<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 8, 1996
REGISTRATION NO. 33-65135
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
MERRILL LYNCH & CO., INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION 13-2740599
OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
WORLD FINANCIAL CENTER
NORTH TOWER
NEW YORK, NEW YORK 10281-1334
(212) 449-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ROSEMARY T. BERKERY, ESQ.
ASSOCIATE GENERAL COUNSEL
MERRILL LYNCH & CO., INC.
WORLD FINANCIAL CENTER
NORTH TOWER
NEW YORK, NEW YORK 10281-1334
(212) 449-6990
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
NORMAN D. SLONAKER, ESQ.
BROWN & WOOD
ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
----------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
----------------
THIS POST-EFFECTIVE AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT SHALL
HEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES
ACT OF 1933 OR ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Post-Effective Amendment No. 1 contains only a form of prospectus
supplement and prospectus to be used in connection with an underwritten
offering of the Registrant's Structured Yield Product Exchangeable for
StockSM, % STRYPESSM Due , 1999, payable at maturity or upon redemption
with shares of Class A Common Stock of Cox Communications, Inc. Copies of
various prospectuses that were included in the Registration Statement on Form
S-3 (No. 33-65135) as originally filed by the Registrant with the Securities
and Exchange Commission are not included herein.
1
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A POST- +
+EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT RELATING TO THESE +
+SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE +
+SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE +
+TIME THE POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT BECOMES +
+EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS SHALL NOT CONSTITUTE +
+AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE +
+ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION +
+OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, ISSUE DATE: MAY 8, 1996
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY , 1996)
8,500,000 STRYPES SM
MERRILL LYNCH & CO., INC.
% STRYPES SM DUE , 1999
PAYABLE WITH SHARES OF COMMON STOCK OF
LOGO of COX
Merrill Lynch & Co. COMMUNICATIONS
COX COMMUNICATIONS, INC.
(OR CASH WITH AN EQUAL VALUE)
----------
The issue price of each Structured Yield Product Exchangeable for
Stock SM, % STRYPESSM Due , 1999 (each, a "STRYPES") of Merrill Lynch & Co.,
Inc. (the "Company") being offered hereby is $ , which amount is equal to
the last sale price of the Class A Common Stock, par value $1.00 per share (the
"Cox Common Stock"), of Cox Communications, Inc., a Delaware corporation
("Cox"), on , 1996, as reported on the New York Stock Exchange (the "Initial
Price"). The STRYPES will mature on , 1999 (the "Maturity Date").
Interest on the STRYPES, at the rate of % of the issue price per annum, is
payable in cash quarterly in arrears on , , and , beginning
, 1996. The STRYPES will be unsecured obligations of the Company ranking pari
passu with all of its other unsecured and unsubordinated indebtedness. In
addition, the STRYPES will not restrict the Company's ability to incur
additional indebtedness ranking senior to, or pari passu with, the STRYPES. See
"SUPPLEMENTAL DESCRIPTION OF THE STRYPES--Ranking."
On the Maturity Date, unless previously redeemed, the Company will pay and
discharge each STRYPES by delivering to the holder thereof a number of shares
of Cox Common Stock (or, at the Company's option, which may be exercised with
respect to all, but not less than all, shares of Cox Common Stock deliverable
on the Maturity Date, cash with an equal value) determined in accordance with
the following formula (the "Payment Rate Formula"), subject to certain
adjustments: (a) if the Maturity Price is greater than or equal to $ per
share of Cox Common Stock (the "Threshold Appreciation Price"), shares
of Cox Common Stock per STRYPES, (b) if the Maturity Price is less than the
Threshold Appreciation Price but is greater than the Initial Price, a
fractional share of Cox Common Stock per STRYPES so that the value thereof
(determined based on the Maturity Price) equals the Initial Price and (c) if
the Maturity Price is less than or equal to the Initial Price, one share of Cox
Common Stock per STRYPES. The "Maturity Price" means the average Closing Price
(as defined herein) per share of Cox Common Stock on the 20 Trading Days (as
defined herein) immediately prior to the second Trading Day preceding the
Maturity Date. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE AMOUNT
RECEIVABLE BY HOLDERS OF THE STRYPES ON THE MATURITY DATE WILL BE EQUAL TO OR
GREATER THAN THE ISSUE PRICE OF THE STRYPES. IF THE MATURITY PRICE OF THE COX
COMMON STOCK IS LESS THAN THE INITIAL PRICE, SUCH AMOUNT RECEIVABLE ON THE
MATURITY DATE WILL BE LESS THAN THE ISSUE PRICE PAID FOR THE STRYPES, IN WHICH
CASE AN INVESTMENT IN THE STRYPES WILL RESULT IN A LOSS. See "SUPPLEMENTAL
DESCRIPTION OF THE STRYPES."
From and after a Tax Event Date (as defined herein), the STRYPES will be
redeemable at the option of the Company, in whole but not in part, at the Tax
Event Redemption Price (as defined herein). See "SUPPLEMENTAL DESCRIPTION OF
THE STRYPES--Special Redemption Upon Tax Event." The STRYPES are not subject to
any sinking fund.
Attached hereto as Appendix A is a prospectus of Cox covering the shares of
Cox Common Stock which may be received by a holder of the STRYPES on the
Maturity Date or upon redemption.
Cox is not affiliated with the Company, will not receive any of the proceeds
from the sale of the STRYPES and will have no obligations with respect to the
STRYPES.
SEE "RISK FACTORS" BEGINNING ON PAGE S-8 OF THIS PROSPECTUS SUPPLEMENT FOR
CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE STRYPES.
For a discussion of certain United States Federal income tax consequences for
holders of the STRYPES, see "CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS."
The Cox Common Stock is listed on the New York Stock Exchange ("NYSE") under
the trading symbol "COX." Application has been made to list the STRYPES on the
NYSE.
----------
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.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
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<S> <C> <C> <C>
Per STRYPES.................................. $ $ $
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Total(4)..................................... $ $ $
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</TABLE>
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(1) Plus accrued interest, if any, from , 1996 to the date of delivery.
(2) The Company, Cox and Cox Enterprises, Inc. have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "UNDERWRITING."
(3) Before deducting expenses payable by the Company estimated at $ .
(4) The Company has granted the Underwriter an option for 30 days to purchase
up to an additional 1,275,000 STRYPES at the initial public offering price
per STRYPES, less the underwriting discount, solely to cover over-
allotments. If such over-allotment option is exercised in full, the total
Price to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "UNDERWRITING."
----------
The STRYPES are offered by the Underwriter, subject to prior sale, when, as
and if issued to and accepted by the Underwriter, and subject to certain other
conditions. The Underwriter reserves the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the STRYPES will be made in New York, New York, on or about ,
1996.
This Prospectus may be used by the Underwriter in connection with offers and
sales related to market-making transactions in the STRYPES. 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.
- -----
SM Service mark of Merrill Lynch & Co., Inc.
----------
MERRILL LYNCH & CO.
----------
The date of this Prospectus Supplement is , 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE STRYPES AND
THE COX COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE,
IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER OF
INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE COMMISSIONER PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
S-2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the information
included and incorporated by reference in the accompanying Prospectus (the
"ML&Co. Prospectus") and by the more detailed information included elsewhere in
this Prospectus Supplement. Unless otherwise indicated, the information
contained in this Prospectus Supplement assumes that the Underwriter's over-
allotment option is not exercised.
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its subsidiaries
and affiliates, provides investment, financing, insurance, and related services
on a global basis. Its principal subsidiary, Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("MLPF&S"), is one of the largest securities firms in the
world.
COX COMMUNICATIONS, INC.
Cox Communications, Inc. is the fifth largest operator of cable television
systems in the United States and is a fully integrated, diversified media and
broadband communications company with operations and investments in three
related areas: (i) U.S. broadband networks; (ii) United Kingdom broadband
networks; and (iii) cable television programming.
Attached hereto as Appendix A is a prospectus of Cox (the "Cox Prospectus")
covering the shares of Cox Common Stock which may be received by a holder of
STRYPES on the Maturity Date or upon redemption. Cox is not affiliated with the
Company, will not receive any of the proceeds from the sale of the STRYPES and
will have no obligations with respect to the STRYPES. THE COX PROSPECTUS IS
BEING ATTACHED HERETO AND DELIVERED TO PROSPECTIVE PURCHASERS OF STRYPES
TOGETHER WITH THIS PROSPECTUS SUPPLEMENT AND THE ML&CO. PROSPECTUS FOR
CONVENIENCE OF REFERENCE ONLY. THE COX PROSPECTUS DOES NOT CONSTITUTE A PART OF
THIS PROSPECTUS SUPPLEMENT OR THE ML&CO. PROSPECTUS, NOR IS IT INCORPORATED BY
REFERENCE HEREIN OR THEREIN.
THE STRYPES
OFFERING............... 8,500,000 STRYPES
ISSUE PRICE............ $ per STRYPES
MATURITY DATE.......... , 1999
INTEREST RATE.......... % of the issue price per annum, or $ per
STRYPES per quarter, payable in cash quarterly in
arrears
INTEREST PAYMENT DATES...... , , and , beginning , 1996
PAYMENT AT MATURITY.... On the Maturity Date, unless previously redeemed,
the Company will pay and discharge each STRYPES by
delivering to the holder thereof a number of
shares of Cox Common Stock (or, at the Company's
option, which may be exercised with respect to
all, but not less than all, shares of Cox Common
Stock deliverable on the Maturity Date, cash with
an equal value) determined in accordance with the
following Payment Rate Formula, subject to certain
adjustments: (a) if the Maturity Price is greater
than or equal to $ per share of Cox Common
Stock (the "Threshold Appreciation Price"),
shares of Cox Common Stock per STRYPES, (b) if the
Maturity Price is less than the Threshold
Appreciation Price but is greater than the Initial
Price, a fractional
S-3
<PAGE>
share of Cox Common Stock per STRYPES so that the
value thereof (determined based on the Maturity
Price) equals the Initial Price and (c) if the
Maturity Price is less than or equal to the
Initial Price, one share of Cox Common Stock per
STRYPES. The "Maturity Price" means the average
Closing Price per share of Cox Common Stock on the
20 Trading Days immediately prior to the second
Trading Day preceding the Maturity Date.
ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE
AMOUNT RECEIVABLE BY HOLDERS OF THE STRYPES ON THE
MATURITY DATE WILL BE EQUAL TO OR GREATER THAN THE
ISSUE PRICE OF THE STRYPES. IF THE MATURITY PRICE
OF THE COX COMMON STOCK IS LESS THAN THE INITIAL
PRICE, SUCH AMOUNT RECEIVABLE ON THE MATURITY DATE
WILL BE LESS THAN THE ISSUE PRICE PAID FOR THE
STRYPES, IN WHICH CASE AN INVESTMENT IN THE
STRYPES WILL RESULT IN A LOSS. See "SUPPLEMENTAL
DESCRIPTION OF THE STRYPES--General."
SPECIAL REDEMPTION UPON
TAX EVENT.............
From and after a Tax Event Date (as defined
herein), the STRYPES will be redeemable at the
option of the Company, in whole but not in part,
at the Tax Event Redemption Price (as defined
herein). See "SUPPLEMENTAL DESCRIPTION OF THE
STRYPES-- Special Redemption Upon Tax Event."
NO SINKING FUND........ The STRYPES do not contain any sinking fund or
other mandatory redemption provisions. The STRYPES
are not subject to payment prior to the Maturity
Date at the option of the holder. See
"SUPPLEMENTAL DESCRIPTION OF THE STRYPES--No
Sinking Fund."
RANKING................ The STRYPES will be unsecured obligations of the
Company ranking pari passu with all of its other
unsecured and unsubordinated indebtedness. See
"SUPPLEMENTAL DESCRIPTION OF THE STRYPES--Ranking"
herein and "DESCRIPTION OF THE STRYPES--Ranking"
in the ML&Co. Prospectus.
RELATIONSHIP TO COX
COMMON STOCK.......
The STRYPES will bear interest at % of the issue
price per annum. Cox has never paid any cash
dividends on the Cox Common Stock and does not
expect to pay any cash dividends on the Cox Common
Stock in the foreseeable future. The opportunity
for equity appreciation afforded by an investment
in the STRYPES is less than the opportunity for
equity appreciation afforded by a direct
investment in the Cox Common Stock because the
amount receivable by a holder of a STRYPES on the
Maturity Date will only exceed the issue price of
such STRYPES if the Maturity Price of the Cox
Common Stock exceeds the Threshold Appreciation
Price (which represents an appreciation of %
over the Initial Price). Moreover, holders of the
STRYPES will only be entitled to receive on the
Maturity Date % (the percentage equal to the
Initial Price divided by the Threshold
Appreciation Price) of any appreciation of the
value of Cox Common Stock in excess of the
Threshold Appreciation Price. Holders of the
STRYPES will not
S-4
<PAGE>
be entitled to any rights with respect to the Cox
Common Stock (including, without limitation,
voting rights and rights to receive any dividends
or other distributions in respect thereof) unless
and until such time, if any, as the Company shall
have delivered shares of Cox Common Stock for
STRYPES on the Maturity Date or upon redemption,
and unless the applicable record date, if any, for
the exercise of such rights occurs after such
delivery. See "RISK FACTORS--Limitations on
Opportunity for Equity Appreciation" and "--No
Stockholder Rights."
TRADING PRICES......... The trading prices of the STRYPES in the secondary
market will be directly affected by the trading
prices of the Cox Common Stock in the secondary
market. It is impossible to predict whether the
price of Cox Common Stock will rise or fall. In
addition, any market that develops for the STRYPES
is likely to influence the market for Cox Common
Stock. For example, the price of Cox Common Stock
could become more volatile and could be depressed
by investors' anticipation of the potential
distribution into the market of substantial
amounts of Cox Common Stock on the Maturity Date
or upon redemption of the STRYPES, by possible
sales of Cox Common Stock by investors who view
the STRYPES as a more attractive means of equity
participation in Cox and by hedging or arbitrage
trading activity that may develop involving the
STRYPES and the Cox Common Stock. See "RISK
FACTORS--Factors Affecting Trading Prices" and "--
Impact of the STRYPES on the Market for Cox Common
Stock."
DILUTION............... The number of shares (or, pursuant to the
Company's option, the amount of cash) that holders
of the STRYPES are entitled to receive upon
payment and discharge on the Maturity Date or upon
redemption will not be adjusted for certain
events, such as offerings of Cox Common Stock for
cash or in connection with acquisitions. Cox is
not restricted from issuing additional Cox Common
Stock during the term of the STRYPES and has no
obligation to consider the interests of holders of
STRYPES for any reason. Additional issuances may
materially and adversely affect the price of Cox
Common Stock and, because of the relationship of
the number of shares (or cash amount) to be
received upon payment and discharge or redemption
to the price of the Cox Common Stock, such other
events may adversely affect the trading price of
the STRYPES. See "RISK FACTORS--Dilution of Cox
Common Stock."
STRYPES AGREEMENT WITH COX
ENTERPRISES, INC. ....
Pursuant to an agreement (the "STRYPES Agreement")
among the Company, Merrill Lynch Capital Services,
Inc., a wholly owned subsidiary of the Company
(the "ML&Co. Subsidiary"), and Cox Enterprises,
Inc. ("CEI"), CEI is obligated to deliver to the
ML&Co. Subsidiary immediately prior to the
Maturity Date a number of shares of Cox Common
Stock equal to the number required by the Company
to pay and discharge all of the STRYPES (including
any STRYPES issued pursuant to the over-allotment
option granted by the Company to the Underwriter).
In lieu of
S-5
<PAGE>
delivering shares of Cox Common Stock immediately
prior to the Maturity Date, CEI has the option,
exercisable in its sole discretion, to satisfy its
obligation under the STRYPES Agreement by
delivering at such time cash in an amount equal to
the value of such number of shares of Cox Common
Stock at the Maturity Price. Such option, if
exercised by CEI, must be exercised with respect
to all shares of Cox Common Stock then deliverable
pursuant to the STRYPES Agreement. Under the
STRYPES Agreement, the Company has agreed to pay
and discharge the STRYPES by delivering to the
holders thereof on the Maturity Date the form of
consideration that the ML&Co. Subsidiary receives
from CEI. CEI also has the option, exercisable on
or after a Tax Event Date, to satisfy and
discharge its obligations under the STRYPES
Agreement by delivering to the ML&Co. Subsidiary,
on a date fixed by CEI for early settlement, cash
and shares of Cox Common Stock in an amount and
number, respectively, equal to the amount and
number required by the Company to redeem all of
the STRYPES (including any STRYPES issued pursuant
to the over-allotment option granted by the
Company to the Underwriter). Under the STRYPES
Agreement, the Company has agreed to redeem all of
the STRYPES in the event that CEI exercises such
option. The consideration to be paid by the ML&Co.
Subsidiary under the STRYPES Agreement is $ in
the aggregate, and is payable to CEI on or about
, 1996. No other consideration is payable by the
ML&Co. Subsidiary to CEI in connection with its
acquisition of the Cox Common Stock or the
performance of the STRYPES Agreement by CEI.
CEI has no obligations with respect to the
STRYPES or amounts to be paid to holders thereof,
including any obligation to take the needs of the
Company or of holders of the STRYPES into
consideration in determining whether to deliver
shares of Cox Common Stock or cash or for any
other reason. The STRYPES Agreement among the
Company, the ML&Co. Subsidiary and CEI is a
commercial transaction and does not create any
rights in, or for the benefit of, any third party,
including any holder of STRYPES. See "CERTAIN
ARRANGEMENTS WITH CEI."
CERTAIN UNITED STATES
FEDERAL INCOME TAX
CONSIDERATIONS........
Prospective investors in the STRYPES should be
aware that there exists uncertainty concerning the
proper United States Federal income tax
characterization and treatment of the STRYPES.
Accordingly, prospective investors should consider
the tax consequences of investing in the STRYPES.
See "RISK FACTORS--Tax Matters" and "CERTAIN
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS."
GLOBAL NOTES........... Upon issuance, all STRYPES will be represented by
one or more global securities deposited with, and
registered in the name of, The Depository Trust
Company, as Securities Depositary (the "Securities
Depositary"), or a nominee thereof. As a result,
the
S-6
<PAGE>
Securities Depositary, or its nominee, will be
considered the sole owner of the STRYPES under the
Indenture. Ownership interests of actual
purchasers of STRYPES will be recorded on the
records
of participants in the Securities Depositary. See
"DESCRIPTION OF THE STRYPES--Securities
Depositary" in the ML&Co. Prospectus.
USE OF PROCEEDS........ The net proceeds to the Company from the sale of
the STRYPES are expected to be $ , $ of which
will be used to purchase an obligation of the
ML&Co. Subsidiary and the remainder of which will
be used to pay certain expenses of the offering.
The ML&Co. Subsidiary will use the consideration
that it receives from the Company to pay to CEI
the consideration due under the STRYPES Agreement.
S-7
<PAGE>
RISK FACTORS
Prospective purchasers should read carefully this entire Prospectus
Supplement and the ML&Co. Prospectus and should consider, among other things,
the factors set forth below and under "Risk Factors" in the Cox Prospectus.
COMPARISON TO OTHER DEBT SECURITIES; RELATIONSHIP TO COX COMMON STOCK
The terms of the STRYPES differ from those of ordinary debt securities in
that the value of the Cox Common Stock (or, pursuant to the option of the
Company, the amount of cash) that a holder of a STRYPES will receive on the
Maturity Date is not fixed, but is based on the Maturity Price of the Cox
Common Stock (see "SUPPLEMENTAL DESCRIPTION OF THE STRYPES"). THERE CAN BE NO
ASSURANCE THAT SUCH AMOUNT RECEIVABLE BY THE HOLDER ON THE MATURITY DATE WILL
BE EQUAL TO OR GREATER THAN THE ISSUE PRICE OF THE STRYPES. IF THE MATURITY
PRICE OF THE COX COMMON STOCK IS LESS THAN THE INITIAL PRICE, SUCH AMOUNT
RECEIVABLE ON THE MATURITY DATE WILL BE LESS THAN THE ISSUE PRICE PAID FOR THE
STRYPES, IN WHICH CASE AN INVESTMENT IN STRYPES WILL RESULT IN A LOSS.
ACCORDINGLY, A HOLDER OF STRYPES ASSUMES THE RISK THAT THE MARKET VALUE OF THE
COX COMMON STOCK MAY DECLINE, AND THAT SUCH DECLINE COULD BE SUBSTANTIAL. THE
COX PROSPECTUS COVERS THE SHARES OF COX COMMON STOCK WHICH MAY BE RECEIVED BY A
HOLDER OF THE STRYPES ON THE MATURITY DATE OR UPON REDEMPTION.
LIMITATION ON OPPORTUNITY FOR EQUITY APPRECIATION
The opportunity for equity appreciation afforded by an investment in the
STRYPES is less than the opportunity for equity appreciation afforded by a
direct investment in the Cox Common Stock because the amount receivable by a
holder of a STRYPES on the Maturity Date will only exceed the issue price of
such STRYPES if the Maturity Price of the Cox Common Stock exceeds the
Threshold Appreciation Price (which represents an appreciation of % over the
Initial Price). Moreover, holders of the STRYPES will only be entitled to
receive on the Maturity Date % (the percentage equal to the Initial Price
divided by the Threshold Appreciation Price) of any appreciation of the value
of Cox Common Stock in excess of the Threshold Appreciation Price. See
"SUPPLEMENTAL DESCRIPTION OF THE STRYPES." Because the price of the Cox Common
Stock is subject to market fluctuations, the value of the Cox Common Stock (or,
pursuant to the option of the Company, the amount of cash) received by a holder
of a STRYPES on the Maturity Date, determined as described herein, may be more
or less than the issue price of the STRYPES.
FACTORS AFFECTING TRADING PRICES
The trading prices of the STRYPES in the secondary market will be directly
affected by the trading prices of the Cox Common Stock in the secondary market.
It is impossible to predict whether the price of Cox Common Stock will rise or
fall. Trading prices of Cox Common Stock will be influenced by Cox's operating
results and prospects, by complex and interrelated political, economic,
financial and other factors and market conditions that can affect the capital
markets generally, the market segment of which Cox is a part, the NYSE (on
which the Cox Common Stock is traded), including the level of, and fluctuations
in, the trading prices of stocks generally and sales of substantial amounts of
Cox Common Stock in the market subsequent to the offering of the STRYPES or the
perception that such sales could occur, and by other events that are difficult
to predict and beyond the Company's control.
IMPACT OF STRYPES ON THE MARKET FOR COX COMMON STOCK
It is not possible to predict accurately how or whether the STRYPES will
trade in the secondary market or whether such market will be liquid. Any market
that develops for the STRYPES is likely to influence and be influenced by the
market for Cox Common Stock. For example, the price of Cox Common Stock could
become more volatile and could be depressed by investors' anticipation of the
potential distribution into the market of substantial amounts of Cox Common
Stock on the Maturity Date or upon redemption of the STRYPES, by possible sales
of Cox Common Stock by investors who view the STRYPES as a more attractive
means of equity participation in Cox and by hedging or arbitrage trading
activity that may develop involving the STRYPES and the Cox Common Stock. In
addition, CEI is not precluded from selling shares of Cox Common Stock, either
pursuant to Rule 144 or by causing Cox to register such shares. Any such sales
could have an adverse effect on the market price of Cox Common Stock and/or the
STRYPES and could affect the Payment Rate Formula.
S-8
<PAGE>
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
It is not possible to predict how the STRYPES will trade in the secondary
market or whether such market will be liquid or illiquid. The STRYPES are novel
securities and there is currently no secondary market for the STRYPES.
Application has been made to list the STRYPES on the NYSE. However, there can
be no assurance that an active trading market for the STRYPES will develop,
that such listing will provide the holders of the STRYPES with liquidity of
investment, or that the STRYPES will not later be delisted or that trading of
the STRYPES on the NYSE will not be suspended. In the event of a delisting or
suspension of trading on the NYSE, the Company will apply for listing of the
STRYPES on another national securities exchange or for quotation on another
trading market. If the STRYPES are not listed or traded on any securities
exchange or trading market, or if trading of the STRYPES is suspended, pricing
information for the STRYPES may be more difficult to obtain and the liquidity
of the STRYPES may be adversely affected.
NO STOCKHOLDER'S RIGHTS
Holders of the STRYPES will not be entitled to any rights with respect to the
Cox Common Stock (including, without limitation, voting rights and rights to
receive any dividends or other distributions in respect thereof) unless and
until such time, if any, as the Company shall have delivered shares of Cox
Common Stock for STRYPES on the Maturity Date or upon redemption, and unless
the applicable record date, if any, for the exercise of such rights occurs
after such date. For example, in the event that an amendment is proposed to the
Certificate of Incorporation of Cox and the record date for determining the
stockholders of record entitled to vote on such amendment occurs prior to such
delivery, holders of the STRYPES will not be entitled to vote on such
amendment.
NO AFFILIATION BETWEEN THE COMPANY AND COX
The Company has no affiliation with Cox, and Cox has no obligations with
respect to the STRYPES or amounts to be paid to holders thereof, including any
obligation to take the needs of the Company or of holders of the STRYPES into
consideration for any reason. Cox will not receive any of the proceeds of the
offering of the STRYPES made hereby and is not responsible for, and has not
participated in, the determination or calculation of the amount receivable by
holders of the STRYPES on the Maturity Date or upon redemption. Cox is not
involved with the administration or trading of the STRYPES and has no
obligations with respect to the amount receivable by holders of the STRYPES on
the Maturity Date or upon redemption.
DILUTION OF COX COMMON STOCK
The number of shares of Cox Common Stock (or, pursuant to the option of the
Company, the amount of cash) that holders of the STRYPES are entitled to
receive on the Maturity Date or upon redemption is subject to adjustment for
certain events arising from, among others, a merger or consolidation in which
Cox is not the surviving or resulting corporation, or a sale or transfer of all
or substantially all of the assets of Cox and the liquidation, dissolution,
winding up or bankruptcy of Cox as well as stock splits and combinations, stock
dividends and certain other actions of Cox that modify its capital structure.
See "SUPPLEMENTAL DESCRIPTION OF THE STRYPES--Dilution Adjustments" and "--
Special Redemption Upon Tax Event." Such number of shares of Cox Common Stock
(or cash amount) to be received by such holders on the Maturity Date or upon
redemption will not be adjusted for other events, such as offerings of Cox
Common Stock for cash or in connection with acquisitions. Cox is not restricted
from issuing additional shares of Cox Common Stock during the term of the
STRYPES and has no obligation to consider the interests of the holders of the
STRYPES for any reason. Additional issuances may materially and adversely
affect the price of the Cox Common Stock and, because of the relationship of
the number of shares (or cash amount) to be received on the Maturity Date or
upon redemption to the price of the Cox Common Stock, such other events may
adversely affect the trading price of the STRYPES.
S-9
<PAGE>
TAX MATTERS
Because of an absence of authority as to the proper characterization of the
STRYPES, their ultimate tax treatment is uncertain. Accordingly, no assurances
can be given that any particular characterization and treatment of the STRYPES
will be accepted by the Internal Revenue Service ("IRS") or upheld by a court.
However, it is the opinion of Brown & Wood, counsel to the Company, that the
characterization and tax treatment of the STRYPES described herein (and
described in greater detail under "CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS"), while not the only reasonable characterization and tax
treatment, is based on reasonable interpretations of law currently in effect
and, even if successfully challenged by the IRS, will not result in the
imposition of penalties. The Indenture will require that any holder subject to
U.S. Federal income tax include currently in income, for U.S. Federal income
tax purposes, payments denominated as interest that are made with respect to a
STRYPES in accordance with such holder's regular method of tax accounting. The
Indenture also requires the Company and holders to treat each STRYPES for tax
purposes as a unit (a "Unit") consisting of (i) a debt instrument (the "Debt
Instrument") with a fixed principal amount unconditionally payable on the
Maturity Date equal to the issue price of the STRYPES and bearing interest at
the stated interest rate on the STRYPES and (ii) a forward purchase contract
(the "Forward Contract") pursuant to which the holder agrees to use the
principal payment due on the Debt Instrument to purchase on the Maturity Date
or upon redemption the Cox Common Stock which the Company is obligated under
the STRYPES to deliver at that time (subject to the Company's right to deliver
cash in lieu of the Cox Common Stock). The Indenture also requires that upon
the acquisition of a STRYPES and upon a holder's sale or other disposition of a
STRYPES prior to the Maturity Date, the amount paid or realized by the holder
be allocated by the holder between the Debt Instrument and the Forward Contract
based upon their relative fair market values (as determined on the date of
acquisition or disposition). For these purposes, with respect to acquisitions
of STRYPES in connection with the original issuance thereof, the Company and
each holder agrees, pursuant to the terms of the Indenture, to allocate
$ of the entire initial purchase price of a STRYPES (i.e., the issue
price of a STRYPES) to the Debt Instrument and to allocate the remaining
$ of the entire initial purchase price of a STRYPES to the Forward
Contract. As previously mentioned, the appropriate character and timing of
income, gain or loss to be recognized on a STRYPES is uncertain and investors
should consult their own tax advisers concerning 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 STRYPES arising
under the laws of any other taxing jurisdiction. The tax consequences of
investing in the STRYPES are described in greater detail under "CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSIDERATIONS."
HOLDING COMPANY STRUCTURE
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 STRYPES),
to participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of the subsidiary, except to the extent that claims of the
Company itself as a creditor of the subsidiary may be recognized. In addition,
dividends, loans and advances from certain subsidiaries, including MLPF&S, to
the Company are restricted by net capital requirements under the Exchange Act
and under rules of certain exchanges and other regulatory bodies.
S-10
<PAGE>
COX COMMUNICATIONS, INC.
Cox Communications, Inc. is the fifth largest operator of cable television
systems in the United States and is a fully integrated, diversified media and
broadband communications company with operations and investments in three
related areas: (i) U.S. broadband networks; (ii) United Kingdom broadband
networks; and (iii) cable television programming.
Cox is subject to the informational requirements of the Exchange Act.
Accordingly, Cox files reports, proxy and information statements and other
information with the Commission. Copies of such material can be inspected and
copied at the public reference facilities maintained by the Commission at the
addresses specified under "Available Information" in the Cox Prospectus.
Reports, proxy and information statements and other information concerning Cox
may also be inspected at the offices of the NYSE.
THE COMPANY IS NOT AFFILIATED WITH COX, AND COX HAS NO OBLIGATIONS WITH
RESPECT TO THE STRYPES. THIS PROSPECTUS SUPPLEMENT AND THE ML&CO. PROSPECTUS
RELATE ONLY TO THE STRYPES OFFERED HEREBY AND DO NOT RELATE TO THE COX COMMON
STOCK. COX HAS FILED A REGISTRATION STATEMENT ON FORM S-3 WITH THE COMMISSION
COVERING THE SHARES OF COX COMMON STOCK THAT MAY BE RECEIVED BY A HOLDER OF
STRYPES ON THE MATURITY DATE OR UPON REDEMPTION. THE PROSPECTUS OF COX
CONSTITUTING A PART OF SUCH REGISTRATION STATEMENT INCLUDES INFORMATION
RELATING TO COX AND THE COX COMMON STOCK, INCLUDING CERTAIN FACTORS RELEVANT TO
AN INVESTMENT IN COX COMMON STOCK. THE COX PROSPECTUS IS BEING ATTACHED HERETO
AND DELIVERED TO PROSPECTIVE PURCHASERS OF STRYPES TOGETHER WITH THIS
PROSPECTUS SUPPLEMENT AND THE ML&CO. PROSPECTUS FOR CONVENIENCE OF REFERENCE
ONLY. THE COX PROSPECTUS DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS
SUPPLEMENT OR THE ML&CO. PROSPECTUS, NOR IS IT INCORPORATED BY REFERENCE HEREIN
OR THEREIN.
S-11
<PAGE>
PRICE RANGE OF COX COMMON STOCK
The Cox Common Stock is listed on the NYSE under the trading symbol "COX."
The following table sets forth, for the periods indicated, the high and low
sales prices of the Cox Common Stock, as reported on the NYSE Composite Tape,
for each quarter since February 1, 1995, the date the Cox Common Stock began
trading on the NYSE.
<TABLE>
<CAPTION>
PERIOD HIGH LOW
------ ---- ---
<S> <C> <C>
1995
First Quarter........................ $17 5/8 $16 1/8
Second Quarter....................... 20 1/4 14
Third Quarter........................ 21 1/2 19
Fourth Quarter....................... 20 5/8 17 3/4
1996
First Quarter........................ 23 3/4 18 7/8
Second Quarter (through May 6, 1996). 22 5/8 19 3/4
</TABLE>
As of May 1, 1996, there were approximately 3,449 record holders of the Cox
Common Stock. On May 6, 1996, the last reported sale price of the Cox Common
Stock on the NYSE was $20 5/8 per share.
COX DIVIDEND POLICY
Cox has never declared or paid cash dividends on the Cox Common Stock and
currently intends to retain any future earnings for use in the development and
operations of its businesses. Accordingly, Cox does not expect to pay cash
dividends on the Cox Common Stock in the foreseeable future. In addition, Cox's
bank indebtedness contains covenants that limit its ability to pay dividends.
SUPPLEMENTAL USE OF PROCEEDS
The net proceeds to the Company from the sale of STRYPES are expected to be $
, $ of which will be used to purchase an obligation of the ML&Co.
Subsidiary and the remainder of which will be used to pay certain expenses of
the offering. The ML&Co. Subsidiary will use the consideration that it receives
from the Company to pay to CEI the consideration due under the STRYPES
Agreement.
S-12
<PAGE>
SUPPLEMENTAL DESCRIPTION OF THE STRYPES
The STRYPES are a series of Senior Debt Securities to be issued under an
indenture, dated as of April 1, 1983 and restated as of April 1, 1987, as
amended and supplemented as of , 1996 (the indenture dated as of April 1,
1983 and restated as of April 1, 1987, as amended and supplemented from time to
time, the "Indenture") between the Company and Chemical Bank (successor by
merger to Manufacturers Hanover Trust Company), as trustee (the "Trustee").
Certain provisions of the Indenture are summarized in the ML&Co. Prospectus.
All capitalized terms not otherwise defined herein have the meanings specified
in the Indenture.
GENERAL
The aggregate number of STRYPES to be issued under the Indenture will be
limited to 8,500,000, plus such additional number of STRYPES as may be issued
pursuant to the over-allotment option granted by the Company to the
Underwriter. See "UNDERWRITING." No fractional STRYPES will be issued.
Each STRYPES, which will be issued at a price of $ , will bear interest at
the rate of % of the issue price per annum (or $ per annum) from , 1996,
or from the most recent Interest Payment Date to which interest has been paid
or provided for, until the Maturity Date or such earlier date on which such
STRYPES is redeemed or the issue price of such STRYPES is repaid pursuant to
the terms thereof. Interest on the STRYPES will be payable in cash quarterly in
arrears on , , and , beginning , 1996, and on the Maturity Date
(each, an "Interest Payment Date"), to the persons in whose names the STRYPES
are registered at the close of business on the last day (whether or not a
Business Day) of the calendar month immediately preceding such Interest Payment
Date. Interest on the STRYPES will be computed on the basis of a 360-day year
of twelve 30-day months. If an Interest Payment Date falls on a day that is not
a Business Day, the interest payment to be made on such Interest Payment Date
will be made on the next succeeding Business Day with the same force and effect
as if made on such Interest Payment Date, and no additional interest will
accrue as a result of such delayed payment.
The STRYPES will mature on , 1999. On the Maturity Date, unless previously
redeemed, the Company will pay and discharge each STRYPES by delivering to the
holder thereof a number of shares (such number of shares being hereinafter
referred to as the "Payment Rate") of Cox Common Stock (or, at the Company's
option, which may be exercised with respect to all, but not less than all,
shares of Cox Common Stock deliverable on the Maturity Date, cash with an equal
value) determined in accordance with the following "Payment Rate Formula,"
subject to adjustment as a result of certain dilution events: (a) if the
Maturity Price (as defined below) per share of Cox Common Stock is greater than
or equal to the Threshold Appreciation Price, shares of Cox Common
Stock per STRYPES, (b) if the Maturity Price is less than the Threshold
Appreciation Price but is greater than the Initial Price, a fractional share of
Cox Common Stock per STRYPES so that the value thereof (determined based on the
Maturity Price) is equal to the Initial Price and (c) if the Maturity Price is
less than or equal to the Initial Price, one share of Cox Common Stock per
STRYPES. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE AMOUNT RECEIVABLE BY
HOLDERS OF THE STRYPES ON THE MATURITY DATE WILL BE EQUAL TO OR GREATER THAN
THE ISSUE PRICE OF THE STRYPES. IF THE MATURITY PRICE OF THE COX COMMON STOCK
IS LESS THAN THE INITIAL PRICE, SUCH AMOUNT RECEIVABLE ON THE MATURITY DATE
WILL BE LESS THAN THE ISSUE PRICE PAID FOR THE STRYPES, IN WHICH CASE AN
INVESTMENT IN STRYPES WILL RESULT IN A LOSS. The numbers of shares of Cox
Common Stock per STRYPES specified in clauses (a) and (c) of the Payment Rate
Formula are hereinafter referred to as the "Share Components."
Notwithstanding the foregoing, the Company may, at its option, in lieu of
delivering shares of Cox Common Stock, deliver cash in an amount equal to the
value of such number of shares of Cox Common Stock at the Maturity Price,
subject to the Company's agreement contained in the STRYPES Agreement to
deliver on the Maturity Date the form of consideration that the ML&Co.
Subsidiary receives from CEI. Such option, if exercised by the Company, must be
exercised with respect to all shares of Cox Common Stock otherwise deliverable
on the Maturity Date in payment of all outstanding STRYPES. On or prior to the
sixth Business Day prior to the Maturity Date, the Company will notify The
Depository Trust Company and the
S-13
<PAGE>
Trustee and publish a notice in The Wall Street Journal or another daily
newspaper of national circulation stating whether the STRYPES will be paid and
discharged with shares of Cox Common Stock or cash. At the time such notice is
published, the Maturity Price will not have been determined. If the Company
elects to deliver shares of Cox Common Stock, holders of the STRYPES will be
responsible for the payment of any and all brokerage costs upon the subsequent
sale of such stock.
The "Maturity Price" is defined as the average Closing Price per share of Cox
Common Stock on the 20 Trading Days immediately prior to, but not including,
the second Trading Day preceding the Maturity Date. The "Closing Price" of any
security on any date of determination means the closing sale price (or, if no
closing price is reported, the last reported sale price) of such security on
the NYSE on such date or, if such security is not listed for trading on the
NYSE on any such date, as reported in the composite transactions for the
principal United States securities exchange on which such security is so
listed, or if such security is not so listed on a United States national or
regional securities exchange, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System, or, if such security is
not so reported, the last quoted bid price for such security in the over-the-
counter market as reported by the National Quotation Bureau or similar
organization, or, if such bid price is not available, the market value of such
security on such date as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Company. In the event
that the Payment Rate Formula is adjusted as described under "--Dilution
Adjustments" below, each of the Closing Prices used in determining the Maturity
Price will be similarly adjusted to derive, for purposes of determining which
of clauses (a), (b) or (c) of the Payment Rate Formula will apply on the
Maturity Date, a Maturity Price stated on a basis comparable to the Initial
Price and the Threshold Appreciation Price. A "Trading Day" is defined as a day
on which the security the Closing Price of which is being determined (A) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of such security.
For illustrative purposes only, the following table shows the number of
shares of Cox Common Stock or the amount of cash that a holder of STRYPES would
receive for each STRYPES at various Maturity Prices. The table assumes that
there will be no dilution adjustments to the Payment Rate Formula as described
below. There can be no assurance that the Maturity Price will be within the
range set forth below. Given the Initial Price of $ and the Threshold
Appreciation Price of $ , a STRYPES holder would receive on the Maturity Date
the following number of shares of Cox Common Stock or amount of cash (if the
Company elects to pay and discharge the STRYPES with cash) per STRYPES:
<TABLE>
<S> <C> <C>
MATURITY PRICE NUMBER OF
OF COX SHARES OF COX
COMMON STOCK COMMON STOCK AMOUNT OF CASH
-------------- ------------- --------------
$ $
</TABLE>
DILUTION ADJUSTMENTS
The Payment Rate Formula is subject to adjustment if Cox shall: (i) pay a
stock dividend or make a distribution with respect to Cox Common Stock in
shares of such stock; (ii) subdivide or split the outstanding shares of Cox
Common Stock into a greater number of shares; (iii) combine the outstanding
shares of Cox Common Stock into a smaller number of shares; (iv) issue by
reclassification of shares of Cox Common Stock any shares of common stock of
Cox; (v) issue rights or warrants to all holders of Cox Common Stock entitling
them to subscribe for or purchase shares of Cox Common Stock at a price per
share less than the then current
S-14
<PAGE>
market price of the Cox Common Stock (other than rights to purchase Cox Common
Stock pursuant to a plan for the reinvestment of dividends or interest); or
(vi) pay a dividend or make a distribution to all holders of Cox Common Stock
of evidences of its indebtedness or other assets (excluding any stock dividends
or distributions referred to in clause (i) above or any cash dividends other
than any Extraordinary Cash Dividend (as defined below)) or issue to all
holders of Cox Common Stock rights or warrants to subscribe for or purchase any
of its securities (other than those referred to in clause (v) above) (any of
the foregoing are referred to as the "Distributed Assets"). The effect of the
foregoing is that there will not be any adjustments to the Payment Rate Formula
for the issuance by Cox of options, warrants, stock purchase rights or
securities in connection with Cox's employee benefit plans.
In the case of the events referred to in clauses (i), (ii), (iii) and (iv)
above, the Payment Rate Formula shall be adjusted by multiplying each of the
Share Components in the Payment Rate Formula in effect immediately prior to
such event by a fraction, the numerator of which shall be the number of shares
of Cox Common Stock outstanding immediately following such event, and the
denominator of which shall be the number of shares of Cox Common Stock
outstanding immediately prior to such event.
In the case of the event referred to in clause (v) above, the Payment Rate
Formula shall be adjusted by multiplying each of the Share Components in the
Payment Rate Formula in effect immediately prior to the date of issuance of the
rights or warrants referred to in clause (v) above by a fraction, the numerator
of which shall be the number of shares of Cox Common Stock outstanding on the
date of issuance of such rights or warrants, immediately prior to such
issuance, plus the number of additional shares of Cox Common Stock offered for
subscription or purchase pursuant to such rights or warrants, and the
denominator of which shall be the number of shares of Cox Common Stock
outstanding on the date of issuance of such rights or warrants, immediately
prior to such issuance, plus the number of additional shares of Cox Common
Stock which the aggregate offering price of the total number of shares of Cox
Common Stock so offered for subscription or purchase pursuant to such rights or
warrants would purchase at the current market price (determined as the average
Closing Price per share of Cox Common Stock on the 20 Trading Days immediately
prior to the date such rights or warrants are issued, subject to certain
adjustments), which shall be determined by multiplying such total number of
shares by the exercise price of such rights or warrants and dividing the
product so obtained by such current market price. To the extent that shares of
Cox Common Stock are not delivered after the expiration of such rights or
warrants, or if such rights or warrants are not issued, the Payment Rate
Formula shall be readjusted to the Payment Rate Formula which would then be in
effect had such adjustments for the issuance of such rights or warrants been
made upon the basis of delivery of only the number of shares of Cox Common
Stock actually delivered.
In the case of the event referred to in clause (vi) above, the Payment Rate
Formula shall be adjusted by multiplying each of the Share Components in the
Payment Rate Formula in effect on the record date by a fraction, the numerator
of which shall be the market price per share of the Cox Common Stock on the
record date for the determination of stockholders entitled to receive the
dividend or distribution referred to in clause (vi) above (such market price
being determined as the average Closing Price per share of Cox Common Stock on
the 20 Trading Days immediately prior to such record date, subject to certain
adjustments), and the denominator of which shall be such market price per share
of Cox Common Stock less the fair market value (as determined by the Board of
Directors of the Company, whose determination shall be conclusive, and
described in a resolution adopted with respect thereto) as of such record date
of the portion of the Distributed Assets so distributed applicable to one share
of Cox Common Stock; provided, however, that in the event that the then fair
market value (as so determined) of the portion of the Distributed Assets so
distributed applicable to one share of Cox Common Stock is equal to or greater
than the market price per share of Cox Common Stock as of such record date, in
lieu of the foregoing adjustment, the Company shall reserve such Distributed
Assets (or, in the case of Distributed Assets of a kind described in (z) below,
an amount in cash equal to the fair market value thereof, determined in the
manner and as of the date described in clause (z) below) for delivery to the
holders of the STRYPES on the Maturity Date and, on the Maturity Date, shall
deliver to each such holder, in addition to the shares of Cox Common Stock (or
cash in lieu thereof) to which such holder is otherwise entitled, (x) in
respect of that portion, if any, of the Distributed Assets consisting of cash,
S-15
<PAGE>
the amount of such Distributed Assets consisting of cash which such holder
would have received had each STRYPES held by such holder been paid and
discharged immediately prior to the record date for the determination of
stockholders entitled to receive such dividend or distribution or such rights
or warrants, without interest, plus (y) in respect of that portion, if any, of
the Distributed Assets consisting of securities for which there is an actual or
when issued trading market ("marketable securities"), the amount of such
Distributed Assets consisting of marketable securities which such holder would
have received had each STRYPES held by such holder been paid and discharged
immediately prior to the record date for the determination of stockholders
entitled to receive such dividend or distribution or such rights or warrants,
plus (z) in respect of that portion, if any, of the Distributed Assets which
are of a kind other than that described in clause (x) or (y) above, an amount
in cash equal to the fair market value (as determined by the Board of Directors
of the Company, whose determination shall be conclusive, and described in a
resolution adopted with respect thereto), as of the record date for
determination of stockholders entitled to receive such dividend or distribution
or such rights or warrants, of the Distributed Assets consisting of other
assets which such holder would have received had each STRYPES held by such
holder been paid and discharged immediately prior to such record date, without
interest thereon.
An "Extraordinary Cash Dividend" means, with respect to any consecutive 12-
month period, all cash dividends on the Cox Common Stock during such period to
the extent such dividends exceed on a per share basis 10% of the average
Closing Price of the Cox Common Stock over such period (less any such dividends
for which a prior adjustment to the Payment Rate Formula was previously made).
All adjustments to the Payment Rate Formula will be calculated to the nearest
1/10,000th of a share of Cox Common Stock (or if there is not a nearest
1/10,000th of a share to the next lower 1/10,000th of a share). No adjustment
in the Payment Rate Formula shall be required unless such adjustment would
require an increase or decrease of at least one percent therein; provided,
however, that any adjustments which by reason of the foregoing are not required
to be made shall be carried forward and taken into account in any subsequent
adjustment. If an adjustment is made to the Payment Rate Formula as described
above, an adjustment will also be made to the Maturity Price solely to
determine which of clauses (a), (b) or (c) of the Payment Rate Formula will
apply on the Maturity Date. The required adjustment to the Maturity Price will
be made by multiplying each of the Closing Prices used in determining the
Maturity Price by a fraction, the numerator of which shall be the Share
Component in clause (c) of the Payment Rate Formula immediately after such
adjustment described above, and the denominator of which shall be the Share
Component in clause (c) of the Payment Rate Formula immediately before such
adjustment described above. Each such adjustment to the Payment Rate Formula
shall be made successively.
In the event of (A) any consolidation or merger of Cox, or any surviving
entity or subsequent surviving entity of Cox (a "Cox Successor"), with or into
another entity (other than a merger or consolidation in which Cox is the
continuing corporation and in which the Cox Common Stock outstanding
immediately prior to the merger or consolidation is not exchanged for cash,
securities or other property of Cox or another corporation), (B) any sale,
transfer, lease or conveyance to another corporation of the property of Cox or
any Cox Successor as an entirety or substantially as an entirety, (C) any
statutory exchange of securities of Cox or any Cox Successor with another
corporation (other than in connection with a merger or acquisition) or (D) any
liquidation, dissolution, winding up or bankruptcy of Cox or any Cox Successor
(any such event described in clause (A), (B), (C) or (D), a "Reorganization
Event"), the Payment Rate Formula used to determine the amount payable on the
Maturity Date for each STRYPES will be adjusted to provide that each holder of
STRYPES will receive on the Maturity Date for each STRYPES cash in an amount
equal to (a) if the Transaction Value (as defined below) is greater than or
equal to the Threshold Appreciation Price, multiplied by the Transaction
Value, (b) if the Transaction Value is less than the Threshold Appreciation
Price but greater than the Initial Price, the Initial Price and (c) if the
Transaction Value is less than or equal to the Initial Price, the Transaction
Value. "Transaction Value" means (i) for any cash received in any such
Reorganization Event, the amount of cash received per share of Cox Common
Stock, (ii) for any property other than cash or securities received in any such
Reorganization Event, an amount equal to the market value
S-16
<PAGE>
on the Maturity Date of such property received per share of Cox Common Stock as
determined by a nationally recognized independent investment banking firm
retained for this purpose by the Company and (iii) for any securities received
in any such Reorganization Event, an amount equal to the average Closing Price
per unit of such securities on the 20 Trading Days immediately prior to the
second Trading Day preceding the Maturity Date multiplied by the number of such
securities received for each share of Cox Common Stock. Notwithstanding the
foregoing, in the event that property or securities, or a combination of cash,
on the one hand, and property or securities, on the other, are received in such
Reorganization Event, the Company may, at its option, in lieu of delivering
cash as described above, deliver the amount of cash, securities and other
property received per share of Cox Common Stock in such Reorganization Event
determined in accordance with clause (i), (ii) or (iii) above, as applicable.
If the Company elects to deliver securities or other property, holders of the
STRYPES will be responsible for the payment of any and all brokerage and other
transaction costs upon any subsequent sale of such securities or other
property. The kind and amount of securities with which the STRYPES shall be
paid and discharged after consummation of such transaction shall be subject to
adjustment as described above following the date of consummation of such
transaction.
No adjustments will be made for certain other events, such as offerings of
Cox Common Stock by Cox for cash or in connection with acquisitions. Likewise,
no adjustments will be made for any sales of Cox Common Stock by CEI.
The Company is required, within ten Business Days following the occurrence of
an event that requires an adjustment to the Payment Rate Formula (or if the
Company is not aware of such occurrence, as soon as practicable after becoming
so aware), to provide written notice to the Trustee and to the holders of the
STRYPES of the occurrence of such event and a statement in reasonable detail
setting forth the adjusted Payment Rate Formula and the method by which the
adjustment to the Payment Rate Formula was determined, provided that, in
respect of any adjustment to the Maturity Price, such notice will only disclose
the factor by which each of the Closing Prices used in determining the Maturity
Price is to be multiplied in order to determine the Payment Rate on the
Maturity Date. Until the Maturity Date, the Payment Rate itself cannot be
determined.
FRACTIONAL SHARES
No fractional shares of Cox Common Stock will be delivered if the Company
pays and discharges the STRYPES by delivering shares of Cox Common Stock. In
lieu of any fractional share otherwise deliverable in respect of all STRYPES of
any holder on the Maturity Date, such holder shall be entitled to receive an
amount in cash equal to the value of such fractional share at the Maturity
Price.
SPECIAL REDEMPTION UPON TAX EVENT
The STRYPES will be redeemable at the option of the Company, in whole but not
in part, at any time from and after the date (the "Tax Event Date") on which a
Tax Event (as defined below) shall occur at a price per STRYPES (the "Tax Event
Redemption Price") equal to (a) an amount of cash equal to the sum of (i) all
accrued and unpaid interest on such STRYPES to the date fixed for redemption
(the "Redemption Date"), (ii) the sum of all interest payments on such STRYPES
due after the Redemption Date and on or prior to the Maturity Date and (iii)
$ (equal to the interest payable on such STRYPES for one year), plus (b) a
number of shares of Cox Common Stock determined in accordance with the Payment
Rate Formula, with the Redemption Date being deemed to be the Maturity Date for
purposes of calculating the Maturity Price.
A "Tax Event" means that CEI shall have delivered to the Company an opinion
(the "Tax Event Opinion") from independent tax counsel experienced in such
matters to the effect that, as a result of (a) any amendment or proposed
amendment to, or change (including any announced prospective change) or
proposed change in, the laws (or any regulations thereunder) of the United
States or any taxing authority thereof or therein or (b) any amendment to, or
change in, an interpretation or application of such laws or regulations
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by any legislative body, court, governmental agency or regulatory authority,
enacted, promulgated, introduced, issued or announced or which interpretation
is issued or announced or which action is taken, on or after the date of this
Prospectus Supplement, there is more than an insubstantial risk that a
corporation that sells or otherwise disposes of stock in another corporation on
a date that is after the date of this Prospectus Supplement and that is on or
prior to the Maturity Date would not be permitted to specifically identify the
stock sold or disposed of for purposes of determining the amount of such
corporation's gain or loss on the stock sold or disposed of for United States
Federal income tax purposes.
On March 19, 1996, the U.S. Treasury Department proposed a series of tax law
changes as part of President Clinton's 1997 Budget proposal. These proposed tax
law changes would, among other things, require taxpayers (including
corporations) that sell or otherwise dispose of securities (which term includes
stock in a corporation) that are substantially identical to securities which
they continue to hold to determine their tax basis in such substantially
identical securities using the average basis of all of their holdings in the
securities, and would prevent such taxpayers from specifically identifying the
securities sold or disposed of for purposes of determining the amount of their
gain or loss on the securities sold or disposed of for United States Federal
income tax purposes. As originally proposed, this "average cost basis" rule
would apply to determinations (i.e., tax basis determinations made at the time
of sale or disposition) made more than 30 days after the date on the which the
proposal is enacted. Thus, if this "average cost basis" rule is ultimately
adopted in its current form on a date that is 31 or more days prior to the
Maturity Date, such enactment could result in a Tax Event. Furthermore, if
there are future legislative developments such that as a result thereof there
is more than an insubstantial risk that this "average cost basis" rule or a
provision with similar effect will be adopted and effective for determinations
made on or prior to the Maturity Date, such legislative developments could
result in a Tax Event. The Company cannot predict whether or not these proposed
tax law changes will ultimately become law. Moreover, the Company cannot
predict whether or not any other future change or proposed change in the tax
law will occur which could give rise to a Tax Event, nor can it predict whether
CEI will elect to cause a Tax Event by delivering the Tax Event Opinion to the
Company in the event that a change or proposed change in the tax law occurs
which could give rise to a Tax Event.
The Company will provide notice of any call for redemption of STRYPES to
holders of record of the STRYPES not less than 10 nor more than 30 calendar
days prior to the related Redemption Date. Such notice will state the following
and may contain such other information as the Company deems advisable: (a) the
Redemption Date; (b) the place or places where certificates for the STRYPES are
to be surrendered for redemption and (c) that interest will cease to accrue on
the STRYPES on the Redemption Date (except as otherwise provided in the
Indenture). Any such notice will be provided by mail, sent to each holder of
record of STRYPES at such holder's address as it appears on the security
register for the STRYPES, first class postage prepaid; provided, however, that
failure to give such notice or any defect therein shall not affect the validity
of the proceeding for redemption of any STRYPES except as to the holder to whom
the Company has failed to give said notice or whose notice was defective. At or
prior to the mailing of such notice of redemption, the Company will publish a
public announcement of redemption in The Wall Street Journal or another daily
newspaper of national circulation.
The Company will not be required to deliver any fractional share of Cox
Common Stock on the Redemption Date and, in lieu thereof, will pay an amount in
cash equal to the value of such fractional share of Cox Common Stock based on
the average Closing Price per share of Cox Common Stock on the 20 Trading Days
immediately prior to, but not including, the second Trading Day preceding the
Redemption Date.
On and after the Redemption Date, all rights of a holder of STRYPES will
terminate except the right to receive for each STRYPES so redeemed the Tax
Event Redemption Price (unless there is a default on the payment of such Tax
Event Redemption Price).
NO SINKING FUND
The STRYPES do not contain sinking fund or other mandatory redemption
provisions. The STRYPES are not subject to payment prior to the Maturity Date
at the option of the holder.
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RANKING
The STRYPES will be unsecured obligations and will rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. At March 29,
1996, the Company had long-term borrowings outstanding of $20,226 million. In
addition, at March 29, 1996, there were $526 million of bank loans and $17,222
million of commercial paper outstanding.
The Company had no secured debt at March 29, 1996. At such date,
collateralized financing transactions of the Company's subsidiaries consisted
of $3,767 million of cash deposits for securities loaned and $61,657 million of
securities sold under agreements to repurchase. See Note 4 to "SUMMARY
FINANCIAL INFORMATION" in the ML&Co. Prospectus.
There are no contractual restrictions on the ability of the Company or its
subsidiaries to incur additional secured or unsecured debt. However, borrowings
by certain subsidiaries, including MLPF&S, are restricted by net capital
requirements under the Exchange Act and under rules of certain exchanges and
other regulatory bodies. See "DESCRIPTION OF THE STRYPES--Ranking" in the
ML&Co. Prospectus.
LISTING
Application has been made to list the STRYPES on the NYSE.
CERTAIN ARRANGEMENTS WITH CEI
Pursuant to the STRYPES Agreement, CEI is obligated to deliver to the ML&Co.
Subsidiary immediately prior to the Maturity Date a number of shares of Cox
Common Stock equal to the number required by the Company to pay and discharge
all of the STRYPES (including any STRYPES issued pursuant to the over-allotment
option granted by the Company to the Underwriter). In lieu of delivering shares
of Cox Common Stock immediately prior to the Maturity Date, CEI has the option,
exercisable in its sole discretion, to satisfy its obligation under the STRYPES
Agreement by delivering at such time cash in an amount equal to the value of
such number of shares of Cox Common Stock at the Maturity Price. Such option,
if exercised by CEI, must be exercised with respect to all shares of Cox Common
Stock then deliverable pursuant to the STRYPES Agreement. Under the STRYPES
Agreement, the Company has agreed to pay and discharge the STRYPES by
delivering to the holders thereof on the Maturity Date the form of
consideration that the ML&Co. Subsidiary receives from CEI. CEI also has the
option, exercisable on or after a Tax Event Date, to satisfy and discharge its
obligations under the STRYPES Agreement by delivering to the ML&Co. Subsidiary,
on a date fixed by CEI for early settlement, cash and shares of Cox Common
Stock in an amount and number, respectively, equal to the amount and number
required by the Company to redeem all of the STRYPES (including any STRYPES
issued pursuant to the over-allotment option granted by the Company to the
Underwriter). Under the STRYPES Agreement, the Company has agreed to redeem all
of the STRYPES in the event that CEI exercises such option. The consideration
to be paid by the ML&Co. Subsidiary under the STRYPES Agreement is $ in the
aggregate, and is payable to CEI on or about , 1996. No other
consideration is payable by the ML&Co. Subsidiary to CEI in connection with its
acquisition of the Cox Common Stock or the performance of the STRYPES Agreement
by CEI. The Company has agreed with CEI that, without the prior consent of CEI,
it will not amend the Indenture to increase the consideration that CEI is
obligated to deliver pursuant to the STRYPES Agreement.
Until such time, if any, as CEI shall have delivered shares of Cox Common
Stock to the ML&Co. Subsidiary pursuant to the terms of the STRYPES Agreement,
CEI will retain all ownership rights with respect to the Cox Common Stock held
by it (including, without limitation, voting rights and rights to receive any
dividends or other distributions in respect thereof).
CEI has no obligations with respect to the STRYPES or amounts to be paid to
holders thereof, including any obligation to take the needs of the Company or
holders of the STRYPES into consideration in determining whether to deliver
shares of Cox Common Stock or cash or for any other reason. The STRYPES
Agreement between the ML&Co. Subsidiary and CEI is a commercial transaction and
does not create any rights in, or for the benefit of, any third party,
including any holder of STRYPES.
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In the event CEI does not perform under the STRYPES Agreement, the Company
will be required to otherwise acquire shares of Cox Common Stock for delivery
to holders of the STRYPES on the Maturity Date or upon redemption, unless, in
the case of shares deliverable on the Maturity Date, it elects to exercise its
option to deliver cash with an equal value.
For more information regarding the relationship between CEI and Cox and the
Cox Common Stock that may be delivered to holders of STRYPES on the Maturity
Date or upon redemption, see the Cox Prospectus attached as Appendix A to this
Prospectus Supplement and the ML&Co. Prospectus.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
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 the STRYPES. Such opinion is based upon
laws, regulations, rulings and decisions now in effect (or, in the case of
certain regulations, in proposed form), all of which are subject to change
(including retroactive changes in effective dates) or possible differing
interpretations. The discussion below deals only with STRYPES held as capital
assets and does not purport to deal with persons in special tax situations,
such as financial institutions, insurance companies, regulated investment
companies, dealers in securities or currencies, tax-exempt entities, or persons
holding STRYPES as a hedge against currency risks or as a position in a
"straddle" for tax purposes. It also does not deal with holders of STRYPES
other than original purchasers thereof (except where otherwise specifically
noted herein). The following discussion also does not address the tax
consequences of investing in the STRYPES arising under the laws of any state,
local or foreign jurisdiction. Persons considering the purchase of the STRYPES
should consult their own tax advisors concerning 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 STRYPES arising
under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a STRYPES
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 STRYPES is effectively
connected with the conduct of a United States trade or business. As used
herein, the term "non-U.S. Holder" means a beneficial owner of a STRYPES that
is not a U.S. Holder.
GENERAL
There are no statutory provisions, regulations (except possibly the Proposed
Regulations as described below), published rulings or judicial decisions
addressing or involving the characterization, for United States Federal income
tax purposes, of the STRYPES or securities with terms substantially the same as
the STRYPES. Accordingly, the proper United States Federal income tax
characterization and treatment of the STRYPES is uncertain. Pursuant to the
terms of the Indenture, the Company and any holder of a STRYPES agree to treat
each STRYPES for tax purposes as a unit (a "Unit") consisting of (i) a debt
instrument (the "Debt Instrument") with a fixed principal amount
unconditionally payable on the Maturity Date equal to the issue price of the
STRYPES and bearing interest at the stated interest rate on the STRYPES and
(ii) a forward purchase contract (the "Forward Contract") pursuant to which the
holder agrees to use the principal
payment due on the Debt Instrument to purchase on the Maturity Date or upon
redemption the Cox Common Stock which the Company is obligated to deliver at
that time (subject to the Company's right to deliver cash in lieu of the Cox
Common Stock). Therefore, the Company currently intends to treat each STRYPES
as a Unit consisting of the Debt Instrument and the Forward Contract for United
States Federal income tax purposes and, where required, intends to file
information returns with the Internal Revenue Service ("IRS") in accordance
with such treatment, in the absence of any change or clarification in the law,
by regulation or otherwise, requiring a different characterization and
treatment of the STRYPES for United
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States Federal income tax purposes. In the opinion of Brown & Wood, counsel to
the Company, such characterization and tax treatment of the STRYPES, although
not the only reasonable characterization and tax treatment, is based on
reasonable interpretations of law currently in effect and, even if successfully
challenged by the IRS, will not result in the imposition of penalties.
Prospective investors in the STRYPES should be aware, however, that no ruling
is being requested from the IRS with respect to the STRYPES, the IRS is not
bound by the characterization of each STRYPES by the Company and the holders
thereof as a Unit consisting of the Debt Instrument and the Forward Contract,
and the IRS could possibly assert a different position as to the proper United
States Federal income tax characterization and treatment of the STRYPES. For
instance, it is possible that the IRS could assert that each STRYPES should be
treated entirely as a single debt instrument of the Company for United States
Federal income tax purposes. Except where otherwise specifically provided
herein, the following discussion of the principal United States Federal income
tax consequences of the purchase, ownership and disposition of the STRYPES is
based upon the assumption that each STRYPES will be characterized and treated
as a Unit consisting of the Debt Instrument and the Forward Contract for United
States Federal income tax purposes. As discussed in greater detail herein, if
the STRYPES are not in fact ultimately characterized and treated as a Unit
consisting of the Debt Instrument and the Forward Contract for United States
Federal income tax purposes, then the United States Federal income tax
treatment of the purchase, ownership and disposition of the STRYPES could
significantly differ from the treatment discussed immediately below with the
result that the timing and character of income, gain or loss recognized on a
STRYPES could significantly differ from the timing and character of income,
gain or loss recognized on a STRYPES had each STRYPES in fact been
characterized and treated as a Unit consisting of the Debt Instrument and the
Forward Contract for United States Federal income tax purposes.
U.S. HOLDERS
As previously discussed, pursuant to the terms of the Indenture, the Company
and any holder of a STRYPES agree to treat each STRYPES as a Unit consisting of
the Debt Instrument and the Forward Contract. Consistent with this treatment of
the STRYPES, pursuant to the terms of the Indenture, a U.S. Holder of a STRYPES
will be required to include currently in income payments denominated as
interest that are made with respect to a STRYPES in accordance with such U.S.
Holder's regular method of tax accounting. Furthermore, pursuant to the
agreement contained in the Indenture to treat each STRYPES for tax purposes as
a Unit consisting of the Debt Instrument and the Forward Contract, any holder
of a STRYPES agrees to allocate the purchase price paid by such holder to
acquire the STRYPES between the two components of the Unit (i.e., the Debt
Instrument and the Forward Contract) based upon their relative fair market
values (as determined on the purchase date). The portion of the total purchase
price so allocated by the holder to each component of the Unit will generally
constitute the holder's initial tax basis for each such component of the Unit.
Accordingly, in the event that the fair market value of the Debt Instrument (as
determined on the purchase date) exceeds the purchase price paid by the holder
to acquire the STRYPES, the holder would be deemed to have acquired the Debt
Instrument for an amount equal to the fair market value of the Debt Instrument
(as determined on the purchase date) and would be deemed to have assumed the
Forward Contract component of the STRYPES in exchange for a payment in an
amount equal to the excess of the fair market value of the Debt Instrument (as
determined on the purchase date) over the purchase price paid by the holder to
acquire the STRYPES. In such event, such deemed payment received by the holder
in respect of the Forward Contract should only be taken into account by the
holder as an additional amount
realized with respect to the Forward Contract on the earlier of the sale or
other disposition of the STRYPES by the holder on the Maturity Date or
Redemption Date (which would either reduce the holder's tax basis in any Cox
Common Stock received thereby or, if the STRYPES are paid in cash on the
Maturity Date or sold prior to the Maturity Date, increase the amount of gain
or decrease the amount of loss realized with respect to the Forward Contract).
Pursuant to the terms of the Indenture, with respect to acquisitions of STRYPES
in connection with the original issuance thereof, the Company and the holders
agree to allocate $ of the entire initial purchase price of a
STRYPES (i.e., the issue price of a STRYPES) to the
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Debt Instrument component and to allocate the remaining $ of the
entire initial purchase price of a STRYPES to the Forward Contract component.
Based upon the foregoing, pursuant to the agreement to treat each STRYPES as a
Unit consisting of the Debt Instrument and the Forward Contract, a holder who
acquires a STRYPES in connection with the original issuance thereof, will have
agreed to treat such acquisition of the STRYPES by the holder as a purchase of
the Debt Instrument by the holder for $ and the making of an initial
payment by the holder with respect to the Forward Contract of $ .
Under general principles of current United States Federal income tax law,
payments of interest on a debt instrument (e.g., the Debt Instrument) generally
will be taxable to a U.S. Holder as ordinary interest income at the time such
payments are accrued or are received (in accordance with the U.S. Holder's
regular method of tax accounting). In addition, a debt instrument will be
treated as having been issued with original issue discount for United States
Federal income tax purposes to the extent that the stated redemption price at
maturity of the debt instrument (generally the debt instrument's stated
principal amount) exceeds the debt instrument's issue price, if such excess
equals or exceeds a de minimis amount (generally 1/4 of 1% of the debt
instrument's stated redemption price at maturity multiplied by the number of
complete years to maturity from its issue date). Pursuant to the agreement to
treat each STRYPES as a Unit consisting of the Debt Instrument and the Forward
Contract, each such Debt Instrument component will be treated, for these
purposes as having an issue price equal to $ . Since the stated
redemption price at maturity of each such Debt Instrument component (i.e.,
$ ) does not exceed its issue price (i.e., $ ) by an amount
that is equal to or greater than $ (i.e., the applicable de minimis
amount), the Debt Instrument component of each Unit will not be treated as
having been issued with any original issue discount.
Under the foregoing principles and in accordance with the agreement to treat
each STRYPES as a Unit consisting of the Debt Instrument and the Forward
Contract, the quarterly interest payments payable with respect to the STRYPES
at the stated interest rate of % of the issue price of the STRYPES per annum
(the "Interest Payments") generally will be taxable to a U.S. Holder as
ordinary interest income on the respective dates that such Interest Payments
are accrued or are received (in accordance with the U.S. Holder's regular
method of tax accounting). On the Maturity Date or upon redemption, pursuant to
the agreement to treat each STRYPES as a Unit consisting of the Debt Instrument
and the Forward Contract, a U.S. Holder will recognize capital gain or loss
with respect to the Debt Instrument in an amount equal to the difference, if
any, between the principal amount of the Debt Instrument (i.e., the issue price
of the STRYPES) and such U.S. Holder's adjusted tax basis in the Debt
Instrument. Such capital gain or loss will generally be long-term capital gain
or loss if the STRYPES has been held by the U.S. Holder for more than one year
as of the Maturity Date or the Redemption Date. In addition, pursuant to the
agreement to treat each STRYPES as a Unit consisting of the Debt Instrument and
the Forward Contract, on the Maturity Date or upon redemption, if the Company
delivers Cox Common Stock upon payment of the STRYPES, a U.S. Holder will
generally not realize any taxable gain or loss on the exchange, pursuant to the
Forward Contract, of the principal amount of the Debt Instrument for the Cox
Common Stock. However, a U.S. Holder will generally be required to recognize
taxable gain or loss with respect to any cash received in lieu of fractional
shares. The amount of such gain or loss recognized by a U.S. Holder will be
equal to the difference, if any, between the amount of cash received by the
U.S. Holder and the portion of the sum of the principal amount of the Debt
Instrument and the U.S. Holder's tax basis in the Forward Contract that is
allocable to the fractional shares. Any such taxable gain or loss will be
treated as short-term capital gain or loss. A U.S. Holder will have an initial
tax basis in any Cox Common Stock received on the Maturity Date or upon
redemption in an amount
equal to the sum of the principal amount of the Debt Instrument and the U.S.
Holder's tax basis in the Forward Contract less the portion of such sum that is
allocable to any fractional shares (as described above) and will realize
taxable gain or loss with respect to such Cox Common Stock received on the
Maturity Date only upon the subsequent sale or disposition by the U.S. Holder
of such Cox Common Stock. In addition, a U.S. Holder's holding period for any
Cox Common Stock received by such U.S. Holder on the Maturity Date or upon
redemption will begin on the day immediately following the Maturity Date or
Redemption Date and will not include the period during which the U.S. Holder
held such STRYPES. In addition to the
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foregoing, in the event of redemption of the STRYPES upon the occurrence of a
Tax Event, the portion of the Tax Event Redemption Price representing all
accrued and unpaid interest on the STRYPES to the Redemption Date would
constitute a payment of interest on the Debt Instrument and would be taxed
accordingly. The portion of the Tax Event Redemption Price representing the sum
of all interest payments on the STRYPES due after the Redemption Date and on or
prior to the Maturity Date and $ should be treated as redemption premium on
the Debt Instrument and should give rise to long-term or short-term capital
gain (depending upon whether the U.S. Holder has held the STRYPES for more than
one year as of the Redemption Date).
Alternatively, pursuant to the agreement to treat the STRYPES as a Unit
consisting of the Debt Instrument and the Forward Contract, if the Company pays
the STRYPES in cash on the Maturity Date, a U.S. Holder will recognize taxable
gain or loss on the Maturity Date with respect to the Forward Contract (in
addition to any gain or loss recognized with respect to the Debt Instrument as
described above) in an amount equal to the difference, if any, between the
total amount of cash received by such U.S. Holder on the Maturity Date and an
amount equal to the sum of the principal amount of the Debt Instrument and the
U.S. Holder's tax basis in the Forward Contract. It is uncertain whether such
gain or loss would be treated as capital or ordinary gain or loss. If such gain
or loss is properly treated as capital gain or loss, then such gain or loss
will be treated as long-term capital gain or loss if the STRYPES has been held
by the U.S. Holder for more than one year as of the Maturity Date. If such gain
or loss is properly treated as ordinary gain or loss, it is possible that the
deductibility of any loss recognized on the Maturity Date with respect to the
Forward Contract by a U.S. Holder who is an individual could be subject to the
limitations applicable to miscellaneous itemized deductions provided for under
Section 67(a) of the Internal Revenue Code of 1986, as amended (the "Code"). In
general, Section 67(a) of the Code provides that an individual may only deduct
miscellaneous itemized deductions for a particular taxable year to the extent
that the aggregate amount of the individual's miscellaneous itemized deductions
for such taxable year exceed two percent of the individual's adjusted gross
income for such taxable year (although, the miscellaneous itemized deductions
allowable to high-income individuals are generally subject to further
limitations). Prospective investors in the STRYPES are urged to consult their
own tax advisors concerning the character of any gain or loss realized on the
Maturity Date with respect to the Forward Contract in the event that the
Company elects to pay the STRYPES in cash on the Maturity Date as well as the
deductibility of any such loss.
Pursuant to the agreement to treat each STRYPES as a Unit consisting of the
Debt Instrument and the Forward Contract, upon the sale or other disposition of
a STRYPES prior to the Maturity Date or the redemption of the STRYPES, a U.S.
Holder generally will be required to allocate the total amount realized by such
U.S. Holder upon such sale or other disposition (other than amounts
representing accrued and unpaid interest) between the two components of the
Unit (i.e., the Debt Instrument and the Forward Contract) based upon their
relative fair market values (as determined on the date of disposition).
Accordingly, in the event that the fair market value of the Debt Instrument (as
determined on the date of disposition) exceeds the actual amount realized by
the U.S. Holder upon the sale or other disposition of a STRYPES prior to the
Maturity Date or the redemption of the STRYPES, the U.S. Holder would be deemed
to have sold the Debt Instrument for an amount equal to the fair market value
of the Debt Instrument (as determined on the date of disposition) and would be
deemed to have made a payment to the purchaser of the STRYPES in exchange for
such purchaser's assumption of the Forward Contract in an amount equal to the
excess of the fair market value of the Debt Instrument (as determined on the
date of disposition) over the actual amount realized by the U.S. Holder upon
such sale or disposition of the STRYPES. A U.S. Holder will generally be
required to recognize
taxable gain or loss with respect to each such component in an amount equal to
the difference, if any, between (or, in some cases, the sum of) the amount
realized (or paid) with respect to each such component upon the sale or
disposition of the STRYPES (as determined in the manner described above) and
the U.S. Holder's adjusted tax basis in each such component. Any such gain or
loss will generally be treated as long-term capital gain or loss if the U.S.
Holder has held the STRYPES for more than one year at the time of disposition.
As previously discussed, prospective investors in the STRYPES should be aware
that the IRS is not bound by the characterization of the STRYPES by the Company
and the holders thereof as a Unit consisting
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of the Debt Instrument and the Forward Contract, and the IRS could possibly
assert a different position as to the proper United States Federal income tax
characterization and treatment of the STRYPES. For instance, it is possible
that the IRS could assert that each STRYPES should be treated entirely as a
single debt instrument of the Company for United States Federal income tax
purposes.
If the STRYPES were ultimately characterized and treated entirely as debt
instruments of the Company for United States Federal income tax purposes, then
the timing and character of income, gain or loss recognized on a STRYPES would
differ from the timing and character of income, gain or loss recognized on a
STRYPES had each STRYPES in fact been characterized and treated for United
States Federal income tax purposes as a Unit consisting of the Debt Instrument
and the Forward Contract. If the STRYPES were ultimately characterized and
treated entirely as indebtedness of the Company for United States Federal
income tax purposes, under general principles of current United States Federal
income tax law, the Interest Payments generally would be taxable to a U.S.
Holder as ordinary interest income on the respective dates that such Interest
Payments are accrued or are received (in accordance with the U.S. Holder's
regular method of tax accounting). Under this same analysis and treatment of
each STRYPES as a single debt instrument of the Company for United States
Federal income tax purposes, under general principles of current United States
Federal income tax law, if the fair market value (as determined on the Maturity
Date or the Redemption Date) of the amount of Cox Common Stock or cash payable
on the Maturity Date or the Redemption Date with respect to a STRYPES exceeds
the issue price thereof, such excess (except amounts representing accrued and
unpaid interest and possibly any portion of such excess representing redemption
premium) could be treated as contingent interest and, if so treated, generally
would be includible in income by a U.S. Holder as ordinary interest on the
Maturity Date or the Redemption Date (regardless of the U.S. Holder's regular
method of tax accounting). In addition, if the fair market value (as determined
on the Maturity Date or the Redemption Date) of the amount of Cox Common Stock
or cash payable on the Maturity Date or the Redemption Date with respect to a
STRYPES exceeds the issue price thereof, then such STRYPES would be treated as
having been retired on the Maturity Date or the Redemption Date in exchange for
an amount equal to the issue price thereof (plus possibly any amounts
representing redemption premium). If, however, the fair market value (as
determined on the Maturity Date or the Redemption Date) of the amount of Cox
Common Stock or cash payable on the Maturity Date or the Redemption Date with
respect to a STRYPES is equal to or less than the issue price thereof, then
such STRYPES would be treated as having been retired on the Maturity Date or
the Redemption Date in exchange for an amount equal to the fair market value
(as determined on the Maturity Date or the Redemption Date) of the entire
amount payable on the Maturity Date or the Redemption Date with respect to such
STRYPES (other than amounts representing accrued and unpaid interest) and no
portion of the amount payable on the Maturity Date or the Redemption Date with
respect to such STRYPES would be treated as contingent interest. A U.S.
Holder's initial tax basis in any Cox Common Stock received by such U.S. Holder
on the Maturity Date or the Redemption Date of a STRYPES would equal the fair
market value (as determined on the Maturity Date or the Redemption Date) of the
Cox Common Stock received by such U.S. Holder. Furthermore, a U.S. Holder's
holding period for any Cox Common Stock received by such U.S. Holder on the
Maturity Date or the Redemption Date of a STRYPES would begin on the day
immediately following the Maturity Date or the Redemption Date and would not
include the period during which the U.S. Holder held such STRYPES.
Moreover, under this analysis and treatment of each STRYPES as a single debt
instrument of the Company for United States Federal income tax purposes, upon
the sale, exchange or retirement of a STRYPES, a U.S. Holder generally would
recognize taxable gain or loss in an amount equal to the difference, if any,
between the amount realized on the sale, exchange or retirement (other than
amounts representing accrued and unpaid interest) and such U.S. Holder's
adjusted tax basis in the STRYPES. A U.S. Holder's adjusted tax basis in a
STRYPES generally would equal such U.S. Holder's initial investment in the
STRYPES (as adjusted pursuant to the market discount and bond premium rules
described below). Such gain or loss generally would be long-term capital gain
or loss if the STRYPES were held by the U.S. Holder for more than one year
(subject to the market discount rules, as discussed below). It is possible,
however, that under this analysis and treatment of the STRYPES the IRS could
assert that any amounts realized upon
S-24
<PAGE>
the sale or exchange of a STRYPES prior to the Maturity Date or the redemption
of the STRYPES in excess of the STRYPES's issue price constitutes ordinary
interest income (subject to the bond premium rules, as discussed below).
Nonetheless, if the STRYPES were ultimately characterized and treated entirely
as indebtedness of the Company for United States Federal income tax purposes,
although the matter is not free from doubt, in the opinion of Brown & Wood,
counsel to the Company, under current law, any gain realized upon the sale or
exchange of a STRYPES prior to the Maturity Date or the redemption of the
STRYPES should be treated entirely as capital gain (subject to the market
discount rules, as discussed below).
Prospective investors in the STRYPES should also be aware that on December
15, 1994, the Treasury Department issued proposed regulations (the "Proposed
Regulations") concerning the proper United States Federal income tax treatment
of contingent payment debt instruments. In the event that the STRYPES were
characterized and treated entirely as debt instruments of the Company for
United States Federal income tax purposes, the STRYPES would be treated as
contingent payment debt instruments. The Proposed Regulations, however, are
proposed to only be effective 60 days after the date on which the Proposed
Regulations are published as final Treasury regulations. Accordingly, due to
the proposed prospective effective date of the Proposed Regulations, if
ultimately adopted in their current form, the Proposed Regulations would not
apply to the STRYPES even if the STRYPES were characterized and treated
entirely as debt instruments of the Company for United States Federal income
tax purposes. Furthermore, proposed Treasury regulations are not binding upon
either the IRS or taxpayers prior to becoming effective as temporary or final
regulations. In general, if ultimately adopted in their current form, the
Proposed Regulations would cause the timing and character of income, gain or
loss reported on a contingent payment debt instrument to substantially differ
from the timing and character of income, gain or loss reported on a contingent
payment debt instrument under general principles of current United States
Federal income tax law (as described immediately above). Prospective investors
in the STRYPES are urged to consult their own tax advisors concerning the
effect, if any, of the Proposed Regulations on their investment in the STRYPES.
Prospective investors in the STRYPES should also be aware that it is possible
that the ultimate characterization and treatment of the STRYPES for United
States Federal income tax purposes could differ from the possible
characterizations and treatments described herein with the result that the
ultimate United States Federal income tax treatment of the purchase, ownership
and disposition of the STRYPES could significantly differ from any of the
treatments described herein.
Despite the foregoing, as previously discussed, pursuant to the agreement
contained in the Indenture to treat each STRYPES as a Unit consisting of the
Debt Instrument and the Forward Contract, the Company, where required,
currently intends to file information returns with the IRS treating each
STRYPES as a Unit consisting of the Debt Instrument and the Forward Contract
for United States Federal income tax purposes (as described above), in the
absence of any change or clarification in the law, by regulation or otherwise,
requiring another characterization and treatment of the STRYPES for United
States Federal income tax purposes.
MARKET DISCOUNT AND PREMIUM
In general, if a U.S. Holder purchases a debt instrument (e.g., the Debt
Instrument component of a Unit) for an amount that is less than the principal
amount thereof, the amount of the difference will be treated as "market
discount," unless such difference is less than a specified de minimis amount
(generally 1/4 of 1% of the debt instrument's stated principal amount
multiplied by the number of complete years to maturity from the date the U.S.
Holder purchased such debt instrument).
Under the market discount rules, a U.S. Holder will be required to treat any
gain realized on the sale, exchange, retirement or other disposition of a debt
instrument as ordinary income to the extent of the lesser of (i) the amount of
such realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on such debt instrument at
the time of such payment or disposition. Market discount will be considered to
accrue ratably during the period from the date of acquisition to the
S-25
<PAGE>
maturity of the debt instrument, unless the U.S. Holder elects to accrue market
discount on the basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a debt instrument with market discount until the maturity of
the debt instrument or its earlier disposition in a taxable transaction and
certain nontaxable transactions, because a current deduction is only allowed to
the extent that the interest expense exceeds an allocable portion of the market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the deferral of interest
deductions will not apply. Generally, such currently included market discount
is treated as ordinary interest income for United States Federal income tax
purposes and a U.S. Holder would increase its tax basis in a debt instrument by
the amount of any such currently included market discount. Such an election
will apply to all debt instruments acquired by the U.S. Holder on or after the
first day of the first taxable year to which such election applies and may be
revoked only with the consent of the IRS.
In general, if a U.S. Holder purchases a debt instrument for an amount that
is greater than the principal amount thereof, such U.S. Holder will be
considered to have purchased the debt instrument with "amortizable bond
premium" equal in amount to such excess. A U.S. Holder may elect to amortize
such premium using a constant yield method over the remaining term of the debt
instrument and may offset ordinary interest otherwise required to be included
in respect of the debt instrument during any taxable year by the amortized
amount of such premium for such year (or, prior years, if such amortized
premium for prior years has not yet offset interest) and would reduce its tax
basis in the debt instrument by the amount of any such interest offset taken.
Such election, if made, would apply to all debt instruments held by the U.S.
Holder at the beginning of the taxable year to which such election applies and
to all debt instruments acquired by the U.S. Holder thereafter. Such election
would also be irrevocable once made, unless the U.S. Holder making such an
election obtains the express written consent of the IRS to revoke such
election.
MISCELLANEOUS TAX MATTERS
Special tax rules may apply to persons holding a STRYPES as part of a
"synthetic security" or other integrated investment, or as part of a straddle,
hedging transaction or other combination of offsetting positions. For instance,
Section 1258 of the Code may possibly require certain U.S. Holders of the
STRYPES who enter into hedging transactions or offsetting positions with
respect to the STRYPES to treat all or a portion of any gain realized on the
STRYPES as ordinary income in instances where such gain may have otherwise been
treated as capital gain. U.S. Holders hedging their positions with respect to
the STRYPES or otherwise holding their STRYPES in a manner described above
should consult their own tax advisors regarding the applicability of Section
1258 of the Code, or any other provision of the Code, to their investment in
the STRYPES.
PROPOSED TAX LAW CHANGES
On March 19, 1996, the U.S. Treasury Department proposed a series of tax law
changes as part of President Clinton's 1997 Budget proposal. These proposed tax
law changes would, among other things, require taxpayers (including
corporations) that sell or otherwise dispose of securities (which term includes
stock in a corporation) that are substantially identical to securities which
they continue to hold to determine their tax basis in such substantially
identical securities using the average basis of all of their holdings in the
securities, and would prevent such taxpayers from specifically identifying the
securities sold or disposed of for purposes of determining the amount of their
gain or loss on the securities sold or disposed of for United States Federal
income tax purposes. As originally proposed, this "average cost basis" rule
would apply to determinations (i.e., tax basis determinations made at the time
of sale or disposition) made more than 30 days after the date on the which the
proposal is enacted. Thus, if this "average cost basis" rule is ultimately
adopted in its current form on a date that is 31 or more days prior to the
Maturity Date, such enactment
S-26
<PAGE>
could result in a Tax Event. Furthermore, if there are future legislative
developments such that as a result thereof there is more than an insubstantial
risk that this "average cost basis" rule will be adopted in its current form on
a date that is 31 or more days prior to the Maturity Date, such legislative
developments could result in a Tax Event. The Company cannot predict whether or
not these proposed tax law changes will ultimately become law. Moreover, the
Company cannot predict whether or not any other future change or proposed
change in the tax law will occur which could give rise to a Tax Event, nor can
it predict whether CEI will elect to cause a Tax Event by delivering the Tax
Event Opinion to the Company in the event that a change or proposed change in
the tax law occurs which could give rise to a Tax Event.
NON-U.S. HOLDERS
Based on the treatment of each STRYPES as a Unit consisting of the Debt
Instrument and the Forward Contract, in the case of a non-U.S. Holder, payments
made with respect to the STRYPES should not be subject to United States
withholding tax, provided that such non-U.S. Holder complies with applicable
certification requirements. Any capital gain realized upon the sale or other
disposition of a STRYPES by a non-U.S. Holder will generally not be subject to
United States Federal income tax if (i) such gain is not effectively connected
with a United States trade or business of such non-U.S. Holder and (ii) in the
case of an individual non-U.S. Holder, such individual is not present in the
United States for 183 days or more in the taxable year of the sale or other
disposition, or the gain is not attributable to a fixed place of business
maintained by such individual in the United States and such individual does not
have a "tax home" (as defined for United States Federal income tax purposes) in
the United States.
As discussed above, alternative characterizations of the STRYPES for United
States Federal income tax purposes are possible. Should an alternative
characterization of the STRYPES, by reason of a change or clarification of the
law, by regulation or otherwise, cause payments with respect to the STRYPES to
become subject to withholding tax, the Company will withhold tax at the
statutory rate. Prospective non-U.S. Holders of the STRYPES should consult
their own tax advisors in this regard.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A beneficial owner of a STRYPES may be subject to information reporting and
to backup withholding at a rate of 31 percent of certain amounts paid to the
beneficial owner unless such beneficial owner provides proof of an applicable
exemption or a correct taxpayer identification number, and otherwise complies
with applicable requirements of the backup withholding rules.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
S-27
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Underwriter"), and the Underwriter has agreed to purchase
from the Company, 8,500,000 STRYPES. Under the terms and conditions of the
Underwriting Agreement, the Underwriter is committed to take and pay for all of
the STRYPES, if any are taken.
The Underwriter has advised the Company that it proposes initially to offer
the STRYPES directly to the public at the public offering price set forth on
the cover page of this Prospectus Supplement, and to certain dealers at such
price less a concession not to exceed $ per STRYPES. The Underwriter may
allow, and such dealers may reallow, a discount not to exceed $ per STRYPES
to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.
The Company has granted the Underwriter an option exercisable for 30 days
after the date of this Prospectus Supplement to purchase up to an aggregate of
1,275,000 additional STRYPES at the public offering price set forth on the
cover page of this Prospectus Supplement, less the underwriting discount. The
Underwriter may exercise this option only to cover over-allotments, if any,
made on the sale of the STRYPES offered hereby.
Cox and its directors and certain officers have agreed not to offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, or file a
registration statement under the Securities Act with respect to, any shares of
Cox Common Stock, securities convertible into, exchangeable for or repayable
with such shares or rights or warrants to acquire such shares, for a period of
120 days after the date of this Prospectus Supplement without the prior written
consent of the Underwriter, subject to certain exceptions. CEI has agreed not
to offer, sell, contract to sell or otherwise dispose of, directly or
indirectly, or cause to be filed a registration statement under the Securities
Act with respect to, any shares of Cox Common Stock, securities convertible
into, exchangeable for or repayable with such shares or rights or warrants to
acquire such shares, for a period of 120 days after the date of this Prospectus
Supplement without the prior written consent of the Underwriter, subject to
certain exceptions.
The underwriting of the STRYPES 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.
Application has been made to list the STRYPES on the NYSE.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act relating to this
Prospectus Supplement and the ML&Co. Prospectus (including the documents
incorporated by reference therein).
VALIDITY OF THE STRYPES
The validity of the STRYPES offered hereby will be passed upon for the
Company and for the Underwriter by Brown & Wood, New York, New York.
S-28
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A POST- +
+EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT RELATING TO THESE +
+SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE +
+SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE +
+TIME THE POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT BECOMES +
+EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, ISSUE DATE: MAY 8, 1996
PROSPECTUS
LOGO
MERRILL LYNCH & CO., INC.
STRYPES SM
PAYABLE WITH SHARES OF COMMON STOCK OR OTHER SECURITIES
OF THE UNDERLYING ISSUER
(OR CASH WITH AN EQUAL VALUE)
-----------
Merrill Lynch & Co., Inc. (the "Company") intends to sell from time to time
its Structured Yield Product Exchangeable for Stock SM, STRYPES SM. The STRYPES
will be offered to the public in series and on terms determined by market
conditions at the time of sale and set forth in the accompanying prospectus
supplement (the "Prospectus Supplement"). The STRYPES will be unsecured
obligations of the Company ranking pari passu with all of its other unsecured
and unsubordinated indebtedness. See "Description of the STRYPES--Ranking."
On the maturity date of each series of STRYPES (the "Maturity Date"), the
Company will pay and discharge such STRYPES by delivering to the holder thereof
a number of shares of common stock or other securities (the "Underlying
Securities") of the unaffiliated corporation identified in the Prospectus
Supplement (the "Underlying Issuer") determined in accordance with a payment
rate formula specified in the Prospectus Supplement (or, at the Company's
option, which may be exercised with respect to all, but not less than all,
STRYPES of such series, cash with an equal value). THERE CAN BE NO ASSURANCE
THAT THE VALUE OF THE UNDERLYING SECURITIES (OR CASH) PAYABLE TO HOLDERS OF A
SERIES OF STRYPES ON THE MATURITY DATE WILL BE EQUAL TO OR GREATER THAN THE
ISSUE PRICE OF SUCH STRYPES. IF THE VALUE OF THE UNDERLYING SECURITIES (OR
CASH) RECEIVED ON THE MATURITY DATE OF A SERIES OF STRYPES IS LESS THAN THE
ISSUE PRICE PAID FOR SUCH STRYPES, AN INVESTMENT IN STRYPES WILL RESULT IN A
LOSS. SEE "DESCRIPTION OF THE STRYPES."
Each series of STRYPES may vary, where applicable, as to aggregate issue
price, Maturity Date, Underlying Issuer, Underlying Securities deliverable upon
maturity, formula or other method by which the amount of such Underlying
Securities will be determined, public offering or purchase price, interest rate
or rates, if any, and timing of payments thereof, provision for redemption,
currencies of denomination or currencies otherwise applicable thereto and any
other variable terms and method of distribution. The accompanying Prospectus
Supplement sets forth the specific terms with regard to the series of STRYPES
in respect of which this Prospectus is being delivered.
Reference is made to any accompanying prospectus of the Underlying Issuer
covering the Underlying Securities which may be received by holders of a series
of STRYPES on the Maturity Date.
-----------
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 STRYPES may be sold through Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"). STRYPES may not be sold without
delivery of a Prospectus Supplement describing such issue of STRYPES and the
method and terms of offering thereof, and any accompanying prospectus of the
Underlying Issuer covering the Underlying Securities which may be received by
holders of a series of STRYPES on the Maturity Date.
- -----
SM Service mark of Merrill Lynch & Co., Inc.
-----------
The date of this Prospectus is , 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements and
other information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Midwest Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and Northeast Regional Office, Seven
World Trade Center, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Reports, proxy and
information statements and other information concerning the Company may also be
inspected at the offices of the New York Stock Exchange, the American Stock
Exchange, the Chicago Stock Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 29,
1995, and Current Reports on Form 8-K dated January 17, 1996, January 22, 1996,
February 7, 1996, February 29, 1996, March 1, 1996, March 12, 1996, March 18,
1996, April 1, 1996, April 15, 1996 and May 1, 1996 filed pursuant to Section
13 of the Exchange Act, are hereby incorporated by reference into this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the STRYPES 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.
----------------
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED
OR DISAPPROVED THE OFFERING OF THE SECURITIES MADE HEREBY NOR HAS THE
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
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
on a global basis. Its principal subsidiary, MLPF&S, one of the largest
securities firms in the world, is a leading broker in securities, options
contracts, and commodity and financial futures contracts; a leading dealer in
options and in corporate and municipal securities; a leading investment banking
firm that provides advice to, and raises capital for, its clients; and an
underwriter of selected insurance products. Other subsidiaries provide
financial services on a global basis similar to those of MLPF&S and are engaged
in such other activities as international banking, lending, and providing other
investment and financing services. Merrill Lynch International Incorporated,
through subsidiaries and affiliates, provides investment, financing, and
related services outside the United States and Canada. Merrill Lynch Asset
Management, LP and Fund Asset Management, LP together constitute one of the
largest mutual fund managers in the world and provide investment advisory
services. Merrill Lynch Government Securities Inc. is a primary dealer in
obligations issued or guaranteed by the U.S. Government and its agencies.
Merrill Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc.,
and Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. The Company's
insurance underwriting operations consist of the underwriting of life insurance
and annuity products. Banking, trust, and mortgage lending operations conducted
through subsidiaries of the Company include issuing certificates of deposit,
offering money market deposit accounts, making secured loans, and providing
foreign exchange trading facilities and other related services.
The principal executive office of the Company is located at World Financial
Center, North Tower, 250 Vesey Street, New York, New York 10281; its telephone
number is (212) 449-1000.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the STRYPES 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 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. 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 STRYPES 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 of 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 29, 1995 and Current Reports on Form 8-K, dated
April 15, 1996 and May 1, 1996. See "Incorporation of Certain Documents by
Reference." The Current Reports on Form 8-K, which include unaudited
preliminary financial information as of and for the period ended March 29,
1996, will be superseded in their entirety by the Company's Quarterly Report on
Form 10-Q for the period ended March 29, 1996. In the opinion of management of
the Company, all adjustments, consisting only of normal recurring accruals,
necessary for a fair statement of the results of operations have been included.
The year-end results include 52 weeks for 1991, 1992, 1994, and 1995 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 THREE MONTHS ENDED
--------------------------------------------- -------------------
MARCH 31, MARCH 29,
1991 1992 1993 1994 1995 1995 1996
------- -------- -------- -------- -------- --------- ---------
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $12,353 $ 13,413 $ 16,588 $ 18,234 $ 21,513 $ 5,204 $ 6,019
Net revenues............ $ 7,246 $ 8,577 $ 10,558 $ 9,625 $ 10,265 $ 2,421 $ 3,261
Earnings before income
taxes and cumulative
effect of changes in
accounting princi-
ples(1)................ $ 1,017 $ 1,621 $ 2,425 $ 1,730 $ 1,811 $ 380 $ 671
Cumulative effect of
changes in accounting
principles (net of
applicable income
taxes)(1).............. -- $ (58) $ (35) -- -- -- --
Net earnings(1)......... $ 696 $ 894 $ 1,359 $ 1,017 $ 1,114 $ 228 $ 409
Ratio of earnings to
fixed charges(2)....... 1.2 1.3 1.4 1.2 1.2 1.1 1.2
Total assets(3)......... $86,259 $107,024 $152,910 $163,749 $176,857 $176,733 $195,884
Long-term borrowings(4). $ 7,964 $ 10,871 $ 13,469 $ 14,863 $ 17,340 $ 14,485 $ 20,226
Stockholders' equity.... $ 3,818 $ 4,569 $ 5,486 $ 5,818 $ 6,141 $ 5,704 $ 6,364
</TABLE>
- --------
(1) Net earnings for 1992 have been reduced by $58 million to reflect 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 were
reduced by $35 million to reflect 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,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
(3) In 1994, the Company adopted Financial Accounting Standards Board ("FASB")
Interpretation No. 39, "Offsetting of Amounts Related to Certain Contracts,"
and FASB Interpretation No. 41, "Offsetting of Amounts Related to Certain
Repurchase and Reverse Repurchase Agreements," which increased assets and
liabilities at December 30, 1994 by approximately $8,500 million.
(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 varies significantly
with the level of general business activity, on March 29, 1996, $526 million
of bank loans and $17,222 million of commercial paper were outstanding. In
addition, certain of the Company's subsidiaries lend securities and enter
into repurchase agreements to obtain financing. At March 29, 1996, cash
deposits for securities loaned and securities sold under agreements to
repurchase amounted to $3,768 million and $61,657 million, respectively.
From March 30, 1996 to May 6, 1996, long-term borrowings, net of repayments
and repurchases, increased by approximately $768 million.
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FISCAL YEAR 1995
Global financial markets, which steadily weakened during most of 1994,
generally improved during 1995, led by a more stable U.S. economy, declining
interest rates, and heightened investor activity. Inflationary fears eased
throughout 1995 as key U.S. economic statistics indicated slow to moderate
growth. The Federal Reserve decreased short-term interest rates in July and
December 1995 following seven rate increases between February 1994 and February
1995. Investors reacted favorably to these events and were more active in stock
and bond markets during 1995. Net earnings for the 1995 fourth quarter were
$303 million, up 1% from the 1995 third quarter and up 88% from the 1994 fourth
quarter.
Net earnings for 1995 were $1,114 million, up 10% from 1994 net earnings of
$1,017 million. Earnings per common share were $5.44 primary and $5.42 fully
diluted in 1995, compared with $4.75 primary and $4.74 fully diluted in 1994.
Total revenues were a record $21,513 million, up 18% from 1994. Net revenues
(revenues after interest expense) totaled $10,265 million in 1995, up 7% from
1994.
Commission revenues increased 9% to a record $3,126 million from $2,871
million in 1994, due primarily to higher levels of listed and over-the-counter
securities transactions and mutual fund commissions, partially offset by lower
revenues from commodities. Commissions from listed and over-the-counter
securities increased due primarily to higher trading volumes on most major U.S.
and international exchanges. Mutual fund commissions increased due primarily to
higher distribution and redemption fees. Distribution fees from deferred-charge
funds increased due to strong fund sales in prior periods and higher asset
levels. Redemption fees increased as clients repositioned invested assets.
Interest and dividend revenues increased 28% to $12,221 million from $9,578
million in 1994. Interest expense, which includes dividend expense, increased
31% from 1994 to $11,248 million. Net interest and dividend profit was $973
million, virtually unchanged from $969 million in 1994, with increases in net
interest-earning assets offset by declining interest spreads due to the
flattening of the U.S. Treasury yield curve. The change in the yield curve
resulted from long-term interest rates falling more than short-term rates
during 1995.
Principal transactions revenues increased 8% from 1994 to $2,519 million in
1995. Increases in equities and equity derivatives and taxable fixed-income
trading revenues were partially offset by decreases in trading revenues from
municipal securities, foreign exchange and commodities, and interest rate and
currency swaps. Equities and equity derivatives trading revenues, in the
aggregate, increased 46% to $912 million, due primarily to improved volumes in
the convertible, over-the-counter, and international equities markets,
partially offset by lower equity derivatives trading revenues. Taxable fixed-
income trading revenues increased 10% to $516 million due, in part, to higher
revenues from corporate bonds and preferred stock, high-yield bonds, and non-
U.S. governments and agencies securities. Trading revenues from mortgage-backed
products were negatively affected by reduced market liquidity, leading to a
loss. Nevertheless, trading results from mortgage-backed products, which
include related net interest revenues, were positive. U.S. Government and
agencies securities trading revenues were down from 1994 due to tighter spreads
between U.S. Treasury securities and related futures hedges, as well as reduced
retail investor demand attributable to lower interest rates. Municipal
securities revenues decreased 28% to $273 million as a result of decreased
investor demand for tax-exempt investments as investors remained wary of
potential tax law changes and sought higher returns in equity and taxable
fixed-income securities. Foreign exchange and commodities revenues, in the
aggregate, declined 22% to $86 million. Commodities trading revenues decreased
due to lower volumes. Increases in foreign exchange trading revenues resulted
from higher customer volume caused by the strengthening of the U.S. dollar
versus other major currencies during 1995. Interest rate and currency swaps
revenues declined 2% to $732 million. Decreases in U.S. dollar-denominated
transactions were substantially offset by increased revenues in non-dollar-
denominated transactions, particularly in Japanese and European markets.
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Investment banking revenues were $1,308 million, up 5% from $1,240 million in
1994. Strategic services revenues, which include fees for merger and
acquisition activity, debt restructuring, and other advisory services,
increased, as companies worldwide sought strategic partners to promote growth
while cutting costs and increasing efficiencies. Underwriting revenues were
down, as lower revenues from equities, private placements, high-yield debt, and
mortgage-backed securities underwriting were partially offset by increased
underwriting revenues from corporate bonds and preferred stock and defined
asset funds.
Asset management and portfolio service fees rose 9% in 1995 to a record
$1,890 million from $1,739 million in 1994, as a result of higher fees earned
from asset management and other fee-based services. Other revenues decreased 5%
from 1994 to $449 million, due to lower net realized investment gains in 1995
compared with 1994.
Non-interest expenses were $8,454 million, up 7% from $7,895 million in the
year-ago period. Compensation and benefits expense, which represented
approximately 62% of non-interest expenses, increased 6% due primarily to
increased production-related and incentive compensation and the addition of
Smith New Court PLC ("Smith New Court") employees. Compensation and benefits
expense as a percentage of net revenues was 51.3% in 1995, compared with 51.5%
in 1994.
Occupancy costs increased 3% from 1994 primarily due to international growth.
Other facilities-related costs, which include communications and equipment
rental expense and depreciation and amortization expenses, rose 13% primarily
due to expanded use of market data services, as well as higher depreciation
expense from the purchase of technology-related assets over the past year.
Professional fees increased 16% from the year-ago period, due to higher legal
fees and systems development costs related to upgrading technology and
processing capabilities in customer, trading, and transaction processing
systems. Advertising and market development expenses increased 6% from 1994 as
a result of increased advertising, international travel, and sales promotion
primarily related to international growth. Brokerage, clearing, and exchange
fees increased 7% as a result of higher securities volume, particularly in
international markets. Other expenses increased 4% from 1994, due primarily to
a $26 million first quarter charge for the write-off of assets related to a
technology contract and $14 million of goodwill amortization related to Smith
New Court.
Income tax expense totaled $697 million in 1995. The effective tax rate in
1995 was 38.5%, compared with 41.2% in 1994. The decrease in the effective tax
rate was attributable to lower state income taxes, expanded international
business activities in jurisdictions with lower tax rates, and increases in
deductions for dividends received.
In 1995 the Company acquired Smith New Court, a U.K.-based global securities
firm, for approximately $800 million. The Company recorded approximately $530
million of goodwill related to the acquisition, which is being amortized on a
straight-line basis over 15 years. The Company's 1995 results include those of
Smith New Court since mid-August 1995.
CERTAIN BALANCE SHEET INFORMATION AS OF DECEMBER 29, 1995
The Company believes that its equity base is adequate relative to the level
and composition of its assets and the mix of its business.
In the normal course of business, the Company underwrites, trades, and holds
non-investment grade securities in connection with its investment banking,
market-making, and derivative structuring activities. These activities are
subject to risks related to the creditworthiness of the issuers of, and the
liquidity of the market for, such securities, in addition to the usual risks
associated with investing in, financing, underwriting, and trading in
investment grade instruments.
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At December 29, 1995, the fair value of long and short non-investment grade
trading inventories amounted to $5,489 million and $353 million, respectively,
and in the aggregate (i.e. the sum of long and short trading inventories)
represented 6.3% of aggregate consolidated trading inventories.
At December 29, 1995, the carrying value of extensions of credit provided to
corporations entering into leveraged transactions aggregated $489 million
(excluding unutilized revolving lines of credit and other lending commitments
of $127 million), consisting primarily of senior term and subordinated
financings to 30 medium-sized corporations. At December 29, 1995, the Company
had no bridge loans outstanding. Loans to highly leveraged corporations are
carried at unpaid principal balances less a reserve for estimated losses. The
allowance for loan losses is estimated based on a review of each loan, and
consideration of economic, market, and credit conditions. Direct equity
investments made in conjunction with the Company's investment and merchant
banking activities aggregated $211 million at December 29, 1995, representing
investments in 62 enterprises. Equity investments in privately-held companies
for which sale is restricted by government or contractual requirements are
carried at the lower of cost or estimated net realizable value. At December 29,
1995, the Company held interests in partnerships, totaling $91 million
(recorded on the cost basis), that invest in highly leveraged transactions and
non-investment grade securities. At December 29, 1995, the Company also
committed to invest an additional $79 million in partnerships that invest in
leveraged transactions.
The Company's insurance subsidiaries hold non-investment grade securities.
Non-investment grade securities were 4.2% of total insurance investments at
December 29, 1995. Non-investment grade securities of insurance subsidiaries
are classified as available-for-sale and are carried at fair value.
At December 29, 1995, the largest non-investment grade concentration
consisted of various issues of a South American sovereign totaling $674
million, of which $672 million represented on-balance-sheet hedges for off-
balance-sheet financial instruments. No one industry sector accounted for more
than 35% of total non-investment grade positions. At December 29, 1995, the
Company held an aggregate carrying value of $164 million in debt and equity
securities of issuers in various stages of bankruptcy proceedings or in
default, of which 75% resulted from the Company's market-making activities in
such securities.
FIRST QUARTER 1996
Global financial markets were generally strong during 1995, led by a stable
U.S. economy, declining interest rates, and heightened investor activity.
Market expectations for additional declines in interest rates continued through
February 1996, fueling further market advances, strong investor and issuer
activity, higher fee-based revenues, and improved trading profits industrywide.
In March 1996, inflationary fears were stirred by the release of U.S. economic
statistics indicating stronger than anticipated growth and the Federal
Reserve's decision to hold short-term interest rates at current levels. This
led to increases in long-term interest rates and greater market volatility,
although interest rates remained low relative to the year-ago period.
Net earnings for the 1996 first quarter were a record $409 million, up 80%
from 1995 first quarter net earnings of $228 million. Earnings per common share
were $2.03 primary and fully diluted in the 1996 first quarter, compared with
$1.08 primary and fully diluted in the 1995 first quarter. Total revenues were
a record $6,019 million in the first quarter of 1996, up 16% from the 1995
first quarter. Net revenues (revenues after interest expense) totaled $3,261
million in the first quarter of 1996, up 35% from the 1995 first quarter.
Commissions revenues rose 44% to a record $989 million from $685 million in
the 1995 first quarter. Commissions revenues from listed and over-the-counter
securities increased to record levels due to higher trading volumes on most
major U.S. and international exchanges. Mutual fund commissions advanced to
record levels due to strong sales of both domestic and offshore funds.
Interest and dividend revenues decreased to $3,010 million from $3,030
million in the 1995 first quarter. Interest expense, which includes dividend
expense, decreased to $2,758 million from $2,783 million in the year-ago
quarter. Net interest and dividend profit was $252 million, up slightly from
$247 million in 1995, with increases in net interest-earning assets
substantially offset by the effect of lower interest rates.
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Principal transactions revenues increased 46% from the 1995 first quarter to
a record $982 million, as higher investor activity and market volatility led to
increases in virtually all trading products. Equities and equity derivatives
trading revenues, in the aggregate, were up 109% to $347 million. Trading
revenues from most equity products increased, due primarily to higher trading
volume and rising stock prices. International equities trading revenues, in
particular, benefited from the addition of Smith New Court trading activity.
Taxable fixed-income trading revenues rose 62% to $265 million due primarily to
higher revenues from non-U.S. governments and agencies, mortgage-backed
securities, and high-yield bonds. Non-U.S. governments and agencies trading
revenues advanced due to improved results from trading of Japanese Government
Bonds, as well as increased trading volume in certain Latin American emerging
markets as credit ratings improved and investors sought higher returns.
Mortgage-backed securities trading revenues increased due primarily to improved
liquidity and increased customer demand compared with the year-ago period.
Trading revenues from high-yield bonds were up due to lower interest rates and
improved credit ratings of certain issuers. Interest rate and currency swap
trading revenues increased 9% to $255 million due to higher trading revenues
from non-U.S. dollar-denominated transactions, partially offset by decreases in
revenues from U.S. dollar-denominated transactions. Foreign exchange and
commodities trading revenues, in the aggregate, rose 94% from the 1995 first
quarter to $40 million, as foreign exchange trading revenues continued to
benefit from the strengthening of the U.S. dollar versus other major
currencies. Municipal securities trading revenues declined 17% to $75 million,
primarily due to continued weak investor demand for tax-exempt investments.
Investment banking revenues were $378 million, up 52% from $249 million in
the 1995 first quarter. Underwriting revenues increased 82%, benefiting from
strong levels of debt and equity underwriting industrywide, with higher fees
from convertibles, corporate bonds and preferred stock, equities, and high-
yield securities. Strategic services revenues were down slightly from a year
ago, but remained comparable to record 1995 levels, benefiting from continued
strong merger and acquisition activity.
Asset management and portfolio service fees rose 20% in 1996 to a record $538
million from $448 million in the first quarter of 1995, primarily as a result
of strong inflows of client assets. Other revenues were $122 million, up 4%
from $117 million reported in the 1995 first quarter.
Non-interest expenses were $2,590 million, up 27% from $2,041 million in the
year-ago period. Compensation and benefits expense, which represented
approximately 65% of non-interest expenses, increased 33% due primarily to
higher incentive and production-related compensation as well as a 6% increase
in the number of full-time employees, largely due to acquisitions. Compensation
and benefits expense as a percentage of net revenues was 51.8% in the first
quarter of 1996, compared with 52.5% in the 1995 first quarter.
Occupancy costs increased 5% from the 1995 first quarter primarily due to
international growth. Other facilities-related costs, which include
communications and equipment rental expense and depreciation and amortization
expense, rose 16% primarily due to higher levels of business activity and
increased use of market data services, as well as higher depreciation expense
from the purchase of technology-related assets over the past year.
Professional fees increased 32% from the year ago period, primarily as a
result of higher systems development costs related to upgrading technology and
processing capabilities. Advertising and market development expenses increased
33% from the 1995 first quarter. Increased international travel and higher
advertising and client promotion costs contributed to this advance. Brokerage,
clearing, and exchange fees rose 27% as a result of higher trading volume,
particularly in international markets. Other expenses increased 4% from 1995,
primarily due to goodwill amortization related to Smith New Court.
Income tax expense totaled $262 million in the 1996 first quarter. The
effective tax rate in the 1996 first quarter was 39.0%, compared with 40.0% in
the first quarter of 1995. The decrease in the effective tax rate was primarily
attributable to increases in dividends qualifying for the Federal dividends
received deduction, lower state taxes, and expanded international business
activities.
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CERTAIN BALANCE SHEET INFORMATION AS OF MARCH 29, 1996
The Company believes that its equity base is adequate relative to the level
and composition of its assets and the mix of its business.
In the normal course of business, the Company underwrites, trades, and holds
non-investment grade securities in connection with its investment banking,
market making, and derivative structuring activities. These activities are
subject to additional risks related to the creditworthiness of the issuers and
the liquidity of the market for such securities.
At March 29, 1996, the fair value of long and short non-investment grade
trading inventories amounted to $6,026 million and $529 million, respectively,
and in the aggregate (i.e., the sum of long and short trading inventories)
represented 6.6% of aggregate consolidated trading inventories.
At March 29, 1996, the carrying value of extensions of credit provided to
corporations entering into leveraged transactions aggregated $517 million
(excluding unutilized revolving lines of credit and other lending commitments of
$75 million), consisting primarily of senior term and subordinated financings to
34 medium-sized corporations. In addition, at March 29, 1996, the Company had an
outstanding bridge loan of $90 million, and as of May 6, 1996, the Company had
an outstanding bridge loan commitment for $100 million. Direct equity
investments made in conjunction with the Company's investment and merchant
banking activities aggregated $189 million at March 29, 1996, representing
investments in 62 enterprises. At March 29, 1996, the Company held interests in
partnerships, totaling $82 million, that invest in highly leveraged transactions
and non-investment grade securities. At March 29, 1996, the Company also
committed to invest an additional $83 million in partnerships that invest in
leveraged transactions.
The Company's insurance subsidiaries hold non-investment grade securities.
Non-investment grade securities were 4.7% of total insurance investments at
March 29, 1996. Non-investment grade securities of insurance subsidiaries are
classified as available-for-sale and are carried at fair value.
At March 29, 1996, the largest non-investment grade concentration consisted
of various issues of a South American sovereign totaling $764 million, which
primarily represented on-balance-sheet hedges for off-balance-sheet financial
instruments. No one industry sector accounted for more than 31% of total non-
investment grade positions. At March 29, 1996, the Company held an aggregate
carrying value of $169 million in debt and equity securities of issuers in
various stages of bankruptcy proceedings or in default, of which 80% resulted
from the Company's market-making activities in such securities.
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DESCRIPTION OF THE STRYPES
Each issue of STRYPES will be a series of Senior Debt Securities to be issued
under an indenture (the "Chemical 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 "Trustee"), as
further amended and supplemented by a supplemental indenture to be entered into
by the Company and the Trustee relating to each series of STRYPES (the
"Supplemental Indenture") (the Chemical Indenture, as so amended and
supplemented by the Supplemental Indenture with respect to each series of
STRYPES, the "Indenture"). The following summary of certain provisions of the
Indenture does not purport to be complete and is qualified in its entirety by
reference to the Indenture. All capitalized terms not otherwise defined herein
have the meanings specified in the Indenture. Whenever defined terms of the
Indenture are referred to herein, such defined terms are incorporated by
reference herein.
GENERAL
The Supplemental Indenture will provide that STRYPES of the related series
may be issued from time to time under the Indenture, up to a specified
aggregate issue price, upon satisfaction of certain conditions precedent. The
Supplemental Indenture will establish the terms of the related series of
STRYPES, including: (1) the issue price per STRYPES; (2) the date on which such
STRYPES will mature; (3) the consideration deliverable or payable with respect
to such STRYPES, whether at maturity or upon earlier acceleration, and the
formula or other method by which the amount of such consideration will be
determined; (4) the rate or rates per annum (which may be fixed or variable) at
which such STRYPES will bear interest, if any; (5) the dates on which such
interest, if any, will be payable; (6) the provisions for redemption of such
STRYPES, if any, the redemption price and any remarketing arrangements relating
thereto; (7) the sinking fund requirements, if any, with respect to such
STRYPES; (8) whether such STRYPES 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) whether and under what circumstances the Company will
pay additional amounts ("Additional Amounts") in respect of such STRYPES 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 STRYPES
rather than pay such Additional Amounts; (10) the title of the STRYPES and the
series of which such STRYPES shall be a part; and (11) the obligation of the
Company to pay and discharge such STRYPES at maturity by delivery of Underlying
Securities (or, at the Company's option, cash with an equal value), the formula
or other method by which the amount of such Underlying Securities will be
determined, and the terms and conditions upon which such payment and discharge
shall be effected. Reference is made to the Prospectus Supplement for the terms
of the STRYPES being offered thereby.
Under the Indenture, the Company will have the ability, in addition to the
ability to issue STRYPES with terms different from those of STRYPES previously
issued, to "reopen" a previous series of STRYPES and issue additional STRYPES
of such series.
Issue price and interest, premium and Additional Amounts, if any, and
Underlying Securities will be payable or deliverable in the manner, at the
places and subject to the restrictions set forth in the Indenture, the STRYPES
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 STRYPES at their registered
addresses.
STRYPES may be presented for exchange, and registered STRYPES may be
presented for transfer, in the manner, at the places and subject to the
restrictions set forth in the Indenture, the STRYPES and the Prospectus
Supplement relating thereto. No service charge will be made for any transfer or
exchange of STRYPES, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
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RANKING
The STRYPES will be unsecured obligations and will rank pari passu with all
other unsecured and unsubordinated indebtedness 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 STRYPES), to participate
in any distribution of the assets of any subsidiary upon its liquidation or
reorganization or otherwise is necessarily subject to the prior claims of
creditors of the subsidiary, except to the extent that claims of the Company
itself as a creditor of the subsidiary may be recognized. In addition,
dividends, loans and advances from certain subsidiaries, including MLPF&S, to
the Company are restricted by net capital requirements under the Exchange Act
and under rules of certain exchanges and other regulatory bodies.
SECURITIES DEPOSITORY
Upon issuance, each series of STRYPES will be represented by one or more
fully registered global securities (the "Global Notes"). Each such Global Note
will be deposited with, or on behalf of, The Depository Trust Company, as
Securities Depository (the "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 STRYPES in definitive form under the limited
circumstances described below, no Global Note may 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 provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. The Securities Depository was
created to hold securities of its participants ("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 MLPF&S), banks, trust
companies, clearing corporations, and certain other organizations.
The Securities Depository is owned by a number of Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the Securities Depository's
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 ("Indirect Participants").
Purchases of STRYPES must be made by or through Participants, which will
receive a credit on the records of the Securities Depository. The ownership
interest of each actual purchaser of each STRYPES ("Beneficial Owner") is in
turn to be recorded on the Participants' or Indirect Participants' records.
Beneficial Owners will not receive written confirmations from the Securities
Depository of their purchase, but Beneficial Owners are expected to receive
written confirmation providing details of the transaction, as well as periodic
statements of their holdings, from the Participant or Indirect Participant
through which the Beneficial Owner entered into the transaction. Ownership of
beneficial interest in such Global Note 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 Participants) and on
the records of Participants (with respect to interests of persons held through
Participants). The laws of some states may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to own, transfer or pledge
beneficial interests in Global Notes.
So long as the Securities Depository, or its nominee, is the registered owner
of a Global Note, the Securities Depository or its nominee, as the case may be,
will be considered the sole owner or holder of the STRYPES
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represented by such Global Note for all purposes under the Indenture. Except as
provided below, Beneficial Owners in a Global Note will not be entitled to have
the STRYPES represented by such Global Notes registered in their names, will
not receive or be entitled to receive physical delivery of the STRYPES in
definitive form and will not be considered the owners or holders thereof under
the Indenture. Accordingly, each Person owning a beneficial interest in a
Global Note must rely on the procedures of the Securities Depository and, if
such Person is not a Participant, on the procedures of the Participant through
which such Person owns its interest, to exercise any rights of a holder under
the Indenture. The Company understands that under existing industry practices,
in the event that the Company requests any action of holders or that an owner
of a beneficial interest in such a Global Note desires to give or take any
action which a holder is entitled to give or take under the Indenture, the
Securities Depository would authorize the Participants holding the relevant
beneficial interests to give or take such action, and such Participants would
authorize Beneficial Owners owning through such Participants to give or take
such action or would otherwise act upon the instructions of Beneficial Owners.
Conveyance of notices and other communications by the Securities Depository to
Participants, by Participants to Indirect Participants, and by Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Payment of any amount with respect to STRYPES registered in the name of the
Securities Depository or its nominee will be made to the Securities Depository
or its nominee, as the case may be, as the holder of the Global Notes
representing such STRYPES. None of the Company, the Trustee or any other agent
of the Company or agent of the Trustee 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
Securities Depository, upon receipt of any payment in respect of a Global Note,
will credit the accounts of the Participants with payment in amounts
proportionate to their respective holdings of beneficial interest in such
Global Note as shown on the records of the Securities Depository. The Company
also expects that payments by Participants to Beneficial Owners 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
Participants.
If, with respect to a series of STRYPES, (x) the Securities Depository is at
any time unwilling or unable to continue as Securities Depository and a
successor depository is not appointed by the Company within 60 days, (y) the
Company executes and delivers to the Trustee a Company Order to the effect that
the Global Notes shall be exchangeable or (z) an Event of Default has occurred
and is continuing with respect to any STRYPES of that series, the Company will
issue STRYPES in definitive form in exchange for all of the Global Notes
representing the STRYPES of that series. Such definitive STRYPES shall be
registered in such name or names as the Securities Depository shall instruct
the Trustee. It is expected that such instructions may be based upon directions
received by the Securities Depository from Participants with respect to
ownership of beneficial interests in such Global Notes.
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
the due and punctual delivery or payment of the Underlying Securities (or cash
with an equal value) in respect of, any interest and Additional Amounts on, and
any other amounts payable with respect to, the STRYPES of each series and the
due and punctual performance and observance of all of the covenants and
conditions of the Indenture 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 Indenture.
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LIMITATIONS UPON LIENS
The Indenture provides that the Company may not, and may not permit any
Subsidiary (defined in the Indenture as any corporation of which at the time of
determination the Company and/or one or more Subsidiaries owns or controls
directly or indirectly 50% of the shares of Voting Stock of such corporation)
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 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
STRYPES will be secured equally and ratably with such secured indebtedness.
LIMITATIONS ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The 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
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 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.
EVENTS OF DEFAULT
Unless otherwise specified in a Prospectus Supplement, each of the following
will constitute an Event of Default under the Indenture with respect to each
series of STRYPES: (a) failure to pay and discharge the STRYPES of that series
with the Underlying Securities or, if the Company so elects, to pay an
equivalent amount in cash in lieu thereof when due; (b) failure to pay the
Redemption Price or any redemption premium with respect to any STRYPES of that
series when due; (c) failure to deposit any sinking fund payment, when and as
due by the terms of any STRYPES of that series; (d) failure to pay any interest
on or any Additional Amounts in respect of any STRYPES of that series when due,
continued for 30 days; (e) failure to perform any other covenant of the Company
contained in the Indenture for the benefit of that series or in the STRYPES of
that series, continued for 60 days after written notice has been given to the
Company by the Trustee, or to the Company and the Trustee by the holders of at
least 10% of the aggregate issue price of the Outstanding STRYPES of that
series, as provided in the Indenture; (f) certain events in bankruptcy,
insolvency or reorganization of the Company; and (g) any other Event of Default
provided with respect to STRYPES of that series.
Unless otherwise specified in a Prospectus Supplement, if an Event of Default
(other than an Event of Default described in clause (f) of the immediately
preceding paragraph) with respect to the STRYPES of any series shall occur and
be continuing, either the Trustee or the holders of at least 25% of the
aggregate issue price of the Outstanding STRYPES of that series by notice as
provided in the Indenture may declare an amount equal to the aggregate issue
price of all the STRYPES of that series and the interest accrued thereon and
Additional Amounts payable in respect thereof, if any, to be immediately due
and payable in cash. If an Event of Default described in said clause (f) shall
occur, an amount equal to the aggregate issue price of all the STRYPES of that
series and the interest accrued thereon and Additional Amounts payable in
respect thereof, if any, will become immediately due and payable in cash
without any declaration or other action on the part of the Trustee or any
holder. After such acceleration, but before a judgment or decree based on
acceleration, the holders of a majority of the aggregate issue price of the
Outstanding STRYPES of that series may, under certain circumstances, rescind
and annul such acceleration if all Events of Default, other than the non-
payment of the amount equal to the aggregate issue price of all the STRYPES of
that series due by reason of such acceleration, have been cured or waived as
provided in the Indenture. See "Modification and Waiver" below.
13
<PAGE>
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders of STRYPES of any
series, unless such holders of that series shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or direction.
Subject to such provisions for the indemnification of the Trustee, the holders
of a majority of the aggregate issue price of the STRYPES of any series will
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to the STRYPES of that series.
The Company will be required to furnish to the Trustee annually a statement
by certain of its officers as to whether or not the Company, to their
knowledge, is in default in the fulfillment of any of its obligations under the
Indenture and, if so, specifying all such known defaults.
The STRYPES and other series of Senior Debt Securities issued under the
Indenture will not have the benefit of any cross-default provisions with other
indebtedness of the Company.
MODIFICATION AND WAIVER
Unless otherwise specified in a Prospectus Supplement, modifications of and
amendments to the Indenture affecting a series of STRYPES may be made by the
Company and the Trustee with the consent of the holders of 66 2/3% of the
aggregate issue price of the Outstanding STRYPES of such series; provided,
however, that no such modification or amendment may, without the consent of the
holder of each Outstanding STRYPES of such series affected thereby, (a) change
the Maturity Date or the Stated Maturity of any installment of interest or
Additional Amounts on any STRYPES or any premium payable on the redemption
thereof, or change the Redemption Price, (b) reduce the amount of Underlying
Securities payable with respect to any STRYPES (or reduce the amount of cash
payable in lieu thereof), (c) reduce the amount of interest or Additional
Amounts payable on any STRYPES or reduce the amount of cash payable with
respect to any STRYPES upon acceleration of the maturity thereof, (d) change
the place or currency of payment of interest or Additional Amounts on, or any
amount of cash payable with respect to, any STRYPES, (e) impair the right to
institute suit for the enforcement of any payment on or with respect to any
STRYPES, including the payment of Underlying Securities with respect to any
STRYPES, (f) reduce the percentage of the aggregate issue price of Outstanding
STRYPES of such series, the consent of whose holders is required to modify or
amend the Indenture, (g) reduce the percentage of the aggregate issue price of
Outstanding STRYPES of such series necessary for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults or (h)
modify such provisions with respect to modification and waiver. Except as
provided in the Indenture, no modification of or amendment to the Indenture may
adversely affect the rights of a holder of any other Senior Debt Security
without the consent of such holder.
The holders of a majority of the aggregate issue price of each series of
STRYPES may waive compliance by the Company with certain restrictive provisions
of the Indenture. The holders of a majority of the aggregate issue price of
each series of STRYPES may waive any past default under the Indenture, except a
default in the payment of the Underlying Securities with respect to any STRYPES
of that series, or of cash payable in lieu thereof, or in the payment of any
premium, interest or Additional Amounts on any STRYPES of that series for which
payment had not been subsequently made or in respect of a covenant and
provision of the Indenture which cannot be modified or amended without the
consent of the holder of each Outstanding STRYPES of such series affected.
GOVERNING LAW
The Indenture and the STRYPES will be governed by, and construed in
accordance with, the laws of the State of New York.
14
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell STRYPES to the public through MLPF&S. The accompanying
Prospectus Supplement describes the terms of the STRYPES offered thereby,
including the public offering or purchase price, any discounts and commissions
to be allowed or paid to MLPF&S, all other items constituting underwriting
compensation, the discounts and commissions to be allowed or paid to dealers,
if any, and the exchanges, if any, on which the STRYPES will be listed. Only
MLPF&S will act as an underwriter in connection with the STRYPES. Under certain
circumstances, the Company may repurchase STRYPES and reoffer them to the
public as set forth above. The Company may also arrange for repurchases and
resales of such STRYPES by dealers.
The underwriting of STRYPES 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 1995 Annual Report on Form 10-K, and incorporated by
reference in this Prospectus, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The information under the caption "Summary Financial Information" for
each of the five years in the period ended December 29, 1995 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 29, 1995 included in the 1995 Annual Report
to Stockholders of the Company, and incorporated by reference herein, has been
derived from consolidated financial statements audited by Deloitte & Touche
LLP, as set forth in their reports included as an exhibit to the Registration
Statement or incorporated by reference herein. Such consolidated financial
statements and related financial statement schedules, such Summary Financial
Information and Selected Financial Data appearing or incorporated by reference
in this Prospectus and the Registration Statement of which this Prospectus is a
part, have been included or incorporated herein by reference in reliance upon
such reports of Deloitte & Touche LLP given upon their authority as experts in
accounting and auditing.
With respect to unaudited interim financial information for the periods
included in any of the Quarterly Reports on Form 10-Q (including any amendments
applicable thereto) which may be incorporated herein by reference, Deloitte &
Touche LLP have applied limited procedures in accordance with professional
standards for a review of such information. However, as stated in their report
included in any such Quarterly Report on Form 10-Q (including any amendments
applicable thereto) and incorporated by reference herein, they did not audit
and they do not express an opinion on such interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
Deloitte & Touche LLP are not subject to the liability provisions of Section 11
of the Securities Act of 1933, as amended, (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.
15
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR IN-
CORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPEC-
TUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
ANY SECURITIES OTHER THAN THOSE SPECIFICALLY OFFERED HEREBY OR OF ANY SECURI-
TIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE AN OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSE-
QUENT TO ITS DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Prospectus Summary......................................................... S-3
Risk Factors............................................................... S-8
Cox Communications, Inc. .................................................. S-11
Price Range of Cox Common Stock............................................ S-12
Cox Dividend Policy........................................................ S-12
Supplemental Use of Proceeds............................................... S-12
Supplemental Description of the STRYPES.................................... S-13
Certain Arrangements With CEI.............................................. S-19
Certain United States Federal Income Tax Considerations.................... S-20
Underwriting............................................................... S-28
Validity of the STRYPES.................................................... S-28
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 the STRYPES................................................. 10
Plan of Distribution....................................................... 15
Experts.................................................................... 15
</TABLE>
APPENDIX A
Prospectus relating to Class A Common Stock of Cox Communications, Inc.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
8,521,740 STRYPES SM
LOGO
MERRILL LYNCH & CO., INC.
% STRYPES SM
DUE , 1999
PAYABLE WITH SHARES OF COMMON STOCK OF
LOGO
COX COMMUNICATIONS, INC.
(OR CASH WITH AN EQUAL VALUE)
---------------
PROSPECTUS
---------------
MERRILL LYNCH & CO.
, 1996
SMService mark of Merrill Lynch & Co., Inc.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware, as
amended, provides that under certain circumstances a corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or
is or was serving at its request in such capacity in another corporation or
business association, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful.
Article XIII, Section 2 of the Restated Certificate of Incorporation of the
Registrant provides in effect that, subject to certain limited exceptions, the
Registrant shall indemnify its directors and officers to the extent authorized
or permitted by the General Corporation Law of the State of Delaware.
The Form of Underwriting Agreement filed as Exhibit 1(a) provides for the
indemnification of the Registrant, its controlling persons, its directors and
certain of its officers by the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. The Form of
Registration Agreement filed as Exhibit 1(b) provides for the indemnification
of the Registrant and its controlling persons by Cox Communications, Inc.
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
The directors and officers of the Registrant are insured under policies of
insurance maintained by the Registrant, subject to the limits of the policies,
against certain losses arising from any claim made against them by reason of
being or having been such directors or officers. In addition, the Registrant
has entered into contracts with all of its directors providing for
indemnification of such persons by the Registrant to the full extent authorized
or permitted by law, subject to certain limited exceptions.
II-1
<PAGE>
ITEM 16. LIST OF EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1(a) --Form of Underwriting Agreement among the Company, Cox Enterprises,
Inc. and the Underwriter.
1(b) --Form of Registration Agreement among the Company, Cox
Communications, Inc. and the Underwriter.
4(a) --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), incorporated herein by
reference to Exhibit 99(c) to Registrant's Registration Statement on
Form 8-A dated July 20, 1992.
4(b) --Form of Eighth Supplemental Indenture to the Senior Indenture
between the Company and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company).
4(c) --Form of certificate representing the STRYPES.
5 --Opinion of Brown & Wood.
10 --Form of STRYPES Agreement among the Company, Merrill Lynch Capital
Services, Inc. and Cox Enterprises, Inc. relating to shares of Cox
Common Stock.
23(a) --Consent of Deloitte & Touche LLP.
23(b) --Consent of Brown & Wood (included in Exhibit 5).
99 --Report of Deloitte & Touche LLP with respect to certain financial
data appearing in the Registration Statement.
</TABLE>
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in The City of New York and State of
New York on the 8th day of May, 1996.
MERRILL LYNCH & CO., INC.
/s/ Stephen L. Hammerman
By ______________________________
STEPHEN L. HAMMERMAN
(Vice Chairman of the Board and
General Counsel)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST-
EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON THE 8TH DAY OF MAY, 1996.
SIGNATURE TITLE
Chairman of the Board,
/s/ Daniel P. Tully* Chief Executive Officer
- ------------------------------------- and Director
(DANIEL P. TULLY)
President, Chief
/s/ David H. Komansky* Operating Officer and
- ------------------------------------- Director
(DAVID H. KOMANSKY)
/s/ Joseph T. Willett* Senior Vice President
- ------------------------------------- and Chief Financial
(JOSEPH T. WILLETT) Officer (Principal
Financial Officer)
Senior Vice President
/s/ Michael J. Castellano* and Controller
- -------------------------------------
(MICHAEL J. CASTELLANO)
/s/ William O. Bourke* Director
- -------------------------------------
(WILLIAM O. BOURKE)
/s/ Worley H. Clark* Director
- -------------------------------------
(WORLEY H. CLARK)
Director
/s/ Jill K. Conway*
- -------------------------------------
(JILL K. CONWAY)
II-3
<PAGE>
SIGNATURE TITLE
Director
/s/ Stephen L. Hammerman*
- -------------------------------------
(STEPHEN L. HAMMERMAN)
Director
/s/ Earle H. Harbison, Jr.*
- -------------------------------------
(EARLE H. HARBISON, JR.)
Director
/s/ George B. Harvey*
- -------------------------------------
(GEORGE B. HARVEY)
Director
/s/ William R. Hoover*
- -------------------------------------
(WILLIAM R. HOOVER)
Director
/s/ Robert P. Luciano*
- -------------------------------------
(ROBERT P. LUCIANO)
Director
/s/ Aulana L. Peters*
- -------------------------------------
(AULANA L. PETERS)
Director
/s/ John J. Phelan, Jr.*
- -------------------------------------
(JOHN J. PHELAN, JR.)
Director
/s/ William L. Weiss*
- -------------------------------------
(WILLIAM L. WEISS)
/s/ Stephen L. Hammerman
*By: ___________________________
STEPHEN L. HAMMERMAN
(ATTORNEY-IN-FACT)
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1(a) --Form of Underwriting Agreement among the Company, Cox
Enterprises, Inc. and the Underwriter.
1(b) --Form of Registration Agreement among the Company, Cox
Communications, Inc. and the Underwriter.
4(a) --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), incorporated herein by reference to
Exhibit 99(c) to Registrant's Registration Statement
on Form 8-A dated July 20, 1992.
4(b) --Form of Eighth Supplemental Indenture to the Senior
Indenture between the Company and Chemical Bank
(successor by merger to Manufacturers Hanover Trust
Company).
4(c) --Form of certificate representing the STRYPES.
5 --Opinion of Brown & Wood.
10 --Form of STRYPES Agreement among the Company, Merrill
Lynch Capital Services, Inc. and Cox Enterprises, Inc.
relating to shares of Cox Common Stock.
23(a) --Consent of Deloitte & Touche LLP.
23(b) --Consent of Brown & Wood (included in Exhibit 5).
99 --Report of Deloitte & Touche LLP with respect to
certain financial data appearing in the Registration
Statement.
</TABLE>
<PAGE>
Exhibit 1(a)
DRAFT
4/29/96
______________________________________________________________________________
______________________________________________________________________________
MERRILL LYNCH & CO., INC.
(a Delaware corporation)
UNDERWRITING AGREEMENT
----------------------
Dated: __________, 1996
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1. Representations and Warranties........................... 4
(a) Representations and Warranties by the Company............ 4
(i) Compliance with Registration Requirements 4
(ii) Incorporated Documents........................ 5
(iii) Independent Accountants....................... 5
(iv) Financial Statements.......................... 5
(v) No Material Adverse Change in Business........ 6
(vi) Good Standing of the Company.................. 6
(vii) Good Standing of Subsidiaries................. 6
(viii) Authorization of Agreement.................... 7
(ix) Authorization of the Indenture................ 7
(x) Authorization of the Securities............... 7
(xi) Authorization of the STRYPES Agreement........ 7
(xii) Description of Securities, Indenture and
STRYPES Agreement............................. 8
(xiii) Absence of Defaults and Conflicts............. 8
(xiv) Absence of Labor Dispute...................... 9
(xv) Absence of Proceedings........................ 9
(xvi) Exhibits...................................... 9
(xvii) Possession of Intellectual Property........... 9
(xviii) Absence of Further Requirements............... 9
(xix) Possession of Licenses and Permits............ 10
(xx) Title to Property............................. 10
(xxi) Compliance with Cuba Act...................... 10
(b) Representations and Warranties by CEI.................... 10
(i) Good Standing of CEI.......................... 11
(ii) Delivery of Cox Common Stock.................. 11
(iii) Authorization of Agreement.................... 11
(iv) Authorization of the STRYPES Agreement........ 11
(v) Absence of Defaults and Conflicts............. 11
(vi) Absence of Further Requirements............... 12
(vii) Cox Registration Statement and Prospectus..... 12
(c) Officer's Certificates................................... 13
SECTION 2. Sale and Delivery to Underwriter; Closing................ 13
(a) Initial Securities....................................... 13
(b) Option Securities........................................ 13
(c) Payment.................................................. 13
(d) Denominations; Registration.............................. 13
SECTION 3. Covenants................................................ 14
(a) Covenants of the Company................................. 14
(i) Compliance with Securities Regulations and
Commission Requests................................. 14
(ii) Filing of Amendments................................ 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
(iii) Delivery of ML&Co. Registration Statements.......... 14
(iv) Delivery of ML&Co. Prospectuses..................... 15
(v) Continued Compliance with Securities Laws........... 15
(vi) Blue Sky Qualifications............................. 15
(vii) Rule 158............................................ 16
(viii)Use of Proceeds..................................... 16
(ix) Listing............................................. 16
(x) Reporting Requirements.............................. 16
(b) Covenants of CEI..................................................... 16
(i) Restriction on Sale of Securities................... 16
(ii) Purpose Statement................................... 16
SECTION 4. Payment of Expenses....................................... 16
(a) Expenses Payable by the Company........................... 16
(b) Expenses Payable by CEI................................... 17
(c) Termination of Agreement.................................. 17
SECTION 5. Conditions................................................ 17
(a) Conditions of Underwriter's Obligations................... 17
(1) Effectiveness of ML&Co. Registration Statement...... 17
(2) Effectiveness of Cox Registration Statement......... 18
(3) Opinion of Counsel for the Company.................. 18
(4) Opinion of Counsel for Cox and CEI.................. 18
(5) Company Officers' Certificate....................... 18
(6) Cox Officers' Certificate........................... 18
(7) CEI Officer's Certificate........................... 19
(8) Company Accountant's Comfort Letter................. 19
(9) Cox Accountant's Comfort Letters.................... 19
(10) Company Bring-down Comfort Letter................... 19
(11) Cox Bring-down Comfort Letter....................... 19
(12) Maintenance of Rating............................... 20
(13) Approval of Listing................................. 20
(14) No Objection........................................ 20
(15) Lock-up Agreements.................................. 20
(16) Conditions to Purchase of Option Securities......... 20
(17) Additional Documents................................ 21
(b) Conditions of the Company's Obligations................... 21
(1) Effectiveness of Cox Registration Statement......... 21
(2) Opinion of Counsel for the Company.................. 22
(3) Opinion of Counsel for Cox and CEI.................. 22
(4) Cox Officers' Certificate........................... 22
(5) CEI Officer's Certificate........................... 22
(6) Cox Accountant's Comfort Letters.................... 22
(7) Cox Bring-down Comfort Letter....................... 22
(8) Conditions to Sale of Option Securities............. 22
(c) Termination of Agreement.................................. 23
SECTION 6. Indemnification........................................... 23
(a) Indemnification of the Underwriter by the Company......... 23
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
(b) Indemnification of the Underwriter and the Company by CEI. 24
(c) Indemnification of the Company, Directors and Officers.... 25
(d) Actions against Parties; Notification..................... 26
(e) Settlement without Consent if Failure to Reimburse........ 26
SECTION 7. Contribution.............................................. 26
SECTION 8. Representations, Warranties and Agreements to
Survive Delivery.......................................... 29
SECTION 9. Termination of Agreement......................... 29
(a) Termination; General..................................... 29
(b) Liabilities.............................................. 29
SECTION 10. Notices................................................... 30
SECTION 11. Parties................................................... 30
SECTION 12. GOVERNING LAW AND TIME.................................... 30
SECTION 13. Effect of Headings........................................ 30
</TABLE>
iii
<PAGE>
MERRILL LYNCH & CO., INC.
(a Delaware corporation)
____% STRYPES/SM/ DUE ____, 1999
Payable with Shares of Common Stock of Cox Communications, Inc.
UNDERWRITING AGREEMENT
----------------------
_____________, 1996
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Merrill Lynch & Co., Inc., a Delaware corporation (the "Company"), and Cox
Enterprises, Inc., a ___________ corporation ("CEI"), confirm their respective
agreements with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Underwriter") with respect to the issue and sale by the
Company and the purchase by the Underwriter of an aggregate of ____________ of
the Company's Structured Yield Product Exchangeable for Stock/SM/, ____%
STRYPES/SM/ Due ____, 1999 (each, a "STRYPES") and with respect to the grant by
the Company to the Underwriter of the option described in Section 2(b) hereof to
purchase all or any part of ______ additional STRYPES to cover over-allotments,
if any. The aforesaid ______ STRYPES (the "Initial Securities") to be purchased
by the Underwriter and all or any part of the ______ STRYPES subject to the
option described in Section 2(b) hereof (the "Option Securities") are
hereinafter called, collectively, the "Securities." The Securities are to be
issued pursuant to an indenture, dated as of April 1, 1983 and restated as of
April 1, 1987, as amended and supplemented as of __________, 1996 (the
"Indenture"), between the Company and [Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company)], as trustee (the "Trustee").
__________________________
/SM/ Service mark of Merrill Lynch & Co., Inc.
1
<PAGE>
The STRYPES will be payable at maturity or upon redemption by delivery of
shares of Class A Common Stock, par value $1.00 per share (the "Cox Common
Stock"), of Cox Communications, Inc., a Delaware corporation ("Cox"), subject to
the Company's option to deliver at maturity, in lieu of shares of Cox Common
Stock, cash with an equal value. The Company, Cox and the Underwriter are
concurrently entering into an agreement dated the date hereof (the "Registration
Agreement") relating to the registration of shares of Cox Common Stock
deliverable by the Company pursuant to the STRYPES.
The Company understands that the Underwriter proposes to make a public
offering of the Securities as soon as the Underwriter deems advisable after this
Agreement has been executed and delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33-65135) for the
registration of debt securities, including the Securities, and warrants under
the Securities Act of 1933, as amended (the "1933 Act"), and the offering
thereof from time to time in accordance with Rule 415 of the rules and
regulations of the Commission under the 1933 Act (the "1933 Act Regulations"),
and the Company has filed post-effective amendment no. 1 thereto, including a
preliminary prospectus and preliminary prospectus supplement relating to the
offering of the Securities. Promptly after execution and delivery of this
Agreement, the Company will either (i) prepare and file a prospectus and
prospectus supplement in accordance with the provisions of Rule 430A ("Rule
430A") of the 1933 Act Regulations and paragraph (b) of Rule 424 ("Rule 424(b)")
of the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (an
"ML&Co. Term Sheet") in accordance with the provisions of Rule 434 and Rule
424(b). The information included in such prospectus and prospectus supplement
or in such ML&Co. Term Sheet, as the case may be, that was omitted from such
registration statement (as so amended) at the time it became effective but that
is deemed to be part of such registration statement (as so amended) at the time
it became effective (i) pursuant to paragraph (b) of Rule 430A is referred to as
"Rule 430A Information" or (ii) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Any prospectus and prospectus supplement
relating to the offering of the Securities used before such registration
statement (as so amended) became effective, and any prospectus and prospectus
supplement relating to the offering of the Securities that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, in each case excluding any Cox preliminary prospectus (as defined
below) attached [as Appendix A] thereto, are herein called, collectively, an
"ML&Co. preliminary prospectus." Such registration statement (as so amended),
including the exhibits thereto, the schedules thereto, if any, and the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933
Act, at the time it became effective and including the Rule 430A Information and
the Rule 434 Information, as applicable, is herein called the "ML&Co.
Registration Statement." Any registration statement filed by the Company
pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the
"ML&Co. Rule 462(b) Registration Statement," and after such filing the term
"ML&Co. Registration Statement" shall include the ML&Co. Rule 462(b)
Registration Statement. The final prospectus and final prospectus supplement
relating to the offering of the Securities, including the documents
2
<PAGE>
incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933
Act, but excluding any Cox Prospectus (as defined below) attached [as Appendix
A] thereto, in the form first furnished to the Underwriter for use in connection
with the offering of the Securities are collectively referred to herein as the
"ML&Co. Prospectus." If Rule 434 is relied on, the term "ML&Co. Prospectus"
shall refer to the ML&Co. preliminary prospectus dated _______, 1996 together
with the ML&Co. Term Sheet and all references in this Agreement to the date of
the ML&Co. Prospectus shall mean the date of the ML&Co. Term Sheet. For
purposes of this Agreement, all references to the ML&Co. Registration Statement,
any ML&Co. preliminary prospectus, the ML&Co. Prospectus or any ML&Co. Term
Sheet or any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the ML&Co.
Registration Statement, any ML&Co. preliminary prospectus or the ML&Co.
Prospectus (or other references of like import) shall be deemed to mean and
include all such financial statements and schedules and other information which
is incorporated by reference in the ML&Co. Registration Statement, any ML&Co.
preliminary prospectus or the ML&Co. Prospectus, as the case may be, and shall
be deemed to exclude all financial statements and schedules and other
information which is included or incorporated by reference in any Cox
preliminary prospectus or the Cox Prospectus which is attached [as Appendix A]
to any ML&Co. preliminary prospectus or the ML&Co. Prospectus; and all
references in this Agreement to amendments or supplements to the ML&Co.
Registration Statement, any ML&Co. preliminary prospectus or the ML&Co.
Prospectus shall be deemed to mean and include the filing of any document under
the Securities Exchange Act of 1934, as amended (the "1934 Act"), which is
incorporated by reference in the ML&Co. Registration Statement, such ML&Co.
preliminary prospectus or the ML&Co. Prospectus, as the case may be.
Cox has filed with the Commission a registration statement on Form S-3 (No.
333-______) covering the registration of the shares of Cox Common Stock
deliverable at maturity or upon redemption of the Securities under the 1933 Act,
including the related preliminary prospectus or prospectuses. Each prospectus
used before such registration statement became effective is herein called a "Cox
preliminary prospectus." Such registration statement, including the exhibits
thereto, the schedules thereto, if any, and the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, at the
time it became effective, is herein called the "Cox Registration Statement."
Any registration statement filed by Cox pursuant to Rule 462(b) of the 1933 Act
Regulations is herein referred to as the "Cox Rule 462(b) Registration
Statement," and after such filing the term "Cox Registration Statement" shall
include the Cox Rule 462(b) Registration Statement. The final prospectus,
including the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the 1933 Act, in the form first furnished to the Underwriter for
use in connection with the offering of the Securities is herein called the "Cox
Prospectus." For purposes of this Agreement, all references to the Cox
Registration Statement, any Cox preliminary prospectus, the Cox Prospectus or
any amendment or supplement to any of the foregoing shall be deemed to include
the copy filed with the Commission pursuant to EDGAR.
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<PAGE>
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the Cox
Registration Statement, any Cox preliminary prospectus or the Cox Prospectus (or
other references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Cox Registration Statement, any Cox preliminary prospectus
or the Cox Prospectus, as the case may be; and all references in this Agreement
to amendments or supplements to the Cox Registration Statement, any Cox
preliminary prospectus or the Cox Prospectus shall be deemed to mean and include
the filing of any document under the 1934 Act which is incorporated by reference
in the Cox Registration Statement, such Cox preliminary prospectus or the Cox
Prospectus, as the case may be.
Prior to the closing under this Agreement, [the Company,] ________________,
a wholly-owned subsidiary of the Company (the "ML&Co. Subsidiary"), and CEI will
enter into a contract (the "STRYPES Agreement") pursuant to which CEI will be
obligated to deliver to the ML&Co. Subsidiary, immediately prior to the maturity
date or date of redemption of the Securities, a number of shares of Cox Common
Stock equal to the number required by the Company to pay and discharge or redeem
all of the Securities, subject to CEI's option, exercisable in its sole
discretion, to satisfy its obligation under the STRYPES Agreement by delivering
immediately prior to the maturity date a specified amount of cash in lieu of
such shares.
SECTION 1. Representations and Warranties.
------------------------------
(a) Representations and Warranties by the Company. The Company represents
and warrants to the Underwriter as of the date hereof, as of the Closing Time
referred to in Section 2(c) hereof, and as of each Date of Delivery (if any)
referred to in Section 2(b) hereof, and agrees with the Underwriter, as follows:
(i) Compliance with Registration Requirements. The Company meets the
-----------------------------------------
requirements for use of Form S-3 under the 1933 Act. Each of the ML&Co.
Registration Statement and any ML&Co. Rule 462(b) Registration Statement
has become effective under the 1933 Act and no stop order suspending the
effectiveness of the ML&Co. Registration Statement or any ML&Co. Rule
462(b) Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to the
knowledge of the Company, are contemplated by the Commission, and any
request on the part of the Commission for additional information has been
complied with.
At the respective times the ML&Co. Registration Statement, any ML&Co.
Rule 462(b) Registration Statement and any post-effective amendments
thereto became effective and at the Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery), the ML&Co. Registration
Statement, the ML&Co. Rule 462(b) Registration Statement and any amendments
and supplements thereto complied and will comply in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations and the
Trust Indenture Act of 1939, as amended (the "1939 Act"), and the rules and
regulations of the Commission under the 1939 Act (the "1939 Act
Regulations"), and did not and will not contain an untrue statement of a
material fact or
4
<PAGE>
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading. Neither the ML&Co. Prospectus
nor any amendments or supplements thereto, at the time the ML&Co.
Prospectus or any such amendment or supplement was issued and at the
Closing Time (and, if any Option Securities are purchased, at the Date of
Delivery), included or will include an untrue statement of a material fact
or omitted or will omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. If Rule 434 is used, the Company will comply
with the requirements of Rule 434. The representations and warranties in
this subsection shall not apply to (A) statements in or omissions from the
ML&Co. Registration Statement or ML&Co. Prospectus made in reliance upon
and in conformity with information furnished to the Company in writing by
the Underwriter expressly for use in the ML&Co. Registration Statement or
ML&Co. Prospectus or (B) that part of the ML&Co. Registration Statement
that constitutes the Statement of Eligibility on Form T-1 (the "Form T-1")
under the 1939 Act of the Trustee.
Each ML&Co. preliminary prospectus and the prospectus relating to the
offering of the Securities filed as part of the ML&Co. Registration
Statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the 1933 Act, complied when so filed in all
material respects with the 1933 Act Regulations and, if applicable, each
ML&Co. preliminary prospectus and the ML&Co. Prospectus delivered to the
Underwriter for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or deemed to
----------------------
be incorporated by reference in the ML&Co. Registration Statement and the
ML&Co. Prospectus, when they became effective or at the time they were or
hereafter are filed with the Commission, complied and will comply in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations or the 1934 Act and the rules and regulations of the Commission
thereunder (the "1934 Act Regulations"), as applicable, and, when read
together with the other information in the ML&Co. Prospectus, at the time
the ML&Co. Registration Statement became effective, at the time the ML&Co.
Prospectus was issued and at the Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery), did not and will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading.
(iii) Independent Accountants. The accountants who certified the
-----------------------
financial statements and supporting schedules included in the ML&Co.
Registration Statement are independent public accountants as required by
the 1933 Act and the 1933 Act Regulations.
(iv) Financial Statements. The financial statements included in the
--------------------
ML&Co. Registration Statement and the ML&Co. Prospectus, together with the
related schedules and notes, present fairly the financial position of the
Company and its consolidated
5
<PAGE>
subsidiaries at the dates indicated and the statement of operations,
stockholders' equity and cash flows of the Company and its consolidated
subsidiaries for the periods specified; said financial statements have been
prepared in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved. The
supporting schedules, if any, included in the ML&Co. Registration Statement
present fairly in accordance with GAAP the information required to be
stated therein. The selected financial data and the summary financial
information included in the ML&Co. Prospectus present fairly the
information shown therein and have been compiled on a basis consistent with
that of the audited financial statements included in the ML&Co.
Registration Statement.
(v) No Material Adverse Change in Business. Since the respective
--------------------------------------
dates as of which information is given in the ML&Co. Registration Statement
and the ML&Co. Prospectus, except as otherwise stated therein, (A) there
has been no material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
the Company and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business (a "Material Adverse
Effect"), (B) there have been no transactions entered into by the Company
or any of its subsidiaries, other than those in the ordinary course of
business, which are material with respect to the Company and its
subsidiaries considered as one enterprise, and (C) except for regular
quarterly dividends on its outstanding common stock and regular dividends
on its outstanding preferred stock in amounts per share that are consistent
with past practice, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.
(vi) Good Standing of the Company. The Company has been duly
----------------------------
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the ML&Co. Prospectus and to enter into and perform its
obligations under this Agreement, the Indenture [and the STRYPES
Agreement]; and the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so
to qualify or to be in good standing would not result in a Material Adverse
Effect.
(vii) Good Standing of Subsidiaries. Each subsidiary of the Company
-----------------------------
which is a "significant subsidiary" as defined in Rule 1-02 of Regulation
S-X under the 1933 Act (each a "Subsidiary" and, collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the ML&Co.
Prospectus and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify
or to be in good standing would not result in a Material Adverse Effect;
except as
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<PAGE>
otherwise disclosed in the ML&Co. Registration Statement, all of the issued
and outstanding capital stock of each such Subsidiary has been duly
authorized and validly issued and is fully paid and non-assessable and is
owned by the Company, directly or through subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; and none of the outstanding shares of capital stock of any
Subsidiary was issued in violation of the preemptive or similar rights of
any securityholder of such Subsidiary. The only subsidiaries of the Company
are (A) the subsidiaries listed in Exhibit 21 to the Annual Report on Form
10-K of the Company filed with the Commission under Section 13 of the 1934
Act for the fiscal year ended December 29, 1995 and (B) certain other
subsidiaries which, considered in the aggregate as a single subsidiary, do
not constitute a "significant subsidiary" as defined in Rule 1-02 of
Regulation S-X under the 1933 Act.
(viii) Authorization of Agreement. This Agreement has been duly
--------------------------
authorized, executed and delivered by the Company.
(ix) Authorization of the Indenture. The Indenture has been duly
------------------------------
authorized by the Company, duly qualified under the 1939 Act and duly
executed and delivered by the Company and (assuming the due authorization,
execution and delivery by the Trustee) will constitute a valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
(x) Authorization of the Securities. The Securities have been duly
-------------------------------
authorized by the Company for issuance and sale to the Underwriter pursuant
to this Agreement and, at the Closing Time, will have been duly executed by
the Company and, when authenticated by the Trustee in the manner provided
for in the Indenture and delivered against payment of the purchase price
therefor as provided in this Agreement, will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and will be
in the form contemplated by, and entitled to the benefits of, the
Indenture.
(xi) Authorization of the STRYPES Agreement. The STRYPES Agreement
--------------------------------------
has been duly authorized by [the Company and] the ML&Co. Subsidiary and, at
the Closing Time, will have been duly executed and delivered by [the
Company and] the ML&Co. Subsidiary and (assuming the due authorization,
execution and delivery by CEI) will constitute a valid and binding
agreement of [the Company and] the ML&Co. Subsidiary,
7
<PAGE>
enforceable against [the Company and] the ML&Co. Subsidiary in accordance
with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
(xii) Description of Securities, Indenture and STRYPES Agreement.
----------------------------------------------------------
The Securities, the Indenture and the STRYPES Agreement will conform in all
material respects to the respective statements relating thereto contained
in the ML&Co. Prospectus and will be in substantially the respective forms
filed or incorporated by reference, as the case may be, as exhibits to the
ML&Co. Registration Statement.
(xiii) Absence of Defaults and Conflicts. Neither the Company nor
---------------------------------
any of its subsidiaries is in violation of its charter or by-laws or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, deed
of trust, loan or credit agreement, note, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which it or any of them may be bound, or to which any of the property or
assets of the Company or any subsidiary is subject (collectively,
"Agreements and Instruments") except for such defaults that would not
result in a Material Adverse Effect; and (A) the execution, delivery and
performance by the Company of this Agreement, the Indenture, the Securities
[and the STRYPES Agreement] and the consummation of the transactions
contemplated herein, therein and in the ML&Co. Registration Statement
(including the issuance and sale of the Securities and the delivery of
shares of Cox Common Stock pursuant thereto and the use of the proceeds
from the sale of the Securities as described in the ML&Co. Prospectus under
the caption "Supplemental Use of Proceeds") and compliance by the Company
with its obligations hereunder and under the Indenture, the Securities [and
the STRYPES Agreement] and (B) the execution, delivery and performance by
the ML&Co. Subsidiary of the STRYPES Agreement and the consummation of the
transactions contemplated therein and compliance by the ML&Co. Subsidiary
with its obligations under the STRYPES Agreement have been duly authorized
by all necessary corporate action and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined below)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any subsidiary
pursuant to, the Agreements and Instruments (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not
result in a Material Adverse Effect), nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or any
subsidiary or, to the best of the Company's knowledge, any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any subsidiary or any of their
assets, properties or operations. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note, debenture
or other evidence of indebtedness of the Company or any subsidiary (or any
person acting on such holder's behalf) the
8
<PAGE>
right to require the repurchase, redemption or repayment of all or a
portion of such indebtedness by the Company or any subsidiary.
(xiv) Absence of Labor Dispute. No labor dispute with the employees
------------------------
of the Company or any subsidiary exists or, to the knowledge of the
Company, is imminent which may reasonably be expected to result in a
Material Adverse Effect.
(xv) Absence of Proceedings. There is no action, suit, proceeding,
----------------------
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company or any
subsidiary, which is required to be disclosed in the ML&Co. Registration
Statement (other than as disclosed therein), or which, individually or in
the aggregate, might reasonably be expected to result in a Material Adverse
Effect, or which, individually or in the aggregate, might reasonably be
expected to materially and adversely affect the properties or assets
thereof or the consummation of the transactions contemplated in this
Agreement, the Indenture or the STRYPES Agreement (including the issuance
and sale of the Securities and the delivery of shares of Cox Common Stock
pursuant thereto) or the performance by the Company of its obligations
hereunder or thereunder or the performance by the ML&Co. Subsidiary of its
obligations under the STRYPES Agreement; the aggregate of all pending legal
or governmental proceedings to which the Company or any subsidiary is a
party or of which any of their respective property or assets is the subject
which are not described in the ML&Co. Registration Statement, including
ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.
(xvi) Exhibits. There are no contracts or documents which are of a
--------
character required to be described in the ML&Co. Registration Statement,
the ML&Co. Prospectus or the documents incorporated by reference therein or
to be filed as exhibits thereto which have not been so described or filed
as required.
(xvii) Possession of Intellectual Property. The Company and its
-----------------------------------
subsidiaries own or possess, or can acquire on reasonable terms, adequate
trademarks, service marks, trade names and other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by them, and neither the Company nor any of its subsidiaries
has received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of the
Company or any of its subsidiaries therein, and which infringement or
conflict (if the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, singly or in the aggregate, would result in a
Material Adverse Effect.
(xviii) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required (A) for the performance by the Company of its
obligations under this Agreement [or the STRYPES Agreement] or
9
<PAGE>
the consummation by the Company of the transactions contemplated herein [or
therein] (including the issuance and sale of the Securities and the
delivery of shares of Cox Common Stock pursuant thereto) or for the due
execution, delivery or performance of the Indenture by the Company or (B)
for the performance by the ML&Co. Subsidiary of its obligations under the
STRYPES Agreement or the consummation by the ML&Co. Subsidiary of the
transactions contemplated therein, except, in each case, such as have been
already obtained or as may be required under the 1933 Act or the 1933 Act
Regulations or state securities laws and except for the qualification of
the Indenture under the 1939 Act.
(xix) Possession of Licenses and Permits. The Company and the
----------------------------------
subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them; the Company and its
subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xx) Title to Property. The Company and its subsidiaries have good
-----------------
and marketable title to all real property owned by the Company and its
subsidiaries and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (A) are
described in the ML&Co. Prospectus or (B) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company or any of its subsidiaries; and all of the leases and subleases
material to the business of the Company and its subsidiaries, considered as
one enterprise, and under which the Company or any of its subsidiaries
holds properties described in the ML&Co. Prospectus, are in full force and
effect, and neither the Company nor any subsidiary has any notice of any
material claim of any sort that has been asserted by anyone adverse to the
rights of the Company or any subsidiary under any of the leases or
subleases mentioned above, or affecting or questioning the rights of the
Company or such subsidiary to the continued possession of the leased or
subleased premises under any such lease or sublease.
(xxi) Compliance with Cuba Act. The Company has complied with, and
------------------------
is and will be in compliance with, the provisions of that certain Florida
act relating to disclosure of doing business with Cuba, codified as Section
517.075 of the Florida statutes, and the rules and regulation thereunder
(collectively, the "Cuba Act") or is exempt therefrom.
10
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(b) Representations and Warranties by CEI. CEI represents and warrants to
each of the Company and the Underwriter as of the date hereof, as of the Closing
Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if
any) referred to in Section 2(b) hereof, and agrees with each of the Company and
the Underwriter, as follows:
(i) Good Standing of CEI. CEI has been duly organized and is validly
--------------------
existing as a corporation in good standing under the laws of the State of
________ and has corporate power and authority to enter into and perform
its obligations under this Agreement and the STRYPES Agreement.
(ii) Delivery of Cox Common Stock. At the date hereof, CEI is the
----------------------------
sole registered owner of and has all rights in and to at least ____________
shares of Cox Common Stock, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity. If immediately prior
to maturity or redemption of the Securities CEI delivers to the ML&Co.
Subsidiary shares of Cox Common Stock pursuant to the STRYPES Agreement,
upon delivery by CEI to the ML&Co. Subsidiary of such shares of Cox Common
Stock pursuant to the STRYPES Agreement, the ML&Co. Subsidiary will be the
sole registered owner of the shares of Cox Common Stock so delivered and,
assuming the ML&Co. Subsidiary purchased for value in good faith and
without notice of any adverse claim, the ML&Co. Subsidiary will have
acquired all rights in and to such shares of Cox Common Stock, free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim
or equity. The delivery of shares of Cox Common Stock to the ML&Co.
Subsidiary at maturity or upon redemption of the Securities in accordance
with the STRYPES Agreement is not, and at the time of delivery of such
shares will not be, subject to any right of first refusal or similar rights
of any person pursuant to any contract to which CEI or any of its
subsidiaries is a party or by which any of them is bound.
(iii) Authorization of Agreement. This Agreement has been duly
--------------------------
authorized, executed and delivered by CEI.
(iv) Authorization of the STRYPES Agreement. The STRYPES Agreement
--------------------------------------
has been duly authorized by CEI and, at the Closing Time, will have been
duly executed and delivered by CEI and (assuming the due authorization,
execution and delivery by [the Company and] the ML&Co. Subsidiary) will
constitute a valid and binding agreement of CEI, enforceable against CEI in
accordance with its terms, except as the enforcement thereof may be limited
by bankruptcy, insolvency (including, without limitation, all laws relating
to fraudulent transfers), reorganization, moratorium or similar laws
affecting enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law).
Amounts received by CEI at Closing Time and at each Date of Delivery, if
any, pursuant to the STRYPES Agreement will not be used by CEI for the
purpose, whether immediate, incidental or ultimate, of buying or carrying a
margin stock, as such terms are defined in Regulation G promulgated by the
Board of Governors of the Federal Reserve System.
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(v) Absence of Defaults and Conflicts. The execution, delivery and
---------------------------------
performance by CEI of this Agreement and the STRYPES Agreement and the
consummation by CEI of the transactions contemplated herein and therein and
compliance by CEI with its obligations hereunder and thereunder have been
duly authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or CEI Repayment Event
(as defined below) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of CEI or any of
its subsidiaries pursuant to, any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or any other agreement or
instrument to which CEI or any of its subsidiaries is a party or by which
it or any of them may be bound, or to which any of the property or assets
of CEI or any of its subsidiaries is subject (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not,
singly or in the aggregate, materially and adversely affect the ability of
CEI to perform its obligations under this Agreement or the STRYPES
Agreement), nor will such action result in any violation of the provisions
of the charter or by-laws of CEI or any of its subsidiaries, or any
applicable law, statute, rule, regulation, judgment, order, writ or decree
of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over CEI or any of its subsidiaries or any of
their assets, properties or operations (except for such violations that
would not, singly or in the aggregate, materially and adversely affect the
ability of CEI to perform its obligations under this Agreement or the
STRYPES Agreement). As used herein, a "CEI Repayment Event" means any event
or condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder's behalf) the
right to require the repurchase, redemption or repayment of all or a
portion of such indebtedness by CEI or any of its subsidiaries.
(vi) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the execution, delivery or performance by CEI
of this Agreement or the STRYPES Agreement or the consummation by CEI of
the transactions contemplated by this Agreement or the STRYPES Agreement,
except such as have been already obtained or as may be required under the
1933 Act or the 1933 Act Regulations or state securities laws.
(vii) Cox Registration Statement and Prospectus. CEI is familiar
-----------------------------------------
with the representations and warranties of Cox contained in Section 1(a) of
the Registration Agreement and the information included or incorporated by
reference in the Cox Registration Statement and the Cox Prospectus and has
no reason to believe that (A) the representations and warranties of Cox
contained in Section 1(a) of the Registration Agreement are not true and
correct, (B) the Cox Registration Statement, any Cox Rule 462(b)
Registration Statement or any post-effective amendments thereto, at the
respective times the Cox Registration Statement, any Cox Rule 462(b)
Registration Statement or any post-effective amendments thereto became
effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading or (C) the Cox Prospectus or any
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amendment or supplement thereto, at the time the Cox Prospectus was issued,
at the time any such amended or supplemented prospectus was issued or at
the Closing Time (and, if any Option Securities are purchased, at the Date
of Delivery), included or will include an untrue statement of a material
fact or omitted or will omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(c) Officer's Certificates. Any certificate signed by any officer of the
Company or any of its subsidiaries delivered to the Underwriter shall be deemed
a representation and warranty by the Company to the Underwriter as to the
matters covered thereby. Any certificate signed by any officer of CEI or any of
its subsidiaries delivered to the Underwriter or the Company shall be deemed a
representation and warranty by CEI to the Underwriter or the Company, as the
case may be, as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriter; Closing.
-----------------------------------------
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to the Underwriter, and the Underwriter agrees to
purchase from the Company, at the price per STRYPES set forth in Schedule A, the
Initial Securities.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the Underwriter to purchase up
to an additional ______ STRYPES at the price per STRYPES set forth in Schedule
A. The option hereby granted will expire 30 days after the date hereof and may
be exercised in whole or in part from time to time only for the purpose of
covering over-allotments which may be made in connection with the offering and
distribution of the Initial Securities upon notice by the Underwriter to the
Company setting forth the number of Option Securities as to which the
Underwriter is then exercising the option and the time and date of payment and
delivery for such Option Securities. Any such time and date of delivery (a
"Date of Delivery") shall be determined by the Underwriter, but shall not be
later than seven full business days after the exercise of said option, nor in
any event prior to the Closing Time, as hereinafter defined.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Brown &
Wood, One World Trade Center, New York, New York 10048, or at such other place
as shall be agreed upon by the Underwriter and the Company, at 10:00 A.M.
(Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M.
(Eastern time) on any given day) business day after the date hereof, or such
other time not later than ten business days after such date as shall be agreed
upon by the Underwriter and the Company (such time and date of payment and
delivery being herein called "Closing Time"). In addition, in the event that
any or all of the Option Securities are purchased by the Underwriter, payment of
the purchase price for, and delivery of certificates for, such Option Securities
shall be made at the above-mentioned offices, or at such other place as shall be
agreed upon by the Underwriter and the Company, on each Date of Delivery as
specified in the notice from the Underwriter to the Company.
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Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Underwriter of certificates for the Securities to be purchased by it.
(d) Denominations; Registration. Certificates for the Initial Securities
and the Option Securities, if any, shall be in such denominations and registered
in such names as the Underwriter may request in writing at least one full
business day before the Closing Time or the relevant Date of Delivery, as the
case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Underwriter in The City of New York not later than 10:00 A.M. (Eastern time) on
the business day prior to the Closing Time or the relevant Date of Delivery, as
the case may be.
SECTION 3. Covenants.
---------
(a) Covenants of the Company. The Company covenants with the Underwriter
as follows:
(i) Compliance with Securities Regulations and Commission Requests.
The Company, subject to Section 3(a)(ii), will comply with the requirements
of Rule 430A or Rule 434, as applicable, and will notify the Underwriter
immediately, and confirm the notice in writing, (A) when any post-effective
amendment to the ML&Co. Registration Statement shall become effective, or
any supplement to the ML&Co. Prospectus or any amended ML&Co. Prospectus
shall have been filed, (B) of the receipt of any comments from the
Commission, (C) of any request by the Commission for any amendment to the
ML&Co. Registration Statement or any amendment or supplement to the ML&Co.
Prospectus or for additional information, and (D) of the issuance by the
Commission of any stop order suspending the effectiveness of the ML&Co.
Registration Statement or of any order preventing or suspending the use of
any ML&Co. preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction,
or of the initiation or threatening of any proceedings for any of such
purposes. The Company will promptly effect the filings necessary pursuant
to Rule 424(b) and will take such steps as it deems necessary to ascertain
promptly whether the form of prospectus transmitted for filing under Rule
424(b) was received for filing by the Commission and, in the event that it
was not, it will promptly file such prospectus. The Company will make
every reasonable effort to prevent the issuance of any stop order and, if
any stop order is issued, to obtain the lifting thereof at the earliest
possible moment.
(ii) Filing of Amendments. The Company will give the Underwriter
notice of its intention to file or prepare any amendment to the ML&Co.
Registration Statement (including any filing under Rule 462(b)), any ML&Co.
Term Sheet or any amendment, supplement or revision to either the
prospectus relating to the offering of the Securities included in the
ML&Co. Registration Statement at the time it became effective or to the
ML&Co. Prospectus, whether pursuant to the 1933 Act, the 1934 Act or
otherwise, will furnish the Underwriter with copies of any such documents a
reasonable amount of time prior to such proposed filing or use, as the case
may be, and will not file or use any such
14
<PAGE>
document to which the Underwriter or counsel for the Underwriter shall
reasonably object.
(iii) Delivery of ML&Co. Registration Statements. The Company has
furnished or will deliver to the Underwriter, without charge, signed copies
of the ML&Co. Registration Statement as originally filed and of each
amendment thereto (including exhibits filed therewith or incorporated by
reference therein and documents incorporated or deemed to be incorporated
by reference therein) and signed copies of all consents and certificates of
experts. If applicable, the copies of the ML&Co. Registration Statement
and each amendment thereto furnished to the Underwriter will be identical
to the electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(iv) Delivery of ML&Co. Prospectuses. The Company has delivered to
the Underwriter, without charge, as many copies of each ML&Co. preliminary
prospectus as the Underwriter reasonably requested, and the Company hereby
consents to the use of such copies for purposes permitted by the 1933 Act.
The Company will furnish to the Underwriter, without charge, during the
period when the ML&Co. Prospectus is required to be delivered under the
1933 Act or the 1934 Act, such number of copies of the ML&Co. Prospectus
(as amended or supplemented) as the Underwriter may reasonably request. If
applicable, the ML&Co. Prospectus and any amendments or supplements thereto
furnished to the Underwriter will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(v) Continued Compliance with Securities Laws. The Company will
comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and
the 1934 Act Regulations so as to permit the completion of the distribution
of the Securities as contemplated in this Agreement and in the ML&Co.
Prospectus. If at any time when a prospectus is required by the 1933 Act
to be delivered in connection with sales of the Securities, any event shall
occur or condition shall exist as a result of which it is necessary, in the
opinion of counsel for the Underwriter or for the Company, to amend the
ML&Co. Registration Statement or amend or supplement the ML&Co. Prospectus
in order that the ML&Co. Prospectus will not include any untrue statements
of a material fact or omit to state a material fact necessary in order to
make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of either such counsel, at any such time
to amend the ML&Co. Registration Statement or amend or supplement the
ML&Co. Prospectus in order to comply with the requirements of the 1933 Act
or the 1933 Act Regulations, the Company will promptly prepare and file
with the Commission, subject to Section 3(a)(ii), such amendment or
supplement as may be necessary to correct such statement or omission or to
make the ML&Co. Registration Statement or the ML&Co. Prospectus comply with
such requirements, and the Company will furnish to the Underwriter such
number of copies of such amendment or supplement as the Underwriter may
reasonably request.
15
<PAGE>
(vi) Blue Sky Qualifications. The Company will use its best efforts,
in cooperation with the Underwriter, to qualify the Securities for offering
and sale under the applicable securities laws of such states and other
jurisdictions of the United States as the Underwriter may designate and to
maintain such qualifications in effect for a period of not less than one
year from the later of the effective date of the ML&Co. Registration
Statement and any ML&Co. Rule 462(b) Registration Statement; provided,
however, that the Company shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation or as
a dealer in securities in any jurisdiction in which it is not so qualified
or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject. In each jurisdiction
in which the Securities have been so qualified, the Company will file such
statements and reports as may be required by the laws of such jurisdiction
to continue such qualification in effect for a period of not less than one
year from the effective date of the ML&Co. Registration Statement and any
ML&Co. Rule 462(b) Registration Statement.
(vii) Rule 158. The Company will timely file such reports pursuant
to the 1934 Act as are necessary in order to make generally available to
its securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(viii) Use of Proceeds. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified in
the ML&Co. Prospectus under "Supplemental Use of Proceeds."
(ix) Listing. The Company will use its best efforts to effect the
listing of the Securities on the New York Stock Exchange.
(x) Reporting Requirements. The Company, during the period when the
ML&Co. Prospectus is required to be delivered under the 1933 Act or the
1934 Act, will file all documents required to be filed with the Commission
pursuant to the 1934 Act within the time periods required by the 1934 Act
and the 1934 Act Regulations.
(b) Covenants of CEI.
(i) Restriction on Sale of Securities. During a period of 120 days
from the date of the Cox Prospectus, CEI will not, without the prior
written consent of the Underwriter, (x) offer, sell, contract to sell or
otherwise dispose of, directly or indirectly, any shares of Cox Common
Stock, securities convertible into, exchangeable for or repayable with
shares of Cox Common Stock, or rights or warrants to acquire shares of Cox
Common Stock, or (y) cause to be filed any registration statement under the
1933 Act with respect to any shares of Cox Common Stock, securities
convertible into, exchangeable for or repayable with shares of Cox Common
Stock, or rights or warrants to acquire shares of Cox Common Stock.
16
<PAGE>
(ii) Purpose Statement. At or prior to Closing Time, CEI will
deliver to the ML&Co. Subsidiary a duly executed purpose statement on Form
F. R. G-3 of the Board of Governors of the Federal Reserve System.
SECTION 4. Payment of Expenses. (a) Expenses Payable by the Company.
-------------------
The Company will pay all expenses incident to the performance of its obligations
under this Agreement, including (i) the preparation, printing and filing of the
ML&Co. Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the preparation, printing
and delivery to the Underwriter of this Agreement, the Indenture, the STRYPES
Agreement and such other documents as may be required in connection with the
offering, purchase, sale, issuance or delivery of the Securities, (iii) the
preparation, issuance and delivery of the certificates for the Securities to the
Underwriter, (iv) the fees and disbursements of the Company's counsel,
accountants and other advisors, (v) the qualification of the Securities under
securities laws in accordance with the provisions of Section 3(a)(vi) hereof,
including filing fees and the reasonable fees and disbursements of the Company's
counsel in connection therewith and in connection with the preparation of the
Blue Sky Survey and any supplement thereto, (vi) the printing and delivery to
the Underwriter of copies of each ML&Co. preliminary prospectus, any ML&Co. Term
Sheets and of the ML&Co. Prospectus and any amendments or supplements thereto,
(vii) the preparation, printing and delivery to the Underwriter of copies of the
Blue Sky Survey and any supplement thereto, (viii) the fees and expenses of the
Trustee, including the fees and disbursements of counsel for the Trustee in
connection with the Indenture and the Securities, (ix) any fees payable in
connection with the rating of the Securities, (x) the filing fees incident to,
and the reasonable fees and disbursements of counsel to the Underwriter in
connection with, the review by the National Association of Securities Dealers,
Inc. (the "NASD") of the terms of the sale of the Securities and (xi) the fees
and expenses incurred in connection with the listing of the Securities on the
New York Stock Exchange.
(b) Expenses Payable by CEI. CEI will pay all expenses incident to the
performance of its obligations under this Agreement, including the fees and
disbursements of CEI's counsel and advisors.
(c) Termination of Agreement. If this Agreement is terminated by the
Underwriter in accordance with the provisions of Section 5 or Section 9(a)(i)
hereof, the Company shall reimburse the Underwriter for all of its out-of-pocket
expenses, including the reasonable fees and disbursements of counsel for the
Underwriter.
SECTION 5. Conditions.
----------
(a) Conditions of Underwriter's Obligations. The obligations of the
Underwriter hereunder are subject to the accuracy of the representations and
warranties of the Company and CEI contained in Sections 1(a) and 1(b) hereof,
respectively, to the accuracy of the representations and warranties of Cox
contained in the Registration Agreement, to the accuracy of the statements in
certificates of any officer of the Company, Cox or CEI delivered pursuant to the
provisions hereof, to the performance by the Company and CEI of their respective
17
<PAGE>
covenants and other obligations hereunder, to the performance by Cox of its
covenants and other obligations under the Registration Agreement, and to the
following further conditions:
(1) Effectiveness of ML&Co. Registration Statement. The ML&Co.
Registration Statement, including any ML&Co. Rule 462(b) Registration
Statement, has become effective and at Closing Time no stop order
suspending the effectiveness of the ML&Co. Registration Statement shall
have been issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission, and any request on the part of the Commission
for additional information shall have been complied with to the reasonable
satisfaction of counsel to the Underwriter. A prospectus containing the
Rule 430A Information shall have been filed with the Commission in
accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with
the requirements of Rule 430A) or, if the Company has elected to rely upon
Rule 434, an ML&Co. Term Sheet shall have been filed with the Commission in
accordance with Rule 424(b).
(2) Effectiveness of Cox Registration Statement. The Cox Registration
Statement, including any Cox Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of
the Cox Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the
Underwriter.
(3) Opinion of Counsel for the Company. At Closing Time, the
Underwriter shall have received the favorable opinion, dated as of Closing
Time, of Brown & Wood, counsel for the Company, in form and substance
satisfactory to the Underwriter, to the effect set forth in Exhibit A
hereto and to such further effect as the Underwriter may reasonably
request.
(4) Opinion of Counsel for Cox and CEI. At Closing Time, the
Underwriter shall have received the favorable opinion, dated as of Closing
Time, of Dow, Lohnes & Albertson, counsel for Cox and CEI, in form and
substance satisfactory to the Underwriter, to the effect set forth in
Exhibit B hereto and to such further effect as the Underwriter may
reasonably request.
(5) Company Officers' Certificate. At Closing Time, there shall not
have been, since the date hereof or since the respective dates as of which
information is given in the ML&Co. Prospectus, any material adverse change
in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course
of business, and the Underwriter shall have received a certificate of the
President or a Vice President of the Company and of the chief financial or
chief accounting officer of the Company, dated as of Closing Time, to the
effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1(a) hereof are true and correct
with the same force and effect as though expressly made at and as of
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<PAGE>
Closing Time, (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or
prior to Closing Time, and (iv) no stop order suspending the effectiveness
of the ML&Co. Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or are contemplated by the
Commission.
(6) Cox Officers' Certificate. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Cox Prospectus, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of Cox and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and
the Underwriter shall have received a certificate of the President or a
Vice President of Cox and of the chief financial or chief accounting
officer of Cox, dated as of Closing Time, to the effect that (i) there has
been no such material adverse change, (ii) the representations and
warranties of Cox contained in Section 1(a) of the Registration Agreement
are true and correct with the same force and effect as though expressly
made at and as of Closing Time, (iii) Cox has complied with all agreements
and satisfied all conditions on its part to be performed or satisfied at or
prior to Closing Time pursuant to the Registration Agreement, and (iv) no
stop order suspending the effectiveness of the Cox Registration Statement
has been issued and no proceedings for that purpose have been instituted
or, to the best of their knowledge, are pending or are contemplated by the
Commission.
(7) CEI Officer's Certificate. At Closing Time, the Underwriter shall
have received a certificate of the President or a Vice President of CEI,
dated as of Closing Time, to the effect that (i) the representations and
warranties of CEI contained in Section 1(b) hereof are true and correct
with the same force and effect as though expressly made at and as of
Closing Time and (ii) CEI has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied at or prior to
Closing Time.
(8) Company Accountant's Comfort Letter. At the time of the execution
of this Agreement, the Underwriter shall have received from Deloitte &
Touche LLP a letter dated such date, in form and substance satisfactory to
the Underwriter, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information
contained in the ML&Co. Registration Statement and the ML&Co. Prospectus.
(9) Cox Accountant's Comfort Letters. At the time of the execution of
this Agreement, the Underwriter shall have received from each of Deloitte &
Touche LLP and Ernst & Young LLP a letter dated such date, in form and
substance satisfactory to the Underwriter, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Cox Registration Statement
and the Cox Prospectus.
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(10) Company Bring-down Comfort Letter. At Closing Time, the
Underwriter shall have received from Deloitte & Touche LLP a letter, dated
as of Closing Time, to the effect that they reaffirm the statements made in
the letter furnished by them pursuant to Section 5(a)(8) hereof, except
that the "specified date" referred to shall be a date not more than three
business days prior to Closing Time.
(11) Cox Bring-down Comfort Letter. At Closing Time, the Underwriter
shall have received from Deloitte & Touche LLP a letter, dated as of
Closing Time, to the effect that they reaffirm the statements made in the
letter furnished by them pursuant to Section 5(a)(9) hereof, except that
the "specified date" referred to shall be a date not more than three
business days prior to Closing Time.
(12) Maintenance of Rating. Since the date of this Agreement, there
shall not have occurred a downgrading in the rating assigned to any of the
Company's securities by any "nationally recognized statistical rating
agency", as that term is defined by the Commission for purposes of Rule
436(g)(2) under the 1933 Act, and no such organization shall have publicly
announced that it has under surveillance or review its rating of any of the
Company's securities.
(13) Approval of Listing. At Closing Time, the Securities shall have
been approved for listing on the New York Stock Exchange, subject only to
official notice of issuance.
(14) No Objection. The NASD shall not have raised any objection with
respect to the fairness and reasonableness of the underwriting terms and
arrangements.
(15) Lock-up Agreements. At the date of this Agreement, the
Underwriter shall have received an agreement substantially in the form of
Exhibit C hereto signed by each of the persons and entities listed on
Schedule B hereto.
(16) Conditions to Purchase of Option Securities. In the event that
the Underwriter exercises its option provided in Section 2(b) hereof to
purchase all or any portion of the Option Securities, the representations
and warranties of the Company and CEI contained herein, the representations
and warranties of Cox contained in the Registration Agreement and the
statements in any certificates furnished by the Company, Cox or CEI
hereunder shall be true and correct as of each Date of Delivery and, at the
relevant Date of Delivery, the Underwriter shall have received:
(A) Company Officers' Certificate. A certificate, dated such Date of
-----------------------------
Delivery, of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at Closing Time pursuant to
Section 5(a)(5) hereof is true and correct as of such Date of
Delivery.
(B) Cox Officers' Certificate. A certificate, dated such Date of
-------------------------
Delivery, of the President or a Vice President of Cox and of the chief
financial or chief accounting
20
<PAGE>
officer of Cox confirming that the certificate delivered at Closing
Time pursuant to Section 5(a)(6) hereof is true and correct as of such
Date of Delivery.
(C) CEI Officers' Certificate. A certificate, dated such Date of
-------------------------
Delivery, of the President or a Vice President of CEI confirming that
the certificate delivered at Closing Time pursuant to Section 5(a)(7)
hereof is true and correct as of such Date of Delivery.
(D) Opinion of Counsel for the Company. The favorable opinion of
----------------------------------
Brown & Wood, counsel for the Company, in form and substance
satisfactory to the Underwriter, dated such Date of Delivery, relating
to the Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by Section
5(a)(3) hereof.
(E) Opinion of Counsel for Cox and CEI. The favorable opinion of
----------------------------------
Dow, Lohnes & Albertson, counsel for Cox and CEI, in form and
substance satisfactory to the Underwriter, dated such Date of
Delivery, to the same effect as the opinion required by Section
5(a)(4) hereof.
(F) Company Bring-down Comfort Letter. A letter from Deloitte &
---------------------------------
Touche LLP, in form and substance satisfactory to the Underwriter and
dated such Date of Delivery, substantially the same in form and
substance as the letter furnished to the Underwriter pursuant to
Section 5(a)(10) hereof, except that the "specified date" in the
letter furnished pursuant to this paragraph shall be a date not more
than five days prior to such Date of Delivery.
(G) Cox Bring-down Comfort Letter. A letter from Deloitte & Touche
-----------------------------
LLP, in form and substance satisfactory to the Underwriter and dated
such Date of Delivery, substantially the same in form and substance as
the letter furnished to the Underwriter pursuant to Section 5(a)(11)
hereof, except that the "specified date" in the letter furnished
pursuant to this paragraph shall be a date not more than five days
prior to such Date of Delivery.
(17) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the Underwriter shall have been furnished with such
documents and opinions as they may require for the purpose of enabling them
to pass upon the issuance and sale of the Securities as herein
contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
contained herein or in the Registration Agreement; and all proceedings
taken by the Company in connection with the issuance and sale of the
Securities as herein contemplated shall be satisfactory in form and
substance to the Underwriter and counsel for the Underwriter.
(b) Conditions of the Company's Obligations. The obligations of the
Company hereunder are subject to the accuracy of the representations and
warranties of CEI contained in Section 1(b) hereof, to the accuracy of the
representations and warranties of Cox contained in the Registration Agreement,
to the accuracy of the statements in certificates of any officer of
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Cox or CEI delivered pursuant to the provisions hereof, to the performance by
CEI of its covenants and other obligations hereunder, to the performance by Cox
of its covenants and other obligations under the Registration Agreement, and to
the following further conditions:
(1) Effectiveness of Cox Registration Statement. The Cox Registration
Statement, including any Cox Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of
the Cox Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the
Company.
(2) Opinion of Counsel for the Company. At Closing Time, the Company
shall have received the favorable opinion, dated as of Closing Time, of
Brown & Wood, counsel for the Company, to the same effect as the opinion
required by Section 5(a)(3) hereof.
(3) Opinion of Counsel for Cox and CEI. At Closing Time, the Company
shall have received the favorable opinion, dated as of Closing Time, of
Dow, Lohnes & Albertson, counsel for Cox and CEI, to the same effect as the
opinion required by Section 5(a)(4) hereof.
(4) Cox Officers' Certificate. At Closing Time, the Company shall
have received a certificate of the President or a Vice President of Cox and
of the chief financial or chief accounting officer of Cox, dated as of
Closing Time, to the same effect as the certificate delivered to the
Underwriter pursuant to Section 5(a)(6) hereof.
(5) CEI Officer's Certificate. At Closing Time, the Company shall
have received a certificate of the President or a Vice President of CEI,
dated as of Closing Time, to the same effect as the certificate delivered
to the Underwriter pursuant to Section 5(a)(7) hereof.
(6) Cox Accountant's Comfort Letters. At the time of the execution of
this Agreement, the Company shall have received from each of Deloitte &
Touche LLP and Ernst & Young LLP a letter dated such date, in form and
substance satisfactory to the Company, substantially the same in form and
substance as the letter delivered to the Underwriter pursuant to Section
5(a)(9) hereof.
(7) Cox Bring-down Comfort Letter. At Closing Time, the Company shall
have received from Deloitte & Touche LLP a letter, dated as of Closing
Time, in form and substance satisfactory to the Company, substantially the
same in form and substance as the letter delivered to the Underwriter
pursuant to Section 5(a)(11) hereof.
(8) Conditions to Sale of Option Securities. In the event that the
Underwriter exercises its option provided in Section 2(b) hereof to
purchase all or any portion of the Option Securities, the representations
and warranties of CEI contained
22
<PAGE>
herein, the representations and warranties of Cox contained in the
Registration Agreement and the statements in any certificates furnished by
Cox or CEI hereunder shall be true and correct as of each Date of Delivery
and, at the relevant Date of Delivery, the Company shall have received:
(A) Cox Officers' Certificate. A certificate, dated such Date of
-------------------------
Delivery, of the President or a Vice President of Cox and of the chief
financial or chief accounting officer of Cox confirming that the
certificate delivered at Closing Time pursuant to Section 5(b)(4)
hereof is true and correct as of such Date of Delivery.
(B) CEI Officers' Certificate. A certificate, dated such Date of
-------------------------
Delivery, of the President or a Vice President of CEI confirming that
the certificate delivered at Closing Time pursuant to Section 5(b)(5)
hereof is true and correct as of such Date of Delivery.
(C) Opinion of Counsel for the Company. The favorable opinion, dated
----------------------------------
such Date of Delivery, of Brown & Wood, counsel for the Company, to
the same effect as the opinion required by Section 5(a)(16)(D) hereof.
(D) Opinion of Counsel for Cox and CEI. The favorable opinion, dated
----------------------------------
such Date of Delivery, of Dow, Lohnes & Albertson, counsel for Cox and
CEI, to the same effect as the opinion required by Section 5(a)(16)(E)
hereof.
(E) Cox Bring-down Comfort Letter. A letter from Deloitte & Touche
-----------------------------
LLP, in form and substance satisfactory to the Company and dated such
Date of Delivery, substantially the same in form and substance as the
letter furnished to the Underwriter pursuant to Section 5(a)(16)(G)
hereof.
(c) Termination of Agreement. If any condition specified in subsection (a)
of this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the purchase of
Option Securities on a Date of Delivery which is after the Closing Time, the
obligations of the Underwriter to purchase the relevant Option Securities, may
be terminated by the Underwriter by notice to the Company and CEI at any time at
or prior to Closing Time or such Date of Delivery, as the case may be, and such
termination shall be without liability of any party to any other party except as
provided in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any
such termination and remain in full force and effect. If any condition
specified in subsection (b) of this Section shall not have been fulfilled when
and as required to be fulfilled, this Agreement, or, in the case of any
condition to the sale of Option Securities on a Date of Delivery which is after
the Closing Time, the obligations of the Company to sell the relevant Option
Securities, may be terminated by the Company by notice to the Underwriter and
CEI at any time at or prior to Closing Time or such Date of Delivery, as the
case may be, and such termination shall be without liability of any party to any
other party except as provided in Section 4 and except that Sections 1, 6, 7 and
8 shall survive any such termination and remain in full force and effect.
23
<PAGE>
SECTION 6. Indemnification.
---------------
(a) Indemnification of the Underwriter by the Company. The Company agrees
to indemnify and hold harmless the Underwriter and each person, if any, who
controls the Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the ML&Co. Registration
Statement (or any amendment thereto), including the Rule 430A Information
and the Rule 434 Information, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
any untrue statement or alleged untrue statement of a material fact
contained in any ML&Co. preliminary prospectus or the ML&Co. Prospectus (or
any amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, referred to under (i) above; provided
that (subject to Section 6(e) below) any such settlement is effected with
the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by the Underwriter),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, referred to under (i) above, to the extent that any such expense
is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Underwriter expressly for use in the ML&Co. Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any ML&Co. preliminary prospectus or the ML&Co.
Prospectus (or any amendment or supplement thereto).
Insofar as this indemnity agreement may permit indemnification for
liabilities under the 1933 Act of any person who controls an underwriter within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and who,
at the date of this Agreement, is a director
24
<PAGE>
or officer of the Company or controls the Company within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act, such indemnity agreement is
subject to the undertaking of the Company in the ML&Co. Registration Statement
under Item 17 thereof.
(b) Indemnification of the Underwriter and the Company by CEI. CEI agrees
to indemnify and hold harmless (1) the Underwriter and each person, if any, who
controls the Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act and (2) the Company and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Cox Registration
Statement (or any amendment thereto), or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Cox preliminary prospectus or the Cox Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, referred to under (i) above; provided
that (subject to Section 6(e) below) any such settlement is effected with
the written consent of CEI; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by the Underwriter or the
Company, as the case may be), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, referred to under (i) above,
to the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to (A) any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to Cox by the
Underwriter expressly for use in the Cox Registration Statement (or any
amendment thereto), or any Cox preliminary prospectus or the Cox Prospectus (or
any amendment or supplement thereto) or (B) any loss, liability, claim, damage
or expense to the extent arising out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to Cox by the Company expressly for use in
the Cox Registration Statement (or any amendment thereto),
25
<PAGE>
or any Cox preliminary prospectus or the Cox Prospectus (or any amendment or
supplement thereto).
(c) Indemnification of the Company, Directors and Officers. The
Underwriter agrees to indemnify and hold harmless the Company, its directors,
each of its officers who signed the ML&Co. Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the ML&Co.
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any ML&Co.
preliminary prospectus or the ML&Co. Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by the Underwriter expressly for use in the ML&Co. Registration
Statement (or any amendment thereto) or such ML&Co. preliminary prospectus or
the ML&Co. Prospectus (or any amendment or supplement thereto).
(d) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) or
clause (1) of Section 6(b) above, counsel to the indemnified parties shall be
selected by the Underwriter, and, in the case of parties indemnified pursuant to
clause (2) of Section 6(b) or Section 6(c) above, counsel to the indemnified
parties shall be selected by the Company. An indemnifying party may participate
at its own expense in the defense of any such action; provided, however, that
counsel to the indemnifying party shall not (except with the consent of the
indemnified party) also be counsel to the indemnified party. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. No indemnifying party shall, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 6 or Section 7 hereof (whether
or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(e) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of
26
<PAGE>
the nature contemplated by Section 6(a)(ii) and 6(b)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement .
SECTION 7. Contribution.
------------
(a) If the indemnification provided for in Sections 6(a) and 6(c) is for
any reason unavailable to or insufficient to hold harmless an indemnified party
in respect of any losses, liabilities, claims, damages or expenses referred to
therein, then the Company and the Underwriter shall contribute to the aggregate
amount of such losses, liabilities, claims, damages and expenses incurred by
such indemnified party, as incurred, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Underwriter on the other hand from the offering of the Securities pursuant to
this Agreement or (ii) if the allocation provided by clause (i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and of the Underwriter on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriter on the other hand in connection with the offering
of the Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Underwriter, in
each case as set forth on the cover of the ML&Co. Prospectus, or, if Rule 434 is
used, the corresponding location on the ML&Co. Term Sheet, bear to the aggregate
initial public offering price of the Securities as set forth on such cover. The
relative fault of the Company on the one hand and the Underwriter on the other
hand shall be determined by reference to, among other things, whether any such
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Underwriter and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the provisions of this Section 7(a), the Underwriter shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which the
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
The Company and the Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 7(a) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 7(a). The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 7(a) shall be
27
<PAGE>
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7(a), each person, if any, who controls the
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as the Underwriter, and
each director of the Company, each officer of the Company who signed the ML&Co.
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company.
(b) If the indemnification provided for in Section 6(b) hereof is for any
reason unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, liabilities, claims, damages or expenses referred to
therein, then CEI on the one hand and the Underwriter and the Company on the
other hand shall contribute to the aggregate amount of such losses, liabilities,
claims, damages and expenses incurred by such indemnified party, as incurred,
(i) in such proportion as is appropriate to reflect the relative benefits
received by CEI on the one hand and by the Underwriter and the Company on the
other hand from the offering of the Securities pursuant to this Agreement or
(ii) if the allocation provided by clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of CEI on
the one hand and of the Underwriter and the Company on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations. The relative benefits received from the offering of
the Securities pursuant to this Agreement shall be deemed to be such that the
Underwriter and the Company shall be responsible for that portion of the
aggregate amount of such losses, liabilities, claims, damages and expenses
represented by the percentage that the total underwriting discount received by
the Underwriter, as set forth on the cover of the ML&Co. Prospectus, or, if Rule
434 is used, the corresponding location on the ML&Co. Term Sheet, bears to the
aggregate initial public offering price of the Securities as set forth on such
cover and CEI shall be responsible for the balance. The relative fault of CEI
on the one hand and the Underwriter and the Company on the other hand shall be
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by CEI or Cox on the one
hand or by the Underwriter or the Company on the other hand and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
Notwithstanding the provisions of this Section 7(b), the Underwriter and
the Company shall not be required to contribute any amount in excess of the
amount by which the total price at which the Securities underwritten by the
Underwriter and distributed to the public were
28
<PAGE>
offered to the public exceeds the amount of any damages which the Underwriter
and the Company have otherwise been required to pay by reason of any such untrue
or alleged untrue statement or omission or alleged omission.
CEI, the Underwriter and the Company agree that it would not be just and
equitable if contribution pursuant to this Section 7(b) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 7(b). The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 7(b) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7(b), each person, if any, who controls the
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as the Underwriter, and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Company.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company, Cox or CEI submitted pursuant hereto,
shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of the Underwriter or controlling person, or
by or on behalf of the Company or CEI, and shall survive delivery of the
Securities to the Underwriter.
SECTION 9. Termination of Agreement.
------------------------
(a) Termination; General. The Underwriter may terminate this Agreement, by
notice to the Company and CEI, at any time at or prior to Closing Time (i) if
there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the ML&Co. Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has been, since the time of
execution of this Agreement, or since the respective dates as of which
information is given in the Cox Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of Cox and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, or (iii) if there has
occurred any material adverse change in the financial markets in the United
States, any outbreak of hostilities or escalation thereof or other calamity or
crisis or any change or development involving a prospective change in national
or
29
<PAGE>
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Underwriter,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, or (iv) if trading in any securities of the Company or in the
Cox Common Stock has been suspended or limited by the Commission or the New York
Stock Exchange, or if trading generally on the American Stock Exchange or the
New York Stock Exchange or in the Nasdaq National Market has been suspended or
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the NASD or any other governmental authority, or
(v) if a banking moratorium has been declared by either federal or New York
authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7 and 8 shall survive such termination and remain in full force and effect.
SECTION 10. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriter shall be directed to it at North Tower, World Financial Center, New
York, New York 10281-1201, attention of Douglas Squires, Managing Director;
notices to the Company shall be directed to it at 100 Church St., 12th Floor,
New York, New York 10007, attention of the Secretary, with a copy to the
Treasurer at World Financial Center, South Tower, New York, New York 10080-6107;
and notices to CEI shall be directed to it at 1400 Lake Hearn Drive, Atlanta,
Georgia 30319, attention of ____________.
SECTION 11. Parties. This Agreement shall each inure to the benefit of
-------
and be binding upon each of the Underwriter, the Company and CEI and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the parties hereto and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the parties hereto and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Securities from the Underwriter shall be deemed to
be a successor by reason merely of such purchase.
SECTION 12. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
----------------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 13. Effect of Headings. The Article and Section headings herein
------------------
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
30
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the Underwriter, the Company and CEI in accordance with its terms.
Very truly yours,
MERRILL LYNCH & CO., INC.
By_________________________________
Name:
Title:
COX ENTERPRISES, INC.
By_________________________________
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By__________________________________
Authorized Signatory
31
<PAGE>
SCHEDULE A
MERRILL LYNCH & CO. INC
____% STRYPES/SM/ DUE ____, 1999
1. The initial public offering price of the Securities shall be
$__________ per STRYPES.
2. The purchase price for the Securities to be paid by the
Underwriter shall be $___________ per STRYPES, being an amount equal to the
initial public offering price set forth above less $_______ per STRYPES.
3. The "Threshold Appreciation Price" with respect to the Securities
shall be $________.
__________________________
/SM/ Service mark of Merrill Lynch & Co., Inc.
Sch A - 1
<PAGE>
[SCHEDULE B]
[List of persons and entities subject to lock-up]
Sch B - 1
<PAGE>
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(a)(3)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the ML&Co.
Prospectus and to enter into and perform its obligations under the
Underwriting Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Delaware, has corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the ML&Co. Prospectus and is duly qualified as a foreign
corporation to transact business and is in good standing in the State of New
York; all of the issued and outstanding capital stock of MLPF&S has been duly
authorized and validly issued, is fully paid and non-assessable and, to the
best of our knowledge, is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity; none of the outstanding shares of capital stock
of MLPF&S was issued in violation of the preemptive or similar rights of any
securityholder of MLPF&S.
(v) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
(vi) The Indenture has been duly authorized, executed and delivered by
the Company and (assuming the due authorization, execution and delivery
thereof by the Trustee) constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
A-1
<PAGE>
(vii) The Securities are in the form contemplated by the Indenture, have
been duly authorized by the Company and, assuming that the Securities have
been duly authenticated by the Trustee in the manner described in its
certificate delivered to you today (which fact such counsel need not determine
by an inspection of the Securities), the Securities have been duly executed,
issued and delivered by the Company and constitute valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting enforcement
of creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law), and will be entitled to the benefits of
the Indenture.
(viii) The STRYPES Agreement has been duly authorized, executed and
delivered by [the Company and] the ML&Co. Subsidiary and (assuming the due
authorization, execution and delivery thereof by CEI) constitutes a valid and
binding agreement of [the Company and] the ML&Co. Subsidiary, enforceable
against [the Company and] the ML&Co. Subsidiary in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(ix) The Indenture has been duly qualified under the 1939 Act.
(x) The Securities, the Indenture and the STRYPES Agreement conform in
all material respects as to legal matters to the descriptions thereof
contained in the ML&Co. Prospectus.
(xi) The ML&Co. Registration Statement, including any ML&Co. Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act; any
required filing of the ML&Co. Prospectus pursuant to Rule 424(b) has been made
in the manner and within the time period required by Rule 424(b); and, to the
best of our knowledge, no stop order suspending the effectiveness of the
ML&Co. Registration Statement or any ML&Co. Rule 462(b) Registration Statement
has been issued under the 1933 Act and no proceedings for that purpose have
been instituted or are pending or threatened by the Commission.
(xii) The ML&Co. Registration Statement, including any ML&Co. Rule
462(b) Registration Statement, the Rule 430A Information and the Rule 434
Information, as applicable, the ML&Co. Prospectus, excluding the documents
incorporated by reference therein, and each amendment or supplement to the
ML&Co. Registration Statement and ML&Co. Prospectus, excluding the documents
incorporated by reference therein, as of their respective effective or issue
dates (other than the financial statements and supporting schedules included
therein or omitted therefrom, and the Trustee's Statement of Eligibility on
Form T-1 (the "Form T-1"), as to which we need express no opinion) complied as
to form in all material respects with the requirements of the 1933 Act and the
1933 Act Regulations.
A-2
<PAGE>
(xiii) The documents incorporated by reference in the ML&Co. Prospectus
(other than the financial statements and supporting schedules included therein
or omitted therefrom, as to which we need express no opinion), when they
became effective or were filed with the Commission, as the case may be,
complied as to form in all material respects with the requirements of the 1933
Act or the 1934 Act, as applicable, and the rules and regulations of the
Commission thereunder.
(xiv) The Cox Registration Statement, including any Cox Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act; any
required filing of the Cox Prospectus pursuant to Rule 424(b) has been made in
the manner and within the time period required by Rule 424(b); and, to the
best of our knowledge, no stop order suspending the effectiveness of the Cox
Registration Statement or any Cox Rule 462(b) Registration Statement has been
issued under the 1933 Act and no proceedings for that purpose have been
instituted or are pending or threatened by the Commission.
(xv) The Cox Registration Statement, including any Cox Rule 462(b)
Registration Statement, the Cox Prospectus, excluding the documents
incorporated by reference therein, and each amendment or supplement to the Cox
Registration Statement and Cox Prospectus, excluding the documents
incorporated by reference therein, as of their respective effective or issue
dates (other than the financial statements and supporting schedules included
therein or omitted therefrom, as to which we need express no opinion) complied
as to form in all material respects with the requirements of the 1933 Act and
the 1933 Act Regulations.
(xvi) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the 1933 Act and
the 1933 Act Regulations, which have been obtained, or as may be required
under the securities or blue sky laws of the various states and except for the
qualification of the Indenture under the 1939 Act, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the Underwriting Agreement by the Company or the due
execution, delivery or performance of the Indenture [or the STRYPES Agreement]
by the Company or for the offering, issuance, sale or delivery of the
Securities or for the due execution, delivery or performance of the STRYPES
Agreement by the ML&Co. Subsidiary.
(xvii) (A) The execution, delivery and performance by the Company of
the Underwriting Agreement, the Indenture, the Securities [and the STRYPES
Agreement] and the consummation by the Company of the transactions
contemplated in the Underwriting Agreement, [the STRYPES Agreement] and in the
ML&Co. Registration Statement (including the issuance and sale of the
Securities and the delivery of shares of Cox Common Stock pursuant thereto and
the use of the proceeds from the sale of the Securities as described in the
ML&Co. Prospectus under the caption "Supplemental Use of Proceeds") and
compliance by the Company with its obligations under the Underwriting
Agreement, the Indenture, the Securities [and the STRYPES Agreement] and (B)
the execution, delivery and performance by the ML&Co. Subsidiary of the
STRYPES Agreement and the consummation by the ML&Co. Subsidiary of the
transactions contemplated therein and compliance by the ML&Co. Subsidiary with
its obligations under the STRYPES Agreement do not and will not, whether with
or without the giving of notice or lapse
A-3
<PAGE>
of time or both, conflict with or constitute a breach of, or default or
Repayment Event (as defined in Section 1(a)(xiii) of the Underwriting
Agreement) under or result in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or any subsidiary
pursuant to any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or any other agreement or instrument, known to us, to
which the Company or any subsidiary is a party or by which it or any of them
may be bound, or to which any of the property or assets of the Company or any
subsidiary is subject (except for such conflicts, breaches or defaults or
liens, charges or encumbrances that would not have a Material Adverse Effect),
nor will such action result in any violation of the provisions of the charter
or by-laws of the Company or any subsidiary, or any applicable law, statute,
rule, regulation, judgment, order, writ or decree, known to us, of any
government, government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any subsidiary or any of their respective
properties, assets or operations.
We have participated in conferences with officers and representatives of
the Company and Cox, representatives of the independent accountants of the
Company and Cox, and the Underwriter at which the contents of the ML&Co.
Registration Statement and Prospectus, the contents of the Cox Registration
Statement and Prospectus and related matters were discussed and, although we
are not passing upon or assuming responsibility for the accuracy, completeness
or fairness of the statements contained or incorporated by reference in said
Registration Statements and Prospectuses and have made no independent check or
verification thereof, on the basis of the foregoing, nothing has come to our
attention that would lead us to believe (i) that the ML&Co. Registration
Statement or any amendment thereto, including the Rule 430A Information and
Rule 434 Information (if applicable), (except for financial statements and
schedules and other financial data included or incorporated by reference
therein or omitted therefrom and the Form T-1, as to which we need make no
statement), at the time such ML&Co. Registration Statement or any such
amendment became effective or at the date of the Underwriting Agreement,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that the ML&Co. Prospectus or any
amendment or supplement thereto (except for financial statements and schedules
and other financial data included or incorporated by reference therein or
omitted therefrom, as to which we need make no statement), at the time the
ML&Co. Prospectus was issued, at the time any such amended or supplemented
prospectus was issued or at the Closing Time, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or (ii) that the Cox
Registration Statement or any amendment thereto, (except for financial
statements and schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which we need make no
statement), at the time such Cox Registration Statement or any such amendment
became effective, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Cox Prospectus or any
amendment or supplement thereto (except for financial statements and schedules
and other financial data included or incorporated by reference therein or
omitted therefrom, as to which we need make no statement), at the time the Cox
Prospectus was issued, at the time any such amended or supplemented prospectus
was issued or at the Closing Time, included or includes an untrue statement of
a material fact or omitted or
A-4
<PAGE>
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
In rendering such opinion, such counsel may rely as to matters of fact (but
not as to legal conclusions), to the extent they deem proper, on certificates of
responsible officers of the Company and public officials.
A-5
<PAGE>
Exhibit B
FORM OF OPINION OF COX'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(a)(4)
(i) Cox has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, has
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Cox Prospectus and to enter into and
perform its obligations under the Registration Agreement and is duly qualified
as a foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a Material
Adverse Effect.
(ii) CEI has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation and has corporate power and authority to enter into and perform
its obligations under the Underwriting Agreement and the STRYPES Agreement.
(iii) The shares of issued and outstanding capital stock of Cox have
been duly authorized and validly issued and are fully paid and non-assessable;
and none of the outstanding shares of capital stock of Cox was issued in
violation of the preemptive or other similar rights of any securityholder of
Cox.
(iv) CEI is the sole registered owner of and has all rights in and to at
least _____________ shares of Cox Common Stock, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity.
[(v)If immediately prior to maturity or redemption of the Securities CEI
delivers to the ML&Co. Subsidiary shares of Cox Common Stock pursuant to the
STRYPES Agreement, upon delivery by CEI to the ML&Co. Subsidiary of such
shares of Cox Common Stock pursuant to the STRYPES Agreement, the ML&Co.
Subsidiary will be the sole registered owner of the shares of Cox Common Stock
so delivered and, assuming the ML&Co. Subsidiary purchased for value in good
faith and without notice of any adverse claim, the ML&Co. Subsidiary will have
acquired all rights in and to such shares of Cox Common Stock, free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity.]
(vi) Each Subsidiary has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the
B-1
<PAGE>
Cox Prospectus and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect; except
as otherwise disclosed in the Cox Registration Statement, all of the issued
and outstanding capital stock of each Subsidiary has been duly authorized and
validly issued, is fully paid and non-assessable and, to the best of our
knowledge, is owned by Cox, directly or through subsidiaries, free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding shares of capital stock of any Subsidiary was
issued in violation of the preemptive or similar rights of any securityholder
of such Subsidiary.
(vii) The Registration Agreement has been duly authorized, executed and
delivered by Cox.
(viii) The Underwriting Agreement has been duly authorized, executed and
delivered by CEI.
(ix) The STRYPES Agreement has been duly authorized, executed and
delivered by CEI and (assuming the due authorization, execution and delivery
thereof by the other parties thereto) constitutes a valid and binding
agreement of CEI, enforceable against CEI in accordance with its terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(x) The Cox Registration Statement, including any Cox Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act; any
required filing of the Cox Prospectus pursuant to Rule 424(b) has been made in
the manner and within the time period required by Rule 424(b); and, to the
best of our knowledge, no stop order suspending the effectiveness of the Cox
Registration Statement or any Cox Rule 462(b) Registration Statement has been
issued under the 1933 Act and no proceedings for that purpose have been
instituted or are pending or threatened by the Commission.
(xi) The Cox Registration Statement, including any Cox Rule 462(b)
Registration Statement, the Cox Prospectus, excluding the documents
incorporated by reference therein, and each amendment or supplement to the Cox
Registration Statement and Cox Prospectus, excluding the documents
incorporated by reference therein, as of their respective effective or issue
dates (other than the financial statements and supporting schedules included
therein or omitted therefrom, as to which we need express no opinion) complied
as to form in all material respects with the requirements of the 1933 Act and
the 1933 Act Regulations.
(xii) The documents incorporated by reference in the Cox Prospectus
(other than the financial statements and supporting schedules included therein
or omitted therefrom, as to which we need express no opinion), when they
[became effective or] were filed with the Commission,
B-2
<PAGE>
[as the case may be,] complied as to form in all material respects with the
requirements of [the 1933 Act or] the 1934 Act [, as applicable,] and the
rules and regulations of the Commission thereunder.
(xiii) The form of certificate used to evidence the Cox Common Stock
complies in all material respects with all applicable statutory requirements,
with any applicable requirements of the charter and by-laws of Cox and the
requirements of the New York Stock Exchange.
(xiv) To the best of our knowledge, there is not pending or threatened
any action, suit, proceeding, inquiry or investigation, to which Cox or any
subsidiary is a party, or to which the property of Cox or any subsidiary is
subject, before or brought by any court or governmental agency or body,
domestic or foreign, (including the U.S. Federal Communications Commission
("FCC")) which might reasonably be expected to result in a Material Adverse
Effect, or which might reasonably be expected to materially and adversely
affect the properties or assets thereof or the consummation of the
transactions contemplated in the Registration Agreement or the performance by
Cox of its obligations thereunder.
(xv) The information in the Prospectus under "Business--Legislation and
Regulation", "Certain Transactions" and "Description of Capital Stock", and in
the Registration Statement under Items 14 and 15, to the extent that it
constitutes matters of law, summaries of legal matters, Cox's charter and
bylaws or legal proceedings, or legal conclusions, has been reviewed by us and
is correct in all material respects.
(xvi) To the best of our knowledge, there are no statutes or regulations,
and no legal or governmental proceedings pending or threatened to which Cox or
any of its subsidiaries is a party or to which any of the properties of Cox or
any of its subsidiaries is subject, that are required to be described in the
Cox Prospectus that are not described as required.
(xvii) All descriptions in the Cox Registration Statement of contracts
and other documents to which Cox or its subsidiaries are a party are accurate
in all material respects; to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases
or other instruments required to be described or referred to in the Cox
Registration Statement or to be filed as exhibits thereto other than those
described or referred to therein or filed or incorporated by reference as
exhibits thereto, and the descriptions thereof or references thereto are
correct in all material respects.
(xviii) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign, (including the FCC) (other than
under the 1933 Act and the 1933 Act Regulations, which have been obtained, or
as may be required under the securities or blue sky laws of the various
states, as to which we need express no opinion) is necessary or required in
connection with the due authorization, execution, and delivery by Cox of the
Registration Agreement or the performance by Cox of its obligations
thereunder.
(xix) The execution, delivery and performance of the Registration
Agreement and the consummation of the transactions contemplated in the
Registration Agreement and in the Cox
B-3
<PAGE>
Registration Statement and compliance by Cox with its obligations under the
Registration Agreement do not and will not, whether with or without the giving
of notice or lapse of time or both, conflict with or constitute a breach of,
or default or Repayment Event (as defined in Section [1(a)(xi)] of the
Registration Agreement) under or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of Cox or any
subsidiary pursuant to, any contract, indenture, mortgage, deed of trust, loan
or credit agreement, note, lease or any other agreement or instrument, known
to us, to which Cox or any subsidiary is a party or by which it or any of them
may be bound, or to which any of the property or assets of Cox or any
subsidiary is subject (except for such conflicts, breaches or defaults or
liens, charges or encumbrances that would not have a Material Adverse Effect),
nor will such action result in any violation of the provisions of the charter
or by-laws of Cox or any subsidiary, or any applicable law, statute, rule,
regulation, judgment, order, writ or decree, known to us, of any government,
government instrumentality or court, domestic or foreign, having jurisdiction
over Cox or any subsidiary or any of their respective properties, assets or
operations.
(xx) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority
or agency (including the FCC) (other than under the 1933 Act and the 1933 Act
Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery by CEI of the Underwriting Agreement or the STRYPES
Agreement or the performance by CEI of its obligations thereunder.
(xxi) The execution, delivery and performance by CEI of the Underwriting
Agreement and the STRYPES Agreement and the consummation by CEI of the
transactions contemplated therein and compliance by CEI with its obligations
thereunder have been duly authorized by all necessary corporate action and do
not and will not, whether with or without the giving of notice or lapse of
time or both, conflict with or constitute a breach of, or default or CEI
Repayment Event under or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of CEI or any of its
subsidiaries pursuant to, any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or any other agreement or instrument,
known to us, to which CEI or any of its subsidiaries is a party or by which it
or any of them may be bound, or to which any of the property or assets of CEI
or any of its subsidiaries is subject (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not, singly or in the
aggregate, materially and adversely affect the ability of CEI to perform its
obligations under the Underwriting Agreement or the STRYPES Agreement), nor
will such action result in any violation of the provisions of the charter or
by-laws of CEI or any of its subsidiaries, or any applicable law, statute,
rule, regulation, judgment, order, writ or decree, known to us, of any
government, government instrumentality or court, domestic or foreign, having
jurisdiction over CEI or any of its subsidiaries or any of their respective
assets, properties or operations (except for such violations that would not,
singly or in the aggregate, materially and adversely affect the ability of CEI
to perform its obligations under the Underwriting Agreement or the STRYPES
Agreement).
(xxii) Cox has been granted and presently holds the FCC authorizations
necessary for Cox to conduct its business as presently conducted or proposed
to be conducted, except such as would
B-4
<PAGE>
not have, singly or in the aggregate with all such other authorizations that
have not been granted or are not presently held, a Material Adverse Effect;
such FCC authorizations are valid and in full force and effect, except when
the invalidity of such authorizations or the failure of such authorizations to
be in full force and effect would not have a Material Adverse Effect; and to
our knowledge, no proceedings to revoke or modify any of such FCC
authorizations are pending or threatened.
(xxiii)To our knowledge after due inquiry, we are of the opinion that Cox
is not, nor with the giving of notice or lapse of time or both would be, in
violation of any judgment, injunction, order or decree of the FCC other than
those that would not have, singly or in the aggregate with all such other
violations, a Material Adverse Effect.
(xxiv)The execution, delivery and performance of the Registration
Agreement by Cox, and the execution, delivery and performance of the
Underwriting Agreement and the STRYPES Agreement by CEI, do not violate the
Communications Act of 1934, as amended, or any rules or the regulations
thereunder binding on Cox, CEI or their respective subsidiaries or any
order, writ, judgment, injunction, decree or award of the FCC binding on Cox,
CEI or their respective subsidiaries of which we have knowledge after due
inquiry.
(xxv)The execution, delivery and performance of the STRYPES Agreement
does not constitute the transfer or assignment, directly or indirectly, of any
license existing as of the date hereof issued by the FCC in connection with
the operations of Cox or the transfer of control of Cox within the meaning of
Section 310(d) of the Communications Act of 1934, as amended.
(xxvi) Cox is not an "investment company" or an entity "controlled" by
an "investment company," as such terms are defined in the 1940 Act.
We have participated in conferences with officers and representatives of
Cox, representatives of the independent accountants of Cox, and the
Underwriter at which the contents of the Cox Registration Statement and the
Cox Prospectus and related matters were discussed and, although we are not
passing upon or assuming responsibility for the accuracy, completeness or
fairness of the statements contained or incorporated by reference in the Cox
Registration Statement and the Cox Prospectus and have made no independent
check or verification thereof except as described in paragraph (xv) above, on
the basis of the foregoing, nothing has come to our attention that would lead
us to believe that the Cox Registration Statement or any amendment thereto
(except for financial statements and schedules and other financial data
included or incorporated by reference therein or omitted therefrom, as to
which we need make no statement), at the time such Cox Registration Statement
or any such amendment became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Cox Prospectus or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which we need make no
statement), at the time the Cox Prospectus was issued, at the time any such
amended or supplemented prospectus was issued or at the Closing Time, included
or includes an untrue statement of a material fact or omitted or omits to
state a material fact necessary in
B-5
<PAGE>
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
[In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the State of New
York, the corporate laws of the State of Delaware or the federal laws of the
United States of America, to the extent such counsel deems proper and
specified in such opinion, upon the opinion of other counsel whom such counsel
believes to be reliable, provided that such counsel furnishes copies thereof
to the Underwriter and states that such opinion of such local counsel is
satisfactory in form and substance and the Underwriter and counsel for the
Underwriter are entitled to rely thereon, and (B) as to matters of fact (but
not as to legal conclusions), to the extent they deem proper, on certificates
of responsible officers of Cox, CEI and public officials. As used in this
Exhibit B, the terms "Material Adverse Effect", "Subsidiary" and
"Subsidiaries" shall have the meanings ascribed to them in the Registration
Agreement.]
B-6
<PAGE>
[FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR OTHER
STOCKHOLDERS PURSUANT TO SECTION 5(a)(15)]
Exhibit C
___________, 1996
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Public Offering of STRYPES by Merrill Lynch & Co. Inc.
---------------------------------------------------------------
Ladies and Gentlemen:
The undersigned, a stockholder [and an officer and/or director] of Cox
Communications, Inc., a Delaware corporation (the "Company"), understands that
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") proposes to enter into an Underwriting Agreement (the
"Underwriting Agreement") with Merrill Lynch & Co., Inc. ("ML&Co.") and Cox
Enterprises, Inc. providing for the public offering of ML&Co.'s Structured Yield
Product Exchangeable for Stock/sm/, __% STRYPES/sm/ due _________, 1999, payable
at maturity or upon redemption with shares of Class A Common Stock, par value
$1.00 per share (the "Cox Common Stock"), of the Company. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned agrees with Merrill Lynch that, during a period of 120 days from the
date of the Underwriting Agreement, the undersigned will not, without the prior
written consent of Merrill Lynch, offer, sell, contract to sell or otherwise
dispose of, directly or indirectly, any shares of Cox Common Stock or any
securities convertible into, exchangeable for or repayable with shares of Cox
Common Stock, whether now owned or hereafter acquired by the undersigned or with
respect to which the undersigned has or hereafter acquires the power of
disposition, or cause to be filed any registration statement under the
Securities Act of 1933, as amended, with respect to any of the foregoing.
Very truly yours,
Signature:
Print Name:
C-1
<PAGE>
Exhibit 1(b)
DRAFT
4/29/96
______________________________________________________________________________
______________________________________________________________________________
COX COMMUNICATIONS, INC.
(a Delaware corporation)
REGISTRATION AGREEMENT
----------------------
Dated: __________, 1996
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
REGISTRATION AGREEMENT................................................. 1
SECTION 1. Representations and Warranties............................. 3
(a) Representations and Warranties by the Company.............. 3
(i) Compliance with Registration Requirements...... 3
(ii) Incorporated Documents......................... 4
(iii) Independent Accountants........................ 4
(iv) Financial Statements........................... 4
(v) No Material Adverse Change in Business......... 5
(vi) Good Standing of the Company................... 5
(vii) Good Standing of Subsidiaries.................. 5
(viii) Capitalization................................. 5
(ix) Description of Common Stock.................... 6
(x) Authorization of Agreement..................... 6
(xi) Absence of Defaults and Conflicts.............. 6
(xii) Absence of Labor Dispute....................... 6
(xiii) Absence of Proceedings......................... 6
(xiv) Accuracy of Exhibits........................... 7
(xv) Possession of Intellectual Property............ 7
(xvi) Absence of Further Requirements................ 7
(xvii) Possession of Licenses and Permits............. 8
(xviii) Title to Property.............................. 8
(xix) Compliance with Cuba Act....................... 8
(xx) Investment Company Act......................... 8
(xxi) Environmental Laws............................. 8
(b) Officer's Certificates..................................... 9
SECTION 2. Covenants of the Company....................... 9
(a) Compliance with Securities Regulations and
Commission Requests........................................ 9
(b) Filing of Amendments....................................... 9
(c) Delivery of Cox Registration Statements.................... 10
(d) Delivery of Cox Prospectuses............................... 10
(e) Continued Compliance with Securities Laws.................. 10
(f) Blue Sky Qualifications.................................... 10
(g) Rule 158................................................... 11
(h) Restriction on Sale of Securities.......................... 11
(i) Reporting Requirements..................................... 11
SECTION 3. Payment of Expenses........................................ 11
(a) Expenses................................................... 11
SECTION 4. Indemnification............................................ 12
(a) Indemnification of Underwriter and ML&Co................... 12
(b) Indemnification of Company, Directors, Officers............ 13
(c) Actions against Parties; Notification ..................... 13
(d) Settlement without Consent if Failure to Reimburse......... 13
SECTION 5. Contribution............................................... 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 6. Representations, Warranties and Agreements to
Survive Delivery.......................................... 15
SECTION 7. Termination............................................... 15
SECTION 8. Notices................................................... 15
SECTION 9. Parties................................................... 15
SECTION 10. GOVERNING LAW............................................. 16
SECTION 11. Effect of Headings........................................ 16
</TABLE>
ii
<PAGE>
COX COMMUNICATIONS, INC.
(a Delaware corporation)
REGISTRATION AGREEMENT
----------------------
_________, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
MERRILL LYNCH & CO., INC.
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Cox Communications, Inc., a Delaware corporation (the "Company"), and Cox
Enterprises, Inc., a Delaware corporation ("CEI"), confirm their respective
agreements with Merrill Lynch & Co., Inc., a Delaware corporation ("ML&Co."),
and with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Underwriter"), in connection with the proposed issue and sale
by ML&Co. to the Underwriter, pursuant to an underwriting agreement, dated the
date hereof (the "Underwriting Agreement"), among ML&Co., CEI and the
Underwriter, of an aggregate of _____________ of ML&Co.'s Structured Yield
Product Exchangeable for Stock/SM/, ___% STRYPES/SM/ due ________, 1999 (each, a
"STRYPES"), payable at maturity or upon redemption by delivery of shares of
Class A Common Stock, par value $1.00 per share (the "Cox Common Stock"), of the
Company, and, at the option of the Underwriter, all or any part of ________
additional STRYPES to cover over-allotments, if any. The aforesaid _______
STRYPES (the "Initial Securities") to be purchased by the Underwriter and all or
any part of the _________ STRYPES subject to the option described in Section
2(b) of the Underwriting Agreement (the "Option Securities") are hereinafter
called, collectively, the "Securities." Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Underwriting
Agreement.
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<PAGE>
The Company understands that the Underwriter proposes to make a public
offering of the Securities as soon as the Underwriter deems advisable after this
Agreement and the Underwriting Agreement have been executed and delivered. The
Company acknowledges that the execution and delivery of this Agreement is a
condition to the execution and delivery of the Underwriting Agreement by the
Underwriter and ML&Co. and that, in consideration of the execution and delivery
of the Underwriting Agreement by the Underwriter and ML&Co., the Company is
willing to make the representations, warranties and covenants herein contained.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-_____) covering the
registration of the shares of Cox Common Stock deliverable at maturity or upon
redemption of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses. Each
prospectus used before such registration statement became effective is herein
called a "Cox preliminary prospectus." Such registration statement, including
the exhibits thereto, the schedules thereto, if any, and the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933
Act, at the time it became effective, is herein called the "Cox Registration
Statement." Any registration statement filed pursuant to Rule 462(b) of the
rules and regulations of the Commission under the 1933 Act (the "1933 Act
Regulations") is herein referred to as the "Cox Rule 462(b) Registration
Statement," and after such filing the term "Cox Registration Statement" shall
include the Cox Rule 462(b) Registration Statement. The final prospectus,
including the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the 1933 Act, in the form first furnished to the Underwriter for
use in connection with the offering of the Securities is herein called the "Cox
Prospectus." For purposes of this Agreement, all references to the Cox
Registration Statement, any Cox preliminary prospectus, the Cox Prospectus or
any amendment or supplement to any of the foregoing shall be deemed to include
the copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the Cox
Registration Statement, any Cox preliminary prospectus or the Cox Prospectus (or
other references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Cox Registration Statement, any Cox preliminary prospectus
or the Cox Prospectus, as the case may be; and all references in this Agreement
to amendments or supplements to the Cox Registration Statement, any Cox
preliminary prospectus or the Cox Prospectus shall be deemed to mean and include
the filing of any document under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), which is incorporated by reference in the Cox Registration
Statement, such Cox preliminary prospectus or the Cox Prospectus, as the case
may be.
Prior to the closing under the Underwriting Agreement, [ML&Co.,]
_____________, a wholly-owned subsidiary of ML&Co. (the "ML&Co. Subsidiary"),
and CEI will enter into a contract (the "STRYPES Agreement"), pursuant to which
CEI will be obligated to deliver to the ML&Co. Subsidiary, immediately prior to
the maturity date or date of redemption of the Securities, a number of shares of
Cox Common Stock equal to the number required by ML&Co. to pay and discharge or
redeem all of the Securities, subject to CEI's option, exercisable in its
2
<PAGE>
sole discretion, to satisfy its obligation under the STRYPES Agreement by
delivering immediately prior to the maturity date a specified amount of cash in
lieu of such shares.
SECTION 1. Representations and Warranties.
------------------------------
(a) Representations and Warranties by the Company. The Company represents
and warrants to each of the Underwriter and to ML&Co. as of the date hereof, as
of the Closing Time referred to in Section 2(c) of the Underwriting Agreement,
and as of each Date of Delivery (if any) referred to in Section 2(b) of the
Underwriting Agreement, and agrees with each of the Underwriter and ML&Co. as
follows:
(i) Compliance with Registration Requirements. The Company meets the
-----------------------------------------
requirements for the use of Form S-3 under the 1933 Act. Each of the Cox
Registration Statement and any Cox Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Cox Registration Statement or any Cox Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to the
knowledge of the Company, are contemplated by the Commission, and any
request on the part of the Commission for additional information has been
complied with.
At the respective times the Cox Registration Statement, any Cox Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), the Cox Registration Statement, the
Cox Rule 462(b) Registration Statement and any amendments and supplements
thereto complied and will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and did not and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. Neither the Cox Prospectus nor any
amendments or supplements thereto, at the time the Cox Prospectus or any
such amendment or supplement was issued and at the Closing Time (and, if
any Option Securities are purchased, at the Date of Delivery), included or
will include an untrue statement of a material fact or omitted or will omit
to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. The representations and warranties in this subsection shall
not apply to statements in or omissions from the Cox Registration Statement
or Cox Prospectus made in reliance upon and in conformity with (x)
information furnished to the Company in writing by the Underwriter
expressly for use in the Cox Registration Statement or Cox Prospectus and
(y) information furnished to the Company in writing by ML&Co. expressly for
use in the Cox Registration Statement or Cox Prospectus.
Each Cox preliminary prospectus and the Cox Prospectus filed as part
of the Cox Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and, if applicable, each Cox preliminary prospectus and the Cox
Prospectus delivered to the Underwriter for use in connection with the
offering
3
<PAGE>
of the Securities was identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or deemed to
----------------------
be incorporated by reference in the Cox Registration Statement and the Cox
Prospectus, when they became effective or at the time they were or
hereafter are filed with the Commission, complied and will comply in all
material respects with the requirements of [the 1933 Act and the 1933 Act
Regulations or] 1934 Act and the rules and regulations of the Commission
thereunder (the "1934 Act Regulations"), [as applicable,] and, when read
together with the other information in the Cox Prospectus, at the time the
Cox Registration Statement became effective, at the time the Cox Prospectus
was issued and at the Closing Time (and if any Option Securities are
purchased, at the Date of Delivery), did not and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading.
(iii) Independent Accountants. The accountants who certified the
-----------------------
financial statements and supporting schedules of the Company and its
subsidiaries, and of Times Mirror Cable Television, Inc. and its
subsidiaries ("Times Mirror"), included in the Cox Registration Statement
are independent public accountants as required by the 1933 Act and the 1933
Act Regulations.
(iv) Financial Statements. The financial statements of the Company
--------------------
included in the Cox Registration Statement and the Cox Prospectus, together
with the related schedules and notes, present fairly the financial position
of the Company and its consolidated subsidiaries at the dates indicated and
the statement of operations, stockholders' equity and cash flows of the
Company and its consolidated subsidiaries for the periods specified; said
financial statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved. The financial statements of Times Mirror
included in the Cox Registration Statement and the Cox Prospectus, together
with the related notes, present fairly the financial position of Times
Mirror and its consolidated subsidiaries at the dates indicated and the
statement of operations, stockholders' equity and cash flows of Times
Mirror and its consolidated subsidiaries for the periods specified; said
financial statements have been prepared in conformity with GAAP applied on
a consistent basis throughout the periods involved. The supporting
schedules, if any, included in the Cox Registration Statement present
fairly in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial information
included in the Cox Prospectus present fairly the information shown therein
and have been compiled on a basis consistent with that of the audited
financial statements of the Company and its subsidiaries included in the
Cox Registration Statement. [The selected pro forma financial data
included in the Cox Prospectus present fairly the information shown therein
and have been compiled from pro forma financial statements prepared in
accordance with the Commission's rules and guidelines with respect to pro
forma financial statements.]
4
<PAGE>
(v) No Material Adverse Change in Business. Since the respective
--------------------------------------
dates as of which information is given in the Cox Registration Statement
and the Cox Prospectus, except as otherwise stated therein, (A) there has
been no material adverse change in the condition, financial or otherwise,
or in the earnings, business affairs or business prospects of the Company
and its subsidiaries considered as one enterprise, whether or not arising
in the ordinary course of business (a "Material Adverse Effect"), (B) there
have been no transactions entered into by the Company or any of its
subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered as
one enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock.
(vi) Good Standing of the Company. The Company has been duly
----------------------------
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Cox Prospectus and to enter into and perform its
obligations under this Agreement; and the Company is duly qualified as a
foreign corporation to transact business and is in good standing in each
other jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect.
(vii) Good Standing of Subsidiaries. Each "significant subsidiary"
-----------------------------
of the Company (as such term is defined in Rule 1-02 of Regulation S-X)
(each a "Subsidiary" and, collectively, the "Subsidiaries") has been duly
organized and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Cox Prospectus and is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result
in a Material Adverse Effect; except as otherwise disclosed in the Cox
Registration Statement, all of the issued and outstanding capital stock of
each such Subsidiary has been duly authorized and validly issued, is fully
paid and non-assessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity; none of the outstanding shares of
capital stock of any Subsidiary was issued in violation of the preemptive
or similar rights of any securityholder of such Subsidiary. The only
subsidiaries of the Company are [(A)] the subsidiaries listed on Exhibit __
to the Annual Report on Form 10-K of the Company filed with the Commission
under Section 13 of the 1934 Act [and (B) certain other subsidiaries which,
considered in the aggregate as a single Subsidiary, do not constitute a
"significant subsidiary" as defined in Rule 1-02 of Regulation S-X].
(viii) Capitalization. The shares of outstanding capital stock of
--------------
the Company have been duly authorized and validly issued and are fully paid
and non-assessable; none of the
5
<PAGE>
outstanding shares of capital stock of the Company was issued in violation
of the preemptive or other similar rights of any securityholder of the
Company.
(ix) Description of Common Stock. The Cox Common Stock conforms to
---------------------------
all statements relating thereto contained in the Cox Prospectus and such
description conforms to the rights set forth in the instruments defining
the same.
(x) Authorization of Agreement. This Agreement has been duly
--------------------------
authorized, executed and delivered by the Company.
(xi) Absence of Defaults and Conflicts. Neither the Company nor any
---------------------------------
of its subsidiaries is in violation of its charter or bylaws or in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which it or
any of them may be bound, or to which any of the property or assets of the
Company or any subsidiary is subject (collectively, "Agreements and
Instruments") except for such defaults that would not result in a Material
Adverse Effect; and the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated herein and
compliance by the Company with its obligations hereunder have been duly
authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
subsidiary pursuant to, the Agreements and Instruments (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that
would not result in a Material Adverse Effect), nor will such action result
in any violation of the provisions of the charter or bylaws of the Company
or any subsidiary or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any subsidiary or any of their assets, properties or operations.
As used herein, a "Repayment Event" means any event or condition which
gives the holder of any note, debenture or other evidence of indebtedness
of the Company or any subsidiary (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of all
or a portion of such indebtedness by the Company or any subsidiary.
(xii) Absence of Labor Dispute. No labor dispute with the employees
------------------------
of the Company or any subsidiary exists or, to the knowledge of the
Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any
subsidiary's principal suppliers, manufacturers, customers or contractors,
which, in either case, may reasonably be expected to result in a Material
Adverse Effect.
(xiii) Absence of Proceedings. There is no action, suit, proceeding,
----------------------
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or
6
<PAGE>
affecting the Company or any subsidiary, which is required to be disclosed
in the Cox Registration Statement (other than as disclosed therein), or
which, individually or in the aggregate, might reasonably be expected to
result in a Material Adverse Effect, or which, individually or in the
aggregate, might reasonably be expected to materially and adversely affect
the properties or assets thereof or the performance by the Company of its
obligations hereunder; the aggregate of all pending legal or governmental
proceedings to which the Company or any subsidiary is a party or of which
any of their respective property or assets is the subject which are not
described in the Cox Registration Statement, including ordinary routine
litigation incidental to the business, could not reasonably be expected to
result in a Material Adverse Effect.
(xiv) Accuracy of Exhibits. There are no contracts or documents
--------------------
which are required to be described in the Cox Registration Statement, the
Cox Prospectus or the documents incorporated by reference therein or to be
filed as exhibits thereto which have not been so described or filed as
required.
(xv) Possession of Intellectual Property. The Company and its
-----------------------------------
subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by them, and neither the Company nor any of its subsidiaries
has received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of the
Company or any of its subsidiaries therein, and which infringement or
conflict (if the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, singly or in the aggregate, would result in a
Material Adverse Effect.
(xvi) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, except such as has been already obtained or as may
be required under the 1933 Act or the 1933 Act Regulations or state
securities laws.
(xvii) Possession of Licenses and Permits. The Company and its
----------------------------------
subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them; the Company and its
subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries
7
<PAGE>
has received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a Material Adverse Effect.
(xviii) Title to Property. The Company and its subsidiaries have
-----------------
good and marketable title to all real property owned by the Company and its
subsidiaries and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
described in the Cox Prospectus or (b) do not, singly or in the aggregate,
materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company or any of
its subsidiaries; and all of the leases and subleases material to the
business of the Company and its subsidiaries, considered as one enterprise,
and under which the Company or any of its subsidiaries holds properties
described in the Cox Prospectus, are in full force and effect, and neither
the Company nor any subsidiary has any notice of any material claim of any
sort that has been asserted by anyone adverse to the rights of the Company
or any subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such subsidiary to
the continued possession of the leased or subleased premises under any such
lease or sublease.
(xix) Compliance with Cuba Act. The Company has complied with, and
------------------------
is and will be in compliance with, the provisions of that certain Florida
act relating to disclosure of doing business with Cuba, codified as Section
517.075 of the Florida statutes, and the rules and regulations thereunder
(collectively, the "Cuba Act") or is exempt therefrom.
(xx) Investment Company Act. The Company is not an "investment
----------------------
company" or an entity "controlled" by an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
(xxi) Environmental Laws. Except as described in the Cox
------------------
Registration Statement and except as would not, singly or in the aggregate,
result in a Material Adverse Effect, (A) neither the Company nor any of its
subsidiaries is in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of common
law or any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land surface
or subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Hazardous Materials") or to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and its subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements, (C)
there are no pending or threatened administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating
8
<PAGE>
to any Environmental Law against the Company or any of its subsidiaries and
(D) there are no events or circumstances that might reasonably be expected
to form the basis of an order for clean-up or remediation, or an action,
suit or proceeding by any private party or governmental body or agency,
against or affecting the Company or any of its subsidiaries relating to
Hazardous Materials or any Environmental Laws.
(b) Officer's Certificates. Any certificate signed by any officer of the
Company and delivered to the Underwriter or counsel for the Underwriter or to
ML&Co. or counsel for ML&Co. in connection with the offering of the Securities
shall be deemed a representation and warranty by the Company to the Underwriter
and to ML&Co., as the case may be, as to the matters covered thereby.
SECTION 2. Covenants of the Company. The Company covenants with the
------------------------
Underwriter and with ML&Co. as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 2(b), will notify the Underwriter and ML&Co.
immediately, and confirm the notice in writing, (i) when any post-effective
amendment to the Cox Registration Statement shall become effective, or any
supplement to the Cox Prospectus or any amended Cox Prospectus shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of any
request by the Commission for any amendment to the Cox Registration Statement or
any amendment or supplement to the Cox Prospectus or for additional information,
and (iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Cox Registration Statement or of any order preventing or
suspending the use of any Cox preliminary prospectus, or of the suspension of
the qualification of the shares of Cox Common Stock deliverable at maturity or
upon redemption of the Securities for offering or sale in any jurisdiction, or
of the initiation or threatening of any proceedings for any of such purposes.
The Company will promptly effect the filings necessary pursuant to Rule 424(b)
and will take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will promptly
file such prospectus. The Company will make every reasonable effort to prevent
the issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Underwriter and ML&Co.
notice of its intention to file or prepare any amendment to the Cox Registration
Statement (including any filing under Rule 462(b)) or any amendment, supplement
or revision to either the prospectus included in the Cox Registration Statement
at the time it became effective or to the Cox Prospectus, whether pursuant to
the 1933 Act, the 1934 Act or otherwise, will furnish the Underwriter and ML&Co.
with copies of any such documents a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file or use any such
document to which the Underwriter or counsel for the Underwriter or ML&Co. or
counsel for ML&Co. shall reasonably object.
(c) Delivery of Cox Registration Statements. The Company has furnished or
will deliver to the Underwriter, counsel for the Underwriter, ML&Co. and counsel
for ML&Co., without charge, signed copies of the Cox Registration Statement as
originally filed and of each
9
<PAGE>
amendment thereto (including exhibits filed therewith or incorporated by
reference therein and documents incorporated or deemed to be incorporated by
reference therein) and signed copies of all consents and certificates of
experts. If applicable, the copies of the Cox Registration Statement and each
amendment thereto furnished to the Underwriter and ML&Co. will be identical to
the electronically transmitted copies thereof filed with the Commission pursuant
to EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Cox Prospectuses. The Company has delivered to the
Underwriter, without charge, as many copies of each Cox preliminary prospectus
as the Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to the Underwriter, without charge, during the period when the Cox
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such
number of copies of the Cox Prospectus (as amended or supplemented) as the
Underwriter may reasonably request. If applicable, the Cox Prospectus and any
amendments or supplements thereto furnished to the Underwriter and ML&Co. will
be identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the completion of
the distribution of the Securities as contemplated in the Underwriting
Agreement. If at any time when a prospectus is required by the 1933 Act to be
delivered in connection with sales of the Securities, any event shall occur or
condition shall exist as a result of which it is necessary, in the opinion of
counsel for the Underwriter, counsel for ML&Co. or counsel for the Company, to
amend the Cox Registration Statement or amend or supplement the Cox Prospectus
in order that the Cox Prospectus will not include any untrue statements of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances existing at
the time it is delivered to a purchaser, or if it shall be necessary, in the
opinion of any such counsel, at any such time to amend the Cox Registration
Statement or amend or supplement the Cox Prospectus in order to comply with the
requirements of the 1933 Act or the 1933 Act Regulations, the Company will
promptly prepare and file with the Commission, subject to Section 2(b), such
amendment or supplement as may be necessary to correct such statement or
omission or to make the Cox Registration Statement or the Cox Prospectus comply
with such requirements, and the Company will furnish to the Underwriter and
ML&Co. such number of copies of such amendment or supplement as the Underwriter
and ML&Co. may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the Underwriter, to qualify the shares of Cox Common Stock
deliverable at maturity or upon redemption of the Securities for offering and
sale under the applicable securities laws of such states and other jurisdictions
of the United States as the Underwriter may designate and to maintain such
qualifications in effect through the maturity date of the Securities; provided,
however, that the Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not so qualified or to subject
itself to taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject. In each jurisdiction in which the shares of Cox
Common
10
<PAGE>
Stock deliverable at maturity or upon redemption of the Securities have been so
qualified, the Company will file such statements and reports as may be required
by the laws of such jurisdiction to continue such qualification in effect
through the maturity date of the Securities.
(g) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) Restriction on Sale of Securities. During a period of 120 days from
the date of the Cox Prospectus, the Company will not, without the prior written
consent of the Underwriter, (x) offer, sell, contract to sell or otherwise
dispose of, directly or indirectly, any shares of Cox Common Stock, securities
convertible into, exchangeable for or repayable with shares of Cox Common Stock,
or rights or warrants to acquire shares of Cox Common Stock or (y) file any
registration statement under the 1933 Act with respect to any shares of Cox
Common Stock, securities convertible into, exchangeable for or repayable with
shares of Cox Common Stock, or rights or warrants to acquire shares of Cox
Common Stock.
(i) Reporting Requirements. The Company, during the period when the Cox
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the 1934
Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder.
SECTION 3. Payment of Expenses. (a) Expenses. CEI will pay all
-------------------
expenses incident to the performance of the Company's obligations under this
Agreement, including (i) the preparation, printing and filing of the Cox
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the preparation, printing
and delivery to the Underwriter and ML&Co. of this Agreement, (iii) the fees and
disbursements of the Company's counsel, accountants and other advisors, (iv) the
qualification of the shares of Cox Common Stock deliverable at maturity or upon
redemption of the Securities under securities laws in accordance with the
provisions of Section 2(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for ML&Co. in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (v) the printing and delivery to the Underwriter of copies of each Cox
Preliminary Prospectus and of the Cox Prospectus and any amendments or
supplements thereto, (vi) the preparation, printing and delivery to the
Underwriter of copies of the Blue Sky Survey and any supplement thereto and
(vii) the filing fees incident to, and the reasonable fees and disbursements of
counsel to the Underwriter in connection with, the review by the National
Association of Securities Dealers, Inc. of the terms of the offering and sale of
the shares of Cox Common Stock deliverable at maturity or upon redemption of the
Securities.
SECTION 4. Indemnification.
---------------
(a) Indemnification of Underwriter and ML&Co. The Company agrees to
indemnify and hold harmless (1) the Underwriter and each person, if any, who
controls the Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act and (2)
11
<PAGE>
ML&Co. and each person, if any, who controls ML&Co. within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Cox Registration
Statement (or any amendment thereto) or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Cox preliminary prospectus or the Cox Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, referred to under (i) above; provided
that (subject to Section 4(d) below) any such settlement is effected with
the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by the Underwriter or ML&Co.,
as the case may be), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, referred to under (i) above, to the
extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to (A) any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Company by the Underwriter expressly for use in the Cox Registration Statement
(or any amendment thereto), or any Cox preliminary prospectus or the Cox
Prospectus (or any amendment or supplement thereto) or (B) any loss, liability,
claim, damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by ML&Co.
expressly for use in the Cox Registration Statement (or any amendment thereto),
or any Cox preliminary prospectus or the Cox Prospectus (or any amendment or
supplement thereto).
(b) Indemnification of Company, Directors, Officers. The Underwriter
agrees to indemnify and hold harmless the Company, its directors, each of its
officers who signed the Cox Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this Section,
12
<PAGE>
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Cox Registration Statement (or any
amendment thereto), or any Cox preliminary prospectus or the Cox Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by the Underwriter expressly for
use in the Cox Registration Statement (or any amendment thereto) or such Cox
preliminary prospectus or the Cox Prospectus (or any amendment or supplement
thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to clause (1) of Section
4(a) above, counsel to the indemnified parties shall be selected by the
Underwriter; in the case of parties indemnified pursuant to clause (2) of
Section 4(a), counsel to the indemnified parties shall be selected by ML&Co.;
and, in the case of parties indemnified pursuant to Section 4(b) above, counsel
to the indemnified parties shall be selected by the Company. An indemnifying
party may participate at its own expense in the defense of any such action;
provided, however, that counsel to the indemnifying party shall not (except with
the consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 4 or Section
5 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 4(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
13
<PAGE>
SECTION 5. Contribution. If the indemnification provided for in Section 4
------------
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then the Company on the one hand and the
Underwriter and ML&Co. on the other hand shall contribute to the aggregate
amount of such losses, liabilities, claims, damages and expenses incurred by
such indemnified party, as incurred, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Underwriter and ML&Co. on the other hand from the offering of the Securities
pursuant to the Underwriting Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the
Underwriter and ML&Co. on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the offering of the Securities pursuant
to the Underwriting Agreement shall be deemed to be such that the Underwriter
and ML&Co. shall be responsible for that portion of the aggregate amount of such
losses, liabilities, claims, damages and expenses represented by the percentage
that the total underwriting discount received by the Underwriter, as set forth
on the cover of the ML&Co. Prospectus, or, if Rule 434 is used, the
corresponding location on the ML&Co. Term Sheet, bears to the aggregate initial
public offering price of the Securities as set forth on such cover and the
Company shall be responsible for the balance.
The relative fault of the Company on the one hand and the Underwriter and
ML&Co. on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or CEI on the one hand or by the Underwriter or ML&Co.
on the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the provisions of this Section 5, the Underwriter and
ML&Co. shall not be required to contribute any amount in excess of the amount by
which the total price at which the Securities underwritten by the Underwriter
and distributed to the public were offered to the public exceeds the amount of
any damages which the Underwriter and ML&Co. have otherwise been required to pay
by reason of any such untrue or alleged untrue statement or omission or alleged
omission.
The Company, the Underwriter and ML&Co. agree that it would not be just and
equitable if contribution pursuant to this Section 5 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 5. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 5 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
14
<PAGE>
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 5, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as the Underwriter; each
person, if any, who controls ML&Co. within the meaning of Section 15 of the 1933
Act shall have the same rights to contribution as ML&Co.; and each director of
the Company, each officer of the Company who signed the Cox Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as the Company.
SECTION 6. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company submitted pursuant to the Underwriting
Agreement, shall remain operative and in full force and effect, regardless of
any investigation made by or on behalf of the Underwriter or controlling person
thereof, or by or on behalf of ML&Co. or controlling person thereof or by or on
behalf of the Company, and shall survive delivery of the Securities to the
Underwriter pursuant to the Underwriting Agreement.
SECTION 7. Termination. In the event that the Underwriter terminates the
-----------
Underwriting Agreement as provided in Section 9 thereof, this Agreement shall
simultaneously terminate, except that the provisions of Section 3, the indemnity
agreements set forth in Section 4, the contribution provisions set forth in
Section 5, and the provisions of Section 6 shall remain in effect.
SECTION 8. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriter shall be directed to it at North Tower, World Financial Center, New
York, New York 10281-1209, attention of Douglas W. Squires, Managing Director;
notices to ML&Co. shall be directed to it at 100 Church St.. 12th Floor, New
York, New York 10007, attention of the Secretary, with a copy to the Treasurer
at World Financial Tower, South Tower, New York, New York 10080-6107; notices to
the Company shall be directed to it at 1400 Lake Hearn Drive, Atlanta, Georgia
30319, attention of _____________.
SECTION 9. Parties. This Agreement shall inure to the benefit of and be
-------
binding upon each of the Underwriter, ML&Co. and the Company and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Underwriter, ML&Co. and the Company and their respective successors and
the controlling persons and officers and directors referred to in Sections 4 and
5 and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Underwriter, ML&Co. and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for
15
<PAGE>
the benefit of no other person, firm or corporation. No purchaser of Securities
from the Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 11. Effect of Headings. The Article and Section headings herein
------------------
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
16
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Underwriter, ML&Co., CEI and the Company in accordance with its terms.
Very truly yours,
COX COMMUNICATIONS, INC.
By__________________________________________
Name:
Title:
COX ENTERPRISES, INC.
By__________________________________________
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By __________________________________
Authorized Signatory
MERRILL LYNCH & CO., INC.
By __________________________________
Name:
Title:
17
<PAGE>
EXHIBIT 4(b)
MERRILL LYNCH & CO., INC.
TO
CHEMICAL BANK,
as Trustee
__________________________________
EIGHTH SUPPLEMENTAL INDENTURE
Dated as of May __, 1996
__________________________________
Creating a series of Securities designated
Structured Yield Product Exchangeable for Stock/SM/
__% STRYPES/SM/ Due ___________, 1999
Supplemental to Indenture
Dated as of April 1, 1983,
as Amended
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE ONE
DEFINITIONS
SECTION 101. Definitions....................................... 2
-----------
"Business Day"............................................ 2
"Closing Price"........................................... 2
"Company"................................................. 2
"Cox"..................................................... 2
"Cox Common Stock"........................................ 2
"Cox Successor"........................................... 2
"Distributed Assets"...................................... 2
"Extraordinary Cash Dividend"............................. 2
"Event of Default"........................................ 3
"Indenture"............................................... 3
"Initial Price"........................................... 3
"Interest Payment Date"................................... 3
"Maturity Consideration".................................. 3
"Maturity Date"........................................... 3
"Maturity Price".......................................... 3
"Notice of Default"....................................... 3
"NYSE".................................................... 3
"Optional Cash Redemption Price".......................... 3
"Payment Rate"............................................ 3
"Payment Rate Formula".................................... 3
"Principal Indenture"..................................... 3
"Redemption Date"......................................... 3
"Regular Record Date"..................................... 3
"Reorganization Event".................................... 3
"Securities".............................................. 3
"Share Components"........................................ 3
"STRYPES"................................................. 3
"STRYPES Certificates".................................... 3
"Supplemental Indenture".................................. 4
"Tax Event"............................................... 4
"Tax Event Date".......................................... 4
"Tax Event Redemption Price".............................. 4
"Threshold Appreciation Price"............................ 4
"Trading Day"............................................. 4
"Transaction Value"....................................... 4
"Trustee"................................................. 4
"Unit".................................................... 4
2
<PAGE>
ARTICLE TWO
THE STRYPES
SECTION 201. .................................................. 4
SECTION 202. .................................................. 5
ARTICLE THREE
PAYMENT AND DISCHARGE OF STRYPES
SECTION 301. Payment and Discharge on the Maturity Date........ 5
SECTION 302. No Fractional Shares.............................. 6
SECTION 303. Adjustment of Payment Rate Formula................ 7
(a) Adjustment for Distributions, Reclassifications,
etc.............................................. 7
(b) Adjustment for Consolidation, Merger or Other
Reorganization Event.............................. 10
SECTION 304. Notice of Adjustments and Certain Other Events.... 11
SECTION 305. Shares Free and Clear............................. 12
SECTION 306. Cancellation of STRYPES Certificates.............. 13
ARTICLE FOUR
SPECIAL REDEMPTION UPON TAX EVENT
SECTION 401. Special Redemption Upon Tax Event................. 13
SECTION 402. Notice of Redemption.............................. 13
SECTION 403. No Fractional Shares.............................. 14
SECTION 404. Deposit of Shares and Funds....................... 14
SECTION 405. Surrender of Certificates; Rights of Holder....... 14
ARTICLE FIVE
TAXES
SECTION 501. Documentary, Stamp, Transfer or Similar Taxes..... 15
SECTION 502. Treatment of STRYPES.............................. 15
ARTICLE SIX
AMENDMENT OF CERTAIN PROVISIONS
OF THE PRINCIPAL INDENTURE
SECTION 601.................................................... 16
SECTION 6.02................................................... 22
3
<PAGE>
ARTICLE SEVEN
MISCELLANEOUS
SECTION 701. ................................................. 23
SECTION 702. ................................................. 23
SECTION 703. ................................................. 23
SECTION 704. ................................................. 23
SECTION 705. ................................................. 23
SECTION 706. ................................................. 23
SECTION 707. ................................................. 23
SECTION 708. ................................................. 23
SECTION 709. ................................................. 24
4
<PAGE>
Eighth Supplemental Indenture, dated as of __________, 1996 (the
"Supplemental Indenture"), by and between Merrill Lynch & Co., Inc., a
corporation organized and existing under the laws of the State of Delaware,
having its principal office at World Financial Center, New York, New York 10281
(the "Company"), and Chemical Bank, a corporation duly organized and existing
under the laws of the State of New York and successor by merger to Manufacturers
Hanover Trust Company, having its Corporate Trust Office at 450 West 33rd
Street, New York, New York 10001, as trustee (the "Trustee").
WHEREAS, the Company has heretofore executed and delivered its Indenture,
dated as of April 1, 1983 and restated as of April 1, 1987 (as amended and
supplemented to the date hereof, the "Principal Indenture"), to the Trustee to
provide for the issuance from time to time of its unsecured and unsubordinated
debentures, notes or other evidences of senior indebtedness (the "Securities"),
unlimited as to principal amount; and
WHEREAS, the Principal Indenture, as amended by the Trust Indenture Reform
Act of 1990, and this Supplemental Indenture are hereinafter collectively
referred to as the "Indenture"; and
WHEREAS, the Company proposes to create and issue a new series of
Securities denominated its Structured Yield Product Exchangeable for Stock/SM/,
___% STRYPES/SM/ Due _________, 1999 (each such Security being referred to
herein as a "STRYPES"), the terms of which will require the Company to pay and
discharge the STRYPES on their maturity date or upon earlier redemption by
delivering to the Holders thereof shares of Class A Common Stock, par value
$1.00 per share ("Cox Common Stock"), of Cox Communications, Inc., a Delaware
corporation ("Cox") (or, in the event there shall occur a Reorganization Event
(as defined in Section 303(b) of Article Three), cash, securities and/or other
property in lieu thereof) or, at the option of the Company, cash, in either case
at the Payment Rate as provided herein; and
WHEREAS, Section 901 of the Principal Indenture provides that, without the
consent of any Holders, the Company, when authorized by a Board Resolution, and
the Trustee, at any time and from time to time, may enter into one or more
indentures supplemental to the Principal Indenture, in form satisfactory to the
Trustee, (a) to establish the form or terms of Securities of any series as
permitted by Section 201 and 301 thereof and (b) to cure any ambiguity, to
correct or supplement any provision in the Principal Indenture which may be
defective or inconsistent with any other provision of the Principal Indenture,
or to make any other provisions with respect to matters or questions arising
under the Principal Indenture which shall not adversely affect the interests of
the Holders of Securities of any series or any related coupons in any material
respect; and
_______________________
/SM/ Service mark of Merrill Lynch & Co., Inc.
<PAGE>
WHEREAS, the Company has duly authorized the execution and delivery of this
Supplemental Indenture, and all things necessary to make this Supplemental
Indenture a valid agreement of the Company, in accordance with its terms, have
been done;
NOW, THEREFORE, the Company and the Trustee, in consideration of the
premises and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, hereby covenant and agree, for the
equal and proportionate benefit of all Holders, as follows:
ARTICLE ONE
DEFINITIONS
SECTION 101. Definitions. For all purposes of the Principal Indenture and
-----------
this Supplemental Indenture relating to the series of Securities (consisting of
STRYPES) created hereby, except as otherwise expressly provided or unless the
context otherwise requires, the terms defined in this Article have the meanings
assigned to them in this Article. Capitalized terms used in the Principal
Indenture and this Supplemental Indenture but not defined herein are used as
they are defined in the Principal Indenture.
"Business Day" means any day that is not a Saturday, a Sunday or a day
on which the New York Stock Exchange, banking institutions or trust
companies in The City of New York are authorized or obligated by law or
executive order to close.
"Closing Price" has the meaning specified in Section 301.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have
become such pursuant to the applicable provisions of the Principal
Indenture, and thereafter "Company" shall mean such successor corporation.
"Cox" has the meaning specified in the third recital of the Company in
this instrument.
"Cox Common Stock" has the meaning specified in the third recital of
the Company in this instrument.
"Cox Successor" has the meaning specified in Section 303(b).
"Distributed Assets" has the meaning specified in Section 303(a)(iii).
"Extraordinary Cash Dividend" has the meaning specified in Section
303(a)(vi).
2
<PAGE>
"Event of Default" has the meaning specified in Section 401(b).
"Indenture" has the meaning specified in the second recital of the
Company in this instrument.
"Initial Price" has the meaning specified in Section 301.
"Interest Payment Date" has the meaning specified in Section 201.
"Maturity Consideration" has the meaning specified in Section 301.
"Maturity Date" has the meaning specified in Section 201.
"Maturity Price" has the meaning specified in Section 301.
"Notice of Default" has the meaning specified in Section 402.
"NYSE" has the meaning specified in Section 301.
"Optional Cash Redemption Price" has the meaning specified in Section
401.
"Payment Rate" has the meaning specified in Section 301.
"Payment Rate Formula" has the meaning specified in Section 301.
"Principal Indenture" has the meaning specified in the first recital
of the Company in this instrument.
"Redemption Date" has the meaning specified in Section 401.
"Regular Record Date" has the meaning specified in Section 201.
"Reorganization Event" has the meaning specified in Section 303(b).
"Securities" has the meaning specified in the first recital of the
Company in this instrument
"Share Components" has the meaning specified in Section 301.
"STRYPES" has the meaning specified in the third recital of the
Company in this instrument.
"STRYPES Certificates" has the meaning specified in Section 202.
3
<PAGE>
"Supplemental Indenture" has the meaning specified in the first
paragraph of this instrument.
"Tax Event" has the meaning specified in Section 401.
"Tax Event Date" has the meaning specified in Section 401.
"Tax Event Redemption Price" has the meaning specified in Section 401.
"Threshold Appreciation Price" has the meaning specified in Section
301.
"Trading Day" has the meaning specified in Section 301.
"Transaction Value" has the meaning specified in Section 303(b).
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee with respect to the
STRYPES shall have become such pursuant to the applicable provisions of the
Principal Indenture, and thereafter "Trustee" shall mean such successor
Trustee.
"Unit" has the meaning specified in Section 305(b)(i).
ARTICLE TWO
THE STRYPES
SECTION 201. The Securities shall be known and designated as the
"Structured Yield Product Exchangeable for Stock, ___% STRYPES Due _________,
1999" of the Company. The aggregate number of STRYPES which may be
authenticated and delivered under this Supplemental Indenture is limited to
_________ with an issue price of $_____ per STRYPES, or $____________ in the
aggregate, except for STRYPES evidenced by STRYPES Certificates (as defined in
Section 202) authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other STRYPES Certificates evidencing such STRYPES
pursuant to Section 304, 305, 306 or 906 of the Principal Indenture.
The STRYPES shall mature on _________, 1999 (the "Maturity Date"). On the
Maturity Date, the STRYPES shall be paid and discharged as provided in Article
Three of this Supplemental Indenture.
The STRYPES shall bear interest at the rate of ___% of the issue price per
annum (or $___________ per annum), from _______, 1996, or from the most recent
Interest Payment Date (as defined below) to which interest has been paid or
provided for, as the case may be, until the Maturity Date or such earlier date
on which such STRYPES is redeemed or the issue price of such STRYPES is repaid
in accordance with the provisions of the Indenture. Interest shall be
4
<PAGE>
payable in cash quarterly in arrears on ___________, ___________, ___________
and ___________, beginning ___________, 1996, and on the Maturity Date (each, an
"Interest Payment Date"), to the Persons in whose names the STRYPES are
registered at the close of business on the last day (whether or not a Business
Day) of the calendar month immediately preceding such Interest Payment Date
(each, a "Regular Record Date"). Interest on the STRYPES shall be computed on
the basis of a 360-day year of twelve 30-day months.
The interest on the STRYPES shall be payable and the Maturity Consideration
(as defined in Section 301 of Article Three) shall be deliverable or payable at
the office or agency of the Company in the Borough of Manhattan, The City of New
York maintained for such purpose and at any other office or agency maintained by
the Company for such purpose; provided, however, that at the option of the
Company payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register.
From and after a Tax Event Date (as defined in Section 401 of Article
Four), the STRYPES will be redeemable at the option of the Company, in whole but
not in part, as provided in Article Four of this Supplemental Indenture. The
STRYPES are not subject to any sinking fund or other mandatory redemption
provisions. The STRYPES shall not be payable at the option of the Holders prior
to the Maturity Date.
The STRYPES shall be issuable only in registered form without coupons. The
STRYPES will be issued in any whole numbers. No fractional STRYPES or scrip
representing fractional STRYPES shall be issued.
SECTION 202. The STRYPES shall be evidenced by certificates ("STRYPES
Certificates") in the form attached hereto as Exhibit A.
ARTICLE THREE
PAYMENT AND DISCHARGE OF STRYPES
SECTION 301. Payment and Discharge on the Maturity Date. On the Maturity
------------------------------------------
Date, unless previously redeemed, the Company shall pay and discharge each
STRYPES by delivering to the Holder thereof a number of shares (such number of
shares being hereinafter referred to as the "Payment Rate") of Cox Common Stock
determined in accordance with the following formula (the "Payment Rate
Formula"), subject to adjustment as a result of certain dilution events relating
to the Cox Common Stock as provided for in Section 303 of this Article Three:
(a) if the Maturity Price (as defined below) is greater than or equal to $_____
per share of Cox Common Stock (the "Threshold Appreciation Price"), _____ shares
of Cox Common Stock per STRYPES, (b) if the Maturity Price is less than the
Threshold Appreciation Price but is greater than $_____ per share of Cox Common
Stock (the "Initial Price"), a fractional share of Cox Common Stock per STRYPES
so that the value thereof (determined based on the Maturity Price) is equal to
the Initial Price (such fractional share being calculated to the nearest
1/10,000th of a share or, if there is not a nearest 1/10,000th of a share, to
the next highest 1/10,000th of a
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share) and (c) if the Maturity Price is less than or equal to the Initial Price,
one share of Cox Common Stock per STRYPES. The numbers of shares of Cox Common
Stock per STRYPES specified in clauses (a) and (c) of the Payment Rate Formula
are hereinafter referred to as the "Share Components". No fractional shares of
Cox Common Stock shall be delivered on the Maturity Date as provided in Section
302 of this Article Three. Notwithstanding the foregoing, the Company may, at
its option, in lieu of delivering shares of Cox Common Stock, deliver cash in an
amount (calculated to the nearest 1/100th of a dollar per STRYPES or, if there
is not a nearest 1/100th of a dollar, then to the next higher 1/100th of a
dollar) equal to the value of such number of shares of Cox Common Stock at the
Maturity Price. Such option, if exercised by the Company, must be exercised
with respect to all shares of Cox Common Stock otherwise deliverable on the
Maturity Date upon payment and discharge of all Outstanding STRYPES. In
determining the amount of cash deliverable upon payment and discharge of the
STRYPES in lieu of shares of Cox Common Stock pursuant to the second preceding
sentence, if more than one STRYPES shall be held at one time by the same Holder,
the amount of cash which shall be delivered to such Holder upon payment and
discharge shall be computed on the basis of the aggregate number of STRYPES so
held on the Maturity Date. Such number of shares of Cox Common Stock (or amount
of cash or, in the event there shall occur a Reorganization Event, cash,
securities and/or other property, in lieu thereof) deliverable upon payment and
discharge of the STRYPES on the Maturity Date is hereinafter referred to as the
"Maturity Consideration."
The term "Maturity Price" means, subject to Section 303(a)(v) of this
Article Three, the average Closing Price per share of Cox Common Stock on the 20
Trading Days immediately prior to, but not including, the second Trading Day
preceding the Maturity Date. The term "Closing Price" means, with respect to
any security on any date of determination, the closing sale price (or, if no
closing price is reported, the last reported sale price) of such security on the
New York Stock Exchange (the "NYSE") on such date or, if such security is not
listed for trading on the NYSE on any such date, as reported in the composite
transactions for the principal United States securities exchange on which such
security is so listed, or if such security is not so listed on a United States
national or regional securities exchange, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System, or, if such
security is not so reported, the last quoted bid price for such security in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or, if such bid price is not available, the market value of such
security on such date as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Company. The term
"Trading Day" means, with respect to any security the Closing Price of which is
being determined, a day on which such security (A) is not suspended from trading
on any national or regional securities exchange or association or over-the-
counter market at the close of business and (B) has traded at least once on the
national or regional securities exchange or association or over-the-counter
market that is the primary market for the trading of such security.
SECTION 302. No Fractional Shares. No fractional shares or scrip
--------------------
representing fractional shares of Cox Common Stock shall be delivered on the
Maturity Date. If more than one STRYPES shall be held at one time by the same
Holder, the number of full shares of Cox Common Stock which shall be delivered
in payment of such Holder's STRYPES shall be
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computed on the basis of the aggregate number of STRYPES so held on the Maturity
Date. In lieu of any fractional share of Cox Common Stock which would otherwise
be deliverable upon payment and discharge of any STRYPES on the Maturity Date,
the Company, through any applicable Paying Agent, shall make a cash payment in
respect of such fractional interest in an amount equal to the value of such
fractional share at the Maturity Price.
SECTION 303. Adjustment of Payment Rate Formula.
----------------------------------
(a) Adjustment for Distributions, Reclassifications, etc. The Payment Rate
-----------------------------------------------------
Formula shall be subject to adjustment from time to time as follows:
(i) If Cox shall:
(A) pay a stock dividend or make a distribution with respect to
Cox Common Stock in shares of such stock;
(B) subdivide or split the outstanding shares of Cox Common
Stock into a greater number of shares;
(C) combine the outstanding shares of Cox Common Stock into a
smaller number of shares; or
(D) issue by reclassification of shares of Cox Common Stock any
shares of common stock of Cox;
then, in any such event, the Payment Rate Formula shall be adjusted by
multiplying each of the Share Components in the Payment Rate Formula in effect
immediately prior to such event by a fraction, the numerator of which shall be
the number of shares of Cox Common Stock outstanding immediately following such
event, and the denominator of which shall be the number of shares of Cox Common
Stock outstanding immediately prior to such event. Each such adjustment shall
become effective at the opening of business on the Business Day next following
the record date for determination of holders of Cox Common Stock entitled to
receive such dividend or distribution in the case of a dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, split, combination or reclassification. Each such adjustment shall
be made successively.
(ii) If Cox shall, after the date hereof, issue rights or warrants to
all holders of Cox Common Stock entitling them to subscribe for or purchase
shares of Cox Common Stock (other than rights to purchase Cox Common Stock
pursuant to a plan for the reinvestment of dividends or interest) at a price per
share less than the then current market price of the Cox Common Stock, then in
each case the Payment Rate Formula shall be adjusted by multiplying each of the
Share Components in the Payment Rate Formula in effect immediately prior to the
date of issuance of such rights or warrants, by a fraction, the numerator of
which shall be the number of shares of Cox Common Stock outstanding on the date
of issuance of such rights or warrants, immediately prior to such issuance, plus
the number of additional shares of Cox
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Common Stock offered for subscription or purchase pursuant to such rights or
warrants, and the denominator of which shall be the number of shares of Cox
Common Stock outstanding on the date of issuance of such rights or warrants,
immediately prior to such issuance, plus the number of additional shares of Cox
Common Stock which the aggregate offering price of the total number of shares of
Cox Common Stock so offered for subscription or purchase pursuant to such rights
or warrants would purchase at such current market price, which shall be
determined by multiplying such total number of shares by the exercise price of
such rights or warrants and dividing the product so obtained by such current
market price. Such adjustment shall become effective at the opening of business
on the Business Day next following the record date for the determination of
stockholders entitled to receive such rights or warrants. To the extent that
shares of Cox Common Stock are not delivered after the expiration of such rights
or warrants, or if such rights or warrants are not issued, the Payment Rate
Formula shall be readjusted to the Payment Rate Formula which would then be in
effect had such adjustments for the issuance of such rights or warrants been
made upon the basis of delivery of only the number of shares of Cox Common Stock
actually delivered. Each such adjustment shall be made successively. For
purposes of this subparagraph (ii), the term "current market price" shall mean
the average Closing Price per share of Cox Common Stock on the 20 Trading Days
immediately prior to the date such rights or warrants are issued; provided,
however, if any event that would result in another adjustment of the Payment
Rate Formula pursuant to this Section 303(a) occurs during such 20-day period,
the current market price as determined pursuant to the foregoing shall be
appropriately adjusted to reflect the occurrence of such event.
(iii) If Cox shall pay a dividend or make a distribution to all
holders of Cox Common Stock of evidences of its indebtedness or other assets
(excluding any stock dividends or distributions referred to in subparagraph
(i)(A) above or any ordinary periodic cash dividends that do not constitute
Extraordinary Cash Dividends (as defined in subparagraph (vi) below)) or shall
issue to all holders of Cox Common Stock rights or warrants to subscribe for or
purchase any of its securities (other than those referred to in subparagraph
(ii) above) (any of the foregoing being hereinafter referred to in this
subparagraph (iii) as the "Distributed Assets"), then in each such case, the
Payment Rate Formula shall be adjusted by multiplying each of the Share
Components in the Payment Rate Formula in effect on the record date referred to
below by a fraction, the numerator of which shall be the market price per share
of the Cox Common Stock on the record date for the determination of stockholders
entitled to receive such dividend or distribution or such rights or warrants,
and the denominator of which shall be such market price per share of Cox Common
Stock less the fair market value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive, and described in a resolution
adopted with respect thereto) as of such record date, of the portion of the
Distributed Assets so distributed applicable to one share of Cox Common Stock;
provided, however, that in the event that the then fair market value (as so
determined) of the portion of the Distributed Assets so distributed applicable
to one share of Cox Common Stock is equal to or greater than the market price
per share of Cox Common Stock as of such record date, in lieu of the foregoing
adjustment, the Company shall reserve such Distributed Assets (or, in the case
of Distributed Assets of a kind described in (z) below, an amount in cash equal
to the fair market value thereof, determined in the manner and as of the date
described in clause (z) below) for delivery to the holders of the STRYPES on the
Maturity Date and, on the Maturity Date, shall deliver
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<PAGE>
to each such holder, in addition to the shares of Cox Common Stock (or cash in
lieu thereof) to which such holder is otherwise entitled, (x) in respect of that
portion, if any, of the Distributed Assets consisting of cash, the amount of
such Distributed Assets consisting of cash which such holder would have received
had each STRYPES held by such holder been paid and discharged immediately prior
to the record date for the determination of stockholders entitled to receive
such dividend or distribution or such rights or warrants, without interest, plus
(y) in respect of that portion, if any, of the Distributed Assets consisting of
securities for which there is an actual or when issued trading market
("marketable securities"), the amount of such Distributed Assets consisting of
marketable securities which such holder would have received had each STRYPES
held by such holder been paid and discharged immediately prior to the record
date for the determination of stockholders entitled to receive such dividend or
distribution or such rights or warrants, plus (z) in respect of that portion, if
any, of the Distributed Assets which are of a kind other than that described in
clause (x) or (y) above, an amount in cash equal to the fair market value (as
determined by the Board of Directors of the Company, whose determination shall
be conclusive, and described in a resolution adopted with respect thereto), as
of the record date for determination of stockholders entitled to receive such
dividend or distribution or such rights or warrants, of the Distributed Assets
consisting of other assets which such holder would have received had each
STRYPES held by such holder been paid and discharged immediately prior to such
record date, without interest thereon. Each such adjustment shall become
effective on the opening of business on the Business Day next following the
record date for the determination of stockholders entitled to receive such
dividend or distribution or such rights or warrants. To the extent that such
dividend or distribution is not so paid or made, the Payment Rate Formula shall
be readjusted to the Payment Rate Formula which would then be in effect if such
dividend or distribution had not occurred. Each such adjustment shall be made
successively. For purposes of this subparagraph (iii), the term "market price"
shall mean the average Closing Price per share of Cox Common Stock on the 20
Trading Days immediately prior to such record date for the determination of
stockholders entitled to receive such dividend or distribution or such rights or
warrants; provided, however, if any event that would result in another
adjustment of the Payment Rate Formula pursuant to this Section 303(a) occurs
during such
20-day period, the market price as determined pursuant to the foregoing shall be
appropriately adjusted to reflect the occurrence of such event.
(iv) Any shares of Cox Common Stock issuable in payment of a dividend
shall be deemed to have been issued immediately prior to the close of business
on the record date for such dividend for purposes of calculating the number of
outstanding shares of Cox Common Stock under subparagraph (ii) above.
(v) All adjustments to the Payment Rate Formula shall be calculated
to the nearest 1/10,000th of a share of Cox Common Stock (or if there is not a
nearest 1/10,000th of a share to the next lower 1/10,000th of a share). No
adjustment in the Payment Rate Formula shall be required unless such adjustment
would require an increase or decrease of at least one percent therein; provided,
however, that any adjustments which by reason of this subparagraph are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. If an adjustment is made to the Payment Rate Formula
pursuant to subparagraph (i), (ii) or (iii) of this Section 303(a), an
adjustment shall also be made to the Maturity Price
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<PAGE>
solely to determine which of clauses (a), (b) or (c) of the Payment Rate Formula
in Section 301 will apply on the Maturity Date. The required adjustment to the
Maturity Price shall be made by multiplying each of the Closing Prices used in
determining the Maturity Price by a fraction, the numerator of which shall be
the Share Component in clause (c) of the Payment Rate Formula immediately after
such adjustment pursuant to subparagraph (i), (ii) or (iii) and the denominator
of which shall be the Share Component in clause (c) of the Payment Rate Formula
immediately before such adjustment. Each such adjustment shall be made
successively. This subparagraph (v) shall be so used to adjust the definition
of Maturity Price only as such term is used for the first time in each of
clauses (a), (b) and (c) of the Payment Rate Formula.
(vi) For purposes of the foregoing, the term "Extraordinary Cash
Dividend" shall mean, with respect to any consecutive 12-month period, any cash
dividend with respect to Cox Common Stock the amount of which, together with the
aggregate amount of all other such cash dividends on the Cox Common Stock
occurring in such 12-month period, exceeds on a per share basis 10% of the
average of the Closing Prices per share of the Cox Common Stock over such 12-
month period, and for purposes of applying the formula set forth in subparagraph
(iii) above, the fair market value of such dividends being calculated pursuant
to such subparagraph (iii) shall be equal to (x) the aggregate amount of such
cash dividend together with the amounts of such other cash dividends occurring
in such period minus (y) the aggregate amount of such other cash dividends
occurring in such period for which a prior adjustment in the Payment Rate
Formula was previously made under this Section 303(a). In making the
determinations required by the foregoing sentence, the amount of cash dividends
paid on a per share basis shall be appropriately adjusted to reflect the
occurrence during such period of any event described in this Section 303(a).
(b) Adjustment for Consolidation, Merger or Other Reorganization Event. In
------------------------------------------------------------------
the event of (i) any consolidation or merger of Cox, or any surviving entity or
subsequent surviving entity of Cox (a "Cox Successor"), with or into another
entity (other than a merger or consolidation in which Cox is the continuing
corporation and in which the Cox Common Stock outstanding immediately prior to
the merger or consolidation is not exchanged for cash, securities or other
property of Cox or another corporation), (ii) any sale, transfer, lease or
conveyance to another corporation of the property of Cox or any Cox Successor as
an entirety or substantially as an entirety, (iii) any statutory exchange of
securities of Cox or any Cox Successor with another corporation (other than in
connection with a merger or acquisition) or (iv) any liquidation, dissolution,
winding up or bankruptcy of Cox or any Cox Successor (any such event described
in clause (i), (ii), (iii) or (iv), a "Reorganization Event"), the Payment Rate
Formula used to determine the amount payable on the Maturity Date for each
STRYPES will be adjusted to provide that each Holder of STRYPES will receive for
each STRYPES on the Maturity Date cash in an amount equal to (a) if the
Transaction Value (as defined below) is greater than or equal to the Threshold
Appreciation Price, _____ multiplied by the Transaction Value, (b) if the
Transaction Value is less than the Threshold Appreciation Price but greater than
the Initial Price, the Initial Price and (c) if the Transaction Value is less
than or equal to the Initial Price, the Transaction Value. "Transaction Value"
means (x) for any cash received in any such Reorganization Event, the amount of
cash received per share of Cox Common Stock, (y) for any property other than
cash or securities received in any such Reorganization Event, an
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<PAGE>
amount equal to the market value on the Maturity Date of such property received
per share of Cox Common Stock as determined by a nationally recognized
independent investment banking firm retained for this purpose by the Company and
(z) for any securities received in any such Reorganization Event, an amount
equal to the average Closing Price per unit of such securities on the 20 Trading
Days immediately prior to the second Trading Day preceding the Maturity Date,
multiplied by the number of such securities received for each share of Cox
Common Stock. Notwithstanding the foregoing, in the event that property or
securities, or a combination of cash, on the one hand, and property or
securities, on the other, are received in such Reorganization Event, the Company
may, at its option, in lieu of delivering cash as described above, deliver the
amount of cash, securities and other property received per share of Cox Common
Stock in such Reorganization Event determined in accordance with clause (x), (y)
or (z) above, as applicable. If the Company elects to deliver securities or
other property, Holders of the STRYPES will be responsible for the payment of
any and all brokerage and transaction costs upon any subsequent sale of such
securities or other property. The kind and amount of securities with which the
STRYPES shall be paid and discharged after consummation of such transaction
shall be subject to adjustment as described in paragraph (a) above following the
date of consummation of such transaction.
SECTION 304. Notice of Adjustments and Certain Other Events.
----------------------------------------------
(a) Whenever the Payment Rate Formula requires adjustment as herein
provided, the Company shall:
(i) forthwith compute the adjusted Payment Rate Formula in accordance
with Section 303 of this Article Three and prepare a certificate signed by an
officer of the Company setting forth the adjusted Payment Rate Formula, the
method of calculation thereof in reasonable detail, and the facts requiring such
adjustment and upon which such adjustment is based, which certificate shall be
conclusive, final and binding evidence of the correctness of the adjustment, and
file such certificate forthwith with the Trustee; and
(ii) within 10 Business Days following the occurrence of an event
that requires an adjustment to the Payment Rate Formula pursuant to Section 303
of this Article Three (or if the Company is not aware of such occurrence, as
soon as practicable after becoming so aware), provide written notice to the
Trustee and to the Holders of the STRYPES of the occurrence of such event and a
statement in reasonable detail setting forth the adjusted Payment Rate Formula
and the method by which the adjustment to the Payment Rate Formula was
determined, provided, that, in respect of any adjustment to the Maturity Price
required pursuant to Section 303(a)(v), such notice need only disclose the
factor by which each of the Closing Prices used in determining the Maturity
Price is to be multiplied in order to determine the Payment Rate on the Maturity
Date, it being understood that, until the Maturity Date, the Payment Rate itself
cannot be determined.
(b) In case at any time while any of the STRYPES are outstanding the
Company receives notice that:
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(i) Cox shall declare a dividend (or any other distribution) on or in
respect of the Cox Common Stock to which Section 303(a)(i) or (iii) shall apply
(other than any cash dividends and distributions, if any, paid from time to time
by Cox that do not constitute Extraordinary Cash Dividends);
(ii) Cox shall authorize the issuance to all holders of Cox Common
Stock of rights or warrants to subscribe for or purchase shares of Cox Common
Stock or of any other subscription rights or warrants;
(iii) there shall occur any conversion or reclassification of Cox
Common Stock (other than a subdivision or combination of outstanding shares of
such Cox Common Stock) or any consolidation, merger or reorganization to which
Cox is a party and for which approval of any stockholders of Cox is required, or
the sale or transfer of all or substantially all of the assets of Cox; or
(iv) there shall occur the voluntary or involuntary dissolution,
liquidation, winding up or bankruptcy of Cox;
then the Company shall promptly cause to be delivered to the Trustee and any
applicable Paying Agent and filed at the office or agency maintained for the
purpose of payment and discharge of STRYPES on the Maturity Date in the Borough
of Manhattan, The City of New York by the Trustee (or any applicable Paying
Agent), and shall promptly cause to be mailed to the Holders of STRYPES at their
last addresses as they shall appear in the Security Register, at least 10 days
before the date hereinafter specified (or the earlier of the dates hereinafter
specified, in the event that more than one is specified), a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution or grant of rights or warrants, or, if a record is not to be taken,
the date as of which the holders of Cox Common Stock of record to be entitled to
such dividend, distribution or grant of rights or warrants are to be determined,
or (y) the date, if known by the Company, on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up or
bankruptcy is expected to become effective.
(c) On or prior to the sixth Business Day preceding the Maturity Date, the
Company will notify The Depository Trust Company and the Trustee and will
publish a notice in The Wall Street Journal or another daily newspaper of
national circulation stating whether the STRYPES will be paid and discharged
with shares of Cox Common Stock or cash (or any other property or securities
that may be delivered pursuant to Section 303(b)) on the Maturity Date in
accordance with Section 301.
SECTION 305. Shares Free and Clear. The Company hereby warrants that upon
---------------------
payment and discharge of a STRYPES on the Maturity Date pursuant to this
Supplemental Indenture, the Holder of a STRYPES shall receive all rights held by
the Company in the Cox Common Stock with which such STRYPES is at such time
payable and dischargeable pursuant to this Supplemental Indenture, free and
clear of any and all liens, claims, charges and encumbrances, other than any
liens, claims, charges and encumbrances which may have been placed on any Cox
Common Stock by the prior owner thereof prior to the time such Cox
12
<PAGE>
Common Stock was acquired by the Company. Except as provided in Section 501,
the Company will pay all taxes and charges with respect to the delivery of Cox
Common Stock delivered upon payment and discharge of STRYPES hereunder. In
addition, the Company further warrants that any Cox Common Stock so delivered
upon payment and discharge of STRYPES hereunder shall be free of any transfer
restrictions (other than such as are solely attributable to any Holder's status
as an affiliate of Cox).
SECTION 306. Cancellation of STRYPES Certificates. Upon receipt by the
------------------------------------
Trustee of a STRYPES Certificate delivered to it for payment and discharge of
the STRYPES evidenced thereby under this Article Three, the Trustee shall cancel
and dispose of the same as provided in Section 309 of the Principal Indenture.
ARTICLE FOUR
SPECIAL REDEMPTION UPON TAX EVENT
SECTION 401. Special Redemption Upon Tax Event. The STRYPES shall be
---------------------------------
redeemable at the option of the Company, in whole but not in part, at any time
from and after the date (the "Tax Event Date") on which a Tax Event (as defined
below) shall occur at a price per STRYPES (the "Tax Event Redemption Price")
equal to (a) an amount of cash equal to the sum of (x) all accrued and unpaid
interest on such STRYPES to the date fixed for redemption (the "Redemption
Date"), (y) the sum of all interest payments on such STRYPES due after the
Redemption Date and on or prior to the Maturity Date and (z) $__________, plus
(b) a number of shares of Cox Common Stock determined in accordance with the
Payment Rate Formula, with the Redemption Date being deemed to be the Maturity
Date for purposes of calculating the Maturity Price.
A "Tax Event" means that Cox Enterprises, Inc. ("CEI") shall have delivered
to the Company an opinion (the "Tax Event Opinion") from independent tax counsel
experienced in such matters to the effect that, as a result of (a) any amendment
or proposed amendment to, or change (including any announced prospective change)
or proposed change in, the laws (or any regulations thereunder) of the United
States or any taxing authority thereof or therein or (b) any amendment to, or
change in, an interpretation or application of such laws or regulations by any
legislative body, court, governmental agency or regulatory authority, enacted,
promulgated, introduced, issued or announced or which interpretation is issued
or announced or which action is taken, on or after _______________, 1996, there
is more than an insubstantial risk that a corporation that sells or otherwise
disposes of stock in another corporation on a date that is after _________, 1996
and that is on or prior to the Maturity Date would not be permitted to
specifically identify the stock sold or disposed of for purposes of determining
the amount of such corporation's gain or loss on the stock sold or disposed of
for United States Federal income tax purposes.
SECTION 402. Notice of Redemption. The Company shall provide notice of
--------------------
any call for redemption of STRYPES to Holders of record of the STRYPES not less
than 10 nor more
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<PAGE>
than 30 calendar days prior to the related Redemption Date. Such notice will
state the following and may contain such other information as the Company deems
advisable: (a) the Redemption Date; (b) the place or places where certificates
for the STRYPES are to be surrendered for redemption and (c) that interest will
cease to accrue on the STRYPES on the Redemption Date (except as otherwise
provided in the Indenture). Any such notice will be provided by mail, sent to
each Holder of record of STRYPES at such Holder's address as it appears on the
security register for the STRYPES, first class postage prepaid; provided,
however, that failure to give such notice or any defect therein shall not affect
the validity of the proceeding for redemption of any STRYPES except as to the
Holder to whom the Company has failed to give said notice or whose notice was
defective. At or prior to the mailing of such notice of redemption, the Company
will publish a public announcement of redemption in The Wall Street Journal or
another daily newspaper of national circulation.
SECTION 403. No Fractional Shares. The Company will not be required to
--------------------
deliver any fractional share of Cox Common Stock on the Redemption Date and, in
lieu thereof, will pay an amount in cash equal to the value of such fractional
share of Cox Common Stock based on the average Closing Price per share of Cox
Common Stock on the 20 Trading Days immediately prior to, but not including, the
second Trading Day preceding the Redemption Date.
SECTION 404. Deposit of Shares and Funds. The Company's obligation to pay
---------------------------
the Tax Event Redemption Price upon redemption in accordance with Section 401 of
this Article Four shall be deemed fulfilled if, on or before a Redemption Date,
the Company shall irrevocably deposit, with a bank or trust company, or an
affiliate of a bank or trust company, having an office or agency in The City of
New York and having a capital and surplus of at least $50,000,000, or shall set
aside or make other reasonable provision for the delivery and payment of, such
number of shares of Cox Common Stock and funds for payment of such Tax Event
Redemption Price as is required to be delivered and paid by the Company pursuant
to Section 401 of this Article Four upon the occurrence of such redemption (and,
if applicable, funds for payment of cash in lieu of the issuance of fractional
share amounts as provided by Section 403 of this Article Four). Any interest
accrued on such funds shall be paid to the Company from time to time. Any
shares of Cox Common Stock and funds so deposited and unclaimed at the end of
two years from such Redemption Date shall be repaid and released to the Company,
after which the Holder or Holders of such STRYPES called for redemption shall
look only to the Company for delivery of such shares of Cox Common Stock and
funds.
SECTION 405. Surrender of Certificates; Rights of Holder. Each Holder of
-------------------------------------------
STRYPES shall surrender the STRYPES Certificates evidencing such STRYPES
(properly endorsed or assigned for transfer, if the Board of Directors of the
Company shall so require and the redemption notice shall so state) to the
Company at the place designated in the notice of such redemption and shall
thereupon be entitled to receive Tax Event Redemption Price pursuant to Section
401 of this Article Four following such surrender and following such Redemption
Date. If such notice of redemption shall have been given, and if on the
Redemption Date shares of Cox Common Stock and funds necessary for redemption
shall have been irrevocably either set aside by the Company separate and apart
from its other funds or assets in trust for the account of the Holders of
STRYPES (and so as to be and continue to be available therefor) or deposited
with
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a bank or trust company or an affiliate thereof as provided herein or the
Company shall have made other reasonable provision therefor, then,
notwithstanding that the STRYPES Certificates evidencing any STRYPES shall not
have been surrendered, the STRYPES evidenced thereby shall be deemed no longer
outstanding, interest on the STRYPES shall cease to accrue on the Redemption
Date and all rights of a Holder of the STRYPES shall forthwith after such date
cease and terminate, except the right to receive the shares of Cox Common Stock
and funds constituting the Tax Event Redemption Price (and cash in lieu of any
fractional share amount) deliverable and payable pursuant to Section 401 of this
Article Four without interest upon surrender of their STRYPES Certificates
therefor (unless the Company defaults on the payment of such Tax Event
Redemption Price).
ARTICLE FIVE
TAXES
SECTION 501. Documentary, Stamp, Transfer or Similar Taxes. The Company
---------------------------------------------
will pay any and all documentary, stamp, transfer or similar taxes that may be
payable in respect of the transfer and delivery of Cox Common Stock pursuant
hereto; provided, however, that the Company shall not be required to pay any
such tax which may be payable in respect of any transfer involved in the
delivery of Cox Common Stock in a name other than that in which the STRYPES so
paid and discharged were registered, and no such transfer or delivery shall be
made unless and until the Person requesting such transfer has paid to the
Company the amount of any such tax, or has established, to the satisfaction of
the Company, that such tax has been paid.
SECTION 502. Treatment of STRYPES. The parties hereto hereby agree, and
--------------------
each Holder of a STRYPES by its purchase of a STRYPES hereby agrees:
(a) to treat, for all United States Federal, state and local tax
purposes, each STRYPES as a unit (a "Unit") consisting of (A) a debt
instrument (the "Debt Instrument") with a fixed principal amount
unconditionally payable on the Maturity Date equal to the issue price
of the STRYPES and bearing interest at the stated interest rate on the
STRYPES and (B) a forward purchase contract (the "Forward Contract")
pursuant to which the Holder is [irrevocably committed] to use the
principal payment due on the Debt Instrument to purchase on the
Maturity Date or upon redemption the Cox Common Stock which the
Company is obligated to deliver at that time (subject to the Company's
right to deliver cash with an equal value in lieu of the Cox Common
Stock), which treatment will require, among other things, each Holder
that is subject to United States Federal income tax in connection with
its ownership of the STRYPES to include currently in income payments
denominated as interest that are made with respect to the STRYPES in
accordance with such Holder's regular method of tax accounting;
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<PAGE>
(b) in the case of purchases of STRYPES in connection with the original
issuance thereof, (A) to allocate $____________ of the entire initial
purchase price of a STRYPES (i.e., the issue price of a STRYPES) to
the Debt Instrument component and to allocate the remaining
$___________ of the entire initial purchase price of a STRYPES to the
Forward Contract component and (B) such acquisition of the STRYPES by
the Holder as a purchase of the Debt Instrument by the Holder for
$__________ and the making of an initial payment by the Holder with
respect to the Forward Contract of $__________;
(c) in the case of purchases and sales of STRYPES subsequent to the
original issuance thereof, the purchase price paid (or received) by a
Holder will be allocated by the Holder between the Debt Instrument and
the Forward Contract based upon their relative fair market values (as
determined on the date of acquisition or disposition);
(d) to file all United States Federal, state and local income, franchise
and estate tax returns consistent with the treatment of each STRYPES
as a Unit consisting of the Debt Instrument and the Forward Contract
(in the absence of any change or clarification in applicable law, by
regulation or otherwise, requiring a different characterization or
treatment of the STRYPES).
ARTICLE SIX
AMENDMENT OF CERTAIN PROVISIONS
OF THE PRINCIPAL INDENTURE
SECTION 601. The Principal Indenture is hereby amended, solely with
respect to the STRYPES, as follows:
(a) By deleting Section 308 of the Principal Indenture in its entirety and
inserting in its stead the following:
"SECTION 308. Persons Deemed Owners. Prior to due presentment of a STRYPES
Certificate for registration of transfer of STRYPES evidenced thereby, the
Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such STRYPES Certificate is registered as the
owner of the STRYPES evidenced thereby for the purpose of receiving
delivery or payment of the Maturity Consideration or Tax Event Redemption
Price in respect of, and (subject to Sections 305 and 307) interest on,
such STRYPES and for all other purposes whatsoever, whether or not such
STRYPES be overdue, and neither the Company, the Trustee nor any agent of
the Company or the Trustee shall be affected by notice to the contrary."
(b) By deleting Section 501 of the Principal Indenture in its entirety and
inserting in its stead the following:
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"SECTION 501. Events of Default. "Event of Default", wherever used herein with
respect to STRYPES, means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) failure to deliver or pay the Maturity Consideration on the
Maturity Date, or to pay the Tax Event Redemption Price on the Redemption
Date; or
(2) failure to pay any interest on any STRYPES when due, and
continuance of such failure for a period of 30 days; or
(3) failure to perform any other covenant of the Company in this
Indenture (other than a covenant a failure in whose performance is
elsewhere in this Section specifically dealt with), and the continuance of
such failure for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee, or to the
Company and the Trustee by the Holders of at least 10% of the aggregate
issue price of the Outstanding STRYPES a written notice specifying such
failure and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or
(4) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Company in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Company or for any
substantial part of its property, or ordering the winding-up or liquidation
of its affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(5) the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of the Company or for any substantial
part of its property, or shall fail generally to pay its debts as they
become due or shall take any corporate action in furtherance of any of the
foregoing."
(c) By deleting Section 502 of the Principal Indenture in its entirety and
inserting in its stead the following:
"SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default (other than an Event of Default specified in Section
501(4) or 501(5)) occurs and is continuing, then and in every such case the
Trustee or the Holders of not less than 25% of the aggregate issue price of
the Outstanding STRYPES may declare an amount equal to the issue price of
all the STRYPES to be due and payable immediately, by a notice in writing
to the Company (and to the Trustee if given by the Holders), and upon
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any such declaration such amount shall become immediately due and payable
in cash. If an Event of Default specified in Section 501(4) or 501(5)
occurs, an amount equal to the issue price of all the STRYPES shall
automatically, and without any declaration or other action on the part of
the Trustee or any Holder, become immediately due and payable in cash.
At any time after such a declaration of acceleration has been made or an
Event of Default specified in Section 501(4) or 501(5) has occurred, and
before a judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter provided, the Holders of a majority of the
aggregate issue price of the Outstanding STRYPES, by written notice to the
Company and the Trustee, may rescind and annul such declaration or Event of
Default and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue installments of interest on all STRYPES,
(B) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest at the rate borne
by the STRYPES, and
(C) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel,
and
(2) all Events of Default with respect to the STRYPES, other than the
non-payment of the amount equal to the issue price of all the STRYPES
due solely by reason of such declaration of acceleration or Event of
Default specified in Section 501(4) or 501(5), have been cured or
waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon."
(d) By deleting the first paragraph of Section 503 of the Principal
Indenture in its entirety and inserting in its stead the following:
"The Company covenants that, if default is made in the payment of any
installment of interest on any STRYPES (other than interest due on the
Maturity Date) when such interest becomes due and payable and such default
continues for a period of 30 days, the Company will, upon demand of the
Trustee, pay to it, for the benefit of the Holders of such STRYPES, an
amount equal to the issue price of all the STRYPES, the whole amount of
interest then due and payable on such STRYPES and, to the extent that
payment of such interest shall be legally enforceable, interest on any
overdue interest, at the rate borne by the STRYPES, and, in addition
thereto, such further amount as shall
18
<PAGE>
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
The Company further covenants that, if the Maturity Consideration or
any interest due on the Maturity Date is not delivered or paid in respect
of any STRYPES on the Maturity Date or if the Tax Event Redemption Price is
not delivered or paid in respect of any STRYPES on the Redemption Date, the
Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such STRYPES, the Maturity Consideration or Tax Event Redemption
Price, as the case may be, then due and payable on such STRYPES, the whole
amount of interest then due and payable on such STRYPES and, to the extent
that payment of such interest shall be legally enforceable, interest on any
Maturity Consideration or Tax Event Redemption Price, as the case may be,
that is overdue and on any overdue interest, at the rate borne by the
STRYPES, and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel."
(e) By deleting Section 506 of the Principal Indenture in its entirety and
inserting in its stead the following:
"SECTION 506. Application of Money Collected. Any money collected by the
Trustee pursuant to this Article shall be applied in the following order,
at the date or dates fixed by the Trustee and, in case of the distribution
of such money on account of the Maturity Consideration, the Tax Event
Redemption Price or interest, upon presentation of the relevant STRYPES
Certificate and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
607;
SECOND: To the payment of any amounts then due and unpaid on the
STRYPES in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according
to the amounts due and payable on such STRYPES; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto."
(f) By deleting Section 508 of the Principal Indenture in its entirety and
inserting in its stead the following:
"SECTION 508. Unconditional Right of Holders to Receive the Maturity
Consideration and Interest. Notwithstanding any other provision in this
Indenture, the Holder of any STRYPES shall have the right, which is
absolute and unconditional, to receive (subject to Section 502) payment of
the Maturity Consideration or Tax Event Redemption Price in respect of and
(subject to Sections 305 and 307) interest on such STRYPES and to
19
<PAGE>
institute suit for the enforcement of any such payment, and such right
shall not be impaired without the consent of such Holder."
(g) By deleting the first sentence of Section 513 of the Principal
Indenture in its entirety and inserting in its stead the following:
"The Holders of not less than a majority of the aggregate issue price of
the Outstanding STRYPES may on behalf of the Holders of all STRYPES waive
any past default hereunder and its consequences, except a default
(1) in the delivery or payment of the Maturity Consideration or the
Tax Event Redemption Price or in the payment of interest on any STRYPES, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding STRYPES affected."
(h) By deleting Section 801 of the Principal Indenture in its entirety and
inserting in its stead the following:
"SECTION 801. Consolidations and Mergers of the Company and Sales, Leases
and Conveyances Permitted Subject to Certain Conditions. The Company may
consolidate with, or sell, lease or convey all or substantially all of its
assets to, or merge with or into any other corporation, provided that in
any such case, (i) either the Company shall be the continuing corporation,
or the successor corporation shall be a corporation organized and existing
under the laws of the United States of America or a State thereof and such
successor corporation shall expressly assume the due and punctual delivery
or payment of the Maturity Consideration or Tax Event Redemption Price in
respect of and interest on all the STRYPES, according to their tenor, and
the due and punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed by the Company by supplemental
indenture satisfactory to the Trustee, executed and delivered to the
Trustee by such corporation, and (ii) the Company or such successor
corporation, as the case may be, shall not, immediately after such merger
or consolidation, or such sale, lease or conveyance, be in default in the
performance of any such covenant or condition."
(i) By deleting the first sentence of Section 902 of the Principal
Indenture in its entirety and inserting in its stead the following:
"With the consent of the Holders of not less than 66-2/3% of the aggregate
issue price of the Outstanding STRYPES, by Act of said Holders delivered to
the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of STRYPES under
20
<PAGE>
this Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding STRYPES
affected thereby,
(1) change the Maturity Date or the Stated Maturity of any installment
of interest on any STRYPES, or reduce the amount of Maturity Consideration
deliverable or payable on the Maturity Date or reduce the amount of
interest payable on any STRYPES or reduce the amount of cash payable with
respect to any STRYPES upon acceleration of the Maturity, or change the
provisions with respect to redemption of any STRYPES, or change any Place
of Payment where, or the coin or currency in which, any interest on or any
amount of cash payable with respect to any STRYPES is payable, or impair
the right to institute suit for the enforcement of (i) any payment on or
with respect to any STRYPES or (ii) the delivery or payment of the Maturity
Consideration or Tax Event Redemption Price with respect to any STRYPES, or
(2) reduce the percentage of the aggregate issue price of Outstanding
STRYPES, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this Indenture, or reduce
the requirements of Section 1404 for quorum or voting, or
(3) modify any of the provisions of this Section, or Section 513, or
Section 1007, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding STRYPES affected
thereby.
(j) By deleting Section 1001 of the Principal Indenture in its entirety and
inserting in its stead the following:
"SECTION 1001. Delivery and Payment of the Maturity Consideration or Tax
Event Redemption Price and Interest. The Company covenants and agrees for
the benefit of the Holders of the STRYPES that it will duly and punctually
deliver or pay the Maturity Consideration or Tax Event Redemption Price in
respect of, and interest on, the STRYPES in accordance with the terms of
the STRYPES and this Indenture."
(k) By deleting Section 1003 of the Principal Indenture in its entirety and
inserting in its stead the following:
"SECTION 1003. Money for Security Payments to Be Held in Trust. If the
Company shall at any time act as its own Paying Agent, it will, on or
before each due date of the Maturity Consideration or Tax Event Redemption
Price in respect of, or interest on, any of the STRYPES, segregate and hold
in trust for the benefit of the Persons entitled thereto consideration in
an amount sufficient to deliver or pay the Maturity Consideration or Tax
Event Redemption Price or a sum sufficient to pay the interest so becoming
due until such consideration shall be delivered or paid to such Persons or
otherwise disposed
21
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of as herein provided and will promptly notify the Trustee of its action or
failure so to act.
Whenever the Company shall have one or more Paying Agents, it will, prior
to each due date of the Maturity Consideration or Tax Event Redemption
Price in respect of, or interest on, any STRYPES, deposit with a Paying
Agent consideration in an amount sufficient to deliver or pay the Maturity
Consideration or Tax Event Redemption Price or a sum sufficient to pay the
interest so becoming due, such consideration to be held as provided by the
Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so to
act.
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall
agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust
Indenture Act applicable to it as Paying Agent and (ii) during the
continuance of any default by the Company (or any other obligor upon the
STRYPES) in the making of any payment in respect of the STRYPES, upon the
written request of the Trustee, forthwith pay to the Trustee all sums held
in trust by such Paying Agent as such.
The Company may at any time, for any purpose, pay, or by Company Order
direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon
the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability
with respect to such money.
Any consideration deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the interest on or
delivery upon discharge of any STRYPES and remaining unclaimed for two
years after such consideration has become due and payable shall be paid to
the Company on Company Request, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such STRYPES shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust consideration, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee
or such Paying Agent, before being required to make any such repayment, may
at the expense of the Company cause to be published once, in an Authorized
Newspaper in each Place of Payment or to be mailed to Holders of the
STRYPES, or both, notice that such consideration remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days
from the date of such publication or mailing, any unclaimed balance of such
consideration then remaining will be repaid to the Company."
SECTION 6.02 Except as otherwise specifically provided in this
Supplemental Indenture, whenever in the Principal Indenture there is mentioned,
in any context, the principal of or
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principal amount of any Security of any series or a percentage in principal
amount of the Outstanding Securities of any series, such mention shall be deemed
to be, solely with respect to the STRYPES, the issue price of the STRYPES or a
percentage of the aggregate issue price of the Outstanding STRYPES.
ARTICLE SEVEN
MISCELLANEOUS
SECTION 701. The Principal Indenture, as supplemented and amended by this
Supplemental Indenture and all other indentures supplemental thereto, is in all
respects ratified and confirmed, and the Principal Indenture, this Supplemental
Indenture and all indentures supplemental thereto shall be read, taken and
construed as one and the same instrument.
SECTION 702. If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this Supplemental
Indenture by any of the provisions of the Trust Indenture Act, such required
provision shall control.
SECTION 703. All covenants and agreements in this Supplemental Indenture
by the Company shall bind its successors and assigns, whether so expressed or
not.
SECTION 704. In case any provision in this Supplemental Indenture or in
the STRYPES shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions (or of the other series of
Securities) shall not in any way be affected or impaired thereby.
SECTION 705. Nothing in this Supplemental Indenture, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders of the STRYPES, any benefit or any legal or equitable
right, remedy or claim under this Supplemental Indenture.
SECTION 706. This Supplemental Indenture and each STRYPES shall be deemed
to be a contract made under the laws of the State of New York and this
Supplemental Indenture and each such STRYPES shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 707. All terms used in this Supplemental Indenture not otherwise
defined herein that are defined in the Principal Indenture shall have the
meanings set forth therein.
SECTION 708. This Supplemental Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
23
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SECTION 709. The recitals contained herein shall be taken as statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of the
Principal Indenture or this Supplemental Indenture.
24
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IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
Merrill Lynch & Co., Inc.
By: ____________________________
Name:
Title:
Chemical Bank, as Trustee
By: ____________________________
Name:
Title:
25
<PAGE>
EXHIBIT A
[Form of Face of STRYPES Certificate]
[THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN CERTIFICATED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS
A WHOLE BY THE DEPOSITORY TRUST COMPANY (THE "DEPOSITORY") TO A NOMINEE OF THE
DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS SECURITY IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.]
No. ____________ ___________ STRYPES
CUSIP NO. ___________
MERRILL LYNCH & CO., INC.
Structured Yield Product Exchangeable for Stock/SM/
__% STRYPES/SM/ Due _________, 1999
(Payable with Shares of Common Stock,
par value $1.00 per share, of Cox Communications, Inc.)
Issue Price Per STRYPES: $_____
Merrill Lynch & Co., Inc., a Delaware corporation (hereinafter called the
"Company", which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay and
discharge each STRYPES evidenced hereby on _________, 1999 (the "Maturity Date")
(subject to the Company's right to redeem the STRYPES evidenced hereby, as
described on the reverse hereof) by delivering to
_____________________________________, or registered assigns, a number of shares
(such number of shares, the "Payment Rate") of common stock, par value $1.00 per
share ("Cox
A-1
<PAGE>
Common Stock"), of Cox Communications, Inc. ("Cox") determined in accordance
with the Payment Rate Formula (as defined below), and to pay interest (computed
on the basis of a 360-day year of twelve 30-day months) on such STRYPES from
_______, 1996, or from the most recent Interest Payment Date to which interest
has been paid or provided for, on ___________, ______, __________ and
___________ in each year, beginning ___________, 1996, and on the Maturity Date,
at the rate of ___% of the Issue Price per annum, until the Maturity Date or
such earlier date on which such STRYPES is redeemed or the Issue Price of such
STRYPES is repaid in accordance with the provisions described below. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in said Indenture, be paid to the Person in whose
name this STRYPES Certificate (or one or more Predecessor STRYPES Certificates)
is registered at the close of business on the last day (whether or not a
Business Day) of the calendar month immediately preceding such Interest Payment
Date (each a "Regular Record Date"). In any case where such Interest Payment
Date shall not be a Business Day, then (notwithstanding any other provision of
said Indenture or this STRYPES Certificate) payment of such interest need not be
made on such date, but may be made on the next succeeding Business Day with the
same force and effect as if made on such date, and, if such payment is so made,
no interest shall accrue for the period from and after such date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to be
payable to the registered Holder on the relevant Regular Record Date, and may be
paid to the Person in whose name this STRYPES Certificate (or one or more
Predecessor STRYPES Certificates) is registered at the close of business on a
Special Record Date for the payment of such interest to be fixed by the Trustee
hereinafter referred to, notice whereof shall be given to Holders of STRYPES not
less than 10 days prior to such Special Record Date, or may be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the STRYPES may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.
The Payment Rate shall be determined in accordance with the following
formula (the "Payment Rate Formula"), subject to adjustment as a result of
certain dilution events relating to the Cox Common Stock as provided for in the
Indenture: (a) if the Maturity Price (as defined below) is greater than or
equal to $_____ per share of Cox Common Stock (the "Threshold Appreciation
Price"), _____ shares of Cox Common Stock per STRYPES, (b) if the Maturity Price
is less than the Threshold Appreciation Price but is greater than $_____ per
share of Cox Common Stock (the "Initial Price"), a fractional share of Cox
Common Stock per STRYPES so that the value thereof (determined based on the
Maturity Price) is equal to the Initial Price (such fractional share being
calculated to the nearest 1/10,000th of a share or, if there is not a nearest
1/10,000th of a share, to the next higher 1/10,000th of a share) and (c) if the
Maturity Price is less than or equal to the Initial Price, one share of Cox
Common Stock per STRYPES. Notwithstanding the foregoing, the Company may, at
its option in lieu of delivering shares of Cox Common Stock, deliver cash in an
amount equal to the value of such number of shares of Cox Common Stock at the
Maturity Price as provided in the Indenture. Such number of shares of Cox
Common Stock (or amount of cash or, in the event there shall occur a
Reorganization Event as provided in the Indenture, cash, securities and/or other
property, in lieu thereof) deliverable upon payment and discharge hereof is
hereinafter referred to as the "Maturity Consideration." The term "Maturity
Price" means, except as otherwise provided in the
A-2
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Indenture, the average Closing Price per share of Cox Common Stock on the 20
Trading Days immediately prior to, but not including, the second Trading Day
preceding the Maturity Date. The term "Closing Price" means, with respect to
any security on any date of determination, the closing sale price (or, if no
closing price is reported, the last reported sale price) of such security on the
New York Stock Exchange (the "NYSE") on such date or, if such security is not
listed for trading on the NYSE on any such date, as reported in the composite
transactions for the principal United States securities exchange on which such
security is so listed, or if such security is not so listed on a United States
national or regional securities exchange, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System, or, if such
security is not so reported, the last quoted bid price for such security in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization or, if such bid price is not available, the market value of such
security on such date as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Company. The term
"Trading Day" means, with respect to any security the Closing Price of which is
being determined, a day on which such security (A) is not suspended from trading
on any national or regional securities exchange or association or over-the-
counter market at the close of business and (B) has traded at least once on the
national or regional securities exchange or association or over-the-counter
market that is the primary market for the trading of such security.
Interest on the STRYPES evidenced hereby will be payable, and delivery of
the Maturity Consideration in payment of the STRYPES evidenced hereby on the
Maturity Date will be made, upon surrender of this STRYPES Certificate, at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, The City of New York, and payment of interest on the STRYPES
evidenced by this STRYPES Certificate (and, if the Company elects to deliver
cash in lieu of Cox Common Stock on the Maturity Date, the amount of cash
payable on the Maturity Date) will be made in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that at the option of the
Company payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear on the Securities Register.
ADDITIONAL PROVISIONS OF THIS STRYPES CERTIFICATE ARE CONTAINED ON THE
REVERSE HEREOF AND SUCH PROVISIONS SHALL HAVE THE SAME EFFECT AS THOUGH FULLY
SET FORTH IN THIS PLACE.
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this STRYPES Certificate shall not be
entitled to any benefit under
A-3
<PAGE>
the Indenture, or be valid or obligatory for any purpose. "Structured Yield
Product Exchangeable for Stock" and "STRYPES" are service marks of Merrill Lynch
& Co., Inc.
IN WITNESS WHEREOF, Merrill Lynch & Co., Inc. has caused this instrument to
be duly executed under its corporate seal.
Dated:
Merrill Lynch & Co., Inc.
By:_____________________________
Name:
Title:
Attest:________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This certificate evidences Securities of the series designated herein and
referred to in the within-mentioned Indenture.
Chemical Bank, as Trustee
By:_______________________________
Authorized Officer
A-4
<PAGE>
[Form of Reverse of STRYPES Certificate]
MERRILL LYNCH & CO., INC.
Structured Yield Product Exchangeable for Stock
___% STRYPES Due _________, 1999
(Payable with Shares of Common Stock, par value $1.00 per share,
of Cox Communications, Inc.)
This STRYPES Certificate evidences part of a duly authorized issue of
unsecured and unsubordinated debentures, notes or other evidences of senior
indebtedness (hereinafter called the "Securities") of the Company of the series
hereinafter specified, all such Securities issued and to be issued under an
indenture dated as of April 1, 1983 and restated as of April 1, 1987, as amended
and supplemented as of ______, 1996, between the Company and Chemical Bank
(successor by merger to Manufacturers Hanover Trust Company), as Trustee (the
indenture dated as of April 1, 1983 and restated as of April 1, 1987, as
amended, restated and supplemented from time to time, the "Indenture"), to which
Indenture and all other indentures supplemental thereto reference is hereby made
for a statement of the rights and limitation of rights thereunder of the Holders
of the Securities and of the rights, obligations, duties and immunities of the
Trustee for each series of Securities and of the Company, and the terms upon
which the Securities are and are to be authenticated and delivered. As provided
in the Indenture, the Securities may be issued in one or more series, which
different series may be issued in various aggregate principal amounts, may be
denominated in currencies other than U.S. Dollars (including composite
currencies), may mature at different times, may bear interest, if any, at
different rates, may be subject to different redemption provisions, if any, may
be subject to different sinking, purchase and analogous funds, if any, may be
subject to different covenants and Events of Default and may otherwise vary as
in the Indenture provided or permitted. This STRYPES Certificate evidences
Securities of the series designated as Structured Yield Product Exchangeable for
Stock, ___% STRYPES Due __________, 1999 (each, a "STRYPES").
The STRYPES will be redeemable at the option of the Company, in whole but
not in part, at any time from and after the date (the "Tax Event Date") on which
a Tax Event (as defined below) shall occur at a price per STRYPES (the "Tax
Event Redemption Price") equal to (a) an amount of cash equal to the sum of (x)
all accrued and unpaid interest on such STRYPES to the date fixed for redemption
(the "Redemption Date"), (y) the sum of all interest payments on such STRYPES
due after the Redemption Date and on or prior to the Maturity Date and (z)
$___________, plus (b) a number of shares of Cox Common Stock determined in
accordance with the Payment Rate Formula, with the Redemption Date being deemed
to be the Maturity Date for purposes of calculating the Maturity Price.
A "Tax Event" means that CEI shall have delivered to the Company an opinion
(the "Tax Event Opinion") from independent tax counsel experienced in such
matters to the effect
A-5
<PAGE>
that, as a result of (a) any amendment or proposed amendment to, or change
(including any announced prospective change) or proposed change in, the laws (or
any regulations thereunder) of the United States or any taxing authority thereof
or therein or (b) any amendment to, or change in, an interpretation or
application of such laws or regulations by any legislative body, court,
governmental agency or regulatory authority, enacted, promulgated, issued or
announced or which interpretation is issued or announced or which action is
taken, on or after __________, 1996, there is more than an insubstantial risk
that a corporation that sells or otherwise disposes of stock in another
corporation on a date that is after ______________, 1996 and that is on or prior
to the Maturity Date would not be permitted to specifically identify the stock
sold or disposed of for purposes of determining the amount of such corporation's
gain or loss on the stock sold or disposed of for United States Federal income
tax purposes.
The STRYPES are not subject to any sinking fund or other mandatory
redemption provisions. The STRYPES are not payable at the option of the Holders
prior to the the Maturity Date.
If an Event of Default with respect to the STRYPES, as defined in the
Indenture, shall occur and be continuing, then an amount equal to the issue
price of all the STRYPES may be declared immediately due and payable in cash in
the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the STRYPES under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of 66-2/3%
of the aggregate issue price of the Outstanding STRYPES. The Indenture also
contains provisions permitting the Holders of a majority of the aggregate issue
price of the Outstanding STRYPES, on behalf of the Holders of all STRYPES, to
waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences with respect to
the STRYPES. Any such consent or waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of the
STRYPES evidenced by this STRYPES Certificate and of any STRYPES evidenced by a
STRYPES Certificate issued upon the transfer hereof or in exchange herefor or in
lieu hereof whether or not notation of such consent of waiver is made upon this
STRYPES Certificate.
No reference herein to the Indenture and no provision of this STRYPES
Certificate or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to deliver or pay the interest on,
and Maturity Consideration in respect of, the STRYPES evidenced by this STRYPES
Certificate at the times, place and rate, and in the manner, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the STRYPES evidenced by this STRYPES Certificate are transferable on the
Security Register of the Company, upon surrender of this STRYPES Certificate for
registration of transfer at
A-6
<PAGE>
the office or agency of the Company to be maintained for that purpose in The
City of New York, New York, or at any other office or agency of the Company
maintained for that purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new STRYPES Certificates, evidencing the same
aggregate number of STRYPES, will be issued to the designated transferee or
transferees.
No service charge shall be made for any such transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the registration of such transfer
or exchange, other than certain exchanges not involving any transfer. Certain
terms used in this STRYPES Certificate which are defined in the Indenture have
the meanings set forth therein.
This STRYPES Certificate shall for all purposes be governed by, and
construed in accordance with, the laws of the State of New York. The Company,
the Trustee and any agent of the Company or the Trustee may treat the Person in
whose name this STRYPES Certificate is registered as the owner of the STRYPES
evidenced hereby for the purpose of receiving payment as herein provided and for
all other purposes, whether or not the STRYPES be overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
A-7
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations.
TEN COM -- as tenants in UNIF GIFT MIN -- _____ Custodian _______
common (Cust) (Minor)
TEN ENT -- as tenants by the Under Uniform Gifts to Minors Act
entireties ________________________
(State)
JT TEN -- as joint tenants with
right of survivorship
and not as tenants in common
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
unto
PLEASE INSERT SOCIAL SECURITY
OR TAXPAYER I.D. OR OTHER
IDENTIFYING NUMBER OF
ASSIGNEE
- ----------------------------------------------
(Please print or typewrite name and address including postal
zip code of assignee)
___________________________ STRYPES and all rights thereunder, hereby
irrevocably constituting and appointing
attorney to transfer said STRYPES on the books of the Company, with full power
of substitution in the premises.
Dated:
------------------------------------
NOTICE: The signature to this assignment must correspond with
the name as written upon on the face of the within Security
in every particular, without alteration or enlargement or any
change whatever.
A-8
<PAGE>
EXHIBIT 4(c)
[Form of Face of STRYPES Certificate]
[THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN CERTIFICATED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS
A WHOLE BY THE DEPOSITORY TRUST COMPANY (THE "DEPOSITORY") TO A NOMINEE OF THE
DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS SECURITY IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.]
No. ____________ ___________ STRYPES
CUSIP NO. ___________
MERRILL LYNCH & CO., INC.
Structured Yield Product Exchangeable for Stock/SM/
__% STRYPES/SM/ Due _________, 1999
(Payable with Shares of Common Stock,
par value $1.00 per share, of Cox Communications, Inc.)
Issue Price Per STRYPES: $_____
Merrill Lynch & Co., Inc., a Delaware corporation (hereinafter called the
"Company", which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay and
discharge each STRYPES evidenced hereby on _________, 1999 (the "Maturity Date")
(subject to the Company's right to redeem the STRYPES evidenced hereby, as
described on the reverse hereof) by delivering to
_____________________________________, or registered assigns, a number of shares
(such number of shares, the "Payment Rate") of common stock, par value $1.00 per
share ("Cox Common Stock"), of Cox Communications, Inc. ("Cox") determined in
accordance with the
<PAGE>
Payment Rate Formula (as defined below), and to pay interest (computed on the
basis of a 360-day year of twelve 30-day months) on such STRYPES from _______,
1996, or from the most recent Interest Payment Date to which interest has been
paid or provided for, on ___________, ______, __________ and ___________ in each
year, beginning ___________, 1996, and on the Maturity Date, at the rate of ___%
of the Issue Price per annum, until the Maturity Date or such earlier date on
which such STRYPES is redeemed or the Issue Price of such STRYPES is repaid in
accordance with the provisions described below. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in said Indenture, be paid to the Person in whose name this STRYPES
Certificate (or one or more Predecessor STRYPES Certificates) is registered at
the close of business on the last day (whether or not a Business Day) of the
calendar month immediately preceding such Interest Payment Date (each a "Regular
Record Date"). In any case where such Interest Payment Date shall not be a
Business Day, then (notwithstanding any other provision of said Indenture or
this STRYPES Certificate) payment of such interest need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on such date, and, if such payment is so made, no interest
shall accrue for the period from and after such date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to the
registered Holder on the relevant Regular Record Date, and may be paid to the
Person in whose name this STRYPES Certificate (or one or more Predecessor
STRYPES Certificates) is registered at the close of business on a Special Record
Date for the payment of such interest to be fixed by the Trustee hereinafter
referred to, notice whereof shall be given to Holders of STRYPES not less than
10 days prior to such Special Record Date, or may be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the STRYPES may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.
The Payment Rate shall be determined in accordance with the following
formula (the "Payment Rate Formula"), subject to adjustment as a result of
certain dilution events relating to the Cox Common Stock as provided for in the
Indenture: (a) if the Maturity Price (as defined below) is greater than or
equal to $_____ per share of Cox Common Stock (the "Threshold Appreciation
Price"), _____ shares of Cox Common Stock per STRYPES, (b) if the Maturity Price
is less than the Threshold Appreciation Price but is greater than $_____ per
share of Cox Common Stock (the "Initial Price"), a fractional share of Cox
Common Stock per STRYPES so that the value thereof (determined based on the
Maturity Price) is equal to the Initial Price (such fractional share being
calculated to the nearest 1/10,000th of a share or, if there is not a nearest
1/10,000th of a share, to the next higher 1/10,000th of a share) and (c) if the
Maturity Price is less than or equal to the Initial Price, one share of Cox
Common Stock per STRYPES. Notwithstanding the foregoing, the Company may, at
its option in lieu of delivering shares of Cox Common Stock, deliver cash in an
amount equal to the value of such number of shares of Cox Common Stock at the
Maturity Price as provided in the Indenture. Such number of shares of Cox
Common Stock (or amount of cash or, in the event there shall occur a
Reorganization Event as provided in the Indenture, cash, securities and/or other
property, in lieu thereof) deliverable upon payment and discharge
2
<PAGE>
hereof is hereinafter referred to as the "Maturity Consideration." The term
"Maturity Price" means, except as otherwise provided in the Indenture, the
average Closing Price per share of Cox Common Stock on the 20 Trading Days
immediately prior to, but not including, the second Trading Day preceding the
Maturity Date. The term "Closing Price" means, with respect to any security on
any date of determination, the closing sale price (or, if no closing price is
reported, the last reported sale price) of such security on the New York Stock
Exchange (the "NYSE") on such date or, if such security is not listed for
trading on the NYSE on any such date, as reported in the composite transactions
for the principal United States securities exchange on which such security is so
listed, or if such security is not so listed on a United States national or
regional securities exchange, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System, or, if such security is not
so reported, the last quoted bid price for such security in the over-the-counter
market as reported by the National Quotation Bureau or similar organization or,
if such bid price is not available, the market value of such security on such
date as determined by a nationally recognized independent investment banking
firm retained for this purpose by the Company. The term "Trading Day" means,
with respect to any security the Closing Price of which is being determined, a
day on which such security (A) is not suspended from trading on any national or
regional securities exchange or association or over-the-counter market at the
close of business and (B) has traded at least once on the national or regional
securities exchange or association or over-the-counter market that is the
primary market for the trading of such security.
Interest on the STRYPES evidenced hereby will be payable, and delivery of
the Maturity Consideration in payment of the STRYPES evidenced hereby on the
Maturity Date will be made, upon surrender of this STRYPES Certificate, at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, The City of New York, and payment of interest on the STRYPES
evidenced by this STRYPES Certificate (and, if the Company elects to deliver
cash in lieu of Cox Common Stock on the Maturity Date, the amount of cash
payable on the Maturity Date) will be made in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that at the option of the
Company payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear on the Securities Register.
ADDITIONAL PROVISIONS OF THIS STRYPES CERTIFICATE ARE CONTAINED ON THE
REVERSE HEREOF AND SUCH PROVISIONS SHALL HAVE THE SAME EFFECT AS THOUGH FULLY
SET FORTH IN THIS PLACE.
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this STRYPES Certificate shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose. "Structured Yield
3
<PAGE>
Product Exchangeable for Stock" and "STRYPES" are service marks of Merrill Lynch
& Co., Inc.
IN WITNESS WHEREOF, Merrill Lynch & Co., Inc. has caused this instrument to
be duly executed under its corporate seal.
Dated:
Merrill Lynch & Co., Inc.
By:_____________________________
Name:
Title:
Attest:________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This certificate evidences Securities of the series designated herein and
referred to in the within-mentioned Indenture.
Chemical Bank, as Trustee
By:_______________________________
Authorized Officer
4
<PAGE>
[Form of Reverse of STRYPES Certificate]
MERRILL LYNCH & CO., INC.
Structured Yield Product Exchangeable for Stock
___% STRYPES Due _________, 1999
---
(Payable with Shares of Common Stock, par value $1.00 per share,
of Cox Communications, Inc.)
This STRYPES Certificate evidences part of a duly authorized issue of
unsecured and unsubordinated debentures, notes or other evidences of senior
indebtedness (hereinafter called the "Securities") of the Company of the series
hereinafter specified, all such Securities issued and to be issued under an
indenture dated as of April 1, 1983 and restated as of April 1, 1987, as amended
and supplemented as of ______, 1996, between the Company and Chemical Bank
(successor by merger to Manufacturers Hanover Trust Company), as Trustee (the
indenture dated as of April 1, 1983 and restated as of April 1, 1987, as
amended, restated and supplemented from time to time, the "Indenture"), to which
Indenture and all other indentures supplemental thereto reference is hereby made
for a statement of the rights and limitation of rights thereunder of the Holders
of the Securities and of the rights, obligations, duties and immunities of the
Trustee for each series of Securities and of the Company, and the terms upon
which the Securities are and are to be authenticated and delivered. As provided
in the Indenture, the Securities may be issued in one or more series, which
different series may be issued in various aggregate principal amounts, may be
denominated in currencies other than U.S. Dollars (including composite
currencies), may mature at different times, may bear interest, if any, at
different rates, may be subject to different redemption provisions, if any, may
be subject to different sinking, purchase and analogous funds, if any, may be
subject to different covenants and Events of Default and may otherwise vary as
in the Indenture provided or permitted. This STRYPES Certificate evidences
Securities of the series designated as Structured Yield Product Exchangeable for
Stock, ___% STRYPES Due __________, 1999 (each, a "STRYPES").
The STRYPES will be redeemable at the option of the Company, in whole but
not in part, at any time from and after the date (the "Tax Event Date") on which
a Tax Event (as defined below) shall occur at a price per STRYPES (the "Tax
Event Redemption Price") equal to (a) an amount of cash equal to the sum of (x)
all accrued and unpaid interest on such STRYPES to the date fixed for redemption
(the "Redemption Date"), (y) the sum of all interest payments on such STRYPES
due after the Redemption Date and on or prior to the Maturity Date and (z)
$___________, plus (b) a number of shares of Cox Common Stock determined in
accordance with the Payment Rate Formula, with the Redemption Date being deemed
to be the Maturity Date for purposes of calculating the Maturity Price.
5
<PAGE>
A "Tax Event" means that CEI shall have delivered to the Company an opinion
(the "Tax Event Opinion") from independent tax counsel experienced in such
matters to the effect that, as a result of (a) any amendment or proposed
amendment to, or change (including any announced prospective change) or proposed
change in, the laws (or any regulations thereunder) of the United States or any
taxing authority thereof or therein or (b) any amendment to, or change in, an
interpretation or application of such laws or regulations by any legislative
body, court, governmental agency or regulatory authority, enacted, promulgated,
issued or announced or which interpretation is issued or announced or which
action is taken, on or after __________, 1996, there is more than an
insubstantial risk that a corporation that sells or otherwise disposes of stock
in another corporation on a date that is after ______________, 1996 and that is
on or prior to the Maturity Date would not be permitted to specifically identify
the stock sold or disposed of for purposes of determining the amount of such
corporation's gain or loss on the stock sold or disposed of for United States
Federal income tax purposes.
The STRYPES are not subject to any sinking fund or other mandatory
redemption provisions. The STRYPES are not payable at the option of the Holders
prior to the the Maturity Date.
If an Event of Default with respect to the STRYPES, as defined in the
Indenture, shall occur and be continuing, then an amount equal to the issue
price of all the STRYPES may be declared immediately due and payable in cash in
the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the STRYPES under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of 66-2/3%
of the aggregate issue price of the Outstanding STRYPES. The Indenture also
contains provisions permitting the Holders of a majority of the aggregate issue
price of the Outstanding STRYPES, on behalf of the Holders of all STRYPES, to
waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences with respect to
the STRYPES. Any such consent or waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of the
STRYPES evidenced by this STRYPES Certificate and of any STRYPES evidenced by a
STRYPES Certificate issued upon the transfer hereof or in exchange herefor or in
lieu hereof whether or not notation of such consent of waiver is made upon this
STRYPES Certificate.
No reference herein to the Indenture and no provision of this STRYPES
Certificate or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to deliver or pay the interest on,
and Maturity Consideration in respect of, the STRYPES evidenced by this STRYPES
Certificate at the times, place and rate, and in the manner, herein prescribed.
6
<PAGE>
As provided in the Indenture and subject to certain limitations therein set
forth, the STRYPES evidenced by this STRYPES Certificate are transferable on the
Security Register of the Company, upon surrender of this STRYPES Certificate for
registration of transfer at the office or agency of the Company to be maintained
for that purpose in The City of New York, New York, or at any other office or
agency of the Company maintained for that purpose, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new STRYPES
Certificates, evidencing the same aggregate number of STRYPES, will be issued to
the designated transferee or transferees.
No service charge shall be made for any such transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the registration of such transfer
or exchange, other than certain exchanges not involving any transfer. Certain
terms used in this STRYPES Certificate which are defined in the Indenture have
the meanings set forth therein.
This STRYPES Certificate shall for all purposes be governed by, and
construed in accordance with, the laws of the State of New York. The Company,
the Trustee and any agent of the Company or the Trustee may treat the Person in
whose name this STRYPES Certificate is registered as the owner of the STRYPES
evidenced hereby for the purpose of receiving payment as herein provided and for
all other purposes, whether or not the STRYPES be overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
7
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations.
TEN COM -- as tenants in UNIF GIFT MIN -- _____ Custodian _______
common (Cust) (Minor)
TEN ENT -- as tenants by the Under Uniform Gifts to Minors Act
entireties ________________________
(State)
JT TEN -- as joint tenants with
right of survivorship
and not as tenants in common
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
unto
PLEASE INSERT SOCIAL SECURITY
OR TAXPAYER I.D. OR OTHER
IDENTIFYING NUMBER OF
ASSIGNEE
- ----------------------------------------------
(Please print or typewrite name and address including postal
zip code of assignee)
___________________________ STRYPES and all rights thereunder, hereby
irrevocably constituting and appointing
attorney to transfer said STRYPES on the books of the Company, with full power
of substitution in the premises.
Dated:
------------------------------------
NOTICE: The signature to this assignment must correspond
with the name as written upon on the face of the within
Security in every particular, without alteration or
enlargement or any change whatever.
8
<PAGE>
EXHIBIT 5
May 8, 1996
Merrill Lynch & Co., Inc.
World Financial Center
North Tower
New York, New York 10281-1334
Gentlemen:
We have acted as your counsel and are familiar with the corporate
proceedings had in connection with the proposed issuance and sale by Merrill
Lynch & Co., Inc. (the "Company") of up to 9,800,000 of its Structured Yield
Product Exchangeable for Stock, _____% STRYPES Due _________, 1999 (the
"Securities").
We have examined such documents and records as we deemed appropriate,
including the following:
(a) a copy of the Restated Certificate of Incorporation of the
Company, certified by the Secretary of State of the State of Delaware;
(b) a copy of the Company's Registration Statement on Form S-3, as
amended by Post-Effective Amendment No. 1 thereto, relating to the
Securities (as so amended, the "Registration Statement");
(c) a copy of the indenture with respect to the Company's senior debt
securities between the Company and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company), as trustee (the "Trustee"), dated as
of April 1, 1983, as amended and restated (the "Principal Indenture"), in
the form executed by the Company and the Trustee; and
(d) a copy of the supplemental indenture with respect to the
Securities between the Company and the Trustee (the "Supplemental
Indenture"), in the form filed as an exhibit to the Registration Statement.
The term "Indenture" shall mean the Principal Indenture as amended by the
Trust Indenture Reform Act of 1990 and as amended and supplemented by the
Supplemental Indenture.
Based upon the foregoing and upon such further investigation as we deem
relevant in the premises, we are of the opinion:
1. The Company has been duly incorporated under the laws of the State of
Delaware.
<PAGE>
2. The Principal Indenture has been duly and validly authorized, executed
and delivered by the Company and, as amended by the Trust Indenture Reform Act
of 1990, constitutes a valid and binding agreement of the Company, enforceable
in accordance with its terms.
3. The Supplemental Indenture has been duly authorized by the Company
and, when the Supplemental Indenture has been duly executed and delivered by the
Company and the Trustee, such Supplemental Indenture will constitute a valid and
binding agreement of the Company, enforceable in accordance with its terms.
4. When the Supplemental Indenture has been duly executed and delivered
by the Company and the Trustee, and when the Securities shall have been duly
authenticated or countersigned by the Trustee and duly issued under the
Indenture, such Securities will constitute valid and binding obligations of the
Company, enforceable in accordance with their terms.
With respect to enforcement, the above opinions are qualified to the extent
that enforcement of the Principal Indenture, the Supplemental Indenture or the
Securities may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws affecting enforcement of creditors' rights
generally and may be subject to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law).
We consent to the filing of this opinion as an exhibit to the Registration
Statement, to the quotation in the Registration Statement of our opinion with
respect to certain tax matters and to the use of our name wherever appearing in
the Registration Statement and any amendment thereto.
Very truly yours,
/s/ Brown & Wood
2
<PAGE>
EXHIBIT 10
5/8/96 DRAFT
STRYPES AGREEMENT
-----------------
THIS AGREEMENT is made as of this ___ day of May, 1996 between MERRILL
LYNCH CAPITAL SERVICES, INC. ("MLCS"), a Delaware corporation and wholly-owned
subsidiary of MERRILL LYNCH & CO., INC., a Delaware corporation ("ML & Co."), ML
& Co. and COX ENTERPRISES, INC., a Delaware corporation ("CEI").
WHEREAS, ML & Co. has filed with the Securities and Exchange Commission
(the "SEC") a registration statement on Form S-3 (File No. 33-65135) and Post-
Effective Amendment No. 1 thereto contemplating the offering of up to _______ of
its Structured Yield Product Exchangeable for Stock/SM), ____% STRYPES(SM) Due
_____, 1999 (the "STRYPES"), the terms of which require ML & Co. to pay and
discharge the STRYPES on _____, 1999 (the "Maturity Date") by delivering to the
holders thereof a specified number of shares of Class A Common Stock, par value
$1.00 per share (the "Cox Common Stock"), of Cox Communications, Inc., a
Delaware corporation ("Cox"), or, at ML & Co.'s option, cash with an equal
value. The terms of the STRYPES permit ML & Co., from and after a Tax Event
Date, to redeem the STRYPES, in whole but not in part, at the Tax Event
Redemption Price (as such terms are defined in the Supplemental Indenture
referred to below), consisting of a specified number of shares of Cox Common
Stock and an amount of cash determined as set forth in the Supplemental
Indenture (such amount of cash payable upon redemption being hereinafter
referred to as the "Redemption Cash Component").
WHEREAS, ML & Co. has agreed, pursuant to an underwriting agreement dated
the date hereof (the "Underwriting Agreement") among ML & Co., CEI and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Underwriter"), to issue and sell to the Underwriter an aggregate of _____
STRYPES (the "Initial STRYPES") and, at the Underwriter's option, all or any
part of ______ additional STRYPES (the "Option STRYPES") to cover over-
allotments, if any.
WHEREAS, the STRYPES are to be issued under an indenture, dated as of April
1, 1983 and restated as of April 1, 1987 (as amended and supplemented, the
"Principal Indenture"), between ML & Co. and Chemical Bank (successor by merger
to Manufacturers Hanover Trust Company), as trustee (the "Trustee"), as further
amended and supplemented by the Eighth Supplemental Indenture, dated as of May
__, 1996 (the "Supplemental Indenture"), between ML & Co. and the Trustee,
relating to the STRYPES. The Principal Indenture, as amended and supplemented
by the Supplemental Indenture, is hereinafter referred to as the "Indenture."
- -----------------------
/SM/ Service mark of Merrill Lynch & Co., Inc.
<PAGE>
WHEREAS, in order to obtain the cash and/or shares of Cox Common Stock (or,
in the event there shall occur a Reorganization Event, cash, securities and/or
other property in lieu thereof) required to satisfy its obligations under the
STRYPES, ML & Co. has agreed to purchase from MLCS, and MLCS has agreed to sell
to ML & Co., (i) concurrent with the issuance and sale of the Initial STRYPES,
an obligation of MLCS in the form of Exhibit A hereto, the aggregate principal
amount of which will be equal to the net proceeds to ML & Co. from the sale of
the Initial STRYPES and the payment terms (other than the interest rate) of
which will be identical to the payment terms of the Initial STRYPES (the
"Initial Subsidiary STRYPES") and (ii) concurrent with each issuance and sale of
any Option STRYPES, an additional obligation of MLCS in the form of Exhibit A
hereto, the aggregate principal amount of which will be equal to the net
proceeds to ML & Co. from the sale of such Option STRYPES and the payment terms
(other than the interest rate) of which will be identical to the payment terms
of such Option STRYPES (an "Option Subsidiary STRYPES"); the Initial Subsidiary
STRYPES and each Option Subsidiary STRYPES are hereinafter collectively referred
to as the "Subsidiary STRYPES."
WHEREAS, CEI owns a number of shares of Cox Common Stock in excess of the
maximum number that would be required by MLCS to satisfy its obligations under
the Subsidiary STRYPES.
WHEREAS, in exchange for certain consideration to be paid by MLCS and to be
established hereunder, MLCS and CEI desire to provide for the Periodic Payments
(as defined herein) and for the future acquisition, sale and delivery of that
number of shares of Cox Common Stock (or, in the event there shall occur a
Reorganization Event, cash, securities and/or other property in lieu thereof)
that would be required by MLCS to pay and discharge the Subsidiary STRYPES on
the Maturity Date or redeem the Subsidiary STRYPES on the Redemption Date,
without taking into account any default with respect to the Subsidiary STRYPES
or any acceleration of the maturity of the Subsidiary STRYPES resulting
therefrom (the number of shares of Cox Common Stock (or, in the event there
shall occur a Reorganization Event, such cash, securities and/or other property
in lieu thereof) that would be required to pay and discharge the Subsidiary
STRYPES on the Maturity Date, without taking into account any default with
respect to the Subsidiary STRYPES or any acceleration of the maturity of the
Subsidiary STRYPES resulting therefrom, are hereinafter referred to as the
"Maturity Contract Shares", and the number of shares of Cox Common Stock (or, in
the event there shall occur a Reorganization Event, such cash, securities and/or
other property in lieu thereof) that would be required to redeem the Subsidiary
STRYPES on the Redemption Date, without taking into account any default with
respect to the Subsidiary STRYPES or any acceleration of the maturity of the
Subsidiary STRYPES resulting therefrom are hereinafter referred to as the
"Redemption Contract Shares"; the Maturity Contract Shares and the Redemption
Contract Shares are hereinafter collectively referred to as the "Contract
Shares").
WHEREAS, CEI and MLCS desire that, at the option of CEI, the respective
future acquisition, sale and delivery obligations with respect to the Maturity
Contract Shares can be
2
<PAGE>
settled entirely, but not less than entirely, through cash settlement in lieu of
delivery of the Maturity Contract Shares.
WHEREAS, CEI has initially placed in escrow, pursuant to an Escrow
Agreement dated as of _________, 1996 (the "Escrow Agreement"), among MLCS, CEI
and _____________, as escrow agent (the "Escrow Agent"), an aggregate of
_________ shares of Cox Common Stock.
WHEREAS, CEI has agreed, pursuant to a Collateral Agreement dated as of
_________, 1996 (the "Collateral Agreement"), among MLCS, CEI and _____________,
as collateral agent (the "Collateral Agent"), under the circumstances set forth
therein, to pledge and grant to MLCS a first priority lien on, and security
interest in, and right to set off against, all of CEI's right, title and
interest in and to the shares of Cox Common Stock (or, in the event there shall
occur a Reorganization Event, cash, securities and/or other property in lieu
thereof) held thereunder.
WHEREAS, CEI and MLCS desire that the voting rights and rights to receive
any dividends or other distributions in respect of the Escrow Shares (as defined
herein) shall remain with CEI unless and until delivery, if any, of such Escrow
Shares to MLCS pursuant to the provisions of this Agreement.
NOW, THEREFORE, in consideration of their mutual covenants herein
contained, the parties hereto, intending to be legally bound, hereby mutually
covenant and agree as follows:
1.
Definitions
-----------
1.1. Definitions. Capitalized words and phrases used herein and not
-----------
otherwise defined shall have the meanings ascribed to them in the Supplemental
Indenture.
2.
Periodic Payments and Future Delivery of Maturity Contract Shares or Cash
-------------------------------------------------------------------------
Settlement
----------
2.1. Periodic Payments; Acquisition, Sale and Delivery. On the basis of
-------------------------------------------------
the representations and warranties herein set forth and subject to the terms and
conditions herein set forth, (i) CEI agrees to make the periodic payments to
MLCS required by Section 2.3 hereof, and (ii) on the Maturity Date Closing (as
defined in Section 2.4 hereof), CEI agrees to sell, assign, transfer, convey and
deliver to MLCS, and MLCS agrees to purchase and acquire from CEI, the Maturity
Contract Shares.
3
<PAGE>
2.2. Consideration.
-------------
(a) The consideration to be paid by MLCS in exchange for CEI's obligations
hereunder to make the Periodic Payments and to deliver the Contract Shares in
respect of the Initial Subsidiary STRYPES (the "Firm Consideration Amount")
shall be $_______ in cash. Upon the terms and subject to the conditions of this
Agreement, MLCS shall deliver to CEI the Firm Consideration Amount on _____,
1996 (the "Firm Payment Date") at the offices of Brown & Wood, One World Trade
Center, New York, New York 10048, or at such other place as shall be agreed upon
by MLCS and CEI.
(b) ML & Co. shall deliver promptly to MLCS and CEI notice of any exercise
by the Underwriter of its option to purchase any Option STRYPES, stating the
number of Option STRYPES as to which the Underwriter is then exercising the
option and the time and date of payment and delivery for such Option STRYPES
(any such time and date of delivery, a "Date of Delivery"). The consideration
to be paid by MLCS in exchange for CEI's obligations hereunder to make the
Periodic Payments and to deliver the Contract Shares in respect of any Option
Subsidiary STRYPES shall be an amount in cash equal to 100% of the aggregate
principal amount of such Option Subsidiary STRYPES (the "Option Consideration
Amount"). Upon the terms and subject to the conditions of this Agreement, MLCS
shall deliver to CEI the Option Consideration Amount on the related Date of
Delivery at the offices of Brown & Wood, One World Trade Center, New York, New
York 10048, or at such other place as shall be agreed upon by MLCS and CEI.
(c) Payment of the Firm Consideration Amount and the Option Consideration
Amount shall be made by Fedwire transfer of immediately available funds to an
account designated by CEI, or such other form of payment specified by CEI,
against delivery by CEI to the Escrow Agent of the number of shares of Cox
Common Stock (or, in the event there shall occur a Reorganization Event, cash,
securities and/or other property in lieu thereof) necessary to comply with its
obligations under Section 6.1 hereof.
2.3. Periodic Payments. On or prior to _______ a.m., New York City time,
-----------------
on _________, 1996 and on each _______, _________, _________, and __________, to
and including _______. 1999, CEI shall pay to MLCS, by Fedwire transfer of
immediately available funds to an account designated by MLCS, an amount equal to
the total interest payments due on the Subsidiary STRYPES on such dates (each
such payment being hereinafter referred to as a "Periodic Payment").
2.4. Delivery upon Maturity. Consummation of the acquisition, sale and
----------------------
delivery of the Maturity Contract Shares shall take place on a date mutually
agreeable to MLCS and CEI, not later than one (1) Trading Day prior to the
Maturity Date (the "Maturity Date Closing"). Delivery of the certificates
representing the Maturity Contract Shares (unless the Maturity Contract Shares
are represented by one or more global certificates registered in the name of a
depositary or a nominee of a depositary, in which event MLCS's interest in such
Maturity Contract Shares shall be noted in a manner satisfactory to MLCS and its
counsel) shall be made
4
<PAGE>
at the offices of the MLCS, or at such other place as shall be agreed upon by
MLCS and CEI. Any certificates for the Maturity Contract Shares delivered shall
be registered in MLCS's name (or endorsed in blank or otherwise registered as
requested by MLCS).
2.5. Cash Settlement. Notwithstanding the provisions of Sections 2.1 and
---------------
2.4 hereof, CEI shall have the option, exercisable in its sole discretion, to
require that its obligation contained therein be settled, in whole, through a
cash payment at the Maturity Date Closing in lieu of delivery of the Maturity
Contract Shares. The amount of such cash settlement payment shall be equal to
the value of the Maturity Contract Shares at the Maturity Price (the "Share
Value"). On or prior to the day seven Business Days preceding the Maturity
Date, CEI shall notify MLCS whether it will exercise its option to require cash
settlement pursuant to this Section 2.5.
[2.6. Maturity Date Closing Conditions. Consummation of the acquisition,
--------------------------------
sale and delivery of the Maturity Contract Shares shall be conditioned upon MLCS
receiving at the Maturity Date Closing a certificate of the Chairman of the
Board, the President, a Vice President, the Treasurer or Controller of CEI,
dated as of the date of the applicable Closing, to the effect that the Maturity
Contract Shares so delivered hereunder may be transferred without further
registration under the Securities Act of 1933 and are free of any transfer
restrictions. If the condition set forth in the preceding sentence shall not be
satisfied, then, notwithstanding the provisions hereof, the respective
obligations contained therein shall be settled, in whole, through a cash payment
at the Maturity Date Closing in lieu of delivery of the Maturity Contract Shares
as provided in Section 2.5.]
3.
Early Satisfaction and Discharge
--------------------------------
3.1. Early Satisfaction and Discharge. Except as provided in Section 7.1
--------------------------------
hereof, CEI shall have the option, exercisable at any time from and after the
Tax Event Date, to require that the parties satisfy and discharge their
respective obligations hereunder, on a date fixed by CEI for early settlement
(the "Early Settlement Date Closing" and, together with the Maturity Date
Closing, a "Closing"), in the following manner:
(i) CEI shall sell, assign, transfer, convey and deliver to MLCS, and MLCS
shall purchase and acquire from CEI, the Redemption Contract Shares; and
(ii) CEI shall deliver to MLCS the Redemption Cash Component.
CEI shall provide notice of its intention to require early satisfaction and
discharge of this Agreement to MLCS and ML & Co. not less than [15] nor more
than [30] calendar days prior to the Early Settlement Date Closing (or at such
other time as shall be acceptable to both MLCS and ML & Co.).
5
<PAGE>
3.2. Payment and Delivery. Consummation of the acquisition, sale and
--------------------
delivery of the Redemption Contract Shares and delivery of the Redemption Cash
Component shall take place at the Early Settlement Date Closing. Payment of the
Redemption Cash Component shall be made by Fedwire transfer of immediately funds
to an account designated by MLCS, or such other form of payment specified by
MLCS. Delivery of the certificates representing the Redemption Contract Shares
(unless the Redemption Contract Shares are represented by one or more global
certificates registered in the name of a depositary or a nominee of a
depositary, in which event MLCS's interest in such Redemption Contract Shares
shall be noted in a manner satisfactory to MLCS and its counsel) shall be made
at the offices of the MLCS, or at such other place as shall be agreed upon by
MLCS and CEI. Any certificates for the Redemption Contract Shares delivered
shall be registered in MLCS's name (or endorsed in blank or otherwise registered
as requested by MLCS).
4.
Representations and Warranties of CEI
-------------------------------------
CEI represents and warrants to MLCS as of the date hereof and as of the
date of each Closing as follows:
(a) CEI has been duly organized and is validly existing as a corporation in
good standing under the laws of the State of Delaware and has corporate power
and authority to enter into and perform its obligations under this Agreement.
(b) This Agreement has been duly authorized, executed and delivered by CEI
and (assuming the due authorization, execution and delivery by MLCS and ML &
Co.) constitutes a valid and binding agreement of CEI, enforceable against CEI
in accordance with its terms, except as the enforcement hereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement hereof is
subject to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(c) (i) At the date hereof, CEI is the sole registered owner of and has
all rights in and to at least ____________ shares of Cox Common Stock, free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; and (ii) to the extent CEI elects to deliver the Contract Shares at
Closing, upon delivery of such Contract Shares against payment therefor pursuant
to this Agreement, MLCS will be the sole registered owner of such Contract
Shares and, assuming MLCS purchased for value in good faith and without notice
of any adverse claim, MLCS will have acquired all rights in and to such Contract
Shares, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
6
<PAGE>
(d) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency is necessary or required for the execution, delivery or performance by
CEI of this Agreement or the consummation by CEI of the transactions
contemplated herein, except such as have been already obtained or as may be
required under the Securities Act of 1933 or the rules and regulations
promulgated thereunder or state securities laws; and CEI has full right, power
and authority to enter into this Agreement and to sell, assign, transfer and
deliver the Contract Shares pursuant to this Agreement.
(e) The execution, delivery and performance by CEI of this Agreement and
the consummation by CEI of the transactions contemplated herein and compliance
by CEI with its obligations hereunder do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of CEI
pursuant to, any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or any other agreement or instrument to which CEI is a
party or by which CEI is bound, or to which any of the property or assets of CEI
is subject (except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not, singly or in the aggregate, materially and
adversely affect the ability of CEI to perform its obligations under this
Agreement), nor will such action result in any violation of the provisions of
the charter or by-laws of CEI, or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over CEI or any of its assets,
properties or operations (except for violations that would not, singly or in the
aggregate, materially and adversely affect the ability of CEI to perform its
obligations under this Agreement).
5.
Representations and Warranties of MLCS
--------------------------------------
MLCS represents and warrants to CEI as of the date hereof and as of the
date of each Closing as follows:
(a) MLCS has been duly organized and is validly existing as a corporation
in good standing under the laws of the State of Delaware and has corporate power
and authority to enter into and perform its obligations under this Agreement.
(b) This Agreement has been duly authorized, executed and delivered by MLCS
and (assuming the due authorization, execution and delivery by CEI) constitutes
a valid and binding agreement of MLCS, enforceable against MLCS in accordance
with its terms, except as the enforcement hereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and except as enforcement hereof is subject to
general
7
<PAGE>
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(c) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency is necessary or required for the execution, delivery or performance by
MLCS of this Agreement or the consummation by MLCS of the transactions
contemplated herein, except such as have been already obtained or as may be
required under the Securities Act of 1933 or the rules and regulations
promulgated thereunder or state securities laws; and MLCS has full right, power
and authority to enter into this Agreement and to purchase the Contract Shares
pursuant to this Agreement.
(d) The execution, delivery and performance by MLCS of this Agreement and
the consummation by MLCS of the transactions contemplated herein and compliance
by MLCS with its obligations hereunder do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
MLCS pursuant to, any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or any other agreement or instrument to which MLCS
is a party or by which MLCS is bound, or to which any of the property or assets
of MLCS is subject (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not, singly or in the aggregate, materially
and adversely affect the ability of MLCS to perform its obligations under this
Agreement), nor will such action result in any violation of the provisions of
the charter or by-laws of MLCS, or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over MLCS or
any of its assets, properties or operations (except for violations that would
not, singly or in the aggregate, materially and adversely affect the ability of
MLCS to perform its obligations under this Agreement).
6.
Covenants
---------
6.1. Escrow. (a) CEI shall cause to be held, collectively by the Escrow
------
Agent under the Escrow Agreement and the Collateral Agent under the Collateral
Agreement:
(i) an aggregate number of shares of Cox Common Stock (or, in the
event there shall occur a Reorganization Event, cash, securities and/or
other property in lieu thereof) equal to the maximum number of shares of
Cox Common Stock (or, in the event there shall occur a Reorganization
Event, cash, securities and/or other property in lieu thereof) that would
be required by MLCS to pay and discharge all Subsidiary STRYPES on the
Maturity Date (the "Maximum Contract Shares"); and
8
<PAGE>
(ii) an aggregate number of shares of Cox Common Stock (or such other
assets permitted by the Escrow Agreement and the Collateral Agreement) (the
"Periodic Payment Shares" and, together with the Maximum Contract Shares,
the "Escrow Shares") so that the total value thereof, based upon the
Closing Price at the end of each calendar [week] [month], shall be at least
equal to twice the sum of all Periodic Payments due and unpaid and to
become due on and prior to the Maturity Date.
(b) CEI shall cause the Escrow Shares to bear the legends required by the
Escrow Agreement and the Collateral Agreement, and to cause the required orders
to be given to the Transfer Agent for the Cox Common Stock in order to restrict
the transfer thereof.
6.2. Collateral. If at any time after the date hereof (i) the credit
----------
rating assigned by Moody's Investor Services, Inc. ("Moody's") to the long-term
senior unsecured debt of CEI ("Senior Debt") shall be lowered by Moody's or (ii)
the credit rating assigned by Standard & Poor's Ratings Services, a division of
McGraw Hill, Inc. ("S&P"), to the Senior Debt shall be lowered by S&P, then CEI
shall deliver, or cause to be delivered by the Escrow Agent, to the Collateral
Agent to be held as collateral pursuant to the Collateral Agreement, a number of
Escrow Shares so that, immediately after such delivery, the total number of
Escrow Shares held as collateral pursuant to the terms of the Collateral
Agreement is equal to the sum of (x) the Applicable Percentage of the Periodic
Payment Shares and (y) the Applicable Percentage of the Maximum Contract Shares.
Each Applicable Percentage shall be determined based upon the lower of the
credit ratings assigned to the Senior Debt by Moody's and S&P (or, of only one
of Moody's or S&P has assigned a rating to the Senior Debt, such rating) or a
substitute rating agency or agencies as follows:
<TABLE>
<CAPTION>
Applicable
Credit Ratings Percentage
-------------- -----------
Periodic Maximum
Payment Contract
Moody's S&P Shares Shares
- ----------------- ------------ ---------- ------
<S> <C> <C> <C>
Baa1 or higher A- or higher 0% 0%
BBB+ 100% 0%
Baa2 BBB 100% 25%
Baa3 BBB- 100% 75%
Below Baa3 Below BBB- 100% 100%
</TABLE>
In the event the Senior Debt is not rated by Moody's or S&P, the Applicable
Percentage of Periodic Payment Shares and the Applicable Percentage of Maturity
Contract Shares shall each be 100%.
6.3. No Default. CEI agrees that at all times from the date hereof through
----------
the Closing hereunder, it will conduct its affairs so that compliance with its
obligations hereunder and under
9
<PAGE>
the Escrow Agreement and the Collateral Agreement do not and will not result in
any violation of its charter or by-laws or conflict with or constitute a breach
or default (or in any situation that, with the giving of notice or the passage
of time, or both, would result in default) in the performance of observance of
any obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease or
other agreement or instrument to which the CEI is a party or by which it may be
bound or to which any of the property or assets of the CEI is subject.
6.4. Taxes. (a) CEI shall pay any and all documentary, stamp, transfer or
-----
similar taxes and charges that may be payable in respect of the entry into this
Agreement and the transfer and delivery of the Contract Shares pursuant hereto.
(b) MLCS and CEI hereby agree:
(i) to treat, for all United States Federal, state and local tax purposes,
this Agreement as a unit (a "Unit") consisting of (A) a debt
instrument (the "Debt Instrument") with a fixed principal amount
unconditionally payable on the Maturity Date equal to the principal
amount of the Subsidiary STRYPES and bearing interest at the stated
interest rate on the Subsidiary STRYPES and (B) a forward contract
(the "Forward Contract") pursuant to which MLCS is irrevocably
committed to use the principal payment due on the Debt Instrument to
purchase on the Maturity Date or the Early Settlement Date Closing the
Contract Shares which CEI is obligated to deliver at that time
(subject to CEI's right to deliver cash with an equal value in lieu of
the Contract Shares), which treatment will require, among other
things, MLCS to include currently in income as ordinary interest the
Periodic Payments that are made under this Agreement by CEI in
accordance with MLCS's regular method of tax accounting;
(ii) to allocate $______ of the total Firm Consideration Amount and the
Option Consideration Amount (the "Total Consideration Amount") payable
by MLCS hereunder to the Debt Instrument component and to allocate the
remaining $______ of the Total Compensation Amount to the Forward
Contract component;
(iii) to file all United States Federal, state and local income, franchise
and estate tax returns consistent with the treatment of this Agreement
as a Unit consisting of the Debt Instrument and the Forward Contract
(in the absence of any change or clarification in applicable law, by
regulation or otherwise, requiring a different characterization or
treatment of this Agreement).
6.5. Amounts Due to Trustee. ML & Co. shall pay any and all amounts due to
----------------------
the Trustee under Section 607 of the Indenture.
10
<PAGE>
6.6. Certain Notices. (a) ML & Co. shall notify MLCS and CEI of any
---------------
notice of default with respect to the STRYPES received by ML & Co. from the
Trustee or any holders of STRYPES pursuant to the Indenture as promptly as
reasonably practicable after receipt thereof.
(b) In case at any time while any of the STRYPES are outstanding CEI
receives notice that:
(i) Cox shall declare a dividend (or any other distribution) on or in
respect of the Cox Common Stock to which Section 203(a)(i) or 203(a)(iii)
of the Supplemental Indenture shall apply (other than any cash dividends
and distributions, if any, paid from time to time by Cox that do not
constitute Extraordinary Cash Dividends);
(ii) Cox shall authorize the issuance to all holders of Cox Common
Stock of rights or warrants to subscribe for or purchase shares of Cox
Common Stock or of any other subscription rights or warrants;
(iii) there shall occur any conversion or reclassification of Cox
Common Stock (other than a subdivision or combination of outstanding shares
of such Cox Common Stock) or any consolidation, merger or reorganization to
which Cox is a party and for which approval of any stockholders of Cox is
required, or the sale or transfer of all or substantially all of the assets
of Cox; or
(iv) there shall occur the voluntary or involuntary dissolution,
liquidation, winding up or bankruptcy of Cox;
then CEI shall promptly notify MLCS and ML & Co. of such fact and of (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution or grant of rights or warrants, or, if a record is not to be taken,
the date as of which the holders of Cox Common Stock of record to be entitled to
such dividend, distribution or grant of rights or warrants are to be determined,
or (y) the date, if known by CEI, on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or bankruptcy is
expected to become effective.
6.7. No Supplemental Indentures Without Consent. ML & Co. shall not,
------------------------------------------
without the consent of MLCS and CEI, enter into any indenture supplemental to
the Indenture which would have the effect of increasing the consideration that
CEI is obligated to deliver at Closing or on any Early Settlement Date pursuant
to this Agreement.
6.8. Limitations on Trading During Certain Days. Each of CEI and ML & Co.
------------------------------------------
hereby agrees that it will not, and it will cause each of its Majority-Owned
Subsidiaries not to, buy or sell shares of Cox Common Stock for their own
account during the 20 Trading Days immediately prior to the second Trading Day
preceding the Maturity Date or any Redemption Date of the STRYPES. For purposes
hereof, "Majority-Owned Subsidiaries" with respect to
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either party means a subsidiary more than 50% of whose outstanding securities
representing the right to vote for the election of directors is owned by such
party and/or one or more of such party's other Majority-Owned Subsidiaries.
6.9. Payment and Discharge of STRYPES. MLCS agrees that it shall pay and
--------------------------------
discharge its obligations under the Subsidiary STRYPES by delivering to ML & Co.
on the Maturity Date the form of consideration that it receives from CEI
hereunder. ML & Co. agrees that it shall pay and discharge its obligations
under the STRYPES by delivering to the holders of the STRYPES on the Maturity
Date the form of consideration that it receives from MLCS under the Subsidiary
STRYPES.
6.10. Redemption. In the event that CEI exercises its option granted
----------
pursuant to Section 3.1 hereof, MLCS agrees that it shall effect the redemption
of the Subsidiary STRYPES and ML & Co. agrees that it shall effect the
redemption of the STRYPES.
6.11. Further Assurances. From time to time on and after the date hereof
------------------
through the date of Closing or Early Settlement Date, as the case may be, each
of the parties hereto shall use its best efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper and
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement in accordance with the terms and
conditions hereof, including (i) using best efforts to remove any legal
impediment to the consummation of such transactions and (ii) the execution and
delivery of all such deeds, agreements, assignments and further instruments of
transfer and conveyance necessary, proper or advisable to consummate and make
effect the transactions contemplated by this Agreement in accordance with the
terms and conditions hereof.
7.
Conditions to Closing
---------------------
7.1. CEI's Conditions to Each Closing. CEI's obligation to consummate the
--------------------------------
transactions contemplated hereunder is conditioned upon (i) the purchase and
sale of the Initial STRYPES pursuant to the Underwriting Agreement having been
consummated as contemplated therein, (ii) CEI having received, at or prior to
the date of such Closing, notice from MLCS specifying the number of shares of
Cox Common Stock, or such cash, securities or other property as may have been
received in a Reorganization Event, that would be required by MLCS to pay and
discharge all of the Subsidiary STRYPES on the Maturity Date or to redeem all of
the Subsidiary STRYPES on the Redemption Date, as applicable, without taking in
account any default with respect to the Subsidiary STRYPES or any acceleration
of the maturity of the Subsidiary STRYPES resulting therefrom, (iii) the
representations and warranties of MLCS contained in Article 5 hereof being true
and correct as of the date of such Closing, and (iv) the performance by MLCS and
ML & Co. of their respective covenants and other obligations hereunder.
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7.2. MLCS's Conditions to each Closing. MLCS's obligation to consummate
---------------------------------
the transactions contemplated hereunder is conditioned upon (i) the purchase and
sale of the Initial STRYPES pursuant to the Underwriting Agreement having been
consummated as contemplated therein, (ii) the representations and warranties of
CEI contained in Article 4 hereof being true and correct as of the date of such
Closing, and (iii) the performance by CEI of its covenants and other obligations
hereunder.
8.
Acceleration of Delivery
------------------------
8.1. Events of Default; Acceleration of Delivery. If one or more of the
-------------------------------------------
following events (each an "Event of Default") shall occur:
(i) CEI shall fail to make any Periodic Payment when due;
(ii) CEI shall commence a voluntary case or other proceeding seeking a
liquidation, reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against it, or shall take any corporate
action to authorize any of the foregoing;
(iii) an involuntary case or other proceeding shall be commenced
against CEI seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60 days;
or an order for relief shall be entered against the CEI, under the federal
bankruptcy laws as now or hereafter in effect; or
(iv) a Collateral Event of Default within the meaning of the
Collateral Agreement;
then, (A) the Periodic Payment Shares and the Maximum Contract Shares (together,
the "Aggregate Acceleration Value") shall become immediately deliverable and
payable by CEI to MLCS hereunder without any declaration or other action on the
part of MLCS hereunder and (B) CEI's rights under Sections 2.5 and 3.1 hereof
shall terminate immediately.
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MLCS, CEI and ML & Co. agree that the Aggregate Acceleration Value is a
reasonable pre-estimate of loss and not a penalty. Such amount is payable for
the loss of bargain and MLCS will not be entitled to recover additional damage
as a consequence of loss resulting from an Event of Default.
9.
Miscellaneous
-------------
9.1. Adjustments of Payment Rate Formula; Selection of Independent
-------------------------------------------------------------
Investment Banking Firm. MLCS shall provide CEI reasonable opportunity to
- -----------------------
review the calculations pertaining to any adjustment of the Payment Rate Formula
made pursuant to Section 203 of the Supplemental Indenture. If, pursuant to the
terms and conditions of the Supplemental Indenture and the Subsidiary STRYPES,
MLCS shall be required to retain a nationally recognized independent investment
banking firm for any purpose provided in the Supplemental Indenture or the
Subsidiary STRYPES, such nationally recognized independent investment banking
firm shall be selected and retained by MLCS only after consultation with CEI.
9.2. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to have been duly given if mailed or transmitted by
any standard form of telecommunication. Notices to MLCS shall be directed to it
at North Tower, World Financial Center, New York, New York 10281-13__,
attention of _______________, with a copy to the Treasurer of ML & Co. at World
Financial Center, South Tower, New York, New York, 10080-6107; notices to CEI
shall be directed to it at 1400 Lake Hearn Drive, Atlanta, Georgia 30319,
attention of Andrew A. Merdek.
9.3. Governing Law; Consent to Jurisdiction. This Agreement shall be
--------------------------------------
governed by and construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed wholly within such State. For
the purpose of any suit, action or proceeding arising out of or relating to this
Agreement, the parties hereto hereby expressly and irrevocably consent and
submit to the non-exclusive jurisdiction of any competent court in the place of
its domicile and any United States Federal court sitting in the Borough of
Manhattan, City and State of New York, and expressly and irrevocably waive, to
the extent permitted under applicable law, any immunity from the jurisdiction
thereof and any claim or defense in such suit, action or proceeding based on a
claim of improper venue, forum non conveniens or any similar basis to which it
might otherwise be entitled.
9.4. Entire Agreement. Except as expressly set forth herein, this
----------------
Agreement constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, among the parties with respect to the
subject matter of this Agreement.
9.5. Amendments; Waivers. Any provision of this Agreement may be amended
-------------------
or waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an
14
<PAGE>
amendment, by MLCS, ML & Co. and CEI or, in the case of a waiver, by the party
against whom the waiver is to be effective. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
9.6. Successors, Assigns. The provisions of this Agreement shall be
-------------------
binding upon and accrue to the benefit of the parties hereto and their
respective heirs, successors and permitted assigns. Notwithstanding the
foregoing, neither this Agreement nor any right, remedy, obligation or liability
arising hereunder or by reason hereof shall be assignable by any party hereto
without the prior written consent of the other parties hereto.
9.7. No Third Party Rights. This Agreement is not intended and shall not
---------------------
be construed to create any rights in any person other than CEI, MLCS and ML &
Co. and no person shall assert any rights as third party beneficiary hereunder.
9.8. Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
15
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
and year first above written.
MERRILL LYNCH CAPITAL SERVICES, INC. COX ENTERPRISES, INC.
By_____________________________ By______________________________
Name: Name:
Title: Title:
MERRILL LYNCH & CO., INC.
By______________________________
Name:
Title:
16
<PAGE>
EXHIBIT 23(b)
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
We consent to the incorporation by reference in this Post-Effective Amendment
No. 1 to the Registration Statement of Merrill Lynch & Co., Inc. on Form S-3 of
our reports dated February 26, 1996, appearing in or incorporated by reference
in the Annual Report on Form 10-K of Merrill Lynch & Co., Inc. (the "Company")
for the year ended December 29, 1995 (the "Annual Report") and to the reference
to us under the heading "Experts" in the Prospectus, which is a part of this
Registration Statement. We also consent to the inclusion as Exhibit 99 to this
Post-Effective Amendment No. 1 to the Registration Statement of our report dated
February 26, 1996 relating to information under the caption "Summary Financial
Information," for each of the five years in the period ended December 29, 1995,
appearing in the Prospectus. We also consent to the incorporation by reference
to this Post-Effective Amendment No. 1 to the Registration Statement of our
report dated February 26, 1996, appearing as Exhibit 99(ii) in the Current
Report on Form 8-K dated March 12, 1996, relating to the Selected Financial Data
under the captions "Operating Results," "Financial Position" and "Common Share
Data" appearing on page 26 of the Company's 1995 Annual Report to Stockholders.
/s/ Deloitte & Touche LLP
New York, New York
May 8, 1996
<PAGE>
EXHIBIT 99
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Board of Directors and Stockholders of
Merrill Lynch & Co., Inc.:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of Merrill Lynch & Co., Inc. and subsidiaries
as of December 29, 1995 and December 30, 1994 and for each of the three years in
the period ended December 29, 1995 and have issued our report thereon dated
February 26, 1996. Such financial statements and our report thereon are
incorporated by reference in the Company's 1995 Annual Report on Form 10-K
which is incorporated herein by reference.
We have also previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets of Merrill Lynch & Co., Inc. and
subsidiaries as of December 31, 1993, December 25, 1992 and December 27, 1991
and the related statements of consolidated earnings, changes in consolidated
stockholders' equity and consolidated cash flows for the years ended December
25, 1992 and December 27, 1991 (none of which are presented or incorporated by
reference herein); and we expressed unqualified opinions on those consolidated
financial statements. In our opinion, the information set forth in the table
under the caption Summary Financial Information for each of the five years in
the period ended December 29, 1995, appearing on page 4 of the Prospectus,
which is a part of this Post-Effective Amendment No. 1 of the Registration
Statement of Merrill Lynch & Co., Inc. on Form S-3, is fairly stated in all
material respects in relation to the consolidated financial statements from
which it has been derived.
/s/ Deloitte & Touche LLP
New York, New York
February 26, 1996
