<PAGE>
Rule No. 424(b)(5)
Registration No. 33-49947
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 27, 1994)
LOGO
MERRILL LYNCH & CO., INC.
1,800,000 CONSTANT MATURITY U.S. TREASURY YIELD INCREASE WARRANTS, EXPIRING
AUGUST 25, 1995
Each Constant Maturity U.S. Treasury Yield Increase Warrant ("Warrant") will
entitle the Holder thereof to receive from Merrill Lynch & Co., Inc. (the
"Company") a payment, if any, (the "Cash Settlement Value") on August 25, 1995
(the "Expiration Date"), or on such earlier date as described herein, based
upon the increase in the CMT Yield. The CMT Yield is the yield to maturity on
U.S. Treasury securities with a constant maturity of five years as more fully
described herein. The Cash Settlement Value will equal the greater of (i) U.S.
$100 x 4 x (Spot Yield - Strike Yield) and (ii) zero. The "Strike Yield" equals
5.03%. The "Spot Yield" will equal the CMT Yield on the Exercise Date, as
determined by the Calculation Agent. The Warrants will be automatically
exercised on the earlier of the fifth New York Business Day immediately
preceding August 25, 1995 or the New York Business Day immediately preceding
the date of occurrence of certain events in bankruptcy, insolvency or
reorganization involving the Company or the date of their earlier expiration
upon delisting from, or permanent suspension from trading on, the American
Stock Exchange unless the Warrants are simultaneously accepted for trading
pursuant to the rules of another Self-Regulatory Organization (as defined
herein). The Warrants are not exercisable at the option of the Holder. See
"Description of the Warrants".
THE WARRANTS INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE RISK OF EXPIRING
WORTHLESS UNLESS THE CMT YIELD INCREASES. INVESTORS THEREFORE SHOULD BE
PREPARED TO SUSTAIN A TOTAL LOSS OF THE PURCHASE PRICE OF THEIR WARRANTS, AND
ARE ADVISED TO CAREFULLY CONSIDER THE INFORMATION UNDER "RISK FACTORS RELATING
TO THE WARRANTS", "DESCRIPTION OF THE WARRANTS", "DESCRIPTION OF THE WARRANTS--
AUTOMATIC EXERCISE PRIOR TO THE EXPIRATION DATE" AND "CERTAIN FEDERAL INCOME
TAX CONSIDERATIONS CONCERNING THE WARRANTS".
The Warrants have been approved for listing by the American Stock Exchange,
subject to official notice of issuance.
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 OR THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS THE COMPANY(1)
- --------------------------------------------------------------------------------
- -
<S> <C> <C> <C>
Per Warrant............................. $5.25 $.20 $5.05
- --------------------------------------------------------------------------------
- -
Total................................... $9,450,000 $360,000 $9,090,000
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Before deducting expenses payable by the Company.
----------------
The Warrants are offered by the Underwriter, subject to prior sale, when, as
and if delivered to and accepted by the Underwriter, subject to certain other
conditions. The Underwriter reserves the right to reject orders in whole or in
part. It is expected that delivery of the Warrants will be made on or about
February 3, 1994.
This Prospectus Supplement and related Prospectus may be used by the
Underwriter in connection with offers and sales related to market-making
transactions in the Warrants. The Underwriter may act as principal or agent in
such transactions. Such sales will be made at prices related to prevailing
market prices at the time of sale.
----------------
MERRILL LYNCH & CO.
----------------
The date of this Prospectus Supplement is January 27, 1994.
<PAGE>
IN CONNECTION WITH THE OFFERING OF THE WARRANTS, THE UNDERWRITER MAY OVER-
ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF
THE WARRANTS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
----------------
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED
OR DISAPPROVED THIS OFFERING NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR PROSPECTUS.
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The information below is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus Supplement and in the
Prospectus.
THE OFFERING
Securities Offered.......... 1,800,000 Constant Maturity U.S. Treasury Yield
Increase Warrants, Expiring August 25, 1995 (the
"Warrants").
Cash Settlement Value.......
Each Warrant will entitle the Holder thereof to
receive from the Company a cash payment (the
"Cash Settlement Value") based upon the increase
in the CMT Yield. The Cash Settlement Value of a
Warrant will be determined on the Exercise Date
as the amount which is the greater of:
(i) $100 x 4 x (Spot Yield - Strike Yield),
and
(ii) $0.
See "Description of the Warrants--Cash Settlement
Value."
Spot Yield.................. The CMT Yield on the Exercise Date as determined
by the Calculation Agent.
Strike Yield................ 5.03%
CMT Yield................... U.S. Treasury securities, including those used to
calculate the CMT Yield, are direct obligations
of the United States government and carry the
full faith and credit of the United States of
America. The Warrants, however, are solely the
obligation of the Company and are not backed by
the full faith and credit of the United States.
If the CMT Yield is determined using yields
reported on Telerate Page 7052, in H.15(519) or
as reported by the Federal Reserve Bank of New
York as described in "Description of the
Warrants--Cash Settlement Value", the CMT Yield
will be a one-week average yield on 5-year
United States Treasury securities at "constant
maturity" (the "Weekly CMT Yield"). Yields on
Treasury securities at "constant maturity" used
to calculate the Weekly CMT Yield are
interpolated from the daily yield curve. This
curve, which relates the yield on a security to
its time to maturity, is based upon the market
yields on actively traded Treasury securities in
the over-the-counter market. The constant
maturity yield values are derived from the yield
curve at fixed maturities. This method permits
estimation of the yield for a five year
maturity, even if no outstanding security has
exactly five years remaining to maturity. If the
Weekly CMT Yield cannot be calculated, the CMT
Yield will be determined based on the yield to
maturity of certain Treasury securities on the
Exercise Date based on secondary market offer
prices of certain dealers as more fully
described in "Description of the Warrants--Cash
Settlement Value".
S-3
<PAGE>
Automatic Exercise of The Warrants will be automatically exercised on
Warrants.................... the fifth New York Business Day, as hereinafter
defined, immediately preceding August 25, 1995
or, if the Warrants are subject to automatic
exercise in the event they cease to be traded
pursuant to the rules of a Self-Regulatory
Organization or if certain events in bankruptcy,
insolvency or reorganization involving the
Company occur, the New York Business Day
immediately preceding the Early Expiration Date.
The Warrants will be automatically exercised on
the Exercise Date and are not exercisable at the
option of the Holder. See "Description of the
Warrants--Exercise of Warrants" and "Description
of the Warrants--Automatic Exercise Prior to the
Expiration Date".
Form........................ The Warrants will be in book-entry form and,
accordingly, no Holder will be entitled to
receive a certificate representing such
Warrants. See "Description of the Warrants--
Book-Entry Procedures and Settlement".
Listing..................... The Warrants have been approved for listing by
the American Stock Exchange, subject to official
notice of issuance.
AMEX Symbol................. YIW.WS
Certain Risk Factors........ The Warrants involve a high degree of risk,
including the risk of expiring worthless. If the
Spot Yield is equal to or less than the Strike
Yield, the Warrant will expire worthless.
INVESTORS THEREFORE SHOULD BE PREPARED TO
SUSTAIN A TOTAL LOSS OF THE PURCHASE PRICE OF
THEIR WARRANTS.
The Warrants are not exercisable at the option of
the Holder.
It is not possible to predict the price at which
the Warrants will trade in the secondary market
or whether such market will be liquid or
illiquid. The trading value of a Warrant is
expected to be dependent upon a number of
complex interrelated factors, including the CMT
Yield, the volatility of the CMT Yield and the
time remaining to the expiration of the
Warrants.
In the event that the Warrants are delisted from,
or permanently suspended from trading on, the
American Stock Exchange and the Warrants are not
simultaneously accepted for trading pursuant to
the rules of another self-regulatory
organization whose rules are filed with the
Securities and Exchange Commission (a "Self-
Regulatory Organization") under the Securities
Act of 1934, as amended, the Warrants will be
automatically exercised on the New York Business
Day immediately preceding the date such
delisting or trading suspension becomes
effective. At the time of such automatic
exercise, the Warrants may be out-of-the-money
such that the Cash Settlement Value will equal
zero.
The initial public offering price of the Warrants
is expected to be in excess of the price a
commercial purchaser might pay in the market for
a comparable option involving significantly
larger amounts.
S-4
<PAGE>
The CMT Yield is based upon the value of United
States Treasury securities. The value of any
debt, including U.S. government debt, may be
affected by complex political and economic
factors, including the rate of inflation, growth
of gross national product and balance of
payments for the United States.
Prospective investors in the Warrants should be
aware that the proper characterization of the
Warrants for United States Federal income tax
purposes is uncertain and that the ultimate
United States Federal income tax treatment of
the Warrants could differ significantly
depending upon how the Warrants are
characterized for United States Federal income
tax purposes. Accordingly, prospective investors
in the Warrants are urged to consult their own
tax advisors as to the proper characterization
of the Warrants for United States Federal income
tax purposes.
Investors are advised to carefully consider the
foregoing risk factors, and the risks and other
matters discussed under "Risk Factors Relating
to the Warrants", "Description of the Warrants"
and "Certain Federal Income Tax Considerations
Concerning the Warrants", prior to purchasing
the Warrants.
Investors in Warrants....... The AMEX requires that Warrants be sold only to
investors with options approved accounts and
requires that its members and member
organizations and registered employees thereof
make certain suitability determinations before
recommending transactions in Warrants. It is
suggested that investors considering purchasing
the Warrants be experienced with respect to
options on securities and option transactions
and reach an investment decision only after
carefully considering the suitability of the
Warrants in light of their particular
circumstances. The Warrants are not suitable for
persons solely dependent upon a fixed income,
for retirement plan accounts or for accounts
under the Uniform Gift to Minors Act. INVESTORS
SHOULD BE PREPARED TO SUSTAIN A TOTAL LOSS OF
THE PURCHASE PRICE OF THEIR WARRANTS.
S-5
<PAGE>
CERTAIN IMPORTANT INFORMATION CONCERNING THE WARRANTS
A Holder will receive a cash payment on the Expiration Date only if the
Warrants have a Cash Settlement Value in excess of zero on the Exercise Date.
The Spot Yield determined on the Exercise Date will establish whether the
Warrants have a positive Cash Settlement Value on the Expiration Date. The
Warrants may be "out-of-the-money" (i.e., their Cash Settlement Value will be
zero) when initially sold and the Warrants will be "in-the-money" (i.e., their
Cash Settlement Value will exceed zero) only if the Spot Yield is greater than
5.03%. If the Spot Yield is equal to or less than 5.03%, the Warrant will
expire worthless and the Holder will have sustained a total loss of the
purchase price of such Warrant. Investors therefore should be prepared to
sustain a total loss of the purchase price of their Warrants.
On January 24, 1994 the CMT Yield quoted by the Federal Reserve Bank for the
week ended January 21, 1994 was 5.06%.
RISK FACTORS RELATING TO THE WARRANTS
THE WARRANTS INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE RISK OF EXPIRING
WORTHLESS. INVESTORS THEREFORE SHOULD BE PREPARED TO SUSTAIN A TOTAL LOSS OF
THE PURCHASE PRICE OF THEIR WARRANTS. IT IS SUGGESTED THAT INVESTORS
CONSIDERING PURCHASING THE WARRANTS BE EXPERIENCED WITH RESPECT TO OPTIONS ON
SECURITIES AND OPTION TRANSACTIONS AND REACH AN INVESTMENT DECISION ONLY AFTER
CAREFULLY CONSIDERING ALL THE RISK FACTORS SET FORTH IN THIS SECTION OF THIS
PROSPECTUS SUPPLEMENT, THE SUITABILITY OF THE WARRANTS IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES AND ALL THE OTHER INFORMATION SET FORTH IN THIS
PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS.
Exercise of the Warrants. The Warrants will be automatically exercised on the
Exercise Date and are not exercisable at the option of the Holder.
Automatic Exercise of the Warrants upon Delisting. In the event that the
Warrants are delisted from, or permanently suspended from trading on, the
American Stock Exchange and the Warrants are not simultaneously accepted for
trading pursuant to the rules of another self-regulatory organization (a "Self-
Regulatory Organization") that are filed with the Securities and Exchange
Commission under the Securities Act of 1934, as amended, the Warrants will
expire on the date such delisting or trading suspension becomes effective and
will be automatically exercised on the New York Business Day immediately
preceding the date of such early expiration. At the time of such automatic
exercise, the Warrants may be out-of-the-money such that the Cash Settlement
Value will equal zero.
Offering Price of the Warrants. The initial public offering price of the
Warrants is expected to be in excess of the price a commercial purchaser of or
dealer in options on the CMT Yield might pay for a comparable option involving
significantly larger amounts.
Certain Factors Affecting the Value of the Warrants. Each Warrant may have a
Cash Settlement Value of zero at issuance. The Cash Settlement Value of the
Warrants at any time prior to expiration is typically expected to be less than
the Warrants' trading value at that time. The difference between the trading
value and the Cash Settlement Value will reflect a number of factors, including
a "time value" for the Warrants. The "time value" of the Warrants will depend
upon the length of the period remaining to expiration, among other factors. The
expiration date of the Warrants will be accelerated should the Warrants be
delisted or should their trading on the American Stock Exchange be suspended
permanently unless the Warrants simultaneously are accepted for trading
pursuant to the rules of another Self-Regulatory Organization. Any such
acceleration would result in the total loss of any otherwise remaining "time
value" and could occur when the Warrants are out-of-the-money, thus resulting
in total loss of the purchase price of the Warrants. See "Description of the
Warrants--Automatic Exercise Prior to the Expiration Date". Before exercising
or selling Warrants, Holders should carefully consider the trading value of the
Warrants, the value of the CMT Yield and probable range of Cash Settlement
Values and any related transaction costs.
S-6
<PAGE>
There can be no assurance as to how the Warrants will trade in the secondary
market or whether such market will be liquid. The trading value of a Warrant is
expected to be dependent upon a number of complex interrelated factors,
including those listed below. The expected effect on the trading value of a
Warrant of each of the factors listed below, assuming in each case that all
other factors are held constant, is as follows:
(1) The CMT Yield. If the CMT Yield increases relative to the Strike
Yield, the trading value of a Warrant is expected to increase. If the CMT
Yield decreases relative to the Strike Yield, the trading value of a
Warrant is expected to decrease.
(2) The volatility of the CMT Yield. If the volatility of the CMT Yield
increases, the trading value of a Warrant is expected to increase. If such
volatility decreases, the trading value of a Warrant is expected to
decrease.
(3) The general level of interest rates in the United States. If the
general level of interest rates in the United States increases, the trading
value of a Warrant is expected to increase. If the general level of
interest rates in the United States decreases, the trading value of a
Warrant is expected to decrease.
(4) The time remaining to the expiration date of the Warrants. As the
time remaining to the expiration date of the Warrants decreases, the
trading value of a Warrant is expected to decrease.
As noted above, these hypothetical scenarios are based on the assumption that
all other factors are held constant. In reality, it is unlikely that only one
factor would change in isolation, since changes in one factor usually cause, or
result from, changes in others. Some of the factors referred to above are, in
turn, influenced by the political and economic factors discussed below.
Warrants Not Standardized Options Issued by the Options Clearing
Corporation. Each Warrant constitutes an option having a value based upon one
or more United States Treasury securities, as calculated in the CMT Yield.
However, the Warrants are not standardized options of the type issued by the
Options Clearing Corporation (the "OCC"), a clearing agency regulated by the
Securities and Exchange Commission. For example, unlike purchasers of OCC
standardized options who have the credit benefits of guarantees and margin and
collateral deposits by OCC clearing members to protect the OCC from a clearing
member's failure, purchasers of Warrants must look solely to the Company for
performance of its obligations to pay the Cash Settlement Value on the exercise
of Warrants. Further, the market for the Warrants is not expected to be
generally as liquid as the market for some OCC standardized options.
The Warrants are unsecured contractual obligations of the Company and will
rank on a parity with the Company's other unsecured contractual obligations and
with the Company's unsecured and unsubordinated debt. However, since the
Company is a holding company, the right of the Company, and hence the right of
creditors of the Company (including Holders of the Warrants), 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,
and under rules of certain exchanges and other regulatory bodies.
General Risk Considerations. Options and warrants provide opportunities for
investment and pose risks to investors as a result of fluctuations in the value
of the underlying investment. In general, certain of the risks associated with
the Warrants are similar to those generally applicable to other options or
warrants of private corporate issuers.
The purchaser of a Warrant may lose his entire investment. This risk reflects
the nature of a Warrant as an asset which tends to decline in value over time
and which may, depending on the CMT Yield as compared to the Strike Yield,
become worthless when it expires. Assuming all other factors are held constant,
the more a Warrant is out-of-the-money and the shorter its remaining term to
expiration, the greater the risk that a
S-7
<PAGE>
purchaser of the Warrant will lose all of his investment. This means that the
purchaser of a Warrant who does not sell it in the secondary market will
necessarily lose his entire investment in the Warrant if it expires when the
Spot Yield is less than or equal to the Strike Yield.
If the CMT Yield does not increase relative to the Strike Yield to an extent
sufficient to cover an investor's cost of the Warrant (i.e., the purchase price
plus transaction costs, if any) before the Warrant expires, the investor will
lose all or a part of his investment in the Warrant upon expiration.
The CMT Yield is derived from United States Treasury securities. The value of
any debt security, including Treasury securities, may be affected by complex
political and economic factors, including the rate of inflation, growth of
gross national product and balance of payments for the United States.
Prospective investors in the Warrants should be aware that the proper
characterization of the Warrants for United Stated Federal income tax purposes
is uncertain and that the ultimate United States Federal income tax treatment
of the Warrants could differ significantly depending upon how the Warrants are
characterized for United States Federal income tax purposes. Accordingly,
prospective investors in the Warrants are urged to consult their own tax
advisors as to the proper characterization of the Warrants for United States
Federal income tax purposes.
The AMEX requires that Warrants be sold only to investors with options
approved accounts and requires that its members and member organizations and
registered employees thereof make certain suitability determinations before
recommending transactions in Warrants. It is suggested that investors
considering purchasing the Warrants be experienced with respect to options on
securities and option transactions and understand the risks of transactions
such as the Warrants and reach an investment decision only after carefully
considering the suitability of the Warrants in light of their particular
circumstances. The Warrants are not suitable for persons solely dependant upon
a fixed income, for retirement plan accounts or for accounts under the Uniform
Gift to Minors Act. INVESTORS SHOULD BE PREPARED TO SUSTAIN A TOTAL LOSS OF THE
PURCHASE PRICE OF THEIR WARRANTS.
S-8
<PAGE>
DESCRIPTION OF THE WARRANTS
GENERAL
An aggregate of 1,800,000 Warrants will be issued. The Warrants will be
issued under a Warrant Agreement (the "Warrant Agreement"), to be dated as of
February 3, 1994, between the Company and Citibank, N.A., as Warrant Agent (the
"Warrant Agent"). The following statements with respect to the Warrants are
summaries of the detailed provisions of the Warrant Agreement, the form of
which is filed as an exhibit to the Registration Statement. Wherever particular
provisions of the Warrant Agreement or terms defined therein are referred to,
such provisions or definitions are incorporated by reference as a part of the
statements made, and the statements are qualified in their entirety by such
reference.
A Warrant will not require, or entitle, a Holder to sell or purchase a U.S.
Treasury security to or from the Company. The Company will make only a cash
settlement, if any, with respect to the Warrants.
The Warrants will expire on August 25, 1995 (the "Expiration Date") or on
such earlier date as described under "Exercise of Warrants" and "Automatic
Exercise Prior to the Expiration Date". The Warrants will be automatically
exercised on the Exercise Date, as set forth under "Exercise of Warrants", and
are not exercisable at the option of the Holder. The term "New York Business
Day", as used herein, means any day other than a Saturday or a Sunday or a day
on which commercial banks in The City of New York are required or authorized by
law or executive order to be closed.
The Warrants will be unsecured contractual obligations of the Company and
will rank on a parity with the Company's other unsecured contractual
obligations and with the Company's unsecured and unsubordinated debt. However,
since the Company is a holding company, the right of the Company, and hence the
right of creditors of the Company (including Holders of the Warrants), 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,
and under rules of certain exchanges and other regulatory bodies.
CASH SETTLEMENT VALUE
The Cash Settlement Value of a Warrant will be determined on the Exercise
Date as the amount which is the greater of:
(i) $100 x 4 x (Spot Yield - Strike Yield), and
(ii) $0
The "Strike Yield" equals 5.03%. The "Spot Yield" will be determined on the
Exercise Date by Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Calculation Agent"), an affiliate of the Company. The "Spot Yield will be
determined as follows:
(i) The Spot Yield will equal the rate which appears on Telerate Page
7052, "WEEKLY AVG YIELDS ON TREASURY CONSTANT MATURITIES ", under the
column entitled "5 YR", which appears as of 2:30 P.M., New York time, on
the Exercise Date. "Telerate Page 7052" means the display designated as
page 7052 on the Dow Jones Telerate Service (or such page as may replace
page 7052 on that service). The rate which appears on Telerate Page 7052
under the column entitled "5 YR" is the rate described in paragraph (ii)
below published in the most recent H.15(519) (as defined below).
(ii) If the Spot Yield as described in clause (i) is not available by
2:30 P.M., New York City time, on the Exercise Date, the Spot Yield will
equal the one-week average yield on 5-year United States Treasury
securities at "constant maturity", as published in the most recent
H.15(519) available on the Exercise Date, in the column "Week Ending" for
the most recent date opposite the heading "Treasury constant maturities, 5-
Year." "H.15(519)" means the weekly statistical release designated as such,
published by the Board of Governors of the Federal Reserve System.
S-9
<PAGE>
(iii) If the most recent H.15(519) available on the Exercise Date as
described in clause (ii) above was published more than fourteen calendar
days prior to the Exercise Date, the Spot Yield will equal the one-week
average yield on 5-year United States Treasury securities at "constant
maturity" as otherwise announced by the Federal Reserve Bank of New York on
the Exercise Date for the preceding week.
(iv) If the Spot Yield as described in clause (iii) is not announced by
3:00 p.m., New York City time, on the Exercise Date, the Spot Yield will be
calculated by the Calculation Agent and will be a yield to maturity
(expressed as a bond equivalent and as a decimal rounded, if necessary, to
the nearest one hundred-thousandth of a percentage point with five one-
millionths of a percentage point rounded up, on the basis of a year of 365
days, applied on a daily basis) based on the arithmetic mean of the
secondary market offer prices as of approximately 3:30 p.m., New York City
time, on the Exercise Date of three leading primary United States
government securities dealers in The City of New York selected by the
Calculation Agent (from five such dealers 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 approximately five years, a remaining
term to maturity of not less than four years and in an amount of
$100,000,000. If three or four (and not five) of such dealers are quoting
as described in this clause (iv), then the Spot Yield will be based on the
arithmetic mean of the bid prices obtained and neither the highest nor
lowest of such quotations will be eliminated.
(v) If fewer than three dealers selected by the Calculation Agent are
quoting as described in clause (iv), the Spot Yield will be calculated by
the Calculation Agent and will be a yield to maturity (expressed as a bond
equivalent and as a decimal rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point with five one-millionths of a
percentage point rounded up, on the basis of a year of 365 days, and
applied on a daily basis) based on the arithmetic mean of the secondary
market offer prices as of approximately 3:30 p.m., New York City time, on
the Exercise Date of three leading primary United States government
securities dealers in The City of New York selected by the Calculation
Agent (from five such dealers 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 approximately ten years, a remaining term to maturity
closest to five years and in an amount of $100,000,000. If three or four
(and not five) of such dealers are quoting as described in this clause,
then the Spot Yield will be based on the arithmetic mean of the bid prices
obtained and neither the highest nor lowest of such quotes will be
eliminated. If two Treasury Notes with an original maturity of
approximately ten years have remaining terms to maturity equally close to
five years, the quotes for the Treasury Note with the shorter remaining
term to maturity will be used.
The Cash Settlement Value will be rounded, if necessary, to the nearest cent
(with one-half cent being rounded upwards).
Set forth below is an illustration of the Cash Settlement Values of Warrants
on the Exercise Date based on the Strike Yield equal to 5.03% and various
hypothetical Spot Yields. The actual Cash Settlement Value of a Warrant will
depend entirely on the actual Spot Yield on the Exercise Date. The illustrative
Cash Settlement Values in the table do not reflect any "time value" for a
Warrant, which may be reflected in trading value, and are not necessarily
indicative of potential profit or loss, which are also affected by purchase
price and transaction costs.
<TABLE>
<CAPTION>
HYPOTHETICAL CASH SETTLEMENT
CMT SPOT YIELD VALUE OF A WARRANT
-------------- ------------------
<S> <C>
4.03%................................................. $0.00
4.53%................................................. $0.00
5.03%................................................. $0.00
5.53%................................................. $2.00
6.03%................................................. $4.00
6.53%................................................. $6.00
7.03%................................................. $8.00
</TABLE>
S-10
<PAGE>
BOOK-ENTRY PROCEDURES AND SETTLEMENT
Upon issuance, all Warrants will be represented by one registered global
currency Warrant (the "Global Warrant"). The Global Warrant will be deposited
with, or on behalf of, The Depository Trust Company, as Securities Depository,
and registered in the name of the Securities Depository or a nominee thereof.
Unless and until it is exchanged in whole or in part for Warrants in definitive
form in the limited circumstances described below, the Global Warrant may not
be transferred except as a whole by the Securities Depository to a nominee of
such Securities Depository or by a nominee of such Securities Depository to
such Securities Depository or another nominee of such Securities Depository or
by such Securities Depository or any such nominee to a successor of such
Securities Depository or a nominee of such successor.
The Securities Depository has advised the Company as follows: The Securities
Depository is a limited-purpose trust company organized under the Banking Law
of the State of New York, 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 provision of Section 17A of the
Securities Exchange Act of 1934, as amended. The Securities Depository was
created to hold securities of its participants and to facilitate the clearance
and settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Securities Depository's participants include securities
brokers and dealers (including the Underwriter), banks, trust companies,
clearing corporations, and certain other organizations, some of whom (and/or
their representatives) own the Securities Depository. Access to the Securities
Depository book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. Persons who are
not participants may beneficially own securities held by the Securities
Depository only through participants.
Ownership of beneficial interests in the Warrants will be limited to persons
that have accounts with the Securities Depository ("Agent Members") or persons
that may hold interests through Agent Members. The Securities Depository has
advised the Company that upon the issuance of the Global Warrant representing
the Warrants, the Securities Depository will credit, on its book-entry
registration and transfer system, the Agent Members' accounts with the
respective principal amounts of the Warrants represented by the Global Warrant.
Ownership of beneficial interests in the Global Warrant will be shown on, and
the transfer of such ownership interests will be effected only through, records
maintained by the Securities Depository (with respect to interests of Agent
Members) and on the records of Agent Members (with respect to interests of
persons held through Agent Members). 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 the Global Warrant.
So long as the Securities Depository, or its nominee, is the registered owner
of the Global Warrant, the Securities Depository or its nominee, as the case
may be, will be considered the sole owner or Holder of the Warrants represented
by the Global Warrant for all purposes under the Warrant Agreement. Except as
provided below, owners of beneficial interests in the Global Warrant will not
be entitled to have the Warrants represented by the Global Warrant registered
in their names, will not receive or be entitled to receive physical delivery of
the Warrants in definitive form and will not be considered the owners or
Holders thereof under the Warrant Agreement. Accordingly, each person owning a
beneficial interest in the Global Warrant must rely on the procedures of the
Securities Depository and, if such person is not an Agent Member, on the
procedures of the Agent Member through which such person owns its interest, to
exercise any rights of a Holder under the Warrant Agreement. 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 Warrant desires to give or take any action which a
Holder is entitled to give or take under the Warrant Agreement, the Securities
Depository would authorize the Agent Members holding the relevant beneficial
interests to give or take such action, and such Agent Members would authorize
beneficial owners owning through such Agent Members to give or take such action
or would otherwise act upon the instructions of beneficial owners through them.
S-11
<PAGE>
The Cash Settlement Value in exercise of Warrants registered in the name of
the Securities Depository or its nominee will be paid by the Warrant Agent to
the Agent Members or, in the case of delisting, to the Securities Depository.
None of the Company, the Warrant Agent or any other agent of the Company or
agent of the Warrant Agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests or for supervising or reviewing any records relating to
such beneficial ownership interests. The Company expects that the Warrant
Agent, upon the receipt of payment of the Cash Settlement Value in respect of
the Global Warrant, will pay the relevant Agent Member in an amount
proportionate to its beneficial interest in the Global Warrant and that such
Agent Member will credit the accounts of the beneficial owners of such
Warrants. The Company expects that the Securities Depository, in the case of
delisting, upon receipt of payment of the Cash Settlement Value in respect of
the Global Warrant, will credit the accounts of the Agent Members with payment
in amounts proportionate to their respective beneficial interests in the Global
Warrant so delisted, as shown on the records of the Securities Depository. The
Company also expects that payments by Agent Members to owners of beneficial
interests in the Global Warrant will be governed by standing customer
instructions and customary practices, as is now 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 Agent Members. It is suggested that
purchasers of Warrants with accounts at more than one brokerage firm effect
transactions in the Warrants, only through the brokerage firm or firms which
hold that purchaser's Warrants.
If the Securities Depository is at any time unwilling or unable to continue
as depository and a successor Securities Depository is not appointed by the
Company within 90 days or if the Company is subject to certain events in
bankruptcy, insolvency or reorganization, the Company will issue Warrants in
definitive form in exchange for the Global Warrant. In addition, the Company
may at any time determine not to have the Warrants represented by the Global
Warrant and, in such event, will issue Warrants in definitive form in exchange
for the Global Warrant. In any such instance, an owner of a beneficial interest
in the Global Warrant will be entitled to have a number of Warrants equivalent
to such beneficial interest registered in its name and will be entitled to
physical delivery of such Warrants in definitive form.
EXERCISE OF WARRANTS
The Warrants are not exercisable at the option of the Holder. The Warrants
will be automatically exercised on the fifth New York Business Day immediately
preceding the Expiration Date or, if an Early Expiration Date occurs, the New
York Business Day immediately preceding the Early Expiration Date (the
"Exercise Date").
The Warrant Agent will obtain the Spot Yield on the Exercise Date from
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Calculation Agent"),
an affiliate of the Company, and determine the Cash Settlement Value of the
Warrants. The Warrant Agent will pay the Cash Settlement Value of a Warrant to
the Securities Depository by check on the Expiration Date and, if August 25,
1995 is not a New York Business Day, on the next succeeding New York Business
Day. If an Early Expiration Date occurs, as described below under "Automatic
Exercise Prior to the Expiration Date", the Warrant Agent will pay the Cash
Settlement Value of a Warrant to the Securities Depository by check on the
fifth New York Business Day following the Early Expiration Date (as defined
below). See "Description of the Warrants--Book-Entry Procedures and
Settlement".
LISTING OF THE WARRANTS
The Warrants have been approved for listing by the American Stock Exchange,
subject to official notice of issuance. The American Stock Exchange will expect
to cease trading the Warrants on such Exchange as of the close of business on
the Expiration Date.
S-12
<PAGE>
AUTOMATIC EXERCISE PRIOR TO THE EXPIRATION DATE
In the event that the Warrants are delisted from, or permanently suspended
from trading on, the American Stock Exchange and the Warrants are not
simultaneously accepted for trading pursuant to the rules of another self-
regulatory organization whose rules are filed with the Securities and Exchange
Commission (a "Self-Regulatory Organization") under the Securities Act of 1934,
as amended, the Warrants will expire on the date such delisting or trading
suspension becomes effective (an "Early Expiration Date") and the Warrants will
be automatically exercised on the New York Business Day immediately preceding
such Early Expiration Date, and the Cash Settlement Value, if any (determined
as provided under "Exercise of Warrants"), of such automatically exercised
Warrants will be paid on the fifth New York Business Day following such Early
Expiration Date. Settlement shall otherwise occur as described under "Book-
Entry Procedures and Settlement". The Company will notify Holders as soon as
practicable of such delisting or trading suspension. The Company has agreed in
the Warrant Agreement that it will not seek delisting of the Warrants or
suspension of their trading on the American Stock Exchange.
The Warrants may also expire on the date of occurrence of certain events in
bankruptcy, insolvency or reorganization involving the Company (any such date
also being an "Early Expiration Date") and the Warrants will be automatically
exercised as of the New York Business Day immediately preceding such Early
Expiration Date. The Cash Settlement Value, if any (determined as provided
under "Exercise of Warrants"), of such automatically exercised Warrants will be
due and payable on the fifth New York Business Day following such Early
Expiration Date. Settlement will otherwise occur as described under "Book-Entry
Procedures and Settlement".
MODIFICATION
The Warrant Agreement and the terms of the Warrants may be amended by the
Company and the Warrant Agent, without the consent of the Holders of any
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 Holders of the
Warrants.
The Company and the Warrant Agent also may modify or amend the Warrant
Agreement and the terms of the Warrants, with the consent of the Holders of not
less than a majority in number of the then outstanding Warrants affected,
provided that no such modification or amendment that changes the Spot Yield so
as to adversely affect the Holder, shortens the period of time remaining to the
Expiration Date or otherwise materially and adversely affects the exercise
rights of the Holders of the Warrants or reduces the percentage of the number
of outstanding Warrants, the consent of whose Holders is required for
modification or amendment of a Warrant Agreement or the terms of Warrants may
be made without the consent of the Holders of Warrants affected thereby.
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 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 Cash Settlement Value with respect to all unexercised Warrants,
according to their tenor, and the due and punctual performance and observance
of all of the covenants and conditions of the Warrant Agreement and of the
Global Warrant to be performed by the Company.
S-13
<PAGE>
CMT YIELD
GENERAL
U.S. Treasury securities, including those used to calculate the CMT Yield,
are direct obligations of the United States government and carry the full faith
and credit of the United States of America. The Warrants, however, are solely
the obligation of the Company and are not backed by the full faith and credit
of the United States. If the CMT Yield is determined using yields reported on
Telerate Page 7052, in H.15(519) or as reported by the Federal Reserve Bank of
New York as described in "Description of the Warrants--Cash Settlement Value",
the CMT Yield will be a one-week average yield on 5-year United States Treasury
securities at "constant maturity" (the "Weekly CMT Yield"). Yields on Treasury
securities at "constant maturity" used to calculate the Weekly CMT Yield are
interpolated from the daily yield curve. This curve, which relates the yield on
a security to its time to maturity, is based upon the market yields on actively
traded Treasury securities in the over-the-counter market. The constant
maturity yield values are derived from the yield curve at fixed maturities.
This method permits estimation of the yield for a five year maturity, even if
no outstanding security has exactly five years remaining to maturity. If the
Weekly CMT Yield cannot be calculated, the CMT Yield will be determined based
on the yield to maturity of certain Treasury securities on the Exercise Date
based on secondary market offer prices of certain dealers as more fully
described in "Description of the Warrants--Cash Settlement Value". The value of
the CMT Yield during the term of the Warrants will likely not be calculated
based on one specific Treasury security.
HISTORICAL INFORMATION ON THE CMT YIELD
The following table sets forth the monthly averages of the daily CMT Yield
from 1989 to the present. The CMT Yield used to calculate the Cash Settlement
Value will be the one-week average yield on 5-year United States Treasury
securities at "constant maturity" available during the calendar week preceding
the Exercise Date, or if such yield is not available as described under
"Description of the Warrants--Cash Settlement Value", the yield to maturity on
specified United States Treasury securities on the Exercise Date. The
historical experience of the CMT Yield should not be taken as an indication of
future performance and no assurance can be given that the value of the CMT
Yield will not decline and thereby cause the Cash Settlement Value with respect
to the Warrants to equal zero.
<TABLE>
<CAPTION>
CMT YIELD
---------
<S> <C>
1989: January.......................................................... 9.15
February......................................................... 9.27
March............................................................ 9.51
April............................................................ 9.30
May.............................................................. 8.91
June............................................................. 8.29
July............................................................. 7.83
August........................................................... 8.09
September........................................................ 8.17
October.......................................................... 7.97
November......................................................... 7.81
December......................................................... 7.75
1990: January.......................................................... 8.12
February......................................................... 8.42
March............................................................ 8.60
April............................................................ 8.77
May.............................................................. 8.74
June............................................................. 8.43
July............................................................. 8.33
August........................................................... 8.44
</TABLE>
S-14
<PAGE>
<TABLE>
<CAPTION>
CMT YIELD
---------
<S> <C>
1990: September........................................................ 8.51
October.......................................................... 8.33
November......................................................... 8.02
December......................................................... 7.73
1991: January.......................................................... 7.70
February......................................................... 7.47
March............................................................ 7.77
April............................................................ 7.70
May.............................................................. 7.70
June............................................................. 7.94
July............................................................. 7.91
August........................................................... 7.43
September........................................................ 7.14
October.......................................................... 6.87
November......................................................... 6.62
December......................................................... 6.19
1992: January.......................................................... 6.24
February......................................................... 6.58
March............................................................ 6.95
April............................................................ 6.78
May.............................................................. 6.69
June............................................................. 6.48
July............................................................. 5.84
August........................................................... 5.60
September........................................................ 5.38
October.......................................................... 5.60
November......................................................... 6.04
December......................................................... 6.08
1993: January.......................................................... 5.83
February......................................................... 5.43
March............................................................ 5.19
April............................................................ 5.13
May.............................................................. 5.20
June............................................................. 5.22
July............................................................. 5.09
August........................................................... 5.03
September........................................................ 4.73
October.......................................................... 4.71
November......................................................... 5.06
December......................................................... 5.15
1994: January (week ending January 21, 1994)........................... 5.06
</TABLE>
- --------
Source: Federal Reserve Board Statistical Release H.15(519) under "Selected
Interest Rates".
S-15
<PAGE>
The following graph sets forth the historical performance of the monthly
averages of the daily CMT Yield from January 1989 through December 1993. PAST
MOVEMENTS OF THE CMT YIELD ARE NOT NECESSARILY INDICATIVE OF THE FUTURE CMT
YIELD. The actual CMT Yield could materially differ from those set forth below.
The CMT Yield for the week ending January 21, 1994 was 5.06%.
[GRAPHIC NO. 1 APPEARS HERE]
Source: Federal Reserve statistical release
The information presented in this Prospectus Supplement relating to the CMT
Yield is furnished as a matter of information only. The fluctuations in the CMT
Yield that have occurred in the past are not necessarily indicative of
fluctuations in that rate which may occur over the term of the Warrants.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
CONCERNING THE WARRANTS
Set forth in full below is the opinion of Brown & Wood, counsel to the
Company, as to certain United States Federal income tax consequences of the
purchase, ownership and disposition of a Warrant. Such opinion is based upon
laws, regulations, rulings and decisions now in effect, all of which are
subject to change (possibly with retroactive effect) or possible differing
interpretations. The following discussion of certain United States Federal
income tax consequences to Holders of the Warrants applies only to a person who
holds a Warrant as a capital asset and does not purport to address the United
States Federal income tax consequences to special classes of investors
including persons who are securities or options dealers, or persons who may
hold the Warrants as part of an integrated transaction (e.g., as part of a
hedge or straddle for tax purposes). Prospective purchasers of Warrants are
urged to consult their own tax advisors as to the application of the United
States Federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the Warrants arising
under the laws of any other taxing jurisdiction.
S-16
<PAGE>
As used herein, the term "U.S. Holder" means a beneficial owner of a Warrant
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created
or organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any
other person whose income or gain in respect of a Warrant is effectively
connected with the conduct of a United States trade or business. As used
herein, the term "non-U.S. Holder" means a Holder of a Warrant that is not a
U.S. Holder.
GENERAL
The United States Federal income tax treatment of the Warrants will depend
upon how the Warrants are characterized for United States Federal income tax
purposes and the United States Federal income tax consequences of the purchase,
ownership and disposition of the Warrants could differ significantly depending
upon whether the Warrants are characterized as "options" or as some financial
instrument other than an option. Prospective investors in the Warrants should
be aware that there are no statutes, regulations, published rulings or judicial
decisions involving the characterization, for United States Federal income tax
purposes, of securities with terms substantially the same as the Warrants.
Accordingly, it is unclear how the Warrants will be characterized for United
States Federal income tax purposes.
U.S. HOLDERS
If the Warrants are characterized as "options" for United States Federal
income tax purposes, then each Warrant should be treated as a "nonequity"
option for purposes of Section 1256 of the Internal Revenue Code of 1986, as
amended (the "Code"), which must be "marked-to-market". Accordingly, under such
circumstances, a U.S. Holder of a Warrant would be required to treat such
Warrant as if sold for its fair market value on the last business day of the
U.S. Holder's taxable year and would be required to recognize taxable gain or
loss for that taxable year in an amount equal to the difference between the
fair market value of the Warrant on the last business day of such taxable year
and the U.S. Holder's adjusted tax basis in the Warrant. A U.S. Holder's
adjusted tax basis in a Warrant would equal such U.S. Holder's initial
investment in the Warrant, increased or decreased by any net gain or loss
recognized by the U.S. Holder in respect of the Warrant in prior taxable years.
In addition, upon the sale, exchange, exercise or expiration of a Warrant, a
U.S. Holder would be required to recognize taxable gain or loss in an amount
equal to the difference between the amount realized upon such sale, exchange,
exercise or expiration and the U.S. Holder's adjusted tax basis in the Warrant.
Any gain or loss recognized by a U.S. Holder of a Warrant in accordance with
the preceding rules would generally be treated as 60 percent long-term capital
gain or loss and 40 percent short-term capital gain or loss.
If the Warrants are not characterized as "options" for United States Federal
income tax purposes, then the United States Federal income tax treatment of the
purchase, ownership and disposition of the Warrants could differ from the
treatment discussed above with the result that the timing and character of
income, gain or loss recognized by a U.S. Holder with respect to a Warrant
could differ from the timing and character of income, gain or loss recognized
with respect to a Warrant had the Warrants been treated as "options" for United
States Federal income tax purposes. For instance, the Warrants could possibly
be characterized as notional principal contracts for United States Federal
income tax purposes. If the Warrants were characterized as notional principal
contracts for United States Federal income tax purposes, then a U.S. Holder of
a Warrant would be required to recognize taxable gain or loss with respect to a
Warrant only upon the sale, exchange, exercise or expiration of the Warrant.
The amount of gain or loss required to be recognized by a U.S. Holder with
respect to a Warrant under such circumstances would be equal to the difference
between the amount realized upon such sale, exchange, exercise or expiration
and the amount of the U.S. Holder's initial investment in the Warrant. Such
gain or loss would generally be treated as long-term capital gain or loss if
the Warrant was held by the U.S. Holder for more than one year. Alternatively,
it is also possible that the Warrants could be characterized, for United States
Federal income tax purposes, as either contingent payment debt instruments or
some other type of commercial or financial contract. In light of the
uncertainty concerning the proper United States Federal income tax
characterization of the Warrants,
S-17
<PAGE>
prospective investors are urged to consult their own tax advisors as to the
proper characterization of the Warrants for United States Federal income tax
purposes.
The Company, where required, currently intends to report any gross proceeds
received upon the sale, exchange or exercise of a Warrant on an IRS Form 1099B.
NON-U.S. HOLDERS
Gains realized on the sale, exchange or exercise of a Warrant by a non-U.S.
Holder will not be subject to United States Federal income or withholding tax
in respect of such amounts, assuming the income is not effectively connected
with a United States trade or business of the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its own tax
advisor in this regard.
Under current law, the fair market value of a Warrant may be includible in
the estate of an individual non-U.S. Holder for United States Federal estate
tax purposes, unless an applicable estate tax treaty provides otherwise.
Individual non-U.S. Holders should consult their own tax advisors concerning
the United States Federal estate tax consequences, if any, of investing in the
Warrants.
BACKUP WITHHOLDING
A Holder of a Warrant will be subject to backup withholding at the rate of 31
percent with respect to the gross proceeds upon a sale or exercise of a Warrant
if such Holder fails to supply an accurate taxpayer identification number and
does not establish, when required, that it is an exempt recipient or a non-U.S.
Holder. Any amount withheld under the backup withholding rules would be allowed
as a refund or a credit against the Holder's United States Federal income tax
provided the required information is furnished to the IRS.
USE OF PROCEEDS
A substantial portion of the proceeds from the sale of the Warrants may be
used to hedge market risks with respect to the payment at expiration of the
Warrants. The Company does not intend to confine its hedging activities to any
particular domestic or foreign exchanges.
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriter") has
agreed, subject to the terms and conditions of the Underwriting Agreement and a
Terms Agreement, to purchase from the Company all of the Warrants offered
hereby. The Underwriting Agreement and Terms Agreement provide that the
Underwriter will purchase all the Warrants if any are purchased.
The Underwriter has advised the Company that it proposes initially to offer
all or part of the Warrants directly to the public at the offering price set
forth on the cover page of this Prospectus Supplement and to certain dealers at
such price less a concession not in excess of $.15. After the initial public
offering, the public offering price and concession may be changed.
An affiliate of the Underwriter will receive a fee from the Company for
assisting the Company in arranging hedging of the Company's risks with respect
to the Warrants.
The underwriting of the Securities will conform to the requirements set forth
in the applicable sections of Schedule E to the By-Laws of the National
Association of Securities Dealers, Inc.
VALIDITY OF SECURITIES
The validity of the Securities will be passed upon for the Company and for
the Underwriter by Brown & Wood, New York, New York.
S-18
<PAGE>
PROSPECTUS
LOGO
MERRILL LYNCH & CO., INC.
DEBT SECURITIES AND WARRANTS
Merrill Lynch & Co., Inc. (the "Company") intends to sell from time to time
up to $1,290,061,614 aggregate principal amount (or net proceeds in the case of
warrants and in the case of securities issued at an original issue discount),
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, of its senior debt
securities ("Senior Debt Securities"), subordinated debt securities
("Subordinated Debt Securities" and, together with the Senior Debt Securities,
the "Debt Securities"), warrants to purchase Debt Securities ("Debt Warrants");
warrants entitling the holders thereof to receive from the Company an amount in
cash determined by reference to decreases or increases in the level of a
specified stock or security index or the value of a portfolio of specified
stocks or other securities which may be based on U.S. or foreign stocks or
securities or a combination thereof (the "Index Warrants") and 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") such foreign
currencies or units of two or more currencies as shall be designated by the
Company at the time of offering. The Debt Securities, Debt Warrants, Index
Warrants and Currency Warrants, which are collectively called the "Securities",
may be offered either jointly or separately and 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 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, provision for
redemption, sinking fund requirements, if any, exercise provisions, currencies
of denomination or currencies otherwise applicable thereto 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.
----------------
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 directly or 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 of the following: MLPF&S; Bear, Stearns & Co. Inc.;
Donaldson, Lufkin & Jenrette Securities Corporation; The First Boston
Corporation; Goldman, Sachs & Co.; Kidder, Peabody & Co. Incorporated; Lehman
Brothers Inc.; Morgan Stanley & Co. Incorporated; Nomura Securities
International, Inc.; PaineWebber Incorporated; and Salomon Brothers Inc, or
directly to purchasers by the Company. The Company has entered into agreements
with such firms with respect to the Securities providing for agency sales of
the Securities through MLPF&S or the purchase and offering from time to time by
one or more of such firms, either alone or with the several members of any
syndicate formed by them. Additional agreements respecting the distribution of
the Securities may be entered into from time to time by the Company. Securities
may not be sold without delivery of a Prospectus Supplement describing such
issue of Securities and the method and terms of offering thereof.
----------------
The date of this Prospectus is January 27, 1994.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (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: Chicago Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and New York 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
Midwest Stock Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 25,
1992, Quarterly Reports on Form 10-Q for the quarters ending March 26, 1993,
June 25, 1993 and September 24, 1993, and Current Reports on Form 8-K dated
January 25, 1993, January 26, 1993, January 28, 1993, February 1, 1993,
February 22, 1993, March 1, 1993, March 19, 1993, April 13, 1993, April 15,
1993, April 22, 1993, April 27, 1993, April 29, 1993, June 24, 1993, June 28,
1993, July 7, 1993, July 13, 1993, July 27, 1993, September 8, 1993, September
13, 1993, September 23, 1993, October 7, 1993, October 11, 1993, October 15,
1993, October 27, 1993, December 17, 1993, December 22, 1993, December 27,
1993, December 30, 1993, January 20, 1994, January 24, 1994 and January 27,
1994, 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 Sections 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 MR. GREGORY T. RUSSO, SECRETARY,
MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR, NEW YORK, NEW YORK
10080-6512; TELEPHONE NUMBER (212) 602-8435.
2
<PAGE>
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.
Its principal subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S"), is one of the largest securities firms in the world. MLPF&S is a
broker in securities, options contracts, commodity and financial futures
contracts and selected insurance products, a dealer in options and in corporate
and municipal securities and an investment banking firm. Merrill Lynch Asset
Management manages mutual funds and provides investment advisory services.
Merrill Lynch Government Securities Inc. is a primary dealer in obligations
issued by the U.S. Government or agencies thereof or guaranteed or insured by
Federal agencies. Other subsidiaries provide financial services outside the
United States similar to those of MLPF&S and are engaged in such other
activities as international banking, lending and providing other investment and
financing services. The Company's insurance underwriting and marketing
operations consist of the underwriting of life insurance and annuity products
through subsidiaries of Merrill Lynch Insurance Group, Inc., and the sale of
life insurance and annuities through Merrill Lynch Life Agency Inc. and other
life insurance agencies associated with MLPF&S.
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. Such uses may include the funding of
investments in, or extensions of credit to, its subsidiaries, the funding of
assets held by the Company or its subsidiaries, including securities
inventories, customer receivables and loans (including business loans, home
equity loans and loans in connection with investment banking-related merger and
acquisition activities) and the lengthening of the average maturity of the
Company's borrowings (including the refunding of maturing indebtedness). The
precise amount and timing of investments in, and extensions of credit to, its
subsidiaries will depend upon their funding requirements and the availability
of other funds to the Company and its subsidiaries. A substantial portion of
the proceeds from the sale of any Currency Warrants or Index Warrants may be
used to hedge market risks with respect to such Warrants. Pending such
applications, the net proceeds will be temporarily invested or applied to the
reduction of short-term indebtedness. 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 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
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following summary consolidated financial information was derived from,
and is qualified in its entirety by reference to, the financial statements and
other information and data contained in the Company's Annual Report on Form
10-K for the year ended December 25, 1992 and Current Report on Form 8-K dated
January 24, 1994. See "Incorporation of Certain Documents by Reference". The
Current Report on Form 8-K, dated January 24, 1994 (which includes unaudited
preliminary financial information for the year ended December 31, 1993) and
the other documents incorporated herein by reference will be superseded by the
Company's Annual Report on Form 10-K for the year ended December 31, 1993. In
the opinion of management of the Company, all adjustments (consisting only of
normal recurring accruals and a non-recurring pretax charge of $103 million
described below) necessary for a fair statement of the 1993 results of
operations have been included. The year-end results include 52 weeks for 1989,
1990, 1991 and 1992 and 53 weeks for 1993.
The Company conducts its business in highly volatile markets. Consequently,
the Company's results can be affected by many factors, including general
market conditions, the liquidity of secondary markets, the level and
volatility of interest rates and currency values, the valuation of securities
positions, competitive conditions, and the size, number and timing of
transactions. In periods of unfavorable market activity, profitability can be
adversely affected because certain expenses remain relatively fixed. As a
result, net earnings and revenues can vary significantly from period to
period.
<TABLE>
<CAPTION>
YEAR ENDED LAST FRIDAY IN DECEMBER
--------------------------------------------------------------
1989 1990 1991 1992 1993
----------- ----------- ----------- ------------ -----------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
Revenues................ $11,273,223 $11,147,229 $12,352,812 $ 13,412,668 $16,588,177
Net Revenues............ $ 5,902,195 $ 5,783,329 $ 7,246,468 $ 8,577,401 $10,558,230
Earnings (loss) before
income taxes,
discontinued operations
and cumulative effect
of changes in
accounting
principles(1).......... $ (158,386) $ 282,328 $ 1,017,418 $ 1,621,389 $ 2,424,808
Discontinued operations
(net of income
taxes)(1).............. $ 3,981 -- -- -- --
Cumulative effect of
changes in accounting
principles (net of
applicable income
taxes)(1).............. -- -- -- $ (58,580) $ (35,420)
Net earnings (loss)(1).. $ (213,385) $ 191,856 $ 696,117 $ 893,825 $ 1,358,939
Ratio of earnings to
fixed charges(2)....... -- 1.1 1.2 1.3 --
Total assets(3)......... $63,942,263 $68,129,527 $86,259,343 $107,024,173 --
Long-term
borrowings(3)(4)....... $ 6,897,109 $ 6,341,559 $ 7,964,424 $ 10,871,100 --
Stockholders' equity(3). $ 3,151,343 $ 3,225,430 $ 3,818,088 $ 4,569,104 --
</TABLE>
- --------
(1) Net loss for 1989 includes an after-tax reduction of $395,000,000
($470,000,000 before income taxes) resulting from a provision for the
costs of divesting certain nonstrategic product lines and business
activities, consolidating and relocating selected retail and support
facilities and downsizing certain other operations. Results for 1989 have
been restated to reflect the effects of discontinued operations related to
the sale of the Company's real estate brokerage, relocation and related
services subsidiary, Fine Homes International, L.P. ("FHI"), in the third
quarter of 1989. Discontinued operations include the results of FHI's
operations through September 15, 1989 (the date of final disposition) and
the loss on disposal in 1989. Net earnings for 1992 have been reduced by
$58,580,000 to reflect the effects of the adoption of Statement of
Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting
for Postretirement Benefits Other than Pensions" and SFAS No. 109,
"Accounting for Income Taxes." Net earnings for 1993 have been reduced by
$35,420,000 to reflect the effects of the adoption of SFAS No. 112,
"Employers' Accounting for Postemployment Benefits."
(2) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs and
that portion of rentals estimated to be representative of the interest
factor. The ratio of earnings to fixed charges for 1988 was 1.2. In 1989,
fixed charges exceeded pretax earnings before fixed charges by
$187,564,000.
(3) Balance sheet information for the year ended December 31, 1993 is not
available as of the date of this Prospectus. At September 24, 1993, total
assets, long-term borrowings and stockholders' equity were
$147,611,339,000, $13,027,015,000 and $5,573,236,000, respectively.
(4) To finance its diverse activities, the Company and certain of its
subsidiaries borrow substantial amounts of short-term funds on a regular
basis. Although the amount of short-term borrowings significantly varies
with the level of general business activity, on September 24, 1993,
$336,151,000 of bank loans and $12,916,972,000 of commercial paper were
outstanding. In addition, certain of the Company's subsidiaries lend
securities and enter into repurchase agreements to obtain financing. At
September 24, 1993, cash deposits for securities loaned and securities
sold under agreements to repurchase amounted to $3,267,169,000 and
$52,771,145,000, respectively. From September 25, 1993 to January 20,
1994, long-term borrowings, net of repayments and repurchases, increased
in the amount of approximately $586,487,000.
4
<PAGE>
FISCAL YEAR 1993
Net earnings for 1993 were a record $1,358.9 million, an increase of $465.1
million (52%) above the $893.8 million reported for 1992. Results for 1993
include a non-recurring pretax lease charge in the first quarter totaling
$103.0 million ($59.7 million after income taxes) related to the Company's
decision not to occupy certain space at its World Financial Center Headquarters
facility. The 1993 results also reflect the early adoption of Statement of
Financial Accounting Standards ("SFAS") No. 112, "Employers' Accounting for
Postemployment Benefits." The cumulative effect of this change in accounting
principle reduced 1993 net earnings by $35.4 million. Revenues after interest
expense ("net revenues") reached a record $10,558 million, up 23% over the
$8,577 million reported in 1992. Total 1993 revenues advanced 24% to $16,588
million versus $13,413 million for the prior year.
Commission revenues increased 19% in 1993 to $2,894 million due primarily to
the continued growth of listed securities transactions, increases in sales of
mutual funds and higher revenues from other commission categories. Commissions
on listed securities benefited from higher trading volume and increases in
average market prices. Mutual fund commissions benefited from increased sales
of front-end funds. Strong 1992 sales led to an increase in 1993 distribution
fees for deferred-charge funds, however, redemption fees declined from 1992 due
to lower levels of redemptions. Interest and dividend revenues in 1993 were
$7,099 million, up 22% from 1992. Interest expense (including dividend expense)
rose 25% in 1993 to $6,030 million. As a result, in 1993 net interest and
dividend profit advanced 10% to $1,069 million, compared to the $971 million
reported in 1992. This increase in net interest and dividend profit resulted
from the expansion of collateralized borrowing and lending activities, the
increased use of interest-free funds due to a larger equity base, and decreased
funding costs due to lower interest rates and improved credit ratings.
Principal transactions revenues rose to record levels in 1993, up 35% to
$2,920 million from the $2,166 million reported in 1992. Fixed-income and
foreign exchange revenues, in the aggregate, increased on higher revenues from
swaps and derivatives, corporate bonds and preferred stocks, and non-U.S.
governments and agencies. These advances were somewhat offset by lower revenues
from foreign exchange. In addition, 1993 mortgage-backed securities principal
transactions revenues were essentially break-even; however, net revenues,
including related hedges and net interest, were positive, although
significantly below 1992 levels. Equity trading revenues increased primarily
due to higher volume and prices in over-the-counter and foreign equity markets.
Investment banking revenues increased 23% to a record $1,831 million from the
$1,484 million reported a year ago. Underwriting revenues benefited from the
low interest rate environment, as corporations refinanced higher interest-
bearing debt with lower rate issuances, or raised capital through equity
offerings. Investor demand remained strong for equity and high-yield bond
underwritings which offer the potential for higher returns compared with other
investment alternatives. Asset management and portfolio service fees were also
a record, advancing 24% to $1,558 million from the $1,253 million reported last
year. Increased fees earned from asset management activities, the Merrill Lynch
Consults(Registered Trademark) portfolio management service and other fee-based
portfolio services businesses contributed to these favorable results. Asset
management fees increased from 1992 due primarily to asset growth in stock and
bond funds. Merrill Lynch Consults revenue increased due to the growth in the
number of accounts and higher asset levels. Other revenues rose 1% to $285
million due to higher equity access fees generated from increased home equity
loan activity, partially offset by net investment losses related primarily to
provisions for merchant banking activities.
Non-interest expenses totaled $8,133 million, up 17% from the $6,956 million
in 1992. Excluding the 1993 first quarter non-recurring lease charge totaling
$103.0 million, non-interest expenses were up 15%. Compensation and benefits
expense, which represented approximately 65% of total non-interest expenses,
increased 20% from 1992 due to higher production-related compensation and
increases in incentive compensation linked to the Company's improved
profitability and return on common equity. Nevertheless, compensation and
benefits expense, as a percentage of net revenues, declined to 49.8% from 50.9%
in 1992. Facilities-related costs, including occupancy, communications and
equipment rental, and depreciation and amortization, increased 13% from 1992
(3% excluding the non-recurring lease charge). Advertising and market
development expenses increased 25% reflecting higher sales promotion and
recognition program costs for Financial Consultants that are tied to increased
business activity. In addition, travel costs were up as the
5
<PAGE>
increase in business volume required additional domestic and international
travel, while favorable markets contributed to the expansion of certain
discretionary national and local advertising campaigns. Professional fees
increased 13% due to technology upgrades which required the use of system and
management consultants, as well as higher employment agency fees. Brokerage,
clearing and exchange fees were up 1% as a result of increased trading volume,
while other expenses increased 5% principally as a result of additions to loss
provisions related to litigation and claims.
Income tax expense was $1,030 million versus $669 million in the prior year
as the effective rate in 1993 rose to 42.5%, compared with 41.3% a year ago.
The higher effective tax rate in 1993 related to the increase in the Federal
statutory rate from 34% in 1992 to 35% in 1993 due to legislation raising
corporate income tax rates retroactive to January 1, 1993.
The Company's Board of Directors declared a two-for-one common stock split
effected in the form of a 100% dividend paid November 24, 1993 to stockholders
of record on October 22, 1993.
The Company believes that its equity base is adequate relative to the level
and composition of its assets and the mix of its businesses.
In the normal course of its investment banking, trading and insurance
activities, the Company underwrites, purchases, sells and makes markets in
high-yield securities and other non-investment grade securities. Additionally,
the Company provides financing and advisory services to corporations entering
into leveraged transactions. These activities are subject to risks related to
the creditworthiness of the issuers and the liquidity of the market for such
securities, in addition to the usual risks associated with investing, extending
credit, underwriting and trading in investment grade instruments.
Information concerning the Company's positions in high-yield securities and
investments in highly leveraged transactions for the year ended December 31,
1993 is not available as of the date of this Prospectus. At September 24, 1993,
the carrying value of extensions of credit provided to corporations entering
into leveraged transactions aggregated $496 million (excluding unutilized
revolving lines of credit and other lending commitments of $72 million),
consisting primarily of senior term and subordinated financings to 44 medium-
sized corporations. At September 24, 1993, the Company had one bridge loan
outstanding, totaling $70 million, which has since been repaid. Loans to highly
leveraged corporations are carried at unpaid principal balance less a reserve
for estimated losses. The allowance for loan losses is estimated based on a
review of each loan, and considerations of economic, market and credit
conditions. Direct equity investments made in conjunction with the Company's
investment and merchant banking activities, which are generally recorded at the
lower of cost or estimated net realizable value, aggregated $306 million at
September 24, 1993, representing investments in 85 enterprises. At September
24, 1993, the Company held interests in partnerships, totaling $85 million
(recorded on the cost basis), that invest in highly leveraged transactions and
non-investment grade securities. The Company has a co-investment arrangement to
enter into direct equity investments. At September 24, 1993, the additional co-
investment commitments were $81 million. The Company also has committed to
invest an additional $14 million in partnerships that invest in leveraged
transactions.
As a market-maker, the Company holds trading positions in non-investment
grade securities. At September 24, 1993, the fair value of long and short non-
investment grade trading positions amounted to $2,065 million and $236 million,
respectively, and in aggregate (i.e., the sum of long and short trading
positions), represented 3.6% of aggregate consolidated trading positions.
Investments of the Company's insurance subsidiaries, which are carried at
amortized cost, include non-investment grade securities. At September 24, 1993,
$492 million or 6.0% of the aggregate carrying value of such investments were
non-investment grade.
As of September 24, 1993, the largest non-investment grade holdings related
to a single issuer totaled $158 million. No one industry sector represented
more than 16% of total non-investment grade positions. At September 24, 1993,
the Company held an aggregate carrying value of $294 million in securities of
issuers who were in various stages of bankruptcy proceedings or in default.
Approximately 46% of this amount resulted from the Company's market-making
activities in such securities.
6
<PAGE>
DESCRIPTION OF DEBT SECURITIES
Unless otherwise specified in a Prospectus Supplement, the Senior Debt
Securities are to be issued under an indenture (the "Senior Indenture"), dated
as of April 1, 1983, as amended and restated, between the Company and Chemical
Bank (successor by merger to Manufacturers Hanover Trust Company), as trustee
(the "Senior Debt Trustee"). The Subordinated Debt Securities are to be issued
under an indenture (the "Subordinated Indenture"), dated as of August 1, 1991,
between the Company and Chemical Bank (successor by merger to Manufacturers
Hanover Trust Company), 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 Indenture
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
Indenture, the Subordinated Indenture and any Subsequent Indentures (whether
senior or subordinated) are referred to herein as the "Indentures"; and the
Senior Debt Trustee, 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 Indenture 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; and (13) the denominations of such Debt
Securities. 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. Debt
Securities may also be issued
7
<PAGE>
under the Indenture 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.
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 Securities Exchange Act of 1934 and under rules of
certain exchanges and other regulatory bodies.
Principal and interest, premium and Additional Amounts, if any, 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 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.
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.
8
<PAGE>
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 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 that series when
due, 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, 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, if 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. Before
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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 Indenture provides 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 Indenture) 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.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS BY,
MLPF&S
The Senior Indenture provides 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 Indenture 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 Indenture provides that the Company may not 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 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.
Senior Indebtedness is defined in the Subordinated Indenture as the principal
of, premium, if any, and unpaid interest on (a) indebtedness of the Company
(including indebtedness of others guaranteed by the Company), other than the
Subordinated Debt Securities, whether outstanding on the date of execution of
the Subordinated Indenture or thereafter created, incurred, assumed or
guaranteed, (i) for money owing to banks, (ii) for money borrowed from sources
other than banks or (iii) in connection with the acquisition by the Company or
a subsidiary of assets of any kind except in the ordinary course of business,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is provided that such indebtedness is not superior
in right of payment to the Subordinated Debt Securities, and (b) renewals,
extensions, modifications and refundings of any such indebtedness. As of June
25, 1993, a total of approximately $24.3 billion of the Company's indebtedness
would have been Senior Indebtedness as so defined.
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DESCRIPTION OF DEBT WARRANTS
The Company may issue, together with Debt Securities, Currency Warrants or
Index Warrants or separately, Debt Warrants for the purchase of Debt
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 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, and the
number of such Debt Warrants issued with each such Debt Security; (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) if the Debt Securities purchasable upon exercise
of such Debt Warrants are original issue discount Debt Securities, a discussion
of Federal income tax considerations applicable thereto; and (6) 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.
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 Debt Warrants will not have any of the rights of Holders
of the Debt Securities purchasable upon such exercise and will not be entitled
to payments of principal of, and any premium, Additional Amounts or interest
on, the Debt Securities purchasable upon such exercise.
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 purchasable
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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.
DESCRIPTION OF CURRENCY WARRANTS
The Company may issue, together with Debt Securities, Debt Warrants or Index
Warrants or separately, 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. 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
applicable Prospectus Supplement. Copies of the forms of Currency Put Warrant
Agreement and Currency Call Warrant Agreement, including the forms of global
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 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; and (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.
BOOK-ENTRY PROCEDURES AND SETTLEMENT
Except as may otherwise be provided in an applicable Prospectus Supplement,
the Currency Warrants will be issued in the form of global Currency Warrant
Certificates, registered in the name of a depository or its nominee. Beneficial
owners will not be entitled to receive definitive certificates representing
Currency Warrants. Ownership of 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 depository 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 1:30
P.M., New York City time, on the fifth New York Business Day preceding the
Expiration Date, Currency Warrants will be deemed automatically exercised.
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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 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") and call warrants (the "Index Call
Warrants"). The Index Warrants will entitle the holders to receive from the
Company an amount in cash 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 of a specified stock or security index or the value of a portfolio of
specified stocks or other securities (the "Index"). The Index may be composed
of U.S. or foreign stocks or securities or a combination thereof (the
"Underlying Securities"). Unless otherwise specified in the accompanying
Prospectus Supplement, payments, if any, on the Index Warrants will be made in
U.S. dollars. An Index Warrant will not require or entitle the holder thereof
(the "Index Warrantholder") to purchase or take delivery of or sell or make
delivery of any securities (including Underlying Securities); nor will the
Company be under any obligation to, nor will it, purchase or take delivery of
or sell or make delivery of any securities (including Underlying Securities)
from or to Index Warrantholders pursuant to the Index Warrants. The Index
Warrants will be offered on terms to be determined at the time of sale.
GENERAL
The applicable Prospectus Supplement will describe the Index Warrant
Agreement or Index Warrant Trust Indenture (each as defined below), as the case
may be, relating to the Index Warrants being offered thereby and the terms of
such Index Warrants, including, without limitation: (i) whether the Index
Warrants to be issued will be Index Put Warrants, Index Call Warrants or both;
(ii) the aggregate number and initial public offering price or purchase price;
(iii) the Index for such Index Warrants, which may be based on U.S. or foreign
stocks or securities or a combination thereof and may be a preexisting U.S. or
foreign stock or security index compiled and published by a third party or a
portfolio of Underlying Securities selected by the Company in connection with
the issuance of such Index Warrants, and certain information regarding such
Index and the Underlying Securities; (iv) the date on which the right to
exercise such Index Warrants commences and the date on which such right
expires; (v) 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; (vi) the minimum number, if any, of such Index Warrants
exercisable at any one time; (vii) 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; (viii) 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; (ix)
any provisions for the automatic exercise of such Index Warrants other than at
expiration; (x) any provisions permitting the Company to cancel such Index
Warrants upon the occurrence of certain events; (xi) any additional
circumstances which would constitute an Event of Default with respect to such
Index Warrants; (xii) the method of determining (a) the amount (the "Cash
Settlement Value") payable in connection with the exercise or deemed exercise
of such Index Warrants, (b) the minimum value, if any, payable upon expiration
of such Index Warrants (the "Minimum Expiration Value"), (c) the
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amount payable upon the exercise of any right which the Company may have to
cancel such Index Warrants and (d) the value of the Index; (xiii) in the case
of Index Warrants relating to an Index for which the trading prices of
Underlying Securities are expressed in a foreign currency, the method of
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); (xiv) the method of providing for a substitute index or
otherwise determining the amount payable in connection with the exercise of
such Index Warrants if the Index changes or ceases to be made available by its
publisher; (xv) the time or times at which amounts will be payable in respect
of such Index Warrants following exercise or deemed exercise; (xvi) the
national securities exchange on which such Index Warrants will be listed, if
any; (xvii) any provisions for issuing such Index Warrants in other than global
form; (xviii) if such Index Warrants are not issued in book-entry form, the
place or places at which payment of the Cash Settlement Value, amount payable
on cancellation, if any, and the Minimum Expiration Value, if any, of such
Index Warrants is to be made by the Company; (xix) certain U.S. federal income
tax consequences relating to such Index Warrants; and (xx) other specific
provisions.
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,
with their advisers, the suitability of the Index Warrants in light of their
particular circumstances and the information set forth below and under
"Description of Index Warrants" as well as additional information contained in
the Prospectus Supplement relating to such Index Warrants.
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Unless otherwise provided in the Prospectus Supplement, each Index Warrant
will entitle Index Warrantholders to receive from the Company upon exercise the
Cash 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, an
amount equal to the greater of the applicable Cash 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 amount 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 Cash 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 Prospectus Supplement, the Index will be an
established, broadly-based index related to a major domestic or foreign equity
or security trading market or based upon a portfolio of specified stocks or
other securities, and the Cash Settlement Value (and, if applicable, the
Minimum Expiration Value or amount payable on cancellation) of the Index
Warrants will be payable in U.S. dollars.
An Index Warrant will be settled only in cash, and accordingly, will not
require or entitle an Index Warrantholder to sell, make delivery, purchase or
take delivery of any shares of any Underlying Securities or any other
securities, nor will the Company be under any obligation to, nor will it,
purchase or take delivery of or sell or make delivery of any securities
(including Underlying Securities) from or to Index Warrantholders pursuant to
the Index Warrants. The Index Warrantholders will not receive any interest on
any Cash Settlement Value, Minimum Expiration Value or amount payable on
cancellation of the Index Warrants and the Index Warrants will not entitle the
Index Warrantholders to any of the rights of holders of any Underlying
Securities.
Unless otherwise specified in the related Prospectus Supplement, the Index
Warrants will be deemed to be automatically exercised upon expiration. Upon
such automatic exercise, Index Warrantholders will be entitled to receive the
Cash Settlement Value of the Index Warrants, except that holders of Index
Warrants having a Minimum Expiration Value will be entitled to receive an
amount equal to the greater of such Cash Settlement Value and the applicable
Minimum Expiration Value. The Minimum Expiration Value may be either a fixed
amount or an amount 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 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 amount payable on cancellation specified in such Prospectus
Supplement. The amount payable on cancellation may be either a fixed amount or
an amount 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 of the Cash Settlement Value, Minimum Expiration Value or
cancellation amount (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.
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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.
Certain special United States federal income tax considerations may be
applicable to instruments such as the Index Warrants. The related Prospectus
Supplement will describe such tax considerations. The summary of United Stated
federal income tax considerations contained in the Prospectus Supplement will
be presented for informational purposes only, however, and will not be intended
as legal or tax advice to prospective purchasers. Prospective purchasers of
Index Warrants are urged to consult their own tax advisors prior to any
acquisition of Index Warrants.
BOOK-ENTRY PROCEDURES AND SETTLEMENT
Except as may otherwise be provided in an applicable Prospectus Supplement,
Index Warrants will be issued in book-entry form and represented by global
Index Warrants, registered in the name of a depository or its nominee. Except
as may otherwise be provided in an applicable Prospectus Supplement, Index
Warrantholders will not be entitled to receive definitive certificates
representing Index Warrants, unless the depository is unwilling or unable to
continue as depository 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 depository in the name of such brokerage firm or other
entity or its agent.
LISTING
Unless otherwise indicated in the Prospectus Supplement, the Index Warrants
will be listed on a national securities exchange as specified in the Prospectus
Supplement. It is expected that such exchange will cease trading an issue of
Index Warrants at the close of business on the related expiration date of such
Index Warrants.
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
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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 Cash Settlement
Value or amount payable 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 amount receivable 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.
EVENT 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 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 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
payment of the Cash Settlement Value (or any Minimum Expiration Value or
cancellation amount, 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 for, its Index Warrants.
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<PAGE>
PLAN OF DISTRIBUTION
The Company may sell Securities (i) through MLPF&S as agent, (ii) to the
public through, or through underwriting syndicates managed by, one or more of
the firms named on the cover page of this Prospectus 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.
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 (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 Schedule E to the By-Laws 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 1992 Annual Report on Form 10-K and incorporated by
reference in this Prospectus have been audited by Deloitte & Touche,
independent auditors, as stated in their reports incorporated by reference
herein. The information under the caption "Summary Financial Information" for
each of the four years in the period ended December 25, 1992 included in this
Prospectus and 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 25, 1992 included in the 1992 Annual Report
to Stockholders of the Company and incorporated by reference herein have been
derived from consolidated financial statements audited by Deloitte & Touche, as
set forth in their reports incorporated by reference herein. The consolidated
financial statements and related financial statement schedules, such Summary
Financial Information 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 given upon their
authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in any of the Quarterly Reports on Form 10-Q which may be incorporated
herein by reference, Deloitte & Touche have applied
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<PAGE>
limited procedures in accordance with professional standards for a review of
such information. However, as stated in their report included in any such
Quarterly Report 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 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.
19
<PAGE>
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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 IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY
THIS PROSPECTUS 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 UNDERWRITER. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND
THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION 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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement Summary............................................. S-3
Certain Important Information Concerning the Warrants..................... S-6
Risk Factors Relating to the Warrants..................................... S-6
Description of the Warrants............................................... S-9
CMT Yield................................................................. S-14
Certain United States Federal Income Tax Considerations Concerning the
Warrants................................................................. S-16
Use of Proceeds........................................................... S-18
Underwriting.............................................................. S-18
Validity of Securities.................................................... S-18
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Merrill Lynch & Co., Inc.................................................. 3
Use of Proceeds........................................................... 3
Summary Financial Information............................................. 4
Description of Debt Securities............................................ 7
Description of Debt Warrants.............................................. 11
Description of Currency Warrants.......................................... 12
Description of Index Warrants............................................. 13
Plan of Distribution...................................................... 18
Experts................................................................... 18
</TABLE>
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LOGO
MERRILL LYNCH & CO., INC.
1,800,000
CONSTANT MATURITY U.S. TREASURY YIELD
INCREASE WARRANTS,
EXPIRING AUGUST 25, 1995
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
JANUARY 27, 1994
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<PAGE>
GRAPHICS APPENDIX LIST
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Page Where
Graphic
Appears Description of Graphic or Cross-Reference
- --------------------------------------------------------------------------------
Page S-16 The graph is entitled "CMT Yield--Historical
Performance" "Monthly Averages from January 1989
through December 1993".
The graph sets forth the monthly averages for
the CMT Yield. The vetical axis specifies the
values of the CMT Yield in a range from 4 to
10 percent in increments of 1; the horizontal
axis specifies the time period in increments
of three months beginning with January 1989 and
ending with December 1993.
