As Filed with the Securities and Exchange Commission on February 25, 2002
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
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MERRILL LYNCH & CO., INC. DELAWARE 13-2740599
(Exact name of registrant as specified in charter) (State of incorporation) (I.R.S. employer identification number)
MERRILL LYNCH PREFERRED FUNDING VI, L.P. DELAWARE 13-4034253
(Exact name of registrant as specified in certificate (State of organization) (I.R.S. employer identification number)
of limited partnership)
MERRILL LYNCH PREFERRED CAPITAL TRUST VI DELAWARE 13-7174482
(Exact name of registrant as specified in certificate (State of organization) (I.R.S. employer identification number)
of trust)
4 World Financial Center
New York, New York 10080
(212) 449-1000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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KATHERINE H. ZRIKE, ESQ.
General Counsel
Corporate Law
Merrill Lynch & Co., Inc.
4 World Financial Center
New York, New York 10080
(212) 449-1000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
NORMAN D. SLONAKER, ESQ. DONALD R. CRAWSHAW, ESQ. RICHARD T. PRINS, ESQ.
Sidley Austin Brown & Wood LLP Sullivan & Cromwell Skadden, Arps, Slate, Meagher & Flom LLP
875 Third Avenue 125 Broad Street Four Times Square
New York, New York 10022 New York, New York 10004 New York, New York 10036
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement as determined
by market conditions.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
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CALCULATION OF REGISTRATION FEE
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Proposed maximum Proposed
Title of each class Amount to be aggregate maximum aggregate Amount of
of securities to be registered(1) registered(2)(3) price per unit(4) offering price(4) registration fee
- -----------------------------------------------------------------------------------------------------------------------------
Debt Securities and Warrants(5)........................ --
Preferred Stock, par value $1.00 per share(5).......... --
Depositary Shares representing Preferred Stock(6)...... --
Common Stock, par value $1.33 1/3 per share (including
preferred share purchase rights)(7)(8)............... --
Trust Originated Preferred Securities of Merrill Lynch
Preferred Capital Trust VI (the "Trust") (the "Trust
Preferred Securities")................................ $10,000,000,000 N/A $10,000,000,000 $920,000
Partnership Preferred Securities of Merrill Lynch
Preferred Funding VI, L.P. (the "Partnership") (the
"Partnership Preferred Securities")(9)................ --
Guarantees of Merrill Lynch & Co., Inc. with respect to
Trust Preferred Securities............................ --
Guarantees of Merrill Lynch & Co., Inc. with respect to
Partnership Preferred Securities...................... --
Guarantees of Merrill Lynch & Co., Inc. with respect to
certain debentures of its wholly owned subsidiaries
(the "Affiliate Debentures").......................... --
Subordinated Debentures of Merrill Lynch & Co., Inc. to
be issued with respect to Trust Originated Preferred
Securities............................................ --
- -----------------------------------------------------------------------------------------------------------------------------
Totals.............................................. $ 10,000,000,000 -- $ 10,000,000,000 $ 920,000
- ------------------------------------------------------- ---------------- ----------------- ----------------- ----------------
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(Footnotes on next page)
(Footnotes from previous page)
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(1) This Registration Statement also registers delayed delivery contracts which
may be issued by Merrill Lynch & Co., Inc. (the "Company") under which the
counterparty may be required to purchase Debt Securities, Preferred Stock,
Depositary Shares and/or Warrants. Such contracts would be issued with the
Debt Securities, Preferred Stock, Depositary Shares and/or Warrants covered
hereby. In addition, securities registered hereunder may be sold
separately, together or as units with other securities registered hereunder.
(2) Such amount shall be increased, if any Debt Securities are issued at an
original issue discount, by an amount such that the net proceeds to be
received by the Company shall be equal to the above amount to be
registered. Any offering of securities denominated other than in U.S.
dollars will be treated as the equivalent in U.S. dollars based on the
official exchange rate applicable to the purchase of such securities from
the Company.
(3) This Registration Statement also registers, where required, an
indeterminate amount of securities to be sold by Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated in market-making
transactions.
(4) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457. The proposed maximum offering price per unit will be
determined from time to time by the Registrants in connection with the
issuance of securities registered hereunder or previously registered under
the Securities Act. No separate consideration will be received for Common
Stock, Preferred Stock, Debt Securities or Warrants that are issued upon
conversion or exchange of Debt Securities, Preferred Stock, Depositary
Shares or Warrants, nor will any separate consideration be received for the
Guarantees or the Subordinated Debentures registered hereunder. The
Subordinated Debentures and the Affiliate Debentures will be purchased by
the Partnership with proceeds of the sale of the Partnership Preferred
Securities, together with a capital contribution from the Company.
(5) There is also registered hereunder such indeterminate amount of Debt
Securities and an indeterminate number of shares of Preferred Stock as may
from time to time be issued upon conversion, exercise or exchange of Debt
Securities, Preferred Stock or Warrants registered hereunder.
(6) To be represented by Depositary Receipts representing an interest in all or
a specified portion of a share of Preferred Stock.
(7) The aggregate amount of Common Stock of the Company registered hereunder is
limited to that which is permissible under Rule 415(a)(4) under the
Securities Act. There is also registered hereunder such indeterminate
number of shares of Common Stock as may from time to time be issued upon
conversion, exercise or exchange of Debt Securities, Preferred Stock or
Warrants registered hereunder.
(8) Prior to the occurrence of certain events, the preferred share purchase
Rights will not be evidenced separately from the Common Stock. The value
attributable to such Rights, if any, is reflected in the market price of
the Common Stock.
(9) The Partnership Preferred Securities will be purchased by the Trust with
the proceeds of the sale of the Trust Preferred Securities, together with
the proceeds received from the Company in respect of the common securities
to be issued by the Trust. No separate consideration will be received for
the Partnership Preferred Securities.
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The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
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 or until this Registration Statement shall become effective
on such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
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EXPLANATORY NOTE
This registration statement contains:
(a) a prospectus to be used by Merrill Lynch & Co., Inc., or ML&Co., in
connection with offerings of its:
. debt securities;
. warrants;
. common stock;
. preferred stock; and
. depositary shares;
(b) a prospectus to be used by ML&Co. in connection with offerings of its
Structured Yield Product Exchangeable for Stock/SM/;
(c) a prospectus to be used in connection with offerings of:
. the preferred securities of Merrill Lynch Preferred Capital Trust VI
("Trust");
. the preferred securities of Merrill Lynch Preferred Funding VI, L.P.
("Partnership");
. the subordinated debentures of ML&Co.; and
. the guarantees of ML&Co. of:
. the preferred securities of Trust;
. the preferred securities of Partnership; and
. specified debentures issued by ML&Co.'s affiliates;
(d) a prospectus supplement to be used by ML&Co. in connection with
offerings of its medium-term notes; and
(e) a prospectus supplement to be used by ML&Co. in connection with
offerings of its retail notes.
Each such prospectus may also be used by Merrill Lynch, Pierce, Fenner &
Smith Incorporated in market making transactions in such securities.
/SM/ Service mark of Merrill Lynch & Co., Inc.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ The information in this prospectus is not complete and may be changed. We +
+ may not sell these securities until the registration statement filed with +
+ the Securities and Exchange Commission is effective. This prospectus is not +
+ an offer to sell these securities and it is not soliciting an offer to buy +
+ these securities in any state where the offer or sale is not permitted. +
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
Preliminary Prospectus dated February 25, 2002
P R O S P E C T U S
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[LOGO]
Merrill Lynch & Co., Inc.
Debt Securities, Warrants, Preferred Stock,
Depositary Shares and Common Stock
We may offer from time to time in one or more series, together or separately:
. debt securities;
. warrants;
. preferred stock;
. depositary shares; and
. common stock.
When we offer securities, we will provide you with a prospectus supplement
or term sheet describing the terms of the specific issue of securities
including the offering price of the securities.
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You should read this prospectus and the prospectus supplement or the term
sheet relating to the specific issue of securities carefully before you invest.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
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The date of this prospectus is , 2002.
MERRILL LYNCH & CO., INC.
We are a holding company that, through our U.S. and non-U.S. subsidiaries
and affiliates such as Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Merrill Lynch Government Securities Inc., Merrill Lynch Capital Services, Inc.,
Merrill Lynch International, Merrill Lynch Capital Markets Bank Ltd., Merrill
Lynch Investment Managers, L.P., Merrill Lynch Investment Managers Limited,
Merrill Lynch Bank U.S.A., Merrill Lynch Bank & Trust Co. and Merrill Lynch
International Bank Limited, provides investment, financing, advisory,
insurance, and related products and services on a global basis, including:
. securities brokerage, trading and underwriting;
. investment banking, strategic services, including mergers and
acquisitions, and other corporate finance advisory activities;
. asset management;
. origination, brokerage, dealer and related activities in swaps, options,
forwards, exchange-traded futures, other derivatives and foreign
exchange products;
. securities clearance and settlement services;
. equity, debt, foreign exchange, commodities and economic research;
. banking, trust and lending services, including commercial and mortgage
lending and related services;
. insurance underwriting and sales; and
. investment advisory and related record keeping services.
We provide these products and services to a wide array of clients, including
individual investors, small businesses, corporations, governments, governmental
agencies and financial institutions.
Our principal executive office is located at 4 World Financial Center, New
York, New York 10080; our telephone number is (212) 449-1000.
If you want to find more information about us, please see the sections
entitled "Where You Can Find More Information" and "Incorporation of
Information We File with the SEC" in this prospectus.
In this prospectus, "ML&Co.", "we", "us" and "our" refer specifically to
Merrill Lynch & Co., Inc., the holding company. ML&Co. is the issuer of all the
securities offered under this prospectus.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the securities for
general corporate purposes, unless otherwise specified in the prospectus
supplement or term sheet relating to a specific issue of securities. Our
general corporate purposes may include financing the activities of our
subsidiaries, financing our assets and those of our subsidiaries, lengthening
the average maturity of our borrowings and financing acquisitions. Until we use
the net proceeds from the sale of any of our securities for general corporate
purposes, we will use the net proceeds to reduce our short-term indebtedness or
for temporary investments. We expect that we will, on a recurrent basis, engage
in additional financings as the need arises to finance our growth, through
acquisitions or otherwise, or to lengthen the average maturity of our
borrowings. To the extent that securities being purchased for resale by our
subsidiary Merrill Lynch, Pierce, Fenner & Smith Incorporated, referred to in
this prospectus as MLPF&S, are not resold, the aggregate proceeds that we and
our subsidiaries would receive would be reduced.
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RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
In July 2000, ML&Co. acquired Herzog, Heine, Geduld, Inc. ("Herzog") through
an exchange offer followed by a merger of a wholly-owned subsidiary of ML&Co.
with and into Herzog. The merger was accounted for as a pooling-of-interests
under generally accepted accounting principles in the United States of America.
The following information for the fiscal years 1996 through 1999 has been
restated by the management of ML&Co. to give effect to the merger.
The following table sets forth our ratios of earnings to fixed charges and
ratios of earnings to combined fixed charges and preferred stock dividends for
the periods indicated:
Year Ended Last Friday in December For the Nine
---------------------------------- Months Ended
1996 1997 1998 1999 2000 September 28, 2001
---- ---- ---- ---- ---- ------------------
Ratio of earnings to fixed charges..... 1.2 1.2 1.1 1.3 1.3 1.2
Ratio of earnings to combined fixed
charges and preferred stock dividends 1.2 1.2 1.1 1.3 1.3 1.2
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of earnings from continuing operations before income taxes
and fixed charges, excluding amortization of capitalized interest and preferred
security dividend requirements. "Fixed charges" consist of interest costs, the
interest factor in rentals, amortization of debt issuance costs, preferred
security dividend requirements of subsidiaries, and amortization of capitalized
interest.
THE SECURITIES
ML&Co. intends to sell its securities from time to time. These securities
may include the following, in each case, as specified by ML&Co. at the time of
offering:
. common stock;
. preferred stock which may be:
. convertible into preferred stock or common stock;
. exchangeable for debt securities, preferred stock or depositary
shares representing preferred stock;
. depositary shares representing preferred stock;
. debt securities, comprising senior debt securities and subordinated debt
securities, each of which may be convertible into common stock or
preferred stock;
. warrants to purchase debt securities;
. warrants to purchase shares of common stock;
. warrants to purchase shares of preferred stock;
. warrants entitling the holders to receive from ML&Co. a payment or
delivery determined by reference to decreases or increases in the level
of an index or portfolio ("Index Warrants") based on:
. one or more equity or debt securities;
. any statistical measure of economic or financial performance such as
a currency or a consumer price or mortgage index; or
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. the price or value of any commodity or any other item or index; and
. warrants to receive from ML&Co. the cash value in U.S. dollars of the
right to purchase ("Currency Call Warrants") or to sell ("Currency Put
Warrants" and, together with the Currency Call Warrants, the "Currency
Warrants") specified foreign currencies or units of two or more
specified foreign currencies.
We may offer the securities independently or together with other securities
and the securities may be attached to, or separate from other securities. We
will offer the securities to the public on terms determined by market
conditions at the time of sale. The terms will be described in a prospectus
supplement or term sheet relating to the specific issue of securities.
ML&Co. will offer up to $ aggregate public offering price of the
securities or its equivalent in foreign currencies or units of two or more
currencies, based on the applicable exchange rate at the time of offering, as
shall be designated by ML&Co. at the time of offering, subject to reduction on
account of the sale of other securities under the registration statement of
which this prospectus is a part.
DESCRIPTION OF DEBT SECURITIES
Unless otherwise specified in a prospectus supplement, the senior debt
securities are to be issued under an indenture (the "1983 Indenture"), dated as
of April 1, 1983, as amended and restated through the date of this prospectus
and as it may be further amended in the future, between ML&Co. and JPMorgan
Chase Bank, as trustee, or issued under an indenture (the "1993 Indenture"),
dated as of October 1, 1993, as amended through the date of this prospectus and
as it may be further amended in the future, between ML&Co. and JPMorgan Chase
Bank, as trustee (each, a "Senior Debt Trustee"). The 1983 Indenture and the
1993 Indenture are referred to as the "Senior Indentures". Unless otherwise
specified in a prospectus supplement, the subordinated debt securities are to
be issued under an indenture (the "Subordinated Indenture"), between ML&Co. and
JPMorgan Chase Bank, as trustee (the "Subordinated Debt Trustee"). The Senior
Debt Securities and Subordinated Debt Securities may also be issued under one
or more other indentures (each, a "Subsequent Indenture") and have one or more
other trustees (each, a "Subsequent Trustee"). Any Subsequent Indenture
relating to senior debt securities will have terms and conditions identical in
all material respects to the above-referenced Senior Indentures and any
Subsequent Indenture relating to subordinated debt securities will have terms
and conditions identical in all material respects to the above-referenced
Subordinated Indenture, including, but not limited to, the applicable terms and
conditions described below. Any Subsequent Indenture relating to a series of
debt securities, and the applicable trustee, will be identified in the
applicable prospectus supplement or term sheet. A copy of each indenture is
filed, or, in the case of a Subsequent Indenture, will be filed, as an exhibit
to the registration statement relating to the securities. The following
summaries of the material provisions of the indentures are not complete and are
subject to, and are qualified in their entirety by reference to, all provisions
of the respective indentures, including the definitions of terms.
Terms of the Debt Securities
ML&Co. may issue the debt securities from time to time, without limitation
as to aggregate principal amount and in one or more series. ML&Co. may issue
debt securities upon the satisfaction of conditions, including the delivery to
the applicable Trustee of a resolution of the Board of Directors of ML&Co., or
a committee of the Board of Directors, or a certificate of an officer of ML&Co.
who has been authorized by the Board of Directors to take that kind of action,
which fixes or establishes the terms of the debt securities being issued. Any
resolution or officer's certificate approving the issuance of any issue of debt
securities will include the terms of that issue of debt securities, including:
. the aggregate principal amount and whether there is any limit upon the
aggregate principal amount that ML&Co. may subsequently issue;
. the stated maturity date;
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. the principal amount payable whether at maturity or upon earlier
acceleration, and whether the principal amount will be determined with
reference to an index, formula or other method;
. any fixed or variable interest rate or rates per annum and any
contingencies relating to changes in any applicable interest rate;
. any interest payment dates;
. any provisions for redemption, the redemption price and any remarketing
arrangements;
. any sinking fund requirements;
. whether the debt securities are denominated or payable in United States
dollars or a foreign currency or units of two or more foreign currencies;
. the form in which ML&Co. will issue the debt securities, whether
registered, bearer or both, and any restrictions applicable to the
exchange of one form for another and to the offer, sale and delivery of
the debt securities in either form;
. whether and under what circumstances ML&Co. will pay additional amounts
("Additional Amounts") under any debt securities held by a person who is
not a U.S. person for specified taxes, assessments or other governmental
charges and whether ML&Co. has the option to redeem the affected debt
securities rather than pay any Additional Amounts;
. whether the debt securities are to be issued in global form;
. the title and series designation;
. the minimum denominations;
. whether, and the terms and conditions relating to when, ML&Co. may
satisfy all or part of its obligations with regard to payment upon
maturity, or any redemption or required repurchase or in connection with
any exchange provisions by delivering to the holders of the debt
securities, other securities, which may or may not be issued by or be
obligations of ML&Co., or a combination of cash, other securities and/or
property ("Maturity Consideration");
. any additions or deletions in the terms of the debt securities with
respect to the Events of Default set forth in the respective indentures;
. the terms, if any, upon which the debt securities are convertible into
common stock or preferred stock of ML&Co. and the terms and conditions
upon which any conversion will be effected, including the initial
conversion price or rate, the conversion period and any other provisions
in addition to or instead of those described in this prospectus;
. whether, and the terms and conditions relating to when, holders may
transfer the debt securities separately from warrants if the debt
securities and warrants are issued together; and
. any other terms of the debt securities which are not inconsistent with
the provisions of the applicable indenture.
Please see the accompanying prospectus supplement or the terms sheet you
have received or will receive for the terms of the specific debt securities
being offered. ML&Co. may deliver this prospectus before or concurrently with
the delivery of a terms sheet. ML&Co. may issue debt securities under the
indentures upon the exercise of warrants to purchase debt securities. See
"Description of Debt Warrants". Nothing in the indentures or in the terms of
the debt securities will prohibit the issuance of securities representing
subordinated indebtedness that is senior or junior to the subordinated debt
securities.
Prospective purchasers of debt securities should be aware that special U.S.
Federal income tax, accounting and other considerations may be applicable to
instruments such as the debt securities. The prospectus supplement relating to
an issue of debt securities will describe these considerations, if they apply.
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ML&Co. will issue each series of debt securities, as described in the
prospectus supplement, in fully registered form without coupons, and/or in
bearer form with or without coupons, and in denominations set forth in the
prospectus supplement. There will be no service charge for any registration of
transfer of registered debt securities or exchange of debt securities, but
ML&Co. may require payment of a sum sufficient to cover any tax or other
governmental charges imposed in connection with any registration of transfer or
exchange. Each indenture provides that ML&Co. may issue debt securities in
global form. If any series of debt securities is issued in global form, the
applicable prospectus supplement will describe the circumstances, if any, under
which beneficial owners of interests in any of those global debt securities may
exchange their interests for debt securities of that series and of like tenor
and principal amount in any authorized form and denomination.
The provisions of the indentures permit ML&Co., without the consent of
holders of any debt securities, to issue additional debt securities with terms
different from those of debt securities previously issued and to reopen a
previous series of debt securities and issue additional debt securities of that
series.
The senior debt securities will be unsecured and will rank equally with all
other unsecured and unsubordinated indebtedness of ML&Co. The subordinated debt
securities will be unsecured and will be subordinated to all existing and
future senior indebtedness of ML&Co. Because ML&Co. is a holding company, the
right of ML&Co. and its creditors, including the holders of the debt
securities, to participate in any distribution of the assets of any subsidiary
upon its liquidation or reorganization or otherwise is necessarily subject to
the prior claims of creditors of the subsidiary, except to the extent that a
bankruptcy court may recognize the claims of ML&Co. itself as a creditor of the
subsidiary. In addition, dividends, loans and advances from certain
subsidiaries, including MLPF&S, to ML&Co. are restricted by net capital
requirements under the Securities Exchange Act of 1934, as amended, and under
rules of certain exchanges and other regulatory bodies.
ML&Co. will pay or deliver principal and any premium, Additional Amounts,
Maturity Consideration and interest in the manner, at the places and subject to
the restrictions set forth in the applicable indenture, the debt securities and
the applicable prospectus supplement. However, at its option, ML&Co. may pay
any interest and any Additional Amounts by check mailed to the holders of
registered debt securities at their registered addresses.
Holders may present debt securities for exchange, and registered debt
securities for registration of transfer, in the manner, at the places and
subject to the restrictions set forth in the applicable indenture, the debt
securities and the applicable prospectus supplement. Holders may transfer debt
securities in bearer form and the coupons, if any, pertaining to the debt
securities by delivery. There will be no service charge for any registration of
transfer or exchange of debt securities, but ML&Co. may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection with a transfer or exchange.
Unless otherwise indicated in the applicable prospectus supplement, ML&Co.
will issue the debt securities under the indentures. If so specified in a
prospectus supplement, ML&Co. may issue senior or subordinated debt securities
under a separate indenture which provides for a single issue of zero coupon
convertible senior or subordinated debt securities, a form of which is filed as
an exhibit to the registration statement of which this prospectus is a part. If
ML&Co. issues debt securities under any indenture, the applicable prospectus
supplement will set forth the terms of the debt securities and will identify
the applicable indenture and trustee.
Merger and Consolidation
ML&Co. may consolidate or merge with or into any other corporation, and
ML&Co. may sell, lease or convey all or substantially all of its assets to any
corporation, provided that:
. the resulting corporation, if other than ML&Co., is a corporation
organized and existing under the laws of the United States of America or
any U.S. state and assumes all of ML&Co.'s obligations to:
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. pay or deliver the principal of, and any premium, Additional Amounts,
Maturity Consideration and interest on, the debt securities; and
. perform and observe all of ML&Co.'s other obligations under the
indentures, and
. ML&Co. or any successor corporation, as the case may be, is not,
immediately after any consolidation or merger, in default under the
indentures.
Modification and Waiver
Each indenture may be modified and amended by ML&Co. and the applicable
trustee with the consent of holders of at least 66 2/3% in principal amount or
aggregate issue price of each series of debt securities affected. However,
without the consent of each holder of any debt security affected, no amendment
or modification to any indenture may:
. change the stated maturity of the principal or Maturity Consideration
of, or any installment of interest or Additional Amounts on, any debt
security or any premium payable on redemption, or change the redemption
price;
. reduce the principal amount of, or the interest or Additional Amounts
payable on, or reduce the amount or change the type of Maturity
Consideration deliverable on, any debt security or reduce the amount of
principal or Maturity Consideration which could be declared due and
payable before the stated maturity;
. change the place or currency of any delivery or payment of principal or
Maturity Consideration of, or any premium, interest or Additional
Amounts on any debt security;
. impair the right to institute suit for the enforcement of any delivery
or payment on any debt security;
. reduce the percentage in principal amount or aggregate issue price of
the outstanding debt securities of any series, the consent of whose
holders is required to modify or amend the applicable indenture; or
. modify the foregoing requirements or reduce the percentage in principal
amount or aggregate issue price of outstanding debt securities necessary
to waive any past default to less than a majority.
No modification or amendment of the Subordinated Indenture or any Subsequent
Indenture for subordinated debt securities may adversely affect the rights of
any holder of ML&Co.'s senior indebtedness without the consent of each holder
affected. The holders of at least a majority in principal amount or aggregate
issue price of the outstanding debt securities of any series may, with respect
to that series, waive past defaults under the applicable indenture and waive
compliance by ML&Co. with certain provisions of that indenture, except as
described under "--Events of Default".
Events of Default
Each of the following will be an Event of Default with respect to each
series of debt securities issued under each indenture:
. default in the payment of any interest or Additional Amounts when due,
and continuing for 30 days;
. default in the payment of any principal or premium, when due;
. default in the delivery or payment of the Maturity Consideration when
due;
. default in the deposit of any sinking fund payment, when due;
. default in the performance of any other obligation of ML&Co. contained
in the applicable indenture for the benefit of that series or in the
debt securities of that series, and continuing for 60 days after written
notice as provided in the applicable indenture or debt securities;
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. specified events in bankruptcy, insolvency or reorganization of ML&Co.;
and
. any other Event of Default provided with respect to debt securities of
that series.
If an Event of Default occurs and is continuing for any series of debt
securities, the applicable trustee or the holders of at least 25% in principal
amount or aggregate issue price of the outstanding debt securities of that
series may declare all amounts, or any lesser amount provided for in the debt
securities of that series, due and payable or deliverable immediately. At any
time after the applicable trustee or the holders have made a declaration of
acceleration with respect to the debt securities of any series but before the
applicable trustee has obtained a judgment or decree for payment of money due,
the holders of a majority in principal amount or aggregate issue price of the
outstanding debt securities of that series may rescind any declaration of
acceleration and its consequences, provided that all payments and/or deliveries
due, other than those due as a result of acceleration, have been made and all
Events of Default have been remedied or waived.
The holders of a majority in principal amount or aggregate issue price of
the outstanding debt securities of any series may waive an Event of Default
with respect to that series, except a default:
. in the payment of any amounts due and payable or deliverable under the
debt securities of that series; or
. in respect of an obligation of ML&Co. contained in, or a provision of,
any indenture which cannot be modified under the terms of that indenture
without the consent of each holder of each series of debt securities
affected.
The holders of a majority in principal amount or aggregate issue price of
the outstanding debt securities of a series may direct the time, method and
place of conducting any proceeding for any remedy available to the applicable
trustee or exercising any trust or power conferred on the trustee with respect
to debt securities of that series, provided that any direction is not in
conflict with any rule of law or the applicable indenture. Subject to the
provisions of each indenture relating to the duties of the appropriate trustee,
before proceeding to exercise any right or power under an indenture at the
direction of the holders, the applicable trustee is entitled to receive from
those holders reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in complying with any direction.
Unless otherwise stated in the applicable prospectus supplement, any series
of debt securities issued under any indenture will not have the benefit of any
cross-default provisions with other indebtedness of ML&Co.
ML&Co. will be required to furnish to each trustee annually a statement as
to the fulfillment by ML&Co. of all of its obligations under the applicable
indenture.
Special Terms Relating to the Senior Debt Securities
Limitations Upon Liens
ML&Co. may not, and may not permit any majority-owned subsidiary to, create,
assume, incur or permit to exist any indebtedness for borrowed money secured by
a pledge, lien or other encumbrance, other than any liens specifically
permitted by the Senior Indentures, on the Voting Stock owned directly or
indirectly by ML&Co. of any majority-owned subsidiary, other than a
majority-owned subsidiary which, at the time of incurrence of the secured
indebtedness, has a net worth of less than $3,000,000, unless the outstanding
senior debt securities are secured equally and ratably with the secured
indebtedness.
"Voting Stock" is defined in the Senior Indentures as the stock of the class
or classes having general voting power under ordinary circumstances to elect at
least a majority of the board of directors, managers or trustees of a
corporation provided that, for the purposes of the Senior Indentures, stock
that carries only the right to vote conditionally on the occurrence of an event
is not considered Voting Stock whether or not the event has happened.
8
Limitations on Disposition of Voting Stock of, and Merger and Sale of Assets
by, MLPF&S
ML&Co. may not sell, transfer or otherwise dispose of any Voting Stock of
MLPF&S or permit MLPF&S to issue, sell or otherwise dispose of any of its
Voting Stock, unless, after giving effect to the transaction, MLPF&S remains a
Controlled Subsidiary.
"Controlled Subsidiary" is defined in the Senior Indentures to mean a
corporation more than 80% of the outstanding shares of Voting Stock of which
are owned directly or indirectly by ML&Co.
In addition, ML&Co. may not permit MLPF&S to:
. merge or consolidate, unless the surviving company is a Controlled
Subsidiary, or
. convey or transfer its properties and assets substantially as an
entirety, except to one or more Controlled Subsidiaries.
Special Terms Relating to the Subordinated Debt Securities
Upon any distribution of assets of ML&Co. resulting from any dissolution,
winding up, liquidation or reorganization, payments on subordinated debt
securities are subordinated to the extent provided in the Subordinated
Indenture in right of payment to the prior payment in full of all senior
indebtedness, but the obligation of ML&Co. to make payments on the subordinated
debt securities will not otherwise be affected. ML&Co. may not make any payment
on subordinated debt securities at any time when there is a default in the
payment or delivery of any amounts due on any senior indebtedness, including
payment of any sinking fund. Because the subordinated debt securities are
subordinated in right of payment to any senior indebtedness, in the event of a
distribution of assets upon insolvency, some creditors of ML&Co. may recover
more, ratably, than holders of subordinated debt securities. Holders of
subordinated debt securities will be subrogated to the rights of holders of
senior indebtedness to the extent of payments made on senior indebtedness upon
any distribution of assets in any proceedings in respect of subordinated debt
securities.
As of December 28, 2001, a total of approximately $81.7 billion of ML&Co.'s
indebtedness was senior indebtedness.
Special Terms Relating to Convertible Debt Securities
The following provisions will apply to debt securities that will be
convertible into common stock or preferred stock of ML&Co. unless otherwise
provided in the prospectus supplement relating to the specific issue of debt
securities.
The holder of any convertible debt securities will have the right,
exercisable at any time during the time period specified in the applicable
prospectus supplement, unless previously redeemed, to convert convertible debt
securities into shares of common stock or preferred stock of ML&Co. as
specified in the prospectus supplement, at the conversion rate per principal
amount of convertible debt securities set forth in the applicable prospectus
supplement. In the case of convertible debt securities called for redemption,
conversion rights will expire at the close of business on the date fixed for
the redemption specified in the applicable prospectus supplement, except that,
in the case of redemption at the option of the holder, if applicable, the
conversion right will terminate upon receipt of written notice of the exercise
of the option.
For each series of convertible debt securities, the conversion price or rate
will be subject to adjustment as contemplated in the applicable indenture.
Unless otherwise provided in the applicable prospectus supplement, these
adjustments may occur as a result of:
. the issuance of shares of ML&Co. common stock as a dividend;
. subdivisions and combinations of ML&Co. common stock;
9
. the issuance to all holders of ML&Co. common stock of rights or warrants
entitling holders to subscribe for or purchase shares of ML&Co. common
stock at a price per share less than the current market price per share;
and
. the distribution to all holders of ML&Co. common stock of:
. shares of ML&Co. capital stock other than common stock;
. evidences of indebtedness of ML&Co. or assets other than cash
dividends paid from retained earnings and dividends payable in common
stock referred to above; or
. subscription rights or warrants other than those referred to above.
In any case, no adjustment of the conversion price or rate will be required
unless an adjustment would require a cumulative increase or decrease of at
least 1% in such price or rate. ML&Co. will not issue any fractional shares of
ML&Co. common stock upon conversion, but, instead, ML&Co. will pay a cash
adjustment. If indicated in the applicable prospectus supplement, convertible
debt securities convertible into common stock of ML&Co. which are surrendered
for conversion between the record date for an interest payment, if any, and the
interest payment date, other than convertible debt securities called for
redemption on a redemption date during that period, must be accompanied by
payment of an amount equal to interest which the registered holder is entitled
to receive.
ML&Co. will determine the adjustment provisions for convertible debt
securities at the time of issuance of each series of convertible debt
securities. These adjustment provisions will be described in the applicable
prospectus supplement.
Except as set forth in the applicable prospectus supplement, any convertible
debt securities called for redemption, unless surrendered for conversion on or
before the close of business on the redemption date, are subject to being
purchased from the holder of the convertible debt securities by one or more
investment banking firms or other purchasers who may agree with ML&Co. to
purchase convertible debt securities and convert them into common stock or
preferred stock of ML&Co., as the case may be.
Governing Law
The indentures and the debt securities will be governed by, and construed in
accordance with, the laws of the State of New York.
DESCRIPTION OF DEBT WARRANTS
ML&Co. may issue warrants for the purchase of debt securities ("Debt
Warrants"). The Debt Warrants are to be issued under debt warrant agreements to
be entered into between ML&Co. and a bank or trust company, as debt warrant
agent, as set forth in the prospectus supplement relating to the specific issue
of Debt Warrants being offered. We have filed a copy of the form of debt
warrant agreement, including the form of warrant certificates representing the
Debt Warrants, reflecting the alternative provisions to be included in the debt
warrant agreements that will be entered into with respect to particular
offerings of Debt Warrants, as an exhibit to the registration statement of
which this prospectus is a part. The following summaries of the material
provisions of the debt warrant agreement and the debt warrant certificates are
not complete and are subject to, and are qualified in their entirety by
reference to, all the provisions of the debt warrant agreement and the debt
warrant certificates, respectively, including the definitions of terms.
Terms of the Debt Warrants
The applicable prospectus supplement will describe the terms of the specific
issue of Debt Warrants being offered, the debt warrant agreement relating to
the Debt Warrants and the debt warrant certificates representing the Debt
Warrants, including the following:
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. the designation and aggregate principal amount of the debt securities
that the holder of a Debt Warrant may purchase upon exercise of the Debt
Warrant and the price at which the purchase may be made;
. the designation and terms of any debt securities issued with or
purchasable upon exercise of the Debt Warrants, including whether the
debt securities will be senior debt securities or subordinated debt
securities and under which indenture the debt securities will be issued;
. the procedures and conditions relating to the exercise of the Debt
Warrants;
. the number of Debt Warrants issued with each debt security;
. any date on and after which the Debt Warrants and any related debt
securities are separately transferable;
. the date on which the right to exercise the Debt Warrants begins and
expires;
. whether the Debt Warrants represented by the debt warrant certificates
will be issued in registered or bearer form, and, if registered, where
they may be transferred and registered;
. any circumstances which will cause the Debt Warrants to be deemed to be
automatically exercised;
. the identity of the debt warrant agent; and
. any other terms of the Debt Warrants which are not inconsistent with the
provisions of the debt warrant agreement.
Holders may exchange debt warrant certificates for new debt warrant
certificates of different denominations. Holders may exercise Debt Warrants at
the corporate trust office of the debt warrant agent or any other office
indicated in the applicable prospectus supplement. Before the exercise of their
Debt Warrants, holders of Debt Warrants will not have any of the rights of
holders of the debt securities that may be purchased upon exercise of the Debt
Warrants and will not be entitled to payment or delivery of any amounts which
may be due on the debt securities purchasable upon exercise of the Debt
Warrants.
Prospective purchasers of Debt Warrants should be aware that special U.S.
Federal income tax, accounting and other considerations may be applicable to
instruments such as Debt Warrants and to the debt securities purchasable upon
exercise of the Debt Warrants. The prospectus supplement relating to any issue
of Debt Warrants will describe these considerations.
Ranking
The Debt Warrants are unsecured contractual obligations of ML&Co. and will
rank equally with its other unsecured contractual obligations and with its
unsecured and unsubordinated debt. Because ML&Co. is a holding company, the
right of ML&Co. and its creditors, including the debt warrantholders, to
participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of the subsidiary, except to the extent that a bankruptcy
court may recognize claims of ML&Co. itself as a creditor of the subsidiary. In
addition, dividends, loans and advances from certain subsidiaries, including
MLPF&S, to ML&Co. are restricted by net capital requirements under the Exchange
Act and under rules of certain exchanges and other regulatory bodies.
Book-Entry Procedures
Except as may otherwise be provided in the applicable prospectus supplement,
the Debt Warrants will be issued in the form of global debt warrant
certificates, registered in the name of a depositary or its nominee.
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Except as may otherwise be provided in the applicable prospectus supplement,
beneficial owners will not be entitled to receive definitive certificates
representing Debt Warrants unless the depositary is unwilling or unable to
continue as depositary or ML&Co. decides to have the Debt Warrants represented
by definitive certificates. A beneficial owner's interest in a Debt Warrant
will be recorded on or through the records of the brokerage firm or other
entity that maintains the beneficial owner's account. In turn, the total number
of Debt Warrants held by an individual brokerage firm for its clients will be
maintained on the records of the depositary in the name of the brokerage firm
or its agent. Transfer of ownership of any Debt Warrant will be effected only
through the selling beneficial owner's brokerage firm.
Exercise of Debt Warrants
Each Debt Warrant will entitle the holder to purchase for cash a principal
amount of debt securities at the exercise price set forth in, or determined in
the manner set forth in, the applicable prospectus supplement. Holders may
exercise Debt Warrants at any time up to the close of business on the
expiration date set forth in the applicable prospectus supplement. After the
close of business on the expiration date, unexercised Debt Warrants will become
void.
Holders may exercise Debt Warrants in the manner described in the applicable
prospectus supplement. Upon receipt of payment and properly completed and duly
executed debt warrant certificate at the corporate trust office of the debt
warrant agent or any other office indicated in the applicable prospectus
supplement, ML&Co. will, as soon as practicable, forward the debt securities
purchased. If less than all of the Debt Warrants represented by any debt
warrant certificate are exercised, a new debt warrant certificate will be
issued for the remaining amount of Debt Warrants.
Listing
ML&Co. may list an issue of Debt Warrants on a national securities exchange.
Any listing will be specified in the applicable prospectus supplement.
DESCRIPTION OF CURRENCY WARRANTS
ML&Co. may issue "Currency Warrants" either in the form of:
. "Currency Put Warrants" entitling the holders to receive from ML&Co. the
cash settlement value in U.S. dollars of the right to sell a specified
amount of a specified foreign currency or currency units for a specified
amount of U.S. dollars, or
. "Currency Call Warrants" entitling the holders to receive from ML&Co.
the cash settlement value in U.S. dollars of the right to purchase a
specified amount of a specified foreign currency or units of two or more
currencies for a specified amount of U.S. dollars.
ML&Co. may issue the Currency Warrants under a currency put warrant
agreement or a currency call warrant agreement, as applicable, to be entered
into between ML&Co. and a bank or trust company, as currency warrant agent, as
set forth in the applicable prospectus supplement relating to Currency Warrants
being offered. Copies of the forms of currency put warrant agreement and
currency call warrant agreement, including the forms of certificates
representing the Currency Put Warrants and Currency Call Warrants, reflecting
the provisions to be included in the currency warrant agreements that will be
entered into with respect to particular offerings of Currency Warrants, are
filed as exhibits to the registration statement of which this prospectus is a
part. The following summaries of the material provisions of the currency
warrant agreements and the currency warrant certificates are not complete and
are subject to, and are qualified in their entirety by reference to, all the
provisions of the currency warrant agreements and the currency warrant
certificates, respectively, including the definitions of terms.
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Terms of the Currency Warrants
The applicable prospectus supplement will describe the terms of the specific
issue of Currency Warrants being offered, the currency warrant agreement
relating to the Currency Warrants and the currency warrant certificates
representing the Currency Warrants, including the following:
. whether the Currency Warrants are Currency Put Warrants, Currency Call
Warrants, or both;
. the formula for determining the cash settlement value of each Currency
Warrant;
. the procedures and conditions relating to the exercise of the Currency
Warrants;
. any circumstances other than those described below under "--Exercise of
Currency Warrants" and
"--Listing" that will cause the Currency Warrants to be deemed to be
automatically exercised;
. any minimum number of Currency Warrants which must be exercised at any
one time, other than upon automatic exercise;
. the date on which the right to exercise the Currency Warrants begins and
expires;
. the identity of the currency warrant agent; and
. any other terms of the Currency Warrants that are not inconsistent with
the provisions of the applicable currency warrant agreement.
Prospective purchasers of Currency Warrants should be aware that special
U.S. Federal income tax, accounting and other considerations may be applicable
to instruments such as Currency Warrants. The prospectus supplement relating to
any issue of Currency Warrants will describe these considerations, if they
apply.
Ranking
The Currency Warrants are unsecured contractual obligations of ML&Co. and
will rank equally with its other unsecured contractual obligations and with its
unsecured and unsubordinated debt. Because ML&Co. is a holding company, the
right of ML&Co. and its creditors, including the currency warrantholders, to
participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of the subsidiary, except to the extent that a bankruptcy
court may recognize claims of ML&Co. itself as a creditor of the subsidiary. In
addition, dividends, loans and advances from certain subsidiaries, including
MLPF&S, to ML&Co. are restricted by net capital requirements under the Exchange
Act and under rules of certain exchanges and other regulatory bodies.
Book-Entry Procedures
Except as may otherwise be provided in the applicable prospectus supplement,
the Currency Warrants will be issued in the form of global currency warrant
certificates, registered in the name of a depositary or its nominee. In that
case, beneficial owners will not be entitled to receive definitive certificates
representing Currency Warrants unless the depositary is unwilling or unable to
continue as depositary or ML&Co. decides to have the Currency Warrants
represented by definitive certificates. A beneficial owner's interest in a
Currency Warrant will be recorded on or through the records of the brokerage
firm or other entity that maintains a beneficial owner's account. In turn, the
total number of Currency Warrants held by an individual brokerage firm for its
clients will be maintained on the records of the depositary in the name of the
brokerage firm or its agent. Transfer of ownership of any Currency Warrant will
be effected only through the selling beneficial owner's brokerage firm.
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Exercise of Currency Warrants
Each Currency Warrant will entitle the holder to the cash settlement value
of that Currency Warrant on the applicable exercise date as described in the
applicable prospectus supplement. If a Currency Warrant has more than one
exercise date and is not exercised before the time specified in the applicable
prospectus supplement, on the fifth business day preceding the expiration date,
the Currency Warrants will be deemed automatically exercised.
Listing
ML&Co. will apply to list each issue of Currency Warrants on a national
securities exchange. In the event that the Currency Warrants are delisted from,
or permanently suspended from trading on, any exchange, the expiration date for
the exercise of the Currency Warrants will be the date the delisting or trading
suspension becomes effective and Currency Warrants not previously exercised
will be deemed automatically exercised on the business day immediately
preceding the expiration date. Under the applicable currency warrant agreement,
ML&Co. will agree not to seek delisting of the Currency Warrants, or suspension
of their trading, on any exchange.
DESCRIPTION OF INDEX WARRANTS
ML&Co. may issue from time to time "Index Warrants" consisting of index put
warrants or index call warrants. Subject to applicable law, ML&Co. will pay or
deliver consideration on each Index Warrant in an amount determined by
reference to the level or value of an index such as:
. an equity or debt security, or a portfolio or basket of indices or
securities, which may include the price or yield of securities;
. any statistical measure of economic or financial performance, which may
include any currency or consumer price, or mortgage index; or
. the price or value of any commodity or any other item or index or any
combination.
The payment or delivery of any consideration on any index put warrant will
be determined by the decrease in the level or value of the applicable index and
the payment or delivery of any consideration on any index call warrant will be
determined by the increase in the level or value of the applicable Index.
Method of Issuance
Index Warrants issued without a Minimum Expiration Value will be issued
under one or more index warrant agreements to be entered into between ML&Co.
and a bank or trust company, as index warrant agent, as set forth in the
prospectus supplement relating to the specific issue of Index Warrants. The
index warrant agent will act solely as the agent of ML&Co. under the applicable
index warrant agreement and will not assume any obligation or relationship of
agency or trust for or with any index warrantholders. A single bank or trust
company may act as index warrant agent for more than one issue of Index
Warrants.
Index Warrants issued with a Minimum Expiration Value will be issued under
one or more index warrant trust indentures to be entered into between ML&Co.
and a corporation or other person permitted by the Trust Indenture Act of 1939,
as amended from time to time, to act as index warrant trustee, as set forth in
the prospectus supplement relating to the Index Warrants. Any index warrant
trust indenture will be qualified under the Trust Indenture Act. To the extent
allowed by the Trust Indenture Act, a single qualified corporation may act as
index warrant trustee for more than one issue of Index Warrants.
14
ML&Co. has filed forms of the index warrant agreement and the index warrant
trust indenture and the related global index warrant certificates as exhibits
to the registration statement of which this prospectus is a part. The summaries
set forth in this section of the material provisions of the index warrant
agreement, the index warrant trust indenture and the global index warrant
certificates are not complete, are subject to, and are qualified in their
entirety by reference to, all the provisions of the index warrant agreement,
the index warrant trust indenture and the global index warrant certificates,
respectively.
Unless otherwise specified in the accompanying prospectus supplement,
payments, if any, upon exercise of the Index Warrants will be made in U.S.
dollars. The Index Warrants will be offered on terms to be determined at the
time of sale. ML&Co. will have the right to reopen a previous issue of Index
Warrants and to issue additional Index Warrants of that issue without the
consent of any index warrantholder.
Terms of the Index Warrants
The applicable prospectus supplement will describe the specific issue of
Index Warrants being offered, the indenture or agreement under which the Index
Warrants will be issued, as the case may be, and the index warrant certificates
representing the Index Warrants, including the following:
. whether the Index Warrants to be issued will be index put warrants,
index call warrants or both;
. the aggregate number and initial public offering price or purchase price;
. the applicable index;
. whether the Index Warrants will be deemed automatically exercised as of
a specified date or whether the Index Warrants may be exercised during a
period and the date on which the right to exercise the Index Warrants
commences and expires;
. the manner in which the Index Warrants may be exercised and any
restrictions on, or other special provisions relating to, the exercise
of the Index Warrants;
. any minimum number of the Index Warrants exercisable at any one time;
. any maximum number of the Index Warrants that may, subject to ML&Co.'s
election, be exercised by all index warrantholders, or by any person or
entity, on any day;
. any provisions permitting an index warrantholder to condition an
exercise notice on the absence of certain specified changes in the level
of the applicable index after the exercise date, any provisions
permitting ML&Co. to suspend exercise of the Index Warrants based on
market conditions or other circumstances and any other special provision
relating to the exercise of the Index Warrants;
. any provisions for the automatic exercise of the Index Warrants other
than at the expiration date;
. any provisions permitting ML&Co. to cancel the Index Warrants upon the
occurrence of certain events;
. any additional circumstances that would constitute an Event of Default
under the Index Warrants;
. the method of determining:
. the payment or delivery, if any, to be made in connection with the
exercise or deemed exercise of the Index Warrants (the "Settlement
Value");
. the minimum payment or delivery, if any, to be made upon expiration
of the Index Warrants (the "Minimum Expiration Value");
. the payment or delivery to be made upon the exercise of any right
which ML&Co. may have to cancel the Index Warrants; and
. the value of the index;
15
. in the case of Index Warrants relating to an index for which the trading
prices of underlying securities, commodities or rates are expressed in a
foreign currency, the method of converting amounts in the relevant
foreign currency or currencies into U.S. dollars, or any other currency
or composite currency in which the Index Warrants are payable;
. any method of providing for a substitute index or otherwise determining
the payment or delivery to be made in connection with the exercise of
the Index Warrants if the index changes or ceases to be made available
by its publisher;
. any time or times at which ML&Co. will make payment or delivery on the
Index Warrants following exercise or automatic exercise;
. any provisions for issuing the Index Warrants in other than book-entry
form;
. if the Index Warrants are not issued in book-entry form, any place or
places at which ML&Co. will make payment or delivery on cancellation and
any Minimum Expiration Value of the Index Warrants;
. any circumstances that will cause the Index Warrants to be deemed to be
automatically exercised;
. any material risk factors relating to the Index Warrants;
. the identity of the index warrant agent; and
. any other terms of the Index Warrants which are not inconsistent with
the provisions of the index warrant agreement.
Prospective purchasers of Index Warrants should be aware that special U.S.
Federal income tax, accounting and other considerations may be applicable to
instruments such as the Index Warrants. The prospectus supplement relating to
any issue of Index Warrants will describe these considerations, if they apply.
Ranking
The Index Warrants are unsecured contractual obligations of ML&Co. and will
rank equally with its other unsecured contractual obligations and with its
unsecured and unsubordinated debt. Because ML&Co. is a holding company, the
right of ML&Co. and its creditors, including the index warrantholders, to
participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of the subsidiary, except to the extent that a bankruptcy
court may recognize claims of ML&Co. itself as a creditor of the subsidiary. In
addition, dividends, loans and advances from certain subsidiaries, including
MLPF&S, to ML&Co. are restricted by net capital requirements under the Exchange
Act and under rules of certain exchanges and other regulatory bodies.
Payment and Delivery
If specified, and under the circumstances described in the prospectus
supplement:
. ML&Co. will pay or deliver to each index warrantholder an amount equal
to the greater of the applicable Settlement Value and a Minimum
Expiration Value of the Index Warrants;
. upon cancellation of the Index Warrants by ML&Co. which may occur upon
specified events, ML&Co. will pay or deliver to each index warrantholder
an amount specified in the prospectus supplement; and
. following the occurrence of an extraordinary event, the Settlement Value
of an Index Warrant may, at the option of ML&Co., be determined on a
different basis, including in connection with automatic exercise at
expiration.
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Unless otherwise specified in the related prospectus supplement, the Index
Warrants will be deemed to be automatically exercised upon expiration or any
earlier date that may be specified. Upon any automatic exercise, ML&Co. will
deliver or pay to each index warrantholder an amount equal to the Settlement
Value of the Index Warrants, except that holders of Index Warrants having a
Minimum Expiration Value will be entitled to receive a payment or delivery
equal to the greater of the Settlement Value and the applicable Minimum
Expiration Value. The Minimum Expiration Value may be either a predetermined
payment or delivery or a payment or delivery that varies during the term of the
Index Warrants in accordance with a schedule or formula. Any Minimum Expiration
Value applicable to an issue of Index Warrants, as well as any additional
circumstances resulting in the automatic exercise of the Index Warrants, will
be specified in the applicable prospectus supplement.
Cancellation or Postponement
If so specified in the applicable prospectus supplement, ML&Co. may cancel
the Index Warrants. In addition, ML&Co. may delay or postpone the exercise or
valuation of, or payment or delivery for, the Index Warrants upon the
occurrence of an extraordinary event. Any extraordinary events relating to an
issue of Index Warrants will be described in the applicable prospectus
supplement. Upon cancellation, the related index warrantholders will be
entitled to receive only the applicable payment or delivery on cancellation
specified in the applicable prospectus supplement. The amount payable or
deliverable upon cancellation may be either a predetermined amount or an amount
that varies during the term of the Index Warrants in accordance with a schedule
or formula.
Waiver of Default
If ML&Co. defaults with respect to any of its obligations under any Index
Warrants issued with a Minimum Expiration Value under an index warrant trust
indenture, the index warrantholders of a majority in interest of all
outstanding Index Warrants may waive a default, except a default:
. in the payment or delivery of the Settlement Value, Minimum Expiration
Value or payment or delivery of any amount upon cancellation of the
Index Warrants; or
. in respect of a covenant or provision of the applicable index warrant
trust indenture which cannot be modified or amended without the consent
of each index warrantholder of each outstanding Index Warrant affected.
Modification
ML&Co. and the index warrant agent or index warrant trustee, as the case may
be, may amend any index warrant agreement or index warrant indenture and the
terms of the related Index Warrants by a supplemental agreement or supplemental
indenture (each, a "Supplemental Agreement"), without the consent of the
holders of any Index Warrants, for the purpose of:
. curing any ambiguity, or of curing, correcting or supplementing any
defective or inconsistent provision, or of making any other provisions
with respect to matters or questions arising under the index warrant
agreement or index warrant trust indenture, as the case may be, which
are not inconsistent with the provisions of the respective agreement or
indenture or of the Index Warrants;
. evidencing the succession to ML&Co. and the assumption by the successor
of ML&Co.'s covenants contained in the index warrant agreement or the
index warrant trust indenture, as the case may be, and the Index
Warrants;
. appointing a successor depositary;
. evidencing and providing for the acceptance of appointment by a
successor index warrant agent or index warrant trustee with respect to
the Index Warrants, as the case may be;
17
. adding to the covenants of ML&Co., for the benefit of the index
warrantholders or surrendering any right or power conferred upon ML&Co.
under the index warrant agreement or index warrant trust indenture, as
the case may be;
. issuing Index Warrants in definitive form; or
. amending the index warrant agreement or index warrant trust indenture,
as the case may be, in any manner which ML&Co. may deem to be necessary
or desirable and which will not materially and adversely affect the
interests of the index warrantholders.
ML&Co. and the index warrant agent may also amend any index warrant
agreement or index warrant trust indenture, as the case may be, and the terms
of the related Index Warrants, by a Supplemental Agreement, with the consent of
the index warrantholders holding not less than 66 2/3% in number of the then
outstanding unexercised Index Warrants affected by the amendment, for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the index warrant agreement or index warrant trust
indenture, as the case may be, or of modifying in any manner the rights of the
index warrantholders. However, without the consent of each index warrantholder
affected, no amendment may be made that:
. changes the determination, or any aspects of the determination, of the
Settlement Value or any payment or delivery to be made on cancellation,
or any Minimum Expiration Value of the Index Warrants so as to reduce
the payment or delivery to be made upon exercise or deemed exercise,
. shortens the period of time during which the Index Warrants may be
exercised, or otherwise materially and adversely affects the exercise
rights of the index warrantholders, or
. reduces the number of outstanding Index Warrants, the consent of whose
holders is required for amendment of the index warrant agreement, the
index warrant trust indenture or the terms of the related Index Warrants.
Events of Default
Specified events in bankruptcy, insolvency or reorganization of ML&Co. will
constitute Events of Default with respect to Index Warrants having a Minimum
Expiration Value which are issued under an index warrant trust indenture. Upon
the occurrence of an Event of Default, the holders of 25% of unexercised Index
Warrants may elect to receive a settlement payment or delivery for any
unexercised Index Warrants. Any settlement payment or delivery will immediately
become due to the index warrantholders upon any election. Assuming ML&Co. is
able to satisfy its obligations when due under the Index Warrants, the
settlement payment or delivery will be an amount equal to the market value of
the Index Warrants as of the date ML&Co. is notified of the intended
liquidation. The market value of the Index Warrants will be determined by a
nationally recognized securities broker-dealer unaffiliated with ML&Co. and
mutually selected by ML&Co. and the index warrant trustee.
Merger, Consolidation, Sale, Lease or Other Dispositions
ML&Co. may consolidate or merge with or into any other corporation and
ML&Co. may sell, lease or convey all or substantially all of its assets to any
corporation, provided that:
. the resulting corporation, if other than ML&Co., is a corporation
organized and existing under the laws of the United States of America or
any U.S. state and assumes all of ML&Co.'s obligations to:
. pay or deliver the Settlement Value, any Minimum Expiration Value or
any consideration payable or deliverable upon cancellation, if
applicable with respect to all the unexercised Index Warrants; and
. perform and observe all of the obligations and conditions of the
index warrant agreement or index warrant trust indenture, as the case
may be, to be performed or observed by ML&Co.; and
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. ML&Co. or the successor corporation, as the case may be, is not,
immediately after any merger or consolidation, in default under the
index warrant agreement or index warrant trust indenture, as the case
may be.
Enforceability of Rights by Index Warrantholders
Any index warrantholder may, without the consent of the related index
warrant agent, enforce by appropriate legal action, in and for its own behalf,
its right to exercise, and receive payment or delivery for, its Index Warrants.
Book-Entry Procedures
Except as may otherwise be provided in the applicable prospectus supplement,
the Index Warrants will be issued in book-entry form and represented by global
Index Warrants, registered in the name of a depositary or its nominee. In that
case, index warrantholders will not be entitled to receive definitive
certificates representing Index Warrants, unless the depositary is unwilling or
unable to continue as depositary or ML&Co. decides to have the Index Warrants
represented by definitive certificates. A beneficial owner's interest in an
Index Warrant represented by a global Index Warrant will be recorded on or
through the records of the brokerage firm or other entity that maintains the
beneficial owner's account. In turn, the total number of Index Warrants held by
an individual brokerage firm or other entity for its clients will be maintained
on the records of the depositary in the name of the brokerage firm or other
entity or its agent. Transfer of ownership of any Index Warrant will be
effected only through the selling beneficial owner's brokerage firm.
Listing
ML&Co. may list an issue of Index Warrants on a national securities
exchange. Any listing will be specified in the applicable prospectus supplement.
DESCRIPTION OF PREFERRED STOCK
The following description sets forth certain general terms of preferred
stock which ML&Co. may issue. The terms of any series of the preferred stock
will be described in the applicable prospectus supplement relating to the
preferred stock being offered. The description set forth below and in any
prospectus supplement is not complete, and is subject to, and qualified in its
entirety by reference to, ML&Co.'s restated certificate of incorporation, as
amended, which is filed as an exhibit to the registration statement of which
this prospectus is a part, and the certificate of designations relating to each
particular series of the preferred stock, which was or will be filed with the
SEC at or before the issuance of the series of preferred stock.
Terms of the Preferred Stock
Under ML&Co.'s restated certificate of incorporation, ML&Co. is authorized
to issue up to 25,000,000 shares of preferred stock, par value $1.00 per share.
The Board of Directors of ML&Co. has the authority, without approval of the
stockholders, to issue all of the shares of preferred stock which are currently
authorized in one or more series and to fix the number of shares and the
rights, preferences, privileges, qualifications, restrictions and limitations
of each series. As of December 28, 2001, ML&Co. had 24,957,500 shares of
preferred stock available for issuance.
ML&Co. has authorized the issuance of shares of Series A junior preferred
stock, par value $1.00 per share, of ML&Co. upon exercise of preferred share
purchase rights associated with each share of common stock outstanding. See
"Description of Common Stock--Rights to Purchase Series A Junior Preferred
Stock".
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In addition, as described under "Description of Depositary Shares", ML&Co.,
at its option, instead of offering full shares of any series of preferred
stock, may offer depositary shares evidenced by depositary receipts, each
representing a fraction of a share of the particular series of preferred stock
issued and deposited with a depositary. The fraction of a share of preferred
stock which each depositary share represents will be set forth in the
prospectus supplement relating to the depositary shares.
The applicable prospectus supplement will describe the terms of each series
of preferred stock, including, where applicable, the following:
. the designation, stated value, liquidation preference and number of
shares offered;
. the offering price or prices;
. the dividend rate or rates, or method of calculation, the dividend
periods, the date on which dividends shall be payable and whether
dividends are cumulative or noncumulative and, if cumulative, the dates
from which dividends begin to cumulate;
. any redemption or sinking fund provisions;
. any conversion or exchange provisions;
. any voting rights;
. whether the preferred stock will be issued in certificated or book-entry
form;
. whether the preferred stock will be listed on a national securities
exchange;
. information with respect to any book-entry procedures; and
. any additional rights, preferences, privileges, limitations and
restrictions of the preferred stock which are not inconsistent with the
provisions of the certificate of incorporation.
The preferred stock will be, when issued against payment, fully paid and
nonassessable. Holders will have no preemptive rights to subscribe for any
additional securities which ML&Co. may issue. Unless otherwise specified in the
applicable prospectus supplement, the shares of each series of preferred stock
will rank equally with all other outstanding series of preferred stock issued
by ML&Co. as to payment of dividends, other than with respect to cumulation of
dividends, and as to the distribution of assets upon liquidation, dissolution,
or winding up of ML&Co. As of December 28, 2001, there were 42,500 shares of
ML&Co.'s 9% Cumulative Preferred Stock, Series A (the "9% Preferred Stock")
represented by 17,000,000 depositary shares and one Special Voting Share
outstanding. See "--Outstanding Preferred Stock". Each series of preferred
stock will rank senior to the common stock, and any other stock of ML&Co. that
is expressly made junior to that series of preferred stock.
Unless otherwise specified in the applicable prospectus supplement,
Citibank, N.A., will be the transfer agent, dividend disbursing agent and
registrar for the shares of the preferred stock.
Because ML&Co. is a holding company, its rights and the rights of holders of
its securities, including the holders of preferred stock, to participate in the
distribution of assets of any subsidiary of ML&Co. upon its liquidation or
recapitalization will be subject to the prior claims of the subsidiary's
creditors and preferred stockholders, except to the extent ML&Co. may itself be
a creditor with recognized claims against the subsidiary or a holder of
preferred stock of the subsidiary.
Dividends and Distributions
Holders of shares of the preferred stock will be entitled to receive, as, if
and when declared by the Board of Directors of ML&Co., or a duly authorized
committee of the Board of Directors, out of funds legally available for the
payment of dividends, cash dividends at the rate set forth in, or calculated in
accordance with the formula set forth in, the prospectus supplement relating to
the preferred stock being offered.
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Dividends on the preferred stock may be cumulative or noncumulative as
provided in the applicable prospectus supplement. Dividends on the cumulative
preferred stock will accumulate from the date of original issue and will be
payable quarterly in arrears on the dates specified in the applicable
prospectus supplement. If any date so specified as a dividend payment date is
not a business day, declared dividends on the preferred stock will be paid on
the immediately succeeding business day, without interest. The applicable
prospectus supplement will set forth the applicable dividend period with
respect to a dividend payment date. If the Board of Directors of ML&Co. or a
duly authorized committee of the Board of Directors, fails to declare a
dividend on any series of noncumulative preferred stock for any dividend
period, ML&Co. will have no obligation to pay a dividend for that period,
whether or not dividends on that series of noncumulative preferred stock are
declared for any future dividend period. Unless otherwise specified in the
applicable prospectus supplement, dividends on the preferred stock will be
payable to record holders as they appear on the stock books of ML&Co. on each
record date, not more than 30 nor less than 15 days preceding the applicable
payment date, as shall be fixed by the Board of Directors of ML&Co. or a duly
authorized committee of the Board of Directors.
No dividends will be declared or paid or set apart for payment on the
preferred stock of any series ranking, as to dividends, equally with or junior
to any other series of preferred stock for any period unless dividends have
been or are contemporaneously declared and paid or declared and a sum
sufficient for the payment of those dividends has been set apart for,
. in the case of cumulative preferred stock, all dividend periods
terminating on or before the date of payment of full cumulative
dividends, or
. in the case of noncumulative preferred stock, the immediately preceding
dividend period.
When dividends are not paid in full upon any series of preferred stock, and
any other preferred stock ranking equally as to dividends with that series of
preferred stock, all dividends declared upon shares of that series of preferred
stock and any other preferred stock ranking equally as to dividends will be
declared pro rata so that the amount of dividends declared per share on that
series of preferred stock and any other preferred stock ranking equally as to
dividends will in all cases bear to each other the same ratio that accrued
dividends per share on the shares of that series of preferred stock and the
other preferred stock bear to each other. In the case of noncumulative
preferred stock, any accrued dividends described in the immediately preceding
paragraph will not include any cumulation in respect of unpaid dividends for
prior dividend periods.
Except as provided in the immediately preceding paragraph, unless full
dividends on all outstanding shares of any series of preferred stock have been
declared and paid,
. in the case of a series of cumulative preferred stock, for all past
dividend periods, or
. in the case of noncumulative preferred stock, for the immediately
preceding dividend period,
then:
. ML&Co. may not declare dividends or pay or set aside for payment or
other distribution on any of its capital stock ranking junior to or
equally with that series of preferred stock as to dividends or upon
liquidation, other than dividends or distributions paid in shares of, or
options, warrants or rights to subscribe for or purchase shares of, the
common stock of ML&Co. or other capital stock of ML&Co. ranking junior
to that series of preferred stock as to dividends and upon liquidation,
and
. other than in connection with the distribution or trading of any of its
capital stock, ML&Co. may not redeem, purchase or otherwise acquire any
of its capital stock ranking junior to or equally with that series of
preferred stock as to dividends or upon liquidation, for any
consideration or any moneys paid to or made available for a sinking fund
for the redemption of any shares of any of its capital stock, except by
conversion or exchange for capital stock of ML&Co. ranking junior to
that series of preferred stock as to dividends and upon liquidation.
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Unless otherwise specified in the applicable prospectus supplement, the
amount of dividends payable for any period shorter than a full dividend period
shall be computed on the basis of twelve 30-day months, a 360-day year and the
actual number of days elapsed in any period of less than one month.
As of December 28, 2001, subsidiaries of ML&Co. had outstanding
approximately $2.695 billion of perpetual Trust Originated Preferred
Securities/SM/ ("TOPrS"). In connection with the issuance of the TOPrS, ML&Co.
has agreed, among other things, that if full distributions on the TOPrS have
not been paid or set apart for payment or if ML&Co. is in default of their
related guarantee obligations, ML&Co., with certain exceptions, will not
declare or pay dividends, make distributions with respect to, or redeem,
purchase or acquire, or make a liquidation payment with respect to any of its
capital stock, including the preferred stock.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up of
ML&Co., the holders of the preferred stock will have preference and priority
over the common stock of ML&Co. and any other class of stock of ML&Co. ranking
junior to the preferred stock upon liquidation, dissolution or winding up, for
payments out of or distributions of the assets of ML&Co. or proceeds from any
liquidation, whether from capital or surplus, of the amount per share set forth
in the applicable prospectus supplement plus all accrued and unpaid dividends,
whether or not earned or declared, to the date of final distribution to such
holders. After any liquidating payment, the holders of preferred stock will be
entitled to no other payments. If, in the case of any liquidation, dissolution
or winding up of ML&Co., the assets of ML&Co. or the proceeds from any
liquidation should be insufficient to make the full liquidation payment in the
amount per share set forth in the applicable prospectus supplement relating to
a series of preferred stock, plus all accrued and unpaid dividends on that
preferred stock, and liquidating payments on any other preferred stock ranking
as to liquidation, dissolution or winding up equally with that preferred stock,
then any assets and proceeds will be distributed among the holders of the
preferred stock and any other preferred stock ratably in accordance with the
respective amounts which would be payable on those shares of preferred stock
and any other preferred stock if all amounts payable were paid in full. In the
case of noncumulative preferred stock, accrued and unpaid dividends will not
include cumulation of unpaid dividends from prior dividend periods. A
consolidation or merger of ML&Co. with one or more corporations will not be
deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, of ML&Co.
Redemption
If specified in the prospectus supplement relating to a series of preferred
stock being offered, ML&Co. may, at its option, at any time or from time to
time on not less than 30 nor more than 60 days notice, redeem that series of
preferred stock in whole or in part at the redemption prices and on the dates
set forth in the applicable prospectus supplement.
If less than all outstanding shares of a series of preferred stock are to be
redeemed, the selection of the shares to be redeemed shall be determined by lot
or pro rata as may be determined by the Board of Directors of ML&Co. or a duly
authorized committee of the Board of Directors to be equitable. From and after
the redemption date, unless ML&Co. is in default in providing for the payment
of the redemption price, dividends shall cease to accrue on the shares of that
series of preferred stock called for redemption and all rights of the holders
shall cease, other than the right to receive the redemption price.
Voting Rights
Unless otherwise described in the applicable prospectus supplement, holders
of the preferred stock will have no voting rights except as set forth below or
as otherwise required by law.
/SM/ Service mark of Merrill Lynch & Co., Inc.
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Whenever dividends payable on the preferred stock are in arrears for a
number of dividend periods, whether or not consecutive, which in the aggregate
is equivalent to six calendar quarters, the holders of outstanding shares of
the preferred stock, voting as a class with holders of shares of all other
series of preferred stock ranking equally with the preferred stock either as to
dividends or the distribution of assets upon liquidation, dissolution or
winding up and upon which like voting rights have been conferred and are
exercisable, will be entitled to vote for the election of two additional
directors on the terms set forth below. These voting rights will continue, in
the case of any series of cumulative preferred stock, until all past dividends
accumulated on shares of cumulative preferred stock are paid in full and, in
the case of noncumulative preferred stock, until all dividends on shares of
noncumulative preferred stock are paid in full for at least one calendar year.
Upon payment in full of these dividends, the voting rights will terminate
except as expressly provided by law. These voting rights are subject to
re-vesting in the event of each and every subsequent default in the payment of
dividends. Holders of all series of preferred stock which are granted these
voting rights and which rank equally with the preferred stock will vote as a
class, and, unless otherwise specified in the applicable prospectus supplement,
each holder of shares of the preferred stock will have one vote for each share
of stock held and each other series will have the number of votes, if any, for
each share of stock held as may be granted to them. In the event that the
holders of shares of the preferred stock are entitled to vote as described in
this paragraph, the Board of Directors of ML&Co. will be increased by two
directors, and the holders of the preferred stock will have the exclusive right
as members of that class, as outlined above, to elect two directors at the next
annual meeting of stockholders.
Upon termination of the right of the holders of the preferred stock to vote
for directors as discussed in the preceding paragraph, the term of office of
all directors then in office elected by those holders will terminate
immediately. Whenever the term of office of the directors elected by those
holders ends and the related special voting rights expire, the number of
directors will automatically be decreased to the number of directors as would
otherwise prevail.
So long as any shares of preferred stock remain outstanding, ML&Co. shall
not, without the affirmative vote or consent of the holders of at least
two-thirds of the shares of the preferred stock outstanding at the time, voting
as a class with all other series of preferred stock ranking equally with the
preferred stock either as to dividends or the distribution of assets upon
liquidation, dissolution or winding up and upon which like voting rights have
been conferred and are exercisable, given in person or by proxy, either in
writing or at a meeting:
. authorize, create or issue, or increase the authorized or issued amount
of, any class or series of stock ranking senior to the preferred stock
with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up of ML&Co.; or
. amend, alter or repeal, whether by merger, consolidation or otherwise,
the provisions of ML&Co.'s restated certificate of incorporation or the
certificate of designations of the preferred stock so as to materially
and adversely affect any right, preference, privilege or voting power of
the preferred stock or the holders of the preferred stock;
provided, however, that any increase in the amount of authorized preferred
stock or the creation and issuance, or an increase in the authorized or issued
amount, of other series of preferred stock, or any increase in the amount of
authorized shares of preferred stock, in each case ranking equally with or
junior to the preferred stock with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or winding up of ML&Co.
will not be deemed to materially and adversely affect these rights,
preferences, privileges or voting powers.
The foregoing voting provisions will not apply if all outstanding shares of
preferred stock have been redeemed or sufficient funds have been deposited in
trust to effect such a redemption which is scheduled to be consummated within
three months after the time that such rights would otherwise be exercisable.
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Conversion or Exchange Rights
The prospectus supplement relating to a series of preferred stock that is
convertible or exchangeable will state the terms on which shares of that series
are convertible or exchangeable into common stock, another series of preferred
stock or debt securities.
Outstanding Preferred Stock
As of December 28, 2001, there were 42,500 shares of 9% Preferred Stock
represented by 17,000,000 depositary shares and one Special Voting Share
outstanding.
9% Preferred Stock
The 9% Preferred Stock has preference over ML&Co.'s common stock and the
Series A junior preferred stock issuable under the Rights Plan described under
"Description of Common Stock" with respect to the payment of dividends and the
distribution of assets in the event of liquidation, dissolution or winding up
of ML&Co. Holders of the 9% Preferred Stock do not have any preemptive rights
to subscribe for any additional securities which may be issued by ML&Co.
Dividends on the 9% Preferred Stock are cumulative and payable quarterly at the
rate per annum of 9% of the $10,000 liquidation preference per share. Holders
of the 9% Preferred Stock have no voting rights except as set forth above under
"--Voting Rights" above. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of ML&Co., the holders of outstanding
shares of 9% Preferred Stock are entitled to receive out of assets of ML&Co.
available for distribution to stockholders a distribution of $10,000 per share,
plus accumulated and unpaid dividends, if any. The 9% Preferred Stock is not
redeemable before December 30, 2004. On and after that date, the 9% Preferred
Stock is redeemable at the option of ML&Co., in whole at any time or from time
to time in part, upon not less than 30 nor more than 60 days notice, at a
redemption price of $10,000 per share, plus accumulated and unpaid dividends,
if any.
Special Voting Share
In connection with the acquisition of Midland Walwyn Inc. by ML&Co. in
August 1998, ML&Co. issued a single share of preferred stock with special
voting rights (the "Special Voting Share"), under the terms of a Voting and
Exchange Trust Agreement entered into by Merrill Lynch & Co., Canada Ltd. ("ML
Canada"), ML&Co. and Montreal Trust Company of Canada, as trustee (the "Voting
Trust Agreement"). The Special Voting Share possesses a number of votes equal
to the number of exchangeable shares of ML Canada (the "Exchangeable Shares")
issued and outstanding from time to time that are not owned by ML&Co. or its
affiliates, which votes may be exercised for the election of directors and on
all other matters submitted to a vote of ML&Co.'s stockholders. The holders of
ML&Co.'s common stock and the holder of the Special Voting Share vote together
as a class on all matters. See "Description of Common Stock--Voting Rights".
The Special Voting Share was issued to the trustee under the Voting Trust
Agreement. The holder of the Special Voting Share is not entitled to receive
dividends, and, in the event of any liquidation, dissolution or winding up of
ML&Co., will receive an amount equal to the par value of the Special Voting
Share. When the Special Voting Share has no votes attached to it because there
are no Exchangeable Shares outstanding not owned by ML&Co. or any of its
affiliates, the Special Voting Share will cease to have any rights.
DESCRIPTION OF DEPOSITARY SHARES
ML&Co. may issue depositary receipts evidencing depositary shares, each of
which will represent a fraction of a share of preferred stock. ML&Co. will
deposit shares of preferred stock of each class or series represented by
depositary shares under deposit agreements to be entered into among ML&Co., a
bank or trust company, as depositary, and the holders from time to time of the
depositary receipts. A copy of the form of deposit agreement, including the
form of certificates representing the depositary receipts, is filed as an
exhibit to the registration statement of which this prospectus is a part. The
following summaries of the material provisions of the deposit
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agreements and the depositary receipt certificates are not complete, are
subject to, and are qualified in their entirety by reference to, all the
provisions of the deposit agreement and the depositary receipt certificates,
respectively, including the definitions of terms.
Terms of the Depositary Shares
Depositary receipts issued under the applicable deposit agreement will
evidence the depositary shares. Immediately following the issuance and delivery
of the preferred stock by ML&Co. to the depositary, ML&Co. will cause the
depositary to issue, on behalf of ML&Co., the depositary receipts. Subject to
the terms of the applicable deposit agreement, each holder of a depositary
receipt will be entitled, in proportion to the fraction of a share of preferred
stock represented by the applicable depositary shares, to all the rights and
preferences of the preferred stock being represented, including dividend,
voting, conversion, redemption and liquidation rights, all as will be set forth
in the prospectus supplement relating to the depositary shares being offered.
The depositary shares will have the dividend, liquidation, redemption,
voting and conversion or exchange rights set forth below unless otherwise
specified in the applicable prospectus supplement. The applicable prospectus
supplement will describe the terms of the specific issue of the depositary
shares being offered, the deposit agreement relating to the depositary shares
and the depositary receipts evidencing the depositary shares, including the
following:
. the designation, stated value and liquidation preference of the
depositary shares and the number of shares offered;
. the offering price or prices;
. the dividend rate or rates, or method of calculation, the dividend
periods, the dates on which dividends will be payable and whether
dividends are cumulative or noncumulative and, if cumulative, the dates
from which dividends will begin to cumulate;
. any redemption or sinking fund provisions;
. any conversion or exchange provisions;
. any material risk factors relating to the depositary shares;
. the identity of the depositary; and
. any other terms of the depositary shares which are not inconsistent with
the provisions of the deposit agreement.
Book-Entry Procedures
Except as may otherwise be provided in the applicable prospectus supplement,
the depositary shares will be evidenced by global depositary receipts,
registered in the name of a depositary or its nominee. In that case, beneficial
owners will not be entitled to receive depositary receipts evidencing their
depositary shares unless the depositary is unwilling or unable to continue as
depositary or ML&Co. decides to have the depositary shares represented by
separate depositary receipts. A beneficial owner's interest in depositary
shares will be recorded on or through the records of the brokerage firm or
other entity that maintains the beneficial owner's account. In turn, the total
number of depositary shares held by an individual brokerage firm for its
clients will be maintained on the records of the depositary in the name of the
brokerage firm or its agent. Transfer of ownership of depositary shares will be
effected only through the selling beneficial owner's brokerage firm.
Dividends and Other Distributions
The depositary will distribute all cash dividends or other cash
distributions received in respect of the preferred stock to the record holders
of depositary receipts in proportion to the number of depositary shares owned
by those holders, subject to the obligations of holders to file proofs,
certificates and other information and to pay certain charges and expenses to
the depositary.
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In the event of a distribution in respect of the preferred stock other than
in cash, the depositary will distribute property it receives to the record
holders of the depositary shares, subject to certain obligations of holders to
file proofs, certificates and other information and to pay certain charges and
expenses to the depositary, unless the depositary, after consultation with
ML&Co., determines that it is not feasible to make the distribution, in which
case the depositary may, with the approval of ML&Co., sell any property and
distribute the net proceeds from the sale to the holders.
Withdrawal of Stock
Unless the related depositary shares have been previously called for
redemption, upon surrender of the depositary receipts at the corporate trust
office of the depositary, the holder of the depositary shares will be entitled
to delivery, at the corporate trust office of the depositary to or upon his or
her order, of the number of whole shares of the preferred stock and any money
or other property represented by the depositary shares. If the depositary
receipts delivered by the holder evidence a number of depositary shares in
excess of the number of depositary shares representing the number of whole
shares of preferred stock to be withdrawn, the depositary will deliver to the
holder at the same time a new depositary receipt evidencing the excess number
of depositary shares. In no event will the depositary deliver fractional shares
of preferred stock upon surrender of depositary receipts.
Redemption of Depositary Shares
Whenever ML&Co. redeems shares of preferred stock held by the depositary,
the depositary will redeem as of the same redemption date the number of
depositary shares representing shares of the preferred stock so redeemed,
provided ML&Co. has paid in full to the depositary the redemption price of the
preferred stock to be redeemed plus an amount equal to any accumulated and
unpaid dividends on the preferred stock to the date fixed for redemption. The
redemption price per depositary share will be equal to the redemption price and
any other amounts per share payable with respect to the preferred stock
multiplied by the fraction of a share of preferred stock represented by one
depositary share. If less than all the depositary shares are to be redeemed,
the depositary shares to be redeemed will be selected by lot or pro rata as may
be determined by the depositary.
After the date fixed for redemption, depositary shares called for redemption
will no longer be deemed to be outstanding and all rights of the holders of
depositary shares called for redemption will cease, except the right to receive
any moneys payable upon redemption and any money or other property to which the
holders of the depositary shares were entitled upon redemption upon surrender
to the depositary of the depositary receipts evidencing the depositary shares.
Voting the Preferred Stock
Upon receipt of notice of any meeting at which the holders of the preferred
stock are entitled to vote, the depositary will mail the information contained
in the notice of meeting to the record holders of the depositary receipts
relating to that preferred stock. The record date for the depositary receipts
relating to the preferred stock will be the same date as the record date for
the preferred stock. Each record holder of the depositary shares on the record
date will be entitled to instruct the depositary as to the exercise of the
voting rights pertaining to the amount of preferred stock represented by that
holder's depositary shares. The depositary will endeavor, insofar as
practicable, to vote the amount of preferred stock represented by the
depositary shares in accordance with those instructions, and ML&Co. will agree
to take all reasonable action which may be deemed necessary by the depositary
in order to enable the depositary to do so. The depositary will not vote any
shares of preferred stock except to the extent it receives specific
instructions from the holders of depositary shares representing that number of
shares of preferred stock.
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Exchange of Preferred Stock
Whenever ML&Co. exchanges all of the shares of a series of preferred stock
held by the depositary for debt securities, common stock or other shares of
preferred stock, the depositary will exchange as of the same exchange date the
number of depositary shares representing all of the shares of the preferred
stock so exchanged for debt securities, common stock or other shares of
preferred stock, provided ML&Co. has issued and deposited with the depositary,
debt securities, common stock or other shares of preferred stock, as
applicable, for all of the shares of the preferred stock to be exchanged. The
exchange rate per depositary share will be equal to the exchange rate per share
of preferred stock multiplied by the fraction of a share of preferred stock
represented by one depositary share, plus all money and other property, if any,
represented by those depositary shares, including all amounts paid by ML&Co. in
respect of dividends which on the exchange date have accumulated on the shares
of preferred stock to be so exchanged and have not already been paid.
Conversion of Preferred Stock
The depositary shares are not convertible or exchangeable into common stock
or any other securities or property of ML&Co. Nevertheless, if so specified in
the applicable prospectus supplement, each depositary receipt may be
surrendered by its holder to the depositary with written instructions to the
depositary to instruct ML&Co. to cause conversion or exchange of the preferred
stock represented by the depositary shares evidenced by that depositary receipt
into whole shares of common stock, other shares of preferred stock or debt
securities of ML&Co. ML&Co. has agreed that upon the receipt of any
instructions to convert or exchange any depositary shares and the payment of
any fees or other amounts applicable to any conversion or exchange, it will
convert or exchange the depositary shares using the same procedures as those
provided for delivery of preferred stock to effect conversions or exchange. If
the depositary shares represented by a depositary receipt are converted in part
only, a new depositary receipt or receipts will be issued for any depositary
shares not converted or exchanged.
Amendment and Termination of the Deposit Agreement
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may at any time be amended by agreement
between ML&Co. and the depositary. However, any amendment that materially and
adversely alters the rights of the holders of depositary receipts will not be
effective unless it has been approved by the holders of at least a majority of
the depositary shares then outstanding. No amendment to the form of depositary
receipt or any provision of the deposit agreement relating to or affecting
rights to receive dividends or distributions or voting, redemption or
conversion rights will be effective unless approved by the holders of at least
two-thirds of the depositary shares then outstanding.
ML&Co. may terminate the deposit agreement at any time upon 60 days prior
written notice to the depositary, in which case the depositary will deliver to
the record holders, upon surrender of the depositary receipts, the number of
whole or fractional shares of preferred stock as is represented by those
depositary receipts. The deposit agreement will automatically terminate if:
. all outstanding depositary shares have been redeemed,
. all shares of preferred stock deposited with the depositary in
accordance with the terms of the deposit agreement and all money and
other property relating to those shares of preferred stock have been
withdrawn in accordance with the terms of the deposit agreement, or
. there has been a final distribution in respect of the preferred stock in
connection with any liquidation, dissolution or winding up of ML&Co. and
the distribution has been distributed to the holders of depositary
receipts.
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Charges of Depositary
ML&Co. will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. ML&Co. will
pay the fees and expenses of the depositary in connection with the performance
of its duties under the deposit agreement. Holders of depositary receipts will
pay transfer and other taxes and governmental charges and any other charges
that are expressly provided in the deposit agreement to be for their accounts.
The depositary may refuse to effect any transfer of a depositary receipt or any
withdrawals of preferred stock evidenced by a depositary receipt until all
taxes and charges with respect to the depositary receipt or preferred stock are
paid by their holders.
Resignation and Removal of Depositary
The depositary may resign at any time by delivering to ML&Co. notice of its
election to do so, and ML&Co. may remove the depositary at any time. Any
resignation or removal of the depositary will take effect upon ML&Co.'s
appointment of a successor depositary, which must be appointed within 60 days
after delivery
of the notice of resignation or removal and must be a bank or trust company
having its principal office in the United States and having a combined capital
and surplus of at least $50,000,000.
Notices
The depositary will forward to holders of depositary receipts all reports
and communications received from ML&Co. and the depositary and which ML&Co. is
required to furnish to holders of the related underlying preferred stock. The
depositary will also, promptly after its receipt, transmit to the holders of
depositary receipts, copies of all notices and reports required by law, the
rules of any national securities exchange or ML&Co.'s restated certificate of
incorporation to be furnished to the record holders of depositary receipts.
Limitation of Liability
Neither the depositary nor ML&Co. will assume any obligation or be subject
to any liability under the deposit agreement to holders of depositary receipts
other than for negligence, willful misconduct or bad faith.
The depositary will not be obligated to prosecute or defend any legal
proceeding in respect of any depositary shares or any shares of preferred stock
unless it is furnished with satisfactory indemnification. ML&Co. and the
depositary may rely on written advice of counsel or accountants, or information
provided by persons presenting shares of preferred stock for deposit, holders
of depositary receipts or other persons believed to be competent and on
documents believed to be genuine. Neither the depositary nor ML&Co. will be
liable if it is prevented from or delayed, by law, by provision of ML&Co.'s
restated certificate of incorporation or any circumstances beyond its control,
in performing its obligations under the deposit agreement.
DESCRIPTION OF PREFERRED STOCK WARRANTS
ML&Co. may issue warrants for the purchase of preferred stock ("Preferred
Stock Warrants"). Each series of Preferred Stock Warrants is to be issued under
a preferred stock warrant agreement to be entered into between ML&Co. and a
bank or trust company, as preferred stock warrant agent, as described in the
applicable prospectus supplement relating to the Preferred Stock Warrants being
offered. A copy of the form of preferred stock warrant agreement, including the
form of warrant certificates representing the Preferred Stock Warrants, is
filed as an exhibit to the registration statement of which this prospectus is a
part. The following summaries of the material provisions of the preferred stock
warrant agreement and preferred stock warrant certificates are not complete and
are subject to and are qualified in their entirety by reference to, all the
provisions of the preferred stock warrant agreement and the preferred stock
warrant certificates, respectively, including the definitions of terms.
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Terms of the Preferred Stock Warrants
The applicable prospectus supplement will describe the terms of the specific
issue of Preferred Stock Warrants being offered, the preferred stock warrant
agreement relating to the Preferred Stock Warrants and the preferred stock
warrant certificates representing the Preferred Stock Warrants, including the
following:
. the offering price or prices;
. designation, aggregate number and terms of the series of preferred stock
that may be purchased upon exercise of the Preferred Stock Warrants and
the minimum number of Preferred Stock Warrants that are exercisable;
. any designation and terms of the securities with which the Preferred
Stock Warrants are being offered and the number of Preferred Stock
Warrants being offered with each Security;
. any date on and after which the Preferred Stock Warrants and the related
securities will be transferable separately;
. the number and stated values of the series of preferred stock that may
be purchased upon exercise of each Preferred Stock Warrant and the price
at which the shares of preferred stock of that series may be purchased
upon exercise, and events or conditions under which the number of shares
that may be purchased may be adjusted;
. the date on which the right to exercise the Preferred Stock Warrants
will begin and the date on which the right to exercise will expire;
. any circumstances that will cause the Preferred Stock Warrants to be
deemed to be automatically exercised;
. any material risk factors relating to the Preferred Stock Warrants;
. the identity of the preferred stock warrant agent; and
. any other terms of the Preferred Stock Warrants which are not
inconsistent with the provisions of the preferred stock warrant
agreement.
Holders may exchange preferred stock warrant certificates for new preferred
stock warrant certificates of different denominations, may, if in registered
form, present for registration of transfer, and may exercise the Preferred
Stock Warrants, at the corporate trust office of the preferred stock warrant
agent or any other office indicated in the applicable prospectus supplement.
Before the exercise of any Preferred Stock Warrant, a holder will not have the
rights of a holder of shares of the preferred stock that may be purchased upon
exercise of the Preferred Stock Warrant, including the right to receive payment
of dividends, if any, on the underlying preferred stock or the right to vote
the underlying preferred stock.
Prospective purchasers of Preferred Stock Warrants should be aware that
special U.S. Federal income tax, accounting and other considerations may be
applicable to instruments such as Preferred Stock Warrants. The prospectus
supplement relating to any issue of Preferred Stock Warrants will describe
these considerations.
Book-Entry Procedures
Except as may otherwise be provided in the applicable prospectus supplement,
the Preferred Stock Warrants will be issued in the form of global preferred
stock warrant certificates, registered in the name of a depositary or its
nominee. In that case, beneficial owners will not be entitled to receive
definitive certificates representing Preferred Stock Warrants unless the
depositary is unwilling or unable to continue as depositary, specified events
of bankruptcy or insolvency occur with respect to ML&Co. or ML&Co. decides to
have the Preferred Stock Warrants represented by definitive certificates. A
beneficial owner's interest in a Preferred Stock Warrant will be recorded on or
through the records of the brokerage firm or other entity that maintains the
beneficial owner's account. In turn, the total number of Preferred Stock
Warrants held by an individual brokerage firm for its clients will be
maintained on the records of the depositary in the name of the brokerage firm
or its agent. Transfer of ownership of any Preferred Stock Warrant will be
effected only through the selling beneficial owner's brokerage firm.
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Exercise of Preferred Stock Warrants
Each Preferred Stock Warrant will entitle its holder to purchase a number of
shares of preferred stock at the exercise price described in the applicable
prospectus supplement. After the close of business on the date the right to
exercise the Preferred Stock Warrants expires, or any later date if extended by
ML&Co., unexercised Preferred Stock Warrants will become void.
Holders may exercise the Preferred Stock Warrants in the manner set forth in
the applicable prospectus supplement. Upon receipt of payment and a properly
completed and duly executed preferred stock warrant certificate at the
corporate trust office of the preferred stock warrant agent or any other office
indicated in the applicable prospectus supplement, ML&Co. will, as soon as
practicable, issue and deliver the shares of preferred stock purchased upon
exercise. If less than all of the Preferred Stock Warrants represented by any
preferred stock warrant certificate are exercised, ML&Co. will issue a new
preferred stock warrant certificate for the remaining number of Preferred Stock
Warrants.
Listing
ML&Co. may list an issue of Preferred Stock Warrants on a national
securities exchange. Any listing will be specified in the applicable prospectus
supplement.
Modifications
ML&Co. and the preferred stock warrant agent may amend any preferred stock
warrant agreement and the terms of the related Preferred Stock Warrants,
without the consent of the holders of the Preferred Stock Warrants, for the
purpose of curing any ambiguity, or of curing, correcting or supplementing any
defective or inconsistent provision, or in any other manner which ML&Co. may
deem necessary or desirable and which will not materially and adversely affect
the interests of the preferred stock warrantholders.
ML&Co. and the preferred stock warrant agent also may amend any preferred
stock warrant agreement and the terms of the related Preferred Stock Warrants,
with the consent of the holders of not less than a majority in number of the
then outstanding unexercised Preferred Stock Warrants affected by the
amendment. However, without the consent of each of the preferred stock
warrantholders affected, no amendment will be effective that:
. shortens the period of time during which the Preferred Stock Warrants
may be exercised;
. otherwise materially and adversely affects the exercise rights of the
preferred stock warrantholders; or
. reduces the number of outstanding Preferred Stock Warrants the consent
of whose holders is required to approve an amendment of the preferred
stock warrant agreement or the terms of the related Preferred Stock
Warrants.
Enforceability of Rights by Preferred Stock Warrantholders
Any preferred stock warrantholder may, without the consent of the related
preferred stock warrant agent, enforce by appropriate legal action, in and of
its own behalf, its right to exercise its Preferred Stock Warrants.
DESCRIPTION OF COMMON STOCK
The following description sets forth the general terms of common stock which
ML&Co. may issue. The description set forth below and in any prospectus
supplement is not complete, is subject to, and is qualified in its entirety by
reference to, ML&Co's restated certificate of incorporation which is filed as
an exhibit to the registration statement of which this prospectus is a part.
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Terms of the Common Stock
Under ML&Co.'s restated certificate of incorporation, ML&Co. is authorized
to issue up to 3,000,000,000 shares of common stock, par value $1.33 1/3 per
share. As of December 28, 2001, there were 962,533,498 shares of common stock
and 4,195,407 Exchangeable Shares outstanding. The Exchangeable Shares are
exchangeable at any time into common stock on a one-for-one basis and entitle
holders to dividend, voting and other rights equivalent to common stock. The
common stock is traded on the New York Stock Exchange under the symbol "MER"
and also on the Chicago Stock Exchange, the Pacific Exchange, the Paris Bourse,
the London Stock Exchange and the Tokyo Stock Exchange.
The common stock has the dividend, voting, liquidation and preemptive rights
set forth below unless otherwise specified in the prospectus supplement being
used to offer the common stock. The applicable prospectus supplement will
describe the terms of the common stock including, where applicable, the
following:
. the number of shares to be offered;
. the offering price or prices;
. to the extent permitted by applicable law, whether the common stock will
be issued in certificated or book-entry form;
. information with respect to any book-entry procedures; and
. any additional terms of the common stock which are not inconsistent with
the provisions of ML&Co.'s restated certificate of incorporation.
The common stock will be, when issued against payment therefor, fully paid
and nonassessable. Holders of the common stock will have no preemptive rights
to subscribe for any additional securities which may be issued by ML&Co. The
rights of holders of common stock will be subject to, and may be adversely
affected by, the rights of holders of any preferred stock that has been issued
and may be issued in the future. As of December 28, 2001, 17,000,000 depositary
shares, each representing a one-four-hundredth interest in a share of 9%
Preferred Stock, and one Special Voting Share were outstanding. See
"Description of Preferred Stock--Outstanding Preferred Stock" for a description
of that preferred stock. The Board of Directors of ML&Co. may issue additional
shares of preferred stock to obtain additional financing, in connection with
acquisitions, to officers, directors and employees of ML&Co. and its
subsidiaries pursuant to benefit plans or otherwise and for other proper
corporate purposes.
ML&Co. is the principal transfer agent for the common stock.
Because ML&Co. is a holding company, its rights, and the rights of holders
of its securities, including the holders of common stock, to participate in the
distribution of assets of any subsidiary of ML&Co. upon the subsidiary's
liquidation or recapitalization will be subject to the prior claims of the
subsidiary's creditors and preferred stockholders, except to the extent ML&Co.
may itself be a creditor with recognized claims against the subsidiary or a
holder of preferred stock of the subsidiary.
Dividends
ML&Co. may pay dividends on the common stock out of funds legally available
for the payment of dividends as, if and when declared by the Board of Directors
of ML&Co. or a duly authorized committee of the Board of Directors.
As of December 28, 2001, subsidiaries of ML&Co. had outstanding
approximately $2.695 billion of perpetual TOPrS. In connection with the
issuance of the TOPrS, ML&Co. has agreed, among other things, that if full
distributions on the TOPrS have not been paid or set apart for payment or
ML&Co. is in default of its related guarantee obligations, ML&Co., with certain
exceptions, will not declare or pay dividends, make distributions with respect
to, or redeem, purchase or acquire, or make a liquidation payment with respect
to any of its capital stock, including the common stock.
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Liquidation Rights
Upon any voluntary or involuntary liquidation, dissolution, or winding up of
ML&Co., the holders of its common stock will be entitled to receive, after
payment of all of its debts, liabilities and of all sums to which holders of
any preferred stock may be entitled, all of the remaining assets of ML&Co.
Voting Rights
Except as described under "Description of Preferred Stock--Outstanding
Preferred Stock", the holders of the common stock currently possess exclusive
voting rights in ML&Co. The Board of Directors of ML&Co. may, however, give
voting power to any preferred stock which may be issued in the future. Each
holder of common stock is entitled to one vote per share with respect to all
matters. There is no cumulative voting in the election of directors. Actions
requiring approval of stockholders generally require approval by a majority
vote of outstanding shares.
The Board of Directors of ML&Co. is currently comprised of 12 directors,
divided into three classes, the precise number of members to be fixed from time
to time by the Board of Directors. The directors of the class elected at each
annual election hold office for a term of three years, with the term of each
class expiring at successive annual meetings of stockholders.
Rights to Purchase Series A Junior Preferred Stock
Under the Amended and Restated Rights Agreement, adopted on December 2, 1997
(the "Rights Agreement"), preferred purchase rights were distributed to holders
of common stock. The preferred purchase rights are attached to each outstanding
share of common stock and will attach to all subsequently issued shares,
including common stock that may be offered by ML&Co. pursuant to an applicable
prospectus supplement. The preferred purchase rights entitle the holder to
purchase fractions of a share ("Units") of Series A junior preferred stock at
an exercise price of $300 per Unit, subject to adjustment from time to time as
provided in the Rights Agreement. The exercise price and the number of Units
issuable are subject to adjustment to prevent dilution.
The preferred purchase rights will separate from the common stock ten days
following the earlier of:
. an announcement of an acquisition by a person or group of 15% or more of
the outstanding common stock of ML&Co.; or
. the commencement of a tender or exchange offer for 15% or more of the
shares of common stock of ML&Co. outstanding.
If, after the preferred purchase rights have separated from the common stock,
. ML&Co. is the surviving corporation in a merger with an acquiring party,
. a person becomes the beneficial owner of 15% or more of the common stock,
. an acquiring party engages in one or more defined "self-dealing"
transactions, or
. an event occurs which results in such acquiring party's ownership
interest being increased by more than 1%,
then, in each case, each holder of a preferred purchase right will have the
right to purchase Units of Series A junior preferred stock having a value equal
to two times the exercise price of the preferred purchase right. In addition,
preferred purchase rights held by or transferred in certain circumstances by an
acquiring party may immediately become void.
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In the event that, at any time,
. ML&Co. is acquired in a merger or other business combination transaction
and ML&Co. is not the surviving corporation,
. any person consolidates or merges with ML&Co. and all or part of
ML&Co.'s common stock is converted or exchanged for securities, cash or
property of any other person or
. 50% or more of ML&Co.'s assets or earning power is sold or transferred,
each holder of a right will have the right to purchase common stock of the
acquiring party having a value equal to two times the exercise price of the
preferred purchase right.
The preferred purchase rights expire on December 2, 2007. The preferred
purchase rights are redeemable at the option of a majority of the independent
directors of ML&Co. at $.01 per right at any time until the tenth day following
an announcement of the acquisition of 15% or more of the common stock.
The foregoing provisions of the Rights Agreement may have the effect of
delaying, deferring or preventing a change in control of ML&Co.
The certificate of designations of the Series A junior preferred stock
provides that the holders of Units of the Series A junior preferred stock will
be entitled to receive quarterly dividends in an amount to be determined in
accordance with the formula set forth in the certificate of designations. These
dividend rights are cumulative. The Series A junior preferred stock rank junior
in right of payment of dividends to the 9% Preferred Stock and to all other
preferred stock issued by ML&Co., unless the terms of any other preferred stock
provide otherwise. The holders of Units of the Series A junior preferred stock
will have one vote per Unit on all matters submitted to the stockholders of
ML&Co., subject to adjustment. If at any time dividends on any Units of the
Series A junior preferred stock are in arrears for a number of periods, whether
or not consecutive, which in the aggregate is equivalent to six calendar
quarters, then during that period of default, the holders of all Units, voting
separately as a class, will have the right to elect two directors to the Board
of Directors of ML&Co. Additionally, whenever quarterly dividends or other
dividends or distributions payable on the Series A junior preferred stock are
in arrears, ML&Co. shall not, among other things, declare or pay dividends on
or make any other distributions on, or redeem or purchase or otherwise acquire
for consideration any shares or capital stock of ML&Co. which ranks junior in
right of payment to the Series A junior preferred stock, including the common
stock. In the event of any voluntary or involuntary liquidation, dissolution or
winding up of ML&Co., the holders of outstanding Units of the Series A junior
preferred stock will be entitled to receive a distribution in an amount to be
determined in accordance with the formula set forth in the certificate of
designations before the payment of any distribution to the holders of common
stock. The Units of Series A junior preferred stock are not redeemable. As of
the date of this prospectus, there are no shares of Series A junior preferred
stock outstanding.
Material Charter Provisions
ML&Co.'s restated certificate of incorporation provides that, except under
specified circumstances, ML&Co. may not merge or consolidate with any one or
more corporations, joint-stock associations or non-stock corporations; sell,
lease or exchange all or substantially all of its property and assets or
dissolve without the affirmative vote of two-thirds of the entire Board of
Directors of ML&Co. and the holders of a majority of the outstanding shares of
common stock entitled to vote. Additionally, ML&Co.'s restated certificate of
incorporation provides that specified business combinations involving ML&Co.
and an interested stockholder or an affiliate or associate of that stockholder
must be approved by 80% of the voting power of the outstanding shares of
capital stock of ML&Co. entitled to vote generally in the election of
directors. The vote of 80% of the voting power of the voting stock referred to
in the immediately preceding sentence is required for amendment of these
provisions. ML&Co.'s restated certificate of incorporation also provides that
only the Board of Directors of ML&Co. has the authority to call special
stockholder meetings.
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The foregoing provisions of ML&Co.'s restated certificate of incorporation
may have the effect of delaying, deferring or preventing a change in control of
ML&Co.
DESCRIPTION OF COMMON STOCK WARRANTS
ML&Co. may issue warrants for the purchase of common stock ("Common Stock
Warrants"). Each series of Common Stock Warrants will be issued under a common
stock warrant agreement to be entered into between ML&Co. and a bank or trust
company, as common stock warrant agent, all as set forth in the applicable
prospectus supplement. A copy of the form of common stock warrant agreement,
including the form of warrant certificates representing the Common Stock
Warrants, reflecting the provisions to be included in the common stock warrant
agreements that will be entered into with respect to particular offerings of
Common Stock Warrants, is filed as an exhibit to the registration statement of
which this prospectus is a part. The following summaries of the material
provisions of the common stock warrant agreement and common stock warrant
certificates are not complete, are subject to, and are qualified in their
entirety by reference to, all of the provisions of the common stock warrant
agreement and the common stock warrant certificates, including the definitions
of terms.
Terms of the Common Stock Warrants
The applicable prospectus supplement will describe the terms of the Common
Stock Warrants being offered, the common stock warrant agreement relating to
the Common Stock Warrants and the common stock warrant certificates, including
the following:
. the offering price or prices;
. the aggregate number of shares of common stock that may be purchased
upon exercise of the Common Stock Warrants and minimum number of
Common Stock Warrants that are exercisable;
. the number of securities, if any, with which the Common Stock
Warrants are being offered and the number of the Common Stock
Warrants being offered with each security;
. the date on and after which the Common Stock Warrants and the related
securities, if any, will be transferable separately;
. the number of shares of common stock purchasable upon exercise of
each Common Stock Warrant, the price at which the common stock may be
purchased, and events or conditions under which the number of shares
purchasable may be adjusted;
. the date on which the right to exercise the Common Stock Warrants
will begin and the date on which the right to exercise will expire;
. the circumstances, if any, which will cause the Common Stock Warrants
to be deemed to be automatically exercised;
. any material risk factors relating to the Common Stock Warrants;
. the identity of the common stock warrant agent; and
. any other terms of the Common Stock Warrants which are not
inconsistent with the provisions of the common stock warrant
agreement.
Holders may exchange common stock warrant certificates for new common stock
warrant certificates of different denominations, may, if in registered form,
present for registration of transfer, and may exercise the Common Stock
Warrants, at the corporate trust office of the common stock warrant agent or
any other office indicated in the applicable prospectus supplement. Before the
exercise of any Common Stock Warrants to
34
purchase common stock, holders of the Common Stock Warrants will not have any
rights of holders of common stock purchasable upon exercise of the Common Stock
Warrants, including the right to receive payments of dividends, if any, on the
common stock purchasable upon any exercise or the right to vote the underlying
common stock.
Prospective purchasers of Common Stock Warrants should be aware that special
U.S. Federal income tax, accounting and other considerations may be applicable
to instruments such as Common Stock Warrants. The prospectus supplement
relating to any issue of Common Stock Warrants will describe these
considerations.
Book-Entry Procedures
Except as may otherwise be provided in the applicable prospectus supplement,
the Common Stock Warrants will be issued in the form of global common stock
warrant certificates, registered in the name of a depositary or its nominee. In
that case, beneficial owners will not be entitled to receive definitive
certificates representing Common Stock Warrants unless the depositary is
unwilling or unable to continue as depositary, certain specified events of
bankruptcy or insolvency occur with respect to ML&Co. or ML&Co. decides to have
the Common Stock Warrants represented by definitive certificates. A beneficial
owner's interest in a Common Stock Warrant will be recorded on or through the
records of the brokerage firm or other entity that maintains a beneficial
owner's account. In turn, the total number of Common Stock Warrants held by an
individual brokerage firm for its clients will be maintained on the records of
the depositary in the name of the brokerage firm or its agent. Transfer of
ownership of any Common Stock Warrant will be effected only through the selling
beneficial owner's brokerage firm.
Exercise of Common Stock Warrants
Each Common Stock Warrant will entitle its holder to purchase a specific
number of shares of common stock at the exercise price described in the
applicable prospectus supplement. After the close of business on the date the
right to exercise the Common Stock Warrants expires, or any later date if
extended by ML&Co., unexercised Common Stock Warrants will become void.
Common Stock Warrants may be exercised as set forth in the applicable
prospectus supplement. Upon receipt of payment and a properly completed and
duly executed common stock warrant certificate at the corporate trust office of
the common stock warrant agent or any other office indicated in the applicable
prospectus supplement, ML&Co. will, as soon as practicable, issue and deliver
the shares of common stock purchased upon exercise. If less than all of the
Common Stock Warrants represented by any common stock warrant certificate are
exercised, a new common stock warrant certificate will be issued for the
remaining Common Stock Warrants.
Listing
ML&Co. may list an issue of Common Stock Warrants on a national securities
exchange. Any listing will be specified in the applicable prospectus supplement.
Modifications
ML&Co. and the common stock warrant agent may amend any common stock warrant
agreement and the terms of the related Common Stock Warrants, without the
consent of the holders of the Common Stock Warrants, for the purpose of curing
any ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision, or in any other manner which ML&Co. may deem necessary
or desirable and which will not materially and adversely affect the interests
of the common stock warrantholders.
ML&Co. and the common stock warrant agent also may amend any common stock
warrant agreement and the terms of the related Common Stock Warrants, with the
consent of the holders of not less than a majority in
35
number of the then outstanding unexercised Common Stock Warrants affected by
amendment. However, without the consent of each of the common stock
warrantholders affected, no amendment will be effective that:
. shortens the period of time during which the Common Stock Warrants may
be exercised;
. otherwise materially and adversely affects the exercise rights of the
common stock warrantholders; or
. reduces the number of outstanding Common Stock Warrants the consent of
whose holders is required to approve an amendment of the common stock
warrant agreement or the terms of the related Common Stock Warrants.
Enforceability of Rights by common stock warrantholders
Any common stock warrantholder may, without the consent of the related
common stock warrant agent, enforce by appropriate legal action, in and for its
own behalf, its right to exercise its Common Stock Warrant.
PLAN OF DISTRIBUTION
ML&Co. may sell securities:
. to the public through MLPF&S, or through a group of underwriters managed
or co-managed by, one or more underwriters, including MLPF&S,
. through MLPF&S as agent, or
. directly to purchasers.
Any at the market offering of Common Stock will be through MLPF&S, acting as
principal or as agent for ML&Co. The prospectus supplement with respect to the
securities of a particular series describes the terms of the offering of the
securities, including the name of the agent or the name or names of any
underwriters, the public offering or purchase price, any discounts and
commissions to be allowed or paid to the agent or underwriters, all other items
constituting underwriting compensation, any discounts and commissions to be
allowed or paid to dealers and any exchanges on which the securities will be
listed. Only the agents or underwriters so named in the prospectus supplement
are agents or underwriters in connection with the securities being offered.
Under certain circumstances, ML&Co. may repurchase securities and reoffer them
to the public as set forth above. ML&Co. may also arrange for repurchases and
resales of the securities by dealers.
If so indicated in the prospectus supplement, ML&Co. will authorize
underwriters to solicit offers by certain institutions to purchase debt
securities from ML&Co. pursuant to delayed delivery contracts providing for
payment and delivery on the date stated in the prospectus supplement. Each
contract will be for an amount not less than, and, unless ML&Co. otherwise
agrees, the aggregate principal amount of debt securities sold pursuant to the
contracts shall not be more than, the respective amounts stated in the
prospectus supplement. Institutions with whom the contracts, when authorized,
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions, and other
institutions, but shall in all cases be subject to the approval of ML&Co.
Delayed delivery contracts will not be subject to any conditions except that
the purchase by an institution of the debt securities covered under that
contract shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which that institution is subject.
ML&Co. has agreed to indemnify any agent or underwriters against certain
civil liabilities, including liabilities under the Securities Act or contribute
to payments any agent or underwriters may be required to make.
The distribution of securities will conform to the requirements set forth in
the applicable sections of Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc.
36
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC. Our
SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. The address of the SEC's Internet site is provided solely
for the information of prospective investors and is not intended to be an
active link. You may also read and copy any document we file by visiting 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 further
information about the public reference rooms. You may also inspect our SEC
reports and other information at the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
We have filed a registration statement on Form S-3 with the SEC covering the
securities described in this prospectus and other securities. For further
information on ML&Co. and these securities, you should refer to our
registration statement and its exhibits. This prospectus summarizes material
provisions of contracts and other documents that we refer you to. Because the
prospectus may not contain all the information that you may find important, you
should review the full text of these documents. We have included copies of
these documents as exhibits to our registration statement of which this
prospectus is a part.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file with
them, which means:
. incorporated documents are considered part of the prospectus;
. we can disclose important information to you by referring you to those
documents; and
. information that we file with the SEC will automatically update and
supersede this incorporated information.
We incorporate by reference the documents listed below which were filed with
the SEC under the Exchange Act (other than information in the documents that is
deemed not to be filed):
. annual report on Form 10-K for the year ended December 29, 2000;
. quarterly reports on Form 10-Q for the periods ended March 30,
2001, June 29, 2001 and September 28, 2001; and
. current reports on Form 8-K dated January 23, 2001, February 28, 2001,
April 18, 2001, April 30, 2001, May 2, 2001, May 4, 2001, May 23, 2001,
June 1, 2001, June 26, 2001, June 29, 2001, July 5, 2001, July 17, 2001,
July 24, 2001, August 1, 2001, August 3, 2001, August 31, 2001,
September 11, 2001, September 28, 2001, October 18, 2001, October 23,
2001, October 31, 2001, November 1, 2001, November 2, 2001, November 21,
2001, November 30, 2001, January 9, 2002, January 16, 2002, January 23,
2002, January 29, 2002, February 1, 2002, February 8, 2002, February 11,
2002 and February 21, 2002.
We also incorporate by reference each of the following documents that we
will file with the SEC after the date of this prospectus until this offering is
completed or after the date of this initial registration statement and before
the effectiveness of the registration statement:
. reports filed under Section 13(a) and (c) of the Exchange Act;
. definitive proxy or information statements filed under Section 14 of the
Exchange Act in connection with any subsequent stockholders' meeting; and
. any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by reference
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
these securities in any jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
37
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Mr. Lawrence
M. Egan, Jr., Corporate Secretary's Office, Merrill Lynch & Co., Inc., 222
Broadway, 17th Floor, New York, New York 10038, Telephone (212) 670-0432.
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from the Annual Report on
Form 10-K of Merrill Lynch & Co., Inc. and subsidiaries for the year ended
December 29, 2000 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports (each of which expressed an unqualified
opinion and which report on the consolidated financial statements included an
explanatory paragraph for the change in accounting method in 1998 for certain
internal-use software development costs to conform with Statement of Position
98-1), which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in the Quarterly Reports on Form 10-Q which are incorporated herein by
reference, Deloitte & Touche LLP have applied limited procedures in accordance
with professional standards for a review of such information. However, as
stated in their reports included in each of the Quarterly Reports on Form 10-Q
and incorporated by reference herein, they did not audit and they do not
express an opinion on that interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted in
light of the limited nature of the review procedures applied. Deloitte & Touche
LLP are not subject to the liability provisions of Section 11 of the Securities
Act of 1933, as amended, for their reports on the unaudited interim financial
information because those reports are not "reports" or a "part" of the
Registration Statement prepared or certified by an accountant within the
meaning of Sections 7 and 11 of the Securities Act of 1933, as amended.
38
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ The information in this prospectus is not complete and may be changed. We +
+ may not sell these securities until the registration statement filed with +
+ the Securities and Exchange Commission is effective. This prospectus is +
+ not an offer to sell these securities and it is not soliciting an offer to +
+ buy these securities in any state where the offer and sale is not +
+ permitted. +
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
Preliminary Prospectus dated February 25, 2002
PROSPECTUS
- ----------
[LOGO]
Merrill Lynch & Co., Inc.
Structured Yield Product Exchangeable for Stock/SM/
STRYPES/SM/
-----------------
Offering of the STRYPES: Distributions at Maturity:
. We will offer from time to time . On the stated maturity date of
our STRYPES, which are senior each series of STRYPES, or any
debt securities of ML&Co. that earlier date described in the
are exchangeable into the applicable prospectus
common stock or other supplement, we will pay and
securities of an unaffiliated discharge the STRYPES by
company. delivering to you a number of
shares of common stock or other
. We will offer the STRYPES in securities of an unaffiliated
series and on terms determined company or property determined
by market conditions at the in accordance with a payment
time of sale. We will describe formula all as described in the
these terms in the prospectus prospectus supplement.
supplement used to offer the
specific series of STRYPES. . Instead of delivering shares of
common stock or other
. Each series of STRYPES may be securities or property, we may
listed on a national securities deliver cash, or a combination
exchange described in the of cash and the common stock or
prospectus supplement. other securities, with an equal
value.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
-----------------
The date of this prospectus is , 2002.
/SM/Service mark of Merrill Lynch & Co., Inc.
MERRILL LYNCH & CO., INC.
We are a holding company that, through our U.S. and non-U.S. subsidiaries
and affiliates such as Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Merrill Lynch Government Securities Inc., Merrill Lynch Capital Services, Inc.,
Merrill Lynch International, Merrill Lynch Capital Markets Bank Ltd., Merrill
Lynch Investment Managers, L.P., Merrill Lynch Investment Managers Limited,
Merrill Lynch Bank U.S.A., Merrill Lynch Bank & Trust Co. and Merrill Lynch
International Bank Limited, provides investment, financing, advisory,
insurance, and related products and services on a global basis, including:
. securities brokerage, trading and underwriting;
. investment banking, strategic services, including mergers and
acquisitions, and other corporate finance advisory activities;
. asset management;
. origination, brokerage, dealer and related activities in swaps, options,
forwards, exchange-traded futures, other derivatives and foreign
exchange products;
. securities clearance and settlement services;
. equity, debt, foreign exchange, commodities and economic research;
. banking, trust and lending services, including commercial and mortgage
lending and related services;
. insurance underwriting and sales; and
. investment advisory and related recordkeeping services.
We provide these products and services to a wide array of clients, including
individual investors, small businesses, corporations, governments, governmental
agencies and financial institutions.
Our principal executive office is located at 4 World Financial Center, New
York, New York 10080; our telephone number is (212) 449-1000.
If you want to find more information about us, please see the sections
entitled "Where You Can Find More Information" and "Incorporation of
Information We File with the SEC" in this prospectus.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the STRYPES for general
corporate purposes, unless otherwise specified in the prospectus supplement
relating to a specific issue of STRYPES. Our general corporate purposes may
include financing the activities of our subsidiaries, financing our assets and
those of our subsidiaries, lengthening the average maturity of our borrowings
and financing acquisitions. Until we use the net proceeds from the sale of any
of our securities for general corporate purposes, we will use the net proceeds
to reduce our short-term indebtedness or for temporary investments. We expect
that we will, on a recurrent basis, engage in additional financings as the need
arises to finance our growth, through acquisitions or otherwise, or to lengthen
the average maturity of our borrowings. To the extent that STRYPES being
purchased for resale by our subsidiary Merrill Lynch, Pierce, Fenner & Smith
Incorporated, referred to in this prospectus as MLPF&S, are not resold, the
aggregate proceeds that we and our subsidiaries would receive would be reduced.
2
RATIO OF EARNINGS TO FIXED CHARGES
In July 2000, ML&Co. acquired Herzog, Heine, Geduld, Inc. ("Herzog") through
an exchange offer followed by a merger of a wholly-owned subsidiary of ML&Co.
with and into Herzog. The merger was accounted for as a pooling-of-interests
under generally accepted accounting principles in the United States of America.
The following information for the fiscal years 1996 through 1999 has been
restated by the management of ML&Co. to give effect to the merger.
The following table sets forth our ratios of earnings to fixed charges for
the periods indicated:
Year Ended Last Friday in December For the Nine
---------------------------------- Months Ended
1996 1997 1998 1999 2000 September 28, 2001
---- ---- ---- ---- ---- ------------------
Ratio of earnings to fixed charges 1.2 1.2 1.1 1.3 1.3 1.2
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of earnings from continuing operations before income taxes
and fixed charges, excluding amortization of capitalized interest and preferred
security dividend requirements. "Fixed charges" consist of interest costs, the
interest factor in rentals, amortization of debt issuance costs, preferred
security dividend requirements of subsidiaries, and amortization of capitalized
interest.
DESCRIPTION OF THE STRYPES
Each issue of STRYPES will be a series of senior debt securities of ML&Co.
to be issued under an indenture (the "1983 Indenture"), dated as of April 1,
1983, as amended and restated, between ML&Co. and JPMorgan Chase Bank, as
trustee. For each series of STRYPES, ML&Co. and the trustee will enter into a
supplemental indenture which will further amend and supplement the 1983
Indenture. Any supplemental indenture relating to a specific series of STRYPES
and the 1983 Indenture are collectively referred to as the indenture. The
following summary of the material provisions of the indenture is not complete
and is qualified in its entirety by reference to the indenture.
Terms of the STRYPES
The supplemental indenture will provide that ML&Co. may issue STRYPES of the
related series from time to time under the indenture, up to a specified
aggregate issue price, upon the satisfaction of certain conditions before
issuance. The supplemental indenture will establish the terms of the related
series of STRYPES, including:
. the issue price per STRYPES;
. the date on which the STRYPES will mature;
. the consideration deliverable or payable with respect to each STRYPES,
whether at maturity or upon earlier acceleration, and the formula or
other method by which the amount of any consideration deliverable or
payable will be determined;
. any fixed or variable rate or rates per annum;
. the interest payment dates;
. any provisions for redemption, the redemption price and any remarketing
arrangements;
. any sinking fund requirements;
3
. whether the STRYPES are denominated or provide for payment in United
States dollars or a foreign currency or units of two or more foreign
currencies;
. whether and under what circumstances ML&Co. will pay additional amounts
("Additional Amounts") under any STRYPES held by a person who is not a
U.S. person for specified taxes, assessments or other governmental
charges and whether ML&Co. has the option to redeem the affected STRYPES
rather than pay any Additional Amounts;
. the title and series designation;
. whether the STRYPES are to be issued in global form;
. the obligation of ML&Co. to pay and discharge the STRYPES at maturity by
delivery of a number of shares of common stock or other securities or
property (the "Underlying Securities") of an unaffiliated corporation or
cash or a combination of cash and Underlying Securities with an equal
value;
. the formula or other method by which the consideration deliverable or
payable at maturity of the STRYPES or any earlier date will be
determined and the terms and conditions upon which any payment and
discharge of the STRYPES will be effected.
The terms of the specific series of STRYPES being offered will be described
in the applicable prospectus supplement.
Under the indenture, ML&Co., without the consent of holders of any STRYPES,
is permitted to issue STRYPES with terms different from those of STRYPES
previously issued and to reopen a previous series of STRYPES and issue
additional STRYPES of that series.
Issue price and interest, premium and Additional Amounts, if any, and
Underlying Securities will be payable or deliverable in the manner, at the
places and subject to the restrictions set forth in the indenture, the
applicable supplemental indenture, the form of the STRYPES and the applicable
prospectus supplement, provided that payment of any interest and any Additional
Amounts may be made at the option of ML&Co. by check mailed to the holders of
registered STRYPES at their registered addresses.
Holders may present the STRYPES for exchange, and may present registered
STRYPES for registration of transfer, in the manner, at the places and subject
to the restrictions set forth in the indenture, the applicable supplemental
indentures, the form of the STRYPES and the applicable prospectus supplement.
There will be no service charge for any registration of transfer or exchange of
STRYPES, but ML&Co. may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection with a transfer or exchange.
Ranking
The STRYPES will be unsecured obligations and will rank equally with all
other unsecured and unsubordinated indebtedness of ML&Co. Because ML&Co. is a
holding company, the rights of ML&Co. and its creditors, including the holders
of the STRYPES, to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is necessarily
subject to the prior claims of creditors of the subsidiary, except to the
extent that a bankruptcy court may recognize the claims of ML&Co. itself as a
creditor of the subsidiary. In addition, dividends, loans and advances from
certain subsidiaries, including MLPF&S, to ML&Co. are restricted by net capital
requirements under the Securities Exchange Act of 1934 and under rules of
exchanges and other regulatory bodies.
Merger and Consolidation
ML&Co. may consolidate or merge with or into any other corporation and
ML&Co. may sell, lease or convey all or substantially all of its assets to any
corporation, provided that:
. the resulting corporation, if other than ML&Co., is a corporation
organized and existing under the laws of the United States of America or
any U.S. state and assumes all of ML&Co.'s obligations to:
4
. pay or deliver the Underlying Securities, cash with an equal value or
a combination of both in respect of, any interest and Additional
Amounts on, and any other amounts payable with respect to, the
STRYPES of each series; and
. perform and observe all of ML&Co.'s obligations under the indenture,
and
. ML&Co. or the successor corporation, as the case may be, is not,
immediately after any consolidation or merger, in default under the
indenture.
Limitations Upon Liens
ML&Co. may not, and may not permit any majority-owned subsidiary to, create,
assume, incur or permit to exist any indebtedness for borrowed money secured by
a pledge, lien or other encumbrance, other than any liens specifically
permitted by the indenture, on the Voting Stock owned directly or indirectly by
ML&Co. of any majority-owned subsidiary, other than a majority-owned subsidiary
which, at the time of incurrence of the secured indebtedness, has a net worth
of less than $3,000,000, unless the outstanding STRYPES are secured equally and
ratably with the secured indebtedness.
"Voting Stock" is defined in the indenture as the stock of the class or
classes having general voting power under ordinary circumstances to elect at
least a majority of the board of directors, managers or trustees of a
corporation provided that, for the purposes of the indenture, stock that
carries only the right to vote conditionally on the occurrence of an event is
not considered Voting Stock whether or not the event has happened.
Limitations on Disposition of Voting Stock of, and Merger and Sale of Assets
by, MLPF&S
ML&Co. may not sell, transfer or otherwise dispose of any Voting Stock of
MLPF&S or permit MLPF&S to issue, sell or otherwise dispose of any of its
Voting Stock, unless, after giving effect to the transaction, MLPF&S remains a
Controlled Subsidiary.
"Controlled Subsidiary" is defined in the indenture to mean a corporation
more than 80% of the outstanding shares of Voting Stock of which are owned
directly or indirectly by ML&Co.
In addition, ML&Co. may not permit MLPF&S to:
. merge or consolidate, unless the surviving company is a Controlled
Subsidiary, or
. convey or transfer its properties and assets substantially as an
entirety, except to one or more Controlled Subsidiaries.
Events of Default
Unless otherwise specified in a prospectus supplement, each of the following
will be an Event of Default under the indenture with respect to each series of
STRYPES:
. failure to pay and discharge the STRYPES of that series with the
Underlying Securities or, if ML&Co. so elects, to pay an equivalent
amount in cash instead of Underlying Securities when due;
. failure to pay the redemption price or any redemption premium with
respect to any STRYPES of that series when due;
. failure to deposit any sinking fund payment, when and as due by the
terms of any STRYPES of that series;
. failure to pay any interest on or any Additional Amounts in respect of
any STRYPES of that series when due, and continuing for 30 days;
5
. failure to perform any other obligation of ML&Co. contained in the
indenture for the benefit of that series or in the STRYPES of that
series, continuing for 60 days after written notice has been given to
ML&Co. by the trustee, or to ML&Co. and the trustee by the holders of at
least 10% of the aggregate issue price of the outstanding STRYPES of
that series, as provided in the indenture or in the STRYPES of that
series;
. specified events in bankruptcy, insolvency or reorganization of ML&Co.;
and
. any other Event of Default provided with respect to STRYPES of that
series.
Unless otherwise specified in a prospectus supplement, if an Event of
Default occurs and is continuing for any series of STRYPES, the trustee or the
holders of at least 25% in aggregate issue price of the outstanding STRYPES of
that series, by notice as provided in the indenture, may declare an amount
equal to the aggregate issue price of all the STRYPES of that series, the
accrued interest on the STRYPES and all Additional Amounts payable with respect
to the STRYPES of that series immediately due and payable in cash. The trustee
or the holders of at least 25% in aggregate issue price of the outstanding
STRYPES may declare these amounts due immediately as described in the preceding
sentence without any other declaration or other action by the trustee or any
holder. At any time after a declaration of acceleration, but before the trustee
has obtained a judgment or decree based on acceleration, the holders of a
majority of the aggregate issue price of the outstanding STRYPES of that series
may, under certain circumstances, rescind and annul any acceleration if all
Events of Default, other than the non-payment of the amount equal to the
aggregate issue price of all the STRYPES of that series due by reason of
acceleration, have been cured or waived as provided in the indenture. See
"Modification and Waiver" below.
The holders of a majority in aggregate issue price of the outstanding
STRYPES of a series may direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any trust
power conferred on the trustee with respect to the STRYPES of that series,
provided that any direction is not in conflict with any rule of law or the
indenture. Subject to the provisions of the indenture relating to the duties of
the trustee, in case an Event of Default shall occur and be continuing, the
trustee will be under no obligation to exercise any of its rights or powers
under the indenture at the request or direction of any of the holders of
STRYPES of any series, unless the holders of that series shall have offered to
the trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with any request or
direction.
Unless otherwise described in the applicable prospectus supplement, the
STRYPES and other series of senior debt securities issued under the indenture
will not have the benefit of any cross-default provisions with other
indebtedness of ML&Co.
ML&Co. will be required to furnish to the trustee annually a statement as to
the fulfillment by ML& Co. of its obligations under the indenture.
Modification and Waiver
Unless otherwise specified in a prospectus supplement, ML&Co. and the
trustee may modify and amend provisions in the indenture affecting a series of
STRYPES with the consent of holders of at least 66 2/3% in
aggregate issue price of the series of STRYPES affected. However, without the
consent of each holder of any STRYPES affected, no amendment or modification to
any indenture may:
. change the maturity date or the stated maturity date or any installment
of interest or Additional Amounts on any STRYPES or any premium payable
on redemption, or change the redemption price,
. reduce the amount of Underlying Securities payable with respect to any
STRYPES or reduce the amount of cash, or cash and Underlying Securities,
payable instead of Underlying Securities,
6
. reduce the amount of interest or Additional Amounts payable on any
STRYPES or reduce the amount of cash payable with respect to any STRYPES
upon acceleration,
. change the place or currency of payment of interest or Additional
Amounts on, or any amount of cash payable with respect to, any STRYPES,
. impair the right to institute suit for the enforcement of any payment on
any STRYPES, including the payment of Underlying Securities with respect
to any STRYPES,
. reduce the percentage of the aggregate issue price of outstanding
STRYPES of that series, the consent of whose holders is required to
modify or amend the indenture,
. reduce the percentage of the aggregate issue price of outstanding
STRYPES of that series necessary for waiver of compliance with certain
provisions of the indenture or for waiver of certain defaults, or
. modify the provisions with respect to modification and waiver.
Except as provided in the indenture, no modification of or amendment to the
indenture may adversely affect the rights of a holder of any other senior debt
security without the consent of each holder affected.
The holders of a majority of the aggregate issue price of each series of
STRYPES may waive compliance by ML&Co. with certain restrictive provisions of
the indenture. Any past default with respect to any series of STRYPES may be
waived by the holders of a majority in aggregate issue price of the outstanding
STRYPES of that series, except a default:
. in the payment of the Underlying Securities or any other amounts due and
payable or deliverable under the STRYPES of that series; or
. in respect of an obligation of ML&Co. contained in, or a provision of,
the indenture which cannot be modified under the terms of that indenture
without the consent of each holder of each outstanding series of STRYPES
affected.
Governing Law
The indenture and the STRYPES will be governed by, and construed in
accordance with, the laws of the State of New York.
PLAN OF DISTRIBUTION
ML&Co. may sell STRYPES to the public solely through MLPF&S or through a
syndicate of underwriters of which MLPF&S is a member. The accompanying
prospectus supplement describes the terms of the STRYPES being offered,
including the public offering or purchase price, any discounts and commissions
to be allowed or paid, all other items constituting underwriting compensation,
the discounts and commissions to be allowed or paid to dealers, if any, and the
exchanges, if any, on which the STRYPES will be listed. Under certain
circumstances, ML&Co. may repurchase STRYPES and reoffer them to the public as
set forth above. ML&Co. may also arrange for repurchases and resales of the
STRYPES by dealers.
The underwriting of STRYPES will conform to the requirements set forth in
the applicable sections of Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc.
7
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC. Our
SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. The address of the SEC's Internet site is provided solely
for the information of prospective investors and is not intended to be an
active link. You may also read and copy any document we file by visiting 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 further
information about the public reference rooms. You may also inspect our SEC
reports and other information at the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
We have filed a registration statement on Form S-3 with the SEC covering the
STRYPES and other securities. For further information on ML&Co. and the
STRYPES, you should refer to our registration statement and its exhibits. This
prospectus summarizes material provisions of contracts and other documents that
we refer you to. Because the prospectus may not contain all the information
that you may find important, you should review the full text of these
documents. We have included copies of these documents as exhibits to our
registration statement.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file with
them, which means:
. incorporated documents are considered part of the prospectus;
. we can disclose important information to you by referring you to those
documents; and
. information that we file with the SEC will automatically update and
supersede this incorporated information.
We incorporate by reference the documents listed below which were filed with
the SEC under the Exchange Act (other than information in the documents that is
deemed not to be filed):
. annual report on Form 10-K for the year ended December 29, 2000;
. quarterly reports on Form 10-Q for the periods ended March 30, 2001,
June 29, 2001 and September 28, 2001; and
. current reports on Form 8-K dated January 23, 2001, February 28, 2001,
April 18, 2001, April 30, 2001, May 2, 2001, May 4, 2001, May 23, 2001,
June 1, 2001, June 26, 2001, June 29, 2001, July 5, 2001, July 17, 2001,
July 24, 2001, August 1, 2001, August 3, 2001, August 31, 2001,
September 11, 2001, September 28, 2001, October 18, 2001, October 23,
2001, October 31, 2001, November 1, 2001, November 2, 2001, November 21,
2001, November 30, 2001, January 9, 2002, January 16, 2002, January 23,
2002, January 29, 2002, February 1, 2002, February 8, 2002, February 11,
2002 and February 21, 2002.
We also incorporate by reference each of the following documents that we
will file with the SEC after the date of this prospectus until this offering is
completed or after the date of this initial registration statement and before
the effectiveness of the registration statement:
. reports filed under Sections 13(a) and (c) of the Exchange Act;
. definitive proxy or information statements filed under Section 14 of the
Exchange Act in connection with any subsequent stockholders' meeting; and
. any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by reference
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
these securities in any jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
8
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Mr. Lawrence
M. Egan, Jr., Corporate Secretary's Office, Merrill Lynch & Co., Inc.,
222 Broadway, 17th Floor, New York, New York 10038, Telephone: (212) 670-0432.
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from the Annual Report on
Form 10-K of Merrill Lynch & Co., Inc. and subsidiaries for the year ended
December 29, 2000 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports (each of which expressed an unqualified
opinion and which report on the consolidated financial statements included an
explanatory paragraph for the change in accounting method in 1998 for certain
internal-use software development costs to conform with Statement of Position
98-1), which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in the Quarterly Reports on Form 10-Q which are incorporated herein by
reference, Deloitte & Touche LLP have applied limited procedures in accordance
with professional standards for a review of such information. However, as
stated in their reports included in each of the Quarterly Reports on Form 10-Q
and incorporated by reference herein, they did not audit and they do not
express an opinion on that interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted in
light of the limited nature of the review procedures applied. Deloitte & Touche
LLP are not subject to the liability provisions of Section 11 of the Securities
Act of 1933, as amended, for their reports on the unaudited interim financial
information because those reports are not "reports" or a "part" of the
Registration Statement prepared or certified by an accountant within the
meaning of Sections 7 and 11 of the Securities Act of 1933, as amended.
9
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ The information in this prospectus is not complete and may be changed. We +
+ may not sell these securities until the registration statement filed with +
+ the Securities and Exchange Commission is effective. This prospectus is +
+ not an offer to sell these securities and it is not soliciting an offer to +
+ buy these securities in any state where the offer or sale is not permitted. +
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
Preliminary Prospectus dated February 25, 2002
PROSPECTUS
- ----------
[LOGO]
% Trust Originated Preferred Securities
("TOPrS")
Merrill Lynch Preferred Capital Trust VI
Liquidation Amount $25 per TOPrS
guaranteed to the extent described in this prospectus by
Merrill Lynch & Co., Inc.
----------------
The TOPrS: Distributions on the TOPrS:
. TOPrS represent preferred ownership . Each TOPrS pays a quarterly distribution at
interests in the assets of ML Trust. the rate of %, or $ per TOPrS per year, if
The sole assets of ML Trust will be the ML Partnership pays distributions on the
partnership preferred securities of ML partnership preferred securities.
Partnership which represent preferred
ownership interests in the assets of ML . If ML Trust and ML Partnership redeem the
Partnership. TOPrS and the partnership preferred
securities, you will receive $25 plus
. The sole assets of ML Partnership will accumulated distributions for each TOPrS you
be the debentures issued by ML&Co. and own.
its affiliates and cash and other
permitted securities described in this . If ML Trust redeems the TOPrS or is
prospectus. liquidated, but ML Partnership does not
redeem the partnership preferred securities,
. The TOPrS and the partnership preferred you will receive the partnership preferred
securities do not have any stated securities rather than cash.
maturity.
. ML&Co. will guarantee the TOPrS to the
. ML Trust will apply to have the TOPrS extent described in this prospectus.
trade on the New York Stock Exchange
starting within 30 days after the TOPrS
are issued.
. Closing Date:
Investing in the TOPrS involves risks that are described in the "Risk
Factors" section beginning on page 6.
Per TOPrS Total
--------- -----
Public offering price..................................... $25.00 $
Proceeds to ML Trust...................................... $25.00 $
If you purchase the TOPrS and settlement occurs after , 20 ,
you will be required to pay accumulated distributions on the aggregate
liquidation amount of your TOPrS at a rate of % per year from that date.
Expenses of the offering and underwriting commissions of $ per TOPrS, or
$ per TOPrS for sales of more than 10,000 TOPrS to a single purchaser,
will be paid by ML&Co.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
----------------
Merrill Lynch & Co.
----------------
The date of this prospectus is , 2002.
/SM/ "TOPrS" and "Trust Originated Preferred Securities" are service marks
owned by Merrill Lynch & Co., Inc.
TABLE OF CONTENTS
Page
----
Summary Information--Q&A........................................................................ 3
Risk Factors.................................................................................... 6
Merrill Lynch & Co., Inc........................................................................ 10
Use of Proceeds................................................................................. 10
Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends............................................................................... 11
Merrill Lynch Preferred Capital Trust VI........................................................ 12
Merrill Lynch Preferred Funding VI, L.P......................................................... 14
Description of the TOPrS........................................................................ 16
Description of the Trust Guarantee.............................................................. 29
Description of the Partnership Preferred Securities............................................. 33
Description of the Partnership Guarantee........................................................ 46
United States Federal Income Taxation........................................................... 49
Underwriting.................................................................................... 54
Where You Can Find More Information............................................................. 55
Incorporation of Information We File with the SEC............................................... 56
Legal Matters................................................................................... 57
Experts......................................................................................... 57
Index of Defined Terms.......................................................................... 58
Index to Financial Statements................................................................... F-1
2
SUMMARY INFORMATION--Q&A
This summary includes questions and answers that highlight selected
information from the prospectus to help you understand the TOPrS. This summary
may not contain all the information that may be important to you. You should
carefully read this prospectus to fully understand the terms of the TOPrS, as
well as the tax and other considerations that should be important to you in
making a decision about whether to invest in the TOPrS. You should pay special
attention to the "Risk Factors" section to determine whether an investment in
the TOPrS is appropriate for you.
In this prospectus:
. references to "ML&Co.", "we", "us" and "our" are to Merrill Lynch & Co.,
Inc.,
. references to "ML Trust" are to Merrill Lynch Capital Preferred Trust
VI, and
. references to "ML Partnership" are to Merrill Lynch Preferred Funding
VI, L.P.
What are the TOPrS?
Each TOPrS is a preferred interest in the assets of ML Trust. We will own
all of the common securities of ML Trust. The sole assets of ML Trust will be
the partnership preferred securities issued by ML Partnership, which represent
preferred ownership interests in the assets of ML Partnership. ML Partnership
will use substantially all of the proceeds from the sale of its partnership
preferred securities and our capital contribution as general partner of ML
Partnership to purchase debentures from us and one or more of our affiliates.
What is the ML Trust?
ML Trust is a business trust established under Delaware law that exists for
the sole purpose of issuing the TOPrS and investing the proceeds and engaging
in incidental activities.
What is ML Partnership?
ML Partnership is a limited partnership established under Delaware law. The
assets of ML Partnership will be:
. the debentures issued by us and our affiliates; and
. cash and securities not issued by us or our affiliates.
We are the general partner of ML Partnership.
What distributions will I receive on the TOPrS?
The TOPrS provide for a quarterly cash distribution at the rate of %
or $ per year for each TOPrS you own. Distributions are payable on
each , , and , beginning ,
. Distributions will accumulate from the date ML Trust originally
issues the TOPrS. Because the sole assets of ML Trust will be the partnership
preferred securities of ML Partnership and substantially all of ML
Partnership's assets will be the debentures issued by us and our affiliates, ML
Trust's ability to pay distributions on the TOPrS is ultimately dependent upon
our and our affiliates' ability to make interest payments on those debentures.
If we or our affiliates exercise our right to defer making an interest payment
on our debentures then held by ML Partnership, ML Partnership will not be able
to pay any distributions on its preferred partnership securities and ML Trust
will not be able to pay quarterly distributions to you until we resume making
interest payments on those debentures.
In addition, ML Partnership is required to make distributions on its
partnership preferred securities only if they are declared by us as general
partner of ML Partnership. As a result, you may not receive any distributions
on your TOPrS if ML Trust does not receive distributions on the partnership
preferred securities.
What are the debentures?
The debentures are long term loans made by ML Partnership to us or our
affiliates from time to time. These debentures will be substantially all of ML
Partnership's assets. The debentures that we issue to ML Partnership will be
subordinated unsecured obligations of ours and will rank equally with all of
our other subordinated unsecured obligations. The
3
debentures issued by our affiliates to ML Partnership will be unsecured
obligations of our affiliates and we will guarantee those obligations on a
subordinated basis. We and our affiliates may exercise our right to defer
interest payments on the debentures for a period of not more than six
consecutive calendar quarters.
Can the TOPrS be redeemed?
Yes. If ML Partnership redeems the partnership preferred securities, each
TOPrS will be redeemed for $25 plus any accumulated and unpaid distributions to
the date of redemption. ML Partnership can redeem the partnership preferred
securities in whole or in part from time to time on or after .
The trustees of ML Trust can elect to liquidate ML Trust and distribute the
partnership preferred securities to you if at any time the specified changes in
U.S. tax law or U.S. investment company law described in this prospectus occur.
Additionally, we, as general partner of ML Partnership, have the right to
redeem the partnership preferred securities and you will receive cash from the
subsequent automatic redemption of the TOPrS if at any time the specified
changes in U.S. tax law or U.S. investment company law described in this
prospectus occur.
Neither the partnership preferred securities nor the TOPrS can be redeemed
at any time at the option of their holders. Neither the TOPrS nor the
partnership preferred securities have any scheduled maturity.
Are there any risks associated with my investment?
Yes, an investment in the TOPrS is subject to risk. Please refer to the
section entitled "Risk Factors" in this prospectus for a description of these
risks.
What happens if ML Trust doesn't pay distributions on the TOPrS?
If you have not received a distribution on the TOPrS for any calendar
quarter then until all scheduled quarterly distributions are paid or set aside
for payment to you, we may not declare or pay dividends on, acquire, or make a
liquidation payment with respect to, any of our outstanding capital stock. In
addition, we will not permit any of our finance subsidiaries to make any
dividend payment on, any distribution with respect to, any acquisition of or
any liquidation payment with respect to, any of their outstanding preferred
securities.
This limitation prevents us from paying cash or other dividends to the
shareholders of our capital stock if payments are not being made on the TOPrS,
any debenture issued by us or our affiliates and held by ML Partnership or the
guarantees. However, these provisions will not restrict:
. our ability to pay dividends or distributions on our capital stock in
shares of, or options, warrants or rights to subscribe for or purchase
shares of our capital stock;
. our ability to convert or exchange our common stock of one class into
our common stock of another class;
. our ability to redeem or purchase any rights under a rights agreement
described in this prospectus or issue preferred stock under those
rights; and
. the ability of us and our affiliates to purchase our capital stock in
connection with transactions for the account of customers of ours or our
affiliates or in connection with the distribution or trading of our
capital stock.
What are the guarantees?
We will guarantee, to the extent described in this prospectus:
. declared distributions by ML Partnership to ML Trust and distribution of
quarterly payments on the TOPrS by ML Trust to you to the extent ML
Trust receives distributions on the partnership preferred securities;
. the redemption amount due to you if ML Trust redeems the TOPrS;
. the liquidation amount of the TOPrS if ML Trust is liquidated; and
4
. interest payments on debentures issued by our affiliates and held by ML
Partnership.
However, these guarantees do not apply to either:
. current distributions on the partnership preferred securities unless and
until ML Partnership declares distributions out of funds legally
available for payment; or
. liquidating distributions on the partnership preferred securities unless
ML Partnership has assets available for payment.
If ML Partnership does not declare distributions on the partnership
preferred securities, ML Trust will not have sufficient funds to pay
distributions on the TOPrS. In that case, you will have no right to receive
those distributions because our guarantee does not cover the non-payment of
distributions on the partnership preferred securities unless the distributions
are declared.
Our obligations under the guarantees are subordinate and junior in right of
payment to all other of our liabilities and rank equally with our most senior
preferred stock and similar guarantees of ours with respect to previous and
future issues of TOPrS and other preferred stock by any other of our finance
subsidiaries.
What happens if ML Trust is liquidated?
If ML Trust is liquidated, other than in connection with any change in U.S.
tax or investment company law described above, for each TOPrS you own, you will
be entitled to receive $25 plus any accumulated and unpaid distributions per
TOPrS.
Do I have voting rights?
Generally, you will not have any voting rights, except under the limited
circumstances described below. The holders of a majority of the TOPrS, however,
subject to certain requirements, have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the property
trustee, or direct the exercise of any trust or power conferred upon the
property trustee.
In what form will the TOPrS be issued?
The TOPrS will be issued in the form of a global certificate or certificates
registered in the name of Cede & Co., as nominee for The Depository Trust
Company also known as DTC. This means you will not receive a certificate for
your TOPrS. Your interests in the TOPrS will be evidenced by, and transfers of
the TOPrS will be effected only through, records maintained by the participants
in DTC.
Can you tell me more about ML&Co.?
Merrill Lynch & Co., Inc. is a holding company. Our subsidiary and
affiliated companies provide investment, financing, insurance and related
products on a global basis. Our principal executive offices are located at 4
World Financial Center, New York, New York 10080. Our telephone number is (212)
449-1000. For information about us, see the section "Merrill Lynch & Co., Inc."
in this prospectus. You should also read the other documents we have filed with
the SEC, which you can find by referring to the section entitled "Where You Can
Find More Information" in this prospectus.
Will the TOPrS be listed on an exchange?
ML Trust has applied to list the TOPrS on the NYSE under the trading symbol
" ". If approved for listing, trading on the NYSE will begin within 30 days
after ML Trust issues the TOPrS. The listing of the TOPrS will not necessarily
ensure that a liquid trading market will be available for the TOPrS.
5
RISK FACTORS
Your investment in the TOPrS will involve risks. You should carefully
consider the following discussion of risks before deciding whether an
investment in the TOPrS is suitable for you.
You will only receive distributions if distributions on the partnership
preferred securities are declared
ML Trust's ability to pay distributions on the TOPrS to you is dependent
upon its receipt of distributions on the partnership preferred securities. If
we or our affiliates defer or fail to make interest or principal payments on
the debentures and we fail to make guarantee payments on the guarantees, ML
Partnership will lack the funds necessary to pay distributions on the
partnership preferred securities. If ML Partnership does not pay current
distributions on the partnership preferred securities, either because we, as
the general partner, did not declare distributions to be made or because ML
Partnership lacks sufficient funds, ML Trust will not have funds to make
current distributions on the TOPrS. If ML Trust does not make payments to you
on the TOPrS, we will be restricted from, among other things, paying cash or
certain other dividends on our capital stock.
There may be tax consequences to you if we fail to pay you distributions
As a holder of the TOPrS, each of which represents a preferred ownership
interest in the assets of ML Trust, even if ML Partnership fails to pay current
distributions on the partnership preferred securities, you will be required to
accrue income, for U.S. federal income tax purposes, on the cumulative deferred
distributions and accumulated interest allocable to your proportionate share of
the partnership preferred securities held by ML Trust. As a result, you will
recognize income for U.S. federal income tax purposes in advance of the receipt
of cash and will not receive the cash from ML Trust related to that
distribution if you dispose of your TOPrS before the record date for the date
on which those distributions are made.
You may not receive full distributions if ML Partnership has insufficient
income or assets
You are subject to the risk that the quarterly or liquidating
distributions paid on the TOPrS will not match the rate paid on the assets held
by ML Partnership, including the debentures and any other securities acquired
by ML Partnership in the future.
This mismatch could occur if:
. we, as the general partner of ML Partnership, in our sole discretion,
do not declare distributions on the partnership preferred securities
or if ML Partnership receives insufficient amounts from its
investments to pay the additional compounded distributions that will
accumulate on any unpaid distributions,
. ML Partnership reinvests the proceeds received from the assets it
initially holds upon their retirement or at their maturities in other
assets which do not generate income sufficient to pay full
distributions in respect of the partnership preferred securities at a
rate of % per annum, or
. ML Partnership invests in assets that are not guaranteed by us and
that cannot be liquidated by ML Partnership for an amount sufficient
to pay any distributions on the partnership preferred securities in
full or if ML Partnership does not make any distributions.
ML Trust will not have sufficient funds available to pay you full
quarterly or liquidating distributions on the TOPrS if ML Partnership lacks
sufficient funds to make quarterly or liquidating distributions on the
partnership preferred securities in full.
6
Our obligations under the guarantees and our debentures are subordinated
Our obligations under the guarantees are unsecured and will rank in
priority of payment:
. subordinate and junior in right of payment to all of our other
liabilities; and
. equally with:
. any of our most senior preferred stock issued from time to time,
and
. similar guarantees of ours with respect to previous and future
issues of TOPrS and other series of preferred stock by any of our
finance subsidiaries.
This means that our obligations under the guarantees will not be paid
unless we can satisfy in full all of our other obligations ranking senior to
the guarantees.
Our obligations under our debentures issued to ML Partnership are
subordinate and junior in right of payment to all of our senior indebtedness.
At , we had outstanding senior indebtedness aggregating
approximately $ billion which would have ranked senior to our obligations
under the guarantees and our debentures.
There are no terms in the TOPrS, the partnership preferred securities,
the guarantees or the debentures that limit our ability to incur additional
indebtedness, including indebtedness that ranks senior to the guarantees.
ML Trust's and ML Partnership's investments are not diversified
Because the investments of ML Trust and ML Partnership are not
diversified, you are subject to a greater risk that their assets will not
generate sufficient income to pay current and liquidating distributions on the
TOPrS and the partnership preferred securities than you would with a vehicle
whose investments were diversified and less exposed to the risk that
non-payment on any particular investment asset would impair its ability to pay
distributions to holders of its capital stock.
Redemption of the TOPrS or the partnership preferred securities may affect your
return
If your TOPrS are exchanged for the partnership preferred securities,
. the trading value of the partnership preferred securities may be
lower than the trading value of the TOPrS which may result in a lower
return upon your sale of the partnership preferred securities; and
. you may incur an additional tax liability in excess of what you
originally contemplated.
Your TOPrS may be redeemed for cash or you may receive the partnership
preferred securities in exchange for your TOPrS in the event that:
(1)a change in U.S. tax law (including certain proposed changes in U.S.
tax law and certain challenges to the tax treatment of the TOPrS or
other transactions that are substantially similar to the issuance of
the TOPrS) occurs which results in more than an insubstantial risk
that:
. ML Trust is, or will be, subject to U.S. federal income tax on the
distributions it receives or accrues on the partnership preferred
securities;
. ML Partnership is, or will be, subject to U.S. federal income tax
on the income or interest payments it receives or accrues on the
investments it holds;
. ML Trust or ML Partnership is, or will be, subject to more than a
minimal amount of other taxes, duties or governmental charges; or
7
. interest payable by us or any of our affiliates on the debentures
then held by ML Partnership is not or will not be, deductible for
U.S. federal income tax purposes; or
(2)a change in U.S. investment company law occurs which requires ML
Trust or ML Partnership to register as an investment company.
Because you may receive partnership preferred securities upon the
occurrence of one of the events described above, in connection with your
investment decision with regard to the TOPrS, you are also making an investment
decision with regard to the partnership preferred securities. You should
carefully review all the information regarding the partnership preferred
securities contained in this prospectus.
Enforcement of certain rights by or on your behalf is limited
The special representative's ability to take action on your behalf under
our guarantee of the partnership preferred securities is limited, and it is
uncertain that you would receive a distribution on the TOPrS even if the
special representative took any action or was successful in recovering funds
under our guarantee. This is because under no circumstances will the special
representative have authority to cause the general partner to declare
distributions on the partnership preferred securities. As a result, although
the special representative may be able to enforce ML Partnership's creditors'
rights to accelerate and receive payments in respect of our and our affiliates'
debenture and our guarantee of those debentures, rather than being required to
declare and make distributions on the partnership preferred securities, ML
Partnership would be entitled to reinvest those payments in additional
debentures of ours and our affiliates, subject to satisfying the reinvestment
criteria.
If at any time:
. you have not received a distribution on the TOPrS for six
consecutive calendar quarters;
. an event of default occurs and is continuing on any debenture
issued by us or our affiliates and then held by ML Partnership;
and
. we default on our obligations under our guarantee of the TOPrS
or the partnership preferred securities;
then:
. you would rely on the enforcement by the property trustee of
its rights, as a holder of the partnership preferred
securities, against us, as guarantor of the partnership
preferred securities, including the right to direct the special
representative to enforce
(1)ML Partnership's creditors' rights and other rights with
respect to our and our affiliate's debentures and our
guarantee of those debentures,
(2)the rights of the holders of the partnership preferred
securities under our guarantee of the partnership preferred
securities, and
(3)the rights of the holders of the partnership preferred
securities to receive distributions, only if and to the
extent declared out of funds legally available for payment,
on the partnership preferred securities, and
. ML Trustee under our guarantee of the TOPrS will have the right
to enforce the terms of the guarantee.
You have limited voting rights
As a holder of the TOPrS you will have limited voting rights and will not
be entitled to vote to appoint, change, or to increase or decrease the number
of trustees of ML Trust. As holder of all of ML Trust's common securities,
those rights are ours exclusively.
8
There is no prior market for the TOPrS
This series of TOPrS constitutes a new issue of securities with no
established trading market. ML Trust has applied to list the TOPrS on the NYSE.
There can be no assurance that an active market for the TOPrS will develop or
be sustained in the future on the NYSE. Although the underwriters have
indicated to us that they intend to make a market in the TOPrS, as permitted by
applicable laws and regulations, they are not obligated to do so and may
discontinue any market-making activities at any time without notice.
Accordingly, there is no assurance that a trading market for the TOPrS will
exist and no assurance as to the liquidity of any trading market.
We will only sell the TOPrS to those investors for whom the TOPrS are
considered suitable in light of their particular circumstances.
9
MERRILL LYNCH & CO., INC.
We are a holding company that, through our U.S. and non-U.S. subsidiaries
and affiliates such as Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Merrill Lynch Government Securities Inc., Merrill Lynch Capital Services, Inc.,
Merrill Lynch International, Merrill Lynch Capital Markets Bank Ltd., Merrill
Lynch Investment Managers, L.P., Merrill Lynch Investment Managers Limited,
Merrill Lynch Bank U.S.A., Merrill Lynch Bank & Trust Co. and Merrill Lynch
International Bank Limited, provides investment, financing, advisory,
insurance, and related products and services on a global basis, including;
. securities brokerage, trading and underwriting;
. investment banking, strategic services, including mergers and
acquisitions, and other corporate finance advisory activities;
. asset management;
. origination, brokerage, dealer and related activities in swaps,
options, forwards, exchange-traded futures, other derivatives and
foreign exchange products;
. securities clearance and settlement services;
. equity, debt, foreign exchange, commodities and economic research;
. banking, trust and lending services, including commercial and
mortgage lending and related services;
. insurance underwriting and sales; and
. investment advisory and related recordkeeping services.
We provide these products and services to a wide array of clients,
including individual investors, small businesses, corporations, governments,
governmental agencies and financial institutions.
Our principal executive office is located at 4 World Financial Center,
New York, New York 10080; our telephone number is (212) 449-1000.
If you want to find more information about us, please see the sections
entitled "Where You Can Find More Information" and "Incorporation of
Information We File with the SEC" in this prospectus.
USE OF PROCEEDS
ML Trust will use the proceeds that it receives from the sale of the
TOPrS and its common securities to purchase the partnership preferred
securities, and those proceeds will be used by ML Partnership to invest in
debentures and other permitted investments. See "Description of the Partnership
Preferred Securities--Partnership Investments". We and our affiliates, the
issuers of the debentures, intend to use the net proceeds from the sale of the
debentures for general corporate purposes. Our general corporate purposes may
include financing the activities of our subsidiaries, financing our assets and
those of our subsidiaries, lengthening the average maturity of our borrowings
and financing acquisitions. Until we use the net proceeds from the sale of any
of our securities for general corporate purposes, we will use the net proceeds
to reduce our short-term indebtedness or for temporary investments. We expect
that we will, on a recurrent basis, engage in additional financings as the need
arises to finance our growth, through acquisitions or otherwise, or to lengthen
the average maturity of our borrowings. To the extent that TOPrS being
purchased for resale by MLPF&S are not resold, the aggregate proceeds that we
and our subsidiaries would receive would be reduced.
10
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
In July 2000, ML&Co. acquired Herzog, Heine, Geduld, Inc. ("Herzog")
through an exchange offer followed by a merger of a wholly-owned subsidiary of
ML&Co. with and into Herzog. The merger was accounted for as a
pooling-of-interests under generally accepted accounting principles in the
United States of America. The following information for the fiscal years 1996
through 1999 has been restated by the management of ML&Co. to give effect to
the merger.
The following table sets forth our ratios of earnings to fixed charges
and ratios of earnings to combined fixed charges and preferred stock dividends
for the periods indicated:
For the Nine
Year Ended Last Friday in December Months Ended
---------------------------------- September 28,
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- -------------
Ratio of earnings to fixed charges..... 1.2 1.2 1.1 1.3 1.3 1.2
Ratio of earnings to combined fixed
charges and preferred stock dividends 1.2 1.2 1.1 1.3 1.3 1.2
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of earnings from continuing operations before income taxes
and fixed charges, excluding amortization of capitalized interest and preferred
security dividend requirements. "Fixed charges" consist of interest costs, the
interest factor in rentals, amortization of debt issuance costs, preferred
security dividend requirements of subsidiaries, and amortization of capitalized
interest.
11
MERRILL LYNCH PREFERRED CAPITAL TRUST VI
Merrill Lynch Preferred Capital Trust VI is a statutory business trust
formed under the Delaware Business Trust Act, as amended, pursuant to a
declaration of trust and the filing of a certificate of trust with the
Secretary of State of the State of Delaware on December 7, 1998; the
declaration will be amended and restated in its entirety substantially in the
form filed as an exhibit to the registration statement of which this prospectus
is a part. The declaration will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended. Upon issuance of the TOPrS, the purchasers
of the TOPrS will own all the TOPrS issued by ML Trust. See "Description of the
TOPrS". ML&Co. will acquire ML Trust's common securities in an amount equal to
at least 3% of the total capital of ML Trust. ML Trust will use all the
proceeds derived from the issuance of the TOPrS and the common securities
(collectively, the "Trust Securities") to purchase the partnership preferred
securities from ML Partnership and, accordingly, the assets of ML Trust will
consist solely of the partnership preferred securities. ML Trust exists for the
exclusive purpose of:
. issuing the Trust Securities representing undivided beneficial
ownership interests in the assets of ML Trust,
. investing the gross proceeds of the Trust Securities in the
partnership preferred securities, and
. engaging in only those other activities necessary or incidental to
the foregoing purposes.
Under the declaration, there will initially be four trustees for ML Trust.
. Two regular trustees who will be individuals who are employees or
officers of or who are affiliated with ML&Co.
. A property trustee who will be a financial institution that is
unaffiliated with ML&Co. and is the indenture trustee for purposes of
compliance with the provisions of the Trust Indenture Act.
. The Delaware trustee who will be an entity that maintains its
principal place of business in the State of Delaware.
Initially, JPMorgan Chase Bank, a New York banking corporation, will act
as property trustee, and its affiliate, Chase Manhattan Bank USA, N.A., a
Delaware corporation, will act as Delaware trustee until, in each case, removed
or replaced by the holder of the common securities. For purposes of compliance
with the Trust Indenture Act, JPMorgan Chase Bank will also act as trustee
under the Trust Guarantee, as defined in this prospectus, as property trustee
under the declaration and as trustee under the indenture under which the ML&Co.
Debenture, as defined in this prospectus, is issued.
The property trustee will hold title to the partnership preferred
securities for the benefit of the holders of the Trust Securities, and the
property trustee will have the power to exercise all rights, powers and
privileges with respect to the partnership preferred securities under the
Amended and Restated Agreement of Limited Partnership to be entered into by
ML&Co. and ML Trust as the holder of the partnership preferred securities. In
addition, the property trustee will maintain exclusive control of the property
account which is a segregated non-interest bearing bank account to hold all
payments made in respect of the partnership preferred securities for the
benefit of the holders of the Trust Securities. The trust guarantee trustee
will hold the Trust Guarantee for the benefit of the holders of the TOPrS.
ML&Co., as the holder of all the common securities, will have the right to
appoint, remove or replace any of the trustees and to increase or decrease the
number of trustees, provided that at least one trustee shall be a Delaware
trustee, at least one trustee shall be the property trustee and at least one
trustee shall be a regular trustee. ML&Co. will pay all fees and expenses
related to the organization and operations of ML Trust, including any taxes,
duties, assessments or governmental charges of whatever nature imposed by the
United States or any other domestic taxing authority upon ML Trust, other than
withholding taxes, and the offering of the TOPrS and be responsible for all
debts and obligations of ML Trust, other than those obligations with respect to
the Trust Securities.
12
For so long as the TOPrS remain outstanding, ML&Co. will be obligated to:
. maintain 100% direct ownership of the common securities,
. cause ML Trust to remain a statutory business trust and not to
voluntarily dissolve, wind-up, liquidate or be terminated, except as
permitted by the declaration, and
. use its commercially reasonable efforts to ensure that ML Trust will
not be
(A)an investment company for purposes of the Investment Company Act
of 1940, as amended, or
(B)classified as other than a grantor trust for United States Federal
income tax purposes.
The rights of the holders of the TOPrS, including economic rights, rights
to information and voting rights, are as set forth in the declaration and the
Delaware Trust Act. See "Description of the TOPrS". The declaration and the
Trust Guarantee also incorporate by reference the terms of the Trust Indenture
Act.
The location of the principal executive office of ML Trust is c/o Merrill
Lynch & Co., Inc., 4 World Financial Center, New York, New York 10080, and its
telephone number is (212) 449-1000.
13
MERRILL LYNCH PREFERRED FUNDING VI, L.P.
Merrill Lynch Preferred Funding VI, L.P. is a limited partnership that
was formed under the Delaware Revised Uniform Limited Partnership Act, as
amended, on December 7, 1998 for the exclusive purposes of purchasing debt
securities of ML&Co. and wholly-owned subsidiaries of ML&Co. (the "Affiliate
Investment Instruments") and other permitted investments, with the proceeds
from the sale of partnership preferred securities to ML Trust and a capital
contribution from ML&Co. in exchange for the general partner interest in ML
Partnership. Under the certificate of limited partnership, as amended, and the
limited partnership agreement, ML&Co. is the sole general partner of ML
Partnership. Upon the issuance of the partnership preferred securities, which
securities represent limited partner interests in ML Partnership, ML Trust will
be the sole limited partner of ML Partnership. Contemporaneously with the
issuance of the partnership preferred securities, ML&Co. as general partner
will contribute capital to ML Partnership in an amount sufficient to establish
its initial capital account at an amount equal to at least 15% of the total
capital of ML Partnership.
ML Partnership is managed by ML&Co. as general partner and exists for the
sole purpose of:
. issuing its partnership interests,
. investing the proceeds from the sale of the partnership preferred
securities in Affiliate Investment Instruments and other eligible
debt securities, as described in this prospectus, and
. engaging in only those other activities necessary or incidental for
these purposes.
To the extent that aggregate payments to ML Partnership on its
investments exceed distributions accumulated or payable with respect to the
partnership preferred securities, ML Partnership may at times have excess funds
which shall be allocated to and may, in ML&Co.'s sole discretion, be
distributed to ML&Co.
For so long as the partnership preferred securities remain outstanding,
ML&Co. will be obligated under the limited partnership agreement:
. to remain the sole general partner of ML Partnership and to maintain
100% direct ownership of the general partner's interest in ML
Partnership, which interest will at all times represent at least 1%
of the total capital of ML Partnership,
. to cause ML Partnership to remain a limited partnership and not to
voluntarily dissolve, liquidate, wind-up or be terminated, except as
permitted by the limited partnership agreement, and
. to use its commercially reasonable efforts to ensure that ML
Partnership will not be,
. an investment company for purposes of the Investment Company Act or
. an association or a publicly traded partnership taxable as a
corporation for United States Federal income tax purposes.
ML&Co. or the then general partner may transfer its obligations as
general partner to a wholly-owned direct or indirect subsidiary of ML&Co.
provided that:
. the successor entity expressly accepts the transfer of the
obligations as general partner, and
. before any transfer, ML&Co. has received an opinion of nationally
recognized independent counsel to ML Partnership experienced in these
matters to the effect that:
(A)ML Partnership will be treated as a partnership for United States
Federal income tax purposes;
(B)any transfer would not cause ML Trust to be classified as an
association taxable as a corporation for United States Federal
income tax purposes;
14
(C)following any transfer, ML&Co. and the successor entity will be in
compliance with the Investment Company Act without being subject
to registration as an investment company; and
(D)any transfer will not adversely affect the limited liability of
the holders of the partnership preferred securities.
The rights of the holders of the partnership preferred securities,
including economic rights, rights to information and voting rights, are set
forth in the limited partnership agreement and the Delaware Limited Partnership
Act. See "Description of the Partnership Preferred Securities".
The limited partnership agreement provides that the general partner will
have liability for the fees and expenses of ML Partnership, including any
taxes, duties, assessments or governmental charges of whatever nature imposed
by the United States or any other domestic taxing authority upon ML
Partnership, other than withholding taxes, and be responsible for all debts and
obligations of ML Partnership, other than with respect to the partnership
preferred securities. Under Delaware law, assuming a limited partner in a
Delaware limited partnership such as ML Partnership, i.e., a holder of the
partnership preferred securities, does not participate in the control of the
business of the limited partnership, that limited partner will not be
personally liable for the debts, obligations and liabilities of the limited
partnership, whether arising in contract, tort or otherwise, solely by reason
of being a limited partner of the limited partnership, subject to any
obligation such limited partner may have to repay any funds that may have been
wrongfully distributed to it. ML Partnership's business and affairs will be
conducted by ML&Co. as general partner.
The location of the principal executive offices of ML Partnership is c/o
Merrill Lynch & Co., Inc., 4 World Financial Center, New York, New York 10080
and its telephone number is (212) 449-1000.
15
DESCRIPTION OF THE TOPrS
The TOPrS will be issued under the terms of the declaration. The
declaration will be qualified as an indenture under the Trust Indenture Act.
The property trustee, JPMorgan Chase Bank, will act as trustee for the TOPrS
under the declaration for purposes of compliance with the provisions of the
Trust Indenture Act. The terms of the TOPrS will include those stated in the
declaration and those made part of the declaration by the Trust Indenture Act.
The following summary of the material terms and provisions of the TOPrS is not
complete and is subject to, and qualified in its entirety by reference to, the
declaration, a copy of which is filed as an exhibit to the registration
statement of which this prospectus is a part, the Delaware Trust Act and the
Trust Indenture Act.
The TOPrS will be issued in fully registered form without coupons. The
TOPrS will not be issued in bearer form. See "--Book-Entry Only Issuance--The
Depository Trust Company".
The declaration authorizes the regular trustees of ML Trust to issue the
Trust Securities, which represent undivided beneficial ownership interests in
the assets of ML Trust. Title to the partnership preferred securities will be
held by the property trustee for the benefit of the holders of the Trust
Securities.
The declaration does not permit ML Trust to:
. acquire any assets other than the partnership preferred securities,
. issue any securities other than the Trust Securities, or
. incur any indebtedness.
The payment of distributions out of money held by ML Trust, and payments out of
money held by ML Trust upon redemption of the TOPrS or liquidation of ML Trust,
are guaranteed by ML&Co. to the extent described under "Description of the
Trust Guarantee".
The Trust Guarantee will be held by JPMorgan Chase Bank, the trust
guarantee trustee, for the benefit of the holders of the TOPrS. The Trust
Guarantee does not cover payment of distributions when ML Trust does not have
sufficient available funds to pay such distributions. In any event of
non-payment, holders of the TOPrS will have the remedies described below under
"--Trust Enforcement Events".
Distributions
The distribution rate on the TOPrS will be fixed at a rate per annum of
% of the stated liquidation amount of $25 per TOPrS and will be paid if, as
and when ML Trust has funds available for distribution. Distributions not paid
on the scheduled payment date will accumulate and compound quarterly at a rate
per annum equal to %. The term "distribution" as used in this prospectus
includes any compounded amounts unless otherwise stated or the context
otherwise requires. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the TOPrS will be cumulative, will accumulate from the
date of initial issuance and will be payable quarterly in arrears on each
, , and , commencing , if, as and when
available for payment, by the property trustee, except as otherwise described
below. If distributions are not paid when scheduled, the accumulated
distributions shall be paid to the holders of record of the TOPrS as they
appear on the books and records of ML Trust on the record date with respect to
the payment date for the TOPrS which corresponds to the payment date fixed by
ML Partnership with respect to the payment of cumulative distributions on the
partnership preferred securities.
16
Distributions on the TOPrS will be made to the extent that ML Trust has
funds available for the payment of the distributions in the property account.
Amounts available to ML Trust for distribution to the
holders of the TOPrS will be limited to payments received by ML Trust from ML
Partnership with respect to the partnership preferred securities or from ML&Co.
on ML&Co.'s guarantee on the TOPrS (the "Trust Guarantee") or its guarantee on
the partnership preferred securities (the "Partnership Guarantee") as described
in this prospectus. Distributions on the partnership preferred securities will
be paid only if, as and when declared in the sole discretion of ML&Co., as the
general partner of ML Partnership. Under the limited partnership agreement,
ML&Co. is not obligated to declare distributions on the partnership preferred
securities at any time, including upon or following a Partnership Enforcement
Event. See "Description of Partnership Preferred Securities--Partnership
Enforcement Events".
The assets of ML Partnership will consist only of Affiliate Investment
Instruments, which initially will be the debentures issued by ML&Co. and
another wholly-owned subsidiary of ML&Co., and other eligible debt securities.
To the extent that the issuers and, where applicable, ML&Co., as guarantor, of
the securities in which ML Partnership invests defer or fail to make any
payment in respect of the securities or, if applicable, the guarantees, ML
Partnership will not have sufficient funds to pay and will not declare or pay
distributions on the partnership preferred securities. If ML Partnership does
not declare and pay distributions on the partnership preferred securities out
of funds legally available for distribution, ML Trust will not have sufficient
funds to make distributions on the TOPrS, in which event the Trust Guarantee
will not apply to those distributions until ML Trust has sufficient funds
available to pay those distributions. See "Description of the Partnership
Preferred Securities--Distributions" and "Description of The Trust Guarantee".
In addition, ML Partnership may not have sufficient funds to pay current or
liquidating distributions on the partnership preferred securities if:
. at any time that ML Partnership is receiving current payments in
respect of the securities held by ML Partnership, including the
debentures, ML&Co, in its sole discretion, does not declare
distributions on the partnership preferred securities and ML
Partnership receives insufficient amounts to pay the additional
compounded distributions that will accumulate in respect of the
partnership preferred securities,
. ML Partnership reinvests the proceeds received in respect of the
debentures upon their retirement or at their maturities in Affiliate
Investment Instruments that do not generate income in an amount that
is sufficient to pay full distributions in respect of the partnership
preferred securities, or
. ML Partnership invests in debt securities of Investment Affiliates,
as defined below, that are not guaranteed by ML&Co. and that cannot
be liquidated by ML Partnership for an amount sufficient to pay the
distributions in full.
Distributions on the TOPrS will be payable to their holders as they
appear on the books and records of ML Trust on the relevant record dates, which
will be one Business Day, as defined below, before the relevant payment dates.
These distributions will be paid through the property trustee who will hold
amounts received in respect of the partnership preferred securities in the
property account for the benefit of the holders of the Trust Securities.
Subject to any applicable laws and regulations and the provisions of the
declaration, each payment will be made as described under "--Book-Entry Only
Issuance--The Depository Trust Company" below. In the event that the TOPrS do
not remain in book-entry only form, the relevant record dates shall be the 15th
day of the month of the relevant payment dates. In the event that any date on
which distributions are payable on the TOPrS is not a Business Day, payment of
the distribution payable on that date will be made on the next succeeding day
which is a Business Day, without any interest or other payment in respect of
the distribution subject to delay, except that, if that Business Day falls in
the next succeeding calendar year, the relevant payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on that date. A "Business Day" shall mean any day other than a day
on which banking institutions in The City of New York are authorized or
required by law to close.
17
Trust Enforcement Events
The occurrence, at any time, of:
. the non-payment of distributions on the TOPrS for six consecutive
quarterly distribution periods,
. a default by ML&Co. in respect of any of its obligations under the
Trust Guarantee, or
. a Partnership Enforcement Event under the limited partnership
agreement,
will constitute an enforcement event under the declaration with respect to the
Trust Securities (a "Trust Enforcement Event"); provided, that under the
declaration, the holder of the common securities will be deemed to have waived
any Trust Enforcement Event with respect to the common securities until all
Trust Enforcement Events with respect to the TOPrS have been cured, waived or
otherwise eliminated. Until any Trust Enforcement Event with respect to the
TOPrS have been so cured, waived or otherwise eliminated, the property trustee
will be deemed to be acting solely on behalf of the holders of the TOPrS and
only the holders of the TOPrS will have the right to direct the property
trustee with respect to certain matters under the declaration and, in the case
of a Partnership Enforcement Event, the special representative with respect to
certain matters under the limited partnership agreement. See "Description of
the Partnership Preferred Securities--Partnership Enforcement Events" for a
description of the events which will trigger the occurrence of a Partnership
Enforcement Event.
Upon the occurrence of a Trust Enforcement Event,
. the property trustee, as the holder of the partnership preferred
securities, shall have the right to enforce the terms of the
partnership preferred securities, including the right to direct the
special representative to enforce:
. ML Partnership's creditors' rights and other rights with respect
to the Affiliate Investment Instruments and ML&Co.'s guarantee of
the Affiliate Investment Instruments (the "Investment Guarantees",
and together with the Trust Guarantee and the Partnership
Guarantee, the "Guarantees"),
. the rights of the holders of the partnership preferred securities
under the Partnership Guarantee, and
. the rights of the holders of the partnership preferred securities
to receive distributions on the partnership preferred securities,
only if and to the extent declared out of funds legally available
for the payment of distributions, and
. the trust guarantee trustee shall have the right to enforce the terms
of the Trust Guarantee, including the right to enforce the
restriction on the payment of distributions by ML&Co. and its finance
subsidiaries on its securities as described in the Trust Guarantee.
If the property trustee fails to enforce its rights under the partnership
preferred securities after a holder of the TOPrS has made a written request,
that holder may directly institute a legal proceeding against ML Partnership
and the special representative to enforce the property trustee's rights under
the partnership preferred securities without first instituting any legal
proceeding against the property trustee, ML Trust or any other person or
entity. In addition, for so long as ML Trust holds any partnership preferred
securities, if the special representative fails to enforce its rights on behalf
of ML Partnership under the Affiliate Investment Instruments after a holder of
the TOPrS has made a written request, any holder may on behalf of ML
Partnership directly institute a legal proceeding against the Investment
Affiliates under the Affiliate Investment Instruments, without first
instituting any legal proceeding against the property trustee, ML Trust, the
special representative or ML Partnership. In any event, for so long as ML Trust
is the holder of any partnership preferred securities, if a Trust Enforcement
Event has occurred and is continuing and such event is attributable to the
failure of an Investment Affiliate to make any required payment when due on any
Affiliate Investment Instrument or the failure of ML&Co. to make any required
payment when due on any Investment Guarantee, then a holder of the
18
TOPrS may on behalf of ML Partnership directly institute a proceeding against
the Investment Affiliate with respect to any Affiliate Investment Instrument or
against ML&Co. with respect to any the Investment Guarantee, in each case for
enforcement of payment.
Under no circumstances, however, shall the special representative have
authority to cause ML&Co to declare distributions on the partnership preferred
securities. As a result, although the special representative may be able to
enforce ML Partnership's creditors' rights to accelerate and receive payments
in respect of the Affiliate Investment Instruments and the Investment
Guarantees, subject to satisfying the reinvestment criteria described under
"Description of the Partnership Preferred Securities--Partnership Investments",
ML Partnership would be entitled to reinvest any payments in additional
Affiliate Investment Instruments and other eligible debt securities, rather
than declaring and making distributions on the partnership preferred securities.
ML&Co. and ML Trust are each required to file annually with the property
trustee an officer's certificate as to its compliance with all conditions and
obligations under the declaration.
Mandatory Redemption
At the option of ML&Co., ML Partnership may redeem the partnership
preferred securities, in whole or in part, at any time on or after ,
or at any time in certain circumstances upon the occurrence of a Partnership
Special Event. Upon the redemption of the partnership preferred securities
either at the option of ML&Co. or under to a Partnership Special Event, the
proceeds from the repayment shall simultaneously be applied to redeem Trust
Securities having an aggregate liquidation amount equal to the partnership
preferred securities so redeemed at an amount per Trust Security equal to $25
plus accumulated and unpaid distributions; provided, that holders of the Trust
Securities shall be given not less than 30 nor more than 60 days notice of any
redemption. See "Description of the Partnership Preferred Securities--General"
and "--Optional Redemption".
Trust Special Event Redemption or Distribution
If, at any time, a Trust Tax Event or a Trust Investment Company Event
(each as defined below, and each, a "Trust Special Event") occurs and is
continuing, the regular trustees shall, unless the partnership preferred
securities are redeemed in the limited circumstances described below, within 90
days following the occurrence of such Trust Special Event elect to either:
(1)dissolve ML Trust upon not less than 30 nor more than 60 days notice
with the result that, after satisfaction of creditors of ML Trust, if
any, partnership preferred securities would be distributed on a pro
rata basis to the holders of the TOPrS and the common securities in
liquidation of the holders' interests in ML Trust; provided, however,
that if at the time there is available to ML Trust the opportunity to
eliminate, within the 90-day period, the Trust Special Event by
taking some ministerial action, such as filing a form or making an
election, or pursuing some other similar reasonable measure which in
the sole judgment of ML&Co. has or will cause no adverse effect on ML
Trust, ML Partnership, ML&Co. or the holders of the Trust Securities
and will involve no material cost, ML Trust will pursue that measure
in lieu of dissolution or
(2)cause the TOPrS to remain outstanding, provided that in the case of
this clause (2), ML&Co. shall pay any and all expenses incurred by or
payable by ML Trust attributable to ML Trust Special Event.
Furthermore, if in the case of the occurrence of a Trust Tax Event, the regular
trustees have received an opinion of nationally recognized independent tax
counsel experienced in these matters that there is more than an insubstantial
risk that interest payable by one or more of the Investment Affiliates with
respect to the debentures issued by any Investment Affiliate is not, or will
not be, deductible by any Investment Affiliate for United States Federal income
tax purposes even if the partnership preferred securities were distributed to
the holders of the Trust Securities in liquidation of the holders' interests in
ML Trust as described above, then
19
ML&Co. shall have the right, within 90 days following the occurrence of the
Trust Tax Event, to elect to cause ML Partnership to redeem the partnership
preferred securities in whole, but not in part, for cash upon not less than 30
nor more than 60 days notice and promptly following any redemption, the Trust
Securities will be redeemed by ML Trust at the redemption price.
"Trust Tax Event" means that ML&Co. shall have requested and received and
shall have delivered to the Regular Trustees an opinion of nationally
recognized independent tax counsel experienced in these matters to the effect
that there has been:
. an amendment to, change in or announced proposed change in the laws,
or any regulations under those laws of the United States or any
political subdivision or taxing authority of that jurisdiction,
. a judicial decision interpreting, applying, or clarifying these laws
or regulations,
. an administrative pronouncement or action that represents an official
position, including a clarification of an official position, of the
governmental authority or regulatory body making the administrative
pronouncement or taking any action, or
. a threatened challenge asserted in connection with an audit of ML&Co.
or any of its subsidiaries, ML Partnership, or ML Trust, or a
threatened challenge asserted in writing against any other taxpayer
that has raised capital through the issuance of securities that are
substantially similar to the debentures, the partnership preferred
securities, or the TOPrS,
which amendment or change is adopted or which proposed change, decision or
pronouncement is announced or which action, clarification or challenge occurs
on or after the date of this prospectus (collectively a "Tax Action"), which
Tax Action relates to any of the items described in (1) through (3) below, and
that following the occurrence of any Tax Action there is more than an
insubstantial risk that:
(1)ML Trust is, or will be, subject to United States Federal income tax
with respect to income accrued or received on the partnership
preferred securities,
(2)ML Trust is, or will be, subject to more than a minimal amount of
other taxes, duties or other governmental charges or
(3)interest payable by an Investment Affiliate with respect to the
Affiliate Investment Instrument issued by the Investment Affiliate is
not, or will not be, deductible by the Investment Affiliate for
United States Federal income tax purposes.
On January 24, 2002, Representative Charles B. Rangel introduced
legislation which, if enacted in its current form, would in some cases result
in interest payable on a security issued in circumstances with certain
similarities to the issuance of the debentures issued by the Investment
Affiliates to ML Partnership not being deductible for United States Federal
income tax purposes. If this legislation were ultimately adopted in its current
form, such legislation could constitute a Trust Tax Event, which could result
in an early redemption of the TOPrS.
"Trust Investment Company Event" means that ML&Co. shall have requested
and received and shall have delivered to the regular trustees an opinion of
nationally recognized independent legal counsel experienced in these matters to
the effect that as a result of the occurrence on or after the date of this
prospectus of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in Investment Company Act Law"), ML
Trust is or will be considered an investment company which is required to be
registered under the Investment Company Act.
If the partnership preferred securities are distributed to the holders of
the TOPrS, ML&Co. will use its best efforts to cause the partnership preferred
securities to be listed on the NYSE or on any other national securities
exchange or similar organization as the TOPrS are then listed or quoted.
20
On the date fixed for any distribution of partnership preferred
securities, upon dissolution of ML Trust,
. the Trust Securities will no longer be deemed to be outstanding, and
. certificates representing the Trust Securities will be deemed to
represent the partnership preferred securities having a liquidation
preference equal to the stated liquidation amount of the Trust
Securities until the certificates are presented to ML&Co. or its
agent for transfer or reissuance.
There can be no assurance as to the market price for the partnership
preferred securities which may be distributed in exchange for TOPrS if a
dissolution and liquidation of ML Trust were to occur. Accordingly, the
partnership preferred securities which an investor may subsequently receive on
dissolution and liquidation of ML Trust may trade at a discount to the price of
the TOPrS exchanged.
Redemption Procedures
ML Trust may not redeem fewer than all of the outstanding TOPrS unless
all accumulated and unpaid distributions have been paid on all TOPrS for all
quarterly distribution periods terminating on or before the date of redemption.
If ML Trust gives a notice of redemption in respect of the TOPrS, which
notice will be irrevocable, and if ML&Co. has paid to the property trustee a
sufficient amount of cash in connection with the related redemption of the
partnership preferred securities, then, by 12:00 noon, New York City time, on
the redemption date, ML Trust will irrevocably deposit with DTC funds
sufficient to pay the amount payable on redemption of all book-entry
certificates and will give DTC irrevocable instructions and authority to pay
the redemption amount to holders of the TOPrS. See "--Book-Entry Only
Issuance--The Depository Trust Company". If notice of redemption shall have
been given and funds are deposited as required, then upon the date of deposit,
all rights of holders of any TOPrS so called for redemption will cease, except
the right of the holders of those TOPrS to receive the redemption price, but
without interest. In the event that any date fixed for redemption of the TOPrS
is not a Business Day, then payment of the amount payable on that date will be
made on the next succeeding day which is a Business Day, without any interest
or other payment in respect of the amount payable subject to delay, except
that, if that Business Day falls in the next calendar year, the payment will be
made on the immediately preceding Business Day. In the event that payment of
the redemption price in respect of the TOPrS is improperly withheld or refused
and not paid either by ML Trust or by ML&Co. under the Trust Guarantee
described under "Description of the Trust Guarantee", distributions on the
TOPrS will continue to accumulate from the original redemption date to the date
of payment.
In the event that fewer than all of the outstanding TOPrS are to be
redeemed, the TOPrS will be redeemed in accordance with the procedures of DTC.
See "--Book-Entry Only Issuance--The Depository Trust Company". In the event
that the TOPrS do not remain in book-entry only form and fewer than all of the
outstanding TOPrS are to be redeemed, the TOPrS shall be redeemed on a pro rata
basis or pursuant to the rules of any securities exchange on which the TOPrS
are listed.
Subject to the foregoing and applicable law, including, without
limitation, United States Federal securities laws, ML&Co. or its subsidiaries
may at any time and from time to time purchase outstanding TOPrS by tender, in
the open market or by private agreement.
21
Subordination of the Common Securities
Payment of amounts upon liquidation of the Trust Securities shall be made
pro rata based on the liquidation amount of the Trust Securities; provided,
however, that upon:
. the occurrence of an event of default by an Investment Affiliate,
including ML&Co., under any Affiliate Investment Instrument, or
. default by ML&Co. on any of its obligations under any guarantee
described in this prospectus, the holders of the TOPrS will have a
preference over the holders of the common securities with respect to
payments upon liquidation of ML Trust.
In the case of any Trust Enforcement Event, the holder of the common
securities will be deemed to have waived the Trust Enforcement Event until all
Trust Enforcement Events with respect to the TOPrS have been cured, waived or
otherwise eliminated. Until all Trust Enforcement Events with respect to the
TOPrS have been so cured, waived or otherwise eliminated, the property trustee
shall act solely on behalf of the holders of the TOPrS and not on behalf of the
holder of the common securities, and only the holders of the TOPrS will have
the right to direct the property trustee to act on their behalf.
Liquidation Distribution Upon Dissolution
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of ML Trust, the holders of the TOPrS will be
entitled to receive out of the assets of ML Trust, after satisfaction of
liabilities to creditors, distributions in cash or other immediately available
funds in an amount equal to the aggregate of the stated liquidation amount of
$25 per TOPrS plus accumulated and unpaid distributions to the date of payment,
unless, in connection with ML Trust's liquidation, partnership preferred
securities have been distributed on a pro rata basis to the holders of the
Trust Securities.
If, upon ML Trust's liquidation, the liquidation distribution can be paid
only in part because ML Trust has insufficient assets available to pay in full
the aggregate liquidation distribution, then the amounts payable directly by ML
Trust on the TOPrS shall be paid on a pro rata basis. The holders of the common
securities will be entitled to receive distributions upon liquidation pro rata
with the holders of the TOPrS, except in the limited circumstances described
above under "--Subordination of the Common Securities".
Under the declaration, ML Trust shall terminate:
(1)upon the bankruptcy of ML&Co.,
(2)upon the filing of a certificate of dissolution or the equivalent
with respect to ML&Co., the filing of a certificate of cancellation
with respect to ML Trust after having obtained the consent of at
least a majority in liquidation amount of the Trust Securities,
voting together as a single class, to file such certificate of
cancellation, or the revocation of the charter of ML&Co. and the
expiration of 90 days after the date of revocation without
reinstatement,
(3)upon the distribution of all of the partnership preferred securities
upon the occurrence of a Trust Special Event,
(4)upon the entry of a decree of a judicial dissolution of ML&Co. or ML
Trust, or
(5)upon the redemption of all the Trust Securities.
Voting Rights
Except as described in this prospectus, under the Delaware Trust Act, the
Trust Indenture Act and under "Description of The Trust Guarantee--Amendments
and Assignment", and as otherwise required by law and the declaration, the
holders of the TOPrS will have no voting rights.
22
Subject to the requirement of the property trustee obtaining a tax
opinion as set forth in the last sentence of this paragraph, the holders of a
majority in liquidation amount of the TOPrS have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
property trustee, or direct the exercise of any trust or power conferred upon
the property trustee under the declaration, including the right to direct the
property trustee, as holder of the partnership preferred securities, to:
. exercise the remedies available to it under the limited partnership
agreement as a holder of the partnership preferred securities,
including the right to direct the special representative to exercise
its rights in the manner described above under "--Trust Enforcement
Events", and
. consent to any amendment, modification, or termination of the limited
partnership agreement or the partnership preferred securities where
consent is required; provided, however, that where a consent or
action under the limited partnership agreement would require the
consent or act of the holders of more than a majority of the
aggregate liquidation preference of partnership preferred securities
affected, only the holders of the percentage of the aggregate stated
liquidation amount of the Trust Securities which is at least equal to
the percentage required under the limited partnership agreement may
direct the property trustee to give consent or take action on behalf
of ML Trust. See "Description of the Partnership Preferred
Securities--Voting Rights".
The property trustee shall notify all holders of the TOPrS of any notice
of any Partnership Enforcement Event received from ML&Co., as general partner
with respect to the partnership preferred securities and the Affiliate
Investment Instruments. The notice shall state that the Partnership Enforcement
Event also constitutes a Trust Enforcement Event. Except with respect to
directing the time, method, and place of conducting a proceeding for a remedy
as described above, the property trustee shall be under no obligation to take
any of the actions described in immediately preceding clauses above unless the
property trustee has obtained an opinion of independent tax counsel to the
effect that as a result of that action, ML Trust will not fail to be classified
as a grantor trust for United States Federal income tax purposes and that after
that action each holder of Trust Securities will continue to be treated as
owning an undivided beneficial ownership interest in the partnership preferred
securities.
A waiver of a Partnership Enforcement Event with respect to the
partnership preferred securities held by the property trustee will constitute a
waiver of the corresponding Trust Enforcement Event.
Any required approval or direction of holders of the TOPrS may be given
at a separate meeting of holders of the TOPrS convened for that purpose, at a
meeting of all of the holders of Trust Securities or pursuant to written
consent. The regular trustees will cause a notice of any meeting at which
holders of the TOPrS are entitled to vote, or of any matter upon which action
by written consent of the holders is to be taken, to be mailed to each holder
of record of the TOPrS. Each notice will include a statement setting forth the
following information:
(1)the date of the meeting or the date by which any action is to be
taken;
(2)a description of any resolution proposed for adoption at the meeting
on which the holders are entitled to vote or of the matter upon which
written consent is sought; and
(3)instructions for the delivery of proxies or consents.
No vote or consent of the holders of the TOPrS will be required for ML Trust to
redeem and cancel the TOPrS or distribute partnership preferred securities in
accordance with the declaration.
Notwithstanding that holders of the TOPrS are entitled to vote or consent
under any of the circumstances described above, any of the Trust Securities
that are beneficially owned at that time by ML&Co. or any entity directly or
indirectly controlled by, or under direct or indirect common control with,
ML&Co., except for TOPrS purchased or acquired by ML&Co. or its affiliates in
connection with transactions effected by
23
or for the account of customers of ML&Co. or any of its subsidiaries or in
connection with the distribution or trading of the TOPrS, shall not be entitled
to vote or consent and shall, for purposes of any vote or consent, be treated
as if the Trust Securities were not outstanding; provided, however, that
persons, other than affiliates of ML&Co., to whom ML&Co. or any of its
subsidiaries have pledged the TOPrS may vote or consent with respect to the
pledged TOPrS pursuant to the terms of the pledge.
The procedures by which holders of the TOPrS represented by the global
certificates may exercise their voting rights are described below. See
"--Book-Entry Only Issuance--The Depository Trust Company".
Holders of the TOPrS will have no rights to appoint or remove the
trustees, who may be appointed, removed or replaced solely by ML&Co., as the
holder of all of the common securities.
Merger, Consolidation or Amalgamation of ML Trust
ML Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other entity, except as
described below. ML Trust may, with the consent of a majority of the regular
trustees and without the consent of the holders of the Trust Securities, the
property trustee or the Delaware trustee consolidate, amalgamate, merge with or
into, or be replaced by a trust organized as such under the laws of any State
of the United States; provided, that:
(1)if ML Trust is not the surviving entity, the successor entity either:
. expressly assumes all of the obligations of ML Trust under the
Trust Securities, or
. substitutes for the TOPrS other securities having substantially
the same terms as the TOPrS, so long as the successor securities
rank the same as the Trust Securities rank with respect to
distributions, assets and payments,
(2)ML&Co. expressly acknowledges a trustee of the successor entity
possessing the same powers and duties as the property trustee as the
holder of the partnership preferred securities,
(3)the TOPrS or any successor securities are listed, or any successor
securities will be listed upon notification of issuance, on any
national securities exchange or with another organization on which
the TOPrS are then listed or quoted,
(4)any merger, consolidation, amalgamation or replacement does not cause
the TOPrS, including any successor securities, to be downgraded by
any nationally recognized statistical rating organization,
(5)any merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the
holders of the TOPrS, including any successor securities, in any
material respect,
(6)the successor entity has a purpose substantially identical to that of
ML Trust,
(7)ML&Co. guarantees the obligations of the successor entity under the
successor securities to the same extent as provided by the Trust
Guarantee, and
(8)before any merger, consolidation, amalgamation or replacement, ML&Co.
has received an opinion of a nationally recognized independent
counsel to ML Trust experienced in these matters to the effect that:
. any merger, consolidation, amalgamation or replacement will not
adversely affect the rights, preferences and privileges of the
holders of the TOPrS, including any successor securities, in any
material respect, other than with respect to any dilution of the
holders' interest in the new entity,
24
. following any merger, consolidation, amalgamation or replacement,
neither ML Trust nor the successor entity will be required to
register as an investment company under the Investment Company Act,
. following any merger, consolidation, amalgamation or replacement,
ML Trust, or any successor trust, will not be classified as an
association or a publicly traded partnership taxable as a
corporation for United States Federal income tax purposes, and
. following any merger, consolidation, amalgamation or replacement,
ML Partnership will not be classified as an association or a
publicly traded partnership taxable as a corporation for United
States Federal income tax purposes.
Notwithstanding the foregoing, ML Trust shall not, except with the consent of
holders of 100% in liquidation amount of the TOPrS, consolidate, amalgamate,
merge with or into, or be replaced by any other entity or permit any other
entity to consolidate, amalgamate, merge with or into, or replace it, if any
consolidation, amalgamation, merger or replacement would cause ML Trust or the
successor entity to be classified as an association or a publicly traded
partnership taxable as a corporation for United States Federal income tax
purposes.
Modification of the Declaration
The declaration may be modified and amended if approved by a majority of
the regular trustees, and in the circumstances described in the declaration,
the property trustee and the Delaware trustee. However, if any proposed
amendment provides for, or the regular trustees otherwise propose to effect,
(1)any action that would adversely affect the powers, preferences or
special rights of the Trust Securities, whether by way of
amendment to the declaration or otherwise, or
(2)the dissolution, winding-up or termination of ML Trust other than
under the terms of the declaration,
then, in each case, the holders of the Trust Securities voting together as a
single class will be entitled to vote on the amendment or proposal and the
amendment or proposal shall not be effective except with the approval of at
least a majority in liquidation amount of the Trust Securities affected;
provided, further that if any amendment or proposal referred to in clause (2)
above would adversely affect only the TOPrS or the common securities, then only
the affected class will be entitled to vote on the amendment or proposal and
the amendment or proposal shall not be effective except with the approval of a
majority in liquidation amount of that class of Trust Securities.
The declaration may be amended without the consent of the holders of the
Trust Securities to:
. cure any ambiguity,
. correct or supplement any provision in the declaration that may be
defective or inconsistent with any other provision of the
declaration,
. add to the restrictions or obligations of the sponsor,
. conform to any change in the Investment Company Act, the Trust
Indenture Act or the rules or regulations under either law and
. modify, eliminate and add to any provision of the declaration to
the extent as may be necessary or desirable;
provided that no amendment shall have a material adverse effect on the rights,
preferences or privileges of the holders of the Trust Securities.
25
Notwithstanding the foregoing, no amendment or modification may be made
to the declaration if the amendment or modification would
. cause ML Trust to fail to be classified as a grantor trust for
United States Federal income tax purposes,
. cause ML Partnership to be classified as an association or
publicly traded partnership taxable as a corporation for those
purposes,
. reduce or otherwise adversely affect the powers of the property
trustee, or
. cause ML Trust or ML Partnership to be deemed an investment
company which is required to be registered under the Investment
Company Act.
Book-Entry Only Issuance--The Depository Trust Company
Description of the Global Certificates
DTC will act as securities depository for the TOPrS and, to the extent
distributed to the holders of the TOPrS, the partnership preferred securities.
The TOPrS will be issued only as fully-registered securities registered in the
name of Cede & Co. (DTC's nominee). One or more fully-registered global
certificates, representing the total aggregate number of TOPrS, will be issued
and will be deposited with DTC.
DTC Procedures
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. DTC holds securities that its participants
deposit with DTC. DTC also facilitates the settlement among participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Participants in DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its participants and by the NYSE, the American Stock Exchange,
Inc., and the National Association of Securities Dealers, Inc. Access to the
DTC system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. The rules
applicable to DTC and its participants are on file with the SEC.
Purchases of the TOPrS within the DTC system must be made by or through
participants, which will receive a credit for the TOPrS on DTC's records. The
ownership interest of each beneficial owner of the TOPrS is in turn to be
recorded on the participants' and indirect participants' records. Beneficial
owners will not receive written confirmation from DTC of their purchases, but
beneficial owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the participants or indirect participants through which the beneficial
owners purchased TOPrS. Transfers of ownership interests in the TOPrS are to be
accomplished by entries made on the books of participants and indirect
participants acting on behalf of beneficial owners. Beneficial owners will not
receive certificates representing their ownership interests in the TOPrS,
except in the event that use of the book-entry system for the TOPrS is
discontinued.
DTC has no knowledge of the actual beneficial owners of the TOPrS; DTC's
records reflect only the identity of the participants to whose accounts the
TOPrS are credited, which may or may not be the beneficial owners. The
participants and indirect participants will remain responsible for keeping
account of their holdings on behalf of their customers.
26
So long as DTC, or its nominee, is the registered owner or holder of a
global certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the TOPrS being represented for all purposes under
the declaration and the TOPrS. No beneficial owner of an interest in a global
certificate will be able to transfer that interest except in accordance with
DTC's applicable procedures, in addition to those provided for under the
declaration.
DTC has advised ML&Co. that it will take any action permitted to be taken
by a holder of the TOPrS, including the presentation of the TOPrS for exchange
as described below, only at the direction of one or more participants to whose
account the DTC interests in the global certificates are credited and only in
respect of such portion of the aggregate liquidation amount of the TOPrS as to
which the participant or participants has or have given the direction. Also, if
there is a Trust Enforcement Event under the TOPrS, DTC will exchange the
global certificates for certificated securities, which it will distribute to
its participants in accordance with its customary procedures.
Conveyance of notices and other communications by DTC to participants, by
participants to indirect participants, and by participants and indirect
participants to beneficial owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices in respect of the TOPrS held in book-entry form will
be sent to Cede & Co. If less than all of the TOPrS are being redeemed, DTC
will determine the amount of the interest of each participant to be redeemed in
accordance with its procedures.
Although voting with respect to the TOPrS is limited, in those cases
where a vote is required, neither DTC nor Cede & Co. will itself consent or
vote with respect to the TOPrS. Under its usual procedures, DTC would mail an
omnibus proxy to ML Trust as soon as possible after the record date. The
omnibus proxy assigns Cede & Co.'s consenting or voting rights to those
participants to whose accounts the TOPrS are allocated on the record date
identified in a listing attached to the omnibus proxy.
Distributions on the TOPrS held in book-entry form will be made to DTC in
immediately available funds. DTC's practice is to credit participants' accounts
on the relevant payment date in accordance with their respective holdings shown
on DTC's records unless DTC has reason to believe that it will not receive
payments on the payment date. Payments by participants and indirect
participants to beneficial owners will be governed by standing instructions and
customary practices and will be the responsibility of the participants and
indirect participants and not of DTC, ML Trust or ML&Co., subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of any distributions to DTC is the responsibility of ML Trust,
disbursement of those payments to participants is the responsibility of DTC,
and disbursement of those payments to the beneficial owners is the
responsibility of participants and indirect participants.
Except as described, a beneficial owner of an interest in a global
certificate will not be entitled to receive physical delivery of the TOPrS.
Accordingly, each beneficial owner must rely on the procedures of DTC to
exercise any rights under the TOPrS.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the global certificates among participants
of DTC, DTC is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither ML&Co.
nor ML Trust will have any responsibility for the performance by DTC or its
participants or indirect participants under the rules and procedures governing
DTC. DTC may discontinue providing its services as securities depository with
respect to the TOPrS at any time by giving notice to ML Trust. Under these
circumstances, in the event that a successor securities depository is not
obtained, the TOPrS certificates are required to be printed and delivered to
the property trustee. Additionally, ML Trust, with the consent of ML&Co., may
decide to discontinue use of the system of book-entry transfers through DTC or
any successor depository. In that event, certificates for the TOPrS will be
printed and delivered to the property trustee. In each of the above
circumstances, ML&Co. will appoint a paying agent with respect to the TOPrS.
27
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. These laws
may impair the ability to transfer beneficial interests in the global TOPrS as
represented by a global certificate.
The information in this section concerning DTC and DTC's system has been
obtained from sources that ML&Co. believes to be reliable, but ML&Co. takes no
responsibility for the accuracy of the information.
Payment
Payments in respect of the TOPrS represented by the global certificates
shall be made to DTC, which shall credit the relevant accounts at DTC on the
scheduled payment dates or, in the case of certificated securities, if any,
payments shall be made by check mailed to the address of the holder entitled to
receive the payment as the holder's address shall appear on the register. The
paying agent shall be permitted to resign as paying agent upon 30 days written
notice to the regular trustees. In the event that JPMorgan Chase Bank shall no
longer be the paying agent, the regular trustees shall appoint a successor to
act as paying Agent which shall be a bank or trust company.
Registrar, Transfer Agent, and Paying Agent
The property trustee will act as registrar, transfer Agent and paying
agent for the TOPrS.
Registration of transfers of the TOPrS will be effected without charge by
or on behalf of ML Trust, but upon payment and with the giving of any indemnity
as ML Trust or ML&Co. may require, in respect of any tax or other government
charges which may be imposed in relation to it.
ML Trust will not be required to register or cause to be registered the
transfer of the TOPrS after the TOPrS have been called for redemption.
Information Concerning the Property Trustee
The property trustee, before the occurrence of a default with respect to
the Trust Securities, undertakes to perform only the duties as are specifically
set forth in the declaration and, after default, shall exercise the same degree
of care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to these provisions, the property trustee is under no
obligation to exercise any of the powers vested in it by the declaration at the
request of any holder of the TOPrS, unless offered reasonable indemnity by the
holder against the costs, expenses and liabilities which might be incurred in
connection with the exercise of any powers. The holders of the TOPrS will not
be required to offer any indemnity in the event the holders, by exercising
their voting rights, direct the property trustee to take any action following a
Trust Enforcement Event.
Governing Law
The declaration and the TOPrS will be governed by, and construed in
accordance with, the internal laws of the State of Delaware.
Miscellaneous
The regular trustees are authorized and directed to conduct the affairs
of and to operate ML Trust in such a way that ML Trust will not be deemed to be
an investment company required to be registered under the Investment Company
Act or characterized as other than a grantor trust for United States Federal
income tax purposes. In this connection, the regular trustees are authorized to
take any action, not inconsistent with applicable law, the certificate of trust
or the declaration that the regular trustees determine in their discretion to
be necessary or desirable for those purposes as long as such action does not
adversely affect the interests of the holders of the TOPrS.
Holders of the TOPrS have no preemptive rights.
28
DESCRIPTION OF THE TRUST GUARANTEE
Set forth below is a summary of material information concerning the Trust
Guarantee which will be executed and delivered by ML&Co. for the benefit of the
holders from time to time of the TOPrS. The summary is not complete and is
subject in all respects to the provisions of, and is qualified in its entirety
by reference to, the Trust Guarantee, which is filed as an exhibit to the
registration statement of which this prospectus is a part. The Trust Guarantee
incorporates by reference the terms of, and will be qualified as an indenture
under, the Trust Indenture Act. JPMorgan Chase Bank, as the trust guarantee
trustee, will hold the Trust Guarantee for the benefit of the holders of the
TOPrS and will act as indenture trustee for the purposes of compliance with the
Trust Indenture Act.
Under the Trust Guarantee, ML&Co. will irrevocably agree, on a
subordinated basis and to the extent set forth in the Trust Guarantee, to pay
in full to the holders of the TOPrS, except to the extent paid by ML Trust, as
and when due, regardless of any defense, right of set off or counterclaim which
ML Trust may have or assert, the following payments (the "Trust Guarantee
Payments"), without duplication:
. any accumulated and unpaid distributions on the TOPrS to the extent
ML Trust has funds available for distribution,
. the redemption price with respect to any TOPrS called for redemption
by ML Trust, to the extent ML Trust has funds available for payment,
and
. upon a voluntary or involuntary dissolution, winding-up or
termination of ML Trust, other than in connection with the
distribution of partnership preferred securities to the holders of
the TOPrS or the redemption of all of the TOPrS, the lesser of:
(1)the aggregate of the liquidation amount and all accumulated and
unpaid distributions on the TOPrS and
(2)the amount of assets of ML Trust remaining available for
distribution to holders of the TOPrS upon the liquidation of ML
Trust.
ML&Co.'s obligation to make a Trust Guarantee Payment may be satisfied by
direct payment of the required amounts by ML&Co. to the holders of the TOPrS or
by causing ML Trust to pay these amounts to holders.
The Trust Guarantee will be a guarantee on a subordinated basis with
respect to the TOPrS from the time of issuance of the TOPrS but will only apply
to any payment of distributions or the redemption price, or to payments upon
the dissolution, winding-up or termination of ML Trust, to the extent ML Trust
shall have funds available. If ML Partnership fails to declare distributions on
the partnership preferred securities, ML Trust would lack available funds for
the payment of distributions or amounts payable on redemption of the TOPrS or
otherwise, and in such event holders of the TOPrS would not be able to rely
upon the Trust Guarantee for payment of these amounts. Instead, holders of the
TOPrS will have the remedies described under "Description of the TOPrS--Trust
Enforcement Events", including the right to direct the trust guarantee trustee
to enforce the restriction of payments by ML&Co. and its finance subsidiaries
on its capital stock. See "--Obligations of ML&Co." below.
The Guarantees, when taken together with the debentures issued by ML&Co.
and ML&Co.'s obligations to pay all fees and expenses of ML Trust and ML
Partnership, constitute a guarantee to the extent set forth in this prospectus
by ML&Co. of the distribution, redemption and liquidation payments payable to
the holders of the TOPrS. The Guarantees do not apply, however, to current
distributions by ML Partnership unless and until these distributions are
declared by ML Partnership out of funds legally available for payment or to
liquidating distributions unless there are assets available for payment in ML
Partnership, each as more fully described under "Risk Factors--Insufficient
Income or Assets Available to Partnership".
29
Obligations of ML&Co.
Under the Trust Guarantee, ML&Co. will agree that, if
. for any distribution period, full distributions on a cumulative basis
on any TOPrS have not been paid,
. an event of default by any Investment Affiliate in respect of any
Affiliate Investment Instrument has occurred and is continuing, or
. it is in default of its obligations under the Trust Guarantee, the
Partnership Guarantee or any Investment Guarantee,
then, during that period:
. it may not declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation
payment with respect to, any of its capital stock or comparable
equity interest, except for:
(1)dividends or distributions in shares of, or options, warrants
or rights to subscribe for or purchase shares of, its capital
stock, and conversions or exchanges of common stock of one
class into common stock of another class,
(2)redemptions or purchases of any rights pursuant to the rights
agreement dated as of December 2, 1997 between ML&Co. and
JPMorgan Chase Bank (the "Rights Agreement") and the issuance
of preferred stock under those rights, and
(3)purchases or acquisitions by ML&Co. or its affiliates in
connection with transactions effected by or for the account of
customers of ML&Co. or any of its subsidiaries or in connection
with the distribution or trading of its capital stock or
comparable equity interest; and
. it may not make, permit any finance subsidiary to make, or make any
payments that would enable any finance subsidiary to make, any
payment of any dividends on, any distribution with respect to, or any
redemption, purchase or other acquisition of, or any liquidation
payment with respect to, any preferred security or comparable equity
interest of any finance subsidiary.
Events of Default; Enforcement of Trust Guarantee
An event of default under the Trust Guarantee will occur upon the failure
of ML&Co. to perform any of its payment or other obligations set forth in the
Trust Guarantee.
The holders of a majority in liquidation amount of the TOPrS have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the trust guarantee trustee or to direct the exercise of
any trust or power conferred upon the trust guarantee trustee under the trust
guarantee. If the trust guarantee trustee fails to enforce its rights under the
Trust Guarantee after a holder of the TOPrS has made a written request, the
holder may institute a legal proceeding directly against ML&Co. to enforce the
trust guarantee trustee's rights under the Trust Guarantee, without first
instituting a legal proceeding against ML Trust, the trust guarantee trustee or
any other person or entity. In any event, if ML&Co. has failed to make a
guarantee payment under the Trust Guarantee, a holder of the TOPrS may directly
institute a proceeding in the holder's own name against ML&Co. for enforcement
of the Trust Guarantee for payment.
Status of the Trust Guarantee; Subordination
The Trust Guarantee will constitute an unsecured obligation of ML&Co. and
will rank subordinate and junior in right of payment to all other liabilities
of ML&Co. and will rank equally with the most senior
30
preferred stock, if any, issued from time to time by ML&Co., with similar
guarantees issued by ML&Co. in connection with:
. the $275,000,000 aggregate liquidation amount of 7 3/4% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust I,
. the $300,000,000 aggregate liquidation amount of 8% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
II,
. the $750,000,000 aggregate liquidation amount of 7% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
III,
. the $400,000,000 aggregate liquidation amount of 7.12% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust IV,
. the $850,000,000 aggregate liquidation amount of 7.28% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust V,
. the (Yen)10,000,000,000 aggregate liquidation amount of Trust
Originated Preferred Securities issued by Merrill Lynch Yen TOPrS
Trust I, and
. with any guarantee now or hereafter entered into by ML&Co. in respect
of any preferred stock of any other Finance Subsidiary.
"Finance Subsidiary" means Merrill Lynch Preferred Capital Trust I,
Merrill Lynch Preferred Capital Trust II, Merrill Lynch Preferred Capital Trust
III, Merrill Lynch Preferred Capital Trust IV, Merrill Lynch Preferred Capital
Trust V, Merrill Lynch Yen TOPrS Trust I and any other wholly-owned subsidiary
of ML&Co. the principal purpose of which is to raise capital for ML&Co. by
issuing securities that are guaranteed by ML&Co. and the proceeds of which are
loaned to or invested in ML&Co. or one or more of its affiliates.
Accordingly, the rights of the holders of the TOPrS to receive payments
under the Trust Guarantee will be subject to the rights of the holders of any
obligations of ML&Co. that are senior in priority to the obligations under the
Trust Guarantee. Furthermore, the holders of obligations of ML&Co. that are
senior to the obligations under the Trust Guarantee, including, but not limited
to, obligations constituting senior indebtedness of ML&Co., will be entitled to
the same rights upon payment default or dissolution, liquidation and
reorganization in respect of the Trust Guarantee that inure to the holders of
senior indebtedness as against the holders of the ML&Co. Debenture. The terms
of the TOPrS that each holder of the TOPrS, by acceptance, agrees to the
subordination provisions and other terms of the Trust Guarantee.
The Trust Guarantee will constitute a guarantee of payment and not of
collection. That is, the guaranteed party may directly institute a legal
proceeding against ML&Co. to enforce its rights under the Trust Guarantee
without instituting a legal proceeding against any other person or entity.
Amendments and Assignment
Except with respect to any changes that do not materially adversely
affect the rights of holders of the TOPrS, in which case no vote will be
required, the Trust Guarantee may be amended only with the prior approval of
the holders of at least a majority in liquidation amount of all the outstanding
TOPrS. The manner of obtaining any approval of holders of the TOPrS will be as
set forth under "Description of the TOPrS--Voting Rights". All guarantees and
agreements contained in the Trust Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of ML&Co. and shall inure to the
benefit of the holders of the TOPrS then outstanding. Except in connection with
permitted merger or consolidation of ML&Co. with or into another entity or
permitted sale, transfer or lease of ML&Co.'s assets to another entity in which
the surviving corporation, if other than ML&Co., assumes ML&Co.'s obligations
under the Trust Guarantee, ML&Co. may not assign its rights or delegate its
obligations under the Trust Guarantee without the prior approval of the holders
of at least a majority of the aggregate stated liquidation amount of the TOPrS
then outstanding.
31
Termination of The Trust Guarantee
The Trust Guarantee will terminate as to each holder of the TOPrS upon:
. full payment of the redemption price of all the TOPrS,
. distribution of the partnership preferred securities held by ML Trust
to the holders of the TOPrS, or
. full payment of the amounts payable in accordance with the
declaration upon liquidation of ML Trust.
The Trust Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of the TOPrS must restore payment
of any sum paid under the TOPrS or the Trust Guarantee.
Information Concerning the Trust Guarantee Trustee
The trust guarantee trustee, before the occurrence of a default with
respect to the Trust Guarantee, undertakes to perform only those duties as are
specifically set forth in the Trust Guarantee and, after default with respect
to the Trust Guarantee, shall exercise the same degree of care as a prudent
person would exercise in the conduct of his or her own affairs. Subject to that
provision, the trust guarantee trustee is under no obligation to exercise any
of the powers vested in it by the Trust Guarantee at the request of any holder
of TOPrS unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred in connection with the exercise of those
powers.
Governing Law
The Trust Guarantee will be governed by, and construed in accordance
with, the internal laws of the State of New York.
32
DESCRIPTION OF THE PARTNERSHIP PREFERRED SECURITIES
All of the partnership interests in ML Partnership, other than the
partnership preferred securities acquired by ML Trust, are owned directly by
ML&Co. Initially, ML&Co. will be the sole general partner of ML Partnership.
The limited partnership agreement authorizes and creates the partnership
preferred securities, which represent limited partner interests in ML
Partnership. The limited partner interests represented by the partnership
preferred securities will have a preference with respect to distributions and
amounts payable on redemption or liquidation over ML&Co.'s interest in ML
Partnership.
Except as otherwise described in this prospectus or provided in the
limited partnership agreement, the limited partnership agreement does not
permit ML Partnership to issue any additional partnership interests or to incur
any indebtedness.
The summary of certain material terms and provisions of the partnership
preferred securities set forth below does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the limited
partnership agreement, which is filed as an exhibit to the registration
statement of which this prospectus is a part, and the Delaware Limited
Partnership Act.
Distributions
Holders of partnership preferred securities will be entitled to receive
cumulative cash distributions, if, as and when declared by ML&Co., as general
partner, in its sole discretion out of assets of ML Partnership legally
available for payment. The distributions payable on each partnership preferred
security will be fixed at a rate per annum of % of the stated liquidation
preference of $25 per partnership preferred security. Distributions not paid on
the scheduled payment date will accumulate and compound quarterly at the rate
per annum equal to %. The amount of distributions payable for any period will
be computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the partnership preferred securities will be payable
quarterly in arrears on , , , and of each
year, commencing , . If distributions are not declared and paid
when scheduled, the accumulated distributions shall be paid to the holders of
record of partnership preferred securities as they appear on the books and
records of ML Partnership on the record date with respect to the payment date
for the partnership preferred securities.
ML Partnership's earnings available for distribution to the holders of
the partnership preferred securities will be limited to payments made on the
Affiliate Investment Instruments and Investment Guarantees and payments on
other eligible debt securities in which ML Partnership has invested from time
to time. See "--Partnership Investments". To the extent that the issuers and,
where applicable, ML&Co., as guarantor, of the securities in which ML
Partnership invests fail to make any payment in respect of the securities or,
if applicable, the guarantees, ML Partnership will not have sufficient funds to
pay and will not declare or pay distributions on the partnership preferred
securities, in which event the Partnership Guarantee will not apply to those
distributions until ML Partnership has sufficient funds available for
distribution. See "Description of the Partnership Guarantee". In addition,
distributions on the partnership preferred securities may be declared and paid
only as determined in the sole discretion of ML&Co. as general partner of ML
Partnership. If ML Partnership fails to declare and pay distributions on the
partnership preferred securities out of funds legally available for
distribution, ML Trust will not have sufficient funds to make distributions on
the TOPrS, in which event the Trust Guarantee will not apply to those
distributions until ML Trust has sufficient funds available. In addition, ML
Partnership may not have sufficient funds to pay current or liquidating
distributions on the partnership preferred securities if:
. at any time that ML Partnership is receiving current payments in
respect of the securities held by ML Partnership including the
debentures, ML&Co., in its sole discretion, does not declare
distributions on the partnership preferred securities and ML
Partnership receives insufficient
33
amounts to pay the additional compounded distributions that will
accumulate in respect of the partnership preferred securities,
. ML Partnership reinvests the proceeds received in respect of the
debentures upon their retirement or at their maturities in Affiliate
Investment Instruments that do not generate income in an amount that
is sufficient to pay full distributions in respect of the partnership
preferred securities, or
. ML Partnership invests in debt securities of Investment Affiliates
that are not guaranteed by ML&Co. and that cannot be liquidated by ML
Partnership for an amount sufficient to pay any distributions in full.
Distributions on the partnership preferred securities will be payable to
holders as they appear on the books and records of ML Partnership on the
relevant record dates, which, as long as the TOPrS remain or, in the event that
ML Trust is liquidated in connection with a Trust Special Event, as long as the
partnership preferred securities remain, in book-entry only form, will be one
Business Day before the relevant payment dates. In the event the TOPrS, or in
the event that ML Trust is liquidated in connection with a Trust Special Event,
the partnership preferred securities, shall not continue to remain in
book-entry only form, the relevant record dates shall be the 15th day of the
month of the relevant payment dates. In the event that any date on which
distributions are payable on the partnership preferred securities is not a
Business Day, then payment of the distribution payable on that date will be
made on the next succeeding day that is a Business Day and without any interest
or other payment in respect of any delay, except that, if that Business Day is
in the next succeeding calendar year, that payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on that date.
Partnership Enforcement Events
If one or more of the following events shall occur and be continuing
(each, a "Partnership Enforcement Event"):
. the non-payment of distributions on the partnership preferred
securities for six consecutive quarterly periods,
. ML&Co. is in default on any of its obligations under the Partnership
Guarantee or any Investment Guarantee, or
. an Investment Event of Default occurs and is continuing on any
Affiliate Investment Instrument,
then the property trustee, for so long as the partnership preferred securities
are held by the property trustee, will have the right, or holders of the
partnership preferred securities will be entitled by the vote of a majority in
aggregate liquidation preference of the holders:
. under the limited partnership agreement to enforce the terms of the
partnership preferred securities, including the right to appoint and
authorize a special representative of ML Partnership and the limited
partners to enforce:
(1)ML Partnership's creditors' rights and other rights with respect
to the Affiliate Investment Instruments and the Investment
Guarantees,
(2)the rights of the holders of the partnership preferred securities
under the Partnership Guarantee, and
(3)the rights of the holders of the partnership preferred securities
to receive distributions on the partnership preferred securities,
only if and to the extent declared out of funds legally available
for distribution, and
. under the Partnership Guarantee to enforce the terms of the
Partnership Guarantee, including the right to enforce the covenant
restricting certain payments by ML&Co. and Finance Subsidiaries.
34
If the special representative fails to enforce its rights under the
Affiliate Investment Instruments after a holder of partnership preferred
securities has made a written request, the holder of record of partnership
preferred securities may directly institute a legal proceeding against ML&Co.
to enforce the rights of the special representative and ML Partnership under
the Affiliate Investment Instruments without first instituting any legal
proceeding against the special representative, ML Partnership or any other
person or entity. In any event, if a Partnership Enforcement Event has occurred
and is continuing and this event is attributable to the failure of an
Investment Affiliate to make any required payment when due on any Affiliate
Investment Instrument, then a holder of partnership preferred securities may on
behalf of ML Partnership directly institute a proceeding against the Investment
Affiliate with respect to the Affiliate Investment Instrument for enforcement
of payment. A holder of partnership preferred securities may also bring a
direct action against ML&Co. to enforce the holder's right under the
Partnership Guarantee. See "Description of the Partnership Guarantee--Events of
Default; Enforcement of Partnership Guarantee".
Under no circumstances, however, shall the special representative have
authority to cause ML&Co. to declare distributions on the partnership preferred
securities. As a result, although the special representative may be able to
enforce ML Partnership's creditors' rights to accelerate and receive payments
in respect of the Affiliate Investment Instruments and the Investment
Guarantees, ML Partnership would be entitled to reinvest those payments in
additional Affiliate Investment Instruments, subject to satisfying the
reinvestment criteria described under "--Partnership Investments", and Eligible
Debt Securities, rather than declaring and making distributions on the
partnership preferred securities. The special representative shall not, by
virtue of acting in such capacity, be admitted as a general partner in ML
Partnership or otherwise be deemed to be a general partner in ML Partnership
and shall have no liability for the debts, obligations or liabilities of ML
Partnership.
Partnership Investments
ML Partnership will use approximately 99% of the proceeds from the
issuance of the partnership preferred securities and ML&Co.'s contemporaneous
capital contribution to purchase the debentures and the remaining 1% of the
initial partnership proceeds will be used to purchase Eligible Debt Securities.
ML Partnership's purchase of the debentures will occur contemporaneously with
the issuance of the partnership preferred securities.
The initial Affiliate Investment Instruments purchased by the Partnership
will consist of two or more debt instruments. ML&Co. anticipates that
approximately 85% of the Initial Partnership Proceeds will be used to purchase
a debenture of ML&Co. (the "ML&Co. Debenture"), and approximately 14% of the
initial partnership proceeds will be used to purchase debentures of one or more
eligible controlled affiliates of ML&Co. Each debenture is expected to have a
term of 20 years and to provide for interest payable on , ,
and of each year, commencing , at market
rates for the debentures. The debentures will be general unsecured debt
obligations of the relevant issuer, except that the ML&Co. Debenture will rank
subordinate and junior to all senior indebtedness of ML&Co.
The payment of interest on each of the debentures may be deferred at any
time, and from time to time, by the relevant issuer for a period not exceeding
six consecutive quarters. If an issuer were to defer the payment of interest,
interest would continue to accrue and compound at the stated interest rate on
the applicable debenture. The debentures will contain covenants appropriate for
unsecured debt securities issued or guaranteed by similar borrowers pursuant to
a public offering or private placement under Rule 144A of the Securities Act of
a comparable debt security, including a limitation on consolidation, merger and
sale or conveyance of assets. The debentures will contain redemption provisions
that correspond to the redemption provisions applicable to the partnership
preferred securities, including an option to redeem the debentures by the
relevant issuer, in whole or in part, from time to time, on or
after , , and following the occurrence of a Partnership Special
Event, in each case, in the same manner described under "Optional Redemption"
and " Partnership Special Event Redemption". The debentures, and any other
Affiliate Investment Instruments that are debt instruments acquired by ML
Partnership in the future, will also contain customary events of default,
including:
35
. events of default for defaults in payments on the securities when
due, provided that no default shall occur upon a valid deferral of an
interest payment by an issuer,
. defaults in the performance of the relevant issuer's obligations
under its debenture or Affiliate Investment Instruments, as the case
may be, and
. certain bankruptcy, insolvency or reorganization events, subject to
customary exceptions and grace periods.
The payment of interest and principal when due and other payment terms of
the debentures other than the ML&Co. Debenture, will be guaranteed to the
extent described in this prospectus (each, an "Investment Guarantee") by ML&Co.
for the benefit of the holders of partnership preferred securities. See
"--Investment Guarantees".
ML Partnership will invest approximately 1% of the initial partnership
proceeds in eligible debt securities. These eligible debt securities will
comprise cash or book-entry securities, negotiable instruments, or other
securities of entities not affiliated with ML&Co. which evidence any of the
following:
. any security issued or guaranteed as to principal or interest by the
United States, or by a person controlled or supervised by and acting
as an instrumentality of the Government of the United States pursuant
to authority granted by the Congress of the United States, or any
certificate of deposit for any of the foregoing;
. commercial paper issued pursuant to Section 3(a)(3) of the Securities
Act and having, at the time of the investment or contractual
commitment to invest therein, a rating from each of Standard & Poor's
Ratings Services, a division of the McGraw-Hill Companies, Inc.
("S&P") and Moody's Investors Service, Inc. ("Moody's") in the
highest investment rating category granted by such rating agency and
having a maturity not in excess of nine months;
. demand deposits, time deposits and certificates of deposit which are
fully insured by the Federal Deposit Insurance Corporation;
. repurchase obligations with respect to any security that is a direct
obligation of, or fully guaranteed by, the Government of the United
States of America or any agency or instrumentality thereof, the
obligations of which are backed by the full faith and credit of the
United States of America, in either case entered into with a
depository institution or trust company which is an Eligible
Institution and the deposits of which are insured by the FDIC; and
. any other security which is identified as a permitted investment of a
finance subsidiary pursuant to Rule 3a-5 under the Investment Company
Act at the time it is acquired by ML Partnership.
"Eligible Institution" means a depository institution organized under the
laws of the United States or any one of the states thereof or the District of
Columbia, or any domestic branch of a foreign bank, which has either:
. a long-term unsecured debt rating of AA or better by S&P and Aa or
better by Moody's, or
. a short-term unsecured debt rating or a certificate of deposit rating
of A-1+ by S&P and P-1 by Moody's,
and whose deposits are insured by the FDIC or whose the parent has a long-term
or short-term unsecured debt rating which signifies investment grade and whose
deposits are insured by the FDIC.
ML Partnership may, from time to time and subject to the restrictions
described below, reinvest payments received with respect to the Affiliate
Investment Instruments and the eligible debt securities in additional Affiliate
Investment Instruments and eligible debt securities. As of the date of this
prospectus,
36
ML&Co., as the General Partner, does not intend to cause ML Partnership to
reinvest regularly scheduled, periodic payments of interest or dividends
received by ML Partnership in the manner described below, although there can be
no assurance that ML&Co.'s intention in respect of any reinvestments will not
change in the future.
The fairness of specific terms of all Affiliate Investment Instruments
will be passed upon by an independent financial advisor which will be a
nationally recognized accounting firm, bank or investment banking firm that
does not, and whose directors, officers, employees and affiliates do not, have
a direct or indirect material equity interest in ML&Co. or any of its
subsidiaries.
ML Partnership may reinvest in additional Affiliate Investment
Instruments only if certain procedures and criteria are satisfied with respect
to each Affiliate Investment Instrument, including the satisfaction of the
following conditions:
(1)ML Partnership did not hold debt securities of the issuer of the
proposed Affiliate Investment Instrument within the three-year period
ending on the date of proposed investment;
(2)there was never a default on any debt obligation of, or arrearages of
dividends on preferred stock issued by, the issuer of the proposed
Affiliate Investment Instrument that was previously or is currently
owned by ML Partnership;
(3)the applicable terms and provisions with respect to the proposed
Affiliate Investment Instrument have been determined by the
independent financial advisor to be at least as favorable as terms
which could be obtained by ML Partnership in a public offering or
private placement under Rule 144A of the Securities Act of a
comparable security issued by the relevant Investment Affiliate and
guarantees, if any; and
(4)the requesting Investment Affiliate shall not be deemed to be an
investment company by reason of Section 3(a) or 3(b) of the
Investment Company Act or is otherwise an eligible recipient of funds
directly or indirectly from ML Trust pursuant to an order issued by
the SEC.
The term "Investment Affiliate" means ML&Co. or any corporation,
partnership, limited liability company or other entity that is controlled by
ML&Co., other than ML Partnership or ML Trust. If ML Partnership is unable to
reinvest payments and proceeds from Affiliate Investment Instruments in
additional Affiliate Investment Instruments meeting the above criteria, ML
Partnership may only invest those funds in eligible debt securities, subject to
restrictions of applicable law, including the Investment Company Act.
Investment Guarantees
ML&Co. will agree to execute and deliver an Investment Guarantee, on a
subordinated basis, for the benefit of the holders of partnership preferred
securities with respect to each debenture issued by an Investment Affiliate,
other than the ML&Co. Debenture, to the extent set forth below. The Investment
Guarantees shall be enforceable regardless of any defense, right of set-off or
counterclaim that ML&Co. may have or assert. The Investment Guarantees will be
full and unconditional guarantees, to the extent set forth in this prospectus,
with respect to the applicable Debentures from the time of issuance. To the
extent that, as described above, ML Partnership invests in additional Affiliate
Investment Instruments, the determination as to whether the Affiliate
Investment Instrument will contain an Investment Guarantee will be made at the
date of its issuance and will be based, among other things, upon its approval
by the independent financial advisor in accordance with the reinvestment
criteria described above.
The Investment Guarantees will constitute guarantees of payment and not
of collection. That is, the guaranteed party may directly institute a legal
proceeding against ML&Co. to enforce its rights under the applicable Investment
Guarantee without instituting a legal proceeding against any other person or
entity. If no special representative has been appointed to enforce any
Investment Guarantee, ML&Co. as general partner
37
has the right to enforce the Investment Guarantee on behalf of the holders of
the partnership preferred securities. The holders of not less than a majority
in aggregate liquidation preference of the partnership preferred securities
have the right to direct the time, method and place of conducting any
proceeding for any remedy available in respect of any Investment Guarantee,
including the giving of directions to ML&Co. as general partner or the special
representative, as the case may be. If ML&Co. or the special representative
fails to enforce any Investment Guarantee as above provided, any holder of the
TOPrS may institute its own legal proceeding to enforce that Investment
Guarantee. No Investment Guarantee will be discharged except by payment in full
of all amounts guaranteed by such Investment Guarantee, without duplication of
amounts previously paid by the relevant Investment Affiliate.
Amendments and Assignment
Except with respect to any changes that do not adversely affect the
rights of holders of partnership preferred securities, in which case no consent
will be required, the Investment Guarantees may be amended only with the prior
approval of the holders of not less than a majority in liquidation preference
of the outstanding partnership preferred securities, provided that for so long
as the property trustee of ML Trust is the holder of the partnership preferred
securities, no amendment will be effective without the prior written approval
of a majority in liquidation amount of the outstanding TOPrS. All guarantees
and agreements contained in the Investment Guarantees shall bind the
successors, assigns, receivers, trustees and representatives of ML&Co. and
shall inure to the benefit of the holders of partnership preferred securities.
Except in connection with any permitted merger or consolidation of ML&Co. with
or into another entity or any permitted sale, transfer or lease of ML&Co.'s
assets to another entity in which the surviving corporation, if other than
ML&Co., assumes ML&Co.'s obligations under the Investment Guarantees, ML&Co.
may not assign its rights or delegate its obligations under the Investment
Guarantees without the prior approval of the holders of at least a majority of
the aggregate stated liquidation preference of the partnership preferred
securities then outstanding.
Status of the Investment Guarantees
ML&Co.'s obligations under the Investment Guarantees will constitute
unsecured obligations of ML&Co. and will rank subordinate and junior in right
of payment to all other liabilities of ML&Co. and will rank equally with the
most senior preferred stock, if any, issued from time to time by ML&Co., with
similar guarantees issued by ML&Co. in connection with:
. the $275,000,000 aggregate liquidation amount of 7 3/4% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust I,
. the $300,000,000 aggregate liquidation amount of 8% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
II,
. the $750,000,000 aggregate liquidation amount of 7% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
III,
. the $400,000,000 aggregate liquidation amount of 7.12% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust IV,
. the $850,000,000 aggregate liquidation amount of 7.28% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust V,
. the (Yen)10,000,000,000 aggregate liquidation amount of Trust
Originated Preferred Securities issued by Merrill Lynch Yen TOPrS
Trust I, and
. with any guarantee now or hereafter entered into by ML&Co. in respect
of any preferred stock of any other Finance Subsidiary.
Accordingly, the rights of the holders of the debentures to receive
payments under the Investment Guarantees will be subject to the rights of the
holders of any obligations that are senior in priority to the obligations under
the Investment Guarantees. Furthermore, the holders of obligations of ML&Co.
that are senior to the obligations under the Investment Guarantees, including,
but not limited to, obligations constituting Senior
38
Indebtedness, will be entitled to the same rights upon payment default or
dissolution, liquidation and reorganization in respect of the Investment
Guarantees that inure to the holders of senior indebtedness as against the
holders of the ML&Co. Debenture. The terms of the debentures provide that each
holder of debentures, by acceptance thereof, agrees to the subordination
provisions and other terms of the Investment Guarantees.
Governing Law
The Investment Guarantees will be governed by and construed in accordance
with the laws of the State of New York.
Optional Redemption
The partnership preferred securities are redeemable, at the option of
ML&Co., as general partner, in whole or in part, from time to time, on or
after , , upon not less than 30 nor more than 60 days notice, at an
amount per partnership preferred security equal to $25 plus accumulated and
unpaid distributions. If ML Partnership redeems partnership preferred
securities in accordance with their terms, ML Trust will redeem the Trust
Securities at the redemption price. If:
. a partial redemption would result in the delisting of the TOPrS,
. ML Trust is liquidated in connection with a Trust Special Event, or
. a partial redemption would result in the delisting of the partnership
preferred securities,
then, in each case, ML Partnership may only redeem the partnership preferred
securities in whole.
Partnership Special Event Redemption
If, at any time, a Partnership Tax Event or a Partnership Investment
Company Event (each as defined below, and each a "Partnership Special Event")
occurs and is continuing, ML&Co. shall, within 90 days following the occurrence
of such Partnership Special Event, elect to either:
. redeem the partnership preferred securities in whole, but not in
part, upon not less than 30 or more than 60 days notice at the
redemption price, provided that, if at the time there is available to
ML Partnership the opportunity to eliminate, within the 90-day
period, the Partnership Special Event by taking some ministerial
action, such as filing a form or making an election, or pursuing some
other similar reasonable measure that in the sole judgment of ML&Co.
has or will cause no adverse effect on ML Partnership, ML Trust or
ML&Co., ML&Co. will pursue that measure in lieu of redemption; or
. cause the partnership preferred securities to remain outstanding,
provided that in the case of this clause, the ML&Co. shall pay any
and all costs and expenses incurred by or payable by ML Partnership
attributable to the Partnership Special Event.
"Partnership Tax Event" means that ML&Co. shall have requested and
received an opinion of nationally recognized independent tax counsel
experienced in these matters to the effect that there has been a Tax Action
which affects any of the events described in (1) through (3) below and that
there is more than an insubstantial risk that:
(1)ML Partnership is, or will be, subject to United States Federal
income tax with respect to income accrued or received on the
Affiliate Investment Instruments or the eligible debt securities,
(2)ML Partnership is, or will be, subject to more than a minimal amount
of other taxes, duties or other governmental charges, or
39
(3)interest payable by an Investment Affiliate with respect to the
Affiliate Investment Instrument issued by that Investment Affiliate
to ML Partnership is not, or will not be, deductible by the
Investment Affiliate for United States Federal income tax purposes.
On January 24, 2002, Representative Charles B. Rangel introduced
legislation which, if enacted in its current form, would in some cases result
in interest payable on a security issued in similar circumstances as the
issuance of the debentures by the Investment Affiliates to ML Partnership not
being deductible for United States Federal income tax purposes. If this
legislation were ultimately adopted in its current form, such legislation could
constitute a Partnership Tax Event, which could result in an early redemption
of the partnership preferred securities.
"Partnership Investment Company Event" means that ML&Co. shall have
requested and received an opinion of nationally recognized independent legal
counsel experienced in these matters to the effect that as a result of the
occurrence on or after the date of this prospectus of a Change in Investment
Company Act Law, ML Partnership is or will be considered an investment company
which is required to be registered under the Investment Company Act.
Redemption Procedures
ML Partnership may not redeem fewer than all the outstanding partnership
preferred securities unless all accumulated and unpaid distributions have been
paid on all partnership preferred securities for all quarterly distribution
periods terminating on or before the date of redemption.
If ML Partnership gives a notice of redemption in respect of partnership
preferred securities, which notice will be irrevocable, then, by 12:00 noon,
New York City time, on the redemption date, ML Partnership:
. if the partnership preferred securities are in book entry form with
DTC, will deposit irrevocably with DTC funds sufficient to pay the
applicable redemption price and will give DTC irrevocable
instructions and authority to pay the redemption price in respect of
the partnership preferred securities held through DTC in global form,
or
. if the partnership preferred securities are held in certificated
form, will deposit with the paying agent for the partnership
preferred securities funds sufficient to pay any amount in respect of
any partnership preferred securities in certificated form and will
give the paying agent irrevocable instructions and authority to pay
these amounts to the holders of partnership preferred securities upon
surrender of their certificates.
See "Description of the TOPrS--Book-Entry Only Issuance--The Depository Trust
Company".
If notice of redemption shall have been given and funds deposited as
required, then upon the date of the deposit, all rights of holders of such
partnership preferred securities so called for redemption will cease, except
the right of the holders of such partnership preferred securities to receive
the redemption price, but without interest on that redemption price. In the
event that any date fixed for redemption of partnership preferred securities is
not a Business Day, then payment of the redemption price payable on that date
will be made on the next succeeding day that is a Business Day, and without any
interest or other payment in respect of any delay, except that, if that
Business Day falls in the next calendar year, the payment will be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date fixed for redemption. In the event that payment of the
redemption price in respect of partnership preferred securities is improperly
withheld or refused and not paid either by ML Partnership or by ML&Co. under
the Partnership Guarantee described under "Description of the Partnership
Guarantee," distributions on the partnership preferred securities will continue
to accumulate, from the original redemption date to the date of payment.
40
Subject to the foregoing and applicable law, including, without
limitation, United States Federal securities laws, ML&Co. or any of its
subsidiaries may at any time and from time to time purchase outstanding
partnership preferred securities by tender, in the open market or by private
agreement.
Liquidation Distribution Upon Dissolution
In the event of any voluntary or involuntary dissolution, winding-up or
termination of ML Partnership, the holders of the partnership preferred
securities at the time will be entitled to receive out of the assets of ML
Partnership available for distribution to partners after satisfaction of
liabilities of creditors as required by the Delaware Partnership Act, before
any distribution of assets is made to ML&Co. as General Partner, an amount
equal to, in the case of holders of partnership preferred securities, the
aggregate of the stated liquidation preference of $25 per partnership preferred
security plus accumulated and unpaid distributions on the partnership preferred
securities to the date of payment.
Under the Limited Partnership Agreement, ML Partnership shall be
dissolved and its affairs shall be wound up:
. upon the bankruptcy of ML&Co.,
. upon the assignment by ML&Co. of its entire interest in ML
Partnership when the assignee is not admitted to ML Partnership as a
general partner of ML Partnership in accordance with the limited
partnership agreement, or the filing of a certificate of dissolution
or its equivalent with respect to ML&Co., or the revocation of
ML&Co.'s charter and the expiration of 90 days after the date of
notice to ML&Co. of revocation without a reinstatement of its
charter, or if any other event occurs that causes the General Partner
to cease to be a general partner of ML Partnership under the Delaware
Limited Partnership Act, unless the business of ML Partnership is
continued in accordance with the Delaware Limited Partnership Act,
. if ML Partnership has redeemed or otherwise purchased all the
partnership preferred securities,
. upon the entry of a decree of judicial dissolution or
. upon the written consent of all partners of ML Partnership.
Voting Rights
Except as provided below and under "Description of the Partnership
Guarantee--Amendments and Assignment" and as otherwise required by law and the
Limited Partnership Agreement, the holders of the partnership preferred
securities will have no voting rights.
Not later than 30 days after any Partnership Enforcement Event occurs,
ML&Co. will convene a meeting for the purpose of appointing a special
representative. If ML&Co. fails to convene a meeting within the 30-day period,
the holders of 10% in liquidation preference of the outstanding partnership
preferred securities will be entitled to convene a meeting. The provisions of
the limited partnership agreement relating to the convening and conduct of the
meetings of the partners will apply with respect to any meeting. In the event
that, at any meeting, holders of less than a majority in aggregate liquidation
preference of partnership preferred securities entitled to vote for the
appointment of a special representative vote for the appointment, no special
representative shall be appointed. Any special representative appointed shall
cease to be a special representative of ML Partnership and the limited partners
if:
. ML Partnership, or ML&Co. pursuant to the Partnership Guarantee,
shall have paid in full all accumulated and unpaid distributions on
the partnership preferred securities,
. any event of default under any Affiliate Investment Instruments shall
have been cured, and
41
. ML&Co. is in compliance with all its obligations under the
Partnership Guarantee and ML&Co., in its capacity as the general
partner, shall continue the business of ML Partnership without
dissolution.
Notwithstanding the appointment of the special representative, ML&Co.
shall continue as General Partner and shall retain all rights under the limited
partnership agreement, including the right not to declare, in its sole
discretion, the payment of distributions on the partnership preferred
securities, for which the failure to declare distributions would not constitute
a default under the limited partnership agreement.
If any proposed amendment to the limited partnership agreement provides
for, or ML&Co. otherwise proposes to effect,
. any action that would adversely affect the powers, preferences or
special rights of the partnership preferred securities, whether by
way of amendment to the limited partnership agreement or otherwise,
including, without limitation, the authorization or issuance of any
limited partner interests in ML Partnership ranking, as to
participation in the profits or distributions or in the assets of ML
Partnership, senior to the partnership preferred securities, or
. the dissolution, winding-up or termination of ML Partnership, other
than:
(A)in connection with the occurrence of a Partnership Special
Event or
(B)as described under "Merger, Consolidation or Amalgamation of
the Partnership" below,
then the holders of outstanding partnership preferred securities will be
entitled to vote on any amendment or proposal of ML&Co., but not on any other
amendment or proposal, as a class, and no amendment or proposal shall be
effective without the approval of the holders of a majority in liquidation
preference of the outstanding partnership preferred securities having a right
to vote on the matter; provided, however, that if the property trustee on
behalf of ML Trust is the holder of the partnership preferred securities, any
amendment or proposal not excepted by clauses (A) and (B) above shall not be
effective without the prior or concurrent approval of the holders of a majority
in liquidation amount of the outstanding TOPrS having a right to vote on the
matters.
ML&Co. shall not
. direct the time, method and place of conducting any proceeding for
any remedy available,
. waive any event of default that is waivable under the Affiliate
Investment Instruments,
. exercise any right to rescind or annul a declaration that the
principal of any Affiliate Investment Instruments shall be due and
payable,
. waive the breach of the obligation by ML&Co. to restrict certain
payments by ML&Co., or
. consent to any amendment, modification or termination of any
Affiliate Investment Instrument, where such consent shall be required
from the investor,
without, in each case, obtaining the prior approval of the holders of at least
a majority in liquidation preference of the partnership preferred securities;
provided, however, that if the property trustee on behalf of ML Trust is the
holder of the partnership preferred securities, any waiver, consent or
amendment or other action shall not be effective without the prior or
concurrent approval of at least a majority in liquidation amount of the
outstanding TOPrS having a right to vote on these matters. ML&Co. shall not
revoke any action previously authorized or approved by a vote of the holders of
the partnership preferred securities without the approval of the revocation by
a majority in liquidation preference of the outstanding partnership preferred
securities. ML&Co. shall notify all holders of the partnership preferred
securities of any notice of an event of default received with respect to any
Affiliate Investment Instrument.
42
Any required approval of holders of partnership preferred securities may
be given at a separate meeting of holders of partnership preferred securities
convened for that purpose, at a meeting of all of the partners in ML
Partnership or pursuant to written consent. ML Partnership will cause a notice
of any meeting at which holders of partnership preferred securities are
entitled to vote, or of any matter upon which action by written consent of the
holders is to be taken, to be mailed to each holder of record of partnership
preferred securities. Each notice will include a statement setting forth
. the date of the meeting or the date by which action is to be taken,
. a description of any resolution proposed for adoption at the meeting
on which holders are entitled to vote or of the matters upon which
written consent is sought and
. instruction for the delivery of proxies or consents.
No vote or consent of the holders of partnership preferred securities
will be required for ML Partnership to redeem and cancel partnership preferred
securities in accordance with the limited partnership agreement.
Notwithstanding that holders of partnership preferred securities are
entitled to vote or consent under any of the circumstances described above, any
of the partnership preferred securities at such time that are beneficially
owned by ML&Co. or by any entity directly or indirectly controlled by, or under
direct or indirect common control with, ML&Co., except for partnership
preferred securities purchased or acquired by ML&Co. or its affiliates in
connection with transactions effected by or for the account of customers of
ML&Co. or any of its subsidiaries or in connection with the distribution or
trading of such partnership preferred securities, shall not be entitled to vote
or consent and shall, for purposes of any vote or consent, be treated as if
they were not outstanding, provided, however, that persons, other than
affiliates of ML&Co., to whom ML&Co. or any of its subsidiaries have pledged
partnership preferred securities may vote or consent with respect to the
pledged partnership preferred securities under the terms of the pledge.
Holders of the partnership preferred securities will have no rights to
remove or replace ML&Co. as general partner.
Merger, Consolidation or Amalgamation of ML Partnership
ML Partnership may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other body, except as
described below. ML Partnership may, without the consent of the holders of the
partnership preferred securities, consolidate, amalgamate, merge with or into,
or be replaced by a limited partnership, limited liability company or trust
organized as such under the laws of any state of the United States of America,
provided that:
. the successor entity either:
(A)expressly assumes all of the obligations of ML Partnership under
the partnership preferred securities, or
(B)substitutes for the partnership preferred securities other
securities having substantially the same terms as the partnership
preferred securities so long as the partnership successor
securities are not junior to any other equity securities of the
successor entity, with respect to participation in the profits and
distributions, and in the assets, of the successor entity,
. the Investment Affiliates expressly acknowledge the successor entity
as the holder of the Affiliate Investment Instruments,
. the partnership preferred securities or any partnership successor
securities are listed, or any partnership successor securities will
be listed upon notification of issuance, on any national securities
exchange or other organization on which the partnership preferred
securities, if so listed, are then listed,
43
. the merger, consolidation, amalgamation or replacement does not cause
the TOPrS or, in the event that ML Trust is liquidated in connection
with a Trust Special Event, the partnership preferred securities or
any partnership successor securities, to be downgraded by any
nationally recognized statistical rating organization,
. the merger, consolidation, amalgamation or replacement does not
adversely affect the powers, preferences and other special rights of
the holders of the TOPrS or partnership preferred securities,
including any partnership successor securities, in any material
respect, other than, in the case of the partnership preferred
securities, with respect to any dilution of the holders' interest in
the new resulting entity,
. the successor entity has a purpose substantially identical to that of
ML Partnership,
. before the merger, consolidation, amalgamation or replacement, ML&Co.
has received an opinion of nationally recognized independent counsel
to ML Partnership experienced in these matters to the effect that:
(A)the successor entity will be treated as a partnership for United
States Federal income tax purposes,
(B)the merger, consolidation, amalgamation or replacement would not
cause ML Trust to be classified as an association taxable as a
corporation for United States Federal income tax purposes,
(C)following the merger, consolidation, amalgamation or replacement,
ML&Co. and such successor entity will be in compliance with the
Investment Company Act without registering as an investment
company, and
(D)the merger, consolidation, amalgamation or replacement will not
adversely affect the limited liability of the holders of the
partnership preferred securities, and
. ML&Co. guarantees the obligations of the successor entity under the
partnership successor securities at least to the extent provided by
the Partnership Guarantee.
Book-Entry and Settlement
If the partnership preferred securities are distributed to holders of the
TOPrS in connection with the involuntary or voluntary dissolution, winding-up
or liquidation of ML Trust as a result of the occurrence of a Trust Special
Event, the partnership preferred securities will be issued in the form of one
or more global partnership securities registered in the name of DTC as the
depository or its nominee. For a description of DTC and the specific terms of
the Depository arrangements, see "Description of the TOPrS--Book-Entry Only
Issuance--The Depository Trust Company". As of the date of this prospectus, the
description therein of DTC's book-entry system and DTC's practices as they
relate to purchases, transfers, notices and payments with respect to the TOPrS
apply in all material respects to any partnership preferred securities
represented by one or more global partnership securities.
Registrar, Transfer Agent and Paying Agent
ML&Co. will act as registrar, transfer agent and paying agent for the
partnership preferred securities for so long as the partnership preferred
securities are held by ML Trust or, if ML Trust is liquidated in connection
with a Trust Special Event, for so long as the partnership preferred securities
remain in book-entry only form. In the event the partnership preferred
securities are distributed in connection with a Trust Special Event and the
book-entry system for the partnership preferred securities is discontinued, it
is anticipated that JPMorgan Chase Bank or one of its affiliates will act as
registrar, transfer agent and paying agent for the partnership preferred
securities.
Registration of transfers of partnership preferred securities will be
effected without charge by or on behalf of ML Partnership, but upon payment,
with the giving of such indemnity as ML Partnership or ML&Co. may require, in
respect of any tax or other governmental charges that may be imposed in
relation to it.
44
ML Partnership will not be required to register or cause to be registered
the transfer of partnership preferred securities after such partnership
preferred securities have been called for redemption.
Miscellaneous
ML&Co. is authorized and directed to conduct its affairs and to operate
ML Partnership in such a way that:
. ML Partnership will not be deemed to be an investment company
required to be registered under the Investment Company Act or
characterized as an association taxable as a corporation for United
States Federal income tax purposes,
. the Affiliate Investment Instruments will be treated as indebtedness
of their respective issuers for United States Federal income tax
purposes and
. ML Partnership will not be treated as an association or as a publicly
traded partnership, within the meaning of Section 7704 of the Code,
taxable as a corporation.
In this connection, ML&Co. as general partner is authorized to take any
action, not inconsistent with applicable law, the certificate of limited
partnership of ML Partnership or the limited partnership agreement, that it
determines in its discretion to be necessary or desirable for the foregoing
purposes as long as any action does not adversely affect the interests of the
holders of the partnership preferred securities.
45
DESCRIPTION OF THE PARTNERSHIP GUARANTEE
Set forth below is a summary of the material information concerning the
Partnership Guarantee (the "Partnership Guarantee") that will be executed and
delivered by ML&Co. for the benefit of the holders from time to time of
partnership preferred securities. The summary is not complete and is subject in
all respects to the provisions of, and is qualified in its entirety by
reference to, the Partnership Guarantee, which is filed as an exhibit to the
registration statement of which this prospectus is a part. ML&Co. will hold the
Partnership Guarantee for the benefit of the holders of the partnership
preferred securities.
Terms of the Partnership Guarantee
Under the Partnership Guarantee, ML&Co. will irrevocably agree, on a
subordinated basis to the extent set forth in this prospectus, to pay in full
to the holders of the partnership preferred securities, without duplication of
amounts previously paid by ML Partnership, as and when due, regardless of any
defense, right of set-off or counterclaim that ML Partnership may have or
assert, the following payments (the "Partnership Guarantee Payments"):
. any accumulated and unpaid distributions that previously have been
declared on ML Partnership preferred securities out of funds legally
available for distribution,
. the redemption price with respect to any partnership preferred
securities called for redemption by ML Partnership out of funds
legally available for that purpose, and
. upon a liquidation of ML Partnership, the lesser of:
(A)the aggregate of the liquidation preference and all accumulated
and unpaid distributions on the partnership preferred
securities to the date of payment and
(B)the amount of assets of ML Partnership, after satisfaction of
all liabilities, remaining available for distribution to
holders of partnership preferred securities in liquidation of
ML Partnership.
ML&Co.'s obligation to make a Partnership Guarantee Payment may be
satisfied by direct payment of the required amounts by ML&Co. to the holders of
partnership preferred securities or by causing ML Partnership to pay these
amounts to holders.
The Partnership Guarantee will be a guarantee on a subordinated basis
with respect to the partnership preferred securities from the time of issuance
of the partnership preferred securities but will not apply to any payment of
distributions or the redemption price, or to payments upon the dissolution,
winding-up or termination of ML Trust, except to the extent ML Partnership
shall have funds available for these purposes. If Investment Affiliates,
including, where applicable, ML&Co., as guarantor, of the Affiliate Investment
Instruments in which ML Partnership invests fail to make any payment in respect
of the securities or, if applicable, guarantees, ML Partnership may not declare
or make distributions on the partnership preferred securities. In such event,
holders of the partnership preferred securities would not be able to rely upon
the Partnership Guarantee for payment of these amounts. Instead, holders of the
partnership preferred securities will have the remedies described in this
prospectus under "Description of the Partnership Preferred
Securities--Partnership Enforcement Events", including the right to direct
ML&Co. or the special representative, as the case may be, to enforce the
covenant restricting certain payments by ML&Co. and Finance Subsidiaries. See
"--Covenants of ML&Co." below.
The Guarantees, when taken together with the ML&Co. Debenture and
ML&Co.'s obligations to pay all fees and expenses of ML Trust and ML
Partnership, constitute a guarantee to the extent set forth in this prospectus
by ML&Co. of the distribution, redemption and liquidation payments payable to
the holders of the TOPrS. The Guarantees do not apply, however, to current
distributions by ML Partnership unless and until
46
distributions are declared by ML Partnership out of funds legally available for
payment or to liquidating distributions unless there are assets available for
payment in ML Partnership.
Obligations of ML&Co.
Under the Partnership Guarantee, ML&Co. will agree that if:
. for any distribution period, full distributions on a cumulative basis
on any partnership preferred securities have not been paid or
declared and set apart for payment,
. an event of default by any Investment Affiliate in respect of any
Affiliate Investment Instrument has occurred and is continuing, or
. ML&Co. is in default of its obligations under any Guarantee,
then, during that period,
. ML&Co. may not declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation
payment with respect to, any of its capital stock or comparable
equity interest, except for:
. dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, its capital stock,
and conversions or exchanges of common stock of one class into
common stock of another class,
. redemptions or purchases of any rights under the Rights Agreement
and the issuance of preferred stock pursuant to those rights and
. purchases or acquisitions by ML&Co. or its affiliates in
connection with transactions effected by or for the account of
customers of ML&Co. or any of its subsidiaries or in connection
with the distribution or trading of such capital stock or
comparable equity interest and
. ML&Co. may not make, permit any Finance Subsidiary to make, or
make any payments that would enable any Finance Subsidiary to
make, any payment of any dividends on, any distribution with
respect to, or any redemption, purchase or other acquisition of,
or any liquidation payment with respect to, any preferred security
or comparable equity interest of any Finance Subsidiary.
Events of Default; Enforcement of Partnership Guarantee
An event of default under the Partnership Guarantee will occur upon the
failure of ML&Co. to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the partnership
preferred securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the special
representative in respect of the Partnership Guarantee or to direct the
exercise of any trust or power conferred upon the special representative under
the Partnership Guarantee. If the special representative fails to enforce its
rights under the Partnership Guarantee, after a holder of partnership preferred
securities has made a written request, such holder of partnership preferred
securities may institute a legal proceeding directly against ML&Co. to enforce
the special representative's rights under the Partnership Guarantee without
first instituting a legal proceeding against ML Partnership, the special
representative or any other person or entity. Notwithstanding the foregoing, if
ML&Co. has failed to make a guarantee payment, a holder of partnership
preferred securities may directly institute a proceeding against ML&Co. for
enforcement of the Partnership Guarantee for the payment.
47
Status of the Partnership Guarantee; Subordination
The Partnership Guarantee will constitute an unsecured obligation of
ML&Co. and will rank subordinate and junior in right of payment to all other
liabilities of ML&Co. and will rank equally with the most senior preferred
stock issued from time to time by ML&Co., with similar guarantees issued by
ML&Co. in connection with
. the $275,000,000 aggregate liquidation amount of 7 3/4% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust I,
. the $300,000,000 aggregate liquidation amount of 8% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
II,
. the $750,000,000 aggregate liquidation amount of 7% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
III,
. the $400,000,000 aggregate liquidation amount of 7.12% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust IV,
. the $850,000,000 aggregate liquidation amount of 7.28% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust V,
. the (Yen)10,000,000,000 aggregate liquidation amount of Trust
Originated Preferred Securities issued by Merrill Lynch Yen TOPrS
Trust I, and
. with any guarantee now or hereafter entered into by ML&Co. in respect
of any preferred stock of any other Finance Subsidiary.
Accordingly, the rights of the holders of partnership preferred
securities to receive payments under the Partnership Guarantee will be subject
to the rights of the holders of any obligations of ML&Co. that are senior in
priority to the obligations under the Partnership Guarantee. Furthermore, the
holders of obligations of ML&Co. that are senior to the obligations under the
Partnership Guarantee, including, but not limited to, obligations constituting
senior indebtedness, will be entitled to the same rights upon payment default
or dissolution, liquidation and reorganization in respect of the Partnership
Guarantee that inure to the holders of senior indebtedness as against the
holders of the ML&Co. Debenture. The limited partnership agreement provides
that each holder of partnership preferred securities, by their acceptance,
agrees to the subordination provisions and other terms of the Partnership
Guarantee.
The Partnership Guarantee will constitute a guarantee of payment and not
of collection. That is, the guaranteed party may directly institute a legal
proceeding against ML&Co. to enforce its rights under the Partnership Guarantee
without instituting a legal proceeding against any other person or entity.
The Partnership Guarantee will be deposited with ML&Co. to be held for
the benefit of the holders of the partnership preferred securities. In the
event of the appointment of a special representative to, among other things,
enforce the Partnership Guarantee, the special representative may take
possession of the Partnership Guarantee for that purpose. If no special
representative has been appointed to enforce the Partnership Guarantee, ML&Co.
has the right to enforce the Partnership Guarantee on behalf of the holders of
the partnership preferred securities.
Amendments and Assignment
Except with respect to any changes that do not adversely affect the
rights of holders of partnership preferred securities, in which case no consent
will be required, the Partnership Guarantee may be amended only with the prior
approval of the holders of not less than a majority in liquidation preference
of the outstanding partnership preferred securities. All guarantees and
agreements contained in the Partnership Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of ML&Co. and shall inure to
the benefit of the
48
holders of the partnership preferred securities then outstanding. Except in
connection with any permitted merger or consolidation of ML&Co. with or into
another entity or any permitted sale, transfer or lease of ML&Co.'s assets to
another entity in which the surviving corporation, if other than ML&Co.,
assumes ML&Co.'s obligations under the Partnership Guarantee, ML&Co. may not
assign its rights or delegate its obligations under the Partnership Guarantee
without the prior approval of the holders of at least a majority of the
aggregate stated liquidation preference of the partnership preferred securities
then outstanding.
Termination of the Partnership Guarantee
The Partnership Guarantee will terminate and be of no further force and
effect as to the partnership preferred securities upon:
. full payment of the redemption price of all partnership preferred
securities, or
. full payment of the amounts payable in accordance with the Limited
Partnership Agreement upon liquidation of ML Partnership.
The Partnership Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of partnership
preferred securities must in accordance with the Delaware Limited Partnership
Act restore payment of any sums paid under the partnership preferred securities
or the Partnership Guarantee. The Delaware Limited Partnership Act provides
that a limited partner of a limited partnership who wrongfully receives a
distribution may be liable to the limited partnership for the amount of such
distribution.
Governing Law
The Partnership Guarantee will be governed by and construed in accordance
with the internal laws of the State of New York.
UNITED STATES FEDERAL INCOME TAXATION
In the opinion of Sidley Austin Brown & Wood LLP, tax counsel to ML&Co.,
ML Trust and ML Partnership ("Tax Counsel"), the following summary accurately
describes the material United States Federal income tax consequences that may
be relevant to the purchase, ownership and disposition of the TOPrS. Unless
otherwise stated, this summary deals only with the TOPrS held as capital assets
by United States Persons who purchase the TOPrS upon original issuance and does
not purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, traders in securities that elect to mark to market,
tax-exempt entities, persons holding TOPrS in a tax-deferred or tax-advantaged
account, or persons holding the TOPrS as a hedge against currency risks, as a
position in a "straddle" or as part of a "hedging" or "conversion" transaction
for tax purposes, or persons whose functional currency is not the United States
dollar. As used in this prospectus, a "United States Person" means a person
that is for Federal United States income tax purposes a (1) citizen or resident
of the United States, (2) a corporation or a partnership (including an entity
treated as a corporation or partnership for United States Federal income tax
purposes) created or organized in or under the laws of the United States, any
state thereof or the District of Columbia (unless, in the case of a
partnership, Treasury regulations are adopted that provide otherwise), (3) an
estate whose income is subject to United States Federal income tax regardless
of its source, or (4) 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 United States persons have the authority to control all substantial
decisions of the trust. Notwithstanding clause (4) of the previous sentence, to
the extent provided in Treasury regulations, certain trusts in existence on
August 20, 1996, and treated as United States persons prior to such date, that
elect to continue to be treated as United States persons will also be United
States Persons. Moreover, as used herein, the term United States Person
includes any holder of a TOPrS whose income or gain in respect of its
investment in a TOPrS is effectively connected with the conduct of a U.S. trade
or business. The tax treatment of a holder may vary depending on its particular
situation.
49
This summary does not address all the tax consequences that may be
relevant to holders who may be subject to special tax treatment, such as banks,
real estate investment trusts, regulated investment companies, insurance
companies, dealers in securities or currencies, tax-exempt investors, or
foreign investors. This summary does not include any description of any
alternative minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to the TOPrS.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), the Treasury regulations promulgated under the Code and administrative
and judicial interpretations of the Code, as of the date of this prospectus,
all of which are subject to change, possibly on a retroactive basis.
The TOPrS are not being marketed to persons that are not United States
Persons ("non-United States Persons") and, consequently, the following
discussion does not discuss the tax consequences that might be relevant to
non-United States Persons. Moreover, in order to protect ML Trust and ML
Partnership from potential adverse consequences, non-United States Persons will
be subject to withholding on distributions on the TOPrS at a rate of 30%. In
determining a holder's status, the United States entity otherwise required to
withhold taxes may rely on an IRS Form W-8BEN, an IRS Form W-8ECI, an IRS Form
W-9, or a holder's certification of its non-foreign status signed under penalty
of perjury. Non-United States Persons should consult their tax advisors as to
the specific United States Federal income tax consequences of the purchase,
ownership, and disposition of TOPrS.
Tax Counsel has advised that there is no authority directly on point
dealing with securities similar to the TOPrS or transactions of the type
described in this prospectus and that the opinions of Tax Counsel are not
binding on the IRS or the courts, either of which could take a contrary
position. No rulings have been or will be sought from the IRS. Accordingly,
there can be no assurance that the IRS will not challenge the opinions
expressed in this tax section or that a court would not sustain a challenge to
these opinions. Nevertheless, Tax Counsel has advised that it is of the view
that, if challenged, the opinions expressed in this tax section would be
sustained by a court with jurisdiction in a properly presented case.
Persons considering the purchase of the TOPrS should consult their tax
advisors with respect to the tax consequences to them of the purchase,
ownership and disposition of the TOPrS, including the tax consequences under
state, local, foreign, and other tax laws and the possible effects of changes
in United States Federal or other tax laws. For a discussion of the possible
redemption of the TOPrS or redemption of the partnership preferred securities
upon the occurrence of certain tax events see "Description of the TOPrS--Trust
Special Event Redemption or Distribution" and "Description of the Partnership
Preferred Securities--Partnership Special Event Redemption" respectively.
Classification of ML Trust
Tax Counsel is of the opinion that, under current law, and based on
certain representations made by ML Trust as well as certain facts and
assumptions with respect to the transaction described in this prospectus, ML
Trust will be classified for United States Federal income tax purposes as a
grantor trust and not as an association taxable as a corporation. Accordingly,
for United States Federal income tax purposes, each holder of the TOPrS will be
considered the owner of an undivided interest in the partnership preferred
securities held by ML Trust. As a result of this treatment, each holder of the
TOPrS will be required to include in its gross income its distributive share of
income attributable to ML Partnership. This amount will generally be equal to a
holder's allocable share of amounts accrued on the partnership preferred
securities. No amount included in income with respect to the TOPrS will be
eligible for the corporate dividends-received deduction.
Classification of the Partnership
Tax Counsel is of the opinion that under current law, and based on
certain representations made by ML Trust as well as certain facts and
assumptions with respect to the transaction described in this prospectus, ML
Partnership will be classified for United States Federal income tax purposes as
a partnership and not as an association or publicly traded partnership taxable
as a corporation.
50
Tax Counsel's opinion is based on certain factual assumptions relating to
the organization and operation of ML Partnership and is conditioned upon
certain representations made by ML&Co., as General Partner, and ML Partnership
as to factual matters, including the organization and the operation of ML
Partnership and the type and frequency of investments made by ML Partnership.
ML&Co., as General Partner, has represented that it intends to operate ML
Partnership in a manner that will enable ML Partnership to be classified as a
partnership for all future taxable periods in which any partnership preferred
securities remain outstanding. In particular, under the limited partnership
agreement, the general partner cannot take any action that would cause ML
Partnership to constitute a "publicly traded partnership" taxable as a
corporation. Accordingly, it is expected that ML Partnership will continue to
qualify as a partnership and, therefore, will not constitute a publicly traded
partnership taxable as a corporation for all taxable years in which any
partnership preferred securities remain outstanding.
Classification of the Debentures
ML Partnership, ML&Co., the relevant Investment Affiliates and the
holders of the Trust Securities (by acceptance of a beneficial interest in a
Trust Security) will agree to treat the debentures as indebtedness of the
relevant issuer for all United States Federal income tax purposes. In
connection with the issuance of the debentures, Tax Counsel will issue its
opinion that, under current law, and based on certain representations, facts
and assumptions to be set forth in such opinion, the debentures will be
classified as indebtedness of the relevant issuer for United States Federal
income tax purposes.
Income and Deductions
Because ML Trust will be classified as a grantor trust for United States
Federal income tax purposes, holders of TOPrS will be considered to own an
undivided interest in the partnership preferred securities held by ML Trust. As
a result of this treatment, a holder of TOPrS will be required to take into
income its proportionate share of income attributable to ML Partnership. A
holder's distributive share of income attributable to ML Partnership generally
will be substantially equal to the amount of the cash distributions that
accumulate with respect to the TOPrS it holds. Accordingly, if quarterly
distributions on the TOPrS are paid currently, the amount of income recognized
by a holder during a taxable year generally will be substantially equal to the
cash distributions received by the holder of the TOPrS.
The nature and timing of the income that is allocated to holders of the
TOPrS will, however, depend on the United States Federal income tax
characterization of the investments held by ML Partnership during the relevant
period. Because ML Partnership will be an accrual basis taxpayer for United
States Federal income tax purposes, income will accrue on the TOPrS and will be
allocated to holders of the TOPrS on a daily accrual basis, generally at a rate
that is expected to be equal to (and that will not be greater than) the
distribution rate on the TOPrS, regardless of the holders' method of
accounting. Actual cash distributions on the TOPrS will not, however, be
separately reported as taxable income to the holders at the time they are
received.
If distributions on the partnership preferred securities are not made
currently, the corresponding distributions on the TOPrS will not be made
currently. Because ML Partnership is an accrual basis taxpayer, it can be
expected that during a period in which interest payments on the debentures or
distributions on the partnership preferred securities are deferred (for
whatever reason), holders will generally recognize income in advance of their
receipt of any cash distributions with respect to their TOPrS. The amount of
income that will be allocated to holders of TOPrS during any such deferral
period will generally equal their pro rata share of the amount of distributions
accruing on the partnership preferred securities during the deferral period.
ML Partnership does not presently intend to make a Section 754 election.
Accordingly, a subsequent purchaser of the TOPrS who does not purchase the
TOPrS at initial issuance will not be permitted to adjust the tax basis in its
allocable share of ML Partnership's assets so as to reflect any difference
between its purchase price for the TOPrS and its share of ML Partnership's
underlying tax basis in its assets. In such an instance, the subsequent
purchaser of the TOPrS may be required to report a larger or smaller amount of
income from holding the TOPrS than would otherwise be appropriate based upon
the holder's purchase price for the TOPrS.
51
Receipt of Partnership Preferred Securities Upon Liquidation of ML Trust
Under certain circumstances, as described under the caption "Description
of the TOPrS--Trust Special Event Redemption or Distribution", partnership
preferred securities may be distributed to holders of the TOPrS in exchange for
their TOPrS and in liquidation of ML Trust. Unless the liquidation of ML Trust
occurs as a result of ML Trust being subject to United States Federal income
tax with respect to income accrued or received on the partnership preferred
securities, a distribution to holders under these circumstances would, for
United States Federal income tax purposes, be treated as a nontaxable event to
each holder. Each holder would receive an aggregate tax basis in the
partnership preferred securities equal to the holder's aggregate tax basis in
its TOPrS with a holding period in the partnership preferred securities so
received in liquidation of ML Trust that would include the period during which
the TOPrS were held. If, however, the liquidation of ML Trust were to occur
because ML Trust is subject to United States Federal income tax with respect to
income accrued or received on the partnership preferred securities, the
distribution of partnership preferred securities to holders by ML Trust would
likely be a taxable event to each holder, and a holder would recognize gain or
loss as if the holder had exchanged its TOPrS for the partnership preferred
securities it received upon the liquidation of ML Trust. Gain or loss to each
holder would be equal to the difference between the holder's aggregate tax
basis in its TOPrS surrendered in the exchange and the aggregate fair market
value of the partnership preferred securities received in the exchange.
Redemption of TOPrS for Cash
Under certain circumstances, as described under the caption "Description
of the TOPrS--Mandatory Redemption", "Description of the TOPrS--Trust Special
Event Redemption or Distribution" and "Description of the Partnership Preferred
Securities--Partnership Special Event Redemption", the General Partner may
cause ML Partnership to redeem the partnership preferred securities for cash,
in which event ML Trust shall simultaneously apply the cash received to redeem
the TOPrS. Under current law, this redemption of the TOPrS would constitute,
for United States Federal income tax purposes, a taxable disposition, and a
holder would recognize gain or loss as if the holder had sold its proportionate
interest in the redeemed partnership preferred securities for an amount of cash
equal to the proceeds received upon redemption. See "--Disposition of TOPrS".
Disposition of TOPrS
A holder that sells TOPrS will recognize gain or loss equal to the
difference between the amount realized on the sale of the TOPrS and the
holder's adjusted tax basis in the TOPrS sold. Gain or loss to the seller will
be a capital gain or loss and will be a long-term capital gain or loss if the
TOPrS have been held for more than one year at the time of the sale. A holder
will be required to include accumulated but unpaid distributions on the
partnership preferred securities through the date of disposition in income as
ordinary income, and to add this amount to the adjusted tax basis of its TOPrS.
A holder's tax basis in its TOPrS generally will equal the amount paid by
the holder for its TOPrS,
. increased by the amount includible in income by the holder with
respect to its TOPrS, and
. reduced by the amount of cash or other property distributed to the
holder with respect to its TOPrS.
A holder who acquires TOPrS at different prices may be required to maintain a
single aggregate adjusted tax basis in all of its TOPrS and, upon sale or other
disposition of some of its TOPrS, to allocate a pro rata portion of such
aggregate tax basis to the TOPrS sold, rather than maintaining a separate tax
basis in each TOPrS for purposes of computing gain or loss on a sale of that
TOPrS.
Other Partnership Provisions
Section 708. Under Section 708 of the Code, ML Partnership will be
deemed to terminate for United States Federal income tax purposes if 50% or
more of the capital and profits interests in ML Trust are sold or exchanged
within a 12-month period. Pursuant to final Treasury regulations issued on May
9, 1997, if a deemed termination under Section 708 were to occur, ML
Partnership would be considered to have contributed its assets
52
to a new partnership in return for partnership interests therein and then to
have distributed those new partnership interests to the partners of the old
partnership in liquidation thereof.
Section 701. The Department of Treasury has promulgated regulations
under Section 701 of the Code that generally permit it to recast a transaction
or disregard a partnership if a partnership is formed or availed of in
connection with a transaction a principal purpose of which is to reduce
substantially the present value of the partners' aggregate Federal tax
liability in a manner that is inconsistent with the intent of the partnership
provisions of the Code or to treat a partnership as an aggregate of its
partners as appropriate to carry out the purpose of any provision of the Code
or the Treasury regulations thereunder. ML Partnership has been formed for, and
will engage in, activities typical for partnerships. Although there is no
precedent that applies to the transactions contemplated herein, Tax Counsel
believes that ML Partnership is not of the type intended to fall within the
scope of these regulations.
Information Reporting and Backup Withholding
Income on the TOPrS will be reported to holders on an IRS Form 1099,
which form should be mailed to holders of TOPrS by January 31 following each
calendar year. Payments made on and proceeds from the sale of TOPrS may be
subject to "back-up" withholding at a current rate of 30% (which rate is
scheduled to be reduced periodically through 2006) unless the beneficial owner
of a TOPrS provides proof of an applicable exemption or a correct taxpayer
identification number, and otherwise complies with applicable requirements of
the backup withholding rules. Any withheld amount generally will be allowed as
a credit against the holder's United States Federal income tax, provided the
required information is timely filed with the IRS.
53
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement, ML
Trust has agreed to sell to each of the underwriters named below, and each of
the underwriters, for whom MLPF&S and are acting as
representatives, has severally agreed to purchase the number of TOPrS set forth
opposite its name below. In the purchase agreement, the several underwriters
have agreed, subject to the terms and conditions set forth therein, to purchase
all the TOPrS offered by this prospectus if any of the TOPrS are purchased. In
the event of default by an underwriter, the purchase agreement provides that,
in certain circumstances, the purchase commitments of the non-defaulting
underwriters may be increased or the purchase agreement may be terminated.
Underwriters Number of TOPrS
------------ ---------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................
--------------
Total..................................................
==============
Commission and Discounts
The underwriters propose to offer the TOPrS to the public at the public
offering price set forth on the cover page of this prospectus, and, to certain
dealers at that price less a concession not in excess of $ per TOPrS;
provided, that the concession for sales of 10,000 or more TOPrS to any single
purchaser will be $ per TOPrS. The underwriters may allow, and such dealers
may reallow, a discount not in excess of $ per TOPrS to certain brokers and
dealers. After the TOPrS are released for sale to the public, the offering
price, concession and discount may be changed. Proceeds to be received by
ML&Co. will be net of the underwriting discount and expenses payable by ML&Co.
In view of the fact that the proceeds of the sale of the TOPrS will
ultimately be used to purchase the investment instruments of ML&Co. and its
subsidiaries, the purchase agreement provides that ML&Co. will pay as
compensation to the underwriters, an amount in immediately available funds of
$ per TOPrS (or $ in the aggregate) for the accounts of
the several underwriters; provided that, such compensation in respect of sales
by any underwriter of 10,000 or more TOPrS to any single purchaser will be
$ per TOPrS. Therefore, to the extent of any such sales, the actual
amount of underwriters' compensation will be less than the aggregate amount
specified in the preceding sentence.
Listing
Application will be made to list the TOPrS on the NYSE. Trading of the
TOPrS on the NYSE is expected to commence within a 30-day period after the
initial delivery of the TOPrS. The representatives have advised ML Trust that
they intend to make a market in the TOPrS prior to the commencement of trading
on the NYSE. The representatives will have no obligation to make a market in
the TOPrS, however, and may cease market making activities, if commenced, at
any time.
Before this offering there has been no public market for the TOPrS. In
order to meet one of the requirements for listing the TOPrS on the NYSE, the
underwriters will undertake to sell lots of 100 or more TOPrS to a minimum of
400 beneficial holders, that there will be at least one million units of TOPrS
outstanding and that the TOPrS will have a minimum market value of $4,000,000.
54
Price Stabilization, Short Positions and Penalty Bids
In connection with the offering, the underwriters are permitted to engage
in certain transactions that stabilize the market price of the TOPrS. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the market price of the TOPrS. If the underwriters create a short
position in the TOPrS in connection with the offering, i.e., if they sell more
TOPrS than are set forth on the cover page of this prospectus, the underwriters
may reduce that short position by purchasing TOPrS in the open market. Because
the underwriters have no overallotment options with respect to the TOPrS, they
would be required to close out a short position in the TOPrS by purchasing
TOPrS in the open market. In general, purchases of a security in the open
market for the purpose of stabilization or to reduce a short position could
have the effect of raising or maintaining the market price of the security or
preventing or retarding a decline in the market price of the security.
The underwriters may also impose a penalty bid on certain underwriters
and selling group members. This means that if an underwriter purchases TOPrS in
the open market to reduce the underwriters' short position or to stabilize the
price of the TOPrS, that underwriter may reclaim the amount of the selling
concession from the underwriters and selling group members who sold those TOPrS
as part of the offering. The imposition of a penalty bid might have an effect
on the price of a security to the extent that it were to discourage resales of
the security.
Neither ML&Co. nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the TOPrS. In addition, neither ML&Co.
nor any of the underwriters makes any representation that the underwriters will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
Miscellaneous
ML Trust, ML&Co., and ML Partnership have agreed to indemnify the
underwriters against, or contribute to payments that the underwriters may be
required to make in respect of, certain liabilities, including liabilities
under the Securities Act.
Because MLPF&S, one of the underwriters in the offering, is an affiliate
of ML&Co. and a member of the National Association of Securities Dealers, Inc.,
the offering of TOPrS will be conducted pursuant to the applicable sections of
Rule 2810 of the Conduct Rules of the NASD. The underwriters may not confirm
sales to any discretionary account without the prior specific written approval
of the customer.
Certain of the underwriters and their affiliates engage in transactions
with, and perform services for, ML&Co. in the ordinary course of business and
have engaged, and may in the future engage, in commercial banking and
investment banking transactions with ML&Co. MLPF&S may use this prospectus for
offers and sales related to market-making transactions in the TOPrS. MLPF&S may
act as principal or agent in these transactions, and the sales will be made at
prices related to prevailing market prices at the time of sale.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC. Our
SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. The address of the SEC's Internet site is provided solely
for the information of prospective investors and is not intended to be an
active link. You may also read and copy any document we file by visiting 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 further
information about the public reference rooms. You may also inspect our SEC
reports and other information at the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
55
We have filed a registration statement on Form S-3 with the SEC covering
the TOPrS and other securities. For further information on ML&Co. and the
TOPrS, you should refer to our registration statement and its exhibits. This
prospectus summarizes material provisions of contracts and other documents that
we refer you to. Because the prospectus may not contain all the information
that you may find important, you should review the full text of these
documents. We have included copies of these documents as exhibits to our
registration statement.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file
with them, which means:
. incorporated documents are considered part of the prospectus;
. we can disclose important information to you by referring you to
those documents; and
. information that we file with the SEC will automatically update and
supersede this incorporated information.
We incorporate by reference the documents listed below which were filed
with the SEC under the Exchange Act (other than information in the documents
that is deemed not to be filed):
. annual report on Form 10-K for the year ended December 29, 2000;
. quarterly reports on Form 10-Q for the periods ended March 30, 2001,
June 29, 2001 and September 28, 2001; and
. current reports on Form 8-K dated January 23, 2001, February 28,
2001, April 18, 2001, April 30, 2001, May 2, 2001, May 4, 2001, May
23, 2001, June 1, 2001, June 26, 2001, June 29, 2001, July 5, 2001,
July 17, 2001, July 24, 2001, August 1, 2001, August 3, 2001, August
31, 2001, September 11, 2001, September 28, 2001, October 18, 2001,
October 23, 2001, October 31, 2001, November 1, 2001, November 2,
2001, November 21, 2001, November 30, 2001, January 9, 2002, January
16, 2002, January 23, 2002, January 29, 2002, February 1, 2002,
February 8, 2002, February 11, 2002 and February 21, 2002.
We also incorporate by reference each of the following documents that we
will file with the SEC after the date of this prospectus until this offering is
completed or after the date of this initial registration statement and before
the effectiveness of the registration statement:
. reports filed under Sections 13(a) and (c) of the Exchange Act;
. definitive proxy or information statements filed under Section 14 of
the Exchange Act in connection with any subsequent stockholders'
meeting; and
. any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by
reference in this prospectus. We have not, and MLPF&S has 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, and MLPF&S is not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Mr. Lawrence
M. Egan, Jr., Corporate Secretary's Office, Merrill Lynch & Co., Inc.,
222 Broadway, 17th Floor, New York, New York 10038, Telephone: (212) 670-0432.
56
LEGAL MATTERS
Certain matters of Delaware law relating to the legality of the TOPrS,
the validity of ML Trust Agreement, the formation of ML Trust and ML
Partnership and the legality under state law of the TOPrS and the partnership
preferred securities are being passed upon by Skadden, Arps, Slate, Meagher &
Flom (Delaware), special Delaware counsel to ML Trust, the Partnership and
ML&Co. The legality under state law of The Trust Guarantee, the Partnership
Guarantee, the ML&Co. Debenture and the Investment Guarantees with respect to
the Affiliate Debentures will be passed upon on behalf of ML Trust, ML
Partnership and ML&Co. by Sidley Austin Brown & Wood LLP, New York, New York.
The validity of the TOPrS, the partnership preferred securities and the Trust
Guarantee and the Partnership Guarantee will be passed upon on behalf of the
underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York,
counsel to the underwriters.
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from the Annual Report on
Form 10-K of Merrill Lynch & Co., Inc. and subsidiaries for the year ended
December 29, 2000 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports (each of which expressed an unqualified
opinion and which report on the consolidated financial statements included an
explanatory paragraph for the change in accounting method in 1998 for certain
internal-use software development costs to conform with Statement of Position
98-1), which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing. The balance sheets of Merrill
Lynch Preferred Funding VI, L.P. and Merrill Lynch Preferred Capital Trust VI
as of December 29, 2000 included in this prospectus have also been audited by
Deloitte & Touche LLP, as stated in their reports appearing herein, and have
been so included in reliance upon such reports of Deloitte & Touche LLP given
upon their authority as experts in accounting and auditing.
57
INDEX OF DEFINED TERMS
Defined Terms Page No.
- ------------- --------
Affiliate Debentures..................................................
Affiliate Investment Instruments......................................
Business Day..........................................................
Change in Investment Company Act Law..................................
Code..................................................................
Eligible Institution..................................................
Finance Subsidiary....................................................
Investment Affiliate..................................................
Investment Company Act................................................
Investment Guarantee..................................................
ML&Co.................................................................
ML&Co. Debenture......................................................
ML Partnership........................................................
Moody's...............................................................
Partnership Enforcement Event.........................................
Partnership Guarantee.................................................
Partnership Guarantee Payments........................................
Partnership Investment Company Event..................................
Partnership Special Event.............................................
Partnership Tax Event.................................................
Rights Agreement......................................................
S&P...................................................................
Special Event.........................................................
Tax Action............................................................
Tax Counsel...........................................................
TOPrS.................................................................
Trust Enforcement Event...............................................
Trust Guarantee.......................................................
Trust Guarantee Payments..............................................
Trust Investment Company Event........................................
Trust Securities......................................................
Trust Special Event...................................................
Trust Tax Event.......................................................
United States Person..................................................
58
INDEX TO FINANCIAL STATEMENTS
Page No.
--------
MERRILL LYNCH PREFERRED FUNDING VI, L.P.
Independent Auditors' Report....................................... F-2
Balance Sheet as of December 29, 2000.............................. F-3
Note to Balance Sheet as of December 29, 2000...................... F-3
Balance Sheet as of September 28, 2001............................. F-4
Note to Balance Sheet as of September 28, 2001..................... F-4
MERRILL LYNCH PREFERRED CAPITAL TRUST VI
Independent Auditors' Report....................................... F-5
Balance Sheet as of December 29, 2000.............................. F-6
Note to Balance Sheet as of December 29, 2000...................... F-6
Balance Sheet as of September 28, 2001............................. F-7
Note to Balance Sheet as of September 28, 2001..................... F-7
F-1
INDEPENDENT AUDITORS' REPORT
To the General Partner and Initial Limited Partner of
Merrill Lynch Preferred Funding VI, L.P.
We have audited the accompanying balance sheet of Merrill Lynch Preferred
Funding VI, L.P. (the "Partnership") as of December 29, 2000. This balance
sheet is the responsibility of the Partnership's management. Our responsibility
is to express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in
all material respects, the financial position of the Partnership as of December
29, 2000, in conformity with generally accepted accounting principles.
/S/ DELOITTE & TOUCHE LLP
New York, New York
F-2
BALANCE SHEET
OF MERRILL LYNCH PREFERRED FUNDING VI, L.P.
December 29, 2000
Assets............................................................... $ --
=====
Partnership Securities...............................................
Limited partner interest.......................................... $ 85
General partner interest.......................................... 15
100
Less: Receivables from partners for subscribed partnership interests (100)
-----
$ --
=====
NOTE TO BALANCE SHEET OF MERRILL LYNCH PREFERRED FUNDING VI, L.P.
Merrill Lynch Preferred Funding VI, L.P. (the "Partnership") is a limited
partnership that was formed under the Delaware Revised Uniform Limited
Partnership Act on December 7, 1998 for the exclusive purposes of purchasing
certain eligible debt instruments of Merrill Lynch & Co., Inc. ("ML&Co.") and
wholly owned subsidiaries of ML&Co. (the "Affiliate Investment Instruments")
with the proceeds from the sale of Partnership Preferred Securities (the
"Partnership Preferred Securities") to Merrill Lynch Preferred Capital Trust VI
(the "Trust") and a capital contribution from ML&Co. in exchange for the
general partnership interest in the Partnership (collectively, the "Partnership
Proceeds"). The Partnership Proceeds will be used initially to purchase debt
instruments from ML&Co. and certain domestic wholly owned subsidiaries of
ML&Co., retaining 1% in unaffiliated debt securities. The Partnership shall
have a perpetual existence subject to certain termination events.
The Partnership Preferred Securities will be redeemable for cash, at the
option of the Partnership, in whole or in part, from time to time, after a
certain date to be determined. Except as provided in the Limited Partnership
Agreement and Partnership Preferred Securities Guarantee Agreement, and as
otherwise provided by law, the holders of the Partnership Preferred Securities
will have no voting rights.
ML&Co. serves as the sole general partner of the Partnership. ML&Co., in
its capacity as General Partner of the Partnership, has agreed to pay all fees
and expenses related to the organization and operations of the Partnership
(including any taxes, duties, assessments or government charges of whatever
nature (other than withholding taxes) imposed by the United States or any other
domestic taxing authority upon the Partnership) and the offering of the
Partnership Preferred Securities and be responsible for all debts and other
obligations of the Partnership (other than with respect to the Partnership
Preferred Securities). The General Partner has agreed to indemnify certain
officers and agents of the Partnership.
F-3
BALANCE SHEET
OF MERRILL LYNCH PREFERRED FUNDING VI, L.P.
September 28, 2001
(unaudited)
Assets............................................................... $ --
=====
Partnership Securities...............................................
Limited partner interest.......................................... $ 85
General partner interest.......................................... 15
100
Less: Receivables from partners for subscribed partnership interests (100)
-----
$ --
=====
NOTE TO BALANCE SHEET OF MERRILL LYNCH PREFERRED FUNDING VI, L.P.
Merrill Lynch Preferred Funding VI, L.P. (the "Partnership") is a limited
partnership that was formed under the Delaware Revised Uniform Limited
Partnership Act on December 7, 1998 for the exclusive purposes of purchasing
certain eligible debt instruments of Merrill Lynch & Co., Inc. ("ML&Co.") and
wholly owned subsidiaries of ML&Co. (the "Affiliate Investment Instruments")
with the proceeds from the sale of Partnership Preferred Securities (the
"Partnership Preferred Securities") to Merrill Lynch Preferred Capital Trust VI
(the "Trust") and a capital contribution from ML&Co. in exchange for the
general partnership interest in the Partnership (collectively, the "Partnership
Proceeds"). The Partnership Proceeds will be used initially to purchase debt
instruments from ML&Co. and certain domestic wholly owned subsidiaries of
ML&Co., retaining 1% in unaffiliated debt securities. The Partnership shall
have a perpetual existence subject to certain termination events.
The Partnership Preferred Securities will be redeemable for cash, at the
option of the Partnership, in whole or in part, from time to time, after a
certain date to be determined. Except as provided in the Limited Partnership
Agreement and Partnership Preferred Securities Guarantee Agreement, and as
otherwise provided by law, the holders of the Partnership Preferred Securities
will have no voting rights.
ML&Co. serves as the sole general partner of the Partnership. ML&Co., in
its capacity as General Partner of the Partnership, has agreed to pay all fees
and expenses related to the organization and operations of the Partnership
(including any taxes, duties, assessments or government charges of whatever
nature (other than withholding taxes) imposed by the United States or any other
domestic taxing authority upon the Partnership) and the offering of the
Partnership Preferred Securities and be responsible for all debts and other
obligations of the Partnership (other than with respect to the Partnership
Preferred Securities). The General Partner has agreed to indemnify certain
officers and agents of the Partnership.
F-4
INDEPENDENT AUDITORS' REPORT
To the Trustees of
Merrill Lynch Preferred Capital Trust VI
We have audited the accompanying balance sheet of Merrill Lynch Preferred
Capital Trust VI (the "Trust") as of December 29, 2000. This balance sheet is
the responsibility of the Trust's management. Our responsibility is to express
an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in
all material respects, the financial position of the Trust as of December 29,
2000, in conformity with generally accepted accounting principles.
/S/ DELOITTE & TOUCHE LLP
New York, New York
F-5
BALANCE SHEET OF
MERRILL LYNCH PREFERRED CAPITAL TRUST VI
December 29, 2000
Assets...................................................................... $0
==
Trust securities............................................................ $0
==
NOTE TO BALANCE SHEET OF MERRILL LYNCH PREFERRED CAPITAL TRUST VI
Merrill Lynch Preferred Capital Trust VI (the "Trust") is a statutory
business trust formed on December 7, 1998 under the laws of the State of
Delaware for the exclusive purposes of (i) issuing the Trust Originated
Preferred Securities (the "TOPrS") and the common securities (together with the
TOPrS, the "Trust Securities") representing undivided beneficial ownership
interests in the assets of the Trust, (ii) purchasing Partnership Preferred
Securities (the "Partnership Preferred Securities") representing the limited
partnership interests of Merrill Lynch Preferred Funding VI, L.P. (the
"Partnership") with the proceeds from the sale of the Trust Securities, and
(iii) engaging in only those other activities necessary or incidental thereto.
The Trust has a perpetual existence, subject to certain termination events as
provided in the Declaration of Trust under which it was formed. Subsequent to
December 29, 2000, the Trust intends to issue and sell its TOPrS in a public
offering and to issue and sell its common securities to Merrill Lynch & Co.,
Inc. ("ML&Co"). No TOPrS have been issued as of December 29, 2000.
The proceeds from the Trust's sale of the Trust Securities will be used
to purchase the Partnership Preferred Securities from the Partnership. The
Partnership Preferred Securities will be redeemable for cash, at the option of
the Partnership, in whole or in part, from time to time, after a certain date
to be determined. Upon any redemption of the Partnership Preferred Securities,
the TOPrS will be redeemed, in whole or in part, as applicable. Holders of the
TOPrS will have limited voting rights and will not be entitled to vote to
appoint, remove or replace, or to increase or decrease the number of, trustees,
which voting rights are vested exclusively in the holder of the common
securities.
ML&Co. will be obligated to pay compensation to the underwriters of the
offering of the TOPrS. ML&Co. will pay all fees and expenses related to the
organization and operations of the Trust (including any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States or any other domestic taxing authority upon
the Trust) and the offering of the TOPrS and be responsible for all debts and
other obligations of the Trust (other than the Trust Securities). ML&Co. has
also agreed to indemnify the Trustees and certain other persons.
F-6
BALANCE SHEET OF
MERRILL LYNCH PREFERRED CAPITAL TRUST VI
September 28, 2001
(unaudited)
Assets...................................................................... $0
==
Trust securities............................................................ $0
==
NOTE TO BALANCE SHEET OF MERRILL LYNCH PREFERRED CAPITAL TRUST VI
Merrill Lynch Preferred Capital Trust VI (the "Trust") is a statutory
business trust formed on December 7, 1998 under the laws of the State of
Delaware for the exclusive purposes of (i) issuing the Trust Originated
Preferred Securities (the "TOPrS") and the common securities (together with the
TOPrS, the "Trust Securities") representing undivided beneficial ownership
interests in the assets of the Trust, (ii) purchasing Partnership Preferred
Securities (the "Partnership Preferred Securities") representing the limited
partnership interests of Merrill Lynch Preferred Funding VI, L.P. (the
"Partnership") with the proceeds from the sale of the Trust Securities, and
(iii) engaging in only those other activities necessary or incidental thereto.
The Trust has a perpetual existence, subject to certain termination events as
provided in the Declaration of Trust under which it was formed. Subsequent to
September 28, 2001, the Trust intends to issue and sell its TOPrS in a public
offering and to issue and sell its common securities to Merrill Lynch & Co.,
Inc. ("ML&Co."). No TOPrS have been issued as of September 28, 2001.
The proceeds from the Trust's sale of the Trust Securities will be used
to purchase the Partnership Preferred Securities from the Partnership. The
Partnership Preferred Securities will be redeemable for cash, at the option of
the Partnership, in whole or in part, from time to time, after a certain date
to be determined. Upon any redemption of the Partnership Preferred Securities,
the TOPrS will be redeemed, in whole or in part, as applicable. Holders of the
TOPrS will have limited voting rights and will not be entitled to vote to
appoint, remove or replace, or to increase or decrease the number of, trustees,
which voting rights are vested exclusively in the holder of the common
securities.
ML&Co. will be obligated to pay compensation to the underwriters of the
offering of the TOPrS. ML&Co. will pay all fees and expenses related to the
organization and operations of the Trust (including any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States or any other domestic taxing authority upon
the Trust) and the offering of the TOPrS and be responsible for all debts and
other obligations of the Trust (other than the Trust Securities). ML&Co. has
also agreed to indemnify the Trustees and certain other persons.
F-7
================================================================================
[LOGO]
Merrill Lynch Preferred Capital Trust VI
% Trust Originated Preferred Securities
("TOPrS")
Liquidation Amount $25 per TOPrS
guaranteed to the extent described in this prospectus by
Merrill Lynch & Co., Inc.
---------------
PROSPECTUS
---------------
Merrill Lynch & Co.
================================================================================
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ The information in this prospectus supplement is not complete and may be +
+ changed. We may not sell these securities until the registration statement +
+ filed with the Securities and Exchange Commission is effective. This +
+ prospectus supplement is not an offer to sell these securities and it is +
+ not soliciting an offer to buy these securities in any state where the +
+ offer or sale is not permitted. +
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
Preliminary Prospectus Supplement dated February 25, 2002
PROSPECTUS SUPPLEMENT
- ---------------------
(To prospectus dated , 2002)
$
[LOGO]
Merrill Lynch & Co., Inc.
Medium-Term Notes, Series B
Due Nine Months or More from Date of Issue
----------------
The notes:
. We will offer notes from time to time and specify the terms and
conditions of each issue of notes in a pricing supplement.
. The notes may bear interest at fixed or floating rates or may not
bear any interest.
. If the notes bear interest at a floating rate, the floating rate may
be based on one or more indices or formulas plus or minus a fixed
amount or multiplied by a factor.
. The notes will be senior unsecured debt securities of ML&Co.
. The notes will have stated maturities of nine months or more from
the date they are originally issued.
. We will specify whether the notes can be redeemed or repaid before
their maturity and whether they are subject to mandatory redemption,
redemption at the option of ML&Co. or repayment at the option of the
holder of the notes.
. We will pay amounts due on the notes in U.S. dollars or any other
consideration described in the applicable pricing supplement.
Investing in the notes involves risks that are described in the "Risk
Factors" section beginning on page S-3 of this prospectus supplement.
----------------
Per Note Total
-------- -----
Public offering price................................ 100% $
Agent's discounts and commissions.................... 0.05%-.60% $
Proceeds, before expenses, to ML&Co.................. 99.95%-99.40% $
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement, the accompanying prospectus or any pricing
supplement is truthful or complete. Any representation to the contrary is a
criminal offense.
We may sell notes to the agent referred to below as principal for resale
at varying or fixed offering prices or through the agent as agent using its
reasonable efforts on our behalf. We may also sell notes without the assistance
of the agent, whether acting as principal or as agent.
If we sell other securities referred to in the accompanying prospectus,
the amount of notes that we may offer and sell under this prospectus supplement
may be reduced.
----------------
Merrill Lynch & Co.
----------------
The date of this prospectus supplement is , 2002.
TABLE OF CONTENTS
Prospectus Supplement
Page
----
Risk Factors..................................................................................... S-3
Description of the Notes......................................................................... S-4
United States Federal Income Taxation............................................................ S-23
Plan of Distribution............................................................................. S-30
Validity of the Notes............................................................................ S-31
Prospectus
Page
----
Merrill Lynch & Co., Inc......................................................................... 2
Use of Proceeds.................................................................................. 2
Ratio of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred
Stock Dividends................................................................................ 3
The Securities................................................................................... 3
Description of Debt Securities................................................................... 4
Description of Debt Warrants..................................................................... 10
Description of Currency Warrants................................................................. 12
Description of Index Warrants.................................................................... 14
Description of Preferred Stock................................................................... 19
Description of Depositary Shares................................................................. 24
Description of Preferred Stock Warrants.......................................................... 28
Description of Common Stock...................................................................... 30
Description of Common Stock Warrants............................................................. 34
Plan of Distribution............................................................................. 36
Where You Can Find More Information.............................................................. 37
Incorporation of Information We File With the SEC................................................ 37
Experts.......................................................................................... 38
References in this prospectus supplement to "ML&Co.", "we", "us" and
"our" are to Merrill Lynch & Co., Inc.
References in this prospectus supplement to "MLPF&S" are to the agent,
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
S-2
RISK FACTORS
Your investment in the notes involves certain risks. In consultation with
your own financial and legal advisers, you should carefully consider, among
other matters, the following discussion of risks before deciding whether an
investment in the notes is suitable for you. The notes are not an appropriate
investment for you if you are unsophisticated with respect to their significant
components and interrelationships.
Structure Risks of Notes Indexed to Interest Rate, Currency or Other Indices or
Formulas
If you invest in notes indexed to one or more interest rate, currency or
other indices or formulas, there will be significant risks not associated with
a conventional fixed rate or floating rate debt security. These risks include
fluctuation of the indices or formulas and the possibility that you will
receive a lower, or no, amount of principal, premium or interest and at
different times than you expected. We have no control over a number of matters,
including economic, financial and political events, that are important in
determining the existence, magnitude and longevity of these risks and their
results. In addition, if an index or formula used to determine any amounts
payable in respect of the notes contains a multiplier or leverage factor, the
effect of any change in that index or formula will be magnified. In recent
years, values of certain indices and formulas have been volatile and volatility
in those and other indices and formulas may be expected in the future. However,
past experience is not necessarily indicative of what may occur in the future.
Redemption May Adversely Affect Your Return on the Notes
If your notes are redeemable at our option we may choose to redeem your
notes at times when prevailing interest rates are relatively low. In addition,
if your notes are subject to mandatory redemption, we may be required to redeem
your notes at times when prevailing interest rates are also relatively low. As
a result, you generally will not be able to reinvest the redemption proceeds in
a comparable security at an effective interest rate as high as that of the
notes.
There May Not Be Any Trading Market for Your Notes; Many Factors Affect the
Trading Market and Value of Your Notes
We cannot assure you a trading market for your notes will ever develop or
be maintained. In addition to our own creditworthiness, many other factors may
affect the trading market value of, and trading market for, your notes. These
factors include:
. the complexity and volatility of the index or formula
applicable to your notes,
. the method of calculating the principal, premium and interest
in respect of your notes,
. the time remaining to the maturity of your notes,
. the outstanding amount of your notes,
. any redemption features of your notes,
. the amount of other securities linked to the index or formula
applicable to your notes, and
. the level, direction and volatility of market interest rates
generally.
In addition, notes that are designed for specific investment objectives
or strategies often experience a more limited trading market and more price
volatility. There may be a limited number of buyers when you decide to sell
your notes. This may affect the price you receive for your notes or your
ability to sell your notes at all. You should not purchase notes unless you
understand and know you can bear all of the investment risks related to your
notes.
S-3
Our Credit Ratings May Not Reflect All Risks of an Investment in the Notes
Our credit ratings are an assessment of our ability to pay our
obligations. Consequently, real or anticipated changes in our credit ratings
will generally affect the market value of your notes. Our credit ratings,
however, may not reflect the potential impact of risks related to structure,
market or other factors discussed above on the value of your notes.
DESCRIPTION OF THE NOTES
The notes will be issued as a series of debt securities under a senior
indenture, dated as of October 1, 1993, as amended (the "1993 Indenture"),
between ML&Co. and JPMorgan Chase Bank, as trustee. The term "senior debt
securities," as used in this prospectus supplement, refers to all securities
issued and issuable from time to time under ML&Co.'s senior indentures and
includes the notes. The senior debt securities and ML&Co.'s senior indentures
are more fully described in the accompanying prospectus. The following summary
of the material provisions of the notes and of the 1993 Indenture is not
complete and is qualified in its entirety by reference to the 1993 Indenture, a
copy of which has been filed as an exhibit to the registration statement of
which this prospectus supplement and the accompanying prospectus are a part.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement, the accompanying prospectus and any
pricing supplement. Neither we nor MLPF&S has authorized any other person to
provide you with different or additional information. If anyone provides you
with different or additional information, you should not rely on it. Neither we
nor MLPF&S is making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that the
information contained or incorporated by reference in this prospectus
supplement, the accompanying prospectus and any pricing supplement is accurate
only as of the date on the front cover of the applicable pricing supplement.
The following description of notes will apply unless otherwise specified
in an applicable pricing supplement.
Terms of the Notes
All senior debt securities, including the notes, issued and to be issued
under ML&Co.'s senior indentures will be unsecured general obligations of
ML&Co. and will rank equally with all other unsecured and unsubordinated
indebtedness of ML&Co. from time to time outstanding. Because ML&Co. is a
holding company, the right of ML&Co. and its creditors, including the holders
of the notes, to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is necessarily
subject to the prior claims of creditors of that subsidiary, except to the
extent that a bankruptcy court may recognize the claims of ML&Co. itself as a
creditor of that subsidiary. In addition, dividends, loans and advances to
ML&Co. from certain subsidiaries, including MLPF&S, are restricted by net
capital requirements under the Securities Exchange Act of 1934, as amended, and
under rules of certain exchanges and other regulatory bodies.
ML&Co.'s senior indentures do not limit the aggregate principal amount of
senior debt securities which ML&Co. may issue. ML&Co. may issue its senior debt
securities from time to time as a single series or in two or more separate
series up to the aggregate principal amount from time to time authorized by
ML&Co. for each series. ML&Co. may, from time to time, without the consent of
the holders of the notes, provide for the issuance of notes or other senior
debt securities under its senior indentures in addition to the $
aggregate principal amount of notes offered by this prospectus supplement. As
of , ML&Co. had approximately $ billion aggregate principal
amount of notes issued and outstanding. The aggregate principal amount of notes
which may be offered and sold by this prospectus supplement may be reduced by
the sale by ML&Co. of other securities under the registration statement of
which this prospectus supplement and the accompanying prospectus are a part.
S-4
The notes will be offered on a continuing basis and will mature on a day
nine months or more from the date of their issue (the "stated maturity date"),
as selected by the purchaser and agreed to by ML&Co., or on any date before the
stated maturity date on which the principal or an installment of principal of a
note becomes due and payable, whether by the declaration of acceleration, call
for redemption at the option of ML&Co., notice of repayment at the option of
the holder or otherwise (the stated maturity date or such prior date, as the
case may be, is referred to as, a "Maturity"). Interest-bearing notes will bear
interest at either fixed or floating rates as specified in the applicable
pricing supplement. Some notes may not bear interest. In addition, notes may be
issued at significant discounts from their principal amount payable at Maturity.
Unless otherwise specified in the applicable pricing supplement, the
notes will be denominated in United States dollars and ML&Co. will make
payments of principal of, and premium, if any, and interest on, the notes in
United States dollars.
Interest rates offered by ML&Co. with respect to the notes may differ
depending upon, among other factors, the aggregate principal amount of notes
purchased in any single transaction. ML&Co. may offer notes with similar
variable terms but different interest rates concurrently at any time. ML&Co.
also may concurrently offer notes having different variable terms to different
investors. Interest rates, interest rate formulae and other variable terms of
the notes are subject to change by ML&Co. from time to time, but no change will
affect any note already issued or as to which ML&Co. has accepted an offer to
purchase.
Each note will be issued in fully registered book-entry form or
certificated form, in denominations of $1,000 and integral multiples of $1,000.
Notes in book-entry form may be transferred or exchanged only through a
participating member of The Depository Trust Company, also known as DTC, or any
other depository as is identified in an applicable pricing supplement. See
"--Book-Entry Notes". Registration of transfer of notes in certificated form
will be made at the corporate trust office of the trustee. There will be no
service charge for any registration of transfer or exchange of notes, but
ML&Co. may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with any transfer or exchange, other
than exchanges pursuant to the 1993 Indenture not involving any transfer.
ML&Co. will make payments of principal of, and premium and interest, if
any, on notes in book-entry form through the trustee to the depository or its
nominee. See "--Book-Entry Notes". Unless otherwise specified in the applicable
pricing supplement, a beneficial owner of notes in book-entry form that are
denominated in a currency other than United States dollars (a "Specified
Currency") electing to receive payments of principal or any premium or interest
in that Specified Currency must notify the participant of DTC through which its
interest is held on or before the applicable regular record date, in the case
of a payment of interest, and on or before the sixteenth day, whether or not a
Business Day, as defined below, before its stated maturity date, in the case of
principal or premium, of the beneficial owner's election to receive all or a
portion of any payment in a Specified Currency. The participant must notify the
depository of any election on or before the third Business Day after the
regular record date. The depository will notify the paying agent of the
election on or before the fifth Business Day after the regular record date. If
complete instructions are received by the participant and forwarded to the
depository, and forwarded by the depository to the paying agent, on or before
the relevant dates, the beneficial owner of the notes in book-entry form will
receive payments in the Specified Currency.
In the case of notes in certificated form, ML&Co. will make payment of
principal or premium, if any, due at Maturity of each note in immediately
available funds upon presentation of the note and, in the case of any repayment
on an optional repayment date, upon submission of a duly completed election
form if and as required by the provisions described below, at the corporate
trust office of the trustee in the Borough of Manhattan, The City of New York,
or at any other place as ML&Co. may designate. Payment of interest due at
Maturity of the notes in certificated form will be made to the person to whom
payment of the principal thereof will be made. Payment of interest due on notes
in certificated form other than at Maturity will be made at the corporate trust
office of the trustee or, at the option of ML&Co., may be made by check mailed
to the address of the person entitled to receive payment as the address shall
appear in the security register. Notwithstanding the immediately
S-5
preceding sentence, a holder of $1,000,000 or more in aggregate principal
amount of notes in certificated form, whether having identical or different
terms and provisions will, at the option of ML&Co., be entitled to receive
interest payments, other than at Maturity, by wire transfer of immediately
available funds if appropriate wire transfer instructions have been received in
writing by the trustee not less than 15 days prior to the applicable interest
payment date. Any wire instructions received by the trustee shall remain in
effect until revoked by the applicable holder.
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which commercial banks are authorized or
required by law, regulation or executive order to close in The City of New
York; provided, however, that, with respect to non-United States
dollar-denominated notes, the day is also not a day on which commercial banks
are authorized or required by law, regulation or executive order to close in
the Principal Financial Center, as defined below, of the country issuing the
Specified Currency or, if the Specified Currency is Euro, the day is also a day
on which the Trans-European Automated Real-Time Gross Settlement Express
Transfer (TARGET) System is open; provided, further, that, with respect to
notes as to which LIBOR is an applicable Interest Rate Basis, the day is also a
London Banking Day. "London Banking Day" means a day on which commercial banks
are open for business, including dealings in the LIBOR Currency, as defined
below, in London.
"Principal Financial Center" means:
(1)the capital city of the country issuing the Specified Currency,
except that with respect to United States dollars, Australian
dollars, Canadian dollars, South African rand and Swiss francs, the
"Principal Financial Center" will be The City of New York, Sydney and
Melbourne, Toronto, Johannesburg and Zurich, respectively, or
(2)the capital city of the country to which the LIBOR Currency relates,
except that with respect to United States dollars, Australian
dollars, Canadian dollars, South African rand and Swiss francs, the
"Principal Financial Center" will be The City of New York, Sydney,
Toronto, Johannesburg and Zurich, respectively.
Redemption at the Option of ML&Co.
The notes will not be subject to, or entitled to the benefit of, any
sinking fund. ML&Co. may redeem the notes at its option before their stated
maturity date only if an initial redemption date is specified in the applicable
pricing supplement. If so indicated in the applicable pricing supplement,
ML&Co. may redeem the notes at its option on any date on and after the
applicable initial redemption date specified in the applicable pricing
supplement. On and after the initial redemption date, if any, ML&Co. may redeem
the related note at any time in whole or from time to time in part at its
option at the applicable redemption price referred to below together with
interest on the principal of the applicable note payable to the redemption
date, on notice given, unless otherwise specified in the applicable pricing
supplement, not more than 60 nor less than 30 days before the redemption date.
ML&Co. will redeem the notes in increments of $1,000, provided that any
remaining principal amount will be an authorized denomination of the applicable
note. Unless otherwise specified in the applicable pricing supplement, the
redemption price with respect to a note will initially mean a percentage, the
initial redemption percentage, of the principal amount of the note to be
redeemed specified in the applicable pricing supplement and shall decline at
each anniversary of the initial redemption date by a percentage specified in
the applicable pricing supplement, of the principal amount to be redeemed until
the redemption price is 100% of the principal amount.
Repayment at the Option of the Holder
If so indicated in an applicable pricing supplement, ML&Co. will repay
the notes in whole or in part at the option of the holders of the notes on any
optional repayment date specified in the applicable pricing
S-6
supplement. If no optional repayment date is indicated with respect to a note,
it will not be repayable at the option of the holder before its stated maturity
date. Any repayment in part will be in an amount equal to $1,000 or integral
multiples of $1,000, provided that any remaining principal amount will be an
authorized denomination of the applicable note. The repurchase price for any
note repurchased will be 100% of the principal amount to be repaid, together
with interest on the principal of the applicable note payable to the date of
repayment. For any note to be repaid, the trustee must receive, at its office
maintained for such purpose in the Borough of Manhattan, The City of New York,
currently the corporate trust office of the trustee, not more than 60 nor less
than 30 days before the optional repayment date, the particular note being
repaid:
. in the case of a note in certificated form, the form entitled
"Option to Elect Repayment" duly completed, or
. in the case of a note in book-entry form, instructions to that
effect from the applicable beneficial owner thereof to the
depository and forwarded by the depository.
Notices of elections from a holder to exercise the repayment option must be
received by the trustee by 5:00 p.m., New York City time, on the last day for
giving notice. Exercise of the repayment option by the holder of a note will be
irrevocable.
Only the depository may exercise the repayment option in respect of
global securities representing notes in book-entry form. Accordingly,
beneficial owners of global securities that desire to have all or any portion
of the notes in book-entry form represented by global securities repaid must
instruct the participant through which they own their interest to direct the
depository to exercise the repayment option on their behalf by forwarding the
repayment instructions to the trustee as discussed above. In order to ensure
that the instructions are received by the trustee on a particular day, the
applicable beneficial owner must so instruct the participant through which it
owns its interest before that participant's deadline for accepting instructions
for that day. Different firms may have different deadlines for accepting
instructions from their customers. Accordingly, beneficial owners of notes in
book-entry form should consult the participants through which they own their
interest for the respective deadlines. All instructions given to participants
from beneficial owners of notes in book-entry form relating to the option to
elect repayment will be irrevocable. In addition, at the time instructions are
given, each beneficial owner will cause the participant through which it owns
its interest to transfer its interest in the global security or securities
representing the related notes in book-entry form, on the depository's records,
to the trustee. See
"--Book-Entry Notes".
If applicable, ML&Co. will comply with the requirements of Section 14(e)
of the Exchange Act and the rules promulgated thereunder and any other
securities laws or regulations in connection with any repayment at the option
of the holder.
ML&Co. may at any time purchase notes at any price or prices in the open
market or otherwise. Notes so purchased by ML&Co. may, at the discretion of
ML&Co., be held, resold or surrendered to the trustee for cancellation.
Interest
Each interest-bearing note will bear interest from the date of issue at
the rate per annum, in the case of a fixed rate note, or pursuant to the
interest rate formula, in the case of a floating rate note, in each case as
stated in the applicable pricing supplement until the principal of the note is
paid or made available for payment. Interest will be payable in arrears on each
interest payment date specified in the applicable pricing supplement on which
an installment of interest is due and payable and at Maturity. The first
payment of interest on any note originally issued between a regular record date
and the related interest payment date will be made on the interest payment date
immediately following the next succeeding regular record date to the holder on
the next succeeding regular record date. The regular record date will be the
fifteenth calendar day, whether or not a Business Day, immediately preceding
the related interest payment date.
S-7
Fixed Rate Notes
Each fixed rate note will bear interest from, and including, the date of
issue, at the rate per annum stated on the face of the note until the principal
amount of the note is paid or made available for payment. Interest payments on
fixed rate notes will equal the amount of interest accrued from and including
the immediately preceding interest payment date in respect of which interest
has been paid or from, and including, the date of issue, if no interest has
been paid with respect to the applicable fixed rate notes, to, but excluding,
the applicable interest payment date or Maturity, as the case may be. Unless
otherwise specified in the applicable pricing supplement, interest on fixed
rate notes will be computed on the basis of a 360-day year of twelve 30-day
months.
Interest on fixed rate notes will be payable semiannually on May 15 and
November 15 of each year and at Maturity. If any interest payment date or the
Maturity of a fixed rate note falls on a day that is not a Business Day, the
related payment of principal, premium, if any, or interest will be made on the
next succeeding Business Day as if made on the date the applicable payment was
due, and no interest will accrue on the amount payable for the period from and
after the interest payment date or Maturity, as the case may be.
Floating Rate Notes
Interest on floating rate notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may be one or more
of:
. the CD Rate,
. the CMT Rate,
. the Commercial Paper Rate,
. the Eleventh District Cost of Funds Rate,
. the Federal Funds Rate,
. LIBOR,
. the Prime Rate,
. the Treasury Rate, or
. any other Interest Rate Basis or interest rate formula that is
specified in the applicable pricing supplement.
A floating rate note may bear interest with respect to two or more
Interest Rate Bases.
Each applicable pricing supplement will specify certain terms of the
floating rate note being delivered, including:
. whether the floating rate note is
. a "Regular Floating Rate Note",
. a "Inverse Floating Rate Note", or
. a "Floating Rate/Fixed Rate Note",
. the Interest Rate Basis or Bases,
. the Initial Interest Rate,
. the Interest Reset Dates,
. the interest payment dates,
S-8
. the period to maturity of the instrument or obligation with respect
to which the Interest Rate Basis or Bases will be calculated (the
"Index Maturity"),
. the Maximum Interest Rate and Minimum Interest Rate, if any,
. the number of basis points to be added to or subtracted from the
related Interest Rate Basis or Bases (the "Spread"),
. the percentage of the related Interest Rate Basis or Bases by which
the Interest Rate Basis or Bases will be multiplied to determine the
applicable interest rate (the "Spread Multiplier"), and
. if one or more of the specified Interest Rate Bases is LIBOR, the
LIBOR Currency and the LIBOR Page.
The interest rate borne by the floating rate notes will be determined as
follows:
Regular Floating Rate Notes. Unless a floating rate note is designated
as a Floating Rate/Fixed Rate Note or an Inverse Floating Rate Note or as
having an Addendum attached or as having "Other Provisions" apply relating to a
different interest rate formula, it will be a "Regular Floating Rate Note" and
will bear interest at the rate determined by reference to the applicable
Interest Rate Basis or Bases:
. plus or minus the applicable Spread, if any, and/or
. multiplied by the applicable Spread Multiplier, if any.
Commencing on the first Interest Reset Date, the rate at which interest on the
Regular Floating Rate Note will be payable will be reset as of each Interest
Reset Date; provided, however, that the interest rate in effect for the period
from the date of issue to the first Interest Reset Date will be the Initial
Interest Rate.
Floating Rate/Fixed Rate Notes. If a floating rate note is designated as
a "Floating Rate/Fixed Rate Note", it will bear interest at the rate determined
by reference to the applicable Interest Rate Basis or Bases:
. plus or minus the applicable Spread, if any, and/or
. multiplied by the applicable Spread Multiplier, if any.
Commencing on the first Interest Reset Date, the rate at which interest on the
Floating Rate/Fixed Rate Note will be payable will be reset as of each Interest
Reset Date; provided, however, that:
. the interest rate in effect for the period from the date of issue to
the first Interest Reset Date will be the Initial Interest Rate, and
. the interest rate in effect commencing on, and including, the date on
which interest begins to accrue on a fixed rate basis to Maturity
will be the Fixed Interest Rate, if the rate is specified in the
applicable pricing supplement, or if no Fixed Interest Rate is
specified, the interest rate in effect on the Floating Rate/Fixed
Rate Note on the day immediately preceding the date on which interest
begins to accrue on a fixed rate basis.
Inverse Floating Rate Notes. If a floating rate note is designated as an
"Inverse Floating Rate Note" it will bear interest equal to the Fixed Interest
Rate specified in the related pricing supplement minus the rate determined by
reference to the applicable Interest Rate Basis or Bases:
. plus or minus the applicable Spread, if any, and/or
. multiplied by the applicable Spread Multiplier, if any;
provided, however, that the interest rate on the applicable Inverse Floating
Rate Note will not be less than zero percent. Commencing on the first Interest
Reset Date, the rate at which interest on the Inverse Floating Rate
S-9
Note is payable will be reset as of each Interest Reset Date; provided,
however, that the interest rate in effect for the period from the date of issue
to the first Interest Reset Date will be the Initial Interest Rate.
The interest rate derived from an Interest Rate Basis will be determined
in accordance with the applicable provisions below. The interest rate in effect
on each day will be based on:
. if the day is an Interest Reset Date, the interest rate determined as
of the Interest Determination Date, as defined below, immediately
preceding the applicable Interest Reset Date, or
. if the day is not an Interest Reset Date, the interest rate
determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date.
Interest Reset Dates. The applicable pricing supplement will specify the
dates on which the interest rate on the related floating rate note will be
reset, each, an "Interest Reset Date". The Interest Reset Date will be, in the
case of floating rate notes which reset:
. daily--each Business Day;
. weekly--the Wednesday of each week, with the exception of weekly
reset Floating Rate Notes as to which the Treasury Rate is an
applicable Interest Rate Basis, which will reset the Tuesday of each
week;
. monthly--the third Wednesday of each month, with the exception of
monthly reset Floating Rate Notes as to which the Eleventh District
Cost of Funds Rate is an applicable Interest Rate Basis, which will
reset on the first calendar day of the month;
. quarterly--the third Wednesday of March, June, September and December
of each year;
. semiannually--the third Wednesday of the two months specified in the
applicable pricing supplement; and
. annually--the third Wednesday of the month specified in the
applicable pricing supplement;
provided, however, that with respect to Floating Rate/Fixed Rate Notes, the
rate of interest will not reset after the applicable date on which interest on
a fixed rate basis begins to accrue.
If any Interest Reset Date for any floating rate note would otherwise be
a day that is not a Business Day, the applicable Interest Reset Date will be
postponed to the next succeeding day that is a Business Day, except that in the
case of a floating rate note as to which LIBOR is an applicable Interest Rate
Basis, if the Business Day falls in the next succeeding calendar month, then
the applicable Interest Reset Date will be the immediately preceding Business
Day.
Maximum and Minimum Interest Rates. A floating rate note may also have
either or both of the following:
. a maximum numerical limitation, or ceiling, on the rate at which
interest may accrue during any interest period (a "Maximum Interest
Rate"), and
. a minimum numerical limitation, or floor, on the rate at which
interest may accrue during any period (a "Minimum Interest Rate").
The 1993 Indenture is, and any notes issued under the 1993 Indenture will
be, governed by and construed in accordance with the laws of the State of New
York. Under present New York law, the maximum rate of interest is 25% per annum
on a simple interest basis. This limit may not apply to securities in which
$2,500,000 or more has been invested. While ML&Co. believes that New York law
would be given effect by a
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state or federal court sitting outside of New York, state laws frequently
regulate the amount of interest that may be charged to and paid by a borrower,
including, in some cases, corporate borrowers. It is suggested that prospective
investors consult their personal advisors with respect to the applicability of
these laws. ML&Co. has agreed for the benefit of the beneficial owners of the
notes, to the extent permitted by law, not to claim voluntarily the benefits of
any laws concerning usurious rates of interest against a beneficial owner of
the notes.
Interest Payments. Each applicable pricing supplement will specify the
dates on which interest will be payable. Each floating rate note will bear
interest from the date of issue at the rates specified in the applicable
floating rate note until the principal of the applicable note is paid or
otherwise made available for payment. The interest payment dates with respect
to floating rate notes will be, in the case of floating rate notes which reset:
. daily, weekly or monthly--the third Wednesday of each month or on the
third Wednesday of March, June, September and December of each year,
as specified in the applicable pricing supplement;
. quarterly--the third Wednesday of March, June, September and December
of each year;
. semiannually--the third Wednesday of the two months of each year
specified in the applicable pricing supplement;
. annually--the third Wednesday of the month of each year specified in
the applicable pricing supplement; and
. at Maturity.
If any interest payment date for any floating rate note, other than an
interest payment date at Maturity, would otherwise be a day that is not a
Business Day, the interest payment date will be postponed to the next
succeeding day that is a Business Day except that in the case of a floating
rate note as to which LIBOR is an applicable Interest Rate Basis, if the
Business Day falls in the next succeeding calendar month, the applicable
interest payment date will be the immediately preceding Business Day. If the
Maturity of a floating rate note falls on a day that is not a Business Day, we
will make the required payment of principal, premium, if any, and interest on
the next succeeding Business Day, and no additional interest on such payment
will accrue for the period from and after the Maturity.
All percentages resulting from any calculation on floating rate notes
will be rounded to the nearest one hundred-thousandth of a percentage point,
with five one-millionths of a percentage point rounded upwards. For example,
9.876545%, or .09876545, would be rounded to 9.87655%, or .0987655. All dollar
amounts used in or resulting from any calculation on floating rate notes will
be rounded to the nearest cent with one-half cent being rounded upward.
Interest payments on floating rate notes will equal the amount of
interest accrued from and including the immediately preceding interest payment
date in respect of which interest has been paid or from and including the date
of issue, if no interest has been paid, to but excluding the related interest
payment date or Maturity.
With respect to each floating rate note, accrued interest is calculated
by multiplying its principal amount by an accrued interest factor. The accrued
interest factor is computed by adding the interest factor calculated for each
day in the period for which accrued interest is being calculated.
. In the case of notes for which the Interest Rate Basis is the CD
Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds
Rate, the Federal Funds Rate, LIBOR or the Prime Rate, the interest
factor for each day will be computed by dividing the interest rate
applicable to each day by 360.
. In the case of notes for which the Interest Rate Basis is the CMT
Rate or the Treasury Rate, the interest factor for each day will be
computed by dividing the interest rate applicable to each day by the
actual number of days in the year.
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. The interest factor for notes for which the interest rate is
calculated with reference to two or more Interest Rate Bases will be
calculated in each period in the same manner as if only one of the
applicable Interest Rate Bases applied.
Interest Determination Dates. The interest rate applicable to each
interest reset period commencing on the Interest Reset Date with respect to
that interest reset period will be the rate determined as of the applicable
"Interest Determination Date".
. The Interest Determination Date with respect to the Federal Funds
Rate and the Prime Rate will be the Business Day immediately
preceding the related Interest Reset Date.
. The Interest Determination Date with respect to the CD Rate, the CMT
Rate and the Commercial Paper Rate will be the second Business Day
preceding the related Interest Reset Date.
. The Interest Determination Date with respect to the Eleventh District
Cost of Funds Rate will be the last working day of the month
immediately preceding the related Interest Reset Date on which the
Federal Home Loan Bank of San Francisco publishes the Index, as
defined below.
. The Interest Determination Date with respect to LIBOR will be the
second London Banking Day preceding the related Interest Reset Date.
. The Interest Determination Date with respect to the Treasury Rate
will be the day in the week in which the related Interest Reset Date
falls on which day Treasury Bills, as defined below, are normally
auctioned. Treasury Bills are normally sold at auction on Monday of
each week, unless that day is a legal holiday, in which case the
auction is normally held on the following Tuesday, except that the
auction may be held on the preceding Friday; provided, however, that
if an auction is held on the Friday of the week preceding the
Interest Reset Date, the related Interest Determination Date will be
the preceding Friday.
. The Interest Determination Date pertaining to a floating rate note
the interest rate of which is determined with reference to two or
more Interest Rate Bases will be the latest Business Day which is at
least two Business Days before the related Interest Reset Date for
the applicable floating rate note on which each Interest Reset Basis
is determinable. Each Interest Rate Basis will be determined on the
Interest Determination Date, and the applicable interest rate will
take effect on the related Interest Reset Date.
Calculation Date. MLPF&S will be the calculation agent. Upon the request
of the holder of any floating rate note, the calculation agent will provide the
interest rate then in effect and, if determined, the interest rate that will
become effective as a result of a determination made for the next Interest
Reset Date with respect to that floating rate note. Unless otherwise specified
in the applicable pricing supplement, the calculation date, if applicable,
pertaining to any Interest Determination Date will be the earlier of:
. the tenth calendar day after the applicable Interest Determination
Date, or, if the tenth calendar day is not a Business Day, the next
succeeding Business Day, or
. the Business Day immediately preceding the applicable Interest
Payment Date or Maturity, as the case may be.
CD Rate. "CD Rate" means:
(1)the rate on the particular Interest Determination Date for
negotiable United States dollar certificates of deposit having the
Index Maturity specified in the applicable pricing supplement as
published in H.15(519), as defined below, under the caption "CDs
(secondary market)", or
(2)if the rate referred to in clause (1) is not published by 3:00
P.M., New York City time, on the related calculation date, the
rate on the particular Interest Determination Date for negotiable
United States dollar certificates of deposit of the particular
Index Maturity as published in H.15
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Daily Update, as defined below, or other recognized electronic
source used for the purpose of displaying the applicable rate,
under the caption "CDs (secondary market)", or
(3)if the rate referred to in clause (2) is not published by 3:00
P.M., New York City time, on the related calculation date, the
rate on the particular Interest Determination Date calculated by
the calculation agent as the arithmetic mean of the secondary
market offered rates as of 10:00 A.M., New York City time, on that
Interest Determination Date, of three leading non-bank dealers in
negotiable United States dollar certificates of deposit in The
City of New York, which may include the agent or its affiliates,
selected by the calculation agent for negotiable United States
dollar certificates of deposit of major United States money market
banks for negotiable United States certificates of deposit with a
remaining maturity closest to the particular Index Maturity in an
amount that is representative for a single transaction in that
market at that time, or
(4)if the dealers selected by the calculation agent are not quoting
as mentioned in clause (3), the CD Rate in effect on the
particular Interest Determination Date.
"H.15(519)" means the weekly statistical release designated as H.15(519),
or any successor publication, published by the Board of Governors of the
Federal Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available
through the world-wide-web site of the Board of Governors of the Federal
Reserve System at http://www.federalreserve.gov/releases/h15/update, or any
successor site or publication.
CMT Rate. "CMT Rate" means:
(1)if CMT Moneyline Telerate Page 7051 is specified in the applicable
pricing supplement:
(a)the percentage equal to the yield for United States Treasury
securities at "constant maturity" having the Index Maturity
specified in the applicable pricing supplement as published in
H.15(519) under the caption "Treasury Constant Maturities", as
the yield is displayed on Moneyline Telerate, or any successor
service, on page 7051, or any other page as may replace page
7051 on that service ("Moneyline Telerate Page 7051"), for the
particular Interest Determination Date, or
(b)if the rate referred to in clause 1(a) does not appear on
Moneyline Telerate Page 7051, the percentage equal to the yield
for United States Treasury securities at "constant maturity"
having the particular Index Maturity and for the particular
Interest Determination Date as published in H.15(519) under the
caption "Treasury Constant Maturities", or
(c)if the rate referred to in clause 1(b) does not appear in
H.15(519), the rate on the particular Interest Determination
Date for the period of the particular Index Maturity as may
then be published by either the Federal Reserve System Board of
Governors or the United States Department of the Treasury that
the calculation agent determines to be comparable to the rate
which would otherwise have been published in H.15(519), or
(d)if the rate referred to in clause 1(c) is not published, the
rate on the particular Interest Determination Date calculated
by the calculation agent as a yield to maturity based on the
arithmetic mean of the secondary market bid prices at
approximately 3:30 P.M., New York City time, on that Interest
Determination Date of three leading primary United States
government securities dealers in The City of New York, which
may include the agent or its affiliates (each, a "Reference
Dealer"), selected by the calculation agent from five Reference
Dealers selected by the calculation agent and eliminating the
highest quotation, or, in the event of equality, one of the
highest, and the lowest quotation or, in the event of equality,
one of the lowest, for United States Treasury securities with
an original maturity
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equal to the particular Index Maturity, a remaining term to
maturity no more than 1 year shorter than that Index Maturity
and in a principal amount that is representative for a single
transaction in the securities in that market at that time, or
(e)if fewer than five but more than two of the prices referred to
in clause 1(d) are provided as requested, the rate on the
particular Interest Determination Date calculated by the
calculation agent based on the arithmetic mean of the bid
prices obtained and neither the highest nor the lowest of the
quotations will be eliminated, or
(f)if fewer than three prices referred to in clause 1(d) are
provided as requested, the rate on the particular Interest
Determination Date calculated by the calculation agent as a
yield to maturity based on the arithmetic mean of the secondary
market bid prices as of approximately 3:30 P.M., New York City
time, on that Interest Determination Date of three Reference
Dealers selected by the calculation agent from five Reference
Dealers selected by the calculation agent and eliminating the
highest quotation or, in the event of equality, one of the
highest and the lowest quotation or, in the event of equality,
one of the lowest, for United States Treasury securities with
an original maturity greater than the particular Index
Maturity, a remaining term to maturity closest to that Index
Maturity and in a principal amount that is representative for a
single transaction in the securities in that market at that
time, or
(g)if fewer than five but more than two prices referred to in
clause 1(f) are provided as requested, the rate on the
particular Interest Determination Date calculated by the
calculation agent based on the arithmetic mean of the bid
prices obtained and neither the highest nor the lowest of the
quotations will be eliminated, or
(h)if fewer than three prices referred to in clause 1(f) are
provided as requested, the CMT Rate in effect on the particular
Interest Determination Date.
(2)if CMT Moneyline Telerate Page 7052 is specified in the applicable
pricing supplement:
(a)the percentage equal to the one-week or one-month, as specified
in the applicable pricing supplement, average yield for United
States Treasury securities at "constant maturity" having the
Index Maturity specified in the applicable pricing supplement
as published in H.15(519) opposite the caption "Treasury
Constant Maturities", as the yield is displayed on Moneyline
Telerate, or any successor service, on page 7052, or any other
page as may replace page 7052 on that service ("Moneyline
Telerate Page 7052"), for the week or month, as applicable,
ended immediately preceding the week or month, as applicable,
in which the particular Interest Determination Date falls, or
(b)if the rate referred to in clause 2(a) does not appear on
Moneyline Telerate Page 7052, the percentage equal to the
one-week or one-month, as specified in the applicable pricing
supplement, average yield for United States Treasury securities
at "constant maturity" having the particular Index Maturity and
for the week or month, as applicable, preceding the particular
Interest Determination Date as published in H.15(519) opposite
the caption "Treasury Constant Maturities," or
(c)if the rate referred to in clause 2(b) does not appear in
H.15(519), the one-week or one-month, as specified in the
applicable pricing supplement, average yield for United States
Treasury securities at "constant maturity" having the
particular Index Maturity as otherwise announced by the Federal
Reserve Bank of New York for the week or month, as applicable,
ended immediately preceding the week or month, as applicable,
in which the particular Interest Determination Date falls, or
(d)the rate referred to in clause 2(c) is not published, the rate
on the particular Interest Determination Date calculated by the
calculation agent as a yield to maturity based on the
arithmetic mean of the secondary market bid prices at
approximately 3:30 P.M., New York
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City time, on that Interest Determination Date of three
Reference Dealers selected by the calculation agent from five
Reference Dealers selected by the calculation agent and
eliminating the highest quotation, or, in the event of
equality, one of the highest, and the lowest quotation or, in
the event of equality, one of the lowest, for United States
Treasury securities with an original maturity equal to the
particular Index Maturity, a remaining term to maturity no more
than 1 year shorter than that Index Maturity and in a principal
amount that is representative for a single transaction in the
securities in that market at that time, or
(e)if fewer than five but more than two of the prices referred to
in clause 2(d) are provided as requested, the rate on the
particular Interest Determination Date calculated by the
calculation agent based on the arithmetic mean of the bid
prices obtained and neither the highest nor the lowest of the
quotations will be eliminated, or
(f)if fewer than three prices referred to in clause 2(d) are
provided as requested, the rate on the particular Interest
Determination Date calculated by the calculation agent as a
yield to maturity based on the arithmetic mean of the secondary
market bid prices as of approximately 3:30 P.M., New York City
time, on that Interest Determination Date of three Reference
Dealers selected by the calculation agent from five Reference
Dealers selected by the calculation agent and eliminating the
highest quotation or, in the event of equality, one of the
highest and the lowest quotation or, in the event of equality,
one of the lowest, for United States Treasury securities with
an original maturity greater than the particular Index
Maturity, a remaining term to maturity closest to that Index
Maturity and in a principal amount that is representative for a
single transaction in the securities in that market at that
time, or
(g)if fewer than five but more than two prices referred to in
clause 2(f) are provided as requested, the rate on the
particular Interest Determination Date calculated by the
calculation agent based on the arithmetic mean of the bid
prices obtained and neither the highest or the lowest of the
quotations will be eliminated, or
(h)if fewer than three prices referred to in clause 2(f) are
provided as requested, the CMT Rate in effect on the particular
Interest Determination Date.
If two United States Treasury securities with an original maturity
greater than the Index Maturity specified in the applicable pricing supplement
have remaining terms to maturity equally close to the particular Index
Maturity, the quotes for the United States Treasury security with the shorter
original remaining term to maturity will be used.
Commercial Paper Rate. "Commercial Paper Rate" means:
(1)the Money Market Yield, as defined below, on the particular
Interest Determination Date of the rate for commercial paper
having the Index Maturity specified in the applicable pricing
supplement as published in H.15(519) under the caption "Commercial
Paper-Nonfinancial", or
(2)if the rate referred to in clause (1) is not published by 3:00
P.M., New York City time, on the related calculation date, the
Money Market Yield of the rate on the particular Interest
Determination Date for commercial paper having the particular
Index Maturity as published in H.15 Daily Update, or other
recognized electronic source used for the purpose of displaying
the applicable rate, under the caption "Commercial
Paper--Nonfinancial", or
(3)if the rate referred to in clause (2) is not published by 3:00
P.M., New York City time, on the related calculation date, the
rate on the particular Interest Determination Date calculated by
the calculation agent as the Money Market Yield of the arithmetic
mean of the offered rates at approximately 11:00 A.M., New York
City time, on that Interest Determination Date of three
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leading dealers of United States dollar commercial paper in The
City of New York, which may include the agent and its affiliates,
selected by the calculation agent for commercial paper having the
particular Index Maturity placed for industrial issuers whose bond
rating is "Aa", or the equivalent, from a nationally recognized
statistical rating organization, or
(4)if the dealers selected by the calculation agent are not quoting
as mentioned in clause (3), the Commercial Paper Rate in effect on
the particular Interest Determination Date.
"Money Market Yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:
D X 360
Money Market Yield = ----------- X 100
360-(D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the applicable interest period.
Eleventh District Cost of Funds Rate. "Eleventh District Cost of Funds
Rate" means:
(1)the rate equal to the monthly weighted average cost of funds for
the calendar month immediately preceding the month in which the
particular Interest Determination Date falls as set forth under
the caption "11th District" on the display on Moneyline Telerate,
or any successor service, on page 7058 or any other page as may
replace page 7058 on that service ("Moneyline Telerate Page 7058")
as of 11:00 A.M., San Francisco time, on that Interest
Determination Date, or
(2)if the rate referred to in clause (1) does not appear on Moneyline
Telerate Page 7058, the monthly weighted average cost of funds
paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the
Federal Home Loan Bank of San Francisco as the cost of funds for
the calendar month immediately preceding that Interest
Determination Date, or
(3)if the Federal Home Loan Bank of San Francisco fails to announce
the Index on or prior to the particular Interest Determination
Date for the calendar month immediately preceding that Interest
Determination Date, the Eleventh District Cost of Funds Rate in
effect on the particular Interest Determination Date.
Federal Funds Rate. "Federal Funds Rate" means:
(1)the rate on the particular Interest Determination Date for United
States dollar federal funds as published in H.15(519) under the
caption "Federal Funds (Effective)" and displayed on Moneyline
Telerate or any successor service on page 120 or any other page as
may replace page 120 on that service ("Moneyline Telerate Page
120"), or
(2)if the rate referred to in clause (1) does not appear on Moneyline
Telerate Page 120 or is not published by 3:00 P.M., New York City
time, on the related calculation date, the rate on the particular
Interest Determination Date for United States dollar federal funds
as published in H.15 Daily Update, or other recognized electronic
source used for the purpose of displaying the applicable rate,
under the caption "Federal Funds (Effective)", or
(3)if the rate referred to in clause (2) is not published by 3:00
P.M., New York City time, on the related calculation date, the
rate on the particular Interest Determination Date calculated by
the calculation agent as the arithmetic mean of the rates for the
last transaction in overnight United States dollar federal funds
arranged by three leading brokers of United States dollar federal
funds transactions in The City of New York, which may include the
agent or its affiliates,
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selected by the calculation agent prior to 9:00 A.M., New York
City time, on that Interest Determination Date, or
(4)if the brokers selected by the calculation agent are not quoting
as mentioned in clause (3), the Federal Funds Rate in effect on
the particular Interest Determination Date.
LIBOR. "LIBOR" means:
(1)if "LIBOR Moneyline Telerate" is specified in the applicable
pricing supplement or if neither "LIBOR Reuters" nor "LIBOR
Moneyline Telerate" is specified in the applicable pricing
supplement as the method for calculating LIBOR, the rate for
deposits in the LIBOR Currency, as defined below, having the Index
Maturity specified in the applicable pricing supplement,
commencing on the related Interest Reset Date, that appears on the
LIBOR Page, as defined below, as of 11:00 A.M., London time, on
the particular Interest Determination Date, or
(2)if "LIBOR Reuters" is specified in the applicable pricing
supplement, the arithmetic mean of the offered rates calculated by
the calculation agent, or the offered rate if the LIBOR Page by
its terms provides only for a single rate, for deposits in the
LIBOR Currency having the particular Index Maturity, commencing on
the related Interest Reset Date, that appear or appears, as the
case may be, on the LIBOR Page as of 11:00 A.M., London time, on
the particular Interest Determination Date, or
(3)if fewer than two offered rates appear, or no rate appears, as the
case may be, on the particular Interest Determination Date on the
LIBOR Page as specified in clause (1) or (2), as applicable, the
rate calculated by the calculation agent of at least two offered
quotations obtained by the calculation agent after requesting the
principal London offices of each of four major reference banks,
which may include affiliates of the agent, in the London interbank
market to provide the calculation agent with its offered quotation
for deposits in the LIBOR Currency for the period of the
particular Index Maturity, commencing on the related Interest
Reset Date, to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on that Interest
Determination Date and in a principal amount that is
representative for a single transaction in the LIBOR Currency in
that market at that time, or
(4)if fewer than two offered quotations referred to in clause (3) are
provided as requested, the rate calculated by the calculation
agent as the arithmetic mean of the rates quoted at approximately
11:00 A.M., in the applicable Principal Financial Center, on the
particular Interest Determination Date by three major banks, which
may include affiliates of the agent, in that Principal Financial
Center selected by the calculation agent for loans in the LIBOR
Currency to leading European banks, having the particular Index
Maturity and in a principal amount that is representative for a
single transaction in the LIBOR Currency in that market at that
time, or
(5)if the banks selected by the calculation agent are not quoting as
mentioned in clause (4), LIBOR in effect on the particular
Interest Determination Date.
"LIBOR Currency" means the currency specified in the applicable pricing
supplement as to which LIBOR will be calculated or, if no currency is specified
in the applicable pricing supplement, United States dollars.
"LIBOR Page" means either:
. if "LIBOR Moneyline Telerate" is specified in the applicable
pricing supplement or neither "LIBOR Reuters" nor "LIBOR
Moneyline Telerate" is specified in the applicable pricing
supplement as the method for calculating LIBOR, the display on
Moneyline Telerate or any successor service on the page
specified in the pricing supplement or any page as may replace
the specified page on that service for the purpose of
displaying the London interbank rates of major banks for the
LIBOR Currency, or
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. if "LIBOR Reuters" is specified in the applicable pricing
supplement, the display on the Reuter Monitor Money Rates
Service or any successor service on the page specified in the
applicable pricing supplement or any other page as may replace
the specified page on that service for the purpose of
displaying the London interbank rates of major banks for the
LIBOR Currency.
Prime Rate. "Prime Rate" means:
(1)the rate on the particular Interest Determination Date as
published in H.15(519) under the caption "Bank Prime Loan", or
(2)if the rate referred to in clause (1) is not published by 3:00
P.M., New York City time, on the related calculation date, the
rate on the particular Interest Determination Date as published in
H.15 Daily Update, or other recognized electronic source used for
the purpose of displaying the applicable rate, under the caption
"Bank Prime Loan", or
(3)if the rate referred to in clause (2) is not published by 3:00
P.M., New York City time, on the related calculation date, the
rate on the particular Interest Determination Date calculated by
the calculation agent as the arithmetic mean of the rates of
interest publicly announced by each bank that appears on the
Reuters Screen US PRIME 1 Page, as defined below, as the
applicable bank's prime rate or base lending rate as of 11:00
A.M., New York City time, on that Interest Determination Date, or
(4)if fewer than four rates referred to in clause (3) are published
by 3:00 P.M., New York City time, on the related calculation date,
the rate on the particular Interest Determination Date calculated
by the calculation agent as the arithmetic mean of the prime rates
or base lending rates quoted on the basis of the actual number of
days in the year divided by a 360-day year as of the close of
business on that Interest Determination Date by three major banks,
which may include affiliates of the agent, in The City of New York
selected by the calculation agent, or
(5)if the banks selected by the calculation agent are not quoting as
mentioned in clause (4), the Prime Rate in effect on the
particular Interest Determination Date.
"Reuters Screen US PRIME 1 Page" means the display on the Reuter Monitor
Money Rates Service or any successor service on the "US PRIME 1" page or any
other page as may replace that page on that service for the purpose of
displaying prime rates or base lending rates of major United States banks.
Treasury Rate. "Treasury Rate" means:
(1)the rate from the auction held on the particular Interest
Determination Date (the "Auction") of direct obligations of the
United States ("Treasury Bills") having the Index Maturity
specified in the applicable pricing supplement under the caption
"INVESTMENT RATE" on the display on Moneyline Telerate or any
successor service on page 56 or any other page as may replace page
56 on that service ("Moneyline Telerate Page 56") or page 57 or
any other page as may replace page 57 on that service ("Moneyline
Telerate Page 57"), or
(2)if the rate referred to in clause (1) is not published by 3:00
P.M., New York City time, on the related calculation date, the
Bond Equivalent Yield, as defined below, of the rate for the
applicable Treasury Bills as published in H.15 Daily Update, or
other recognized electronic source used for the purpose of
displaying the applicable rate, under the caption "U.S. Government
Securities/Treasury Bills/Auction High", or
(3)if the rate referred to in clause (2) is not published by 3:00
P.M., New York City time, on the related calculation date, the
Bond Equivalent Yield of the auction rate of the applicable
Treasury Bills as announced by the United States Department of the
Treasury, or
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(4)if the rate referred to in clause (3) is not announced by the
United States Department of the Treasury, or if the Auction is not
held, the Bond Equivalent Yield of the rate on the particular
Interest Determination Date of the applicable Treasury Bills as
published in H.15(519) under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market", or
(5)if the rate referred to in clause (4) is not published by 3:00
P.M., New York City time, on the related calculation date, the
rate on the particular Interest Determination Date of the
applicable Treasury Bills as published in H.15 Daily Update, or
other recognized electronic source used for the purpose of
displaying the applicable rate, under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market", or
(6)if the rate referred to in clause (5) is not published by 3:00
P.M., New York City time, on the related calculation date, the
rate on the particular Interest Determination Date calculated by
the calculation agent as the Bond Equivalent Yield of the
arithmetic mean of the secondary market bid rates, as of
approximately 3:30 P.M., New York City time, on that Interest
Determination Date, of three primary United States government
securities dealers, which may include the agent or its affiliates,
selected by the calculation agent, for the issue of Treasury Bills
with a remaining maturity closest to the particular Index
Maturity, or
(7)if the dealers selected by the calculation agent are not quoting
as mentioned in clause (6), the Treasury Rate in effect on the
particular Interest Determination Date.
"Bond Equivalent Yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:
D X N
Bond Equivalent Yield = ------------- X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for Treasury Bills quoted on
a bank discount basis and expressed as a decimal, "N" refers to 365 or 366, as
the case may be, and "M" refers to the actual number of days in the applicable
interest period.
Other Provisions; Addenda
Any provisions with respect to an issue of notes, including the
determination of one or more Interest Rate Bases, the specification of one or
more Interest Rate Bases, the calculation of the interest rate applicable to a
floating rate note, the applicable interest payment dates, the stated maturity
date, any redemption or repayment provisions or any other matter relating to
the applicable notes may be modified by the terms as specified under "Other
Provisions" on the face of the applicable notes or in an Addendum relating to
the applicable notes, if so specified on the face of the applicable notes and
in the applicable pricing supplement.
Original Issue Discount Notes
ML&Co. may from time to time offer notes at a price less than their
redemption price at Maturity, resulting in the applicable notes being treated
as if they were issued with original issue discount for federal income tax
purposes ("Original Issue Discount Notes"). Original Issue Discount Notes may
currently pay no interest or interest at a rate which at the time of issuance
is below market rates. Additional considerations relating to any Original Issue
Discount Notes will be specified in the applicable pricing supplement.
Amortizing Notes
ML&Co. may from time to time offer notes ("Amortizing Notes"), with
amounts of principal and interest payable in installments over the term of the
notes. Unless otherwise specified in the applicable pricing
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supplement, interest on each Amortizing Note will be computed on the basis of a
360-day year of twelve 30-day months. Payments with respect to Amortizing Notes
will be applied first to interest due and payable on the Amortizing Notes and
then to the reduction of the unpaid principal amount of the Amortizing Notes.
Further information concerning additional terms and conditions of any issue of
Amortizing Notes will be specified in the applicable pricing supplement. A
table setting forth repayment information in respect of each Amortizing Note
will be specified in the applicable pricing supplement.
Linked Notes
ML&Co. may from time to time offer notes ("Linked Notes") the principal
value of which at Maturity will be determined by reference to:
(a)one or more equity or debt securities, including, but not limited
to, the price or yield of such securities,
(b)any statistical measure of economic or financial performance,
including, but not limited to, any currency, consumer price or
mortgage index, or
(c)the price or value of any commodity or any other item or index or
any combination,
(collectively, the "Linked Securities"). The payment or delivery of any
consideration on any Linked Note at Maturity will be determined by the decrease
or increase, as applicable, in the price or value of the applicable Linked
Securities. The terms of and any additional considerations, including any
material tax consequences, relating to any Linked Notes will be specified in
the applicable pricing supplement.
Extendible Maturity Notes
ML&Co. may from time to time offer notes ("Extendible Maturity Notes")
with the option to extend the maturity of the notes to one or more dates
indicated in the notes and the applicable pricing supplement. The terms of and
any additional considerations relating to any Extendible Maturity Notes will be
specified in the applicable pricing supplement.
Book-Entry Notes
Description of the Global Securities
Upon issuance, all notes in book-entry form having the same date of
issue, Maturity and otherwise having identical terms and provisions will be
represented by one or more fully registered global notes (the "Global Notes").
Each Global Note will be deposited with, or on behalf of, The Depository Trust
Company as depository registered in the name of the depository or a nominee of
the depository. Unless and until it is exchanged in whole or in part for notes
in certificated form, no Global Note may be transferred except as a whole by
the depository to a nominee of the depository or by a nominee of the depository
to the depository or another nominee of the depository or by the depository or
any such nominee to a successor of the depository or a nominee of the successor.
DTC Procedures
The following is based on information furnished by the depository:
The depository will act as securities depository for the notes in
book-entry form. The notes in book-entry form will be issued as fully
registered securities registered in the name of Cede & Co., the depository's
partnership nominee. One fully registered Global Note will be issued for each
issue of notes in book-entry form, each in the aggregate principal amount of
the issue, and will be deposited with the depository. If, however, the
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aggregate principal amount of any issue exceeds $500,000,000, one Global Note
will be issued with respect to each $500,000,000 of principal amount and an
additional Global Note will be issued with respect to any remaining principal
amount of the issue.
The depository is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The depository holds securities that its participants deposit with the
depository. The depository also facilitates the settlement among participants
of securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct participants of the depository include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations. The depository is owned by a number of its direct participants
and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc.,
and the National Association of Securities Dealers, Inc. Access to the
depository's system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a direct participant, either directly or indirectly. The
rules applicable to the depository and its participants are on file with the
SEC.
Purchasers of notes in book-entry form under the depository's system must
be made by or through direct participants, which will receive a credit for
those notes in book-entry form on the depository's records. The ownership
interest of each actual purchaser of each note in book-entry form represented
by a Global Note is, in turn, to be recorded on the records of direct
participants and indirect participants. Beneficial owners of notes in
book-entry form will not receive written confirmation from the depository of
their purchase, but beneficial owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the direct participants or indirect
participants through which the beneficial owner entered into the transaction.
Transfers of ownership interests in a Global Note representing notes in
book-entry form are to be accomplished by entries made on the books of
participants acting on behalf of beneficial owners. Beneficial owners of a
Global Note representing notes in book-entry form will not receive notes in
certificated form representing their ownership interests therein, except in the
event that use of the book-entry system for such notes in book-entry form is
discontinued.
To facilitate subsequent transfers, all Global Notes representing notes
in book-entry form which are deposited with, or on behalf of, the depository
are registered in the name of the depository's nominee, Cede & Co. The deposit
of Global Notes with, or on behalf of, the depository and their registration in
the name of Cede & Co. effect no change in beneficial ownership. The depository
has no knowledge of the actual beneficial owners of the Global Notes
representing the notes in book-entry form; the depository's records reflect
only the identity of the direct participants to whose accounts such notes in
book-entry form are credited, which may or may not be the beneficial owners.
The participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by the depository to
direct participants, by direct participants to indirect participants, and by
direct participants and indirect participants to beneficial owners, will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither the depository nor Cede & Co. will consent or vote with respect
to the Global Notes representing the notes in book-entry form. Under its usual
procedures, the depository mails an omnibus proxy to ML&Co. as soon as possible
after the applicable record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants, identified in a
listing attached to the omnibus proxy, to whose accounts the notes in
book-entry form are credited on the applicable record date.
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ML&Co. will make principal, premium, if any, and/or interest, if any,
payments on the Global Notes representing the notes in book-entry form in
immediately available funds to the depository. The depository's practice is to
credit direct participants' accounts on the applicable payment date in
accordance with their respective holdings shown on the depository's records
unless the depository has reason to believe that it will not receive payment on
the applicable payment date. Payments by participants to beneficial owners will
be governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or registered
in "street name", and will be the responsibility of the applicable participant
and not of the depository, the trustee or ML&Co., subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal, premium, if any, and/or interest, if any, to the depository is the
responsibility of ML&Co. and the trustee, disbursement of payments to direct
participants will be the responsibility of the depository, and disbursement of
payments to the beneficial owners will be the responsibility of direct
participants and indirect participants.
If applicable, redemption notices shall be sent to Cede & Co. If less
than all of the notes in book-entry form of like tenor and terms are being
redeemed, the depository's practice is to determine by lot the amount of the
interest of each direct participant in the issue to be redeemed.
A beneficial owner will give notice of any option to elect to have its
notes in book-entry form repaid by ML&Co., through its participant, to the
trustee, and will effect delivery of the applicable notes in book-entry form by
causing the direct participant to transfer the participant's interest in the
Global Note representing notes in book-entry form, on the depository's records,
to the trustee. The requirement for physical delivery of notes in book-entry
form in connection with a demand for repayment will be deemed satisfied when
the ownership rights in the Global Note or Notes representing such notes in
book-entry form are transferred by direct participants on the depository's
records.
The depository may discontinue providing its services as securities
depository with respect to the notes in book-entry form at any time by giving
reasonable notice to ML&Co. or the trustee. In the event that a successor
securities depository is not obtained, notes in certificated form are required
to be printed and delivered.
ML&Co. may decide to discontinue use of the system of book-entry
transfers through the depository or a successor securities depository. In that
event, notes in certificated form will be printed and delivered.
The laws of some states may require that certain purchasers of securities
take physical delivery of securities in definitive form. Such limits and such
laws may impair the ability to own, transfer or pledge beneficial interests in
Global Notes.
So long as the depository, or its nominee, is the registered owner of a
Global Note, the depository or its nominee, as the case may be, will be
considered the sole owner or holder of the notes represented by such Global
Note for all purposes under the 1993 Indenture. Except as provided below,
beneficial owners of a Global Note will not be entitled to have the notes
represented by a Global Note registered in their names, will not receive or be
entitled to receive physical delivery of the notes in definitive form and will
not be considered the owners or holders thereof under the 1993 Indenture.
Accordingly, each person owning a beneficial interest in a Global Note must
rely on the procedures of the depository and, if that person is not a
participant, on the procedures of the participant through which that person
owns its interest, to exercise any rights of a holder under the 1993 Indenture.
ML&Co. understands that under existing industry practices, in the event that
ML&Co. requests any action of holders or that an owner of a beneficial interest
in a Global Note desires to give or take any action which a holder is entitled
to give or take under the 1993 Indenture, the depository would authorize the
participants holding the relevant beneficial interests to give or take the
desired action, and the participants would authorize beneficial owners owning
through the participants to give or take the desired action or would otherwise
act upon the instructions of beneficial owners.
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Exchange for Notes in Certificated Form
If:
(a)the depository is at any time unwilling or unable to continue as
depository and a successor depository is not appointed by ML&Co.
within 60 days,
(b)ML&Co. executes and delivers to the trustee a company order to the
effect that the Global Notes shall be exchangeable, or
(c)an Event of Default has occurred and is continuing with respect to
the notes,
the Global Note or Global Notes will be exchangeable for notes in certificated
form of like tenor and of an equal aggregate principal amount, in denominations
of $1,000 and integral multiples of $1,000. The certificated notes will be
registered in the name or names as the depository instructs the trustee. It is
expected that instructions may be based upon directions received by the
depository from participants with respect to ownership of beneficial interests
in Global Notes.
The information in this section concerning the depository and the
depository's system has been obtained from sources that ML&Co. believes to be
reliable, but ML&Co. takes no responsibility for the accuracy of the
information.
UNITED STATES FEDERAL INCOME TAXATION
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change, including changes in effective dates, or possible differing
interpretations. It deals only with notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal with
holders other than original purchasers, except where otherwise specifically
noted. Persons considering the purchase of the notes should consult their own
tax advisors concerning the application of United States Federal income tax
laws to their particular situations as well as any consequences of the
purchase, ownership and disposition of the notes arising under the laws of any
other taxing jurisdiction.
As used in this prospectus, the term "U.S. Holder" means a beneficial
owner of a note that is for United States Federal income tax purposes:
(1)a citizen or resident of the United States,
(2)a corporation or a partnership (including an entity treated as a
corporation or a partnership for United States Federal income tax
purposes) created or organized in or under the laws of the United
States, any state thereof or the District of Columbia (unless, in
the case of a partnership, Treasury regulations are adopted that
provide otherwise),
(3)an estate whose income is subject to United States Federal income
tax regardless of its source,
(4)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 United States persons have the authority to control all
substantial decisions of the trust, or
(5)any other person whose income or gain in respect of a note is
effectively connected with the conduct of a United States trade or
business.
Certain trusts not described in clause (4) above in existence on August 20,
1996 that elect to be treated as a United States person will also be a U.S.
Holder for purposes of the following discussion. As used herein, the term
"non-U.S. Holder" means a beneficial owner of a note that is not a U.S. Holder.
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U.S. Holders
Payments of Interest. Payments of interest on a note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular
method of tax accounting).
Original Issue Discount. The following summary is a general discussion
of the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of notes issued with original issue
discount ("Discount Notes"). The following summary is based upon final Treasury
regulations (the "OID Regulations") released by the Internal Revenue Service on
January 27, 1994, as amended on June 11, 1996, under the original issue
discount provisions of the Code.
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of
1% of the note's stated redemption price at maturity multiplied by the number
of complete years to its maturity from its issue date or, in the case of a note
providing for the payment of any amount other than qualified stated interest
(as defined below) prior to maturity, multiplied by the weighted average
maturity of the note). The issue price of each note of an issue of notes equals
the first price at which a substantial amount of the notes has been sold
(ignoring sales to bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers). The
stated redemption price at maturity of a note is the sum of all payments
provided by the note other than "qualified stated interest" payments. The term
"qualified stated interest" generally means stated interest that is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually at a single fixed rate. In addition, under the OID
Regulations, if a note bears interest for one or more accrual periods at a rate
below the rate applicable for the remaining term of the note (e.g., notes with
teaser rates or interest holidays), and if the greater of either the resulting
foregone interest on the note or any "true" discount on the note (i.e., the
excess of the note's stated principal amount over its issue price) equals or
exceeds a specified de minimis amount, then the stated interest on the note
would be treated as original issue discount rather than qualified stated
interest.
Payments of qualified stated interest on a note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of the U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the initial U.S. Holder of a Discount Note is
the sum of the daily portions of original issue discount with respect to the
Discount Note for each day during the taxable year (or portion of the taxable
year) on which the U.S. Holder held the Discount Note. The "daily portion" of
original issue discount on any Discount Note is determined by allocating to
each day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Discount Note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The amount of original issue
discount allocable to each accrual period is generally equal to the difference
between
. the product of the Discount Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity
(determined on the basis of compounding at the close of each
accrual period and appropriately adjusted to take into account
the length of the particular accrual period) and
. the amount of any qualified stated interest payments allocable
to such accrual period.
The "adjusted issue price" of a Discount Note at the beginning of any accrual
period is the sum of the issue price of the Discount Note plus the amount of
original issue discount allocable to all prior accrual periods minus the
S-24
amount of any prior payments on the Discount Note that were not qualified
stated interest payments. Under these rules, U.S. Holders generally will have
to include in income increasingly greater amounts of original issue discount in
successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium". Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder
must include in its gross income with respect to such Discount Note for any
taxable year (or portion thereof in which the U.S. Holder holds the Discount
Note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes
(hereinafter "Variable Notes") are subject to special rules whereby a Variable
Note will qualify as a "variable rate debt instrument" if
. its issue price does not exceed the total noncontingent
principal payments due under the Variable Note by more than a
specified de minimis amount and
. it provides for stated interest, paid or compounded at least
annually, at current values of:
. one or more qualified floating rates,
. a single fixed rate and one or more qualified floating rates,
. a single objective rate, or
. a single fixed rate and a single objective rate that is a
qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than .65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than .65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable
Note's issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute
a qualified floating rate but which is subject to one or more restrictions such
as a maximum numerical limitation (i.e., a cap) or a minimum numerical
limitation (i.e., a floor) may, under certain circumstances, fail to be treated
as a qualified floating rate under the OID Regulations unless such cap or floor
is fixed throughout the term of the note. An "objective rate" is a rate that is
not itself a qualified floating rate but which is determined using a single
fixed formula that is based on objective financial or economic information. A
rate will not qualify as an objective rate if it is based on information that
is within the control of the issuer (or a related party) or that is unique to
the circumstances of the issuer (or a related party), such as dividends,
profits, or the value of the issuer's stock (although a rate does not fail to
be an objective rate merely because it is based on the credit quality of the
issuer). A "qualified inverse floating rate" is any objective rate where such
rate is equal to a fixed rate minus a qualified floating rate, as long as
variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the qualified floating rate. The OID Regulations
also provide that if a Variable Note provides for stated interest at a fixed
rate for an initial period of one year or less followed by a variable rate that
is either a qualified floating rate or an objective rate and if the variable
rate on the Variable Note's issue date is intended to approximate the fixed
rate (e.g., the value of the variable rate on the issue date does not differ
from the value of the fixed rate by more than 25 basis points), then the fixed
rate and the variable rate together will constitute either a single qualified
floating rate or objective rate, as the case may be.
S-25
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, and
if the interest on a Variable Note is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually, then
all stated interest on the Variable Note will constitute qualified stated
interest and will be taxed accordingly. Thus, a Variable Note that provides for
stated interest at either a single qualified floating rate or a single
objective rate throughout the term thereof and that qualifies as a "variable
rate debt instrument" under the OID Regulations will generally not be treated
as having been issued with original issue discount unless the Variable Note is
issued at a "true" discount (i.e., at a price below the Variable Note's stated
principal amount) in excess of a specified de minimis amount. The amount of
qualified stated interest and the amount of original issue discount, if any,
that accrues during an accrual period on such a Variable Note is determined
under the rules applicable to fixed rate debt instruments by assuming that the
variable rate is a fixed rate equal to
(1)in the case of a qualified floating rate or qualified inverse
floating rate, the value as of the issue date, of the qualified
floating rate or qualified inverse floating rate, or
(2)in the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is
reasonably expected for the Variable Note.
The qualified stated interest allocable to an accrual period is increased (or
decreased) if the interest actually paid during an accrual period exceeds (or
is less than) the interest assumed to be paid during the accrual period
pursuant to the foregoing rules.
In general, any other Variable Note that qualifies as a "variable rate
debt instrument" will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount and accrual of original issue
discount and qualified stated interest on the Variable Note. The OID
Regulations generally require that such a Variable Note be converted into an
"equivalent" fixed rate debt instrument by substituting any qualified floating
rate or qualified inverse floating rate provided for under the terms of the
Variable Note with a fixed rate equal to the value of the qualified floating
rate or qualified inverse floating rate, as the case may be, as of the Variable
Note's issue date. Any objective rate (other than a qualified inverse floating
rate) provided for under the terms of the Variable Note is converted into a
fixed rate that reflects the yield that is reasonably expected for the Variable
Note. In the case of a Variable Note that qualifies as a "variable rate debt
instrument" and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating rate (or
a qualified inverse floating rate, if the Variable Note provides for a
qualified inverse floating rate). Under such circumstances, the qualified
floating rate or qualified inverse floating rate that replaces the fixed rate
must be such that the fair market value of the Variable Note as of the Variable
Note's issue date is approximately the same as the fair market value of an
otherwise identical debt instrument that provides for either the qualified
floating rate or qualified inverse floating rate rather than the fixed rate.
Subsequent to converting the fixed rate into either a qualified floating rate
or a qualified inverse floating rate, the Variable Note is then converted into
an "equivalent" fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and
qualified stated interest as if the U.S. Holder held the "equivalent" fixed
rate debt instrument. Each accrual period appropriate adjustments will be made
to the amount of qualified stated interest or original issue discount assumed
to have been accrued or paid with respect to the "equivalent" fixed rate debt
instrument in the event that such amounts differ from the actual amount of
interest accrued or paid on the Variable Note during the accrual period.
S-26
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. On June 11, 1996, the Treasury Department
issued final regulations (the "CPDI Regulations") concerning the proper United
States Federal income tax treatment of contingent payment debt instruments. In
general, the CPDI Regulations would cause the timing and character of income,
gain or loss reported on a contingent payment debt instrument to substantially
differ from the timing and character of income, gain or loss reported on a
contingent payment debt instrument under general principles of current United
States Federal income tax law. Specifically, the CPDI Regulations generally
require a U.S. Holder of such an instrument to include future contingent and
noncontingent interest payments in income as such interest accrues based upon a
projected payment schedule. Moreover, in general, under the CPDI Regulations,
any gain recognized by a U.S. Holder on the sale, exchange, or retirement of a
contingent payment debt instrument will be treated as ordinary income and all
or a portion of any loss realized could be treated as ordinary loss as opposed
to capital loss (depending upon the circumstances). The CPDI Regulations apply
to debt instruments issued on or after August 13, 1996. The proper United
States Federal income tax treatment of Variable Notes that are treated as
contingent payment debt obligations will be more fully described in the
applicable pricing supplement. Furthermore, any other special United States
Federal income tax considerations, not otherwise discussed herein, which are
applicable to any particular issue of notes will be discussed in the applicable
pricing supplement.
ML&Co. may issue notes which;
. may be redeemable at the option of ML&Co. prior to their stated
maturity (a "call option") and/or
. may be repayable at the option of the holder prior to their
stated maturity (a "put option").
Notes containing such features may be subject to rules that differ from the
general rules discussed above. Investors intending to purchase notes with such
features should consult their own tax advisors, since the original issue
discount consequences will depend, in part, on the particular terms and
features of the purchased notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Foreign-Currency Notes. The United States Federal income tax
consequences of the purchase, ownership and disposition of notes providing for
payments denominated in a currency other than U.S. dollars will be more fully
described in the applicable pricing supplement.
Short-Term Notes. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects
to do so. If such an election is not made, any gain recognized by the U.S.
Holder on the sale, exchange or maturity of the Short-Term Note will be
ordinary income to the extent of the original issue discount accrued on a
straight-line basis, or upon election under the constant yield method (based on
daily compounding), through the date of sale or maturity, and a portion of the
deductions otherwise allowable to the U.S. Holder for interest on borrowings
allocable to the Short-Term Note will be deferred until a corresponding amount
of income is realized. U.S. Holders who report income for United States Federal
income tax purposes under the accrual method, and certain other holders
including banks and dealers in securities, are required to accrue original
issue discount on a Short-Term Note on a straight-line basis unless an election
is made to accrue the original issue discount under a constant yield method
(based on daily compounding).
S-27
Market Discount. If a U.S. Holder purchases a note, other than a
Discount Note, for an amount that is less than its issue price (or, in the case
of a subsequent purchaser, its stated redemption price at maturity) or, in the
case of a Discount Note, for an amount that is less than its adjusted issue
price as of the purchase date, such U.S. Holder will be treated as having
purchased the note at a "market discount", unless such market discount is less
than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment (or, in the case of a Discount Note, any payment
that does not constitute qualified stated interest) on, or any gain realized on
the sale, exchange, retirement or other disposition of, a note as ordinary
income to the extent of the lesser of:
. the amount of such payment or realized gain or
. the market discount which has not previously been included in
income and is treated as having accrued on the note at the time
of such payment or disposition.
Market discount will be considered to accrue ratably during the period from the
date of acquisition to the maturity date of the note, unless the U.S. Holder
elects to accrue market discount on the basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion
of the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to
the extent the interest expense exceeds an allocable portion of market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the note and upon the receipt of certain
cash payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States Federal income tax purposes. Such an election will
apply to all debt instruments acquired by the U.S. Holder on or after the first
day of the taxable year to which such election applies and may be revoked only
with the consent of the IRS.
Premium. If a U.S. Holder purchases a note for an amount that is greater
than the sum of all amounts payable on the note after the purchase date other
than payments of qualified stated interest, the U.S. Holder will be considered
to have purchased the note with "amortizable bond premium" equal in amount to
such excess. A U.S. Holder may elect to amortize such premium using a constant
yield method over the remaining term of the note and may offset interest
otherwise required to be included in respect of the note during any taxable
year by the amortized amount of such excess for the taxable year. However, if
the note may be optionally redeemed after the U.S. Holder acquires it at a
price in excess of its stated redemption price at maturity, special rules would
apply which could result in a deferral of the amortization of some bond premium
until later in the term of the note. Any election to amortize bond premium
applies to all taxable debt obligations then owned and thereafter acquired by
the U.S. Holder and may be revoked only with the consent of the IRS.
Disposition of a Note. Except as discussed above, upon the sale,
exchange or retirement of a note, a U.S. Holder generally will recognize
taxable gain or loss equal to the difference between the amount realized on the
sale, exchange or retirement (other than amounts representing accrued and
unpaid interest) and the U.S. Holder's adjusted tax basis in the note. A U.S.
Holder's adjusted tax basis in a note generally will equal the U.S. Holder's
initial investment in the note increased by any original issue discount
included in income (and accrued market discount, if any, if the U.S. Holder has
included such market discount in income) and decreased by the amount of any
payments, other than qualified stated interest payments, received and
amortizable bond premium taken with respect to the note. Such gain or loss
generally will be long-term capital gain or loss if the note were held for more
than one year. Long-term capital gains of individuals are subject to reduced
capital gain rates while short-term capital gains are subject to ordinary
income rates. The deductibility of capital losses is subject to certain
limitations. Prospective investors should consult their own tax advisors
concerning these tax law provisions.
S-28
Non-U.S. Holders
A non-U.S. Holder who is an individual or corporation (or an entity
treated as a corporation for federal income tax purposes) holding notes on its
own behalf will not be subject to United States Federal income taxes on
payments of principal, premium (if any) or interest (including original issue
discount, if any) on a note, unless such non-U.S. Holder is a direct or
indirect 10% or greater shareholder of ML&Co., a controlled foreign corporation
related to ML&Co. or a bank receiving interest described in section
881(c)(3)(A) of the Code. To qualify for the exemption from taxation, the
Withholding Agent, as defined below, must have received a statement from the
individual or corporation that:
. is signed under penalties of perjury by the beneficial owner of the
note,
. certifies that such owner is not a U.S. Holder, and
. provides the beneficial owner's name and address.
A "Withholding Agent" is any person, U.S. or foreign, that has control,
receipt or custody of an amount subject to withholding or who can disburse or
make payments of an amount subject to withholding. Generally, the
aforementioned statement is made on an IRS Form W-8BEN ("W-8BEN"), which is
effective for the period starting on the date the form is signed and ending on
the last day of the third succeeding calendar year, unless a change in
circumstances makes any information on the form incorrect. Notwithstanding the
preceding sentence, a W-8BEN with a U.S. taxpayer identification number will
remain effective until a change in circumstances makes any information on the
form incorrect, provided that the Withholding Agent reports at least annually
to the beneficial owner on IRS Form 1042-S. The beneficial owner must inform
the Withholding Agent within 30 days of a change in circumstances that makes
any information on the W-8BEN incorrect and must furnish a new W-8BEN. A holder
of a note which is not an individual or corporation (or an entity treated as a
corporation for federal income tax purposes) holding the notes on its own
behalf may have substantially increased reporting requirements. In particular,
in the case of notes held by a foreign partnership (or foreign trust or
estate), the partnership (or trust or estate) will be required to provide the
certification from each of its partners (or beneficiaries), and the partnership
(or trust or estate) will be required to provide certain additional information.
A non-U.S. Holder whose income with respect to its investment in a note
is effectively connected with the conduct of a U.S. trade or business would
generally be taxed as if the holder was a U.S. person provided the holder
provides to the Withholding Agent an IRS Form W-8ECI.
Certain securities clearing organizations, and other entities who are not
beneficial owners, may be able to provide a signed statement to the Withholding
Agent. However, in such case, the signed statement may require a copy of the
beneficial owner's W-8BEN (or substitute form).
Generally, a non-U.S. Holder will not be subject to United States Federal
income taxes on any amount which constitutes capital gain upon retirement or
disposition of a note, unless such non-U.S. Holder is an individual who is
present in the United States for 183 days or more in the taxable year of the
disposition and such gain is derived from sources within the United States.
Certain other exceptions may be applicable, and a non-U.S. Holder should
consult its tax advisor in this regard.
The notes will not be includible in the estate of a non-U.S. Holder
unless the individual is a direct or indirect 10% or greater shareholder of
ML&Co. or, at the time of such individual's death, payments in respect of the
notes would have been effectively connected with the conduct by such individual
of a trade or business in the United States.
Backup Withholding
Backup withholding of United States Federal income tax at a current rate
of 30% (which rate is scheduled to be reduced periodically through 2006) may
apply to payments made in respect of the notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information,
such as the registered owner's taxpayer identification number, in the required
manner.
S-29
Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. Holders who
are not exempt recipients.
In addition, upon the sale of a note to (or through) a broker, the broker
must backup withhold on the entire purchase price, unless either:
. the broker determines that the seller is a corporation or other
exempt recipient or
. the seller provides, in the required manner, certain
identifying information and, in the case of a non-U.S. Holder,
certifies that such seller is a non-U.S. Holder (and certain
other conditions are met).
Such a sale must also be reported by the broker to the IRS, unless either:
. the broker determines that the seller is an exempt recipient or
. the seller certifies its non-U.S. status (and certain other
conditions are met).
Certification of the registered owner's non-U.S. status would normally be made
on an IRS Form W-8BEN under penalties of perjury, although in certain cases it
may be possible to submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to
a beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
ML&Co. is offering the notes for sale on a continuing basis through the
agent, MLPF&S, who will purchase the notes, as principal, from ML&Co., for
resale to investors and other purchasers at varying prices relating to
prevailing market prices at the time of resale as determined by the agent, or,
if so specified in an applicable pricing supplement, for resale at a fixed
public offering price. Unless otherwise specified in an applicable pricing
supplement, any note sold to the agent as principal will be purchased by the
agent at a price equal to 100% of the principal amount of the note less a
percentage of the principal amount equal to the commission applicable to an
agency sale as described below of a note of identical maturity. If agreed to by
ML&Co. and the agent, the agent may utilize its reasonable efforts on an agency
basis to solicit offers to purchase the notes at 100% of the principal amount
of the notes, unless otherwise specified in an applicable pricing supplement.
ML&Co. will pay a commission to the agent, ranging from .050% to .600% of the
principal amount of a note, depending upon its stated maturity or, with respect
to a note for which the stated maturity is in excess of 30 years, a commission
as agreed upon by ML&Co. and the agent at the time of sale, sold through the
agent.
The agent may sell notes it has purchased from ML&Co. as principal to
other dealers for resale to investors, and may allow any portion of the
discount received in connection with such purchases from ML&Co. to such
dealers. After the initial public offering of notes, the public offering price,
in the case of notes to be resold at a fixed public offering price, the
concession and the discount allowed to dealers may be changed.
ML&Co. reserves the right to withdraw, cancel or modify the offer made by
this prospectus supplement without notice and may reject orders, in whole or in
part, whether placed directly with ML&Co. or through the agent. The agent will
have the right, in its discretion reasonably exercised, to reject in whole or
in part any offer to purchase notes received by the agent.
S-30
Unless otherwise specified in an applicable pricing supplement, payment
of the purchase price of the notes will be required to be made in immediately
available funds in United States dollars or the Specified Currency, as the case
may be, in The City of New York on the date of settlement.
No Note will have an established trading market when issued. Unless
specified in the applicable pricing supplement, ML&Co. will not list the notes
on any securities exchange. The agent may from time to time purchase and sell
notes in the secondary market, but the agent is not obligated to do so, and
there can be no assurance that there will be a secondary market for the notes
or liquidity in the secondary market if one develops. From time to time, the
agent may make a market in the notes.
The agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended. ML&Co. has agreed to indemnify the agent
against or to make contributions relating to certain civil liabilities,
including liabilities under the Securities Act, or to contribute to payments
the agent may be required to make in respect thereof. ML&Co. has agreed to
reimburse the agent for certain expenses.
From time to time, ML&Co. may issue and sell other securities described
in the accompanying prospectus, and the amount of notes that ML&Co. may offer
and sell under this prospectus supplement may be reduced as a result of such
sales.
In connection with the offering of notes purchased by the agent as
principal on a fixed price basis, the agent is permitted to engage in certain
transactions that stabilize the price of the notes. These transactions may
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the notes. If the agent creates a short position in the notes in
connection with the offering, i.e., if it sells more notes than are set forth
on the cover page of this prospectus supplement, the agent may reduce that
short position by purchasing notes in the open market. In general, purchases of
a security for the purpose of stabilization or to reduce a short position could
have the effect of raising or maintaining the market price of the security or
preventing or retarding a decline in the market price of the security. "Naked"
short sales are sales in excess of the agent's overallotment option. Because
the agent has no overallotment option with respect to the notes, it would be
required to close out a short position in the notes by purchasing notes in the
open market.
Neither ML&Co. nor the agent make any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of the notes. In addition, neither ML&Co. nor the agent
makes any representation that the agent will engage in any such transactions or
that such transactions, once commenced, will not be discontinued without notice.
The distribution of the notes will conform to the requirements set forth
in the applicable sections of Rule 2720 of the Conduct Rules of the NASD.
VALIDITY OF THE NOTES
The validity of the notes will be passed upon for ML&Co. and the agent by
Sidley Austin Brown & Wood LLP, New York, New York.
S-31
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO]
$
Merrill Lynch & Co., Inc.
Medium-Term Notes,
Series B
-------------------------------
PROSPECTUS SUPPLEMENT
-------------------------------
Merrill Lynch & Co.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ The information in this prospectus supplement is not complete and may be +
+ changed. We may not sell these securities until the registration statement +
+ filed with the Securities and Exchange Commission is effective. This +
+ prospectus supplement is not an offer to sell these securities and it is +
+ not soliciting an offer to buy these securities in any state where the +
+ offer or sale is not permitted.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
Preliminary Prospectus dated February 25, 2002
PROSPECTUS SUPPLEMENT
- ---------------------
(To prospectus dated , 2002)
$
[LOGO]
Merrill Lynch & Co., Inc.
Retail Notes
Due Nine Months or More from Date of Issue
----------------
Terms: We plan to offer and sell Notes with various terms, including the
following:
. Ranking as senior indebtedness of ML&Co. . Interest at a fixed rate, if interest-bearing
. Stated maturities of 9 months or more from date of issue . Interest, if any, will be payable either monthly, quarterly,
semiannually or annually on each Interest Payment Date
. Redemption provisions, if applicable, at the option of and at maturity or, if applicable, earlier redemption or
ML&Co. or otherwise repayment
. Provisions permitting early repayment upon the death of a . Book-entry (through The Depository Trust Company),
beneficial owner, exercisable by the estate except in limited circumstances
. Minimum denominations of $1,000, increased in multiples . Payments in U.S. dollars or any other consideration
of $1,000 specified in the applicable pricing supplement
We will specify the final terms for each Note, which may be different from the
terms described in this prospectus supplement, in the applicable pricing
supplement.
Investing in the Notes involves certain risks that are described in the
"Risk Factors" section beginning on page S-5 of this prospectus supplement.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement, the accompanying prospectus or any pricing
supplement is truthful or complete. Any representation to the contrary is a
criminal offense.
We may sell Notes to the Purchasing Agent referred to below as principal
for resale at a fixed offering price specified in the applicable pricing
supplement or at varying prices. We may also explicitly agree with the
Purchasing Agent that it will use its reasonable efforts as agent on our behalf
to solicit offers to purchase Notes from us. If we sell all of the Notes, we
expect to receive aggregate net proceeds of between $ and $ , after
paying the Purchasing Agent's discounts and commissions of between $ and
$ . We may also sell Notes directly to investors without the assistance of
the Purchasing Agent.
If we sell other securities referred to in the accompanying prospectus,
we may be limited in offering and selling the entire amount of Notes referred
to in this prospectus supplement.
----------------
Merrill Lynch & Co.
----------------
The date of this prospectus supplement is , 2002.
TABLE OF CONTENTS
Prospectus Supplement
Page
----
SUMMARY................................................................... S-4
RISK FACTORS.............................................................. S-5
DESCRIPTION OF THE NOTES.................................................. S-6
CERTAIN UNITED STATES INCOME TAX CONSIDERATIONS........................... S-14
PLAN OF DISTRIBUTION...................................................... S-19
Prospectus
Page
----
MERRILL LYNCH & CO., INC.................................................. 2
USE OF PROCEEDS........................................................... 2
RATIO OF EARNINGS TO FIXED CHARGES AND RATIOS OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS............................. 3
THE SECURITIES............................................................ 3
DESCRIPTION OF DEBT SECURITIES............................................ 4
DESCRIPTION OF DEBT WARRANTS.............................................. 10
DESCRIPTION OF CURRENCY WARRANTS.......................................... 12
DESCRIPTION OF INDEX WARRANTS............................................. 14
DESCRIPTION OF PREFERRED STOCK............................................ 19
DESCRIPTION OF DEPOSITARY SHARES.......................................... 24
DESCRIPTION OF PREFERRED STOCK WARRANTS................................... 28
DESCRIPTION OF COMMON STOCK............................................... 30
DESCRIPTION OF COMMON STOCK WARRANTS...................................... 34
PLAN OF DISTRIBUTION...................................................... 36
WHERE YOU CAN FIND MORE INFORMATION....................................... 37
INCORPORATION OF INFORMATION WE FILE WITH THE SEC......................... 37
EXPERTS................................................................... 38
About this Prospectus Supplement, the Accompanying Prospectus and Pricing
Supplements
This prospectus supplement sets forth certain terms of the Notes that we
may offer and supplements the prospectus that is attached to the back of this
prospectus supplement. This prospectus supplement supersedes the accompanying
prospectus to the extent it contains information that is different from or
additional to the information in that prospectus.
Each time we offer and sell Notes, you will receive a pricing supplement
with this prospectus supplement. The pricing supplement will contain the
specific description of the Notes we are offering and the terms of the
offering. The pricing supplement will supersede this prospectus supplement and
the accompanying prospectus to the extent it contains information that is
different from or additional to the information contained in this prospectus
supplement or the accompanying prospectus.
It is important for you to read and consider all information contained in
this prospectus supplement and the accompanying prospectus, as well as in the
applicable pricing supplement relating to the particular offering of Notes, in
making your decision to invest in Notes.
S-2
You should rely only on the information contained or incorporated by
reference in this prospectus supplement, the accompanying prospectus and any
pricing supplement. Neither we nor the Purchasing Agent has authorized any
other person to provide you with different or additional information. If anyone
provides you with different or additional information, you should not rely on
it. Neither we nor the Purchasing Agent is making an offer to sell the Notes in
any jurisdiction where the offer or sale is not permitted. You should assume
that the information contained or incorporated by reference in this prospectus
supplement, the accompanying prospectus and any pricing supplement is accurate
only as of its date.
References in this prospectus supplement to "ML&Co.", "we", "us" or "our"
are to Merrill Lynch & Co., Inc. and references in this prospectus supplement
to "the Purchasing Agent" or "MLPF&S" are to Merrill Lynch, Pierce, Fenner &
Smith Incorporated.
S-3
SUMMARY
This section outlines the legal and financial terms of the Notes that are
more generally described herein under "Description of the Notes." You should
read the more detailed information appearing elsewhere in this prospectus
supplement and the accompanying prospectus, as well as in the applicable
pricing supplement relating to the particular offering of Notes.
Issuer.................... Merrill Lynch & Co., Inc.
Title..................... Retail Notes ( the "Notes")
Purchasing Agent.......... Merrill Lynch, Pierce, Fenner & Smith Incorporated
Amount.................... Up to $ aggregate initial offering price,
subject to increase without the consent of the
registered holders of the Notes.
Ranking................... The Notes will be unsecured and unsubordinated
obligations of ours and will rank equally with all
of our other unsecured and unsubordinated
indebtedness.
Denominations............. $1,000 and integral multiples of $1,000 in excess
thereof.
Maturities................ The Notes will be due nine months or more from the
date of issue, as specified in the applicable
pricing supplement.
Interest.................. Each interest-bearing Note will bear interest from
its date of issue at a fixed rate per annum,
specified in the applicable pricing supplement,
until the principal thereof is paid. Interest on
each such Note will be payable either monthly,
quarterly, semiannually or annually on each
Interest Payment Date and at maturity or, if
applicable, earlier redemption or repayment, and
will be computed on the basis of a 360-day year of
twelve 30-day months.
Principal................. The principal amount of each Note will be payable
on its stated maturity date specified in the
applicable pricing supplement, unless redeemed or
repaid prior thereto in accordance with its terms,
at the corporate trust office of the Trustee or at
such other office in The City of New York as we
may designate.
Redemption................ Unless otherwise specified in the applicable
pricing supplement:
. the Notes will not be redeemable prior to
maturity; and
. the Notes are not subject to any sinking fund.
Survivor's Option......... Unless otherwise specified in the applicable
pricing supplement, the Notes will be subject to
repayment prior to maturity upon the death of a
beneficial owner who held the Notes for at least
six months. The right to require repayment in
these circumstances is referred to herein as the
"Survivor's Option", which is, subject to limits,
both individually and on an aggregate basis, on
the permitted dollar amount of exercise in any
calendar year, exercisable by the estate of the
deceased owner.
Form of Notes............. Book-entry through the facilities of The
Depository Trust Company, except as otherwise
described under "Description of the
Notes--Book-Entry Notes."
Trustee................... JPMorgan Chase Bank.
S-4
RISK FACTORS
Your investment in the Notes involves certain risks, not all of which are
described in this prospectus supplement. In consultation with your own
financial and legal advisers, you should carefully consider, among other
matters, the following discussion of risks before deciding whether an
investment in the Notes is suitable for you. Notes are not an appropriate
investment for you if you are unsophisticated with respect to their significant
components of those Notes or financial matters generally. You should not
purchase Notes unless you understand and know you can bear all of the
investment risks involving your Notes.
There May Not Be Any Trading Market for Your Notes; Many Factors Affect the
Trading Market and Value of Your Notes
Upon issuance, your Notes will not have an established trading market. We
cannot assure you that a trading market for your Notes will ever develop or be
maintained if developed. In addition to our creditworthiness, many factors
affect the trading market for, and trading value of, your Notes. These factors
include:
. the method of calculating the principal, premium and interest in
respect of your Notes,
. the time remaining to the maturity of your Notes,
. the outstanding amount of Notes with terms identical to your Notes,
. any redemption features of your Notes, and
. the level, direction and volatility of market interest rates
generally.
You should also be aware that there may be a limited number of buyers
when you decide to sell your Notes. This may affect the price you receive for
your Notes or your ability to sell your Notes at all.
Redemption May Adversely Affect Your Return on the Notes
If your Notes are redeemable at our option, we may choose to redeem your
Notes at times when prevailing interest rates are relatively low. In addition,
if your Notes are subject to mandatory redemption, we may be required to redeem
your Notes also at times when prevailing interest rates are relatively low. As
a result, you generally will not be able to reinvest the redemption proceeds in
a comparable security at an effective interest rate as high as your Notes being
redeemed.
Survivor's Option May Be Limited in Amount
We will have a discretionary right to limit the aggregate principal
amount of Notes subject to the Survivor's Option that may be exercised in any
calendar year to an amount equal to the greater of (i) $5,000,000 or (ii) 5% of
the outstanding principal amount of all Notes outstanding as of the end of the
most recent calendar year. We also have the discretionary right to limit to
$500,000 in any calendar year the aggregate principal amount of Notes subject
to a Survivor's Option that may be exercised in such calendar year on behalf of
any individual deceased owner of a beneficial interest in a Note. Accordingly,
no assurance can be given that exercise of the Survivor's Option for the
desired amount will be permitted in any single calendar year.
Our Credit Ratings May Not Reflect All Risks of an Investment in the Notes
The credit ratings of the program under which the Notes are offered may
not reflect the potential impact of all risks related to any trading market
for, or trading value of, your Notes. In addition, real or anticipated changes
in our credit ratings will generally affect any trading market for, or trading
value of, your Notes.
S-5
DESCRIPTION OF THE NOTES
We will issue the Notes as a series of Debt Securities under a senior
Indenture, dated as of October 1, 1993, as amended or modified from time to
time (the "Indenture"), between ML&Co. and JPMorgan Chase Bank, formerly known
as The Chase Manhattan Bank, as trustee (the "Trustee"). The Indenture is
subject to, and governed by, the Trust Indenture Act of 1939, as amended. The
following summary of certain provisions of the Notes and the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
actual provisions of the Notes and the Indenture. Capitalized terms used but
not defined in this prospectus supplement shall have the meanings given to them
in the accompanying prospectus, the Notes or the Indenture, as the case may be.
The term "Debt Securities," as used in this prospectus supplement, refers to
all debt securities of ML&Co., including the Notes, issued and issuable from
time to time under ML&Co.'s senior indentures. The following description of
Notes will apply to each Note offered hereby unless otherwise specified in the
applicable pricing supplement.
General
All of our Debt Securities will be unsecured general obligations and will
rank equally with all of our other unsecured and unsubordinated indebtedness
outstanding from time to time. ML&Co.'s senior indentures do not limit the
aggregate amount of Debt Securities that we may issue thereunder. Accordingly,
we may issue Debt Securities from time to time in one or more series up to the
aggregate initial offering price authorized by us for the particular series. In
addition, we may from time to time, without the consent of the holders of the
Notes, provide for the issuance of Notes or other Debt Securities under our
senior indentures in addition to the aggregate initial offering price authorize
by this prospectus supplement. As of the date of this prospectus supplement, we
have issued $ aggregate initial offering price of Notes that are part of
the same series as the Notes, $ of which is outstanding as of that date. We
may also, from time to time, without the consent of the registered holders of
the Notes, issue additional Notes or other Debt Securities having the same
terms as previously issued Notes (other than the date of issuance, the date
interest, if any, begins to accrue and the offering price, which may vary) that
will form a single issue with the previously issued Notes.
Because ML&Co. is a holding company, the right of ML&Co. and its
creditors, including the holders of the notes, to participate in any
distribution of the assets of any subsidiary upon its liquidation or
reorganization or otherwise is necessarily subject to the prior claims of
creditors of that subsidiary, except to the extent that a bankruptcy court may
recognize the claims of ML&Co. itself as a creditor of that subsidiary. In
addition, dividends, loans and advances to ML&Co. from certain subsidiaries,
including MLPF&S, are restricted by net capital requirements under the
Securities Exchange Act of 1934, as amended, and under rules of certain
exchanges and other regulatory bodies.
The Notes are currently limited to up to $ aggregate initial
offering price. However, the $ aggregate initial offering price of Notes
offered hereby may be reduced by our sale of other securities referred to in
the accompanying prospectus.
The Notes will be denominated in, and payments of principal, premium, if
any, and/or interest, if any, in respect thereof will be made in, United States
dollars, unless otherwise specified in the applicable pricing supplement.
We will issue each Note as a book-entry security (each, a "Book-Entry
Note") represented by one or more fully registered certificates (each, a
"Global Security"), except as otherwise contemplated under "--Book-Entry
Notes." The minimum denominations of each Note will be $1,000 and integral
multiples of $1,000 in excess thereof.
Book-Entry Notes may be transferred or exchanged only through the
Depositary. See "--Book-Entry Notes." Registration of transfer or exchange of
Certificated Notes will be made at the office or agency maintained by us for
this purpose in the Borough of Manhattan, The City of New York, currently the
corporate
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trust office of the Trustee. No service charge will be imposed for any such
registration of transfer or exchange of Notes, but we may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith (other than certain exchanges not involving any
transfer).
Maturity
Each Note will mature on any day nine months or more from its date of
issue (the "Stated Maturity Date"), as specified in the applicable pricing
supplement, unless the principal thereof (or, any installment of principal
thereof) becomes due and payable prior to the Stated Maturity Date, whether, as
applicable, by the declaration of acceleration of maturity, notice of
redemption at our option, notice of election to exercise any Survivor's Option
or otherwise (the Stated Maturity Date or any date prior to the Stated Maturity
Date on which the particular Note becomes due and payable, as the case may be,
is referred to as the "Maturity Date" with respect to the principal of the
particular Note repayable on that date).
Payments of Principal and Interest
We will make payments of principal of, and premium, if any, and interest,
if any, on, Book-Entry Notes through the Trustee to the Depositary (as defined
below). See "--Book-Entry Notes." Unless otherwise specified in the applicable
pricing supplement, a beneficial owner of Notes in book-entry form that are
denominated in a currency other than United States dollars (a "Specified
Currency") electing to receive payments of principal or any premium or interest
in that Specified Currency must notify the participant of the Depositary
through which its interest is held on or before the applicable regular record
date, in the case of a payment of interest, and on or before the sixteenth day,
whether or not a Business Day, as defined below, before its stated maturity
date, in the case of principal or premium, of the beneficial owner's election
to receive all or a portion of any payment in a Specified Currency. The
participant must notify the Depositary of any election on or before the third
Business Day after the regular record date. The Depositary will notify the
paying agent of the election on or before the fifth Business Day after the
regular record date. If complete instructions are received by the participant
and forwarded to the Depositary, and forwarded by the Depositary to the paying
agent, on or before the relevant dates, the beneficial owner of the Notes in
book-entry form will receive payments in the Specified Currency.
In the case of Notes in certificated form (each, a "Certificated Note"),
we will make payments of principal of, and premium, if any, on, the Maturity
Date in immediately available funds upon presentation and surrender thereof
(and, in the case of any repayment pursuant to any Survivor's Option, upon
submission of a duly completed election form if and as required by the
provisions described below) at the office or agency maintained by us for this
purpose in the Borough of Manhattan, The City of New York, currently the
corporate trust office of the Trustee. We will make payments of interest, if
any, on the Maturity Date of a Certificated Note to the person to whom payment
of the principal thereof and premium, if any, thereon shall be made. We will
make payments of interest, if any, on a Certificated Note on any Interest
Payment Date (as defined below) other than the Maturity Date by check mailed to
the address of the registered holder entitled thereto appearing in the Security
Register. Notwithstanding the foregoing, we will make payments of interest, if
any, on any Interest Payment Date other than the Maturity Date to each
registered holder of $10,000,000 or more in aggregate principal amount of
Certificated Notes (whether having identical or different terms and provisions)
by wire transfer of immediately available funds if the applicable registered
holder has delivered appropriate wire transfer instructions in writing to the
Trustee not less than 15 days prior to the particular Interest Payment Date.
Any wire transfer instructions received by the Trustee shall remain in effect
until revoked by the applicable registered holder.
If any Interest Payment Date or the Maturity Date of a Note falls on a
day that is not a Business Day (as defined below), we will make the required
payment of principal, premium, if any, and/or interest on the next succeeding
Business Day, and no additional interest will accrue in respect of the payment
made on that next succeeding Business Day. "Business Day" means any day, other
than a Saturday or Sunday, that is neither a legal holiday nor a day on which
commercial banks are authorized or required by law, regulation or executive
order to close in The City of New York.
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Interest
Each interest-bearing Note will bear interest from its date of issue
until the principal thereof is paid. The applicable pricing supplement will
specify the fixed interest rate per annum applicable to each interest-bearing
Note and the frequency in which interest is payable. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
Interest, if any, on the Notes will be payable in arrears on each
Interest Payment Date. The first payment of interest on any Note originally
issued between a Record Date (as defined below) and the related Interest
Payment Date will be made on the Interest Payment Date immediately following
the next succeeding Record Date to the registered holder on the next succeeding
Record Date. The "Record Date" shall be the first day of the calendar month in
which the related Interest Payment Date occurs, except that the "Record Date"
with respect to the Interest Payment Date occurring on the Maturity Date will
be such Interest Payment Date.
The "Interest Payment Dates" for each interest-bearing Note will be as
follows:
Interest
Payment Frequency Interest Payment Dates
- ----------------- ----------------------
Monthly.................. day of each calendar month, beginning in the first calendar month
following the month the Note was issued.
Quarterly................ day of every third month, beginning in the third calendar month following
the month the Note was issued.
Semiannual............... day of every sixth month, beginning in the sixth calendar month following
the month the Note was issued.
Annual................... day of every twelfth month, beginning in the twelfth calendar month
following the month the Note was issued.
Interest rates that we offer on the Notes may differ depending upon,
among other factors, the aggregate principal amount of Notes purchased in any
single transaction. Notes with different variable terms other than interest
rates may also be offered concurrently to different investors. We may change
interest rates or formulas and other terms of Notes from time to time, but no
change of terms will affect any Note we have previously issued or as to which
we have accepted an offer to purchase.
Redemption at the Option of ML&Co.; No Sinking Fund
If one or more Redemption Dates are specified in the applicable pricing
supplement, we may redeem the particular Notes prior to their Stated Maturity
Date at our option on any Redemption Date, in whole or from time to time in
part in increments of $1,000 (provided that any remaining principal amount
thereof shall be at least $1,000), at a redemption price equal to 100% of the
unpaid principal amount thereof to be redeemed, together with unpaid interest
accrued thereon to the date of redemption. We must give written notice to
registered holders of the particular Notes to be redeemed at our option not
more than 60 nor less than 30 calendar days prior to the date of redemption.
For a discussion of the redemption of Discount Notes, see "--Discount Notes."
The Notes will not be subject to, or entitled to the benefit of, any
sinking fund.
Repayment Upon Exercise of Survivor's Option; Repurchases by ML&Co.
A "Survivor's Option" is our agreement with the beneficial owner of a
Note to repurchase that Note, in whole or in part, if requested, upon the death
of that beneficial owner occurring at least six months after its
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acquisition. Unless otherwise specified in the applicable pricing supplement,
the estate of the deceased beneficial owner of a Note will be eligible for a
Survivor's Option.
If a Survivor's Option is exercised, we will repay any Note that is
properly tendered for repayment by or on behalf of the person that has
authority to act on behalf of the deceased owner of that Note under the laws of
the appropriate jurisdiction at a price equal to 100% of the unpaid principal
amount of the beneficial interest to be repaid, together with unpaid interest
accrued thereon to the date of repayment. For a discussion of repayment of
Discount Notes, see "--Discount Notes."
We have the discretionary right to limit the aggregate principal amount
of Notes subject to a Survivor's Option that may be exercised in any calendar
year (the "Annual Put Limitation") to an amount equal to the greater of (i)
$5,000,000 or (ii) 5% of the outstanding principal amount of all Notes
outstanding as of the end of the most recent calendar year. We also have the
discretionary right to limit the aggregate principal amount of Notes subject to
a Survivor's Option that may be exercised in any calendar year on behalf of any
individual deceased owner of a beneficial interest in a Note to $500,000 (the
"Individual Put Limitation"). The Individual Put Limitation will not apply to
the amount by which an individual estate's election of the deceased owner's
Survivor's Option exceeded the Individual Put Limitation if the sum of that
amount and the aggregate principal amount of all Notes as to which the
Survivor's Option was exercised for a particular calendar year does not exceed
the Annual Put Limitation. In addition, we will not permit the exercise of a
Survivor's Option for an amount that is less than $1,000 or that will result in
a Note with a principal amount of less than $1,000 to remain outstanding.
An otherwise valid election to exercise the Survivor's Option may not be
withdrawn. Each election to exercise a Survivor's Option will be accepted in
the order received, except for any Note the acceptance of which would
contravene the Annual Put Limitation or the Individual Put Limitation. Notes
accepted for repayment pursuant to exercise of the Survivor's Option will be
repaid no later than the first Interest Payment Date that occurs 20 or more
calendar days after the date of the acceptance. Each Note submitted for
repayment that is not accepted in any calendar year due to the application of
the Annual Put Limitation or the Individual Put Limitation will be deemed to be
tendered on the first day of the following calendar year in the order in which
all such Notes were originally tendered. If a Note submitted for repayment
pursuant to a valid election of the Survivor's Option is not accepted, the
Trustee will deliver a written notice by first-class mail to the registered
holder, at its last known address as indicated in the Security Register, that
states the reason that particular Note has not been accepted for repayment.
With respect to Notes represented by a Global Security, the Depositary or
its nominee will be treated as the registered holder of the Notes and will be
the only entity that can exercise the Survivor's Option for such Notes. To
obtain repayment pursuant to exercise of the Survivor's Option for a Note
represented by a Global Security, the deceased owner's authorized person must
provide the following items to the Depositary's participant ("Participant")
through which the related beneficial interest is owned.
. a written instruction to such Participant to notify the Depositary of
the authorized person's desire to obtain repayment pursuant to
exercise of the Survivor's Option;
. appropriate evidence that (a) the deceased was the owner of a
beneficial interest in the related Note at the time of death and for
at least six months prior to his or her death, (b) the death of the
owner has occurred and (c) the person has authority to act on behalf
of the deceased owner;
. if the beneficial interest in the related Note is held by a nominee
of the deceased owner, a certificate from the nominee attesting to
the deceased owner's ownership of a beneficial interest in such Note;
. a written request for repayment signed by the authorized person for
the deceased owner with signature guaranteed by a member firm of a
registered national securities exchange or of the National
Association of Securities Dealers, Inc. or a commercial bank or trust
company having an office or correspondent in the United States;
. if applicable, a properly executed assignment or endorsement;
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. tax waivers and any other instruments or documents reasonably
required in order to establish the validity of the ownership of the
beneficial interest in the related Note and the claimant's
entitlement to payment; and
. any additional information reasonably required to document the
ownership or authority to exercise the Survivor's Option and to cause
the repayment of the related Note.
In turn, the applicable Participant will deliver each of these items to
the Trustee, together with evidence satisfactory to the Trustee from the
Participant stating that it represents the deceased owner of the beneficial
interest in the related Note.
Apart from our discretionary right to limit the aggregate principal
amount of Notes subject to a Survivor's Option that may be exercised in any one
calendar year as described above, all other questions regarding the eligibility
or validity of any exercise of the Survivor's Option will be determined by the
Trustee, in its sole discretion, which determination will be final and binding
on all parties.
The death of a person owning a Note in joint tenancy or tenancy by the
entirety with another or others will be deemed the death of the owner of that
Note, and the entire principal amount of the Note so owned will be subject to
repayment.
The death of a person owning a Note by tenancy in common will be deemed
the death of an owner of that Note only with respect to the deceased owner's
interest in that Note. However, if a Note is held by husband and wife as
tenants in common, the death of either spouse will be deemed the death of the
owner of that Note, and the entire principal amount of the Note so owned will
be subject to repayment.
The death of a person who, during his or her lifetime, was entitled to
substantially all of the beneficial interests of ownership of a Note will be
deemed the death of the owner of that Note if the beneficial interest can be
established to the satisfaction of the Trustee. The beneficial interest will be
deemed to exist in typical cases of nominee ownership, ownership under the
Uniform Transfers to Minors Act, community property or other joint ownership
arrangements between a husband and wife and custodial and trust arrangements
where one person has substantially all of the beneficial interests of ownership
in a Note during his or her lifetime.
The applicable Participant will be responsible for disbursing payments
received from the Trustee to the authorized person for the deceased owner.
With respect to Certificated Notes, the estate of the deceased owner of
such Note shall be required to deliver a properly completed notice of election
to exercise any Survivor's Option to the Trustee in order to exercise such
Survivor's Option.
We have attached as Annex A to this prospectus supplement the form to be
used to exercise the Survivor's Option. In addition, forms for the exercise of
the Survivor's Option may be obtained from the Trustee at its corporate trust
office.
If applicable, we will comply with the requirements of Section 14(e) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules promulgated thereunder, and any other securities laws or regulations in
connection with any repayment of Notes at the option of the registered holders
thereof.
We may at any time purchase Notes at any price or prices in the open
market or otherwise. Notes so purchased by us may, at our discretion, be held,
resold or surrendered to the Trustee for cancellation.
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Discount Notes
We may from time to time offer Notes that have an Issue Price (as
specified in the applicable pricing supplement) which is less than 100% of the
principal amount thereof (i.e. par) and that are designated as "Discount
Notes." Discount Notes may not bear any interest currently or may bear interest
at a rate that is below market rates at the time of issuance. The difference
between the Issue Price of a Discount Note and par is referred to as the
"Discount." In the event of redemption, repayment or acceleration of maturity
of a Discount Note, the amount payable to the Holder of a Discount Note will be
equal to the sum of:
. the Issue Price (increased by any accruals of Discount); and
. any unpaid interest accrued on the Discount Notes to the date of the
redemption, repayment or acceleration of maturity, as the case may be.
For purposes of determining the amount of Discount that has accrued as of
any date on which a redemption, repayment or acceleration of maturity occurs
for a Discount Note, a Discount will be accrued using a constant yield method.
The constant yield will be calculated using a 30-day month, 360-day year
convention, a compounding period that, except for the Initial Period (as
defined below), corresponds to the shortest period between Interest Payment
Dates for the applicable Discount Note (with ratable accruals within a
compounding period), and an assumption that the maturity of a Discount Note
will not be accelerated. If the period from the date of issue to the first
Interest Payment Date for a Discount Note (the "Initial Period") is shorter
than the compounding period for the Discount Note, a proportionate amount of
the yield for an entire compounding period will be accrued. If the Initial
Period is longer than the compounding period, then the period will be divided
into a regular compounding period and a short period with the short period
being treated as provided in the preceding sentence. The accrual of the
applicable Discount may differ from the accrual of original issue discount for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"), certain
Discount Notes may not be treated as having original issue discount within the
meaning of the Code, and Notes other than Discount Notes may be treated as
issued with original issue discount for federal income tax purposes. See
"Certain United States Federal Income Tax Considerations."
Other/Additional Provisions
Any provisions with respect to the Notes may be modified and/or
supplemented as specified under "Other/Additional Provisions" on the face of
the applicable Notes or in an Addendum relating to the applicable Notes, if so
specified on the face of the applicable Notes, and, in each case, as specified
in the applicable pricing supplement.
Book-Entry Notes
We have established a depositary arrangement with The Depository Trust
Company (the "Depositary") with respect to the Book-Entry Notes, the terms of
which are summarized below. Any additional or differing terms of the depositary
arrangement with respect to the Book-Entry Notes will be described in the
applicable pricing supplement.
Upon issuance, all Book-Entry Notes of like tenor and terms up to an
aggregate principal amount specified by the Depositary will be represented by a
single Global Security. Each Global Security representing Book-Entry Notes will
be deposited with, or on behalf of, the Depositary and will be registered in
the name of the Depositary or a nominee of the Depositary. No Global Security
may be transferred except as a whole by a nominee of the Depositary to the
Depositary or to another nominee of the Depositary, or by the Depositary or
another nominee of the Depositary to a successor of the Depositary or a nominee
of a successor to the Depositary.
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So long as the Depositary or its nominee is the registered holder of a
Global Security, the Depositary or its nominee, as the case may be, will be the
sole owner of the Book-Entry Notes represented thereby for all purposes under
the Indenture. Except as otherwise provided below, the beneficial owners of the
Global Security or Securities representing Book-Entry Notes will not be
entitled to receive physical delivery of Certificated Notes and will not be
considered the registered holders thereof for any purpose under the Indenture,
and no Global Security representing Book-Entry Notes shall be exchangeable or
transferable. Accordingly, each beneficial owner must rely on the procedures of
the Depositary and, if that beneficial owner is not a Participant, on the
procedures of the Participant through which that beneficial owner owns its
interest in order to exercise any rights of a registered holder under the
Indenture. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in certificated form. Such
limits and laws may impair the ability to transfer beneficial interests in a
Global Security representing Book-Entry Notes.
Each Global Security representing Book-Entry Notes will be exchangeable
for Certificated Notes of like tenor and terms and of differing authorized
denominations in a like aggregate principal amount, only if (i) the Depositary
notifies us that it is unwilling or unable to continue as Depositary for the
Global Securities or we become aware that the Depositary has ceased to be a
clearing agency registered under the Exchange Act and, in any such case we fail
to appoint a successor to the Depositary within 60 calendar days, (ii) we, in
our sole discretion, determine that the Global Securities shall be exchangeable
for Certificated Notes or (iii) an Event of Default has occurred and is
continuing with respect to the Notes under the Indenture. Upon any such
exchange, the Certificated Notes shall be registered in the names of the
beneficial owners of the Global Security or Securities representing Book-Entry
Notes, which names shall be provided by the Depositary's relevant Participants
(as identified by the Depositary) to the Trustee.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Book-Entry
Notes. The Book-Entry Notes will be issued as fully registered securities
registered in the name of Cede & Co. (the Depositary's partnership nominee).
One fully registered Global Security will be issued for each issue of
Book-Entry Notes, each in the aggregate principal amount of such issue, and
will be deposited with the Depositary. If, however, the aggregate principal
amount of any issue exceeds the Depositary's limit for a single Global
Security, then one or more Global Securities will be issued with respect to an
aggregate principal amount to the extent of the Depositary's limit and an
additional Global Security will be issued with respect to any remaining
principal amount of such issue.
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its Participants deposit with the
Depositary. The Depositary also facilitates the settlement among Participants
of securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct Participants of the Depositary ("Direct Participants")
include securities brokers and dealers (including the Purchasing Agent), banks,
trust companies, clearing corporations and certain other organizations. The
Depositary is owned by a number of its Direct Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. Access to the Depositary's system is
also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants").
The rules applicable to the Depositary and its Participants are on file with
the Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be made
by or through Direct Participants, which will receive a credit for such
Book-Entry Notes on the Depositary's records. The ownership
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interest of each actual purchaser of each Book-Entry Note represented by a
Global Security is in turn to be recorded on the records of Direct Participants
and Indirect Participants. Beneficial owners will not receive written
confirmation from the Depositary of their purchase, but beneficial owners are
expected to receive written confirmations providing details of the transaction,
as well as periodic statements of their holdings, from the Direct Participants
or Indirect Participants through which such beneficial owner entered into the
transaction. Transfers of ownership interests in a Global Security representing
Book-Entry Notes are to be accomplished by entries made on the books of
Participants acting on behalf of beneficial owners. Beneficial owners of a
Global Security representing Book-Entry Notes will not receive Certificated
Notes representing their ownership interests therein, except in the event that
use of the book-entry system for such Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Securities representing
Book-Entry Notes which are deposited with, or on behalf of, the Depositary are
registered in the name of the Depositary's nominee, Cede & Co. The deposit of
Global Securities with, or on behalf of, the Depositary and their registration
in the name of Cede & Co. effect no change in beneficial ownership. The
Depositary has no knowledge of the actual beneficial owners of the Global
Securities representing the Book-Entry Notes; the Depositary's records reflect
only the identity of the Direct Participants to whose accounts such Book-Entry
Notes are credited, which may or may not be the beneficial owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to beneficial owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect
to the Global Securities representing the Book-Entry Notes. Under its usual
procedures, the Depositary mails an Omnibus Proxy to a company as soon as
possible after the applicable record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Book-Entry Notes are credited on the applicable record date
(identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest, if any, payments on the
Global Securities representing the Book-Entry Notes will be made in immediately
available funds to the Depositary. The Depositary's practice is to credit
Direct Participants' accounts on the applicable payment date in accordance with
their respective holdings shown on the Depositary's records unless the
Depositary has reason to believe that it will not receive payment on such date.
Payments by Participants to beneficial owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name", and
will be the responsibility of such Participant and not of the Depositary, the
Trustee or us, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal, premium, if any, and/or
interest, if any, to the Depositary is the responsibility of ML&Co. and the
Trustee, disbursement of such payments to Direct Participants shall be the
responsibility of the Depositary, and disbursement of such payments to the
beneficial owners shall be the responsibility of Direct Participants and
Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less
than all of the Book-Entry Notes of like tenor and terms are being redeemed,
the Depositary's practice is to determine by lot the amount of the interest of
each Direct Participant in such issue to be redeemed.
A beneficial owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by us, through its Participant, to the Trustee, and
shall effect delivery of such Book-Entry Notes by causing the Direct
Participant to transfer the Participant's interest in the Global Security or
Securities representing such Book-Entry Notes, on the Depositary's records, to
the Trustee. The requirement for physical delivery of Book-Entry Notes in
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connection with a demand for repayment will be deemed satisfied when the
ownership rights in the Global Security or Securities representing such
Book-Entry Notes are transferred by Direct Participants on the Depositary's
records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to us or the Trustee. Under such circumstances, in the event
that a successor securities depository is not obtained, Certificated Notes are
required to be printed and delivered.
We may decide to discontinue use of the system of book-entry transfers
through the Depositary (or a successor securities depository). In that event,
Certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that we believe to be
reliable, but neither we nor any Agent takes any responsibility for the
accuracy thereof.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal with
holders other than original purchasers (except where otherwise specifically
noted). Persons considering the purchase of the Notes should consult their own
tax advisors concerning the application of United States Federal income tax
laws to their particular situations as well as any consequences of the
purchase, ownership and disposition of the Notes arising under the laws of any
other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation or partnership (including an entity
treated as a corporation or partnership for United States Federal income tax
purposes) created or organized in or under the laws of the United States, any
state thereof or the District of Columbia (other than a partnership that is not
treated as a United States person under any applicable Treasury regulations),
(iii) an estate whose income is subject to United States federal income tax
regardless of its source, (iv) 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 United States persons have the authority to control all substantial
decisions of the trust, or (v) any other person whose income or gain in respect
of a Note is effectively connected with the conduct of a United States trade or
business. Notwithstanding the preceding clause (iv), to the extent provided in
regulations, certain trusts in existence on August 20, 1996 and treated as
United States persons prior to such date that elect to continue to be so
treated also shall be considered U.S. Holders. As used herein, the term
"non-U.S. Holder" means a beneficial owner of a Note that is not a U.S. Holder.
U.S. Holders
Payments of Interest. Payments of interest on a Note generally will be taxable
to a U.S. Holder as ordinary interest income at the time such payments are
accrued or are received (in accordance with the U.S. Holder's regular method of
tax accounting).
Original Issue Discount. The following summary is a general discussion of the
United States Federal income tax consequences to U.S. Holders of the purchase,
ownership and disposition of Notes issued with original issue
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discount ("Original Issue Discount Notes"). The following summary is based upon
final Treasury regulations (the "OID Regulations") released by the Internal
Revenue Service ("IRS") on January 27, 1994, as amended on June 11, 1996, under
the original issue discount provisions of the Code.
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of
1% of the Note's stated redemption price at maturity multiplied by the number
of complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest
(as defined below) prior to maturity, multiplied by the weighted average
maturity of such Note). The issue price of each Note in an issue of Notes
equals the first price at which a substantial amount of such Notes has been
sold (ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers). The stated redemption price at maturity of a Note is the sum of
all payments provided by the Note other than "qualified stated interest"
payments. The term "qualified stated interest" generally means stated interest
that is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually at a single fixed rate. In
addition, under the OID Regulations, if a Note bears interest for one or more
accrual periods at a rate below the rate applicable for the remaining term of
such Note (e.g., Notes with teaser rates or interest holidays), and if the
greater of either the resulting foregone interest on such Note or any "true"
discount on such Note (i.e., the excess of the Note's stated principal amount
over its issue price) equals or exceeds a specified de minimis amount, then the
stated interest on the Note would be treated as original issue discount rather
than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of an Original Issue Discount Note must include
original issue discount in income as ordinary interest for United States
Federal income tax purposes as it accrues under a constant yield method in
advance of receipt of the cash payments attributable to such income, regardless
of such U.S. Holder's regular method of tax accounting. In general, the amount
of original issue discount included in income by the initial U.S. Holder of an
Original Issue Discount Note is the sum of the daily portions of original issue
discount with respect to such Original Issue Discount Note for each day during
the taxable year (or portion of the taxable year) on which such U.S. Holder
held such Original Issue Discount Note. The "daily portion" of original issue
discount on any Original Issue Discount Note is determined by allocating to
each day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Original Issue
Discount Note, provided that each accrual period is no longer than one year and
each scheduled payment of principal or interest occurs either on the final day
of an accrual period or on the first day of an accrual period. The amount of
original issue discount allocable to each accrual period is generally equal to
the difference between (i) the product of the Original Issue Discount Note's
adjusted issue price at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each accrual
period and appropriately adjusted to take into account the length of the
particular accrual period) and (ii) the amount of any qualified stated interest
payments allocable to such accrual period. The "adjusted issue price" of an
Original Issue Discount Note at the beginning of any accrual period is the sum
of the issue price of the Original Issue Discount Note plus the amount of
original issue discount allocable to all prior accrual periods minus the amount
of any prior payments on the Original Issue Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases an Original Issue Discount Note for an amount
that is greater than its adjusted issue price as of the purchase date and less
than or equal to the sum of all amounts payable on the Original Issue Discount
Note after the purchase date other than payments of qualified stated interest,
will be considered to have purchased the Original Issue Discount Note at an
"acquisition premium." Under the acquisition premium rules, the amount of
original issue discount which such U.S. Holder must include in its gross income
with respect to such Original Issue Discount Note for any taxable year (or
portion thereof in which the U.S. Holder holds the Original Issue Discount
Note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period.
S-15
Certain of the Notes (i) may be redeemable at the option of ML&Co. prior
to their stated maturity (a "call option") and/or (ii) may be repayable at the
option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Foreign-Currency Notes. The United States Federal income tax consequences of
the purchase, ownership and disposition of notes providing for payments
denominated in a currency other than U.S. dollars will be more fully described
in the applicable pricing supplement.
Short-Term Notes. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects
to do so. If such an election is not made, any gain recognized by the U.S.
Holder on the sale, exchange or maturity of the Short-Term Note will be
ordinary income to the extent of the original issue discount accrued on a
straight-line basis, or upon election under the constant yield method (based on
daily compounding), through the date of sale or maturity, and a portion of the
deductions otherwise allowable to the U.S. Holder for interest on borrowings
allocable to the Short-Term Note will be deferred until a corresponding amount
of income is realized. U.S. Holders who report income for United States Federal
income tax purposes under the accrual method, and certain other holders
including banks and dealers in securities, are required to accrue original
issue discount on a Short-Term Note on a straight-line basis unless an election
is made to accrue the original issue discount under a constant yield method
(based on daily compounding).
Market Discount. If a U.S. Holder purchases a Note, other than an Original
Issue Discount Note, for an amount that is less than its issue price (or, in
the case of a subsequent purchaser, its stated redemption price at maturity)
or, in the case of an Original Issue Discount Note, for an amount that is less
than its adjusted issue price as of the purchase date, such U.S. Holder will be
treated as having purchased such Note at a "market discount," unless such
market discount is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment (or, in the case of an Original Issue Discount
Note, any payment that does not constitute qualified stated interest) on, or
any gain realized on the sale, exchange, retirement or other disposition of, a
Note as ordinary income to the extent of the lesser of (i) the amount of such
payment or realized gain or (ii) the market discount which has not previously
been included in income and is treated as having accrued on such Note at the
time of such payment or disposition. Market discount will be considered to
accrue ratably during the period from the date of acquisition to the maturity
date of the Note, unless the U.S. Holder elects to accrue market discount on
the basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion
of the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to
the extent the interest expense exceeds an allocable portion of market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon
S-16
the receipt of certain cash payments and regarding the deferral of interest
deductions will not apply. Generally, such currently included market discount
is treated as ordinary interest for United States Federal income tax purposes.
Such an election will apply to all debt instruments acquired by the U.S. Holder
on or after the first day of the first taxable year to which such election
applies and may be revoked only with the consent of the IRS.
Premium. If a U.S. Holder purchases a Note for an amount that is greater than
the sum of all amounts payable on the Note after the purchase date other than
payments of qualified stated interest, such U.S. Holder will be considered to
have purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the Note and may offset interest otherwise
required to be included in respect of the Note during any taxable year by the
amortized amount of such excess for the taxable year. However, if the Note may
be optionally redeemed after the U.S. Holder acquires it at a price in excess
of its stated redemption price at maturity, special rules would apply which
could result in a deferral of the amortization of some bond premium until later
in the term of the Note. Any election to amortize bond premium applies to all
taxable debt instruments acquired by the U.S. Holder on or after the first day
of the first taxable year to which such election applies and may be revoked
only with the consent of the IRS.
Disposition of a Note. Upon the sale, exchange or retirement of a Note, a U.S.
Holder generally will recognize taxable gain or loss equal to the difference
between the amount realized on the sale, exchange or retirement (other than
amounts representing accrued and unpaid interest) and such U.S. Holder's
adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in a Note
generally will equal such U.S. Holder's initial investment in the Note
increased by any original issue discount included in income (and accrued market
discount, if any, if the U.S. Holder has included such market discount in
income) and decreased by the amount of any payments, other than qualified
stated interest payments, received and amortizable bond premium taken with
respect to such Note. Such gain or loss generally will be long-term capital
gain or loss if the Note were held for more than one year. Non-corporate
taxpayers are subject to reduced maximum rates on long-term capital gains and
are generally subject to tax at ordinary income rates on short-term capital
gains. The deductibility of capital losses is subject to certain limitations.
Prospective investors should consult their own tax advisors concerning these
tax law provisions.
Non-U.S. Holders
A non-U.S. Holder who is an individual or corporation (or an entity
treated as a corporation for federal income tax purposes) holding Notes on its
own behalf will not be subject to United States Federal income taxes on
payments of principal, premium, interest or original issue discount on a Note,
unless such non-U.S. Holder is a direct or indirect 10% or greater shareholder
of ML&Co., a controlled foreign corporation related to ML&Co. or a bank
receiving interest described in section 881(c)(3)(A) of the Code. To qualify
for the exemption from taxation, the Withholding Agent, as defined below, must
have received a statement from the individual or corporation that:
. is signed under penalties of perjury by the beneficial owner of the
Note,
. certifies that such owner is not a U.S. Holder, and
. provides the beneficial owner's name and address.
A "Withholding Agent" is any person, U.S. or foreign, that has control,
receipt or custody of an amount subject to withholding or who can disburse or
make payments of an amount subject to withholding. Generally, the
aforementioned statement is made on an IRS Form W-8BEN ("W-8BEN"), which is
effective for the period starting on the date the form is signed and ending on
the last day of the third succeeding calendar year, unless a change in
circumstances makes any information on the form incorrect. Notwithstanding the
preceding sentence, a W-8BEN with a U.S. taxpayer identification number will
remain effective until a change in circumstances makes any information on the
form incorrect, provided that the Withholding Agent reports at least annually
to the beneficial owner on IRS Form 1042-S. The beneficial owner must inform
the Withholding Agent within 30 days
S-17
of a change in circumstances that makes any information on the W-8BEN incorrect
and must furnish a new W-8BEN. A holder of a Note which is not an individual or
corporation (on an entity treated as a corporation for federal income tax
purposes) holding the Note on its own behalf may have substantially increased
reporting requirements. In particular, in the case of Notes held by a foreign
partnership (or foreign trust or estate), the partnership (or trust or estate)
will be required to provide the certification from each of its partners (or
beneficiaries), and the partnership (or trust or estate) will be required to
provide certain additional information.
A non-U.S. Holder whose income with respect to its investment in a Note
is effectively connected with the conduct of a U.S. trade or business would
generally be taxed as if the holder was U.S. person provided the holder
provides to the Withholding Agent an IRS Form W-8ECI.
Certain securities clearing organizations, and other entities who are not
beneficial owners, may be able to provide a signed statement to the Withholding
Agent. However, in such case, the signed statement may require a copy of the
beneficial owner's W-8BEN (or substitute form).
Generally, a non-U.S. Holder will not be subject to United States Federal
income taxes on any amount which constitutes capital gain upon retirement or
disposition of a Note, unless such non-U.S. Holder is an individual who is
present in the United States for 183 days or more in the taxable year of the
disposition and such gain is derived from sources within the United States.
Certain other exceptions may be applicable, and a non-U.S. Holder should
consult its tax advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder
unless the individual is a direct or indirect 10% or greater shareholder of
ML&Co. or, at the time of such individual's death, payments in respect of the
Notes would have been effectively connected with the conduct by such individual
of a trade or business in the United States.
Backup Withholding
Backup withholding of United States Federal income tax at a current rate
of 30% (which rate is scheduled to be reduced periodically through 2006) may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. Holders who
are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must backup withhold on the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines that
the seller is an exempt recipient or (ii) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the registered
owner's non-U.S. status would be made normally on an IRS Form W-8BEN under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to
a beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
Prospective investors are strongly urged to consult their own tax
advisors with respect to the withholding requirements.
S-18
PLAN OF DISTRIBUTION
We are offering the Notes on a continuing basis for sale to or through
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Purchasing Agent") as
described herein. The Purchasing Agent may purchase Notes from us, as
principal, from time to time for resale to investors at a fixed offering price
equal to 100% of the principal amount thereof or such other price specified in
the applicable pricing supplement or, if so specified in the applicable pricing
supplement, for resale at varying prices relating to prevailing market prices
at the time of resale as determined by the Purchasing Agent. However, we may
also explicitly agree with the Purchasing Agent that it will utilize its
reasonable efforts on an agency basis on our behalf to solicit offers to
purchase Notes at 100% of the principal amount thereof, unless otherwise
specified in the applicable pricing supplement.
We will pay the Purchasing Agent a gross selling concession in the form
of a discount ranging from % to %, depending upon the maturity, for each
Note purchased from us by it as principal, unless otherwise specified in the
applicable pricing supplement. The amount of commissions payable to the
Purchasing Agent acting as our agent in the sale of Notes will be identical to
the scheduled discount payable to the Purchasing Agent acting as principal. We
will negotiate compensation payable to the Purchasing Agent with respect to
Notes with maturities in excess of 30 years at the time of the related sale. In
addition, we estimate our expenses incurred in connection with the offering and
sale of the Notes, including reimbursement of certain of the Purchasing Agent's
expenses, total approximately $ .
The Purchasing Agent may sell Notes it has purchased from us as principal
to other NASD dealers in good standing at a concession and, unless otherwise
specified in the applicable pricing supplement, such concession allowed to any
dealer will not, during the distribution of the Notes, be in excess of the
concession to be received by the Purchasing Agent from us. We may not sell
Notes to any broker or dealer other than the Purchasing Agent.
After the initial public offering of Notes, the offering price (in the
case of Notes to be resold on a fixed offering price basis) and the concession
may be changed.
We reserve the right to withdraw, cancel or modify the offer made hereby
without notice and may reject offers in whole or in part (whether placed
directly by us or through the Purchasing Agent). The Purchasing Agent will have
the right, in its discretion reasonably exercised, to reject in whole or in
part any offer to purchase Notes received by it on an agency basis.
Upon issuance, the Notes will not have an established trading market. The
Notes will not be listed on any securities exchange. The Purchasing Agent may
from time to time purchase and sell Notes in the secondary market, but the
Purchasing Agent is not obligated to do so, and there can be no assurance that
a secondary market for the Notes will develop or that there will be liquidity
in the secondary market if one develops. From time to time, the Purchasing
Agent may make a market in the Notes, but the Purchasing Agent is not obligated
to do so and may discontinue any market-making activity at any time.
In connection with an offering of Notes purchased by the Purchasing Agent
as principal on a fixed offering price basis, the Purchasing Agent will be
permitted to engage in certain transactions that stabilize the price of Notes.
These transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of Notes. If the Purchasing Agent creates a
short position in Notes, i.e., if it sells Notes in an amount exceeding the
amount referred to in the applicable pricing supplement, it may reduce that
short position by purchasing Notes in the open market. In general, purchases of
Notes for the purpose of stabilization or to reduce a short position could
cause the price of Notes to be higher than it might be in the absence of these
type of purchases.
Neither we nor the Purchasing Agent makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described in the immediately preceding paragraph may have on the
S-19
price of Notes. In addition, neither we nor the Purchasing Agent makes any
representation that the Purchasing Agent will engage in any such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
The Purchasing Agent may be deemed to be an "underwriter" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"). We
have agreed to indemnify the Purchasing Agent against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
the Purchasing Agent may be required to make in respect thereof.
Broker-dealers and/or securities firms have executed dealer agreements
with the Purchasing Agent and have agreed to market and sell the Notes in
accordance with the terms of these agreements along with all other applicable
laws and regulations.
In the ordinary course of its business, the Purchasing Agent and its
affiliates have engaged, and may in the future engage, in investment and
commercial banking transactions with us and certain of our affiliates.
From time to time, we may sell other securities referred to in the
accompanying prospectus, and the amount of Notes offered hereby may be reduced
as a result of these sales.
S-20
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[LOGO]
$
Merrill Lynch & Co., Inc.
Retail Notes
Due Nine Months or More From Date of Issue
-------------------------------
PROSPECTUS SUPPLEMENT
-------------------------------
Merrill Lynch & Co.
, 2002
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses in connection with the issuance
and distribution of the securities being registered. All the amounts shown are
estimates, except the registration fee and the NASD fee.
Registration fee.............................................. $ 920,000
Fees and expenses of accountants.............................. 400,000
Fees and expenses of counsel.................................. 1,500,000
NASD fee...................................................... 30,500
Fees and expenses of Trustees and Warrant Agents.............. 800,000
Printing expenses............................................. 800,000
Printing and engraving of securities.......................... 100,000
Rating agency fees............................................ 500,000
Stock exchange listing fees................................... 300,000
Miscellaneous................................................. 4,500
----------
Total...................................................... $5,355,000
==========
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware, as
amended, provides that under certain circumstances a corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or
is or was serving at its request in such capacity in another corporation or
business association, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, has no reasonable cause to believe such person's
conduct was unlawful.
Article XIII, Section 2 of the Restated Certificate of Incorporation of the
Company provides in effect that, subject to certain limited exceptions, the
Company shall indemnify its directors and officers to the extent authorized or
permitted by the General Corporation Law of the State of Delaware.
Each of the underwriting and distribution agreements and forms thereof filed
as Exhibit 1 provides for the indemnification of the Company, its controlling
persons, its directors and certain of its officers by the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Act").
The directors and officers of the Company are insured under policies of
insurance maintained by the Company, 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, the Company has
entered into contracts with all of its directors providing for indemnification
of such persons by the Company to the fullest extent authorized or permitted by
law, subject to certain limited exceptions.
The Declaration of Trust of the Trust provides, to the fullest extent
permitted by applicable law, for indemnification of the Regular Trustees (as
defined in the Declaration of Trust), any Affiliate of any Regular Trustee, any
officer, director, shareholder, member, partner, employees, representative or
agent of any Regular Trustee, or any officer, director, shareholder, member,
partner, employee, representative or agent of the Trust or
II-1
its Affiliates (each, a "Company Indemnified Person"), from and against losses
and expenses incurred by such Company Indemnified Person in connection with any
action, suit or proceeding, except that if such action, suit or proceedings is
by or in the right of the Trust, the indemnity shall be limited to expenses of
such Company Indemnified Person.
The Limited Partnership Agreement of the Partnership provides that to the
fullest extent permitted by applicable law, the Partnership shall indemnify and
hold harmless each of the General Partner, and any Special Representative, any
Affiliate of the General Partner or any Special Representative, any officer,
director, shareholder, member, partner, employee, representative or agent of
the General Partner or any Special Representative, or any of their respective
Affiliates, or any employee or agent of the Partnership or its Affiliates
(each, a "Partnership Indemnified Person"), from and against any loss, damage
or claim incurred by such Partnership Indemnified Person by reason of any act
or omission performed or omitted by such Partnership Indemnified Person in good
faith on behalf of the Partnership and in a manner such Partnership Indemnified
Person reasonably believed to be within the scope of authority conferred on
such Partnership Indemnified Person by the Limited Partnership Agreement,
except that no Partnership Indemnified Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such
Partnership Indemnified Person by reason of gross negligence or willful
misconduct with respect to such acts or omissions. The Limited Partnership
Agreement also provides that, to the fullest extent permitted by applicable
law, expenses (including legal fees) incurred by a Partnership Indemnified
Person in defending any claim, demand, action, suit or proceeding shall, from
time to time, be advanced by the Partnership prior to the final disposition of
such claim, demand, action, suit or proceeding upon receipt by the Partnership
of any undertaking by or on behalf of the Partnership Indemnified Person to
repay such amount if it shall be determined that the Partnership Indemnified
Person is not entitled to be indemnified as authorized in the Limited
Partnership Agreement.
The Regular Trustees of the Trust are covered by insurance policies
indemnifying them against certain liabilities, including certain liabilities
arising under the Act, which might be incurred by them in such capacity and
against which they cannot be indemnified by the Company or the Trust. Any
agents, dealers or underwriters who execute the agreements filed as Exhibit 1
of this Registration Statement with respect to Trust Originated Preferred
Securities/SM/ will agree to indemnify the Company's directors and their
officers and the Trustees who signed the Registration Statement with respect to
such securities against certain liabilities that may arise under the Act with
respect to information furnished to the Company or the Trust by or on behalf of
any such indemnifying party.
II-2
Item 16. List of Exhibits.
Exhibit Incorporation by Reference
Number Description to Filings Indicated
- --------- ----------- --------------------------
1(a) --Form of Underwriting Agreement for Debt Exhibit 1(a) to Company's Registration
Securities and Debt, Currency and Index Statement on Form S-3 (No. 333-59997).
Warrants, including forms of Terms Agreement.
1(b) --Form of Distribution Agreement, including form Exhibit 1(b) to Company's Registration
of Terms Agreement, relating to Medium-Term Statement on Form S-3 (No. 33-51489).
Notes, Series B (a series of Senior Debt
Securities).
1(c) --Form of Underwriting Agreement for Preferred Exhibit 1(c) to Company's Registration
Stock and Common Stock Warrants, Preferred Statement on Form S-3 (No. 333-59997).
Stock, Depositary Shares and Common Stock.
1(d) --Form of Purchase Agreement relating to the Exhibit 1(d) to Company's Registration
Trust Preferred Securities. Statement on Form S-3 (No. 333-38792)
1(e) --Form of Distribution Agreement, relating to
Retail Notes.*
4(a)(i) --Senior Indenture, dated as of April 1, 1983, as Exhibit (3) to Company's Registration
amended and restated (the "1983 Senior Statement on Form 8-A dated July 20, 1992.
Indenture"), between the Company and
JPMorgan Chase Bank, formerly known as The
Chase Manhattan Bank and Chemical Bank
(successor by merger to Manufacturers Hanover
Trust Company).
4(a)(ii) --Senior Indenture, dated as of October 1, 1993 Exhibit 4(iv) to Company's Annual Report on
(the "1993 Senior Indenture"), between the Form 10-K for the year ended December 25,
Company and JPMorgan Chase Bank, formerly 1998.
known as The Chase Manhattan Bank (successor
by merger to The Chase Manhattan Bank, N.A.).
4(a)(iii) --Form of initial Subsequent Indenture with Exhibit 4(a)(iii) to Company's Registration
respect to Senior Debt Securities. Statement on Form S-3 (No. 333-38792)
4(a)(iv) --Form of Subsequent Indenture with respect to Exhibit 4(a)(iv) to Company's Registration
Senior Debt Securities. Statement on Form S-3 (No. 333-38792)
4(b)(i) --Supplemental Indenture to the 1983 Senior Exhibit (3) to Company's Registration
Indenture, dated March 15, 1990, between the Statement on Form 8-A dated July 20, 1992.
Company and JPMorgan Chase Bank, formerly
known as The Chase Manhattan Bank and
Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company).
4(b)(ii) --Eighth Supplemental Indenture to the 1983 Exhibit 4(b) to Post-Effective Amendment
Senior Indenture, dated March 1, 1996, between No. 1 to Company's Registration Statement on
the Company and JPMorgan Chase Bank, Form S-3 (No. 33-65135).
formerly known as The Chase Manhattan Bank
and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company).
- --------
* Filed herewith
II-3
Exhibit Incorporation by Reference
Number Description to Filings Indicated
- --------- ----------- --------------------------
4(b)(iii) --Ninth Supplemental Indenture to the 1983 Senior Exhibit 4(b) to Post-Effective Amendment
Indenture, dated June 1, 1996, between the No. 4 to Company's Registration Statement on
Company and JPMorgan Chase Bank, formerly Form S-3 (No. 33-65135).
known as The Chase Manhattan Bank and
Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company).
4(b)(iv) --Tenth Supplemental Indenture to the 1983 Exhibit 4(b) to Post-Effective Amendment
Senior Indenture, dated July 1, 1996, between No. 5 to Company's Registration Statement on
the Company and JPMorgan Chase Bank, Form S-3 (No. 33-65135).
formerly known as The Chase Manhattan Bank
and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company).
4(b)(v) --Supplemental Indenture to the 1983 Senior Exhibit 4(b)(ii) to Company's Registration
Indenture, dated October 25, 1993, between the Statement on Form S-3 (No. 33-61559).
Company and JPMorgan Chase Bank, formerly
known as The Chase Manhattan Bank
(successor by merger to The Chase Manhattan
Bank, N.A.).
4(b)(vi) --Twelfth Supplemental Indenture to the 1983 Exhibit 4(a) to Company's Current report on
Senior Indenture dated as of September 1, 1998 Form 8-K dated October 21, 1998.
between the Company and JPMorgan Chase
Bank, formerly known as The Chase
Manhattan Bank and Chemical Bank
(successor by merger to Manufacturers
Hanover Trust Company).
4(b)(vii) --First Supplemental Indenture to the 1993 Senior Exhibit 4(a) to Company's Current Report on
Indenture, dated as of June 1, 1998, between the Form 8-K dated July 2, 1998.
Company and JPMorgan Chase Bank, formerly
known as The Chase Manhattan Bank (successor
by merger to The Chase Manhattan Bank, N.A.).
4(c)(i) --Form of Subordinated Indenture between the Exhibit 4.7 to Amendment No. 2 to
Company and JPMorgan Chase Bank, formerly Company's Registration Statement on
known as The Chase Manhattan Bank. Form S-3 (No. 333-16603).
4(c)(ii) --Form of Subsequent Indentures with respect to Exhibit 4(c)(ii) to Company's Registration
Subordinated Debt Securities. Statement on Form S-3 (No. 333-38792)
4(d) --Form of Fixed Rate Medium-Term Note, Exhibit 4(dd) to Company's Registration
Series B. Statement on Form S-3 (No. 333-38792)
4(e) --Form of Redeemable Fixed Rate Medium-
Term Note, Series B.*
4(f) --Form of Floating Rate Medium-Term Note, Exhibit 4(ff) to Company's Registration
Series B. Statement on Form S-3 (No. 333-38792)
4(g) --Form of Modified Federal Funds Rate
Medium-Term Note, Series B.*
4(h) --Form of Weekly Average Federal Funds Rate
Medium-Term Note, Series B.*
- --------
* Filed herewith
II-4
Exhibit Incorporation by Reference
Number Description to Filings Indicated
- ------- ----------- --------------------------
4(i) --Form of Multi-Currency Medium-Term Note, Exhibit 4(fff) to Company's Registration
Series B. Statement on Form S-3 (No. 33-52647).
4(j) --Form of Warrant Agreement, including form of Exhibit 4(aa) to Company's Registration
Warrant Certificate. Statement on Form S-3 (No. 33-35456).
4(k) --Form of Currency [Put/Call] Warrant Exhibit 4 to Company's Registration Statement
Agreement, including form of Global Currency on Form S-3 (No. 33-17965).
Warrant Certificate.
4(l) --Form of Index Warrant Agreement, including Exhibit 4(lll) to Company's Registration
form of Global Index Warrant Certificate. Statement on Form S-3 (No. 33-54218).
4(m) --Form of Index Warrant Trust Indenture, Exhibit 4(mmm) to Company's Registration
including form of Global Index Warrant Statement on Form S-3 (No. 33-54218).
Certificate.
4(n) --Form of Preferred Stock and Common Stock Exhibit 4(eeee) to Amendment No. 1 to
Warrant Agreement, including forms of Company's Registration Statement on
Preferred Stock and Common Stock Warrant Form S-3 (File No. 333-44173).
Certificates.
4(o) --Form of Deposit Agreement, including form of Exhibit 4(ffff) to Amendment No. 1 to
Depositary Receipt Certificate representing the Company's Registration Statement on
Depositary Shares. Form S-3 (File No. 333-44173).
4(p) --Form of Certificate of Trust of Merrill Lynch Exhibit 4(oooo) to Company's Registration
Preferred Capital Trust VI. Statement on Form S-3 (File No. 333-68747).
4(q) --Form of Amended and Restated Declaration of Exhibit 4(pppp) to Company's Registration
Trust of Merrill Lynch Preferred Capital Trust Statement on Form S-3 (File No. 333-68747).
VI, including form of Trust Preferred Security.
4(r) --Form of Certificate of Limited Partnership of Exhibit 4(qqqq) to Company's Registration
Merrill Lynch Preferred Funding VI, L.P. Statement on Form S-3 (File No. 333-68747).
4(s) --Form of Amended and Restated Limited Exhibit 4(rrrr) to Company's Registration
Partnership Agreement of Merrill Lynch Statement on Form S-3 (File No. 333-68747).
Preferred Funding VI, L.P., including form of
Partnership Preferred Security.
4(t) --Form of Trust Preferred Securities Guarantee Exhibit 4(ssss) to Company's Registration
Agreement, between the Company and Statement on Form S-3 (File No. 333-68747).
JPMorgan Chase Bank, formerly known as
The Chase Manhattan Bank, as guarantee
trustee.
4(u) --Form of Partnership Preferred Securities Exhibit 4(tttt) to Company's Registration
Guarantee Agreement between the Company and Statement on Form S-3 (File No. 333-68747).
JPMorgan Chase Bank, formerly known as The
Chase Manhattan Bank, as guarantee trustee.
4(v) --Form of Affiliate Debenture Guarantee Exhibit 4(vvvv) to Company's Registration
Agreement between the Company and Statement on Form S-3 (File No. 333-68747).
JPMorgan Chase Bank, formerly known as
The Chase Manhattan Bank, as guarantee
trustee.
4(w) --Form of Subordinated Debenture. Exhibit 4(wwww) to Company's Registration
Statement on Form S-3 (File No. 333-68747).
4(x) --Restated Certificate of Incorporation of the Exhibit 3(i) to Company's Quarterly Report
Company, dated May 3, 2001. on Form 10-Q for the quarter ended
March 30, 2001.
- --------
* Filed herewith
II-5
Exhibit Incorporation by Reference
Number Description to Filings Indicated
- ------- ----------- --------------------------
4(y) --By-Laws of the Company, effective as of Exhibit 3 to Company's Quarterly Report on
July 23, 2001. Form 10-Q for the quarter ended June 29, 2001.
4(z) --Certificate of Designation dated August 20, 1998 Exhibit 3 to Company's Quarterly Report on
for Special Voting Stock, relating to the Form 10-Q for the quarter ended September 25,
Company's Restated Certificate of Incorporation 1998.
effective as of April 28, 1998.
4(aa) --Certificate of Designation dated December 17, Exhibit 3(f) to Company's Registration
1987 relating to the Company's Series A Junior Statement on Form S-3 (File No. 33-19975).
Preferred Stock.
4(bb) --Certificate of Designation of the Company Exhibit 3(i) to Company's Quarterly Report on
establishing the rights, preferences, privileges, Form 10-Q for the quarter ended March 27,
qualifications, restrictions, and limitations 1998.
relating to the Company's 9% Cumulative
Preferred Stock.
4(cc) --Form of Certificate of Designation of the Exhibit 4(ssss) to Amendment No. 1 to
Company establishing the rights, preferences, Company's Registration Statement on
privileges, qualifications, restrictions, and Form S-3 (File No. 333-44173).
limitations relating to a series of the Preferred
Stock.
4(dd) --Form of certificate representing Preferred Stock. Exhibit 4(d) to Company's Registration
Statement on Form S-3 (File No. 33-55363).
4(ee) --Form of certificate representing Common Stock. Exhibit 4(uuuu) to Amendment No. 1 to
Company's Registration Statement on
Form S-3 (File No. 333-44173).
4(ff) --Form of Liquid Yield Option Note Indenture. Exhibit 4(vvvv) to Amendment No. 1 to
Company's Registration Statement on
Form S-3 (File No. 333-44173).
4(gg) --Form of Subsequent Liquid Yield Option Note Exhibit 4(wwww) to Amendment No. 1 to
Indenture. Company's Registration Statement on
Form S-3 (File No. 333-44173).
4(hh) --Form of Liquid Yield Option Note (Zero Exhibit 4(vvvvv) to Company's Registration
Coupon--Senior) Indenture Statement on Form S-3 (File No. 333-52822)
4(ii) --Form of Subsequent Liquid Yield Option Note Exhibit 4(wwwww) to Company's Registration
(Zero Coupon--Senior) Indenture Statement on Form S-3 (File No. 333-52822).
4(jj) --Form of Eleventh Supplemental Indenture to the Exhibit 4(yyyy) to Amendment No. 1 to
Senior Indenture between the Company and Company's Registration Statement on
JPMorgan Chase Bank, formerly known as The Form S-3 (File No. 333-44173).
Chase Manhattan Bank (successor by merger to
Manufacturers Hanover Trust Company).
4(kk) --Form of Amended and Restated Rights Exhibit 4 to Company's Current Report on
Agreement, dated as of December 2, 1997 Form 8-K dated December 3, 1997.
between the Company and Mellon Investor
Services, L.L.C., as Rights Agent.
- --------
* Filed herewith
II-6
Exhibit Incorporation by Reference
Number Description to Filings Indicated
- ------- ----------- --------------------------
4(ll) --Certificate of Designation of the Company Exhibit 3(f) to Company's Registration
establishing the rights, preferences, privileges, Statement on Form S-3 (File No. 33-19975).
qualifications, restrictions and limitations
relating to the Company's Series A Junior
Preferred Stock.
4(mm) --Form of Amendment No. 1 to the Form of Exhibit 4(bbbbb) to Amendment No. 1 to
Distribution Agreement. Company's Registration Statement on
Form S-3 (File No. 333-44173).
5(a) --Opinion of Sidley Austin Brown & Wood LLP.*
5(b) --Opinion of Sidley Austin Brown & Wood LLP.*
5(c) --Opinion of Skadden, Arps, Slate, Meagher &
Flom LLP.*
5(d) --Opinion of Sidley Austin Brown & Wood LLP.*
12(a) --Computation of Ratio of Earnings to Fixed
Charges of the Company.*
12(b) --Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends of
the Company.*
15 --Letter re Unaudited Interim Financial
Information.*
23(a) --Consents of Sidley Austin Brown & Wood LLP
(included as part of each of Exhibits 5(a), (b) and
(d)).*
23(b) --Consents of Deloitte & Touche LLP.*
23(c) --Consent of Skadden, Arps, Slate, Meagher &
Flom LLP (included as part of Exhibit 5(c)).*
24 --Power of Attorney of the Company (included on
page II-10).*
25(a) --Form T-1 Statement of Eligibility under the
Trust Indenture Act of 1939 of JPMorgan Chase
Bank.*
25(b) --Form T-1 Statement of Eligibility under the
Trust Indenture Act of 1939 of JPMorgan Chase
Bank, formerly known as The Chase Manhattan
Bank under the Amended and Restated
Declaration of Trust (contained in Exhibit 4(q));
Trust Preferred Securities Guarantee Agreement
(contained in Exhibit 4(t)); Subordinated
Indenture (contained in Exhibit 4(c)(i)); and
Affiliate Debenture Guarantee Agreement
(contained in Exhibit 4(v)).*
- --------
* Filed herewith
II-7
Exhibit Incorporation by Reference
Number Description to Filings Indicated
- ------- ----------- --------------------------
99(a) --Opinion of Deloitte & Touche LLP with respect Exhibit 99(i) to Company's Annual Report on
to certain financial data appearing in the Form 10-K for the year ended December 29,
Registration Statement. 2000.
99(b) --Opinion of Deloitte & Touche LLP with respect Exhibit 99(ii) to Company's Annual Report on
to certain summary financial information and Form 10-K for the year ended December 29,
selected financial data incorporated by reference 2000.
in the Registration Statement.
- --------
* Filed herewith
II-8
Item 17. Undertakings
Each of the undersigned registrants hereby undertakes:
(a)(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 prospectus filed
with the Securities and Exchange 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;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference 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 the 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.
(b) That, for purpose of determining any liability under the Securities
Act of 1933, each filing of such registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this registration statement shall be deemed to
be a new registration statement relating to the securities offered therein
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of such registrant pursuant to the provisions referred
to in Item 15 of this registration statement, or otherwise, such registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
such Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by such
registrant of expenses incurred or paid by a director, officer or
controlling person of such 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, such
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.
(d) To file an application for the purpose of determining the eligibility
of the trustee to act under subsection (a) of Section 310 of the Trust
Indenture Act (the "Act") in accordance with the rules and regulations
prescribed by the Commission under Section 305(b)(2) of the Act.
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in The City of New York and State of New York on the 25th day of
February, 2002.
MERRILL LYNCH & CO., INC.
/s/ DAVID H. KOMANSKY
By: _______________________________
David H. Komansky
(Chairman of the Board and Chief
Executive Officer)
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints David H. Komansky, E. Stanley O'Neal, Thomas H.
Patrick and Rosemary T. Berkery, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his name or her name, place and stead, in
any and all capacities, to sign any and all amendments (including
post-effective amendments) 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, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on the 25th day of February, 2002.
Signature Title
--------- -----
/s/ DAVID H. KOMANSKY Director, Chairman of the
- -------------------------------------- Board and Chief Executive
(David H. Komansky) Officer (Principal
Executive Officer)
/s/ THOMAS H. PATRICK Executive Vice President and
- -------------------------------------- Chief Financial Officer
(Thomas H. Patrick) (Principal Financial
Officer)
/s/ JOHN J. FOSINA Controller (Principal
- -------------------------------------- Accounting Officer)
(John J. Fosina)
/s/ W.H. CLARK Director
- --------------------------------------
(W.H. Clark)
/s/ JILL K. CONWAY Director
- --------------------------------------
(Jill K. Conway)
/s/ GEORGE B. HARVEY Director
- --------------------------------------
(George B. Harvey)
/s/ ROBERT P. LUCIANO Director
- --------------------------------------
(Robert P. Luciano)
Registration Statement on Form S-3
II-10
Signature Title
--------- -----
/s/ HEINZ-JOACHIM NEUBURGER Director
--------------------------------------
(Heinz-Joachim Neuburger)
/s/ DAVID K. NEWBIGGING Director
--------------------------------------
(David K. Newbigging)
/s/ E. STANLEY O'NEAL Director
--------------------------------------
(E. Stanley O'Neal)
/s/ AULANA L. PETERS Director
--------------------------------------
(Aulana L. Peters)
/s/ JOHN J. PHELAN, JR. Director
--------------------------------------
(John J. Phelan, Jr.)
/s/ JOSEPH W. PRUEHER Director
--------------------------------------
(Joseph W. Prueher)
Registration Statement on Form S-3
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 25th day of February, 2002.
MERRILL LYNCH PREFERRED FUNDING VI,
L.P.
By: MERRILL LYNCH & CO., INC.,
as General Partner
/S/ JOHN C. STOMBER
By: _______________________________
Name: John C. Stomber
Title: Senior Vice President and
Treasurer
Registration Statement on Form S-3
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 25th day of February, 2002.
MERRILL LYNCH PREFERRED CAPITAL TRUST
VI
/S/ JOHN C. STOMBER
By: _______________________________
Name: John C. Stomber
Title: Regular Trustee
Registration Statement on Form S-3
II-13
EXHIBIT INDEX
Exhibit Incorporation by Reference
Number Description to Filings Indicated
- --------- ----------- --------------------------
1(a) --Form of Underwriting Agreement for Debt Exhibit 1(a) to Company's Registration
Securities and Debt, Currency and Index Warrants, Statement on Form S-3 (No. 333-59997).
including forms of Terms Agreement.
1(b) --Form of Distribution Agreement, including form of Exhibit 1(b) to Company's Registration
Terms Agreement, relating to Medium-Term Statement on Form S-3 (No. 33-51489).
Notes, Series B (a series of Senior Debt
Securities).
1(c) --Form of Underwriting Agreement for Preferred Exhibit 1(c) to Company's Registration
Stock and Common Stock Warrants, Preferred Statement on Form S-3 (No. 333-59997).
Stock, Depositary Shares and Common Stock.
1(d) --Form of Purchase Agreement relating to the Trust Exhibit 1(d) to Company's Registration
Preferred Securities. Statement on Form S-3 (No. 333-38792)
1(e) --Form of Distribution Agreement, relating to Retail
Notes.*
4(a)(i) --Senior Indenture, dated as of April 1, 1983, as Exhibit (3) to Company's Registration
amended and restated (the "1983 Senior Statement on Form 8-A dated July 20, 1992.
Indenture"), between the Company and JPMorgan
Chase Bank, formerly known as The Chase
Manhattan Bank and Chemical Bank (successor by
merger to Manufacturers Hanover Trust
Company).
4(a)(ii) --Senior Indenture, dated as of October 1, 1993 (the Exhibit 4(iv) to Company's Annual Report on
"1993 Senior Indenture"), between the Company Form 10-K for the year ended December 25,
and JPMorgan Chase Bank, formerly known as 1998.
The Chase Manhattan Bank (successor by merger
to The Chase Manhattan Bank, N.A.).
4(a)(iii) --Form of initial Subsequent Indenture with respect Exhibit 4(a)(iii) to Company's Registration
to Senior Debt Securities. Statement on Form S-3 (No. 333-38792)
4(a)(iv) --Form of Subsequent Indenture with respect to Exhibit 4(a)(iv) to Company's Registration
Senior Debt Securities. Statement on Form S-3 (No. 333-38792)
4(b)(i) --Supplemental Indenture to the 1983 Senior Exhibit (3) to Company's Registration
Indenture, dated March 15, 1990, between the Statement on Form 8-A dated July 20, 1992.
Company and JPMorgan Chase Bank, formerly
known as The Chase Manhattan Bank and
Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company).
4(b)(ii) --Eighth Supplemental Indenture to the 1983 Senior Exhibit 4(b) to Post-Effective Amendment
Indenture, dated March 1, 1996, between the No. 1 to Company's Registration Statement on
Company and JPMorgan Chase Bank, formerly Form S-3 (No. 33-65135).
known as The Chase Manhattan Bank and
Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company).
- --------
* Filed herewith
II-14
Exhibit Incorporation by Reference
Number Description to Filings Indicated
------- ----------- --------------------------
4(b)(iii) --Ninth Supplemental Indenture to the 1983 Senior Exhibit 4(b) to Post-Effective Amendment
Indenture, dated June 1, 1996, between the No. 4 to Company's Registration Statement on
Company and JPMorgan Chase Bank, formerly Form S-3 (No. 33-65135).
known as The Chase Manhattan Bank and
Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company).
4(b)(iv) --Tenth Supplemental Indenture to the 1983 Senior Exhibit 4(b) to Post-Effective Amendment
Indenture, dated July 1, 1996, between the No. 5 to Company's Registration Statement on
Company and JPMorgan Chase Bank, formerly Form S-3 (No. 33-65135).
known as The Chase Manhattan Bank and
Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company).
4(b)(v) --Supplemental Indenture to the 1983 Senior Exhibit 4(b)(ii) to Company's Registration
Indenture, dated October 25, 1993, between the Statement on Form S-3 (No. 33-61559).
Company and JPMorgan Chase Bank, formerly
known as The Chase Manhattan Bank (successor
by merger to The Chase Manhattan Bank, N.A.).
4(b)(vi) --Twelfth Supplemental Indenture to the 1983 Senior Exhibit 4(a) to Company's Current report on
Indenture dated as of September 1, 1998 between Form 8-K dated October 21, 1998.
the Company and JPMorgan Chase Bank, formerly
known as The Chase Manhattan Bank and
Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company).
4(b)(vii) --First Supplemental Indenture to the 1993 Senior Exhibit 4(a) to Company's Current Report on
Indenture, dated as of June 1, 1998, between the Form 8-K dated July 2, 1998.
Company and JPMorgan Chase Bank, formerly
known as The Chase Manhattan Bank (successor
by merger to The Chase Manhattan Bank, N.A.).
4(c)(i) --Form of Subordinated Indenture between the Exhibit 4.7 to Amendment No. 2 to
Company and JPMorgan Chase Bank, formerly Company's Registration Statement on
known as The Chase Manhattan Bank. Form S-3 (No. 333-16603).
4(c)(ii) --Form of Subsequent Indentures with respect to Exhibit 4(c)(ii) to Company's Registration
Subordinated Debt Securities. Statement on Form S-3 (No. 333-38792)
4(d) --Form of Fixed Rate Medium-Term Note, Series B. Exhibit 4(dd) to Company's Registration
Statement on Form S-3 (No. 333-38792)
4(e) --Form of Redeemable Fixed Rate Medium-Term
Note, Series B.*
4(f) --Form of Floating Rate Medium-Term Note, Exhibit 4(ff) to Company's Registration
Series B. Statement on Form S-3 (No. 333-38792)
4(g) --Form of Modified Federal Funds Rate Medium-
Term Note, Series B.*
4(h) --Form of Weekly Average Federal Funds Rate
Medium-Term Note, Series B.*
- --------
* Filed herewith
II-15
Exhibit Incorporation by Reference
Number Description to Filings Indicated
- ------- ----------- --------------------------
4(i) --Form of Multi-Currency Medium-Term Note, Exhibit 4(fff) to Company's Registration
Series B. Statement on Form S-3 (No. 33-52647).
4(j) --Form of Warrant Agreement, including form of Exhibit 4(aa) to Company's Registration
Warrant Certificate. Statement on Form S-3 (No. 33-35456).
4(k) --Form of Currency [Put/Call] Warrant Agreement, Exhibit 4 to Company's Registration
including form of Global Currency Warrant Statement on Form S-3 (No. 33-17965).
Certificate.
4(l) --Form of Index Warrant Agreement, including form Exhibit 4(lll) to Company's Registration
of Global Index Warrant Certificate. Statement on Form S-3 (No. 33-54218).
4(m) --Form of Index Warrant Trust Indenture, including Exhibit 4(mmm) to Company's Registration
form of Global Index Warrant Certificate. Statement on Form S-3 (No. 33-54218).
4(n) --Form of Preferred Stock and Common Stock Exhibit 4(eeee) to Amendment No. 1 to
Warrant Agreement, including forms of Preferred Company's Registration Statement on
Stock and Common Stock Warrant Certificates. Form S-3 (File No. 333-44173).
4(o) --Form of Deposit Agreement, including form of Exhibit 4(ffff) to Amendment No. 1 to
Depositary Receipt Certificate representing the Company's Registration Statement on
Depositary Shares. Form S-3 (File No. 333-44173).
4(p) --Form of Certificate of Trust of Merrill Lynch Exhibit 4(oooo) to Company's Registration
Preferred Capital Trust VI. Statement on Form S-3 (File No. 333-68747).
4(q) --Form of Amended and Restated Declaration of Exhibit 4(pppp) to Company's Registration
Trust of Merrill Lynch Preferred Capital Trust VI, Statement on Form S-3 (File No. 333-68747).
including form of Trust Preferred Security.
4(r) --Form of Certificate of Limited Partnership of Exhibit 4(qqqq) to Company's Registration
Merrill Lynch Preferred Funding VI, L.P. Statement on Form S-3 (File No. 333-68747).
4(s) --Form of Amended and Restated Limited Exhibit 4(rrrr) to Company's Registration
Partnership Agreement of Merrill Lynch Preferred Statement on Form S-3 (File No. 333-68747).
Funding VI, L.P.).
4(t) --Form of Trust Preferred Securities Guarantee Exhibit 4(ssss) to Company's Registration
Agreement, between the Company and JPMorgan Statement on Form S-3 (File No. 333-68747).
Chase Bank, formerly known as The Chase
Manhattan Bank, as guarantee trustee.
4(u) --Form of Partnership Preferred Securities Guarantee Exhibit 4(tttt) to Company's Registration
Agreement between the Company and JPMorgan Statement on Form S-3 (File No. 333-68747).
Chase Bank, formerly known as The Chase
Manhattan Bank, as guarantee trustee.
4(v) --Form of Affiliate Debenture Guarantee Agreement Exhibit 4(vvvv) to Company's Registration
between the Company and JPMorgan Chase Bank, Statement on Form S-3 (File No. 333-68747).
formerly known as The Chase Manhattan Bank, as
guarantee trustee.
4(w) --Form of Subordinated Debenture. Exhibit 4(wwww) to Company's Registration
Statement on Form S-3 (File No. 333-68747).
4(x) --Restated Certificate of Incorporation of the Exhibit 3(i) to Company's Quarterly Report
Company, dated May 3, 2001. on Form 10-Q for the quarter ended March 30,
2001.
- --------
* Filed herewith
II-16
Exhibit Incorporation by Reference
Number Description to Filings Indicated
- ------- ----------- --------------------------
4(y) --By-Laws of the Company, effective as of July 23, Exhibit 3 to Company's Quarterly Report on
2001. Form 10-Q for the quarter ended June 29,
2001.
4(z) --Certificate of Designation dated August 20, 1998 Exhibit 3 to Company's Quarterly Report on
for Special Voting Stock, relating to the Form 10-Q for the quarter ended September
Company's Restated Certificate of Incorporation 25, 1998.
effective as of April 28, 1998.
4(aa) --Certificate of Designation dated December 17, Exhibit 3(f) to Company's Registration
1987 relating to the Company's Series A Junior Statement on Form S-3 (File No. 33-19975).
Preferred Stock.
4(bb) --Certificate of Designation of the Company Exhibit 3(i) to Company's Quarterly Report
establishing the rights, preferences, privileges, on Form 10-Q for the quarter ended March 27,
qualifications, restrictions, and limitations relating 1998.
to the Company's 9% Cumulative Preferred Stock.
4(cc) --Form of Certificate of Designation of the Company Exhibit 4(ssss) to Amendment No. 1 to
establishing the rights, preferences, privileges, Company's Registration Statement on
qualifications, restrictions, and limitations relating Form S-3 (File No. 333-44173).
to a series of the Preferred Stock.
4(dd) --Form of certificate representing Preferred Stock. Exhibit 4(d) to Company's Registration
Statement on Form S-3 (File No. 33-55363).
4(ee) --Form of certificate representing Common Stock. Exhibit 4(uuuu) to Amendment No. 1 to
Company's Registration Statement on
Form S-3 (File No. 333-44173).
4(ff) --Form of Liquid Yield Option Note Indenture. Exhibit 4(vvvv) to Amendment No. 1 to
Company's Registration Statement on
Form S-3 (File No. 333-44173).
4(gg) --Form of Subsequent Liquid Yield Option Note Exhibit 4(wwww) to Amendment No. 1 to
Indenture. Company's Registration Statement on
Form S-3 (File No. 333-44173).
4(hh) --Form of Liquid Yield Option Note (Zero Exhibit 4(vvvvv) to Company's Registration
Coupon--Senior) Indenture. Statement on Form S-3 (File No. 333-52822).
4(ii) --Form of Subsequent Liquid Yield Option Note Exhibit 4(wwwww) to Company's
(Zero Coupon--Senior) Indenture. Registration Statement on Form S-3 (File No.
333-52822).
4(jj) --Form of Eleventh Supplemental Indenture to the Exhibit 4(yyyy) to Amendment No. 1 to
Senior Indenture between the Company and Company's Registration Statement on
JPMorgan Chase Bank, formerly known as The Form S-3 (File No. 333-44173).
Chase Manhattan Bank (successor by merger to
Manufacturers Hanover Trust Company).
4(kk) --Form of Amended and Restated Rights Agreement, Exhibit 4 to Company's Current Report on
dated as of December 2, 1997 between the Form 8-K dated December 3, 1997.
Company and Mellon Investor Services, L.L.C., as
Rights Agent.
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* Filed herewith
II-17
Exhibit Incorporation by Reference
Number Description to Filings Indicated
- ------- ----------- --------------------------
4(ll) --Certificate of Designation of the Company Exhibit 3(f) to Company's Registration
establishing the rights, preferences, privileges, Statement on Form S-3 (File No. 33-19975).
qualifications, restrictions and limitations relating
to the Company's Series A Junior Preferred Stock.
4(mm) --Form of Amendment No. 1 to the Form of Exhibit 4(bbbbb) to Amendment No. 1 to
Distribution Agreement. Company's Registration Statement on
Form S-3 (File No. 333-44173).
5(a) --Opinion of Sidley Austin Brown & Wood LLP.*
5(b) --Opinion of Sidley Austin Brown & Wood LLP.*
5(c) --Opinion of Skadden, Arps, Slate, Meagher &
Flom LLP.*
5(d) --Opinion of Sidley Austin Brown & Wood LLP.*
12(a) --Computation of Ratio of Earnings to Fixed
Charges of the Company.*
12(b) --Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends of
the Company.*
15 --Letter re Unaudited Interim Financial
Information.*
23(a) --Consents of Sidley Austin Brown & Wood LLP
(included as part of each of Exhibits 5(a), (b) and
(d)).*
23(b) --Consents of Deloitte & Touche LLP.*
23(c) --Consent of Skadden, Arps, Slate, Meagher & Flom
LLP (included as part of Exhibit 5(c)).*
24 --Power of Attorney of the Company (included on
page II-10).*
25(a) --Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of JPMorgan Chase Bank.*
25(b) --Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of JPMorgan Chase Bank,
formerly known as The Chase Manhattan Bank,
under the Amended and Restated Declaration of
Trust (contained in Exhibit 4(q)); Trust Preferred
Securities Guarantee Agreement (contained in
Exhibit 4(t)); Subordinated Indenture (contained in
Exhibit 4(c)(i)); and Affiliate Debenture Guarantee
Agreement (contained in Exhibit 4(v)).*
99(a) --Opinion of Deloitte & Touche LLP with respect to Exhibit 99(i) to Company's Annual Report on
certain financial data appearing in the Registration Form 10-K for the year ended December 29,
Statement. 2000.
99(b) --Opinion of Deloitte & Touche LLP with respect to Exhibit 99(ii) to Company's Annual Report on
certain summary financial information and selected Form 10-K for the year ended December 29,
financial data incorporated by reference in the 2000.
Registration Statement.
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* Filed herewith
II-18