RULE NO. 424(b)(5)
REGISTRATION NO. 333-44173
PRICING SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 29, 1998 AND PROSPECTUS SUPPLEMENT DATED MARCH
12, 1998)
[LOGO]
$250,000,000
AGGREGATE PRINCIPAL AMOUNT
MERRILL LYNCH & CO., INC.
MEDIUM-TERM NOTES, SERIES B
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
CALLABLE ZERO COUPON NOTES DUE MARCH 20, 2028
Aggregate Principal
Amount at Stated
Maturity: $250,000,000
Price to Public: $121.536 per $1,000 principal amount at stated maturity of the
Notes
("Issue Price")
Original Issue Date: March 20, 1998
Stated Maturity: March 20, 2028
Interest Rate: 0% per annum
Yield to Stated
Maturity: 7.15% per annum (on a semi-annual bond equivalent basis)
Interest Payment Dates: Accrued Original Issue Discount will be paid upon maturity or
upon the occurrence of an Event of Default, as described below.
Optional Redemption
Date: March 20, 2008
Redemption Price: 24.5359% of the principal amount
Form: Book-Entry Note
Other Provisions: Notwithstanding any other provision contained in the Notes
offered hereby, if an Event of Default (as defined in the 1993
Indenture) with respect to the Notes shall occur and be
continuing and the principal of all the Notes is declared due
and payable in the manner and with the effect provided in the
Indenture, "principal" with respect to the Notes in determining
any amount then declared due and payable shall mean the Issue
Price of the Note plus Original Issue Discount accrued from the
Original Issue Date to the date of acceleration (calculated on a
semi-annual bond equivalent basis using a 360-day year composed
of twelve 30-day months). Original Issue Discount shall equal
$878.464 per $1,000 principal amount at stated maturity of the
Notes.
This Pricing Supplement relates to $250,000,000 aggregate principal amount
at stated maturity of the Notes which the Company has agreed to sell to
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriter"), and
which the Underwriter has agreed to purchase from the Company, at a price of
11.8376% of the principal amount thereof. The Underwriter has advised the
Company that it proposes initially to offer the Notes to the public at the
Price to Public specified above. The Underwriter may sell Notes to certain
dealers less a selling concession not in excess of .2127% of the principal
amount of Notes. After the initial public offering, the Price to Public and
concession may be changed.
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MERRILL LYNCH & CO.
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The date of this Pricing Supplement is March 12, 1998
RECENT DEVELOPMENTS
The Company, through ML Invest plc, an indirect, wholly owned subsidiary,
has acquired through a tender offer all of the outstanding share capital of
Mercury Asset Management Group plc at a price of (Pounds)17 per share, with an
aggregate offer value for all of the outstanding shares of approximately
(Pounds)3.1 billion (approximately $5.3 billion).
DESCRIPTION OF NOTES
GENERAL
The Medium-Term Notes, Series B of Merrill Lynch & Co., Inc. (the "Company")
offered hereby are "Callable Zero Coupon Notes due March 20, 2028" and are
referred to in this Pricing Supplement as the "Notes". The Notes are Fixed
Rate Notes as described in the accompanying Prospectus Supplement dated March
12, 1998. Certain provisions of the Notes and terms used herein are more fully
described in the accompanying Prospectus and Prospectus Supplement.
Notwithstanding the provisions contained in the Prospectus Supplement dated
March 12, 1998, attached hereto, the Company may redeem the Notes in whole
only on March 20, 2008 (the "Optional Redemption Date"), upon notice given not
more than 60 nor less than 30 days prior to the Optional Redemption Date, at a
Redemption Price equal to the principal amount at stated maturity of the Notes
multiplied by 24.5359%.
INTEREST AND ORIGINAL ISSUE DISCOUNT
The Notes pay no interest and have been issued at a price that is a discount
from the principal amount. Accrued Original Issue Discount will be paid upon
maturity or upon the occurrence of an Event of Default, as described below.
Notwithstanding any other provision contained in the Notes offered hereby, if
an Event of Default (as defined in the 1993 Indenture) with respect to the
Notes shall occur and be continuing and the principal of all the Notes is
declared due and payable in the manner and with the effect provided in the
Indenture, "principal" with respect to the Notes in determining any amount
then declared due and payable shall mean the Issue Price of this Note plus
Original Issue Discount accrued from the Original Issue Date to the date of
acceleration (calculated on a semi-annual bond equivalent basis using a 360-
day year composed of twelve 30-day months). Issue Price shall equal $121.536
per $1,000 principal amount at stated maturity of the Notes and Original Issue
Discount shall equal $878.464 per $1,000 principal amount at stated maturity
of the Notes.
The following table shows the Issue Price of the Notes plus the amount of
accrued Original Issue Discount per $1,000 principal amount of the Notes
through December 31, or March 20 in the case of the year 2028, of each year
indicated below (calculated on a semi-annual bond equivalent basis using a
360-day year composed of twelve 30-day months). The table below assumes that
the Company does not redeem the Notes on the Optional Redemption Date.
1998 $128.386 2009 $278.053 2020 $602.193
1999 $137.730 2010 $298.289 2021 $646.019
2000 $147.754 2011 $319.998 2022 $693.035
2001 $158.507 2012 $343.286 2023 $743.473
2002 $170.043 2013 $368.270 2024 $797.582
2003 $182.418 2014 $395.072 2025 $855.628
2004 $195.694 2015 $423.825 2026 $917.899
2005 $209.936 2016 $454.670 2027 $984.552
2006 $225.215 2017 $487.760 2028 $1000.
2007 $241.606 2018 $523.258
2008 $259.189 2019 $561.340
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ADDITIONAL RISK FACTORS
In addition to the risks described in "Risk Factors" in the accompanying
Prospectus Supplement dated March 12, 1998, an investor should consider that
the prices at which zero-coupon instruments, such as the Notes, trade in the
secondary market tend to fluctuate more in relation to general changes in
interest rates than do such prices for conventional interest-bearing
securities with comparable maturities. Generally, the longer the remaining
term of such instruments, the greater the price volatility as compared with
that of conventional interest-bearing securities with comparable maturities.
The ability of the Company to redeem the Notes prior to their stated
maturity might adversely affect the market value of the Notes relative to the
market value of comparable zero-coupon debt securities of the Company without
an early redemption provision. In particular, as the Optional Redemption Date
approaches, the market value of the Notes generally will not exceed the
Redemption Price. Since the Company may be expected to redeem the Notes when
prevailing interest rates are relatively low, an investor might not be able to
reinvest the redemption proceeds at an effective interest rate as high as the
interest yield realized on the Notes implicit in the accrual of the Original
Issue Discount. Prospective investors should be able to bear the occurrence of
redemption and the related risks pertaining to an investment in the Notes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Although the Notes do not provide for current payments of interest,
beneficial owners of the Notes will be required to include Original Issue
Discount into income over the term of the Notes. See "Certain United States
Federal Income Tax Considerations" in the accompanying Prospectus Supplement
dated March 12, 1998 for a discussion of the tax consequences of investing in
the Notes.
S-3
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 29, 1998)
[LOGO]
$6,500,705,362
MERRILL LYNCH & CO., INC.
MEDIUM-TERM NOTES, SERIES B
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
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Merrill Lynch & Co., Inc. (the "Company") may offer from time to time up to
$6,500,705,362 aggregate principal amount (except that with respect to Notes
sold at a discount, the initial offering price will be used), or the
equivalent thereof in one or more foreign currencies or currency units, of its
Medium-Term Notes, Series B (the "Notes"). Each Note will mature on a day nine
months or more from the date of issue, as selected by the purchaser and agreed
to by the Company, and may be subject to redemption by the Company or
repayment at the option of the Holder thereof, in each case, in whole or in
part, prior to its Stated Maturity, as set forth therein and specified in a
pricing supplement hereto (each, a "Pricing Supplement").
The interest rate, if any, or the formula for the determination of any such
interest rate, applicable to each Note and other variable terms of the Notes
as described herein will be established by the Company at the date of issue of
such Note and will be set forth therein and specified in a Pricing Supplement.
Interest rates, interest rate formulae and such other variable terms are
subject to change by the Company, but no change will affect any Note already
issued or as to which an offer to purchase has been accepted by the Company.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or certificated form (a "Certificated Note"), as set forth in the
applicable Pricing Supplement, in denominations of $1,000 and integral
multiples thereof, unless otherwise specified in the applicable Pricing
Supplement. Each Book-Entry Note will be represented by one or more global
securities ("Global Notes") deposited with or on behalf of The Depository
Trust Company (or such other depository as is identified in an applicable
Pricing Supplement) (the "Depository") and registered in the name of the
Depository's nominee. Beneficial interests in Book-Entry Notes will be shown
on, and transfers thereof will be effected only through, records maintained by
the Depository (with respect to its participants) and the Depository's
participants (with respect to Beneficial Owners). Beneficial Owners of the
Book-Entry Notes will not have the right to receive physical certificates
evidencing their ownership except under the limited circumstances described
herein.
Unless otherwise specified in an applicable Pricing Supplement, the Notes
will bear interest at fixed rates (the "Fixed Rate Notes") or at floating
rates (the "Floating Rate Notes"). The applicable Pricing Supplement will
specify whether a Floating Rate Note is a Floating Rate/Fixed Rate Note,
Inverse Floating Rate Note or Regular Floating Rate Note and whether its rate
of interest is determined by reference to 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 or the Treasury Rate, or any other
interest rate basis or formula (each, an "Interest Rate Basis"), as adjusted
by any Spread and/or Spread Multiplier and will specify such other terms
applicable to such Note. Interest rates offered by the Company with respect to
the Notes may differ depending upon the aggregate principal amount of Notes
subject to purchase in any single transaction. See "Description of Notes".
SEE "RISK FACTORS" ON PAGE S-2 FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD
BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT,
THE PROSPECTUS OR ANY SUPPLEMENT HERETO. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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AGENT'S DISCOUNTS
PRICE TO AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(1)(2) COMPANY(1)(3)
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Per Note......... 100% .050% --.600% 99.950% --99.400%
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$3,250,353-- $6,497,455,009--
Total(4)......... $6,500,705,362 $39,004,232 $6,461,701,130
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(1) Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
(the "Agent") will purchase the Notes, as principal, from the Company, 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 such Agent at a price equal to 100% of the principal amount
thereof 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 the Company and the Agent, the Agent may utilize
their reasonable efforts on an agency basis to solicit offers to purchase
the Notes at 100% of the principal amount thereof, unless otherwise
specified in an applicable Pricing Supplement. The Company will pay a
commission to an Agent, ranging from .050% to .600% (or, with respect to
Notes for which the Stated Maturity is in excess of 30 years, such
commission as shall be agreed upon by the Company and the related Agent at
the time of sale) of the principal amount of a Note, depending upon its
Stated Maturity, sold through such Agent.
(2) The Company has agreed to indemnify the Agent against, and to provide
contribution with respect to, certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Plan of Distribution".
(3) Before deducting expenses payable by the Company.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
---------------
The Notes are being offered on a continuing basis by the Company through the
Agent. Unless otherwise specified in an applicable Pricing Supplement, the
Notes will not be listed on any securities exchange and there can be no
assurance that the Notes offered by this Prospectus Supplement will be sold or
that there will be a secondary market for the Notes. The Company reserves the
right to cancel or modify the offer made hereby without notice. The Company or
the Agent, if it solicits the offer, may reject any offer to purchase Notes in
whole or in part. See "Plan of Distribution".
This Prospectus Supplement and the accompanying Prospectus may be used by
the Agent, a wholly-owned subsidiary of the Company, in connection with offers
and sales related to market-making transactions in the Notes. The Agent may
act as principal or agent in such transactions.
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MERRILL LYNCH & CO.
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The date of this Prospectus Supplement is March 12, 1998.
IN CONNECTION WITH AN OFFERING OF NOTES PURCHASED BY THE AGENT AS PRINCIPAL
ON A FIXED OFFERING PRICE BASIS, THE AGENT MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF SUCH NOTES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF NOTES TO COVER SHORT
POSITIONS OF THE AGENT. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF
DISTRIBUTION".
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RISK FACTORS
"This Prospectus Supplement does not describe all of the risks of an
investment in Notes that result from such Notes being denominated or payable
in or determined by reference to a currency or composite currency other than
United States dollars or to one or more interest rate, currency or other
indices or formulas. The Company and the Agent disclaim any responsibility to
advise prospective investors of such risks as they exist at the date of this
Prospectus Supplement or as they change from time to time. Prospective
investors should consult their own financial and legal advisors as to the
risks entailed by an investment in such Notes and the suitability of investing
in such Notes in light of their circumstances. Such Notes are not an
appropriate investment for investors who are unsophisticated with respect to
foreign currency transactions or transactions involving the applicable
interest rate index or currency index or other indices or formulas.
Prospective investors should carefully consider, among other factors, the
matters described below."
STRUCTURE RISKS
An investment in Notes indexed, as to principal, premium, if any, and/or
interest, if any, to one or more currencies or composite currencies (including
exchange rates and swap indices between currencies or composite currencies),
commodities, interest rates or other indices or formulas, either directly or
inversely, entails significant risks that are not associated with similar
investments in a conventional fixed rate or floating rate debt security. Such
risks include, without limitation, the possibility that such indices or
formulas may be subject to significant changes, that no interest will be
payable in respect of such Notes or that the resulting interest rate will be
less than that payable on a conventional fixed rate or floating rate debt
security issued by the Company at the same time, that the repayment of
principal and/or premium, if any, can occur at times other than that expected
by the investor, and that the investor could lose all or a substantial portion
of principal and/or premium, if any, payable on the Maturity Date (as defined
under "Description of Notes--General"). Such risks depend on a number of
interrelated factors, including economic, financial and political events, over
which the Company has no control. Additionally, if the formula used to
determine the amount of principal, premium, if any, and/or interest, if any,
payable with respect to such Notes contains a multiplier or leverage factor,
the effect of any change in the applicable index or indices or formula or
formulas will be magnified. In recent years, values of certain indices and
formulas have been highly volatile and such volatility may be expected to
continue in the future. Fluctuations in the value of any particular index or
formula that have occurred in the past are not necessarily indicative,
however, of fluctuations that may occur in the future.
Any optional redemption feature of Notes might affect the market value of
such Notes. Since the Company may be expected to redeem such Notes when
prevailing interest rates are relatively low, an investor might not be able to
reinvest the redemption proceeds at an effective interest rate as high as the
interest rate on such Notes.
The Notes will not have an established trading market when issued, and there
can be no assurance of a secondary market for the Notes or the continued
liquidity of such market if one develops. See "Plan of Distribution".
The secondary market, if any, for such Notes will be affected by a number of
factors independent of the creditworthiness of the Company and the value of
the applicable index or indices or formula or formulas, including the
complexity and volatility of each such index or formula, the method of
calculating the principal, premium, if any, and/or interest, if any, in
respect of such Notes, the time remaining to the maturity of such Notes, the
outstanding amount of such Notes, any redemption features of such Notes, the
amount of other debt securities linked to such index or formula and the level,
direction and volatility of market interest rates generally.
S-2
Such factors also will affect the market value of such Notes. In addition,
certain Notes may be designed for specific investment objectives or strategies
and, therefore, may have a more limited secondary market and experience more
price volatility than conventional debt securities. Investors may not be able
to sell such Notes readily or at prices that will enable investors to realize
their anticipated yield. No investor should purchase Notes unless such
investor understands and is able to bear the risk that such Notes may not be
readily saleable, that the value of such Notes will fluctuate over time and
that such fluctuations may be significant.
CREDIT RATINGS
Any credit ratings assigned to the Company's medium-term note program may
not reflect the potential impact of all risks related to structure and other
factors on the market value of the Notes. Accordingly, prospective investors
should consult their own financial and legal advisors as to the risks entailed
by an investment in the Notes and the suitability of such Notes in light of
their particular circumstances.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges for the periods indicated:
YEAR ENDED LAST FRIDAY IN DECEMBER
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
Ratio of earnings to fixed charges..... 1.4 1.2 1.2 1.2 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. "Fixed charges" consist of interest costs, amortization of
debt expense, preferred stock dividend requirements of majority-owned
subsidiaries, and that portion of rentals estimated to be representative of
the interest factor.
S-3
DESCRIPTION OF NOTES
The Notes will be issued as a series of debt securities under a senior
indenture, dated as of October 1, 1993 (the "1993 Indenture"), between the
Company and The Chase Manhattan Bank (successor by merger to The Chase
Manhattan Bank, N.A.), as trustee (as used in this Prospectus Supplement, 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 the Senior Indentures (as defined in the accompanying Prospectus) and
includes the Notes. The Senior Debt Securities and the Trustee are more fully
described in the accompanying Prospectus. The following summary of certain
provisions of the Notes and of the 1993 Indenture does not purport to be
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.
Capitalized terms used but not defined herein have the meanings given to them
in the 1993 Indenture or the Notes, as the case may be.
THE FOLLOWING DESCRIPTION OF NOTES WILL APPLY UNLESS OTHERWISE SPECIFIED IN
AN APPLICABLE PRICING SUPPLEMENT.
GENERAL
All Senior Debt Securities, including the Notes, issued and to be issued
under the Senior Indentures will be unsecured general obligations of the
Company and will rank pari passu with all other unsecured and unsubordinated
indebtedness of the Company from time to time outstanding. However, because
the Company is a holding company, the right of the Company, and hence the
right of creditors of the Company (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 the subsidiary, except to the extent that claims of the
Company itself as a creditor of the subsidiary may be recognized. In addition,
dividends, loans and advances from certain subsidiaries, including Merrill
Lynch, Pierce, Fenner & Smith Incorporated, to the Company 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 Senior Indentures do not limit the aggregate principal amount of Senior
Debt Securities which may be issued thereunder and Senior Debt Securities may
be issued thereunder 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 the Company for each series. The Company 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 the Senior Indentures in addition
to the $6,500,705,362 aggregate principal amount of Notes offered hereby. As
of December 26, 1997, the Company had issued and outstanding Notes in an
aggregate principal amount of approximately $15.7 billion. The aggregate
principal amount of Notes which may be offered hereby may be reduced by the
issuance of other securities of the Company pursuant to the registration
statement of which this Prospectus Supplement and the accompanying Prospectus
are a part.
The Notes will be offered on a continuing basis and will mature on a day
nine months or more from the date of issue, as selected by the purchaser and
agreed to by the Company. Interest-bearing Notes will either be Fixed Rate
Notes or Floating Rate Notes as specified in the applicable Pricing
Supplement. Notes may be issued at significant discounts from their principal
amount payable at Stated Maturity (or on any prior 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 the
Company, repayment at the option of the Holder or otherwise) (each such date,
a "Maturity"), and some Notes may not bear interest.
Unless otherwise indicated in a Note and in the applicable Pricing
Supplement, the Notes will be denominated in United States dollars and
payments of principal of, and premium, if any, and interest on, the Notes will
be made in United States dollars. If any of the Notes to be denominated other
than in United States dollars or if the principal of, and interest on, the
Notes, and any premium provided for in any Note is to be
S-4
payable in or by reference to a currency (or in composite currency units or in
amounts determined by reference to one or more currencies) other than that in
which such Note is denominated, provisions with respect thereto will be set
forth in such Note and in the applicable Pricing Supplement.
Interest rates, interest rate formulae and other variable terms of the Notes
are subject to change by the Company from time to time, but no such change
will affect any Note already issued or as to which an offer to purchase has
been accepted by the Company.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or certificated form (a "Certificated Note"), in denominations of
$1,000 and integral multiples thereof, unless otherwise specified in the
applicable Pricing Supplement. Book-Entry Notes may be transferred or
exchanged only through a participating member of The Depository Trust Company
(or such other depository as is identified in an applicable Pricing
Supplement) (the "Depository"). See "Book-Entry Notes." Registration of
transfer of Certificated Notes will be made at the Corporate Trust Office of
the Trustee. No service charge will be made by the Company, the Trustee or the
Security Registrar for any such registration of transfer or exchange of Notes,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith (other than
exchanges pursuant to the 1993 Indenture, not involving any transfer).
Payments of principal of, and premium and interest, if any, on Book-Entry
Notes will be made by the Company 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 Book-Entry Notes denominated in a
currency other than United States dollars (a "Specified Currency") electing to
receive payments of principal or any premium or interest in such Specified
Currency must notify the Participant through which its interest is held on or
prior to the applicable Record Date, in the case of a payment of interest, and
on or prior to the sixteenth day, whether or not a Business Day (as defined
below), prior to its Stated Maturity, in the case of principal or premium, of
such Beneficial Owner's election to receive all or a portion of such payment
in a Specified Currency. Such Participant must notify the Depository of such
election on or prior to the third Business Day after such Record Date. The
Depository will notify the Paying Agent of such election on or prior to the
fifth Business Day after such Record Date. If complete instructions are
received by the Participant and forwarded by the Participant to the
Depository, and by the Depository to the Paying Agent, on or prior to such
dates, the Beneficial Owner will receive payments in the Specified Currency.
In the case of Certificated Notes, payment of principal or premium, if any,
at the Maturity of each Certificated Note will be made in immediately
available funds upon presentation of the Certificated Note at the Corporate
Trust Office of the Trustee in the Borough of Manhattan, The City of New York,
or at such other place as the Company may designate. Payment of interest due
at Maturity will be made to the person to whom payment of the principal of the
Certificated Note shall be made. Payment of interest due on Certificated Notes
other than at Maturity will be made at the Corporate Trust Office of the
Trustee or, at the option of the Company, may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register. Notwithstanding the foregoing, a Holder of $1,000,000 or
more in aggregate principal amount of Certificated Notes (whether having
identical or different terms and provisions) having the same Interest Payment
Dates will, at the option of the Company, 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 such wire instructions received by the Trustee shall remain in
effect until revoked by such Holder.
TRANSACTION AMOUNT
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of Notes
purchased in any transaction. Notes with similar variable terms but different
interest rates may be offered concurrently at any time. The Company may also
concurrently offer Notes having different variable terms (as are described
herein or in any Prospectus Supplement) to different investors.
S-5
REDEMPTION AT THE OPTION OF THE COMPANY
The Notes will not be subject to any sinking fund. The Notes will be
redeemable at the option of the Company prior to their Stated Maturity only if
an Initial Redemption Date is specified therein and in the applicable Pricing
Supplement. If so indicated in the applicable Pricing Supplement, Notes will
be subject to redemption at the option of the Company on any date on and after
the applicable Initial Redemption Date specified in such Pricing Supplement.
On and after the Initial Redemption Date, if any, the related Note may be
redeemed at any time in whole or from time to time in part (in increments of
$1,000, provided that any remaining principal amount shall be an authorized
denomination of the applicable Note) at the option of the Company at the
applicable Redemption Price (as defined below) together with interest thereon
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
prior to the Redemption Date. Unless otherwise specified in the applicable
Pricing Supplement, "Redemption Price" with respect to a Note will initially
mean a percentage, the Initial Redemption Percentage, of the principal amount
of such Note to be redeemed specified in the applicable Pricing Supplement and
shall decline at each anniversary of the Initial Redemption Date by a
percentage, the Annual Redemption Percentage Reduction, if any, specified in
the applicable Pricing Supplement, of the principal amount to be redeemed
until the Redemption Price is 100% of such principal amount.
REPAYMENT AT THE OPTION OF THE HOLDER
If so indicated in an applicable Pricing Supplement, Notes will be repayable
by the Company in whole or in part at the option of the Holders thereof on
their respective Optional Repayment Dates specified in such Pricing
Supplement. If no Optional Repayment Date is indicated with respect to a Note,
such Note will not be repayable at the option of the Holder prior to its
Stated Maturity. Any repayment in part will be in an amount equal to $1,000 or
integral multiples thereof, provided that any remaining principal amount shall
be an authorized denomination of the applicable Note. The repurchase price for
any Note so repurchased will be 100% of the principal amount to be repaid,
together with interest thereon payable to the date of repayment. For any Note
to be repaid, such Note must be received, together with the form thereon
entitled "Option to Elect Repayment" duly completed, by the Trustee at its
office maintained for such purpose in the Borough of Manhattan, The City of
New York, currently 55 Water Street, Room 234, Corporate Trust Securities
Window, New York, New York 10041, not more than 60 nor less than 30 days prior
to the Optimal Repayment Date. 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 such notice. Exercise of such repayment
option by the Holder will be irrevocable.
While the Book-Entry Notes are represented by Global Notes held by or on
behalf of the Depository, and registered in the name of the Depository or the
Depository's nominee, the option for repayment may be exercised by the
applicable Participant (as defined below under "Book- Entry Notes") on behalf
of the Beneficial Owners (as defined below) of such Book-Entry Notes by
delivering a written notice to the Trustee at the Corporate Trust Office, not
more than 60 nor less than 30 days prior to the Optional Repayment Date.
Notices of elections from Participants on behalf of Beneficial Owners of the
Book-Entry Notes to exercise their option to have the Book-Entry Notes repaid
must be received by the Trustee by 5:00 p.m., New York City time, on the last
day for giving such notice. In order to ensure that a notice is received by
the Trustee on a particular day, the Beneficial Owner of Book-Entry Notes must
so direct the applicable Participant before such Participant's cut-off time
for accepting instructions for that day. Different firms may have different
cut-off times for accepting instructions from their customers. Accordingly,
Beneficial Owners of Book-Entry Notes should consult the Participants through
which they own their interest in the Book-Entry Notes for the cut-off times
for such Participants. All notices shall be executed by a duly authorized
officer of such Participant (with signature guaranteed) and shall be
irrevocable. In addition, such Beneficial Owners of Book-Entry Notes shall
effect delivery of such Book-Entry Notes at the time such notices of election
are given to the Depository by causing the Participant to transfer such
Beneficial Owner's interest in the Book-Entry Notes, on the Depository's
records, to the Trustee. Conveyance of notices and other communications by the
Depository to Participants, by Participants to Indirect Participants (as
defined below) and by Participants and Indirect Participants to Beneficial
Owners of the Book-Entry Notes will be governed by agreements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
S-6
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may, at the
discretion of the Company, be held, resold or surrendered to the Trustee for
cancellation.
INTEREST
"General"
Each Note will bear interest from the date of issue at the rate per annum
or, in the case of a Floating Rate Note, pursuant to the interest rate formula
stated therein and in the applicable Pricing Supplement until the principal
thereof is paid or made available for payment. Interest will be payable in
arrears on each date specified in the applicable Pricing Supplement on which
an installment of interest is due and payable (an "Interest Payment Date") 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 registered Holder on such next succeeding Regular
Record Date. The "Regular Record Date" shall be the fifteenth calendar day
(whether or not a Business Day) (as defined below) immediately preceding the
related Interest Payment Date.
"Fixed Rate Notes"
Unless otherwise specified in an applicable Pricing Supplement, each Fixed
Rate Note will bear interest from, and including, the date of issue, at the
rate per annum stated on the face thereof until the principal amount thereof
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 such Fixed Rate Notes), to, but excluding, the related 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.
Unless otherwise specified in the applicable Pricing Supplement, 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 such payment was due, and no interest will
accrue on the amount so payable for the period from and after such Interest
Payment Date or Maturity, as the case may be.
"Floating Rate Notes"
Floating Rate Notes will be issued as described below. Each applicable
Pricing Supplement will specify certain terms with respect to which such
Floating Rate Note is being delivered, including: whether such Floating Rate
Note is a "Regular Floating Rate Note" (as defined below), an "Inverse
Floating Rate Note" (as defined below) or a "Floating Rate/Fixed Rate Note"
(as defined below); the Interest Rate Basis or Bases, Initial Interest Rate,
Interest Reset Dates, Interest Payment Dates, Index Maturity, Maximum Interest
Rate and Minimum Interest Rate, if any, and the Spread and/or Spread
Multiplier, if any, and, if one or more of the specified Interest Rate Bases
is LIBOR, the Index Currency, the Index Maturity and the Designated LIBOR Page
or, if one or more of the specified Interest Rate Bases is the CMT Rate, the
Designated CMT Telerate Page and Designated CMT Maturity Index, as described
below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a Floating Rate/Fixed
Rate Note, an Inverse Floating Rate Note or as having an Addendum attached
or as having "Other Provisions" apply relating to a different interest rate
formula, such Floating Rate Note will be designated a "Regular Floating
Rate Note" and, except as described below or in an applicable Pricing
Supplement, bear interest at the rate determined
S-7
by reference to the applicable Interest Rate Basis or Bases (i) plus or
minus the applicable Spread, if any, and/or (ii) multiplied by the
applicable Spread Multiplier, if any. Commencing on the first Interest
Reset Date, the rate at which interest on such Regular Floating Rate Note
shall be payable shall be reset as of each Interest Reset Date; provided,
however, that the interest rate in effect for the period from the Original
Issue Date to the first Interest Reset Date will be the Initial Interest
Rate.
(ii) If such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note", then such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (i)
plus or minus the applicable Spread, if any, and/or (ii) multiplied by the
applicable Spread Multiplier, if any. Commencing on the first Interest
Reset Date, the rate at which interest on such Floating Rate/Fixed Rate
Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that (i) the interest rate in effect for the period from
the Original Issue Date to the first Interest Reset Date will be the
Initial Interest Rate, and (ii) the interest rate in effect commencing on,
and including, the Fixed Rate Commencement Date to Maturity shall be the
Fixed Interest Rate, if such rate is specified in the applicable Pricing
Supplement, or if no such Fixed Interest Rate is so specified, the interest
rate in effect thereon on the day immediately preceding the Fixed Rate
Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below, such Floating Rate Note 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 (i) plus or minus the applicable Spread, if
any, and/or (ii) multiplied by the applicable Spread Multiplier, if any;
provided, however, that unless otherwise specified in the applicable
Pricing Supplement, the interest rate thereon will not be less than zero
percent. Commencing on the first Interest Reset Date, the rate at which
interest on such Inverse Floating Rate Note is payable shall be reset as of
each Interest Reset Date; provided, however, that the interest rate in
effect for the period from the Original Issue Date to the first Interest
Reset Date will be the Initial Interest Rate.
Notwithstanding the foregoing, if such Floating Rate Note is designated as
having an Addendum attached or as having "Other Provisions" apply as specified
on the face thereof, such Floating Rate Note shall bear interest in accordance
with the terms described in such Addendum or specified under "Other
Provisions" and the applicable Pricing Supplement.
Each Interest Rate Basis shall be the rate determined in accordance with the
applicable provisions below. Except as set forth above, the interest rate in
effect on each day shall be (a) if such day is an Interest Reset Date, the
interest rate determined as of the Interest Determination Date (as defined
below) immediately preceding such Interest Reset Date or (b) if such day is
not an Interest Reset Date, the interest rate determined as of the Interest
Determination Date immediately preceding the applicable Interest Reset Date.
Interest on Floating Rate Notes will be determined by reference to an
"Interest Rate Basis," which may be one or more of (i) the "CD Rate," (ii) the
"CMT Rate," (iii) the "Commercial Paper Rate," (iv) the "Eleventh District
Cost of Funds Rate," (v) the "Federal Funds Rate," (vi) "LIBOR," (vii) the
"Prime Rate," (viii) the "Treasury Rate," or (ix) such other Interest Rate
Basis or interest rate formula as may be set forth in the applicable Pricing
Supplement. In addition, a Floating Rate Note may bear interest in respect of
two or more Interest Rate Bases.
The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest
Rate Basis or Bases will be multiplied to determine the applicable interest
rate on such Floating Rate Note. The "Index Maturity" is the period to
maturity of the instrument or obligation with respect to which the Interest
Rate Basis or Bases will be calculated.
Each applicable Pricing Supplement will specify the dates on which such
Interest Rate will be reset (each, an "Interest Reset Date"). Unless otherwise
specified in the applicable Pricing Supplement, the Interest Reset
S-8
Date will be, in the case of Floating Rate Notes which reset: (i) daily, each
Business Day; (ii) weekly, the Wednesday of each week (with the exception of
weekly reset Treasury Rate Notes which will reset the Tuesday of each week,
except as specified below); (iii) monthly, the third Wednesday of each month
(with the exception of monthly reset Eleventh District Cost of Funds Rate
Notes, which will reset on the first calendar day of the month); (iv)
quarterly, the third Wednesday of March, June, September and December of each
year; (v) semiannually, the third Wednesday of the two months specified in the
applicable Pricing Supplement; and (vi) 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 fixed rate of interest in
effect for the period from the Fixed Rate Commencement Date until Maturity
shall be the Fixed Interest Rate or the interest rate in effect on the day
immediately preceding the Fixed Rate Commencement Date, as specified in the
applicable Pricing Supplement. If any Interest Reset Date for any Floating
Rate Note would otherwise be a day that is not a Business Day, such 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 such Business Day falls in the next
succeeding calendar month, such Interest Reset Date will be the immediately
preceding Business Day. In addition, in the case of a Floating Rate Note for
which the Treasury Rate is an applicable Interest Rate Basis and the Interest
Determination Date would otherwise fall on an Interest Reset Date, then such
Interest Reset Date will be postponed to the next succeeding Business Day. As
used herein, "Business Day" means any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banking institutions 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, such day is also not a day on which banking
institutions are authorized or required by law, regulation or executive order
to close in the Principal Financial Center (as hereinafter defined) of the
country issuing the Specified Currency (unless the Specified Currency is
European Currency Units ("ECU"), in which case such day is also not a day that
appears as an ECU non-settlement day on the displayed designated as "ISDE" on
the Reuter Monitor Money Rates Service (or is not a day designated as an ECU
non-settlement day by the ECU Banking Association) or, if ECU non-settlement
days do not appear on that page (and are not so designated), a day that is not
a day on which payments in ECU cannot be settled in the international
interbank market); provided, further, that, with respect to Notes as to which
LIBOR is an applicable Interest Rate Basis, such day is also a London Business
Day. "London Business Day" means a day on which dealings in the Index Currency
(as hereinafter defined) are transacted in the London interbank market.
A Floating Rate Note may also have either or both of the following: (i) a
maximum numerical limitation, or ceiling, on the rate at which interest may
accrue during any interest period (a "Maximum Interest Rate"), and (ii) a
minimum numerical limitation, or floor, on the rate at which interest may
accrue during any period (a "Minimum Interest Rate"). The Indenture provides
that the Indenture and the Securities 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 the Company believes that New York law would be given effect
by a 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 such laws. The Company has covenanted for the benefit of the
beneficial owners of the Securities, 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 Securities.
Each applicable Pricing Supplement will specify the dates on which interest
will be payable (each an "Interest Payment Date"). Each Floating Rate Note
will bear interest from the date of issue at the rates specified therein until
the principal thereof is paid or otherwise made available for payment. Unless
otherwise specified in the applicable Pricing Supplement and, except as
provided below, interest will be payable in the case of Floating Rate Notes
which reset: (i) daily, weekly or monthly, on 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; (ii) quarterly, on the
third Wednesday of March, June, September and December of each year; (iii)
S-9
semiannually, on the third Wednesday of the two months of each year specified
in the applicable Pricing Supplement; and (iv) annually, on the third
Wednesday of the month of each year specified in the applicable Pricing
Supplement and, in each case, 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, such 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 such Business Day falls in the next succeeding calendar month,
such 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, the payment of principal, premium, if any, and interest will be made on
the next succeeding Business Day, and no interest on such payment will accrue
for the period from and after such 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 (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts
used in or resulting from such 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 with respect to such Floating Rate Notes),
to but excluding the related Interest Payment Date or Maturity.
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its face amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the period for which accrued interest is being calculated. The interest
factor for each such day will be computed by dividing the interest rate
applicable to such day by 360, 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, or by the
actual number of days in the year in the case of Notes for which the Interest
Rate Basis is the CMT Rate or the Treasury Rate. 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.
The interest rate applicable to each interest reset period commencing on the
Interest Reset Date with respect to such interest reset period will be the
rate determined as of the applicable "Interest Determination 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 each Interest
Reset Date for the related Note; the Interest Determination Date with respect
to the Federal Funds Rate and the Prime Rate, unless otherwise specified in
the applicable Pricing Supplement, will be the Business Day immediately
preceding each 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 each Interest Reset Date on which the
Federal Home Loan Bank of San Francisco (the "FHLB of San Francisco")
publishes the Index (as defined below); the Interest Determination Date with
respect to LIBOR will be the second London Business Day preceding each
Interest Reset Date. With respect to the Treasury Rate, unless otherwise
specified in an applicable Pricing Supplement, the Interest Determination Date
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 such auction may be held on the preceding Friday);
provided, however, that if an auction is held on the Friday of the week
preceding the related Interest Reset Date, the related Interest Determination
Date will be such preceding Friday; and provided, further, that if an auction
falls on any Interest Reset Date, then the related Interest Reset Date will
instead be the first Business Day following such auction. Unless otherwise
specified in the applicable Pricing Supplement, 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 prior to such Interest
Reset Date for such Floating Rate Note on which each Interest Reset Basis is
determinable. Each Interest Rate Basis will be determined on such date, and
the applicable interest rate will take effect on the related Interest Reset
Date.
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Unless otherwise provided in the applicable Pricing Supplement, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, a subsidiary of the Company, 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 such
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 (i) the tenth calendar day after
such Interest Determination Date, or, if such day is not a Business Day, the
next succeeding Business Day or (ii) the Business Day preceding the applicable
Interest Payment Date or Maturity, as the case may be.
"CD Rate." CD Rate Notes will bear interest at the rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in such CD Rate Notes and in any applicable Pricing Supplement.
"CD Rate" means, with respect to any Interest Determination Date relating to
a CD Rate Note or any Floating Rate Note for which the interest rate is
determined with reference to the CD Rate (a "CD Rate Interest Determination
Date"), the rate on such date for negotiable United States dollar certificates
of deposit having the Index Maturity specified in the applicable Pricing
Supplement as published by the Board of Governors of the Federal Reserve
System in "Statistical Release H.15(519), Selected Interest Rates" or any
successor publication ("H.15(519)") under the heading "CDs (Secondary
Market)", or, if not published by 3:00 p.m., New York City time, on the
related Calculation Date, the rate on such CD Rate Interest Determination Date
for negotiable United States dollar certificates of deposit of the Index
Maturity specified in the applicable Pricing Supplement as published by the
Federal Reserve Bank of New York in its daily statistical release "Composite
3:30 p.m. Quotations for U.S. Government Securities" or any successor
publication ("Composite Quotations") under the heading "Certificates of
Deposit". If such rate is not yet published in either H.15(519) or Composite
Quotations by 3:00 p.m., New York City time, on the related Calculation Date,
then the CD Rate on such CD Rate Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City time, on such
CD Rate Interest Determination Date, of three leading non-bank dealers in
negotiable United States dollar certificates of deposit in The City of New
York selected by the Calculation Agent for negotiable United States dollar
certificates of deposit of major United States money market banks with a
remaining maturity closest to the Index Maturity designated in the applicable
Pricing Supplement in an amount that is representative for a single
transaction in that market at that time; provided, however, that if the
dealers so selected by the Calculation Agent are not quoting as set forth
above, the CD Rate with respect to such CD Rate Interest Determination Date
will be the CD Rate in effect on such CD Rate Interest Determination Date.
"CMT Rate." CMT Rate Notes will bear interest at the rates (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in such CMT Rate Notes and in any applicable Pricing Supplement.
"CMT Rate" means, with respect to any Interest Determination Date relating
to any Floating Rate Note for which the interest rate is determined with
reference to the CMT Rate (a "CMT Rate Interest Determination Date"), the rate
displayed on the Designated CMT Telerate Page under the caption "Treasury
Constant Maturities. Federal Reserve Board Release H.15. Mondays Approximately
3:45 p.m.", under the column for the Designated CMT Maturity Index for (i) if
the Designated CMT Telerate Page is 7055, the rate on such CMT Rate Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the
weekly or the monthly average, as specified in the Pricing Supplement, for the
week or the month, as applicable, ended immediately preceding the week in
which the related CMT Rate Interest Determination Date occurs. If such rate is
no longer displayed on the relevant page or is not displayed by 3:00 p.m., New
York City time, on the related Calculation Date, then the CMT Rate for such
CMT Rate Interest Determination Date will be such treasury constant maturity
rate for the Designated CMT Maturity Index as published in the relevant
H.15(519). If such rate is no longer published or is not published by 3:00
p.m., New York City time, on the related Calculation
S-11
Date, then the CMT Rate on such CMT Rate Interest Determination Date will be
such treasury constant maturity rate of the Designated CMT Maturity Index (or
other United States Treasury rate for the Designated CMT Maturity Index) for
the CMT Rate Interest Determination Date with respect to such Interest Reset
Date as may then be published by either the Board of Governors of the Federal
Reserve System or the United States Department of the Treasury that the
Calculation Agent determines to be comparable to the rate formerly displayed
on the Designated CMT Telerate Page and published in the relevant H.15(519).
If such information is not provided by 3:00 p.m., New York City time, on the
related Calculation Date, then the CMT Rate on the CMT Rate Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity, based on the arithmetic mean of the secondary market
closing offer side prices as of approximately 3:30 p.m., New York City time,
on such CMT Rate Interest Determination Date reported, according to their
written records, by three leading primary United States government securities
dealers (each, a "Reference Dealer") in The City of New York (which may
include the Agent or its affiliates) selected by the Calculation Agent (from
five such 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
the most recently issued direct noncallable fixed rate obligations of the
United States ("Treasury Notes") with an original maturity of approximately
the Designated CMT Maturity Index and a remaining term to maturity of not less
than such Designated CMT Maturity Index minus one year. If the Calculation
Agent is unable to obtain three such Treasury Note quotations, the CMT Rate on
such CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity based on the arithmetic mean
of the secondary market offer side prices as of approximately 3:30 p.m., New
York City time, on such CMT Rate Interest Determination Date of three
Reference Dealers in The City of New York (from five such 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 Treasury Notes with an
original maturity of the number of years that is the next highest to the
Designated CMT Maturity Index and a remaining term to maturity closest to the
Designated CMT Maturity Index and in an amount of at least $100 million. If
three or four (and not five) of such Reference Dealers are quoting as
described above, then the CMT Rate will be based on the arithmetic mean of the
offer prices obtained and neither the highest nor the lowest of such quotes
will be eliminated; provided, however, that if fewer than three Reference
Dealers so selected by the Calculation Agent are quoting as mentioned herein,
the CMT Rate determined as of such CMT Rate Interest Determination Date will
be the CMT Rate in effect on such CMT Rate Interest Determination Date. If two
Treasury Notes with an original maturity as described in the second preceding
sentence have remaining terms to maturity equally close to the Designated CMT
Maturity Index, the Calculation Agent will obtain from five Reference Dealers
quotations for the Treasury Note with the shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on the Dow Jones Markets
Limited on the page specified in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)) for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519).
If no such page is specified in the applicable Pricing Supplement, the
Designated CMT Telerate Page shall be 7052 for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified
in the applicable Pricing Supplement with respect to which the CMT Rate will
be calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be 2 years.
"Commercial Paper Rate." Commercial Paper Rate Notes will bear interest at the
rates (calculated with reference to the Commercial Paper Rate and the Spread
and/or Spread Multiplier, if any) specified in such Commercial Paper Rate
Notes and in any applicable Pricing Supplement.
"Commercial Paper Rate" means, with respect to any Interest Determination
Date relating to a Commercial Paper Rate Note or any Floating Rate Note for
which the interest rate is determined with reference to the Commercial Paper
Rate (a "Commercial Paper Rate Interest Determination Date"), the Money Market
Yield (as defined below) on such date of the rate for commercial paper having
the Index Maturity specified in the
S-12
applicable Pricing Supplement as published in H.15(519) under the caption
"Commercial Paper--Nonfinancial". In the event that such rate is not published
by 3:00 p.m., New York City time, on the related Calculation Date, then the
Commercial Paper Rate will be the Money Market Yield on such Commercial Paper
Rate Interest Determination Date of the rate for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Commercial Paper" (with an Index
Maturity of one month or three months being deemed to be equivalent to an
Index Maturity of 30 days or 90 days, respectively). If by 3:00 p.m., New York
City time, on the related Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the Commercial Paper Rate for
such Commercial Paper Rate Interest Determination Date will be calculated by
the Calculation Agent and will be the Money Market Yield of the arithmetic
mean of the offered rates at approximately 11:00 A.M., New York City time, on
such Commercial Paper Rate Interest Determination Date of three leading
dealers of commercial paper in The City of New York selected by the
Calculation Agent for commercial paper having the Index Maturity designated in
the applicable Pricing Supplement placed for a non-financial entity whose bond
rating is "Aa", or the equivalent, from a nationally recognized securities
rating organization; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the
Commercial Paper Rate determined on such Commercial Paper Rate Interest
Determination Date will be the rate in effect on such Commercial Paper Rate
Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
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 interest period for which interest is being
calculated.
"Eleventh District Cost of Funds Rate." Eleventh District Cost of Funds Rate
Notes will bear interest at the rates (calculated with reference to the
Eleventh District Cost of Funds Rate and the Spread and/or Spread Multiplier,
if any) specified in such Eleventh District Cost of Funds Rate Notes and in
any applicable Pricing Supplement.
"Eleventh District Cost of Funds Rate" means, with respect to any Interest
Determination Date relating to an Eleventh District Cost of Funds Rate Note or
any Floating Rate Note for which the interest rate is determined with
reference to the Eleventh District Cost of Funds Rate (an "Eleventh District
Cost of Funds Rate Interest Determination Date"), the rate equal to the
monthly weighted average cost of funds for the calendar month preceding such
Eleventh District Cost of Funds Rate Interest Determination Date as set forth
under the caption "11th District" on Telerate Page 7058 as of 11:00 a.m., San
Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on any
related Eleventh District Cost of Funds Rate Interest Determination Date, the
Eleventh District Cost of Funds for such Eleventh District Cost of Funds Rate
Interest Determination Date shall be 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 FHLB of San
Francisco as such cost of funds for the calendar month preceding the date of
such announcement. If the FHLB of San Francisco fails to announce the Index on
or prior to such Eleventh District Cost of Funds Rate Interest Determination
Date for the calendar month immediately preceding such Eleventh District Cost
of Funds Rate Interest Determination Date, then the Eleventh District Cost of
Funds Rate for such Eleventh District Cost of Funds Rate Interest
Determination Date will be the Eleventh District Cost of Funds Rate in effect
on such Eleventh District Cost of Funds Rate Interest Determination Date.
"Federal Funds Rate." Federal Funds Rate Notes will bear interest at the rates
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in such Federal Funds Rate Notes and in
any applicable Pricing Supplement.
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"Federal Funds Rate" means, with respect to any Interest Determination Date
relating to a Federal Funds Rate Note or any Floating Rate Note for which the
interest rate is determined with reference to the Federal Funds Rate (a
"Federal Funds Rate Interest Determination Date"), the rate on such date for
United States dollar Federal Funds as published in H.15(519) under the heading
"Federal Funds (Effective)" or, if not published by 3:00 p.m., New York City
time, on the related Calculation Date, the rate on such Federal Funds Rate
Interest Determination Date as published in Composite Quotations under the
heading "Federal Funds/Effective Rate." If such rate is not published in
either H.15(519) or Composite Quotations by 3:00 p.m., New York City time, on
the related Calculation Date, the Federal Funds Rate for such Federal Funds
Rate Interest Determination Date will be calculated by the Calculation Agent
and will be the arithmetic mean of the rates for the last transaction in
overnight United States dollar federal funds arranged by three leading brokers
of federal funds transactions in The City of New York selected by the
Calculation Agent prior to 9:00 a.m., New York City time on such Federal Funds
Rate Interest Determination Date; provided, however, that if the brokers so
selected by the Calculation Agent are not quoting as mentioned in this
sentence, the Federal Funds Rate with respect to such Federal Funds Rate
Interest Determination Date will be the Federal Funds Rate in effect on such
Federal Funds Rate Interest Determination Date.
"LIBOR." LIBOR Notes will bear interest at the rates (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified
in such LIBOR Notes and in any applicable Pricing Supplement.
"LIBOR" means the rate determined by the Calculation Agent in accordance
with the following provisions:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note or any Floating Rate Note for which the interest rate is determined
with reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will
be either: (a) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the specified
Designated LIBOR Page (as defined below) by its terms provides only for a
single rate, in which case such single rate shall be used) for deposits in
the Index Currency (as defined below) having the Index Maturity designated
in the applicable Pricing Supplement, commencing on the second London
Business Day immediately following that LIBOR Interest Determination Date,
that appear on the Designated LIBOR Page specified in the applicable
Pricing Supplement as of 11:00 a.m., London time, on that LIBOR Interest
Determination Date, if at least two such offered rates appear (unless, as
aforesaid, only a single rate is required) on such Designated LIBOR Page,
or (b) if "LIBOR Telerate" is specified in the applicable Pricing
Supplement, the rate for deposits in the Index Currency having the Index
Maturity designated in the applicable Pricing Supplement commencing on the
second London Business Day immediately following that LIBOR Interest
Determination Date that appears on the Designated LIBOR Page specified in
the applicable Pricing Supplement as of 11:00 a.m., London time, on that
LIBOR Interest Determination Date. If fewer than two offered rates appear,
or no rate appears, as applicable, LIBOR in respect of the related LIBOR
Interest Determination Date will be determined as if the parties had
specified the rate described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may be, on
the applicable Designated LIBOR Page as specified in clause (i) above, the
Calculation Agent will request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Index Currency for the period of the Index
Maturity designated in the applicable Pricing Supplement, commencing on the
second London Business Day immediately following such LIBOR Interest
Determination Date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on such LIBOR Interest Determination
Date and in a principal amount that is representative for a single
transaction in such Index Currency in such market at such time. If at least
two such quotations are provided, LIBOR determined on such LIBOR Interest
Determination Date will be the arithmetic mean of such quotations. If fewer
than two quotations are provided, LIBOR determined on such LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 a.m. (or such other time specified in the applicable
Pricing Supplement), in the applicable Principal Financial Center(s) (as
defined below), on such LIBOR Interest
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Determination Date by three major banks in such Principal Financial Center
selected by the Calculation Agent for loans in the Index Currency to
leading European banks, having the Index Maturity designated in the
applicable Pricing Supplement and in a principal amount that is
representative for a single transaction in such Index Currency in such
market at such time; provided, however, that if the banks so selected by
the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
determined on such LIBOR Interest Determination Date will be LIBOR in
effect on such LIBOR Interest Determination Date.
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable
Pricing Supplement, the Index Currency shall be United States dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated in
the applicable Pricing Supplement, the display on the Reuter Monitor Money
Rates Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
designated in the applicable Pricing Supplement, the display on the Dow Jones
Markets Limited (or such other service or services as may be nominated by the
British Bankers' Association for the purpose of displaying London interbank
offered rates for the Index Currency) for the purpose of displaying the London
interbank rates of major banks for the applicable Index Currency. If neither
LIBOR Reuters nor LIBOR Telerate is specified in the applicable Pricing
Supplement, LIBOR for the applicable Index Currency will be determined as if
LIBOR Telerate (and, if the United States dollar is the Index Currency, Page
3750) had been specified.
"Principal Financial Center" means, unless otherwise specified in the
applicable Pricing Supplement, (i) the capital city of the country issuing the
Specified Currency (except with respect to ECU) or (ii) the capital city of
the country to which the Index Currency, if applicable, relates (or, in the
case of ECU, Luxembourg), except, in each case, that with respect to United
States dollars, Australian dollars, Canadian dollars, Deutsche marks, Dutch
guilders, Italian lire and Swiss francs, the "Principal Financial Center"
shall be The City of New York, Sydney, Toronto, Frankfurt, Amsterdam, Milan
(solely in the case of clause (i) above) and Zurich, respectively.
"Prime Rate." Prime Rate Notes will bear interest at the rates (calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any) specified in such Prime Rate Notes and any applicable Pricing Supplement.
"Prime Rate" means the rate determined by the Calculation Agent in
accordance with the provisions set out in clause (i) or in clause (ii) below,
depending upon whether such rate is specified as "Prime Rate--Major Banks" or
as "Prime Rate--H.15" in the applicable Pricing Supplement:
(i) If the applicable Pricing Supplement indicates that the applicable
rate is "Prime Rate--Major Banks": "Prime Rate" means, with respect to any
Interest Determination Date relating to a Prime Rate Note or any Floating
Rate Note for which the interest rate is determined with reference to the
Prime Rate (a "Prime Rate Interest Determination Date"), the arithmetic
mean of the prime rates of interest publicly announced by three major banks
in The City of New York as its United States dollar prime rate or base
lending rate as in effect for that day. Each change in the prime rate or
base lending rate of any bank so announced by such bank will be effective
as of the effective date of the announcement or, if no effective date is
specified, as of the date of the announcement. If fewer than three such
quotations are provided, the Prime Rate will be calculated by the
Calculation Agent and will be determined as the arithmetic mean on the
basis of the prime rates quoted in The City of New York by three substitute
banks or trust companies organized and doing business under the laws of the
United States, or any state thereof, each having total equity capital of at
least $500 million and being subject to supervision or examination by a
federal or state authority, selected by the Calculation Agent to quote such
rate or rates; provided, however, that if the banks or trust companies so
selected by the Calculation Agent are not quoting as mentioned in this
sentence, the Prime Rate with respect to such Prime Rate Interest
Determination Date will be the Prime Rate in effect on such Prime Rate
Interest Determination Date.
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(ii) If the applicable Pricing Supplement indicates that the applicable
rate is "Prime Rate--H.15": "Prime Rate" means, with respect to any Prime
Rate Interest Determination Date, the rate on such date as such rate is
published in H.15(519) under the heading "Bank Prime Loan". If such rate is
not published prior to 3:00 p.m., New York City time, on the related
Calculation Date, then the Prime Rate shall be the arithmetic mean of the
rates of interest publicly announced by each bank that appears on the
Reuters Screen USPRIME1 as such bank's prime rate or base lending rate as
in effect for that Prime Rate Interest Determination Date. If fewer than
four such rates but more than one such rate appear on the Reuters Screen
USPRIME1 for such Prime Rate Interest Determination Date, the Prime Rate
shall be the arithmetic mean of the prime 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 such Prime Rate Interest Determination Date by four major
money center banks in The City of New York selected by the Calculation
Agent. If fewer than two such rates appear on the Reuters Screen USPRIME1,
the Prime Rate will be determined by the Calculation Agent on the basis of
the rates furnished in The City of New York by three substitute banks or
trust companies organized and doing business under the laws of the United
States, or any state thereof, having total equity capital of at least $500
million and being subject to supervision or examination by Federal or state
authority, selected by the Calculation Agent to provide such rate or rates;
provided, however, that if the banks or trust companies selected as
aforesaid are not quoting as mentioned in this sentence, the Prime Rate for
such Prime Rate Interest Determination Date will be the Prime Rate in
effect on such Prime Rate Interest Determination Date.
"Reuters Screen USPRIME1" means the display designated as page "USPRIME1"
(or such other page as may replace such page) on that service for the purpose
of displaying prime rates or base lending rates of major United States banks.
"Treasury Rate." Treasury Rate Notes will bear interest at the rates
(calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any) specified in such Treasury Rate Notes and in any
applicable Pricing Supplement.
"Treasury Rate" means, with respect to an Interest Determination Date
relating to a Treasury Rate Note or any Floating Rate Note for which the
interest rate is determined by reference to the Treasury Rate (a "Treasury
Rate Interest Determination Date"), the rate applicable to the most recent
auction of direct obligations of the United States ("Treasury Bills") having
the Index Maturity specified in the applicable Pricing Supplement, as such
rate is published in H.15(519) under the heading "Treasury Bills-auction
average (investment)" or, if not published by 3:00 p.m., New York City time,
on the related Calculation Date, the auction average rate (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) as otherwise announced by the United States
Department of the Treasury. In the event that the results of the auction of
Treasury Bills having the Index Maturity designated in the applicable Pricing
Supplement are not reported as provided by 3:00 p.m., New York City time, on
such Calculation Date, or if no such auction is held in a particular week,
then the Treasury Rate will be calculated by the Calculation Agent and will be
a yield to maturity (expressed as a bond equivalent on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) of the
arithmetic mean of the secondary market bid rates, as of approximately 3:30
p.m., New York City time, on such Treasury Rate Interest Determination Date,
of three leading primary United States government securities dealers (which
may include the Agent) selected by the Calculation Agent, for the issue of
Treasury Bills with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement; provided, however, that if
the dealers so selected by the Calculation Agent are not quoting as mentioned
in this sentence, the Treasury Rate with respect to such Treasury Rate
Interest Determination Date will be the Treasury Rate in effect on such
Treasury Rate Interest Determination Date.
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, calculation of the interest rate applicable to a
Floating
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Rate Note, its Interest Payment Dates or any other matter relating thereto may
be modified by the terms as specified under "Other Provisions" on the face
thereof or in an Addendum relating thereto, if so specified on the face
thereof and in the applicable Pricing Supplement.
ORIGINAL ISSUE DISCOUNT NOTES
Notes may be issued at a price less than their redemption price at Maturity,
resulting in such Notes being treated as if they were issued with original
issue discount for federal income tax purposes ("Original Issue Discount
Notes"). Such Original Issue Discount Notes may currently pay no interest or
interest at a rate which at the time of issuance is below market rates.
Certain additional considerations relating to any Original Issue Discount
Notes may be described in the Pricing Supplement relating thereto.
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes. Unless otherwise
specified in the applicable Pricing 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 thereon and then to the reduction of the unpaid principal
amount thereof. Further information concerning additional terms and conditions
of any issue of Amortizing Notes will be provided in the applicable Pricing
Supplement. A table setting forth repayment information in respect of each
Amortizing Note will be included in the applicable Pricing Supplement and set
forth on such Notes.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes having the same Original Issue Date,
Maturity and otherwise having identical terms and provisions will be
represented by one or more fully registered global Notes (the "Global Notes").
Each such Global Note will be deposited with, or on behalf of, The Depository
Trust Company as Depository (the "Depository") registered in the name of the
Depository or a nominee thereof. Unless and until it is exchanged in whole or
in part for Notes in definitive form, no Global Note may be transferred except
as a whole by the Depository to a nominee of such Depository or by a nominee
of such Depository to such Depository or another nominee of such Depository or
by such Depository or any such nominee to a successor of such Depository or a
nominee of such successor.
The following is based on information furnished by the Depository:
The Depository 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 Depository's partnership nominee). One fully
registered Global Note 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 Depository. If, however, the aggregate principal amount of any issue
exceeds $200,000,000, one Global Note will be issued with respect to each
$200,000,000 of principal amount and an additional Global Note will be issued
with respect to any remaining principal amount of such 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 ("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 ("Direct
Participants") include securities brokers and dealers (including the Agent),
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
S-17
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 ("Indirect Participants").
The rules applicable to the Depository and its Participants are on file with
the Securities and Exchange Commission.
Purchasers of Book-Entry Notes under the Depository's system must be made by
or through Direct Participants, which will receive a credit for such Book-
Entry Notes on the Depository's records. The ownership interest of each actual
purchaser of each Book-Entry Note represented by a Global Note ("Beneficial
Owner") is, in turn, to be recorded on the records of Direct Participants and
Indirect Participants. Beneficial Owners 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 such Beneficial Owner entered into the
transaction. Transfers of ownership interests in a Global Note 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 Note 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 Notes representing Book-Entry
Notes 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
Book-Entry Notes; the Depository'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 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 Book-Entry Notes. Under its usual
procedures, the Depository mails an Omnibus Proxy to the 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
Notes representing the Book-Entry Notes will be made in immediately available
funds to the Depository. The Depository's practice is to credit Director
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 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 Depository, the Trustee or
the Company, 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 the Company and
the Trustee, disbursement of such payments to Direct Participants shall be the
responsibility of the Depository, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct Participants and
Indirect Participants.
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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
Depository'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 the Company, 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 Note
or Notes representing such Book-Entry Notes, on the Depository'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 Note or Notes representing such Book-Entry
Notes are transferred by Direct Participants on the Depository's records.
The Depository may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Company 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.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depository (or a successor securities depository). In
that event, Certificated Notes will be printed and delivered.
The information in this section concerning the Depository and the
Depository's system has been obtained from sources that the Company believes
to be reliable, but the Company takes no responsibility for the accuracy
thereof.
Purchases of Book-Entry Notes must be made by or through Participants, which
will receive a credit on the records of the Depository. The ownership interest
of each actual purchaser of each Book-Entry Note (the "Beneficial Owner") is
in turn to be recorded on the Participants' or Indirect Participants' records.
Beneficial Owners 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 Participant or Indirect Participant
through which the Beneficial Owner entered into the transaction. Ownership of
beneficial interests in Global Notes will be shown on, and the transfer of
such ownership interests will be effected only through, records maintained by
the Depository (with respect to interests of Participants) and on the records
of Participants (with respect to interests of persons held through
Participants). The laws of some states may require that certain purchasers of
securities take physical delivery of such 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 Senior Indenture. Except as provided below,
Beneficial Owners of a Global Note will not be entitled to have the Notes
represented by such 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 such person is not a
Participant, on the procedures of the Participant through which such person
owns its interest, to exercise any rights of a Holder under the 1993
Indenture. The Company understands that under existing industry practices, in
the event that the Company requests any action of Holders or that an owner of
a beneficial interest in such 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 such action, and such Participants would authorize
Beneficial Owners owning through such Participants to give or take such action
or would otherwise act upon the instructions of Beneficial Owners. Conveyance
of notices and other communications by the Depository 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.
S-19
If (x) the Depository is at any time unwilling or unable to continue as
Depository and a successor depository is not appointed by the Company within
60 days, or (y) the Company executes and delivers to the Trustee a Company
Order to the effect that the Global Notes shall be exchangeable, or (z) 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 definitive form
of like tenor and of an equal aggregate principal amount, in denominations of
$1,000 and integral multiples thereof. Such definitive Notes shall be
registered in such name or names as the Depository shall instruct the Trustee.
It is expected that such instructions may be based upon directions received by
the Depository from Participants with respect to ownership of beneficial
interests in Global Notes.
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 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), (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. Certain trusts not described in clause (iv)
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.
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 ("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
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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 of 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 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 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 a Discount
Note is the sum of the daily portions of original issue discount with respect
to such Discount Note for each day during the taxable year (or portion of the
taxable year) on which such U.S. Holder held such 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 (i) 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 (ii) 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 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 (a) 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 (b) it provides
for stated interest, paid or compounded at least annually, at current values
of (i) one or more qualified floating rates, (ii) a single fixed rate and one
or more qualified floating rates, (iii) a single objective rate, or (iv) a
single fixed rate and a single objective rate that is a qualified inverse
floating rate.
S-21
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.
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 such Note is unconditionally payable in cash or property
(other than debt instruments of the issuer) at least annually, then all stated
interest on the 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 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 (i) 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 (ii) 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
S-22
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.
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.
Certain of the Notes (i) may be redeemable at the option of the Company
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.
S-23
"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 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
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 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 (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 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, 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 obligations then owned and thereafter
acquired by the U.S. Holder and may be revoked only with the consent of the
IRS.
S-24
"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 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 the
applicable holding period. The Taxpayer Relief Act of 1997 reduces the maximum
rates on long-term capital gains recognized on capital assets held by
individual taxpayers for more than eighteen months as of the date of
disposition (and would further reduce the maximum rates on such gains in the
year 2001 and thereafter for certain individual taxpayers who meet specified
conditions). Prospective investors should consult their own tax advisors
concerning these tax law changes.
NON-U.S. HOLDERS
A non-U.S. Holder 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 the Company, a controlled foreign
corporation related to the Company or a bank receiving interest described in
section 881(c)(3)(A) of the Code. To qualify for the exemption from taxation,
the last United States payor in the chain of payment prior to payment to a
non-U.S. Holder (the "Withholding Agent") must have received in the year in
which a payment of interest or principal occurs, or in either of the two
preceding calendar years, a statement that (i) is signed by the beneficial
owner of the Note under penalties of perjury, (ii) certifies that such owner
is not a U.S. Holder and (iii) provides the name and address of the beneficial
owner. The statement may be made on an IRS Form W-8 or a substantially similar
form, and the beneficial owner must inform the Withholding Agent of any change
in the information on the statement within 30 days of such change. If a Note
is held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement
to the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by
the beneficial owner to the organization or institution. The Treasury
Department is considering implementation of further certification requirements
aimed at determining whether the issuer of a debt obligation is related to
holders thereof.
On October 6, 1997, the Treasury issued new regulations (the "New
Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
1998, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
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, provided the gain is not effectively connected with the
conduct of a trade or business in the United States by the non-U.S. Holder.
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 the
Company 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 rate of 31% 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-25
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 withhold 31% of 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-8
under penalties of perjury, although in certain cases it may be possible to
submit other documentary evidence. In addition, prospective U.S. Holders are
strongly urged to consult their own tax advisors with respect to the New
Withholding Regulations. See "Certain United States Federal Income Tax
Considerations--Non-U.S. Holders".
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
The Notes are being offered on a continuing basis for sale by the Company,
through the Agent, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, who will purchase the Notes, as principal, from the Company, 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 thereof 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 the Company 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 thereof, unless otherwise specified in an applicable Pricing
Supplement. The Company 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 Notes for which the Stated Maturity is in excess of 30
years, such commission as shall be agreed upon by the Company and the Agent at
the time of sale), sold through the Agent.
The Agent may sell Notes it has purchased from the Company as principal to
other dealers for resale to investors, and may allow any portion of the
discount received in connection with such purchases from the Company 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.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject orders in whole or in part whether placed
directly with the Company 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.
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 New York City on the date of settlement.
No Note will have an established trading market when issued. Unless
specified in the applicable Pricing Supplement, the Notes will not be listed
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.
S-26
The Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Company has agreed to
indemnify the Agent against or to make contributions relating to certain civil
liabilities, including liabilities under the Act, or to contribute to payments
the Agent may be required to make in respect thereof. The Company has agreed
to reimburse the Agent for certain expenses.
From time to time, the Company may issue and sell other Securities described
in the accompanying Prospectus, and the amount of Notes offered hereby is
subject to reduction 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. Such 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 Notes in an aggregate
principal amount exceeding that set forth in the applicable Pricing
Supplement), then the Agent 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 the Notes
to be higher than in the absence of such purchases.
Neither the Company 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 the Company 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 National
Association of Securities Dealers, Inc.
LEGAL OPINION
The validity of the Notes will be passed upon for the Company and the Agent
by Brown & Wood LLP, New York, New York.
S-27
PROSPECTUS
[LOGO]
MERRILL LYNCH & CO., INC.
DEBT SECURITIES, WARRANTS, PREFERRED STOCK,
DEPOSITARY SHARES AND COMMON STOCK
----------------
Merrill Lynch & Co., Inc. (the "Company") intends to sell from time to time
senior debt securities ("Senior Debt Securities") and subordinated debt
securities ("Subordinated Debt Securities" and, together with the Senior Debt
Securities, the "Debt Securities"), both of which may be convertible into
common stock, par value $1.33 1/3 per share, of the Company ("Common Stock"),
preferred stock, par value $1.00 per share, of the Company ("Preferred Stock")
or Depositary Shares representing Preferred Stock ("Depositary Shares");
warrants to purchase Debt Securities ("Debt Warrants"); warrants entitling the
holders thereof to receive from the Company a payment or delivery determined
by reference to decreases or increases in the level of an index or portfolio
based on one or more equity or debt securities (including, but not limited to,
the price or yield of such securities), any statistical measure of economic or
financial performance (including, but not limited to, any consumer price,
currency or mortgage index) or the price or value of any commodity or any
other item or index or a combination thereof ("Index Warrants"); warrants to
receive from the Company 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 such currencies; shares of
Preferred Stock which may be convertible into Preferred Stock or Common Stock
or exchangeable for Debt Securities; shares of Preferred Stock, which may be
represented by Depositary Shares; warrants to purchase shares of Preferred
Stock ("Preferred Stock Warrants"); shares of Common Stock; and warrants to
purchase shares of Common Stock ("Common Stock Warrants"), in each case as
shall be designated by the Company at the time of offering. The Debt Warrants,
Index Warrants, Currency Warrants, Preferred Stock Warrants and Common Stock
Warrants are collectively hereinafter called the "Warrants", and the Debt
Securities, the Warrants, the Preferred Stock, the Depositary Shares and the
Common Stock are collectively called the "Securities". The Securities may be
offered independently or together with other Securities and may be attached
to, or separate from such other Securities. The Securities will be offered to
the public on terms determined by market conditions at the time of sale and
set forth in a prospectus supplement.
The Debt Securities (except for Debt Securities that are convertible into
Common Stock or Preferred Stock), Debt Warrants, Index Warrants and Currency
Warrants offered pursuant to this Prospectus may be offered separately or
together in one or more series of up to $12,108,211,053 aggregate public
offering price or its equivalent in such 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 the Company 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. The Common Stock,
Preferred Stock, Depositary Shares, Common Stock Warrants, Preferred Stock
Warrants and the Debt Securities that are convertible into Common Stock or
Preferred Stock offered pursuant to this Prospectus may be offered separately
or together in one or more series of up to $8,000,000,000 aggregate public
offering price or its equivalent in such 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 the Company 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.
The Debt Securities will be unsecured and, except in the case of
Subordinated Debt Securities, will rank equally with all other unsecured and
unsubordinated indebtedness of the Company. The Subordinated Debt Securities
will be subordinated to all existing and future Senior Indebtedness of the
Company.
Each issue of Securities may vary, where applicable, as to aggregate
principal amount, maturity date, public offering or purchase price, interest
rate or rates, if any, and timing of payments thereof, provisions, if any, for
redemption, exchangeability or conversion, sinking fund requirements, if any,
exercise provisions, ranking, detachability, currencies of denomination or
currencies otherwise applicable thereto, the option of the Company to satisfy
its obligations upon maturity, any redemption or required repurchase or in
connection with any exchange provisions by delivering securities (whether or
not issued by, or the obligations of, the Company) or a combination of cash,
other securities and/or property, the right of the Company to defer payment of
interest and the maximum length of any such deferral period, put options, if
any, number of shares, liquidation preference per share, dividend or
distribution rate (or method of calculation thereof), if any, and timing of
payments thereof, dates from which dividends or distributions shall accrue,
any voting rights, whether interests in the Preferred Stock will be
represented by Depositary Shares and, if so, the fraction of a share of
Preferred Stock which each such Depositary Share will represent, any rights,
preferences, limitations or restrictions relating to the Preferred Stock of a
specific series, the applicable type and amount of Securities covered by any
Warrants, and any other variable terms and method of distribution. The
accompanying Prospectus Supplement (the "Prospectus Supplement") sets forth
the specific terms with regard to the Securities in respect of which this
Prospectus is being delivered. The Company may elect to deliver to purchasers
of Securities an abbreviated term sheet setting forth a description of the
Securities being offered, or a summary thereof (a "Terms Sheet"), instead of a
Prospectus Supplement. This Prospectus may be delivered prior to or
concurrently with a Terms Sheet.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The Securities may be sold through Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S") as agent or may be offered and
reoffered through, or through underwriting syndicates managed or co-managed
by, one or more underwriters, including MLPF&S, or directly to purchasers by
the Company. The Securities may not be sold without delivery of a Prospectus
Supplement describing such issue of Securities, the method and terms of
offering thereof or of a Terms Sheet, the names of any agents or underwriters
and any applicable commissions or discounts. The Company may also issue
contracts under which the counterparty may be required to purchase Debt
Securities, Preferred Stock, Depositary Shares and/or Warrants in amounts and
on terms set forth in a Prospectus Supplement.
----------------
The date of this Prospectus is January 29, 1998.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements and
other information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Midwest Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and Northeast Regional Office, Seven
World Trade Center, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Reports, proxy and
information statements and other information concerning the Company may also
be inspected at the offices of the New York Stock Exchange, the American Stock
Exchange, the Chicago Stock Exchange and the Pacific Exchange. The Commission
maintains a Web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants, including
the Company, that file electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 27,
1996, Quarterly Reports on Form 10-Q for the periods ended March 28, 1997,
June 27, 1997 and September 26, 1997, and Current Reports on Form 8-K dated
January 13, 1997, January 27, 1997, February 25, 1997, March 14, 1997, April
15, 1997, May 2, 1997, May 30, 1997, June 3, 1997, July 16, 1997, July 30,
1997, August 1, 1997, September 24, 1997, September 29, 1997, October 15,
1997, October 29, 1997, November 20, 1997, November 26, 1997, December 2,
1997, December 16, 1997, December 23, 1997 and January 20, 1998 filed pursuant
to Section 13 of the Exchange Act, are hereby incorporated by reference into
this Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering of the Securities shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
(WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY REFERENCE)
OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO LAWRENCE M. EGAN, JR.,
CORPORATE SECRETARY'S OFFICE, MERRILL LYNCH & CO., INC., 100 CHURCH STREET,
12TH FLOOR, NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
2
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one of
the largest securities firms in the world, is a leading broker in securities,
options contracts, and commodity and financial futures contracts; a leading
dealer in options and in corporate and municipal securities; a leading
investment banking firm that provides advice to, and raises capital for, its
clients; and an underwriter of selected insurance products. Other subsidiaries
provide financial services on a global basis similar to those of MLPF&S and
are engaged in such other activities as international banking, lending, and
providing other investment and financing services. Merrill Lynch International
Incorporated, through subsidiaries and affiliates, provides investment,
financing, and related services outside the United States and Canada. Merrill
Lynch Asset Management, LP and Fund Asset Management, LP together constitute
one of the largest mutual fund managers in the world and provide investment
advisory services. Merrill Lynch Government Securities Inc. is a primary
dealer in obligations issued or guaranteed by the U.S. Government and its
agencies. Merrill Lynch Capital Services, Inc., Merrill Lynch Derivative
Products AG, and Merrill Lynch International are the Company's primary
derivative product dealers and enter into interest rate and currency swaps and
other derivative transactions as intermediaries and as principals. The
Company's insurance underwriting operations consist of the underwriting of
life insurance and annuity products. Banking, trust, and mortgage lending
operations conducted through subsidiaries of the Company include issuing
certificates of deposit, offering money market deposit accounts, making
secured loans, and providing currency exchange facilities and other related
services.
The principal executive office of the Company is located at World Financial
Center, North Tower, 250 Vesey Street, New York, New York 10281; its telephone
number is (212) 449-1000.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Securities
for general corporate purposes, unless otherwise specified in the Prospectus
Supplement relating to such Securities. Such general corporate purposes may
include the funding of investments in, or extensions of credit to, its
subsidiaries, the funding of assets of the Company and its subsidiaries, the
lengthening of the average maturity of the Company's borrowings, and the
financing of acquisitions. Pending such applications, the net proceeds will be
applied to the reduction of short-term indebtedness or temporarily invested.
Management of the Company expects that it will, on a recurrent basis, engage
in additional financings as the need arises to finance the growth of the
Company, through acquisitions or otherwise, or to lengthen the average
maturity of its borrowings. To the extent that Securities being purchased for
resale by MLPF&S are not resold, the aggregate proceeds to the Company and its
subsidiaries would be reduced.
3
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, between the Company and The
Chase Manhattan Bank, formerly known as Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company), as trustee or issued under an indenture
(the "1993 Indenture"), dated as of October 1, 1993, between the Company and
The Chase Manhattan Bank (successor by merger to The Chase Manhattan Bank,
N.A.), as trustee (each, a "Senior Debt Trustee"). The 1983 Indenture and the
1993 Indenture are referred to herein 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 the Company and The Chase Manhattan 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 trustee with respect thereto, will be identified in the
applicable Prospectus Supplement. The Senior Indentures, the Subordinated
Indenture and any Subsequent Indentures (whether senior or subordinated) are
referred to herein as the "Indentures"; and the Senior Debt Trustees, the
Subordinated Debt Trustee and any Subsequent Trustees are referred to herein
as the "Trustees". A copy of each Indenture is filed (or, in the case of a
Subsequent Indenture, will be filed) as an exhibit to the registration
statements relating to the Securities (collectively, the "Registration
Statement"). The following summaries of certain provisions of the Indentures
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all provisions of the respective Indentures,
including the definitions therein of certain terms.
GENERAL
Each Indenture provides that Debt Securities (Senior Debt Securities in the
case of the Senior Indentures or a Subsequent Indenture for Senior Debt
Securities, and Subordinated Debt Securities in the case of the Subordinated
Indenture or a Subsequent Indenture for Subordinated Debt Securities) may be
issued thereunder, without limitation as to aggregate principal amount, in one
or more series, by the Company from time to time upon satisfaction of certain
conditions precedent, including the delivery by the Company to the applicable
Trustee of a resolution of the Board of Directors, or the Executive Committee
thereof, of the Company which fixes or provides for the establishment of terms
of such Debt Securities, including: (1) the aggregate principal amount of such
Debt Securities and whether there is any limit upon the aggregate principal
amount of such Debt Securities that may be subsequently issued; (2) the date
on which such Debt Securities will mature; (3) the principal amount payable
with respect to such Debt Securities whether at maturity or upon earlier
acceleration, and whether such principal amount will be determined with
reference to an index, formula or other method; (4) the rate or rates per
annum (which may be fixed or variable) at which such Debt Securities will bear
interest, if any; (5) the dates on which such interest, if any, will be
payable; (6) the provisions for redemption of such Debt Securities, if any,
the redemption price and any remarketing arrangements relating thereto; (7)
the sinking fund requirements, if any, with respect to such Debt Securities;
(8) whether such Debt Securities are denominated or provide for payment in
United States dollars or a foreign currency or units of two or more of such
foreign currencies; (9) the form (registered or bearer or both) in which such
Debt Securities may be issued and any restrictions applicable to the exchange
of one form for another and to the offer, sale and delivery of such Debt
Securities in either form; (10) whether and under what circumstances the
Company will pay additional amounts ("Additional Amounts") in respect of such
Debt Securities held by a person who is not a U.S. person (as defined in the
Prospectus Supplement, as applicable) in respect of specified taxes,
assessments or other governmental charges and whether the Company has the
option to redeem the affected Debt Securities rather than pay such Additional
Amounts; (11) whether such Debt Securities are to be issued in global form;
(12) the title of the Debt Securities and the series of which such Debt
Securities shall be a part; (13) the denominations of such Debt
4
Securities; (14) whether, and the terms and conditions relating to when, the
Company may satisfy certain of its obligations with respect to such Debt
Securities with regard to payment upon maturity, or any redemption or required
repurchase or in connection with any exchange provisions by delivering to the
Holders thereof securities (whether or not issued by, or the obligation of,
the Company) or a combination of cash, other securities and/or property; (15)
any additions or deletions in the terms of the Debt Securities with respect to
the Events of Default set forth in the respective Indentures; (16) the terms,
if any, upon which the Debt Securities may be convertible into Common Stock or
Preferred Stock of the Company and the terms and conditions upon which such
conversion will be effected, including the initial conversion price or rate,
the conversion period and any other provisions in addition to or in lieu of
those described herein; (17) whether, and the terms and conditions relating to
when, the Debt Securities may be transferred separately from Warrants when
such Debt Securities and Warrants are issued together; and (18) any other
terms of the Debt Securities (which shall not be inconsistent with the
provisions of the respective Indentures). Reference is made to the Prospectus
Supplement for the terms of the Debt Securities being offered thereby,
including whether such Debt Securities are Senior Debt Securities or
Subordinated Debt Securities. The Company may elect to deliver to purchasers
of Securities a Terms Sheet instead of a Prospectus Supplement. This
Prospectus may be delivered prior to or concurrently with a Terms Sheet. Debt
Securities may also be issued under the Indentures upon the exercise of Debt
Warrants. 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 Debt Securities. The Prospectus Supplement relating to any
issue of Debt Securities will describe such considerations.
The Debt Securities will be issued, to the extent provided 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. No service charge will be made for any registration of transfer of
registered Debt Securities or exchange of Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charges that may be imposed in connection therewith. Each Indenture provides
that Debt Securities issued thereunder may be issued in global form. If any
series of Debt Securities is issuable in global form, the applicable
Prospectus Supplement will describe the circumstances, if any, under which
beneficial owners of interest in any such global Debt Securities may exchange
such interests for Debt Securities of such series and of like tenor and
principal amount in any authorized form and denomination. Principal of, and
any premium, Additional Amounts and interest on, a global Debt Security will
be payable in the manner described in the applicable Prospectus Supplement.
The provisions of the Indentures described above provide the Company with
the ability, in addition to the ability to issue Debt Securities with terms
different from those of Debt Securities previously issued, to "reopen" a
previous issue of a series of Debt Securities and issue additional Debt
Securities of such series.
The Senior Debt Securities will be unsecured and will rank "pari passu" with
all other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Debt Securities will be unsecured and will be subordinated to all
existing and future Senior Indebtedness (as defined below) of the Company.
Since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (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 claims of the Company itself as a creditor of the subsidiary may
be recognized. In addition, dividends, loans and advances from certain
subsidiaries, including MLPF&S, to the Company are restricted by net capital
requirements under the Exchange Act and under rules of certain exchanges and
other regulatory bodies.
Principal and any interest, premium and Additional Amounts will be payable
in the manner, at the places and subject to the restrictions set forth in the
applicable Indenture, the Debt Securities and the Prospectus
5
Supplement relating thereto, provided that payment of any interest and any
Additional Amounts may be made at the option of the Company by check mailed to
the holders of registered Debt Securities at their registered addresses.
Debt Securities may be presented for exchange, and registered Debt
Securities may be presented for transfer, in the manner, at the places and
subject to the restrictions set forth in the applicable Indenture, the Debt
Securities and the Prospectus Supplement relating thereto. Debt Securities in
bearer form and the coupons, if any, pertaining thereto will be transferable
by delivery. No service charge will be made for any transfer or exchange of
Debt Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Unless otherwise indicated in the applicable Prospectus Supplement, the Debt
Securities will be issued under the Indentures. If so specified in a
Prospectus Supplement, the Company may issue Subordinated Debt Securities
under a separate indenture which provides for a single issue of zero coupon
convertible Subordinated Debt Securities, a form of which is filed as an
exhibit to the Registration Statement. In the event the Company issues Debt
Securities under such indenture, the applicable Prospectus Supplement will set
forth the terms of such Debt Securities and the indenture relating thereto and
will identify such indenture and the trustee with respect thereto.
MERGER AND CONSOLIDATION
The Company may consolidate or merge with or into any other corporation, and
the Company may sell, lease or convey all or substantially all of its assets
to any corporation, provided that (i) the corporation (if other than the
Company) formed by or resulting from any such consolidation or merger or which
shall have received such assets shall be a corporation organized and existing
under the laws of the United States of America or a state thereof and shall
assume payment of the principal of, and any premium, Additional Amounts or
interest on, the Debt Securities and the performance and observance of all of
the covenants and conditions of the Indentures to be performed or observed by
the Company, and (ii) the Company or such successor corporation, as the case
may be, shall not immediately thereafter be in default under the Indentures.
MODIFICATION AND WAIVER
Modification and amendment of each Indenture may be effected by the Company
and the applicable Trustee with the consent of the Holders of at least 66 2/3%
in principal amount of the Outstanding Debt Securities of each series issued
pursuant to such Indenture and affected thereby, provided that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security affected thereby, (a) change the Stated Maturity of,
or any installment of interest or Additional Amounts on, any Debt Security or
any premium payable on the redemption thereof, or change the Redemption Price;
(b) reduce the principal amount of, or the interest or Additional Amounts
payable on, any Debt Security or reduce the amount of principal which could be
declared due and payable prior to the Stated Maturity; (c) change the place or
currency of any payment of principal of, or any premium, interest or
Additional Amounts on, any Debt Security; (d) impair the right to institute
suit for the enforcement of any payment on or with respect to any Debt
Security; (e) reduce the percentage in principal amount of the Outstanding
Debt Securities of any series, the consent of whose Holders is required to
modify or amend such Indenture; or (f) modify the foregoing requirements or
reduce the percentage 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 Senior
Indebtedness without the consent of such Holder. Except with respect to
certain fundamental provisions, the Holders of at least a majority in
principal amount of Outstanding Debt Securities of any series may, with
respect to such series, waive past defaults under the applicable Indenture and
waive compliance by the Company with certain provisions of such Indenture.
EVENTS OF DEFAULT
Under each Indenture, the following will be Events of Default with respect
to Debt Securities of any series issued thereunder: (a) default in the payment
of any interest or Additional Amounts upon any Debt Security of
6
that series when due, and such default has continued for 30 days; (b) default
in the payment of any principal of or premium, if any, on any Debt Security of
that series when due; (c) default in the deposit of any sinking fund payment,
when due, in respect of any Debt Security of that series; (d) default in the
performance of any other covenant of the Company contained in such Indenture
for the benefit of such series or in the Debt Securities of such series, and
such default has continued for 60 days after written notice as provided in
such Indenture; (e) certain events in bankruptcy, insolvency or
reorganization; and (f) any other Event of Default provided with respect to
Debt Securities of that series. The applicable Trustee or the Holders of 25%
in principal amount of the Outstanding Debt Securities of that series may
declare the principal amount (or such lesser amount as may be provided for in
the Debt Securities of that series) of all Outstanding Debt Securities of that
series and the interest accrued thereon and Additional Amounts payable in
respect thereof, if any, to be due and payable immediately if an Event of
Default with respect to Debt Securities of such series shall occur and be
continuing at the time of declaration. At any time after a declaration of
acceleration has been made with respect to Debt Securities of any series but
before a judgment or decree for payment of money due has been obtained by the
applicable Trustee, the Holders of a majority in principal amount of the
Outstanding Debt Securities of that series may rescind any declaration of
acceleration and its consequences, provided that all payments due (other than
those due as a result of acceleration) have been made and all Events of
Default have been remedied or waived. Any Event of Default with respect to
Debt Securities of any series may be waived by the Holders of a majority in
principal amount of all Outstanding Debt Securities of that series, except in
a case of failure to pay principal of or premium, if any, or interest or
Additional Amounts, if any, on any Debt Security of that series for which
payment had not been subsequently made or in respect of a covenant or
provision which cannot be modified or amended without the consent of the
Holder of each Outstanding Debt Security of such series affected.
The Holders of a majority in principal amount 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 such Trustee with respect to Debt Securities
of such series, provided that such direction shall not be 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 such
Holders, the applicable Trustee shall be entitled to receive from such Holders
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in complying with any such direction.
The Company will be required to furnish to each Trustee annually a statement
as to the fulfillment by the Company of all of its obligations under the
applicable Indenture.
SPECIAL TERMS RELATING TO THE SENIOR DEBT SECURITIES
"LIMITATIONS UPON LIENS"
The Senior Indentures provide that the Company may not, and may not permit
any Subsidiary to, create, assume, incur or permit to exist any indebtedness
for borrowed money secured by a pledge, lien or other encumbrance (except for
certain liens specifically permitted by the Senior Indentures) on the Voting
Stock owned directly or indirectly by the Company of any Subsidiary (other
than a Subsidiary which, at the time of incurrence of such secured
indebtedness, has a net worth of less than $3,000,000) without making
effective provision whereby the Outstanding Senior Debt Securities will be
secured equally and ratably with such secured indebtedness.
"LIMITATIONS ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S"
The Senior Indentures provide that the Company 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 any such transaction, MLPF&S remains a Controlled Subsidiary
(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 the Company). In addition, the Senior Indentures provide that the Company
may not
7
permit MLPF&S to (i) merge or consolidate, unless the surviving company is a
Controlled Subsidiary, or (ii) 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 the Company resulting from any
dissolution, winding up, liquidation or reorganization, payments on
Subordinated Debt Securities are to be 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 the Company to make payments on
the Subordinated Debt Securities will not otherwise be affected. No payment on
Subordinated Debt Securities may be made at any time when there is a default
in the payment of any principal, premium, interest, Additional Amounts, if
any, or sinking fund of or on any Senior Indebtedness. 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 such proceedings out of the distributive shares
of Subordinated Debt Securities. By reason of such subordination, in the event
of a distribution of assets upon insolvency, certain creditors of the Company
may recover more, ratably, than Holders of Subordinated Debt Securities.
Unless otherwise specified in the Prospectus Supplement relating to the
Subordinated Debt Securities offered thereby, Senior Indebtedness shall mean
any payment in respect of indebtedness of the Company for money borrowed,
except for any such indebtedness that is by its terms subordinated to or pari
passu with securities issued pursuant to the Subordinated Indenture. As of
September 26, 1997, a total of approximately $77.4 billion of the Company's
indebtedness would have been Senior Indebtedness as so defined.
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 (the "Convertible Debt
Securities") unless otherwise provided in the Prospectus Supplement relating
to Debt Securities being offered thereby.
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 by the Company, to convert
such Convertible Debt Securities into shares of Common Stock or Preferred
Stock, as specified in the Prospectus Supplement, at the conversion rate per
principal amount of Convertible Debt Securities set forth in the 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, such
right will terminate upon receipt of written notice of the exercise of such
option.
In certain events, the conversion price or rate will be subject to
adjustment as contemplated in the applicable Indenture. Unless otherwise
provided in the applicable Prospectus Supplement, such events will include the
issuance of shares of Common Stock of the Company as a dividend; subdivisions
and combinations of Common Stock; the issuance to all holders of Common Stock
of rights or warrants entitling such holders (for a specified period) to
subscribe for or purchase shares of Common Stock at a price per share less
than the current market price per share of Common Stock; and the distribution
to all holders of Common Stock of shares of capital stock of the Company
(other than Common Stock), evidences of indebtedness of the Company or assets
(excluding cash dividends paid from retained earnings and dividends payable in
Common Stock for which adjustment is made as referred to above) or
subscription rights or warrants (other than those referred to above). In any
of such cases, 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. Fractional shares of Common Stock will not be
issued upon conversion, but, in lieu thereof, the Company will pay a cash
adjustment. If indicated in the applicable Prospectus Supplement, Convertible
Debt Securities convertible into Common Stock surrendered for conversion
between the record date for an interest payment, if any, and the interest
payment date (except such
8
Convertible Debt Securities called for redemption on a redemption date during
such period) must be accompanied by payment of an amount equal to the interest
thereon which the registered Holder is entitled to receive.
The adjustment provisions for Convertible Debt Securities will be determined
at the time of issuance of such Convertible Debt Securities and will be set
forth in the applicable Prospectus Supplement related thereto.
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 such Convertible Debt Securities by one or more
investment banking firms or other purchasers who may agree with the Company to
purchase such Convertible Debt Securities and convert them into Common Stock
or Preferred Stock, as the case may be.
DESCRIPTION OF DEBT WARRANTS
The Company may issue Debt Warrants for the purchase of Debt Securities.
Debt Warrants may be issued independently or together with other Securities
offered by any Prospectus Supplement and may be attached to or separate from
such other Securities. The Debt Warrants are to be issued under debt warrant
agreements (each a "Debt Warrant Agreement") to be entered into between the
Company and a bank or trust company, as debt warrant agent (the "Debt Warrant
Agent"), all as shall be set forth in the Prospectus Supplement relating to
the Debt Warrants being offered thereby. A copy of the form of Debt Warrant
Agreement, including the form of warrant certificates representing the Debt
Warrants (the "Debt Warrant Certificates"), 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, is filed as an
exhibit to the Registration Statement. The following summaries of certain
provisions of the Debt Warrant Agreement and the Debt Warrant Certificates do
not purport to be 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 therein
of certain terms.
GENERAL
The applicable Prospectus Supplement will describe the terms of Debt
Warrants offered thereby, the Debt Warrant Agreement relating to such Debt
Warrants and the Debt Warrant Certificates representing such Debt Warrants,
including the following: (1) the designation, aggregate principal amount,
price at which such principal amount may be purchased upon exercise and terms
of the Debt Securities purchasable upon exercise of such Debt Warrants,
including whether such Debt Securities are Senior Debt Securities or
Subordinated Debt Securities, and the procedures and conditions relating to
the exercise of such Debt Warrants; (2) the designation and terms of any
related Debt Securities with which such Debt Warrants are issued, including
whether such Debt Securities are Senior Debt Securities or Subordinated Debt
Securities, the number of such Debt Warrants issued with each such Debt
Security, and the Indenture under which the Debt Securities will be issued;
(3) the date, if any, on and after which such Debt Warrants and the related
Debt Securities will be separately transferable; (4) the date on which the
right to exercise such Debt Warrants shall commence and the date on which such
right shall expire (the "Expiration Date"); (5) 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;
(6) the circumstances, if any, which will cause the Debt Warrants to be deemed
to be automatically exercised; (7) any material risk factors relating to such
Debt Warrants; (8) the identity of the Debt Warrant Agent; and (9) any other
terms of such Debt Warrants (which shall not be inconsistent with the
provisions of the Debt Warrant Agreement).
Debt Warrant Certificates will be exchangeable for new Debt Warrant
Certificates of different denominations and Debt Warrants may be exercised at
the corporate trust office of the Debt Warrant Agent or any other office
indicated in the Prospectus Supplement. Prior to the exercise of their Debt
Warrants, holders of
9
Debt Warrants will not have any of the rights of Holders of the Debt
Securities that may be purchased upon such exercise and will not be entitled
to payments of principal of, and any premium, Additional Amounts, if any, or
interest on, the Debt Securities purchasable upon such exercise.
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 thereof. The Prospectus Supplement relating to any issue of Debt
Warrants will describe such considerations.
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. 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 the Company 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 a 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 such 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 such
principal amount of Debt Securities at such exercise price as shall in each
case be set forth in, or be determinable as set forth in, the Prospectus
Supplement relating to the Debt Warrants offered thereby. Debt Warrants may be
exercised at any time up to the close of business on the Expiration Date set
forth in the Prospectus Supplement relating to the Debt Warrants offered
thereby. After the close of business on the Expiration Date, unexercised Debt
Warrants will become void.
Debt Warrants may be exercised as set forth in the Prospectus Supplement
relating to the Debt Warrants offered thereby. Upon receipt of payment and the
Debt Warrant Certificate properly completed and duly executed at the corporate
trust office of the Debt Warrant Agent or any other office indicated in the
Prospectus Supplement, the Company will, as soon as practicable, forward the
Debt Securities purchased upon such exercise. If less than all of the Debt
Warrants represented by such Debt Warrant Certificate are exercised, a new
Debt Warrant Certificate will be issued for the remaining amount of Debt
Warrants.
LISTING
An issue of Debt Warrants may be listed on a national securities exchange,
as set forth in the applicable Prospectus Supplement.
DESCRIPTION OF CURRENCY WARRANTS
The Company may issue Currency Warrants either in the form of Currency Put
Warrants entitling the Holders thereof to receive from the Company 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 in the form of Currency Call Warrants entitling the Holders
thereof to receive from the Company 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.
Currency Warrants may be issued independently or together with other
Securities offered by any Prospectus Supplement and may be attached to or
10
separate from such other Securities. The Currency Warrants are to be issued
under a currency put warrant agreement or a currency call warrant agreement,
as applicable (each a "Currency Warrant Agreement"), to be entered into
between the Company and a bank or trust company, as currency warrant agent
(the "Currency Warrant Agent"), all as shall be set forth in the Prospectus
Supplement relating to Currency Warrants being offered thereby. Copies of the
forms of Currency Put Warrant Agreement and Currency Call Warrant Agreement,
including the forms of warrant certificates representing the Currency Put
Warrants and Currency Call Warrants (the "Currency Warrant Certificates"),
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. The following
summaries of certain provisions of the Currency Warrant Agreements and the
Currency Warrant Certificates do not purport to be 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 therein of certain terms.
GENERAL
The applicable Prospectus Supplement will describe the terms of Currency
Warrants offered thereby, the Currency Warrant Agreement relating to such
Currency Warrants and the Currency Warrant Certificates representing such
Currency Warrants, including the following: (1) whether such Currency Warrants
shall be Currency Put Warrants, Currency Call Warrants, or both; (2) the
formula for determining the cash settlement value of each Currency Warrant;
(3) the procedures and conditions relating to the exercise of such Currency
Warrants; (4) the circumstances, if any, which will cause the Currency
Warrants to be deemed to be automatically exercised; (5) any minimum number of
Currency Warrants which must be exercised at any one time, other than upon
automatic exercise; (6) the date on which the right to exercise such Currency
Warrants shall commence and the date on which such right shall expire (the
"Expiration Date"), provided that the commencement date and the Expiration
Date may be the same date; (7) any material risk factors relating to such
Currency Warrants; (8) the identity of the Currency Warrant Agent; and (9) any
other terms of such Currency Warrants (which shall not be 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 such considerations.
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. Except as
may otherwise be provided in the applicable Prospectus Supplement, 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 the Company 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 such brokerage
firm or its agent. Transfer of ownership of any Currency Warrant will be
effected only through the selling beneficial owner's brokerage firm.
EXERCISE OF CURRENCY WARRANTS
Each Currency Warrant will entitle the Holder to the cash settlement value
of such Currency Warrant on the applicable Exercise Date, in each case as such
terms will be defined in the applicable Prospectus Supplement. If a Currency
Warrant has more than one exercise date and is not exercised prior to the time
specified in the applicable Prospectus Supplement, on the fifth New York
Business Day preceding the Expiration Date, Currency Warrants will be deemed
automatically exercised.
11
LISTING
Each issue of Currency Warrants will be listed on a national securities
exchange, subject only to official notice of issuance, as a condition of sale
of any such Currency Warrants. In the event that the Currency Warrants are
delisted from, or permanently suspended from trading on, such exchange, the
Expiration Date for such Currency Warrants will be the date such delisting or
trading suspension becomes effective and Currency Warrants not previously
exercised will be deemed automatically exercised on the business day
immediately preceding such Expiration Date. The applicable Currency Warrant
Agreement will contain a covenant of the Company not to seek delisting of the
Currency Warrants, or suspension of their trading, on such exchange.
DESCRIPTION OF INDEX WARRANTS
The Company may issue from time to time Index Warrants consisting of put
warrants (the "Index Put Warrants") or call warrants (the "Index Call
Warrants"). The Index Warrants will entitle the holders to receive from the
Company a payment or delivery, subject to applicable law, determined by
reference to decreases (in the case of Index Put Warrants) or to increases (in
the case of Index Call Warrants) in the level or value of an index, an equity
or debt security, or a portfolio or basket of indices or securities
(including, but not limited to, the price or yield of such securities), any
statistical measure of economic or financial performance (including, but not
limited to, any consumer price, currency or mortgage index) or the price or
value of any commodity or any other item or index or any combination thereof
(the "Index"). Unless otherwise specified in the accompanying Prospectus
Supplement, payments, if any, upon exercise (or deemed 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. Index Warrants may be issued
independently or together with other Securities offered by any Prospectus
Supplement and may be attached to or separate from such other Securities.
GENERAL
The applicable Prospectus Supplement will describe the Index Warrants
offered thereby, the Index Warrant Agreement or Index Warrant Trust Indenture
(each as defined below), as the case may be, relating to such Index Warrants
and the warrant certificates representing the Index Warrants (the "Index
Warrant Certificates"), including the following: (1) whether the Index
Warrants to be issued will be Index Put Warrants, Index Call Warrants or both;
(2) the aggregate number and initial public offering price or purchase price;
(3) the Index for such Index Warrants; (4) whether the Index Warrants will be
deemed 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 such
Index Warrants commences and the date on which such right expires; (5) the
manner in which such Index Warrants may be exercised and any restrictions on,
or other special provisions relating to, the exercise of such Index Warrants;
(6) the minimum number, if any, of such Index Warrants exercisable at any one
time; (7) the maximum number, if any, of such Index Warrants that may, subject
to the Company's election, be exercised by all Index Warrantholders (or by any
person or entity) on any day; (8) 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 the Company to suspend exercise of such Index
Warrants based on market conditions or other circumstances and any other
special provision relating to the exercise of such Index Warrants; (9) any
provisions for the automatic exercise of such Index Warrants other than at
expiration; (10) any provisions permitting the Company to cancel such Index
Warrants upon the occurrence of certain events; (11) any additional
circumstances which would constitute an Event of Default with respect to such
Index Warrants; (12) the method of determining (a) the payment or delivery, if
any, to be made in connection with the exercise or deemed exercise of such
Index Warrants (the "Settlement Value"), (b) the minimum payment or delivery,
if any, to be made upon expiration of such Index Warrants (the "Minimum
Expiration Value"), (c) the payment or delivery to be made upon the exercise
of any right which the Company may have to cancel such Index Warrants and (d)
the value of the Index; (13) 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
12
converting amounts in the relevant foreign currency or currencies into U.S.
dollars (or such other currency or composite currency in which the Index
Warrants are payable); (14) the method of providing for a substitute index or
otherwise determining the payment or delivery, if any, to be made in
connection with the exercise of such Index Warrants if the Index changes or
ceases to be made available by its publisher; (15) the time or times at which
payment or delivery, if any, will be made in respect of such Index Warrants
following exercise or deemed exercise; (16) any provisions for issuing such
Index Warrants in other than book-entry form; (17) if such Index Warrants are
not issued in book-entry form, the place or places at which payment or
delivery on cancellation, if any, and the Minimum Expiration Value, if any, of
such Index Warrants is to be made by the Company; (18) the circumstances, if
any, which will cause the Index Warrants to be deemed to be automatically
exercised; (19) any material risk factors relating to such Index Warrants;
(20) the identity of the Index Warrant Agent; and (21) any other terms of the
Index Warrants (which shall not be 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 such considerations.
Except as otherwise provided in the applicable Prospectus Supplement, each
issue of Index Warrants will contain the terms set forth below.
The Index Warrants which are issued without a Minimum Expiration Value will
be issued under one or more index warrant agreements (each, an "Index Warrant
Agreement") to be entered into between the Company and a bank or trust
company, as warrant agent (the "Index Warrant Agent"), all as described in the
Prospectus Supplement relating to such Index Warrants. The Index Warrant Agent
will act solely as the agent of the Company 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.
The Index Warrants which are issued with a Minimum Expiration Value will be
issued under one or more index warrant trust indentures (each an "Index
Warrant Trust Indenture") to be entered into between the Company and a
corporation (or other person permitted to so act by the Trust Indenture Act of
1939, as amended from time to time (the "Trust Indenture Act")), to act as
trustee (the "Index Warrant Trustee"), all as described in the Prospectus
Supplement relative to such 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.
Forms of Index Warrant Agreement and Index Warrant Trust Indenture and the
respective global index warrant certificates related thereto are filed as
exhibits to the Registration Statement. The summaries herein of certain
provisions of the Index Warrant Agreement, the Index Warrant Trust Indenture
and global index warrant certificates do not purport to be complete and 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 global index warrant certificates, respectively.
The Company will have the right to "reopen" a previous issue of Index
Warrants and to issue additional Index Warrants of such issue without the
consent of any Index Warrantholder.
The Index Warrants involve a high degree of risk, including the risk that
the Index Warrants will expire worthless except for the Minimum Expiration
Value, if any, of such Index Warrants. Investors should therefore be prepared
to sustain a total loss of the purchase price of the Index Warrants (except
for the Minimum Expiration Value, if applicable). Investors who consider
purchasing Index Warrants should be experienced with respect to options and
option transactions and reach an investment decision only after carefully
considering the suitability of the Index Warrants in light of their particular
circumstances and the information set forth below as well as additional
information contained in the Prospectus Supplement relating to such Index
Warrants.
13
Unless otherwise provided in the Prospectus Supplement, each Index Warrant
will entitle the Holder thereof to receive from the Company upon exercise the
Settlement Value of such Index Warrant. Certain Index Warrants issued pursuant
to an Index Warrant Trust Indenture will, if specified in the Prospectus
Supplement, entitle the Index Warrantholder to receive from the Company, under
certain circumstances specified in the Prospectus Supplement, a payment or
delivery equal to the greater of the applicable Settlement Value and a Minimum
Expiration Value of such Index Warrants. In addition, certain Index Warrants
will, if specified in the Prospectus Supplement, entitle Index Warrantholders
to receive from the Company a certain payment or delivery upon cancellation of
the Index Warrants by the Company, upon the occurrence of specified events. In
addition, if so specified in the Prospectus Supplement, following the
occurrence of an extraordinary event, the Settlement Value of an Index Warrant
may, at the option of the Company, be determined on a different basis,
including in connection with automatic exercise at expiration.
Unless otherwise specified in the related Prospectus Supplement, the Index
Warrants will be deemed to be automatically exercised upon expiration or such
earlier date that may be specified. Upon such automatic exercise, Index
Warrantholders will be entitled to receive a payment or delivery 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 such 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 such Index
Warrants, will be specified in the related Prospectus Supplement.
If so specified in the Prospectus Supplement, the Index Warrants may be
canceled by the Company, or the exercise or valuation of, or payment or
delivery for, such Index Warrants may be delayed or postponed upon the
occurrence of an extraordinary event. Any extraordinary events relating to an
issue of Index Warrants will be set forth in the related Prospectus
Supplement. Upon cancellation, the related Index Warrantholders will be
entitled to receive only the applicable payment or delivery on cancellation
specified in such Prospectus Supplement. The payment or delivery on
cancellation 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.
If the Company defaults with respect to any of its obligations under Index
Warrants which are issued with a Minimum Expiration Value pursuant to an Index
Warrant Trust Indenture, such default may be waived by the Index
Warrantholders of a majority in interest of all outstanding Index Warrants,
except a default in the payment or delivery of the Settlement Value, Minimum
Expiration Value or cancellation payment or delivery (if applicable) on such
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 the Index Warrantholder of each outstanding Index Warrant affected.
The Index Warrants are unsecured contractual obligations of the Company and
will rank pari passu with the Company's other unsecured contractual
obligations and with the Company's unsecured and unsubordinated debt. Since
the Company is a holding company, the right of the Company, and hence the
right of creditors of the Company (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 claims of the Company itself as a creditor of the subsidiary may
be recognized. In addition, dividends, loans and advances from certain
subsidiaries, including MLPF&S, to the Company 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 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. Except
as may otherwise be provided in the applicable Prospectus Supplement, Index
14
Warrantholders will not be entitled to receive definitive certificates
representing Index Warrants, unless the depositary is unwilling or unable to
continue as depositary or the Company 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 such
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 such 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
An issue of Index Warrants may be listed on a national securities exchange,
as set forth in the applicable Prospectus Supplement.
MODIFICATION
Any Index Warrant Agreement or Index Warrant Trust Indenture and the terms
of the related Index Warrants may be amended by the Company and the Index
Warrant Agent or Index Warrant Trustee, as the case may be (which amendment
shall take the form of a supplemental index warrant agreement or supplemental
index warrant trust indenture (collectively referred to as "Supplemental
Agreements")), without the consent of the holders of any Index Warrants, for
the purpose of (i) curing any ambiguity, or of curing, correcting or
supplementing any defective or inconsistent provision contained therein, 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 shall not be inconsistent with the provisions thereof or of the
Index Warrants, (ii) evidencing the succession of another corporation to the
Company and the assumption by any such successor of the covenants of the
Company contained in the Index Warrant Agreement or the Index Warrant Trust
Indenture, as the case may be, and the Index Warrants, (iii) appointing a
successor depository, (iv) 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, (v) adding to the covenants
of the Company, for the benefit of the Index Warrantholders or surrendering
any right or power conferred upon the Company under the Index Warrant
Agreement or Index Warrant Trust Indenture, as the case may be, (vi) issuing
Index Warrants in definitive form, or (vii) amending the Index Warrant
Agreement or Index Warrant Trust Indenture, as the case may be, in any manner
which the Company may deem to be necessary or desirable and which will not
materially and adversely affect the interests of the Index Warrantholders.
The Company 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 (which amendment shall take the form of 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 such 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; provided that
no such amendment that (i) changes the determination of the Settlement Value
or the payment or delivery to be made on cancellation, if any, or Minimum
Expiration Value, if any, of the Index Warrants (or any aspects of such
determination) so as to reduce the payment or delivery to be made upon
exercise or deemed exercise, (ii) 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 (iii) 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, may be made without the consent of
each Index Warrantholder affected thereby.
EVENTS OF DEFAULT
Certain events in bankruptcy, insolvency or reorganization of the Company
will constitute an Event of Default with respect to Index Warrants having a
Minimum Expiration Value which are issued under an Index
15
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 such unexercised Index Warrants, which will
immediately become due to the Index Warrantholders upon such election in an
amount equal to the market value of such Index Warrants (assuming the
Company's ability to satisfy its obligations under such Index Warrants as they
would become due) as of the date the Company is notified of the intended
liquidation, as determined by a nationally recognized securities broker-dealer
unaffiliated with the Company and mutually selected by the Company and the
Index Warrant Trustee.
MERGER, CONSOLIDATION, SALE, LEASE OR OTHER DISPOSITIONS
The Company may consolidate or merge with or into any other corporation and
the Company may sell, lease or convey all or substantially all of its assets
to any corporation, provided that (i) the corporation (if other than the
Company) formed by or resulting from any such consolidation or merger or which
shall have received such assets shall be a corporation organized and existing
under the laws of the United States of America or a State thereof and shall
assume the Company's obligations in respect of the payment or delivery of the
Settlement Value (or any Minimum Expiration Value or cancellation payment or
delivery, if applicable) with respect to all the unexercised Index Warrants
and the performance and observance of all of the covenants and conditions of
the Index Warrant Agreement or Index Warrant Trust Indenture, as the case may
be, to be performed or observed by the Company, and (ii) the Company or such
successor corporation, as the case may be, shall not immediately be 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.
DESCRIPTION OF PREFERRED STOCK
The following description sets forth certain general terms of Preferred
Stock which may be issued by the Company. The terms of any series of the
Preferred Stock will be described in the Prospectus Supplement relating to the
Preferred Stock being offered thereby. The description set forth below and in
any Prospectus Supplement does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the Company's Restated
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
which is filed as an exhibit to the Registration Statement, and the
Certificate of Designations (the "Certificate of Designations") relating to
each particular series of the Preferred Stock, which was or will be filed with
the Commission at or prior to the time of sale of such Preferred Stock.
GENERAL
Pursuant to the Certificate of Incorporation, the Company is authorized to
issue up to 25,000,000 shares of undesignated preferred stock, par value $1.00
per share. The Board of Directors of the Company 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 September 26, 1997, the Company had
19,957,500 shares available for issuance as Preferred Stock.
The Company has authorized the issuance of shares of Series A Junior
Preferred Stock, par value $1.00 per share (the "Series A Junior Preferred
Stock"), of the Company upon exercise of certain preferred share purchase
rights associated with each share of Common Stock outstanding. See
"Description of Common Stock -- Rights Agreement".
16
In addition, as described under "Description of Depositary Shares" the
Company, at its option, may elect to offer depositary shares ("Depositary
Shares") evidenced by depositary receipts, each representing a fraction (to be
specified in the Prospectus Supplement relating to the Depositary Shares
offered thereby) of a share of the particular series of Preferred Stock issued
and deposited with a depositary, in lieu of offering full shares of such
series of Preferred Stock.
The Preferred Stock shall have the dividend, liquidation, redemption, voting
and conversion or exchange rights set forth below unless otherwise specified
in the Prospectus Supplement relating to the particular series of Preferred
Stock offered thereby. The applicable Prospectus Supplement will describe the
terms of such Preferred Stock, including, where applicable, the following: (1)
the designation, stated value and liquidation preference of such Preferred
Stock and the number of shares offered; (2) the offering price or prices; (3)
the dividend rate or rates (or method of calculation), the dividend periods,
the date on which dividends shall be payable and whether such dividends shall
be cumulative or noncumulative and, if cumulative, the dates from which
dividends shall commence to cumulate; (4) any redemption or sinking fund
provisions; (5) any conversion or exchange provisions; (6) voting rights, if
any; (7) to the extent permitted by applicable law, whether such Preferred
Stock will be issued in certificated or book-entry form; (8) whether such
Preferred Stock will be listed on a national securities exchange; (9)
information with respect to book-entry procedures, if any; and (10) any
additional rights, preferences, privileges, limitations and restrictions of
such Preferred Stock (which shall not be inconsistent with the provisions of
the Certificate of Incorporation or the Certificate of Designations
establishing such series of Preferred Stock).
The Preferred Stock will be, when issued against payment therefor, fully
paid and nonassessable. Holders thereof shall have no preemptive rights to
subscribe for any additional securities which may be issued by the Company.
Unless otherwise specified in the applicable Prospectus Supplement, the shares
of each series of Preferred Stock will rank on a parity with all other
outstanding series of preferred stock issued by the Company as to payment of
dividends (except with respect to cumulation thereof) and as to the
distribution of assets upon liquidation, dissolution, or winding up of the
Company. As of September 26, 1997, there were 42,500 shares of 9% Cumulative
Preferred Stock, Series A (the "9% Preferred Stock") outstanding. Each series
of Preferred Stock will rank prior to the Common Stock, and any other stock of
the Company that is expressly made junior to such 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 the Company 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 the Company
upon the latter's liquidation or recapitalization will be subject to the prior
claims of such subsidiary's creditors and preferred stockholders, except to
the extent the Company may itself be a creditor with recognized claims against
such subsidiary or a holder of preferred stock of such 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 the Company (or a duly
authorized committee thereof) 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 offered thereby.
Dividends on the Preferred Stock may be cumulative ("Cumulative Preferred
Stock") or noncumulative ("Noncumulative Preferred Stock") as provided in the
applicable Prospectus Supplement. Unless otherwise provided in the Prospectus
Supplement, dividends on the Cumulative Preferred Stock will be cumulative
from the date of original issue of such series and will be payable quarterly
in arrears on the dates specified in the Prospectus Supplement. If any date so
specified as a dividend payment date is not a business day, dividends (if
declared) on the Preferred Stock (unless otherwise provided in the Prospectus
Supplement) will be paid on the immediately succeeding business day, without
interest. The Prospectus Supplement will set forth the applicable
17
dividend period with respect to a dividend payment date. If the Board of
Directors of the Company (or a duly authorized committee thereof) fails to
declare a dividend on any series of Noncumulative Preferred Stock for any
dividend period, the Company shall have no obligation to pay a dividend for
such period, whether or not dividends on such series of Noncumulative
Preferred Stock are declared for any future dividend period. Dividends on the
Preferred Stock will be payable to record holders as they appear on the stock
books of the Company on such record dates, not more than 30 nor less than 15
days preceding the payment dates thereof, as shall be fixed by the Board of
Directors of the Company (or a duly authorized committee thereof).
No dividends will be declared or paid or set apart for payment on the
preferred stock of any series ranking, as to dividends, on a parity 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 thereof set apart for such payment on such series
of Preferred Stock for (i) all dividend periods terminating on or prior to the
date of payment of full cumulative dividends (in the case of a series of
Cumulative Preferred Stock) or (ii) the immediately preceding dividend period
(in the case of a series of Noncumulative Preferred Stock). When dividends are
not paid in full upon such series of Preferred Stock (whether Cumulative
Preferred Stock or Noncumulative Preferred Stock), and any other preferred
stock ranking on a parity as to dividends with such series of Preferred Stock,
all dividends declared upon shares of such series of Preferred Stock and any
other preferred stock ranking on a parity as to dividends will be declared "pro
rata" so that the amount of dividends declared per share on such series of
Preferred Stock and such other preferred stock will in all cases bear to each
other the same ratio that accrued dividends per share (which, in the case of
Noncumulative Preferred Stock, shall not include any cumulation in respect of
unpaid dividends for prior dividend periods) on the shares of such series of
Preferred Stock and such other preferred stock bear to each other.
Except as provided in the preceding paragraph, unless full dividends on all
outstanding shares of any such series of Preferred Stock have been declared
and paid for all past dividend periods, in the case of a series of Cumulative
Preferred Stock, or for the immediately preceding dividend period, in the case
of Noncumulative Preferred Stock, no dividends (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 the Company or another stock of
the Company ranking junior to the Preferred Stock as to dividends and upon
liquidation) will be declared or paid or set aside for payment or other
distribution declared or made upon the Common Stock of the Company or upon any
other stock of the Company ranking junior to or on parity with the Preferred
Stock as to dividends or upon liquidation, nor will any Common Stock of the
Company nor any other stock of the Company ranking junior to or on parity with
such Preferred Stock as to dividends or upon liquidation be redeemed,
purchased or otherwise acquired, other than in connection with the
distribution or trading thereof, for any consideration (or any moneys be paid
to or made available for a sinking fund for the redemption of any shares of
any such stock) by the Company (except by conversion or exchange for stock of
the Company ranking junior to the Preferred Stock as to dividends and upon
liquidation).
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.
Subsidiaries of the Company have issued $1.325 billion of perpetual Trust
Originated Preferred Securities (SM). In connection with the issuance of such
Trust Originated Preferred Securities (SM), the Company has agreed, among other
things, that if full distributions on such securities have not been paid or
set apart for payment or the Company is in default of certain related
guarantee obligations, the Company, 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
the Company, the holders of the Preferred Stock will have preference and
priority over the Common Stock of the Company and any other
18
class of stock of the Company ranking junior to the Preferred Stock upon
liquidation, dissolution or winding up, for payments out of or distributions
of the assets of the Company or proceeds thereof, whether from capital or
surplus, of the amount per share set forth in the Prospectus Supplement plus
all dividends (whether or not earned or declared), accrued and unpaid thereon
to the date of final distribution to such holders (but in the case of
Noncumulative Preferred Stock, without cumulation of unpaid dividends for
prior dividend periods), and after such payment the holders of Preferred Stock
will be entitled to no other payments. If, in the case of any such
liquidation, dissolution or winding up of the Company, the assets of the
Company or proceeds thereof should be insufficient to make the full
liquidation payment in the amount per share set forth in the Prospectus
Supplement relating to the series of Preferred Stock offered thereby, plus all
accrued and unpaid dividends on the Preferred Stock (but in the case of
Noncumulative Preferred Stock without cumulation of unpaid dividends for prior
dividend periods), and liquidating payments on any other preferred stock
ranking as to liquidation, dissolution or winding up on a parity with the
Preferred Stock, then such assets and proceeds will be distributed among the
holders of the Preferred Stock and any such other preferred stock ratably in
accordance with the respective amounts which would be payable on such shares
of Preferred Stock and any such other preferred stock if all amounts thereon
were paid in full. A consolidation or merger of the Company with one or more
corporations will not be deemed to be a liquidation, dissolution or winding
up, voluntary or involuntary, of the Company.
REDEMPTION
If specified in the Prospectus Supplement relating to the series of
Preferred Stock offered thereby, the Company may, at its option, at any time
or from time to time on not less than 30 nor more than 60 days notice, redeem
such 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 the Company
(or a duly authorized committee thereof) to be equitable. From and after the
redemption date (unless default shall be made by the Company in providing for
the payment of the redemption price), dividends shall cease to accrue on the
shares of such series of Preferred Stock called for redemption and all rights
of the holders thereof (except the right to receive the redemption price)
shall cease.
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 from time to time required by law.
Whenever dividends payable on the Preferred Stock shall be in arrears for
such number of dividend periods, whether or not consecutive, which shall in
the aggregate contain a number of months 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 on a
parity 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. Such
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 shall have been paid in full and, in the case of Noncumulative Preferred
Stock, until all dividends on shares of Noncumulative Preferred Stock shall
have been paid in full for at least one year. Upon payment in full of such
dividends, such voting rights shall terminate except as expressly provided by
law, subject to re-vesting in the event of each and every subsequent default
in the payment of dividends as aforesaid. Holders of all series of preferred
stock which are granted such voting rights (which rank on a parity 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 such 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
19
described in this paragraph, the Board of Directors of the Company will be
increased by two directors, and the holders of the Preferred Stock will have
the exclusive right as members of such 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 such holders will terminate
immediately. Whenever the term of office of the directors elected by such
holders ends and the related special voting rights expire, the number of
directors will automatically be decreased to such number as would otherwise
prevail.
So long as any shares of Preferred Stock remain outstanding, the Company
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 on a
parity 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, (i) authorize, create or issue, or increase
the authorized or issued amount of, any class or series of stock ranking prior
to the Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up; or (ii)
amend, alter or repeal, whether by merger, consolidation or otherwise, the
provisions of the Certificate of Incorporation or the Certificate of
Designations of the Preferred Stock designating such Preferred Stock and the
preferences and privileges, relative, participating, optional or other special
rights and qualifications, limitations and restrictions thereof, so as to
materially and adversely affect any right, preference, privilege or voting
power of the Preferred Stock or the holders thereof; 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 on a parity 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 will not be deemed to
materially and adversely affect such 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.
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 such
series are convertible or exchangeable into Common Stock, another series of
Preferred Stock or Debt Securities.
OUTSTANDING PREFERRED STOCK
At September 26, 1997, there were outstanding 42,500 shares of 9% Preferred
Stock represented by 17,000,000 Depositary Shares.
"General"
The 9% Preferred Stock has preference over the Common Stock and the Series A
Junior Preferred Stock issuable pursuant to 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 the Company. Holders of the 9% Preferred Stock do not have any preemptive
rights to subscribe for any additional securities which may be issued by the
Company.
"Dividends"
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.
20
"Voting Rights"
Holders of the 9% Preferred Stock have no voting rights except as set forth
above under "--Voting Rights".
"Liquidation Rights"
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of outstanding shares of 9% Preferred
Stock are entitled to receive out of assets of the Company available for
distribution to stockholders a distribution of $10,000 per share, plus
accumulated and unpaid dividends, if any.
"Redemption"
The 9% Preferred Stock is not redeemable prior to December 30, 2004. On and
after that date, the 9% Preferred Stock is redeemable at the option of the
Company, 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.
DESCRIPTION OF DEPOSITARY SHARES
The Company may issue receipts ("Depositary Receipts") for Depositary
Shares, each of which will represent a fraction of a share of Preferred Stock.
Shares of Preferred Stock of each class or series represented by Depositary
Shares will be deposited under deposit agreements (each a "Deposit Agreement")
to be entered into among the Company, a bank or trust company, as depository
(the "Depositary"), and the holders from time to time of the Depositary
Receipts. Depositary Shares may be issued independently or together with other
Securities offered by any Prospectus Supplement and may be attached to or
separate from such other Securities. A copy of the form of Deposit Agreement,
including the form of certificates representing the Depositary Receipts (the
"Depositary Receipt Certificates"), is filed as an exhibit to the Registration
Statement. The following summaries of certain provisions of the Deposit
Agreements and the Depositary Receipt Certificates do not purport to be
complete and 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 therein of certain
terms.
GENERAL
The Depositary Shares are to be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the
issuance and delivery of the Preferred Stock by the Company to the Depositary,
the Company will cause the Depositary to issue, on behalf of the Company, 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 such Depositary Share,
to all the rights and preferences of the Preferred Stock represented thereby
(including dividend, voting, conversion, redemption and liquidation rights),
all as shall be set forth in the Prospectus Supplement relating to the
Depositary Receipts offered thereby.
The Depositary Shares shall 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 Depositary Shares offered thereby, the
Deposit Agreement relating to such Depositary Shares and the Depositary
Receipt Certificates representing such Depositary Shares, including the
following: (1) the designation, stated value and liquidation preference of
such Depositary Shares and the number of shares offered; (2) the offering
price or prices; (3) the dividend rate or rates (or method of calculation),
the dividend periods, the dates on which dividends shall be payable and
whether such dividends shall be cumulative or noncumulative and, if
cumulative, the dates from which dividends shall commence to
21
cumulate; (4) any redemption or sinking fund provisions; (5) any conversion or
exchange provisions; (6) any material risk factors relating to such Depositary
Shares; (7) the identity of the Depositary; and (8) any other terms of such
Depositary Shares (which shall not be inconsistent with the provisions of the
Deposit Agreement).
BOOK-ENTRY PROCEDURES
Except as may otherwise be provided in the applicable Prospectus Supplement,
the Depositary Receipts will be issued in the form of global Depositary
Receipt Certificates, registered in the name of a depositary or its nominee.
Except as may otherwise be provided in the applicable Prospectus Supplement,
beneficial owners will not be entitled to receive definitive certificates
representing Depositary Receipts unless the depositary is unwilling or unable
to continue as depositary or the Company decides to have the Depositary
Receipts represented by definitive certificates. A beneficial owner's interest
in a Depositary Receipt 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 Depositary Receipts held by an individual brokerage
firm for its clients will be maintained on the records of the depositary in
the name of such brokerage firm or its agent. Transfer of ownership of any
Depositary Receipt 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 such Depositary Receipts
owned by such holders, subject to certain obligations of holders to file
proofs, certificates and other information and to pay certain charges and
expenses to the Depositary.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary
Receipts entitled thereto, 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 the
Company, determines that it is not feasible to make such distribution, in
which case the Depositary may, with the approval of the Company, sell such
property and distribute the net proceeds from such sale to such holders.
WITHDRAWAL OF STOCK
Upon surrender of the Depositary Receipts at the corporate trust office of
the Depositary (unless the related Depositary Shares have previously been
called for redemption), the holder of the Depositary Shares evidenced thereby
will be entitled to delivery, at such office to or upon his order, of the
number of whole shares of the Preferred Stock and any money or other property
represented by such Depositary Shares. Holders of Depositary Receipts will be
entitled to receive whole shares of the Preferred Stock on the basis of the
proportion of Preferred Stock represented by each Depositary Share as
specified in the applicable Prospectus Supplement, but holders of such whole
shares of Preferred Stock will not thereafter be entitled to receive
Depositary Shares therefor. 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 such holder at the same time a new
Depositary Receipt evidencing such excess number of Depositary Shares. In no
event will fractional shares of Preferred Stock be delivered upon surrender of
Depositary Receipts to the Depositary.
REDEMPTION OF DEPOSITARY SHARES
Whenever the Company 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 the Company shall have 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 thereon to the date fixed for redemption.
The redemption price per Depositary Share will be equal to the redemption
price and
22
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 the lot or pro rata
as may be determined by the Depositary.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares so called for redemption will cease, except
the right to receive any moneys payable upon such redemption and any money or
other property to which the holders of such Depositary Shares were entitled
upon such redemption upon surrender to the Depositary of the Depositary
Receipts evidencing such 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 such notice of meeting to the record holders of the Depositary Receipts
relating to Preferred Stock. Each record holder of such Depositary Shares on
the record date (which will be the same date as the record date for the
Preferred Stock) will be entitled to instruct the Depositary as to the
exercise of the voting rights pertaining to the amount of Preferred Stock
represented by such holder's Depositary Receipts. The Depositary will
endeavor, insofar as practicable, to vote the amount of Preferred Stock
represented by such Depositary Shares in accordance with such instructions,
and the Company 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 abstain from voting shares of Preferred Stock to the extent it
does not receive specific instructions from the holders of Depositary Receipts
representing shares of Preferred Stock.
EXCHANGE OF PREFERRED STOCK
Whenever the Company 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 the Company shall have 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 shall 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 such Depositary Shares, including
all amounts paid by the Company in respect of dividends which on the exchange
date have accumulated on the shares of Preferred Stock to be so exchanged and
have not theretofore been paid.
CONVERSION OF PREFERRED STOCK
The Depositary Shares, as such, are not convertible or exchangeable into
Common Stock or any other securities or property of the Company. Nevertheless,
if so specified in the Prospectus Supplement relating to the Depositary Shares
offered thereby, the Depositary Receipts may be surrendered by holders thereof
to the Depositary with written instructions to the Depositary to instruct the
Company to cause conversion or exchange of the Preferred Stock represented by
the Depositary Shares evidenced by such Depositary Receipts into whole shares
of Common Stock, other shares of Preferred Stock or Debt Securities of the
Company, and the Company has agreed that upon receipt of such instructions and
any amounts payable in respect thereof, it will cause the conversion or
exchange thereof utilizing the same procedures as those provided for delivery
of Preferred Stock to effect such conversions or exchange. If the Depositary
Shares represented by a Depositary Receipt are to be converted in part only, a
new Depositary Receipt or Receipts will be issued for any Depositary Shares
not to be converted or exchanged.
23
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 the Company and the Depositary. However, any amendment that materially
and adversely alters the rights of the holders of Depositary Receipts will not
be effective unless such amendment has been approved by the holders of at
least a majority (or, in the case of amendments relating to or affecting
rights to receive dividends or distributions or voting, redemption or
conversion rights, two-thirds) of the Depositary Shares then outstanding.
The Deposit Agreement may be terminated by the Company 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, such
number of whole or fractional shares of Preferred Stock as is represented by
such Depositary Receipts. The Deposit Agreement will automatically terminate
if (i) all outstanding Depositary Shares have been redeemed, (ii) 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 thereto
have been withdrawn in accordance with the terms of the Deposit Agreement, or
(iii) there has been a final distribution in respect of the Preferred Stock in
connection with any liquidation, dissolution or winding up of the Company and
such distribution has been distributed to the holders of Depositary Receipts.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
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 such
other charges as 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 thereby
until all such taxes and charges with respect to such Depositary Receipts or
shares of Preferred Stock are paid by the holders thereof.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Company notice of
its election to do so, and the Company may at any time remove the Depositary.
Any such resignation or removal will take effect upon the appointment of a
successor Depositary, which successor Depositary 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.
MISCELLANEOUS
The Depositary will forward to holders of Depositary Receipts all reports
and communications received from the Company which are received by the
Depositary and which the Company is required to furnish to holders of the
underlying Preferred Stock. The Depositary will also, promptly after receipt
thereof, transmit to the holders of Depositary Receipts, copies of all notices
and reports required by law, the rules of any national securities exchange or
the Company's Certificate of Incorporation to be furnished to the record
holders of Depositary Receipts.
Neither the Depositary nor the Company 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
satisfactory indemnity is furnished. The Company 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 the Company will be liable
if it is prevented from or delayed, by law, by provision of the Company's
Certificate of Incorporation or any circumstances beyond its control, in
performing its obligations under the Deposit Agreement.
24
DESCRIPTION OF PREFERRED STOCK WARRANTS
The Company may issue Preferred Stock Warrants for the purchase of Preferred
Stock. Preferred Stock Warrants may be issued independently or together with
other Securities offered by any Prospectus Supplement and may be attached to
or separate from such other Securities. Each series of Preferred Stock
Warrants is to be issued under a warrant agreement (each a "Preferred Stock
Warrant Agreement") to be entered into between the Company and a bank or trust
company, as preferred stock warrant agent (the "Preferred Stock Warrant
Agent"), all as set forth in the Prospectus Supplement relating to the
Preferred Stock Warrants offered thereby. A copy of the form of Preferred
Stock Warrant Agreement, including the form of warrant certificates
representing the Preferred Stock Warrants (the "Preferred Stock Warrant
Certificates"), is filed as an exhibit to the Registration Statement. The
following summaries of certain provisions of the Preferred Stock Warrant
Agreement and Preferred Stock Warrant Certificates do not purport to be
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
therein of certain terms.
GENERAL
The applicable Prospectus Supplement will describe the terms of the
Preferred Stock Warrants offered thereby, the Preferred Stock Warrant
Agreement relating to such Preferred Stock Warrants and the Preferred Stock
Warrant Certificates representing such Preferred Stock Warrants, including the
following: (1) the offering price or prices; (2) the designation, aggregate
number and terms of the series of Preferred Stock that may be purchased upon
exercise of such Preferred Stock Warrants and the minimum number of Preferred
Stock Warrants that are exercisable; (3) the designation and terms of the
Securities, if any, with which such Preferred Stock Warrants are being offered
and the number of such Preferred Stock Warrants being offered with each such
Security; (4) the date, if any, on and after which such Preferred Stock
Warrants and the related Securities will be transferable separately; (5) the
number and stated values of the series of Preferred Stock that may be
purchased upon exercise of each such Preferred Stock Warrant and the price at
which such number of shares of Preferred Stock of such series may be purchased
upon such exercise, and events or conditions under which such number of shares
may be subject to adjustment; (6) the date on which the right to exercise such
Preferred Stock Warrants shall commence and the date on which such right shall
expire (the "Preferred Stock Warrant Expiration Date"); (7) the circumstances,
if any, which will cause the Preferred Stock Warrants to be deemed to be
automatically exercised; (8) any material risk factors relating to such
Preferred Stock Warrants; (9) the identity of the Preferred Stock Warrant
Agent; and (10) any other terms of such Preferred Stock Warrants (which shall
not be inconsistent with the provisions of the Preferred Stock Warrant
Agreement).
Preferred Stock Warrant Certificates may be exchanged for new Preferred
Stock Warrant Certificates of different denominations, may (if in registered
form) be presented for registration of transfer, and may be exercised at the
corporate trust office of the Preferred Stock Warrant Agent or any other
office indicated in the applicable Prospectus Supplement. Prior to the
exercise of any Preferred Stock Warrant, a Holder thereof shall have no rights
of a holder of shares of the Preferred Stock that may be purchased upon such
exercise, including the right to receive payment of dividends, if any, on the
underlying Preferred Stock or the right to vote such 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
such 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. Except as may otherwise be provided in the applicable Prospectus
Supplement, beneficial owners will not be entitled to receive definitive
certificates representing Preferred Stock Warrants unless the depositary
25
is unwilling or unable to continue as depositary, certain specified events of
bankruptcy or insolvency occur with respect to the Company or the Company
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 a 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 such
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.
EXERCISE OF PREFERRED STOCK WARRANTS
Each Preferred Stock Warrant will entitle the Holder thereof to purchase
such number of shares of Preferred Stock at such exercise price as shall be
set forth in, or calculable from, the applicable Prospectus Supplement. After
the close of business on the Expiration Date (or such later date to which such
Expiration Date may be extended by the Company), unexercised Preferred Stock
Warrants will become void.
Preferred Stock Warrants may be exercised as set forth in the Prospectus
Supplement relating to the Preferred Stock Warrants offered thereby. Upon
receipt of payment and the Preferred Stock Warrant Certificate properly
completed and duly executed at the corporate trust office of the Preferred
Stock Warrant Agent or any other office indicated in the applicable Prospectus
Supplement, the Company will, as soon as practicable, issue and deliver the
shares of Preferred Stock purchased upon such exercise. If less than all of
the Preferred Stock Warrants represented by such Preferred Stock Warrant
Certificate are exercised, a new Preferred Stock Warrant Certificate will be
issued for the remaining number of Preferred Stock Warrants.
LISTING
An issue of Preferred Stock Warrants may be listed on a national securities
exchange, as set forth in the applicable Prospectus Supplement.
MODIFICATIONS
Any Preferred Stock Warrant Agreement and the terms of the related Preferred
Stock Warrants may be amended by the Company and the Preferred Stock Warrant
Agent, 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 contained therein, or in any other
manner which the Company may deem necessary or desirable and which will not
materially and adversely affect the interests of the Preferred Stock
Warrantholders.
The Company 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 such amendment, provided that no such amendment that shortens the period of
time during which the Preferred Stock Warrants may be exercised or 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 for amendment of the Preferred Stock
Warrant Agreement or the terms of the related Preferred Stock Warrants without
the consent of each of the Preferred Stock Warrantholders affected thereby.
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.
26
DESCRIPTION OF COMMON STOCK
The following description sets forth the general terms of Common Stock which
may be issued by the Company. The description set forth below and in any
Prospectus Supplement does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, the Certificate of Incorporation
which is filed as an exhibit to the Registration Statement.
GENERAL
Pursuant to the Certificate of Incorporation, the Company is authorized to
issue up to 500,000,000 shares of Common Stock. As of September 26, 1997,
there were 332,352,210 shares of Common Stock outstanding. 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 shall have the dividend, voting, liquidation and preemptive
rights set forth below unless otherwise specified in the Prospectus Supplement
relating to the Common Stock offered thereby. The applicable Prospectus
Supplement will describe the terms of such Common Stock including, where
applicable, the following: (1) the number of shares to be offered; (2) the
offering price or prices; (3) to the extent permitted by applicable law,
whether such Common Stock will be issued in certificated or book-entry form;
(4) information with respect to book-entry procedures, if any; and (5) any
additional terms of such Common Stock (which shall not be inconsistent with
the provisions of the Certificate of Incorporation).
The Common Stock will be, when issued against payment therefor, fully paid
and nonassessable. Holders thereof will have no preemptive rights to subscribe
for any additional securities which may be issued by the Company. 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 September 26, 1997, 17,000,000 Depositary
Shares, each representing a one-four-hundredth interest in a share of 9%
Preferred Stock, were outstanding. The Board of Directors of the Company may
cause additional shares of Preferred Stock to be issued to obtain additional
financing, in connection with acquisitions, to officers, directors and
employees of the Company and its subsidiaries pursuant to benefit plans or
otherwise and for other proper corporate purposes.
The Company is the principal transfer agent for the Common Stock.
Because the Company 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 the Company
upon the latter's liquidation or recapitalization will be subject to the prior
claims of such subsidiary's creditors and preferred stockholders, except to
the extent the Company may itself be a creditor with recognized claims against
such subsidiary or a holder of preferred stock of such subsidiary.
DIVIDENDS
The Company may pay dividends on the Common Stock out of funds legally
available therefor as, if and when declared by the Board of Directors of the
Company (or a duly authorized committee thereof).
Subsidiaries of the Company have issued $1.325 billion of perpetual Trust
Originated Preferred Securities SM. In connection with the issuance of such
Trust Originated Preferred Securities SM, the Company has agreed, among other
things, that if full distributions on such securities have not been paid or
set apart for payment or the Company is in default of certain related
guarantee obligations, the Company, 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.
27
LIQUIDATION RIGHTS
Upon any voluntary or involuntary liquidation, dissolution, or winding up of
the Company, 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
the Company.
VOTING RIGHTS
Except as described under "Description of Preferred Stock -- Outstanding
Preferred Stock -- Voting Rights", the holders of the Common Stock currently
possess exclusive voting rights in the Company. The Board of Directors of the
Company may, however, specify voting power with respect 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 the Company is currently comprised of 15
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
On December 2, 1997, the Board of Directors of the Company approved and
adopted the Amended and Restated Rights Agreement, which amends and restates
the plan that had originally been adopted in December 1987 (the "Rights
Agreement"). Under the Rights Agreement, preferred purchase rights (the
"Rights") were distributed to holders of Common Stock. The Rights will
separate from the Common Stock ten days following the earlier of: (a) an
announcement of an acquisition by a person or group ("acquiring party") of 15%
or more of the outstanding common shares of the Company; or (b) the
commencement of a tender or exchange offer for 15% or more of the shares of
Common Stock outstanding. The 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 the Company pursuant to an applicable
Prospectus Supplement. The 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.
If, after the Rights have separated, (i) the Company is the surviving
corporation in a merger with an acquiring party, (ii) a person becomes the
beneficial owner of 15% or more of the Common Stock, (iii) an acquiring party
engages in one or more "self-dealing" transactions, or (iv) an event occurs
which results in such acquiring party's ownership interest being increased by
more than 1%, then each holder of a Right will have the right to purchase,
upon exercise, Units of Series A Junior Preferred Stock having a value equal
to two times the exercise price of the Right and, in addition, Rights held by
or transferred in certain circumstances by, an acquiring party may immediately
become void. In the event that, at any time, (i) the Company is acquired in a
merger or other business combination transaction and the Company is not the
surviving corporation, or (ii) any person consolidates or merges with the
Company and all or part of the Common Stock is converted or exchanged for
securities, cash or property of any other person or (iii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a
right shall thereafter have the right to purchase, upon exercise, common stock
of the acquiring party having a value equal to two times the exercise price of
the Right. The Rights expire on December 2, 2007 and are redeemable at the
option of a majority of the independent directors of the Company at $.01 per
Right at any time until the tenth day following an announcement of the
acquisition of 20% 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 the Company.
28
The Certificate of Designations of the Series A Junior Preferred Stock (the
"Series A Certificate of Designations") 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 Series A Certificate of Designations. Such dividend rights shall
be cumulative. The Series A Junior Preferred Stock shall rank junior in right
of payment of dividends to the 9% Preferred Stock and to all other Preferred
Stock issued by the Company, unless the terms of such Preferred Stock provide
otherwise. The holders of Units of the Series A Junior Preferred Stock shall
have one vote per Unit on all matters submitted to the stockholders of the
Company, subject to certain adjustments. If at any time dividends on any Units
of the Series A Junior Preferred Stock shall be in arrears in an amount equal
to six quarterly dividends thereon, then during such default period, the
holders of all Units, voting separately as a class, shall have the right to
elect two directors to the Board of Directors of the Company. Additionally,
whenever quarterly dividends or other dividends or distributions payable on
the Series A Junior Preferred Stock are in arrears, the Company 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 the Company 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 the Company, 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 Series A
Certificate of Designations prior to 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.
CERTAIN CHARTER PROVISIONS
The Certificate of Incorporation provides that the Company may not merge or
consolidate with any one or more corporations, joint-stock associations or
non-stock corporations (except under certain circumstances); 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
the Company and the holders of a majority of the outstanding shares of Common
Stock entitled to vote thereon. Additionally, the Certificate of Incorporation
provides that specified business combinations involving the Company and an
interested stockholder or an affiliate or associate of such stockholder must
be approved by 80% of the voting power of the outstanding shares of capital
stock of the Company entitled to vote generally in the election of directors
(the "Voting Stock"). The vote of 80% of the voting power of the Voting Stock
is required for amendment of these provisions. The Certificate of
Incorporation also provides that only the Board of Directors of the Company
has the authority to call special stockholder meetings.
The foregoing provisions of the Certificate of Incorporation may have the
effect of delaying, deferring or preventing a change in control of the
Company.
DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue Common Stock Warrants for the purchase of Common
Stock. Common Stock Warrants may be issued independently or together with
other Securities offered by any Prospectus Supplement and may be attached to
or separate from such Securities. Each series of Common Stock Warrants will be
issued under a warrant agreement (each a "Common Stock Warrant Agreement") to
be entered into between the Company and a bank or trust company, as common
stock warrant agent (the "Common Stock Warrant Agent"), all as set forth in
the Prospectus Supplement relating to the Common Stock Warrants offered
thereby. A copy of the form of Common Stock Warrant Agreement, including the
form of warrant certificates representing the Common Stock Warrants (the
"Common Stock Warrant Certificates"), 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. The following summaries of certain provisions of
the Common Stock Warrant Agreement and Common Stock Warrant Certificates do
not purport to
29
be complete and 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, respectively, including the definitions
therein of certain terms.
GENERAL
The applicable Prospectus Supplement will describe the terms of the Common
Stock Warrants offered thereby, the Common Stock Warrant Agreement relating to
such Common Stock Warrants and the Common Stock Warrant Certificates,
including the following: (1) the offering price or prices; (2) the aggregate
number of shares of Common Stock that may be purchased upon exercise of such
Common Stock Warrants and minimum number of Common Stock Warrants that are
exercisable; (3) the number of Securities, if any, with which such Common
Stock Warrants are being offered and the number of such Common Stock Warrants
being offered with each such Security; (4) the date on and after which such
Common Stock Warrants and the related Securities, if any, will be transferable
separately; (5) the number of shares of Common Stock purchasable upon exercise
of each such Common Stock Warrant and the price at which such number of shares
of Common Stock may be purchased upon such exercise, and events or conditions
under which such number of shares may be subject to adjustment; (6) the date
on which the right to exercise such Common Stock Warrants shall commence and
the date on which such right shall expire (the "Common Stock Warrant
Expiration Date"); (7) the circumstances, if any, which will cause the Common
Stock Warrants to be deemed to be automatically exercised; (8) any material
risk factors relating to such Common Stock Warrants; (9) the identity of the
Common Stock Warrant Agent; and (10) any other terms of such Common Stock
Warrants (which shall not be inconsistent with the provisions of the Common
Stock Warrant Agreement).
Common Stock Warrant Certificates may be exchanged for new Common Stock
Warrant Certificates of different denominations, may (if in registered form)
be presented for registration of transfer, and may be exercised at the
corporate trust office of the Common Stock Warrant Agent or any other office
indicated in the applicable Prospectus Supplement. Prior to the exercise of
any Common Stock Warrants to purchase Common Stock, Holders of such Common
Stock Warrants will not have any rights of Holders of shares of the Common
Stock purchasable upon such exercise, including the right to receive payments
of dividends, if any, on the Common Stock purchasable upon such exercise or
the right to vote such 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 such
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.
Except as may otherwise be provided in the applicable Prospectus Supplement,
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 the Company or the Company 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 such 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 the Holder thereof to purchase such
number of shares of Common Stock at such exercise price as shall be set forth
in, or calculable from, the applicable Prospectus Supplement. After the close
of business on the Expiration Date (or such later date to which such
Expiration Date may be extended by the Company), unexercised Common Stock
Warrants will become void.
30
Common Stock Warrants may be exercised as set forth in the applicable
Prospectus Supplement relating to the Common Stock Warrants offered thereby.
Upon receipt of payment and the Common Stock Warrant Certificate properly
completed and duly executed at the corporate trust office of the Common Stock
Warrant Agent or any other office indicated in the applicable Prospectus
Supplement, the Company will, as soon as practicable, issue and deliver the
shares of Common Stock purchased upon such exercise. If less than all of the
Common Stock Warrants represented by such Common Stock Warrant Certificate are
exercised, a new Common Stock Warrant Certificate will be issued for the
remaining amount of Common Stock Warrants.
LISTING
An issue of Common Stock Warrants may be listed on a national securities
exchange, as set forth in the applicable Prospectus Supplement.
MODIFICATIONS
Any Common Stock Warrant Agreement and the terms of the related Common Stock
Warrants may be amended by the Company and the Common Stock Warrant Agent,
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 contained therein, or in any other manner
which the Company may deem necessary or desirable and which will not
materially and adversely affect the interests of the Common Stock
Warrantholders.
The Company 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 number of the
then outstanding unexercised Common Stock Warrants affected by such amendment,
provided that no such amendment that shortens the period of time during which
the Common Stock Warrants may be exercised or 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 for amendment of the Common Stock Warrant Agreement or the
terms of the related Common Stock Warrants may be made without the consent of
each of the Common Stock Warrantholders affected thereby.
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
The Company may sell Securities (i) through MLPF&S as agent, (ii) to the
public through, or through underwriting syndicates managed or co-managed by,
one or more underwriters, including MLPF&S, or (iii) directly to purchasers.
The Prospectus Supplement with respect to the Securities of a particular
series describes the terms of the offering of such 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, the discounts and commissions to be allowed or paid to dealers,
if any, and the exchanges, if any, 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 offered thereby.
Under certain circumstances, the Company may repurchase Securities and reoffer
them to the public as set forth above. The Company may also arrange for
repurchases and resales of such Securities by dealers.
31
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters to solicit offers by certain institutions to purchase Debt
Securities from the Company pursuant to delayed delivery contracts providing
for payment and delivery on the date stated in the Prospectus Supplement. Each
such contract will be for an amount not less than, and, unless the Company
otherwise agrees, the aggregate principal amount of Debt Securities sold
pursuant to such contracts shall not be more than, the respective amounts
stated in the Prospectus Supplement. Institutions with whom such 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 the Company. Delayed delivery contracts will not be subject to any
conditions except that the purchase by an institution of the Debt Securities
covered thereby shall not at the time of delivery be prohibited under the laws
of any jurisdiction in the United States to which such institution is subject.
The Company has agreed to indemnify the agent and the several underwriters
against certain civil liabilities, including liabilities under the Securities
Act of 1933, as amended (the "Act"), or contribute to payments the agent or
the underwriters may be required to make in respect thereof.
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.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1996 Annual Report on Form 10-K, and incorporated
by reference in this Prospectus, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating Results",
"Financial Position" and "Common Share Data" for each of the five years in the
period ended December 27, 1996 included in the 1996 Annual Report to
Stockholders of the Company, and incorporated by reference herein, has been
derived from consolidated financial statements audited by Deloitte & Touche
LLP, as set forth in their reports included as an exhibit to the Registration
Statement or incorporated by reference herein. Such consolidated financial
statements and related financial statement schedules, and such Selected
Financial Data appearing or incorporated by reference in this Prospectus and
the Registration Statement of which this Prospectus is a part, have been
included or incorporated herein by reference in reliance upon such reports of
Deloitte & Touche LLP 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 report included in such Quarterly Reports on Form
10-Q and incorporated by reference herein, they did not audit and they do not
express an opinion on such 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
Act for any such report on unaudited interim financial information because any
such report is not a "report" or a "part" of the registration statement
prepared or certified by an accountant within the meaning of Sections 7 and 11
of the Act.
32
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR IN-
CORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING
SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PRO-
SPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE AGENT. NEITHER THE DELIVERY
OF THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR THE PRO-
SPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUM-
STANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE
PRICING SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITA-
TION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Risk Factors.............................................................. S-2
Ratio of Earnings to Fixed Charges........................................ S-3
Description of Notes...................................................... S-4
Certain United States Federal Income Tax Considerations................... S-20
Plan of Distribution...................................................... S-26
Legal Opinion............................................................. S-27
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Merrill Lynch & Co., Inc. ................................................ 3
Use of Proceeds........................................................... 3
Description of Debt Securities............................................ 4
Description of Debt Warrants.............................................. 9
Description of Currency Warrants.......................................... 10
Description of Index Warrants............................................. 12
Description of Preferred Stock............................................ 16
Description of Depositary Shares.......................................... 21
Description of Preferred Stock Warrants................................... 25
Description of Common Stock............................................... 27
Description of Common Stock Warrants...................................... 29
Plan of Distribution...................................................... 31
Experts................................................................... 32
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[LOGO]
$6,500,705,362
MERRILL LYNCH & CO., INC.
MEDIUM-TERM NOTES,
SERIES B
-----------------------
PROSPECTUS SUPPLEMENT
-----------------------
MERRILL LYNCH & CO.
MARCH 12, 1998
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