Filed Pursuant to Rule 424(b)(5)
Registration No. 333-83374
PROSPECTUS SUPPLEMENT
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(To prospectus dated April 1, 2002)
$4,000,000,000
[LOGO]
Merrill Lynch & Co., Inc.
Merrill Lynch Notes
Due Nine Months or More from Date of Issue
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Terms: We plan to offer and sell Notes from time to time with various terms,
including the following:
... Ranking as senior unsecured . Interest at a fixed rate, if
indebtedness of ML&Co. interest-bearing.
... Stated maturities of 9 months or more . Interest, if any, will be payable
from date of original issue. either monthly, quarterly,
semiannually or annually on each
... Redemption provisions, if applicable, Interest Payment Date and at maturity
at the option of ML&Co. or otherwise. or, if applicable, earlier redemption
or repayment.
... If applicable, provisions permitting
early repayment upon the death of a . Book-entry (through The Depository
beneficial owner, exercisable by the Trust Company), except in limited
estate. circumstances.
... Minimum denominations of $1,000, . Payments in U.S. dollars or any other
increased in multiples of $1,000. consideration 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-6 of this prospectus supplement.
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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 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 $3,992,000,000 and
$3,880,000,000 (99.8% to 97% of the principal amount), after paying the
Purchasing Agent's discounts and commissions of between $8,000,000 and
$120,000,000 (0.2% to 3.0% of the principal amount).
If we sell other securities referred to in the accompanying prospectus,
the amount of Notes referred to in this prospectus supplement that we may offer
and sell under this prospectus supplement may be reduced.
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Merrill Lynch & Co.
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The date of this prospectus supplement is April 22, 2002.
TABLE OF CONTENTS
Prospectus Supplement
Page
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SUMMARY................................................................... S-4
RISK FACTORS.............................................................. S-6
DESCRIPTION OF THE NOTES.................................................. S-7
UNITED STATES FEDERAL INCOME TAXATION..................................... S-18
PLAN OF DISTRIBUTION...................................................... S-25
VALIDITY OF THE NOTES..................................................... S-26
ANNEX A................................................................... A-1
Prospectus
Page
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MERRILL LYNCH & CO., INC.................................................. 2
USE OF PROCEEDS........................................................... 3
RATIO OF EARNINGS TO FIXED CHARGES AND RATIOS OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS............................. 3
THE SECURITIES............................................................ 4
DESCRIPTION OF DEBT SECURITIES............................................ 5
DESCRIPTION OF DEBT WARRANTS.............................................. 13
DESCRIPTION OF CURRENCY WARRANTS.......................................... 15
DESCRIPTION OF INDEX WARRANTS............................................. 18
DESCRIPTION OF PREFERRED STOCK............................................ 24
DESCRIPTION OF DEPOSITARY SHARES.......................................... 31
DESCRIPTION OF PREFERRED STOCK WARRANTS................................... 36
DESCRIPTION OF COMMON STOCK............................................... 39
DESCRIPTION OF COMMON STOCK WARRANTS...................................... 43
PLAN OF DISTRIBUTION...................................................... 46
WHERE YOU CAN FIND MORE INFORMATION....................................... 47
INCORPORATION OF INFORMATION WE FILE WITH THE SEC......................... 48
EXPERTS................................................................... 49
S-2
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.
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 our subsidiary 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..................... Merrill Lynch Notes Due Nine Months or More from
Date of Issue (the "Notes").
Purchasing Agent.......... Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S").
Amount.................... Up to $4,000,000,000 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............. Unless otherwise specified in the applicable
pricing supplement, $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
S-4
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......... If specified in the applicable pricing supplement,
the Notes will be subject to repayment prior to
maturity upon the death of a beneficial owner who
owned 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-5
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. The Notes are not an appropriate
investment for you if you are unsophisticated with respect to their significant
components and interrelationships.
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 time remaining to the maturity of your Notes,
. the outstanding amount of Notes with terms identical to your Notes,
. the redemption or repayment features, if any, 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 have the 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
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 the 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.
S-6
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 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 "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 following summary of the material
provisions of the Notes and 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 is a part.
General
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 the other unsecured and unsubordinated
indebtedness of ML&Co. outstanding from time to time. 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 in one or more series up to the aggregate initial offering
price authorized by ML&Co. for each 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 senior debt securities under our senior indentures in
addition to the aggregate initial offering price authorized by this prospectus
supplement. We may also, from time to time, without the consent of the
registered holders of the Notes, issue additional Notes or other senior 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
S-7
MLPF&S, are restricted by net capital requirements under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and under rules of
certain exchanges and other regulatory bodies.
The Notes are currently limited to up to $4,000,000,000 aggregate initial
offering price. However, the $4,000,000,000 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 (as defined below) 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 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 the 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
S-8
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 on the record date 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.
Interest
Each interest-bearing Note will bear interest from its date of issue
until the principal thereof is paid or made available for payment. 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.
S-9
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
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Monthly....................... Fifteenth day of each calendar month, beginning in the first calendar month
following the month the Note was issued.
Quarterly..................... Fifteenth day of every third month, beginning in the third calendar month
following the month the Note was issued.
Semiannual.................... Fifteenth day of every sixth month, beginning in the sixth calendar month
following the month the Note was issued.
Annual........................ Fifteenth 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 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 applicable Redemption Date. 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 applicable Redemption
Date. 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.
S-10
Repayment Upon Exercise of Survivor's Option; Repurchases by ML&Co.
If specified in the applicable pricing supplement, the estate of the
deceased beneficial owner of a Note will be eligible for a Survivor's Option. 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 acquisition.
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 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"). 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 and, after such exercise, the Notes with respect to which the
Survivor's Option has been exercised may not be transferred prior to repayment
by us. Each election to exercise a Survivor's Option will be accepted in the
order received by the Trustee, 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.
S-11
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 the 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;
. 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. In making any determinations hereunder, the Trustee may elect,
in the exercise of its own discretion, to consult with ML&Co. personnel and
seek our advice, but it is in no way obligated to do so. The Trustee may rely
on any advice provided to it by ML&Co. in connection herewith.
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 as described above.
S-12
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 as described above.
Notes beneficially owned by a trust will be regarded as beneficially
owned by each beneficiary of the trust to the extent of that beneficiary's
interest in the trust. The death of a beneficiary of a trust will be deemed the
death of the beneficial owner of the Notes beneficially owned by the trust to
the extent of that beneficiary's interest in the trust. The death of an
individual who was a tenant by the entirety or joint tenant in a tenancy which
is the beneficiary of a trust will be deemed the death of the beneficiary of
the trust. The death of an individual who was a tenant in common in a tenancy
which is the beneficiary of a trust will be deemed the death of the beneficiary
of the trust only with respect to the deceased holder's beneficial interest in
the Note, unless a husband and wife are the tenants in common, in which case
the death of either will be deemed the death of the beneficiary of the trust.
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, JPMorgan Chase Bank, Attn: Review and Certifications Section, Mortgage
Banking Custody Services, 1111 Fannin Street, 12th Floor, Houston, Texas 77002,
Telephone number: (713) 427-6484.
If applicable, we 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 of Notes at the
option of the registered holders thereof.
S-13
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.
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
"United States Federal Income Taxation."
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.
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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.
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 1993 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 1993
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 1993 Indenture. We understand that under existing industry practices,
in the event that we request any action of holders or that an owner of a
beneficial interest in a Global Security desires to give or take any action
which a holder is entitled to give or take under the Indenture, the Depositary
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. 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
is at any time 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 a successor to the Depositary is
not appointed by ML&Co. within 60 calendar days, (ii) ML&Co. executes and
delivers to the Trustee a company order to the effect that the Notes shall be
exchangeable, or (iii) an Event of Default has occurred and is continuing with
respect to the Notes under
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the 1993 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, Inc., 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 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.
S-16
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.
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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
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.
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 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
S-18
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 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.
S-19
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.
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.
S-20
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, exchange 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. However, a Short-Term Note
will never be treated as having been purchased at a market discount.
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
S-21
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 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. Individuals 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
S-22
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 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 Note on its own behalf
may have substantially increased reporting requirements. In particular, in the
case of Notes held by a foreign partnership (or certain foreign trusts), the
partnership (or trust) will be required to provide the certification from each
of its partners (or beneficiaries), and the partnership (or trust) 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).
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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-24
PLAN OF DISTRIBUTION
We are offering the Notes on a continuing basis for sale to or through
MLPF&S (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 0.2% to 3.0%, 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.
The Purchasing Agent may sell Notes it has purchased from us as principal
to other National Association of Securities Dealers, Inc. 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
S-25
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 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.
MLPF&S, a broker-dealer subsidiary of ML&Co., is a member of the NASD and
will participate in distributions of the Notes. Accordingly, offerings of the
Notes will conform to the requirements of Rule 2720 of the Conduct Rules of the
NASD.
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.
VALIDITY OF THE NOTES
The validity of the Notes will be passed upon for ML&Co. and the
Purchasing Agent by Sidley Austin Brown & Wood LLP, New York, New York.
S-26
ANNEX A
REPAYMENT ELECTION FORM
Merrill Lynch & Co., Inc.
Merrill Lynch Notes
Due Nine Months or More from Date of Issue
CUSIP NUMBER ________________
To: Merrill Lynch & Co., Inc.
The undersigned financial institution (the "Financial Institution")
represents the following:
-- The Financial Institution has received a request for repayment from
the executor or other authorized representative (the "Authorized
Representative") of the deceased beneficial owner listed below (the
"Deceased Beneficial Owner") of Merrill Lynch Notes (CUSIP No.
____________ ______) (the "Notes").
-- At the time of his or her death, the Deceased Beneficial Owner owned
Notes in the principal amount listed below, and the Financial
Institution currently holds such Notes as a direct or indirect
participant in The Depository Trust Company (the "Depositary").
The Financial Institution agrees to the following terms:
-- The Financial Institution shall follow the instructions (the
"Instructions") accompanying this Repayment Election Form (the
"Form").
-- The Financial Institution shall make all records specified in the
Instructions supporting the above representations available to
Merrill Lynch & Co., Inc. (the "Company") for inspection and review
within five Business Days of the Company's request.
-- If the Financial Institution or the Company, in either's reasonable
discretion, deems any of the records specified in the Instructions
supporting the above representations unsatisfactory to substantiate a
claim for repayment, the Financial Institution shall not be obligated
to submit this Form, and the Company may deny repayment. If the
Financial Institution cannot substantiate a claim for repayment, it
shall notify the Company immediately.
-- Other than as described in the prospectus supplement in the limited
situation involving tenders of Notes that are not accepted during one
calendar year as a result of the Annual Put Limitation, repayment
elections may not be withdrawn.
-- The Financial Institution agrees to indemnify and hold harmless the
Company against and from any and all claims, liabilities, costs,
losses, expenses, suits and damages resulting from the Financial
Institution's above representations and request for repayment on
behalf of the Authorized Representative.
A-1
REPAYMENT ELECTION FORM
(1)
- --------------------------------------------------------
Name of Deceased Beneficial Owner
(2)
- --------------------------------------------------------
Date of Death
(3)
- --------------------------------------------------------
Name of Authorized Representative Requesting Repayment
(4)
- --------------------------------------------------------
Name of Financial Institution Requesting Repayment
(5)
- --------------------------------------------------------
Signature of Representative of Financial Institution
Requesting Repayment
(6)
- --------------------------------------------------------
Principal Amount of Requested Repayment
(7)
- --------------------------------------------------------
Date of Election
(8)
- --------------------------------------------------------
Date Requested for Repayment
(9) Financial Institution Representative:
Name:
Phone Number:
Fax Number:
Mailing Address (no P.O. Boxes):
(10)Wire instructions for payment:
Bank Name:
ABA Number:
Account Name:
Account Number:
Reference (optional):
TO BE COMPLETED BY THE COMPANY:
(A)Election Number*:
(B)Delivery and Payment Date:
(C)Principal Amount:
(D)Accrued Interest:
(E)Date of Receipt of Form by the Company:
(F)Date of Acknowledgment by the Company:
- --------
*To be assigned by the Company upon receipt of this Form. An acknowledgement,
in the form of a copy of this document with the assigned Election Number, will
be returned to the party and location designated on line (9) above.
A-2
INSTRUCTIONS FOR COMPLETING REPAYMENT ELECTION FORM
AND EXERCISING SURVIVOR'S OPTION
Capitalized terms used and not defined herein have the meanings defined
in the accompanying Repayment Election Form.
1. Collect and retain for a period of at least three years (1)
satisfactory evidence of the authority of the Authorized
Representative, (2) satisfactory evidence of death of the Deceased
Beneficial Owner, (3) satisfactory evidence that the Deceased
Beneficial Owner beneficially owned, at the time of his or her death,
the Notes being submitted for repayment, and (4) any necessary tax
waivers. For purposes of determining whether the Company will deem
Notes beneficially owned by an individual at the time of death, the
following rules shall apply:
-- Notes beneficially owned by tenants by the entirety or joint
tenants will be regarded as beneficially owned by a single owner.
The death of a tenant by the entirety or joint tenant will be
deemed the death of the beneficial owner, and the Notes
beneficially owned will become eligible for repayment. The death
of a person beneficially owning a Note by tenancy in common will
be deemed the death of a holder of a Note only with respect to
the deceased holder's interest in the Note so held by tenancy in
common, unless a husband and wife are the tenants in common, in
which case the death of either will be deemed the death of the
holder of the Note, and the entire principal amount of the Note
so held will be eligible for repayment.
-- Notes beneficially owned by a trust will be regarded as
beneficially owned by each beneficiary of the trust to the extent
of that beneficiary's interest in the trust (however, a trust's
beneficiaries collectively cannot be beneficial owners of more
Notes than are owned by the trust). The death of a beneficiary of
a trust will be deemed the death of the beneficial owner of the
Notes beneficially owned by the trust to the extent of that
beneficiary's interest in the trust. The death of an individual
who was a tenant by the entirety or joint tenant in a tenancy
which is the beneficiary of a trust will be deemed the death of
the beneficiary of the trust. The death of an individual who was
a tenant in common in a tenancy which is the beneficiary of a
trust will be deemed the death of the beneficiary of the trust
only with respect to the deceased holder's beneficial interest in
the Note, unless a husband and wife are the tenants in common, in
which case the death of either will be deemed the death of the
beneficiary of the trust.
-- The death of a person who, during his or her lifetime, was
entitled to substantially all of the beneficial interest in a
Note will be deemed the death of the beneficial owner of that
Note, regardless of the registration of ownership, if such
beneficial interest can be established to the satisfaction of the
Trustee. Such beneficial interest will exist in many cases of
street name or nominee ownership, ownership by a trustee,
ownership under the Uniform Gift to Minors Act and community
property or other joint ownership
A-3
arrangements between spouses. Beneficial interest will be
evidenced by such factors as the power to sell or otherwise
dispose of a Note, the right to receive the proceeds of sale or
disposition and the right to receive interest and principal
payments on a Note.
2. Indicate the name of the Deceased Beneficial Owner on line (1).
3. Indicate the date of death of the Deceased Beneficial Owner on line
(2).
4. Indicate the name of the Authorized Representative requesting
repayment on line (3).
5. Indicate the name of the Financial Institution requesting repayment
on line (4).
6. Affix the authorized signature of the Financial Institution's
representative on line (5). THE SIGNATURE MUST BE MEDALLION SIGNATURE
GUARANTEED.
7. Indicate the principal amount of Notes to be repaid on line (6).
8. Indicate the date this Form was completed on line (7).
9. Indicate the date of requested repayment on line (8). The date of
requested repayment may not be earlier than the first Interest
Payment Date to occur at least 20 calendar days after the date of the
Company's acceptance of the Notes for repayment, unless such date is
not a Business Day, in which case the date of requested payment may
be no earlier than the next succeeding Business Day.
10. Indicate the name, mailing address (no P.O. Boxes, please), telephone
number and facsimile-transmission number of the party to whom the
acknowledgment of this election may be sent on line (9).
11. Indicate the wire instruction for payment on line (10).
12. Leave lines (A), (B), (C), (D), (E) and (F) blank.
13. Mail or otherwise deliver an original copy of the completed Form to:
JPMorgan Chase Bank
Attn: Review and Certifications Section
Mortgage Banking Custody Services
1111 Fannin Street, 12th Floor
Houston, Texas 77002
Telephone number: (713) 427-6484
FACSIMILE TRANSMISSIONS OF THE REPAYMENT ELECTION FORM WILL NOT BE
ACCEPTED.
A-4
14. If the acknowledgement of the Company's receipt of this Form,
including the assigned Election Number, is not received within 10
days of the date such information is sent to the Trustee, contact the
Company's Corporate Secretary's Office at Merrill Lynch & Co., Inc.,
222 Broadway, 17th Floor, New York, New York 10038, Telephone number:
(212) 670-0432.
For assistance with the Form or any questions relating thereto, please
contact the Company's Corporate Secretary's Office at Merrill Lynch & Co.,
Inc., 222 Broadway, 17th Floor, New York, New York 10038, Telephone number:
(212) 670-0432.
A-5
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$4,000,000,000
[LOGO]
Merrill Lynch & Co., Inc.
Merrill Lynch Notes
Due Nine Months or More From Date of Issue
---------------------
PROSPECTUS SUPPLEMENT
---------------------
Merrill Lynch & Co.
April 22, 2002
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