trust Agreement between the Initial Depositor, The Bank of New York, as trustee (in such capacity, the "Trustee"), other depositors and owners of HOLDRSSM (the "Trust Agreement"). In connection with the preparation of this opinion, we have examined and relied on such documents as we have deemed appropriate, including, inter alia, (i) the Trust Agreement and (ii) the Prospectus. We have made such investigations of law as we have deemed appropriate as a basis for the opinion expressed below. Based on the foregoing, it is our opinion that the Trust will provide for flow through tax consequences since it will be treated as a grantor trust or custodial arrangement for United States Federal income tax purposes. Moreover, the discussion set forth under the caption "Federal Income Tax Consequences" in the Prospectus represents our opinion of and, subject to the limitations contained therein, accurately describes, the principal United States Federal income tax consequences to a holder of HOLDRSSM receipts. The foregoing opinion is based upon provisions of the Internal Revenue Code of 1986, as amended, Treasury regulations and administrative 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-----