<PAGE>
RULE NO. 424(b)(5)
REGISTRATION NO. 333-44173
PROSPECTUS
[LOGO]
16,000,000 TRUST PREFERRED SECURITIES
MERRILL LYNCH PREFERRED CAPITAL TRUST IV
7.12% TRUST ORIGINATED PREFERRED SECURITIESSM ("TOPRS/SM/")
(LIQUIDATION AMOUNT $25 PER TRUST PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
MERRILL LYNCH & CO., INC.
---------------
The 7.12% Trust Originated Preferred SecuritiesSM (the "TOPrS/SM/" or "Trust
Preferred Securities") offered hereby represent preferred undivided beneficial
ownership interests in the assets of Merrill Lynch Preferred Capital Trust IV,
a statutory business trust formed under the laws of the State of Delaware (the
"Trust"). Merrill Lynch & Co., Inc., a Delaware corporation (the "Company" or
"Merrill Lynch"), will own all the common securities (the "Trust Common
Securities" and, together with the Trust Preferred Securities, the "Trust
Securities") representing undivided beneficial ownership interests in the
assets of the Trust. The Trust exists for the sole purpose of issuing the
Trust Securities and investing the proceeds as described below and engaging in
activities incident thereto. The proceeds from the sale of the Trust
Securities will be used by the Trust to purchase Partnership Preferred
Securities ("Partnership Preferred Securities"), representing the limited
partner interests of Merrill Lynch Preferred Funding IV, L.P., a Delaware
limited partnership (the "Partnership"). The general partner interest, which
constitutes all of the interest in the Partnership other than the limited
partner interests represented by the Partnership Preferred Securities, is
owned by the Company, which is the sole general partner of the Partnership (in
such capacity, the "General Partner"). Substantially all of the proceeds from
the sale of the Partnership Preferred Securities, together with the capital
contribution from the General Partner, will be used by the Partnership to
purchase Debentures (as defined herein), which consist of debt instruments of
the Company and one or more of its eligible controlled affiliates. In
addition, approximately one percent of the proceeds from the sale of the
Partnership Preferred Securities and the capital contribution from the General
Partner will be used to purchase Eligible Debt Securities (as defined herein).
See "Description of the Partnership Preferred Securities -- Partnership
Investments".
(CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE TRUST PREFERRED
SECURITIES, INCLUDING CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
The Trust Preferred Securities have been approved for listing on the New
York Stock Exchange (the "NYSE"), subject to official notice of issuance.
Trading of the Trust Preferred Securities on the New York Stock Exchange is
expected to commence within the 30-day period after the initial delivery of
the Trust Preferred Securities. See "Underwriting".
---------------
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.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) THE TRUST(3)(4)
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<S> <C> <C> <C>
Per Trust Preferred Security........ $25.00 (3) $25.00
- - -------------------------------------------------------------------------------
Total............................... $400,000,000 (3) $400,000,000
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</TABLE>
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(1) Plus accumulated distributions, if any, from June 19, 1998.
(2) The Trust, the Partnership and the Company have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting".
(3) In view of the fact that the proceeds of the sale of the Trust Preferred
Securities will be ultimately invested in debt securities of the Company
and its subsidiaries, the Company has agreed to pay to the Underwriters as
compensation (the "Underwriters' Compensation") $.7875 per Trust Preferred
Security (or $12,600,000 in the aggregate); provided that such
compensation for sales of more than 10,000 Trust Preferred Securities to a
single purchaser will be $.50 per Trust Preferred Security. Therefore, to
the extent of such sales, the actual amount of Underwriters' Compensation
will be less than the aggregate amount specified in the preceding
sentence. See "Underwriting".
(4) Expenses of the offering payable by the Company are estimated to be
$1,100,000.
---------------
The Trust Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Trust Preferred Securities will be made only in
book-entry form through the facilities of The Depository Trust Company ("DTC")
on or about June 19, 1998.
This Prospectus may be used by Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S") in connection with offers and sales
related to market-making transactions in the Trust Preferred Securities.
MLPF&S may act as principal or agent in such transactions. Such sales will be
made at prices related to prevailing market prices at the time of sale.
---------------
MERRILL LYNCH & CO.
A.G. EDWARDS & SONS, INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
---------------
THE DATE OF THIS PROSPECTUS IS JUNE 16, 1998.
SM"TRUST ORIGINATED PREFERRED SECURITIES" AND "TOPRS" ARE SERVICE MARKS OF
MERRILL LYNCH & CO., INC.
<PAGE>
"(continued from cover page)"
Holders of the Trust Preferred Securities will be entitled to receive
cumulative cash distributions accumulating from the date of original issuance
and payable quarterly in arrears on each March 30, June 30, September 30 and
December 30, commencing September 30, 1998, at an annual rate of 7.12% of the
liquidation amount of $25 per Trust Preferred Security (equivalent to $1.78
per Trust Preferred Security per annum), if, as and when the Trust has funds
available for payment. See "Description of the Trust Preferred Securities --
Distributions". Distributions not paid on the scheduled payment date will
accumulate and compound quarterly at a rate per annum equal to 7.12%. The
distribution rate and the distribution payment dates and other payment dates
for the Trust Preferred Securities will correspond to the distribution rate
and distribution payment dates and other payment dates for the Partnership
Preferred Securities, which are the sole assets of the Trust. As described
above, the assets of the Partnership will initially consist only of the
Debentures and, to a limited extent, Eligible Debt Securities.
The payment of distributions by the Trust and payments on liquidation of the
Trust or the redemption of Trust Preferred Securities, as described below, are
guaranteed on a subordinated basis by the Company (the "Trust Guarantee") to
the extent the Trust has funds available therefor as described under
"Description of the Trust Guarantee". The payment of distributions by the
Partnership (if, as and when declared) on the Partnership Preferred Securities
and payments on liquidation of the Partnership or the redemption of
Partnership Preferred Securities, as described below, are also guaranteed on a
subordinated basis by the Company (the "Partnership Guarantee") to the extent
the Partnership has funds available therefor as described under "Description
of the Partnership Guarantee". In addition, payments in respect of the
Debentures (other than the Company Debenture (as defined herein)) will be
fully and unconditionally guaranteed, on a subordinated basis, by the Company
(the "Investment Guarantees") for the benefit of the holders of the
Partnership Preferred Securities. The Trust Guarantee, the Partnership
Guarantee and the Investment Guarantees (collectively, the "Guarantees"), when
taken together with the Company Debenture and the Company's obligations to pay
all fees and expenses of the Trust and the Partnership, constitute a guarantee
to the extent set forth herein by the Company of the distribution, redemption
and liquidation payments payable to the holders of the Trust Preferred
Securities. The Guarantees do not apply to current distributions by the
Partnership unless and until such distributions are declared by the
Partnership out of funds legally available for payment or to liquidating
distributions unless there are assets available for payment in the
Partnership, each as more fully described in the next succeeding paragraph and
under "Risk Factors -- Insufficient Income or Assets Available to
Partnership". The Company's obligations under the Guarantees are subordinate
and junior in right of payment to all other liabilities of the Company and
rank "pari passu" with the most senior preferred stock issued from time to time
by the Company, with similar guarantees issued by the Company in connection
with the $275,000,000 aggregate liquidation amount of 7 3/4% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust I, the
$300,000,000 aggregate liquidation amount of 8% Trust Originated Preferred
Securities issued by Merrill Lynch Preferred Capital Trust II, the
$750,000,000 aggregate liquidation amount of 7% Trust Originated Preferred
Securities issued by Merrill Lynch Preferred Capital Trust III and with any
guarantee now or hereafter entered into by the Company in respect of any
preferred stock of any other Finance Subsidiary (as defined below). The
Company's obligations under the Company Debenture are subordinate and junior
in right of payment to all Senior Indebtedness of the Company. At March 27,
1998, the Company had outstanding Senior Indebtedness aggregating
approximately $85.1 billion, which would have ranked senior to the Company's
obligations under the Guarantees and the Company Debenture. See "Risk
Factors -- Ranking of Subordinate Obligations Under the Guarantees and the
Company Debenture". The term "Senior Indebtedness" means any payment in
respect of indebtedness of the Company for money borrowed, except for any such
indebtedness that is by its terms subordinated to or "pari passu" with the
Company Debenture, as the case may be.
Distributions on the Partnership Preferred Securities will be declared and
paid only as determined in the sole discretion of the Company in its capacity
as the General Partner of the Partnership. In addition, the General Partner is
not obligated to declare distributions on the Partnership Preferred Securities
at any time, including upon or following a Partnership Enforcement Event (as
defined herein). To the extent that the issuers (including, where applicable,
the Company, as guarantor) of the securities in which the Partnership invests
defer or fail to
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make any payments in respect of such securities (or, if applicable,
guarantees), the Partnership will not have sufficient funds to pay and will
not declare or pay distributions on the Partnership Preferred Securities. In
addition, as described under "Risk Factors -- Insufficient Income or Assets
Available to Partnership", the Partnership may not have sufficient funds to
pay current or liquidating distributions on the Partnership Preferred
Securities if (i) at any time that the Partnership is receiving current
payments in respect of the securities held by the Partnership (including the
Debentures), the General Partner, in its sole discretion, does not declare
distributions on the Partnership Preferred Securities and the Partnership
receives insufficient amounts to pay the additional compounded distributions
that will accumulate in respect of the Partnership Preferred Securities, (ii)
the Partnership reinvests the proceeds received in respect of the Debentures
upon their retirement or at their maturities in Affiliate Investment
Instruments (as defined herein) and Eligible Debt Securities that do not
generate income in an amount that is sufficient to pay full distributions in
respect of the Partnership Preferred Securities or (iii) the Partnership
invests in debt securities of Investment Affiliates that are not guaranteed by
the Company and that cannot be liquidated by the Partnership for an amount
sufficient to pay such distributions in full. The Debentures will provide that
payments of interest may be deferred at any time, and from time to time, by
the relevant issuer for a period not exceeding six consecutive quarters. If an
issuer were to so defer the payment of interest, interest would continue to
accrue and compound at the stated interest rate on such Debenture. If the
Partnership does not declare and pay distributions on the Partnership
Preferred Securities out of funds legally available for distribution, the
Trust will not have sufficient funds to make distributions on the Trust
Preferred Securities, in which event the Trust Guarantee will not apply to
such distributions until the Trust has sufficient funds available therefor.
See "Risk Factors -- Distributions Payable Only if Declared by General
Partner; Restrictions on Certain Payments; Tax Consequences", "-- Insufficient
Income or Assets Available to Partnership", "Description of the Trust
Preferred Securities -- Distributions" and "Description of the Partnership
Preferred Securities -- Distributions".
The Partnership may, from time to time and subject to the restrictions
described herein, reinvest payments received with respect to the Affiliate
Investment Instruments (including the Debentures) and the Eligible Debt
Securities, in additional Affiliate Investment Instruments and Eligible Debt
Securities. As of the date of this Prospectus, the Company, as the General
Partner, does not intend to cause the Partnership to reinvest regularly
scheduled periodic payments of interest or dividends received by the
Partnership in the manner described herein, although there can be no assurance
that the General Partner's intention in respect of such reinvestments will not
change in the future.
If (a) for any distribution period, full distributions on a cumulative basis
on any Trust Preferred Securities have not been paid or set apart for payment,
(b) an Investment Event of Default by any Investment Affiliate in respect of
any Affiliate Investment Instrument has occurred and is continuing or (c) the
Company is in default of its obligations under any Guarantee, then during such
period (i) the Company shall not declare or pay dividends on, make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock or comparable
equity interest (except for (x) dividends or distributions in shares of, or
options, warrants or rights to subscribe for or purchase shares of, its
capital stock, and conversions or exchanges of common stock of one class into
common stock of another class, (y) redemptions or purchases of any rights
pursuant to the Amended and Restated Rights Agreement dated as of December 2,
1997 between the Company and The Chase Manhattan Bank (successor by merger to
Manufacturers Hanover Trust Company), or any successor to such Rights
Agreement (the "Rights Agreement") and the issuance of preferred stock
pursuant to such rights and (z) purchases or acquisitions by the Company or
its affiliates in connection with transactions effected by or for the account
of customers of the Company or any of its subsidiaries or in connection with
the distribution or trading of such capital stock or comparable equity
interest) and (ii) the Company shall not make, permit any Finance Subsidiary
to make, or make any payments that would enable any Finance Subsidiary to
make, any payment of any dividends on, any distribution with respect to, or
any redemption, purchase or other acquisition of, or any liquidation payment
with respect to, any preferred security or comparable equity interest of any
Finance Subsidiary. "Finance Subsidiary" means Merrill Lynch Preferred Capital
Trust I, Merrill Lynch Preferred Capital Trust II, Merrill Lynch Preferred
Capital Trust III and any other wholly-owned subsidiary of the Company the
principal purpose of which is to raise capital for the Company by issuing
securities that are
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guaranteed by the Company and the proceeds of which are loaned to or invested
in the Company or one or more of its affiliates.
The Partnership Preferred Securities are redeemable by the Partnership, in
whole or in part, from time to time, on or after June 30, 2008 at an amount
per Partnership Preferred Security equal to $25 plus accumulated and unpaid
distributions thereon to the date fixed for redemption. The Partnership
Preferred Securities may also be redeemed, in whole but not in part, at any
time upon the occurrence of a Partnership Special Event (as defined herein).
If the Partnership redeems the Partnership Preferred Securities, the Trust
must redeem Trust Securities on a "pro rata" basis having an aggregate
liquidation amount equal to the aggregate liquidation preference of the
Partnership Preferred Securities so redeemed at a redemption price of $25 per
Partnership Preferred Security plus all accumulated and unpaid distributions
thereon to the date fixed for redemption (the "Redemption Price"). See
"Description of the Trust Preferred Securities -- Mandatory Redemption".
Neither the Partnership Preferred Securities nor the Trust Preferred
Securities have any scheduled maturity or are redeemable at any time at the
option of the holders thereof.
The Trust will be dissolved upon the occurrence of a Trust Special Event (as
defined herein). Upon dissolution of the Trust, the Partnership Preferred
Securities will be distributed to the holders of the Trust Securities, on a
"pro rata" basis, in lieu of any cash distribution, unless the Partnership
Preferred Securities are redeemed in the limited circumstances described
herein. If the Partnership Preferred Securities are distributed to the holders
of the Trust Securities, the Company will use its best efforts to cause the
Partnership Preferred Securities to be listed on the NYSE or such other
national securities exchange or similar organization as the Trust Preferred
Securities are then listed or quoted. See "Description of the Trust Preferred
Securities -- Trust Special Event Redemption or Distribution" and "Description
of the Partnership Preferred Securities".
In the event of any liquidation, dissolution, winding up or termination of
the Trust, the holders of the Trust Preferred Securities will be entitled to
receive for each Trust Preferred Security a liquidation amount of $25 plus
accumulated and unpaid distributions thereon, except to the extent, in
connection with such dissolution, Partnership Preferred Securities are
distributed to the holders of the Trust Preferred Securities. Upon (i) the
occurrence of an Investment Event of Default by an Investment Affiliate in
respect of any Affiliate Investment Instrument or (ii) default by the Company
on any of its obligations under any Guarantee, the holders of the Trust
Preferred Securities will have a preference over the holders of the Trust
Common Securities with respect to payments upon liquidation of the Trust.
Under no circumstances will the investment instruments held by the Partnership
be distributed in kind to the holders of the Trust Preferred Securities or
Partnership Preferred Securities. See "Description of the Trust Preferred
Securities -- Liquidation Distribution Upon Dissolution".
Certain persons participating in this offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the Trust Preferred
Securities. Such transactions may include stabilizing, the purchase of Trust
Preferred Securities to cover syndicate short positions and the imposition of
penalty bids. For a description of these activities, see "Underwriting".
AVAILABLE INFORMATION
The Company, the Trust and the Partnership have filed with the Securities
and Exchange Commission (the "Commission") a Registration Statement on Form S-
3 (the "Registration Statement", which term shall include all amendments,
exhibits and schedules thereto), pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations promulgated
thereunder, with respect to the Trust Preferred Securities offered hereby (as
well as the Partnership Preferred Securities, the Trust Guarantee, the
Partnership Guarantee, the Investment Guarantees and the Company Debenture).
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission, and to which reference is hereby made.
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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 Commission. Except for
the listing of Trust Preferred Securities that is expected to be made on the
NYSE, neither the Trust nor the Partnership has any securities that are listed
on any national securities exchange. The Registration Statement, as well as
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: Northeast
Regional Office, Seven World Trade Center, New York, New York 10048 and
Midwest Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2551. 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 NYSE, the American Stock Exchange, the Chicago Stock Exchange and the
Pacific Exchange. The Commission maintains a Web site at http://www.sec.gov
containing reports, proxy and information statements and other information
regarding registrants, including the Company, that file electronically with
the Commission.
Statements made in this Prospectus concerning the provisions of any
contract, agreement or other document referred to herein are not necessarily
complete. With respect to each such statement concerning a contract, agreement
or other document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission, reference is made to such exhibit or
other filing for a more complete description of the matter involved, and each
such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 26,
1997 (the "1997 Form 10-K"), Quarterly Report on Form 10-Q for the period
ended March 27, 1998, and Current Reports on Form 8-K dated January 20, 1998,
January 30, 1998, February 4, 1998, February 12, 1998, February 23, 1998,
March 19, 1998, April 13, 1998, April 29, 1998, May 19, 1998, June 2, 1998,
June 3, 1998 and June 15, 1998 filed pursuant to Section 13 of the Exchange
Act, are hereby incorporated by reference into this Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Trust Preferred Securities, or
subsequent to the date of the initial Registration Statement and prior to
effectiveness of the Registration Statement, shall be deemed to be
incorporated by reference in 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. LAWRENCE M. EGAN, JR.,
CORPORATE SECRETARY'S OFFICE, MERRILL LYNCH & CO., INC., 100 CHURCH STREET,
12TH FLOOR, NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
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SUMMARY
"The following summary does not purport to be complete and is qualified in its
entirety by the more detailed information appearing elsewhere in this
Prospectus. Certain terms used in this Summary are defined elsewhere in this
Prospectus. See "Index of Defined Terms" for a cross reference to the location
in this Prospectus where such terms are defined."
THE TRUST................... Merrill Lynch Preferred Capital Trust IV, a
Delaware statutory business trust. The sole
assets of the Trust will be the Partnership
Preferred Securities.
THE PARTNERSHIP............. Merrill Lynch Preferred Funding IV, L.P., a
Delaware limited partnership. The assets of the
Partnership will initially consist of the
Debentures and certain Eligible Debt Securities.
SECURITIES OFFERED.......... 16,000,000 of 7.12% Trust Preferred Securities.
DISTRIBUTIONS............... Distributions on the Trust Preferred Securities
will accumulate from the date of original
issuance of the Trust Preferred Securities and
will be payable at the annual rate of 7.12% of
the liquidation amount of $25 per Trust Preferred
Security if, as and when the Trust has funds
available for payment. Distributions will be
payable quarterly in arrears on each March 30,
June 30, September 30 and December 30, commencing
September 30, 1998. Distributions not made on the
scheduled payment date will accumulate and
compound quarterly at a rate per annum equal to
7.12%. The distributions payable with respect to
September 30, 1998 will represent distributions
accumulated from June 19, 1998 and will equal
$.4994 for each $25 Trust Preferred Security.
The ability of the Trust to pay distributions on
the Trust Preferred Securities is entirely
dependent on its receipt of corresponding
distributions with respect to the Partnership
Preferred Securities. The ability of the
Partnership to pay distributions on the
Partnership Preferred Securities is, in turn,
dependent on its receipt of payments with respect
to the Debentures and the Eligible Debt
Securities held by the Partnership. The
Debentures will provide that payments of interest
may be deferred at any time, and from time to
time, by the relevant issuer for a period not
exceeding six consecutive quarters. Distributions
on the Partnership Preferred Securities will be
declared and paid only as determined in the sole
discretion of the Company in its capacity as the
General Partner of the Partnership. See "Risk
Factors -- Distributions Payable Only if Declared
by General Partner; Restrictions on Certain
Payments; Tax Consequences", "Description of the
Trust Preferred Securities -- Distributions" and
"Description of the Partnership Preferred
Securities -- Distributions" and "-- Partnership
Investments".
RIGHTS UPON NON-PAYMENT OF
DISTRIBUTIONS AND CERTAIN
DEFAULTS; COVENANTS OF THE
COMPANY.................... If, at any time, (i) arrearages on distributions
on the Trust Preferred Securities shall exist for
six consecutive quarterly distribution
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periods, (ii) an Investment Event of Default
occurs and is continuing on any Affiliate
Investment Instrument or (iii) the Company is in
default on any of its obligations under the Trust
Guarantee or the Partnership Guarantee, then (a)
the Property Trustee, as the holder of the
Partnership Preferred Securities, will have the
right to enforce the terms of the Partnership
Preferred Securities, including the right to
direct the Special Representative (as defined
herein) to enforce (1) the Partnership's
creditors' rights and other rights with respect
to the Affiliate Investment Instruments and the
Investment Guarantees, (2) the rights of holders
of the Partnership Preferred Securities under the
Partnership Guarantee and (3) the rights of the
holders of the Partnership Preferred Securities
to receive distributions (only if, as and when
declared) on the Partnership Preferred
Securities, and (b) the Trust Guarantee Trustee,
as the holder of the Trust Guarantee, shall have
the right to enforce the terms of the Trust
Guarantee, including the right to enforce the
covenant restricting certain payments by the
Company and Finance Subsidiaries described below.
Under no circumstances, however, shall the
Special Representative have authority to cause
the General Partner to declare distributions on
the Partnership Preferred Securities. If the
Partnership does not declare and pay
distributions on the Partnership Preferred
Securities out of funds legally available for
distribution, the Trust will not have sufficient
funds to make distributions on the Trust
Preferred Securities. See "Risk Factors --
Insufficient Income or Assets Available to
Partnership", "Description of the Trust Preferred
Securities -- Trust Enforcement Events" and
"Description of the Partnership Preferred
Securities -- Partnership Enforcement Events".
The Company has agreed that if (a) for any
distribution period, full distributions on a
cumulative basis on any Trust Preferred
Securities have not been paid or set apart for
payment, (b) an Investment Event of Default by
any Investment Affiliate in respect of any
Affiliate Investment Instrument has occurred and
is continuing or (c) the Company is in default on
any of its obligations under the Trust Guarantee,
the Partnership Guarantee or any Investment
Guarantee, then, during such period (i) the
Company shall not declare or pay dividends on,
make distributions with respect to, or redeem,
purchase or acquire, or make a liquidation
payment with respect to any of its capital stock
or comparable equity interest (except for (x)
dividends or distributions in shares of, or
options, warrants or rights to subscribe for or
purchase shares of, its capital stock and
conversions or exchanges of common stock of one
class into common stock of another class, (y)
redemptions or purchases of any rights pursuant
to the Rights Agreement and the issuance of
preferred stock pursuant to such rights and (z)
purchases or acquisitions by the Company or its
affiliates in connection with transactions
effected by or for the account of customers of
the
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Company or any of its subsidiaries or in
connection with the distribution or trading of
such capital stock or comparable equity interest)
and (ii) the Company shall not make, permit any
Finance Subsidiary to make, nor make any payments
that would enable any Finance Subsidiary to make,
any payment of any dividends on, any distribution
with respect to, or any redemption, purchase or
other acquisition of, or any liquidation payment
with respect to, any preferred security or
comparable equity interest of any Finance
Subsidiary. See "Description of the Trust
Guarantee -- Covenants of the Company".
LIQUIDATION AMOUNT.......... In the event of any liquidation of the Trust,
holders will be entitled to receive $25 per Trust
Preferred Security plus an amount equal to any
accumulated and unpaid distributions thereon to
the date of payment (such amount being the "Trust
Liquidation Distribution"), unless Partnership
Preferred Securities are distributed to such
holders in connection with a Trust Special Event.
If upon a liquidation of the Trust (in which the
Partnership Preferred Securities are not
distributed to holders of the Trust Securities),
the Trust Liquidation Distribution can be paid
only in part because the Trust has insufficient
assets available to pay in full the aggregate
Trust Liquidation Distribution, then the amounts
payable directly by the Trust on the Trust
Preferred Securities shall be paid on a "pro rata"
basis. The holders of the Trust Common Securities
will be entitled to receive distributions upon
any such liquidation "pro rata" with the holders
of the Trust Preferred Securities, except that
upon (i) the occurrence of an Investment Event of
Default by an Investment Affiliate (including the
Company) in respect of any Affiliate Investment
Instrument or (ii) default by the Company on any
of its obligations under any Guarantee, the
holders of the Trust Preferred Securities will
have a preference over the holders of the Trust
Common Securities with respect to payments upon
liquidation of the Trust. See "Description of the
Trust Preferred Securities --Subordination of
Trust Common Securities", and "--Liquidation
Distribution Upon Dissolution".
OPTIONAL REDEMPTION......... The Partnership Preferred Securities will be
redeemable for cash, at the option of the
Partnership, in whole or in part, from time to
time, after June 30, 2008 at an amount per
Partnership Preferred Security equal to $25 plus
accumulated and unpaid distributions thereon.
Upon any redemption of the Partnership Preferred
Securities, the Trust Preferred Securities will
be redeemed, in whole or in part, as applicable,
at the Redemption Price. See "Description of the
Partnership Preferred Securities -- Optional
Redemption" and "Description of the Trust
Preferred Securities -- Mandatory Redemption".
Neither the Partnership Preferred Securities nor
the Trust Preferred Securities have any scheduled
maturity or are redeemable at any time at the
option of the holders thereof.
GUARANTEES.................. The Company will irrevocably guarantee, on a
subordinated basis, the payment in full of (i)
any accumulated and unpaid distributions
8
<PAGE>
on the Trust Preferred Securities to the extent
of funds of the Trust legally available therefor,
(ii) the amount payable upon redemption of the
Trust Preferred Securities to the extent of funds
of the Trust legally available therefor and (iii)
generally, the liquidation amount of the Trust
Preferred Securities to the extent of the assets
of the Trust legally available for distribution
to holders of Trust Preferred Securities. See
"Description of the Trust Guarantee".
The Company will also irrevocably guarantee, on a
subordinated basis and to the extent set forth
herein, the payment in full of (i) any
accumulated and unpaid distributions on the
Partnership Preferred Securities if, as and when
declared out of funds legally available therefor,
(ii) the amount payable upon redemption of the
Partnership Preferred Securities to the extent of
funds of the Partnership legally available
therefor and (iii) generally, the liquidation
preference of the Partnership Preferred
Securities to the extent of the assets of the
Partnership legally available for distribution to
holders of Partnership Preferred Securities. See
"Description of the Partnership Guarantee".
The Company will fully and unconditionally
guarantee, on a subordinated basis, payments in
respect of the Debentures (other than the Company
Debenture) for the benefit of the holders of the
Partnership Preferred Securities, to the extent
described under "Description of the Partnership
Preferred Securities -- Investment Guarantees".
The Guarantees, when taken together with the
Company Debenture and the Company's obligations
to pay all fees and expenses of the Trust and the
Partnership, constitute a guarantee to the extent
set forth herein by the Company of the
distribution, redemption and liquidation amounts
payable to the holders of the Trust Preferred
Securities. The Guarantees do not apply, however,
to current distributions by the Partnership
unless and until such distributions are declared
by the Partnership out of funds legally available
for payment or to liquidating distributions
unless there are assets available for payment in
the Partnership, each as more fully described
under "Risk Factors -- Insufficient Income or
Assets Available to Partnership". The Company's
obligations under the Guarantees are subordinate
and junior in right of payment to all other
liabilities of the Company and rank "pari passu"
with the most senior preferred stock issued from
time to time by the Company, with similar
guarantees issued by the Company in connection
with the $275,000,000 aggregate liquidation
amount of 7 3/4% Trust Originated Preferred
Securities issued by Merrill Lynch Preferred
Capital Trust I, the $300,000,000 aggregate
liquidation amount of 8% Trust Originated
Preferred Securities issued by Merrill Lynch
Preferred Capital Trust II, the $750,000,000
aggregate liquidation amount of 7% Trust
Originated Preferred Securities issued by Merrill
Lynch Preferred Capital Trust III and with any
guarantee now or hereafter entered into by the
Company in respect of any preferred stock of any
other Finance Subsidiary.
9
<PAGE>
VOTING RIGHTS............... Generally, holders of the Trust Preferred
Securities will not have any voting rights. The
holders of a majority in liquidation amount of
the Trust Preferred Securities, however, have the
right to direct the time, method and place of
conducting any proceeding for any remedy
available to the Property Trustee, or direct the
exercise of any trust or power conferred upon the
Property Trustee under the Declaration, including
the right to direct the Property Trustee, as
holder of the Partnership Preferred Securities,
(i) to exercise its rights in the manner
described above under "Rights Upon Non-Payment of
Distributions and Certain Defaults; Covenants of
the Company" and (ii) to consent to any
amendment, modification or termination of the
Limited Partnership Agreement or the Partnership
Preferred Securities where such consent shall be
required. See "Description of the Trust Preferred
Securities -- Voting Rights".
SPECIAL EVENT REDEMPTIONS
OR DISTRIBUTIONS............ Upon the occurrence of a Trust Tax Event (which
event will generally be triggered upon the
occurrence of certain adverse tax consequences or
the denial of an interest deduction on the
Debentures held by the Partnership) or a Trust
Investment Company Event (which event will
generally be triggered if the Trust is considered
an "investment company" under the Investment
Company Act of 1940, as amended (the "1940
Act")), except in certain limited circumstances,
the Regular Trustees (as defined herein) will
have the right to liquidate the Trust and cause
Partnership Preferred Securities to be
distributed to the holders of the Trust Preferred
Securities. In certain circumstances involving a
Partnership Tax Event (which event will generally
be triggered upon the occurrence of certain
adverse tax consequences or the denial of an
interest deduction on the Debentures held by the
Partnership) or a Partnership Investment Company
Event (which event will generally be triggered if
the Partnership is considered an "investment
company" under the 1940 Act), the Partnership
will have the right to redeem the Partnership
Preferred Securities, in whole (but not in part),
at $25 per Partnership Preferred Security plus
accumulated and unpaid distributions thereon,
regardless of the occurrence of any Trust Tax
Event or Trust Investment Company Event and in
lieu of any distribution of the Partnership
Preferred Securities required in connection
therewith, in which event the Trust Securities
will be redeemed at the Redemption Price. See
"Description of the Trust Preferred Securities --
Trust Special Event Redemption or Distribution"
and "Description of the Partnership Preferred
Securities -- Partnership Special Event
Redemption".
FORM OF TRUST PREFERRED
SECURITIES.................. The Trust Preferred Securities will be
represented by a global certificate or
certificates registered in the name of Cede &
Co., as nominee for DTC. Beneficial interests in
the Trust Preferred Securities will be evidenced
by, and transfers thereof will be effected only
through, records maintained by the participants
in
10
<PAGE>
DTC. Except as described herein, Trust Preferred
Securities in certificated form will not be
issued in exchange for the global certificate or
certificates. See "Description of the Trust
Preferred Securities -- Book-Entry Only
Issuance -- The Depository Trust Company".
USE OF PROCEEDS............. All of the proceeds from the sale of the Trust
Securities will be invested by the Trust in the
Partnership Preferred Securities. The Partnership
will use the funds to make investments in
Debentures and certain Eligible Debt Securities.
The Company and the subsidiaries of the Company
which are the issuers of the Debentures will use
the proceeds from the sale of such Debentures for
general corporate purposes. See "Use of
Proceeds".
11
<PAGE>
RISK FACTORS
"Prospective purchasers of the Trust Preferred Securities should consider
carefully the risk factors set forth below, as well as all other information
contained or incorporated by reference in this Prospectus, in evaluating an
investment in the Trust Preferred Securities."
DISTRIBUTIONS PAYABLE ONLY IF DECLARED BY GENERAL PARTNER; RESTRICTIONS ON
CERTAIN PAYMENTS; TAX CONSEQUENCES
Distributions on the Partnership Preferred Securities will be payable only
if, as and when declared by the General Partner in its sole discretion. The
Company is the sole General Partner of the Partnership, and the Debentures
will constitute obligations of the Company and its affiliates. If interest
payments on the Debentures are deferred as permitted thereby, or if such
interest payments are not paid to the Partnership according to their terms
(and guarantee payments on the Investment Guarantees are not made by the
Company), the Partnership will generally lack funds to pay distributions on
the Partnership Preferred Securities. If the Partnership does not make current
distributions on the Partnership Preferred Securities, either because the
General Partner does not declare distributions to be made or because the
Partnership lacks sufficient funds, the Trust will not have funds available to
make current distributions on the Trust Preferred Securities. As described
under "Description of the Trust Guarantee -- Covenants of the Company", in
certain circumstances, the Company will be restricted from, among other
things, paying any dividends on its Common Stock.
Should the Partnership fail to pay current distributions on the Partnership
Preferred Securities, each holder of Trust Preferred Securities will generally
be required to accrue income, for United States federal income tax purposes,
in respect of the cumulative deferred distributions (including interest
thereon) allocable to its proportionate share of the Partnership Preferred
Securities. As a result, each holder of Trust Preferred Securities will
recognize income for United States federal income tax purposes in advance of
the receipt of cash and will not receive the cash from the Trust related to
such income if such holder disposes of its Trust Preferred Securities prior to
the record date for the date on which distributions of such amounts are made
by the Trust. See "Certain Federal Income Tax Considerations".
INSUFFICIENT INCOME OR ASSETS AVAILABLE TO PARTNERSHIP
The Trust Preferred Securities are subject to the risk of a current or
liquidating distribution rate mismatch between the rate paid on the Trust
Preferred Securities and the rate paid on the securities held by the
Partnership, including the Debentures and any additional securities acquired
by the Partnership in the future. Such mismatch could occur if (i) at any time
that the Partnership is receiving current payments in respect of the
securities held by the Partnership (including the Debentures), the General
Partner, in its sole discretion, does not declare distributions on the
Partnership Preferred Securities and the Partnership receives insufficient
amounts to pay the additional compounded distributions that will accumulate in
respect of the Partnership Preferred Securities, (ii) the Partnership
reinvests the proceeds received in respect of the Debentures upon their
retirement or at their maturities in Affiliate Investment Instruments or
Eligible Debt Securities that do not generate income in an amount that is
sufficient to pay full distributions in respect of the Partnership Preferred
Securities at a rate of 7.12% per annum or (iii) the Partnership invests in
debt securities of Investment Affiliates that are not guaranteed by the
Company and that cannot be liquidated by the Partnership for an amount
sufficient to pay such distributions in full. If the reinvestments in the
securities of the Investment Affiliates contemplated by the General Partner do
not meet the eligibility criteria for Affiliate Investment Instruments
described under "Description of the Partnership Preferred Securities --
Partnership Investments", the Partnership shall invest funds available for
reinvestment in Eligible Debt Securities. To the extent that the Partnership
lacks sufficient funds to make current or liquidating distributions on the
Partnership Preferred Securities in full, the Trust will not have sufficient
funds available to pay full current or liquidating distributions on the Trust
Preferred Securities.
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<PAGE>
DEPENDENCE ON AFFILIATE INVESTMENT INSTRUMENTS
Approximately 99% of the proceeds from the issuance of the Partnership
Preferred Securities and the General Partner's capital contribution will be
invested in Debentures, which consist of debt instruments of the Company and
one or more eligible controlled affiliates. See "Description of the
Partnership Preferred Securities -- Partnership Investments".
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Trust Special Event or a Partnership Special Event
(each of which will generally be triggered either upon (i) the occurrence of
certain adverse tax consequences to the Trust or the Partnership, as the case
may be, or the denial of an interest deduction by the related Investment
Affiliate on the Debentures held by the Partnership or (ii) the Trust or
Partnership being considered an "investment company" under the 1940 Act)
(each, a "Special Event"), the Trust will be dissolved with the result that,
except in the limited circumstances described below, the Partnership Preferred
Securities would be distributed to the holders of the Trust Securities in
connection with the liquidation of the Trust. In certain circumstances, the
Partnership shall have the right to redeem the Partnership Preferred
Securities, in whole (but not in part), in lieu of a distribution of the
Partnership Preferred Securities by the Trust, in which event the Trust will
redeem the Trust Preferred Securities for cash. See "Description of the Trust
Preferred Securities -- Trust Special Event Redemption or Distribution" and
"Description of the Partnership Preferred Securities -- Partnership Special
Event Redemption".
Unless the liquidation of the Trust occurs as a result of the Trust being
subject to United States federal income tax with respect to income on the
Partnership Preferred Securities, a distribution of the Partnership Preferred
Securities upon the dissolution of the Trust would not be a taxable event to
holders of the Trust Preferred Securities. If, however, the liquidation of the
Trust were to occur because the Trust is subject to United States federal
income tax with respect to income accrued or received on the Partnership
Preferred Securities, the distribution of Partnership Preferred Securities to
holders by the Trust would likely be a taxable event to each such holder, and
a holder would recognize gain or loss as if the holder had exchanged its Trust
Preferred Securities for the Partnership Preferred Securities it received upon
the liquidation of the Trust. Similarly, the holders of the Trust Preferred
Securities would recognize gain or loss if the Trust dissolves upon an
occurrence of a Partnership Special Event and the holders of Trust Preferred
Securities receive cash in exchange for their Trust Preferred Securities. See
"Certain Federal Income Tax Considerations -- Redemption of Trust Preferred
Securities for Cash".
There can be no assurance as to the market prices for the Partnership
Preferred Securities that may be distributed in exchange for Trust Preferred
Securities if a dissolution or liquidation of the Trust were to occur.
Accordingly, the Partnership Preferred Securities that a holder of Trust
Preferred Securities may receive upon dissolution and liquidation of the Trust
may trade at a discount to the price that the investor paid to purchase the
Trust Preferred Securities offered hereby. Because holders of Trust Preferred
Securities may receive Partnership Preferred Securities upon the occurrence of
a Special Event, prospective purchasers of Trust Preferred Securities also are
making an investment decision with regard to the Partnership Preferred
Securities and should carefully review all the information regarding the
Partnership Preferred Securities contained herein. See "Description of the
Partnership Preferred Securities -- Partnership Special Event Redemption" and
"-- General".
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEES AND THE COMPANY
DEBENTURE
The Company's obligations under the Trust Guarantee, the Partnership
Guarantee and the Investment Guarantees are subordinate and junior in right of
payment to all liabilities of the Company and will rank pari passu with the
most senior preferred stock, if any, issued from time to time by the Company,
with similar guarantees issued by the Company in connection with the
$275,000,000 aggregate liquidation amount of 7 3/4% Trust Originated Preferred
Securities issued by Merrill Lynch Preferred Capital Trust I, the $300,000,000
aggregate liquidation amount of 8% Trust Originated Preferred Securities
issued by Merrill Lynch Preferred
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<PAGE>
Capital Trust II, the $750,000,000 aggregate liquidation amount of 7% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred Capital
Trust III and with any guarantee now or hereafter entered into by the Company
in respect of any preferred stock of any other Finance Subsidiary, and the
Company's obligations under the Company Debenture are subordinate and junior
in right of payment to all Senior Indebtedness. At March 27, 1998, the Company
had outstanding Senior Indebtedness aggregating approximately $85.1 billion
which would have ranked senior to the Company's obligations under the
Guarantees and the Company Debenture. There are no terms in the Trust
Preferred Securities, the Partnership Preferred Securities, the Guarantees or
the Debentures that limit the Company's ability to incur additional
indebtedness, including indebtedness that ranks senior to the Guarantees. See
"Description of the Partnership Preferred Securities -- Partnership
Investments" and "-- Investment Guarantees", "Description of the Trust
Guarantee" and "Description of the Partnership Guarantee."
ENFORCEMENT OF CERTAIN RIGHTS BY OR ON BEHALF OF HOLDERS OF TRUST PREFERRED
SECURITIES
If a Trust Enforcement Event occurs and is continuing, then (a) the holders
of Trust Preferred Securities would rely on the enforcement by the Property
Trustee of its rights, as a holder of the Partnership Preferred Securities,
against the Company, including the right to direct the Special Representative
to enforce (i) the Partnership's creditors' rights and other rights with
respect to the Affiliate Investment Instruments and the Investment Guarantees,
(ii) the rights of the holders of the Partnership Preferred Securities under
the Partnership Guarantee, and (iii) the rights of the holders of the
Partnership Preferred Securities to receive distributions (only if and to the
extent declared out of funds legally available therefor) on the Partnership
Preferred Securities, and (b) the Trust Guarantee Trustee shall have the right
to enforce the terms of the Trust Guarantee, including the right to enforce
the covenant restricting certain payments by the Company and Finance
Subsidiaries. Under no circumstances, however, shall the Special
Representative have authority to cause the General Partner to declare
distributions on the Partnership Preferred Securities. As a result, although
the Special Representative may be able to enforce the Partnership's creditors'
rights to accelerate and receive payments in respect of the Affiliate
Investment Instruments and the Investment Guarantees, the Partnership would be
entitled to reinvest such payments in additional Affiliate Investment
Instruments, subject to satisfying the reinvestment criteria described under
"Description of the Partnership Preferred Securities -- Partnership
Investments", and the Eligible Debt Securities, rather than declaring and
making distributions on the Partnership Preferred Securities. See "Description
of the Trust Preferred Securities -- Trust Enforcement Events".
LIMITED VOTING RIGHTS
Holders of the Trust Preferred Securities will have limited voting rights
and will not be entitled to vote to appoint, remove or replace, or to increase
or decrease the number of, Trustees, which voting rights are vested
exclusively in the holder of the Trust Common Securities. See "Description of
the Trust PreferredSecurities -- Voting Rights".
TRADING CHARACTERISTICS OF TRUST PREFERRED SECURITIES
The price at which the Trust Preferred Securities may trade may not fully
reflect the value of the accumulated but unpaid distributions on the Trust
Preferred Securities (which will equal the accumulated but unpaid
distributions on the Partnership Preferred Securities). In addition, as a
result of the right of the General Partner not to declare current
distributions on the Partnership Preferred Securities, the market price of the
Trust Preferred Securities (which represent undivided beneficial ownership
interests in the Partnership Preferred Securities) may be more volatile than
other similar securities where there is no such right to defer current
distributions. A holder who disposes of its Trust Preferred Securities will be
required to include for United States federal income tax purposes accumulated
but unpaid distributions on the Partnership Preferred Securities through the
date of disposition in income as ordinary income, and to add such amount to
its adjusted tax basis in its "pro rata" share of the Partnership Preferred
Securities deemed disposed of. To the extent the selling price is less than
the holder's adjusted tax basis (which will include all accumulated but unpaid
distributions), a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "Certain Federal Income Tax
Considerations".
14
<PAGE>
NO PRIOR MARKET FOR THE TRUST PREFERRED SECURITIES
The Trust Preferred Securities constitute a new issue of securities with no
established trading market. The Trust Preferred Securities have been approved
for listing on the NYSE, subject to official notice of issuance. There can be
no assurance that an active market for the Trust Preferred Securities will
develop or be sustained in the future on the NYSE. Although the Underwriters
have indicated to the Company that they intend to make a market in the Trust
Preferred Securities, as permitted by applicable laws and regulations, they
are not obligated to do so and may discontinue any such market-making at any
time without notice. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Trust Preferred Securities.
The Trust Preferred Securities will only be sold to those investors for whom
such Trust Preferred Securities are considered suitable in light of their
particular circumstances.
THE COMPANY
The Company is a holding company that, through its subsidiaries and
affiliates, provides investment, financing, advisory, 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; an underwriter of selected insurance products, and a distributor of
investment products of the Merrill Lynch Asset Management group. 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. The Company's asset management and investment management activities
are conducted through the Merrill Lynch Asset Management group and Merrill
Lynch Mercury Asset Management, which together constitute one of the largest
asset management organizations in the world. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by the
U.S. Government and its agencies and its government-sponsored entities.
Merrill Lynch Capital Services, Inc., Merrill Lynch Derivative Products AG,
and Merrill Lynch International are the Company's primary derivative product
dealers and enter into interest rate, currency and other over-the-counter
derivative transactions as intermediaries and as principals. The Company's
operations in insurance services consist of the underwriting and sale 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 and purchasing secured
loans, providing currency exchange facilities and other related services and
furnishing trust, employee benefit and custodial 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 proceeds to be received by the Trust from the sale of the Trust
Preferred Securities and the Trust Common Securities will be used by the Trust
to purchase Partnership Preferred Securities, and will be applied by the
Partnership to invest in Debentures and Eligible Debt Securities. See
"Description of the Partnership Preferred Securities -- Partnership
Investments". The Company and the subsidiaries of the Company which are the
issuers of the Debentures will use the proceeds from the sale of such
Debentures to the Partnership for general corporate purposes. Such general
corporate purposes may include the funding of investments in, or extensions of
credit to, its subsidiaries, the funding of assets of the Company and its
subsidiaries, the lengthening of the average maturity of the Company's
borrowings, and the financing of acquisitions, including the recently
completed acquisition of Mercury Asset Management Group plc. Pending such
applications, the net proceeds will be applied to the reduction of short-term
indebtedness or temporarily invested. Management of the Company
15
<PAGE>
expects that it will, on a recurrent basis, engage in additional financings as
the need arises to finance the growth of the Company, through acquisitions or
otherwise, or to lengthen the average maturity of its borrowings. To the
extent that Trust Preferred Securities being purchased for resale by MLPF&S
are not resold, the aggregate proceeds to the Company and its subsidiaries
would be reduced.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of the Company for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED LAST FRIDAY
IN DECEMBER THREE MONTHS
------------------------ ENDED
1993 1994 1995 1996 1997 MARCH 27, 1998
---- ---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges.......................... 1.4 1.2 1.2 1.2 1.2 1.2
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of earnings from continuing operations before income taxes
and fixed charges. "Fixed charges" consist of interest costs, amortization of
debt expense, preferred stock dividend requirements of majority-owned
subsidiaries, and that portion of rentals estimated to be representative of
the interest factor.
MERRILL LYNCH PREFERRED CAPITAL TRUST IV
Merrill Lynch Preferred Capital Trust IV (the "Trust") is a statutory
business trust formed under the Delaware Business Trust Act, as amended (the
"Trust Act"), pursuant to a declaration of trust and the filing of a
certificate of trust with the Secretary of State of the State of Delaware on
December 19, 1997; such declaration will be amended and restated in its
entirety (as so amended and restated, the "Declaration") substantially in the
form filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. The Declaration will be qualified as an indenture
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
Upon issuance of the Trust Preferred Securities, the purchasers thereof will
own all the Trust Preferred Securities. See "Description of the Trust
Preferred Securities". The Company will acquire Trust Common Securities in an
amount equal to at least 3% of the total capital of the Trust. The Trust will
use all the proceeds derived from the issuance of the Trust Securities to
purchase the Partnership Preferred Securities from the Partnership and,
accordingly, the assets of the Trust will consist solely of the Partnership
Preferred Securities. The Trust exists for the exclusive purpose of (i)
issuing the Trust Securities representing undivided beneficial ownership
interests in the assets of the Trust, (ii) investing the gross proceeds of the
Trust Securities in the Partnership Preferred Securities, and (iii) engaging
in only those other activities necessary or incidental thereto.
Pursuant to the Declaration, there will initially be four trustees (the
"Trustees") for the Trust. Two of the Trustees will be individuals who are
employees or officers of or who are affiliated with the Company (the "Regular
Trustees"). The third trustee will be a financial institution that is
unaffiliated with the Company and is indenture trustee for purposes of
compliance with the provisions of the Trust Indenture Act (the "Property
Trustee"). The fourth trustee will be an entity that maintains its principal
place of business in the State of Delaware (the "Delaware Trustee").
Initially, The Chase Manhattan Bank, a New York banking corporation, will act
as Property Trustee, and its affiliate, Chase Manhattan Bank Delaware, a
Delaware corporation, will act as Delaware Trustee until, in each case,
removed or replaced by the holder of the Trust Common Securities. For purposes
of compliance with the Trust Indenture Act, The Chase Manhattan Bank will also
act as trustee under the Trust Guarantee (the "Trust Guarantee Trustee"), as
Property Trustee under the Declaration and as trustee under the indenture
applicable to the Company Debenture.
The Property Trustee will hold title to the Partnership Preferred Securities
for the benefit of the holders of the Trust Securities, and the Property
Trustee will have the power to exercise all rights, powers and privileges with
respect to the Partnership Preferred Securities under the Amended and Restated
Agreement of Limited Partnership to be entered into by the Company and the
Trust (the "Limited Partnership Agreement") as the
16
<PAGE>
holder of the Partnership Preferred Securities. In addition, the Property
Trustee will maintain exclusive control of a segregated non-interest bearing
bank account (the "Property Account") to hold all payments made in respect of
the Partnership Preferred Securities for the benefit of the holders of the
Trust Securities. The Trust Guarantee Trustee will hold the Trust Guarantee
for the benefit of the holders of the Trust Preferred Securities. The Company,
as the holder of all the Trust Common Securities, will have the right to
appoint, remove or replace any of the Trustees and to increase or decrease the
number of trustees, provided that at least one trustee shall be a Delaware
Trustee, at least one trustee shall be the Property Trustee and at least one
Trustee shall be a Regular Trustee. The Company will pay all fees and expenses
related to the organization and operations of the Trust (including any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States or any other domestic taxing
authority upon the Trust) and the offering of the Trust Preferred Securities
and be responsible for all debts and obligations of the Trust (other than with
respect to the Trust Securities).
For so long as the Trust Preferred Securities remain outstanding, the
Company will covenant (i) to maintain directly 100% ownership of the Trust
Common Securities, (ii) to cause the Trust to remain a statutory business
trust and not to voluntarily dissolve, wind-up, liquidate or be terminated,
except as permitted by the Declaration of the Trust and (iii) to use its
commercially reasonable efforts to ensure that the Trust will not be (A) an
"investment company" for purposes of the 1940 Act or (B) classified as other
than a grantor trust for United States federal income tax purposes.
The rights of the holders of the Trust Preferred Securities, including
economic rights, rights to information and voting rights, are as set forth in
the Declaration and the Trust Act. See "Description of the Trust Preferred
Securities". The Declaration and the Trust Guarantee also incorporate by
reference the terms of the Trust Indenture Act.
The location of the principal executive office of the Trust is c/o Merrill
Lynch & Co., Inc., World Financial Center, North Tower, 250 Vesey Street, New
York, New York 10281, and its telephone number is (212) 449-1000.
MERRILL LYNCH PREFERRED FUNDING IV, L.P.
Merrill Lynch Preferred Funding IV, L.P. (the "Partnership") is a limited
partnership that was formed under the Delaware Revised Uniform Limited
Partnership Act, as amended (the "Partnership Act"), on December 19, 1997 for
the exclusive purposes of purchasing certain eligible debt securities of the
Company and wholly-owned subsidiaries of the Company (the "Affiliate
Investment Instruments") with the proceeds from the sale of Partnership
Preferred Securities to the Trust and a capital contribution from the Company
in exchange for the general partner interest in the Partnership. Pursuant to
the certificate of limited partnership, as amended, and the Limited
Partnership Agreement, the Company is the sole general partner of the
Partnership (in such capacity the "General Partner"). Upon the issuance of the
Partnership Preferred Securities, which securities represent limited partner
interests in the Partnership, the Trust will be the sole limited partner of
the Partnership. Contemporaneously with the issuance of the Partnership
Preferred Securities, the General Partner will contribute capital to the
Partnership in an amount sufficient to establish its initial capital account
at an amount equal to at least 15% of the total capital of the Partnership.
The Partnership is managed by the General Partner and exists for the sole
purpose of (i) issuing its partnership interests, (ii) investing the proceeds
thereof in Affiliate Investment Instruments and Eligible Debt Securities and
(iii) engaging in only those other activities necessary or incidental thereto.
To the extent that aggregate payments to the Partnership on the Affiliate
Investment Instruments and on Eligible Debt Securities exceed distributions
accumulated or payable with respect to the Partnership Preferred Securities,
the Partnership may at times have excess funds which shall be allocated to and
may, in the General Partner's sole discretion, be distributed to the General
Partner.
17
<PAGE>
For so long as the Partnership Preferred Securities remain outstanding, the
General Partner will covenant in the Limited Partnership Agreement (i) to
remain the sole general partner of the Partnership and to maintain directly
100% ownership of the General Partner's interest in the Partnership, which
interest will at all times represent at least 1% of the total capital of the
Partnership, (ii) to cause the Partnership to remain a limited partnership and
not to voluntarily dissolve, liquidate, wind-up or be terminated, except as
permitted by the Limited Partnership Agreement and (iii) to use its
commercially reasonable efforts to ensure that the Partnership will not be (A)
an "investment company" for purposes of the 1940 Act or (B) an association or
a publicly traded partnership taxable as a corporation for United States
federal income tax purposes. The Company or the then General Partner may
transfer its obligations as General Partner to a wholly-owned direct or
indirect subsidiary of the Company provided that (i) such successor entity
expressly accepts such transfer of the obligations as General Partner and (ii)
prior to such transfer, the Company has received an opinion of nationally
recognized independent counsel to the Partnership experienced in such matters
to the effect that (A) the Partnership will be treated as a partnership for
United States federal income tax purposes, (B) such transfer would not cause
the Trust to be classified as an association taxable as a corporation for
United States federal income tax purposes, (C) following such transfer, the
Company and such successor entity will be in compliance with the 1940 Act
without registering thereunder as an investment company, and (D) such transfer
will not adversely affect the limited liability of the holders of the
Partnership Preferred Securities.
The rights of the holders of the Partnership Preferred Securities, including
economic rights, rights to information and voting rights, are set forth in the
Limited Partnership Agreement and the Partnership Act. See "Description of the
Partnership Preferred Securities".
The Limited Partnership Agreement provides that the General Partner will
have liability for the fees and expenses of the Partnership (including any
taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the United States or any other domestic
taxing authority upon the Partnership) and be responsible for all debts and
obligations of the Partnership (other than with respect to the Partnership
Preferred Securities). Under Delaware law, assuming a limited partner in a
Delaware limited partnership such as the Partnership (i.e., a holder of the
Partnership Preferred Securities) does not participate in the control of the
business of the limited partnership, such limited partner will not be
personally liable for the debts, obligations and liabilities of such limited
partnership, whether arising in contract, tort or otherwise, solely by reason
of being a limited partner of such limited partnership (subject to any
obligation such limited partner may have to repay any funds that may have been
wrongfully distributed to it). The Partnership's business and affairs will be
conducted by the General Partner.
The location of the principal executive offices of the Partnership is c/o
Merrill Lynch & Co., Inc., World Financial Center, North Tower, 250 Vesey
Street, New York, New York 10281 and its telephone number is (212) 449-1000.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The Trust Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, The Chase Manhattan Bank, will act as
trustee for the Trust Preferred Securities under the Declaration for purposes
of compliance with the provisions of the Trust Indenture Act. The terms of the
Trust Preferred Securities will include those stated in the Declaration and
those made part of the Declaration by the Trust Indenture Act. The following
summary of the material terms and provisions of the Trust Preferred Securities
does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the Declaration, a copy of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part, the
Trust Act and the Trust Indenture Act.
GENERAL
The Trust Preferred Securities will be issued in fully registered form
without coupons. The Trust Preferred Securities will not be issued in bearer
form. See "-- Book-Entry Only Issuance -- The Depository Trust Company".
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The Declaration authorizes the Regular Trustees of the Trust to issue the
Trust Securities, which represent undivided beneficial ownership interests in
the assets of the Trust. Title to the Partnership Preferred Securities will be
held by the Property Trustee for the benefit of the holders of the Trust
Securities. The Declaration does not permit the Trust to acquire any assets
other than the Partnership Preferred Securities or the issuance by the Trust
of any securities other than the Trust Securities or the incurrence of any
indebtedness by the Trust. The payment of distributions out of money held by
the Trust, and payments out of money held by the Trust upon redemption of the
Trust Preferred Securities or liquidation of the Trust, are guaranteed by the
Company to the extent described under "Description of the Trust Guarantee".
The Trust Guarantee will be held by The Chase Manhattan Bank, the Trust
Guarantee Trustee, for the benefit of the holders of the Trust Preferred
Securities. The Trust Guarantee does not cover payment of distributions when
the Trust does not have sufficient available funds to pay such distributions.
In such event, holders of Trust Preferred Securities will have the remedies
described below under "-- Trust Enforcement Events".
DISTRIBUTIONS
The distribution rate on Trust Preferred Securities will be fixed at a rate
per annum of 7.12% of the stated liquidation amount of $25 per Trust Preferred
Security and will be paid if, as and when the Trust has funds available for
payment. Distributions not paid on the scheduled payment date will accumulate
and compound quarterly at a rate per annum equal to 7.12%. The term
"distribution" as used herein includes any such compounded amounts unless
otherwise stated or the context otherwise requires. The amount of
distributions payable for any period will be computed on the basis of a 360-
day year of twelve 30-day months.
Distributions on the Trust Preferred Securities will be cumulative, will
accumulate from the date of initial issuance and will be payable quarterly in
arrears on each March 30, June 30, September 30 and December 30, commencing,
September 30, 1998, if, as and when available for payment, by the Property
Trustee, except as otherwise described below. If distributions are not paid
when scheduled, the accumulated distributions shall be paid to the holders of
record of the Trust Preferred Securities as they appear on the books and
records of the Trust on the record date with respect to the payment date for
the Trust Preferred Securities which corresponds to the payment date fixed by
the Partnership with respect to the payment of cumulative distributions on the
Partnership Preferred Securities.
Distributions on the Trust Preferred Securities will be made to the extent
that the Trust has funds available for the payment of such distributions in
the Property Account. Amounts available to the Trust for distribution to the
holders of the Trust Preferred Securities will be limited to payments received
by the Trust from the Partnership with respect to the Partnership Preferred
Securities or from the Company on the Partnership Guarantee or the Trust
Guarantee. Distributions on the Partnership Preferred Securities will be paid
only if, as and when declared in the sole discretion of the Company, as the
General Partner of the Partnership. Pursuant to the Limited Partnership
Agreement, the General Partner is not obligated to declare distributions on
the Partnership Preferred Securities at any time, including upon or following
a Partnership Enforcement Event. See "Description of Partnership Preferred
Securities -- Partnership Enforcement Events".
The assets of the Partnership will consist only of Affiliate Investment
Instruments (which initially will be the Debentures) and Eligible Debt
Securities. To the extent that the issuers (and, where applicable, the
Company, as guarantor) of the securities in which the Partnership invests
defer or fail to make any payment in respect of such securities (or, if
applicable, such guarantees), the Partnership will not have sufficient funds
to pay and will not declare or pay distributions on the Partnership Preferred
Securities. If the Partnership does not declare and pay distributions on the
Partnership Preferred Securities out of funds legally available for
distribution, the Trust will not have sufficient funds to make distributions
on the Trust Preferred Securities, in which event the Trust Guarantee will not
apply to such distributions until the Trust has sufficient funds available
therefor. See "Description of the Partnership Preferred Securities --
Distributions" and "Description of the Trust Guarantee". In addition, as
described under "Risk Factors -- Insufficient Income or Assets Available to
Partnership", the Partnership may not have sufficient funds to pay current or
liquidating distributions on the Partnership Preferred Securities if (i) at
any time that the Partnership is receiving current payments in respect of
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the securities held by the Partnership (including the Debentures), the General
Partner, in its sole discretion, does not declare distributions on the
Partnership Preferred Securities and the Partnership receives insufficient
amounts to pay the additional compounded distributions that will accumulate in
respect of the Partnership Preferred Securities, (ii) the Partnership
reinvests the proceeds received in respect of the Debentures upon their
retirement or at their maturities in Affiliate Investment Instruments that do
not generate income in an amount that is sufficient to pay full distributions
in respect of the Partnership Preferred Securities or (iii) the Partnership
invests in debt securities of Investment Affiliates that are not guaranteed by
the Company and that cannot be liquidated by the Partnership for an amount
sufficient to pay such distributions in full.
Distributions on the Trust Preferred Securities will be payable to the
holders thereof as they appear on the books and records of the Trust on the
relevant record dates, which will be one Business Day (as defined herein)
prior to the relevant payment dates. Such distributions will be paid through
the Property Trustee who will hold amounts received in respect of the
Partnership Preferred Securities in the Property Account for the benefit of
the holders of the Trust Securities. Subject to any applicable laws and
regulations and the provisions of the Declaration, each such payment will be
made as described under "-- Book-Entry Only Issuance -- The Depository Trust
Company" below. In the event that the Trust Preferred Securities do not remain
in book-entry only form, the relevant record dates shall be the 15th day of
the month of the relevant payment dates. In the event that any date on which
distributions are payable on the Trust Preferred Securities is not a Business
Day, payment of the distribution payable on such date will be made on the next
succeeding day which is a Business Day (without any interest or other payment
in respect of the distribution subject to such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date. A "Business Day" shall mean any day
other than a day on which banking institutions in The City of New York are
authorized or required by law to close.
TRUST ENFORCEMENT EVENTS
The occurrence, at any time, of (i) arrearages on distributions on the Trust
Preferred Securities that shall exist for six consecutive quarterly
distribution periods, (ii) a default by the Company in respect of any of its
obligations under the Trust Guarantee or (iii) a Partnership Enforcement Event
under the Limited Partnership Agreement, will constitute an enforcement event
under the Declaration with respect to the Trust Securities (a "Trust
Enforcement Event"); "provided", that pursuant to the Declaration, the holder of
the Trust Common Securities will be deemed to have waived any Trust
Enforcement Event with respect to the Trust Common Securities until all Trust
Enforcement Events with respect to the Trust Preferred Securities have been
cured, waived or otherwise eliminated. Until such Trust Enforcement Events
with respect to the Trust Preferred Securities have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed to be acting solely
on behalf of the holders of the Trust Preferred Securities and only the
holders of the Trust Preferred Securities will have the right to direct the
Property Trustee with respect to certain matters under the Declaration and, in
the case of a Partnership Enforcement Event, the Special Representative with
respect to certain matters under the Limited Partnership Agreement. See
"Description of the Partnership Preferred Securities -- Partnership
Enforcement Events" for a description of the events which will trigger the
occurrence of a Partnership Enforcement Event.
Upon the occurrence of a Trust Enforcement Event, (a) the Property Trustee,
as the holder of the Partnership Preferred Securities, shall have the right to
enforce the terms of the Partnership Preferred Securities, including the right
to direct the Special Representative to enforce (i) the Partnership's
creditors' rights and other rights with respect to the Affiliate Investment
Instruments and the Investment Guarantees, (ii) the rights of the holders of
the Partnership Preferred Securities under the Partnership Guarantee and (iii)
the rights of the holders of the Partnership Preferred Securities to receive
distributions (only if and to the extent declared out of funds legally
available therefor) on the Partnership Preferred Securities, and (b) the Trust
Guarantee Trustee shall have the right to enforce the terms of the Trust
Guarantee, including the right to enforce the covenant restricting certain
payments by the Company and Finance Subsidiaries.
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If the Property Trustee fails to enforce its rights under the Partnership
Preferred Securities after a holder of Trust Preferred Securities has made a
written request, such holder of record of Trust Preferred Securities may
directly institute a legal proceeding against the Partnership and the Special
Representative to enforce the Property Trustee's rights under the Partnership
Preferred Securities without first instituting any legal proceeding against
the Property Trustee, the Trust or any other person or entity. In addition,
for so long as the Trust holds any Partnership Preferred Securities, if the
Special Representative fails to enforce its rights on behalf of the
Partnership under the Affiliate Investment Instruments after a holder of Trust
Preferred Securities has made a written request, a holder of record of Trust
Preferred Securities may on behalf of the Partnership directly institute a
legal proceeding against the Investment Affiliates under the Affiliate
Investment Instruments, without first instituting any legal proceeding against
the Property Trustee, the Trust, the Special Representative or the
Partnership. In any event, for so long as the Trust is the holder of any
Partnership Preferred Securities, if a Trust Enforcement Event has occurred
and is continuing and such event is attributable to the failure of an
Investment Affiliate to make any required payment when due on any Affiliate
Investment Instrument or the failure of the Company to make any required
payment when due on any Investment Guarantee, then a holder of Trust Preferred
Securities may on behalf of the Partnership directly institute a proceeding
against such Investment Affiliate with respect to such Affiliate Investment
Instrument or against the Company with respect to any such Investment
Guarantee, in each case for enforcement of payment.
Under no circumstances, however, shall the Special Representative have
authority to cause the General Partner to declare distributions on the
Partnership Preferred Securities. As a result, although the Special
Representative may be able to enforce the Partnership's creditors' rights to
accelerate and receive payments in respect of the Affiliate Investment
Instruments and the Investment Guarantees, the Partnership would be entitled
to reinvest such payments in additional Affiliate Investment Instruments,
subject to satisfying the reinvestment criteria described under "Description
of the Partnership Preferred Securities -- Partnership Investments", and
Eligible Debt Securities, rather than declaring and making distributions on
the Partnership Preferred Securities.
The Company and the Trust are each required to file annually with the
Property Trustee an officer's certificate as to its compliance with all
conditions and covenants under the Declaration.
MANDATORY REDEMPTION
The Partnership Preferred Securities may be redeemed by the Partnership at
the option of the General Partner, in whole or in part, at any time on or
after June 30, 2008 or at any time in certain circumstances upon the
occurrence of a Partnership Special Event. Upon such redemption of the
Partnership Preferred Securities (either at the option of the General Partner
or pursuant to a Partnership Special Event), the proceeds from such repayment
shall simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the Partnership Preferred Securities so redeemed
at an amount per Trust Security equal to $25 plus accumulated and unpaid
distributions thereon; "provided", that holders of the Trust Securities shall be
given not less than 30 nor more than 60 days notice of such redemption. See
"Description of the Partnership Preferred Securities -- General" and "--
Optional Redemption".
TRUST SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time, a Trust Tax Event or a Trust Investment Company Event (each
as hereinafter defined, and each, a "Trust Special Event") shall occur and be
continuing, the Regular Trustees shall, unless the Partnership Preferred
Securities are redeemed in the limited circumstances described below, within
90 days following the occurrence of such Trust Special Event elect to either
(i) dissolve the Trust upon not less than 30 nor more than 60 days notice with
the result that, after satisfaction of creditors of the Trust, if any,
Partnership Preferred Securities would be distributed on a "pro rata" basis to
the holders of the Trust Preferred Securities and the Trust Common Securities
in liquidation of such holders' interests in the Trust; "provided, however",
that if at the time there is available to the Trust the opportunity to
eliminate, within such 90-day period, the Trust Special Event by taking some
ministerial action, such as filing a form or making an election, or pursuing
some other similar reasonable measure which in the sole judgment of the
Company has or will cause no adverse effect on the Trust,
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the Partnership, the Company or the holders of the Trust Securities and will
involve no material cost, the Trust will pursue such measure in lieu of
dissolution or (ii) cause the Trust Preferred Securities to remain
outstanding, provided that in the case of this clause (ii), the Company shall
pay any and all expenses incurred by or payable by the Trust attributable to
the Trust Special Event. Furthermore, if in the case of the occurrence of a
Trust Tax Event, the Regular Trustees have received an opinion (a "Trust
Redemption Tax Opinion") of nationally recognized independent tax counsel
experienced in such matters that there is more than an insubstantial risk that
interest payable by one or more of the Investment Affiliates with respect to
the Debentures issued by such Investment Affiliate is not, or will not be,
deductible by such Investment Affiliate for United States federal income tax
purposes even if the Partnership Preferred Securities were distributed to the
holders of the Trust Securities in liquidation of such holders' interests in
the Trust as described above, then the General Partner shall have the right,
within 90 days following the occurrence of such Trust Tax Event, to elect to
cause the Partnership to redeem the Partnership Preferred Securities in whole
(but not in part) for cash upon not less than 30 nor more than 60 days notice
and promptly following such redemption, the Trust Preferred Securities and
Trust Common Securities will be redeemed by the Trust at the Redemption Price.
"Trust Tax Event" means that the Company shall have requested and received
and shall have delivered to the Regular Trustees an opinion of nationally
recognized independent tax counsel experienced in such matters (a "Trust
Dissolution Tax Opinion") to the effect that there has been (a) an amendment
to, change in or announced proposed change in the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, (b) a judicial decision interpreting, applying,
or clarifying such laws or regulations, (c) an administrative pronouncement or
action that represents an official position (including a clarification of an
official position) of the governmental authority or regulatory body making
such administrative pronouncement or taking such action, or (d) a threatened
challenge asserted in connection with an audit of the Company or any of its
subsidiaries, the Partnership, or the Trust, or a threatened challenge
asserted in writing against any other taxpayer that has raised capital through
the issuance of securities that are substantially similar to the Debentures,
the Partnership Preferred Securities, or the Trust Preferred Securities, which
amendment or change is adopted or which proposed change, decision or
pronouncement is announced or which action, clarification or challenge occurs
on or after the date of this Prospectus (collectively a "Tax Action"), which
Tax Action relates to any of the items described in (i) through (iii) below,
and that following the occurrence of such Tax Action there is more than an
insubstantial risk that (i) the Trust is, or will be, subject to United States
federal income tax with respect to income accrued or received on the
Partnership Preferred Securities, (ii) the Trust is, or will be, subject to
more than a "de minimis" amount of other taxes, duties or other governmental
charges or (iii) interest payable by an Investment Affiliate with respect to
the Debenture issued by such Investment Affiliate is not, or will not be,
deductible by such Investment Affiliate for United States federal income tax
purposes.
Recently, the Internal Revenue Service ("IRS") asserted that the interest
payable on a security issued in circumstances with certain similarities to the
issuance of the Debentures issued by the Investment Affiliates to the
Partnership was not deductible for United States federal income tax purposes.
The taxpayer in that case has filed a petition in the United States Tax Court
challenging the IRS's position on this matter. If this matter were to be
litigated and the Tax Court were to sustain the IRS's position on this matter,
such judicial decision could constitute a Trust Tax Event, which could result
in an early redemption of the Trust Preferred Securities.
"Trust Investment Company Event" means that the Company shall have requested
and received and shall have delivered to the Regular Trustees an opinion of
nationally recognized independent legal counsel experienced in such matters to
the effect that as a result of the occurrence on or after the date hereof of a
change in law or regulation or a change in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be
considered an "investment company" which is required to be registered under
the 1940 Act.
If the Partnership Preferred Securities are distributed to the holders of
the Trust Preferred Securities, the Company will use its best efforts to cause
the Partnership Preferred Securities to be listed on the New York Stock
Exchange or on such other national securities exchange or similar organization
as the Trust Preferred Securities are then listed or quoted.
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On the date fixed for any distribution of Partnership Preferred Securities,
upon dissolution of the Trust, (i) the Trust Preferred Securities and the
Trust Common Securities will no longer be deemed to be outstanding and (ii)
certificates representing Trust Securities will be deemed to represent the
Partnership Preferred Securities having a liquidation preference equal to the
stated liquidation amount of such Trust Securities until such certificates are
presented to the Company or its agent for transfer or reissuance.
There can be no assurance as to the market price for the Partnership
Preferred Securities which may be distributed in exchange for Trust Preferred
Securities if a dissolution and liquidation of the Trust were to occur.
Accordingly, the Partnership Preferred Securities which an investor may
subsequently receive on dissolution and liquidation of the Trust may trade at
a discount to the price of the Trust Preferred Securities exchanged.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Trust Preferred
Securities unless all accumulated and unpaid distributions have been paid on
all Trust Preferred Securities for all quarterly distribution periods
terminating on or prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Trust Preferred
Securities (which notice will be irrevocable), and if the Company has paid to
the Property Trustee a sufficient amount of cash in connection with the
related redemption of the Partnership Preferred Securities, then, by 12:00
noon, New York time, on the redemption date, the Trust will deposit
irrevocably with DTC funds sufficient to pay the amount payable on redemption
of all book-entry certificates and will give DTC irrevocable instructions and
authority to pay such amount to holders of the Trust Preferred Securities. See
"-- Book-Entry Only Issuance -- The Depository Trust Company". If notice of
redemption shall have been given and funds are deposited as required, then
upon the date of such deposit, all rights of holders of such Trust Preferred
Securities so called for redemption will cease, except the right of the
holders of such Trust Preferred Securities to receive the Redemption Price,
but without interest on such Redemption Price. In the event that any date
fixed for redemption of Trust Preferred Securities is not a Business Day, then
payment of the amount payable on such date will be made on the next succeeding
day which is a Business Day (without any interest or other payment in respect
of the amount payable subject to such delay), except that, if such Business
Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of Trust Preferred Securities is improperly
withheld or refused and not paid either by the Trust or by the Company
pursuant to the Trust Guarantee described under "Description of the Trust
Guarantee", distributions on such Trust Preferred Securities will continue to
accumulate from the original redemption date to the date of payment.
In the event that fewer than all of the outstanding Trust Preferred
Securities are to be redeemed, the Trust Preferred Securities will be redeemed
in accordance with the procedures of DTC. See "-- Book-Entry Only Issuance --
The Depository Trust Company". In the event that the Trust Preferred
Securities do not remain in book-entry only form and fewer than all of the
outstanding Trust Preferred Securities are to be redeemed, the Trust Preferred
Securities shall be redeemed on a "pro rata" basis or pursuant to the rules of
any securities exchange on which the Trust Preferred Securities are listed.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or its subsidiaries may at
any time and from time to time purchase outstanding Trust Preferred Securities
by tender, in the open market or by private agreement.
SUBORDINATION OF TRUST COMMON SECURITIES
Payment of amounts upon liquidation of the Trust Securities shall be made
"pro rata" based on the liquidation amount of the Trust Securities; "provided,
however", that upon (i) the occurrence of an Investment Event of Default by an
Investment Affiliate (including the Company) in respect of any Affiliate
Investment Instrument or (ii) default by the Company on any of its obligations
under any Guarantee, the holders of the Trust Preferred Securities will have a
preference over the holders of the Trust Common Securities with respect to
payments upon liquidation of the Trust.
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In the case of any Trust Enforcement Event, the holder of Trust Common
Securities will be deemed to have waived any such Trust Enforcement Event
until all such Trust Enforcement Events with respect to the Trust Preferred
Securities have been cured, waived or otherwise eliminated. Until all Trust
Enforcement Events with respect to the Trust Preferred Securities have been so
cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the Trust Preferred Securities and not on behalf
of the holder of the Trust Common Securities, and only the holders of the
Trust Preferred Securities will have the right to direct the Property Trustee
to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Trust Liquidation"), the
holders of the Trust Preferred Securities will be entitled to receive out of
the assets of the Trust, after satisfaction of liabilities to creditors,
distributions in cash or other immediately available funds in an amount equal
to the aggregate of the stated liquidation amount of $25 per Trust Preferred
Security plus accumulated and unpaid distributions thereon to the date of
payment (the "Trust Liquidation Distribution"), unless, in connection with
such Trust Liquidation, Partnership Preferred Securities have been distributed
on a "pro rata" basis to the holders of the Trust Securities.
If, upon any such Trust Liquidation, the Trust Liquidation Distribution can
be paid only in part because the Trust has insufficient assets available to
pay in full the aggregate Trust Liquidation Distribution, then the amounts
payable directly by the Trust on the Trust Preferred Securities shall be paid
on a "pro rata" basis. The holders of the Trust Common Securities will be
entitled to receive distributions upon any such liquidation "pro rata"
with the holders of the Trust Preferred Securities, except in the limited
circumstances described above under "-- Subordination of Trust Common
Securities".
Pursuant to the Declaration, the Trust shall terminate (i) upon the
bankruptcy of the Company, (ii) upon the filing of a certificate of
dissolution or the equivalent with respect to the Company, the filing of a
certificate of cancellation with respect to the Trust after having obtained
the consent of at least a majority in liquidation amount of the Trust
Securities, voting together as a single class, to file such certificate of
cancellation, or the revocation of the charter of the Company and the
expiration of 90 days after the date of revocation without a reinstatement
thereof, (iii) upon the distribution of all of the Partnership Preferred
Securities upon the occurrence of a Trust Special Event, (iv) upon the entry
of a decree of a judicial dissolution of the Company or the Trust, or (v) upon
the redemption of all the Trust Securities.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act and
under "Description of the Trust Guarantee -- Amendments and Assignment", and
as otherwise required by law and the Declaration, the holders of the Trust
Preferred Securities will have no voting rights.
Subject to the requirement of the Property Trustee obtaining a tax opinion
as set forth in the last sentence of this paragraph, the holders of a majority
in liquidation amount of the Trust Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee, or direct the exercise of any trust or
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee, as holder of the Partnership Preferred
Securities, to (i) exercise the remedies available to it under the Limited
Partnership Agreement as a holder of the Partnership Preferred Securities,
including the right to direct the Special Representative to exercise its
rights in the manner described above under "-- Trust Enforcement Events" and
(ii) consent to any amendment, modification, or termination of the Limited
Partnership Agreement or the Partnership Preferred Securities where such
consent shall be required; "provided, however", that where a consent or action
under the Limited Partnership Agreement would require the consent or act of
the holders of more than a majority of the aggregate liquidation preference of
Partnership Preferred Securities affected thereby, only the holders of the
percentage of the aggregate stated liquidation amount of the Trust Securities
which is at least equal to the percentage required under the Limited
Partnership
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Agreement may direct the Property Trustee to give such consent or take such
action on behalf of the Trust. See "Description of the Partnership Preferred
Securities -- Voting Rights". The Property Trustee shall notify all holders of
the Trust Preferred Securities of any notice of any Partnership Enforcement
Event received from the General Partner with respect to the Partnership
Preferred Securities and the Affiliate Investment Instruments. Such notice
shall state that such Partnership Enforcement Event also constitutes a Trust
Enforcement Event. Except with respect to directing the time, method, and
place of conducting a proceeding for a remedy as described above, the Property
Trustee shall be under no obligation to take any of the actions described in
clauses (i) or (ii) above unless the Property Trustee has obtained an opinion
of independent tax counsel to the effect that as a result of such action, the
Trust will not fail to be classified as a grantor trust for United States
federal income tax purposes and that after such action each holder of Trust
Securities will continue to be treated as owning an undivided beneficial
ownership interest in the Partnership Preferred Securities.
A waiver of a Partnership Enforcement Event with respect to the Partnership
Preferred Securities held by the Property Trustee will constitute a waiver of
the corresponding Trust Enforcement Event.
Any required approval or direction of holders of Trust Preferred Securities
may be given at a separate meeting of holders of Trust Preferred Securities
convened for such purpose, at a meeting of all of the holders of Trust
Securities or pursuant to written consent. The Regular Trustees will cause a
notice of any meeting at which holders of Trust Preferred Securities are
entitled to vote, or of any matter upon which action by written consent of
such holders is to be taken, to be mailed to each holder of record of Trust
Preferred Securities. Each such notice will include a statement setting forth
the following information: (i) the date of such meeting or the date by which
such action is to be taken; (ii) a description of any resolution proposed for
adoption at such meeting on which such holders are entitled to vote or of such
matter upon which written consent is sought; and (iii) instructions for the
delivery of proxies or consents. No vote or consent of the holders of Trust
Preferred Securities will be required for the Trust to redeem and cancel Trust
Preferred Securities or distribute Partnership Preferred Securities in
accordance with the Declaration.
Notwithstanding that holders of Trust Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Trust Securities that are beneficially owned at such time by the Company or
any entity directly or indirectly controlled by, or under direct or indirect
common control with, the Company, except for Trust Preferred Securities
purchased or acquired by the Company or its affiliates in connection with
transactions effected by or for the account of customers of the Company or any
of its subsidiaries or in connection with the distribution or trading of such
Trust Preferred Securities, shall not be entitled to vote or consent and
shall, for purposes of such vote or consent, be treated as if such Trust
Securities were not outstanding; "provided, however", that persons (other than
affiliates of the Company) to whom the Company or any of its subsidiaries have
pledged Trust Preferred Securities may vote or consent with respect to such
pledged Trust Preferred Securities pursuant to the terms of such pledge.
The procedures by which holders of Trust Preferred Securities represented by
the global certificates may exercise their voting rights are described below.
See "-- Book-Entry Only Issuance -- The Depository Trust Company".
Holders of the Trust Preferred Securities will have no rights to appoint or
remove the Regular Trustees, who may be appointed, removed or replaced solely
by the Company, as the holder of all of the Trust Common Securities.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other entity, except as
described below. The Trust may, with the consent of a majority of the Regular
Trustees and without the consent of the holders of the Trust Securities, the
Property Trustee or the Delaware Trustee consolidate, amalgamate, merge with
or into, or be replaced by a trust organized as such under the laws of any
State of the United States; "provided", that (i) if the Trust is not the
survivor, such successor entity either (x) expressly assumes all of the
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obligations of the Trust under the Trust Securities or (y) substitutes for the
Trust Preferred Securities other securities having substantially the same
terms as the Trust Preferred Securities (the "Successor Securities"), so long
as the Successor Securities rank the same as the Trust Securities rank with
respect to distributions, assets and payments, (ii) the Company expressly
acknowledges a trustee of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the Partnership Preferred
Securities, (iii) the Trust Preferred Securities or any Successor Securities
are listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or with another organization on
which the Trust Preferred Securities are then listed or quoted, (iv) such
merger, consolidation, amalgamation or replacement does not cause the Trust
Preferred Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the
rights, preferences and privileges of the holders of the Trust Preferred
Securities (including any Successor Securities) in any material respect, (vi)
such successor entity has a purpose substantially identical to that of the
Trust, (vii) the Company guarantees the obligations of such successor entity
under the Successor Securities to the same extent as provided by the Trust
Guarantee and (viii) prior to such merger, consolidation, amalgamation or
replacement, the Company has received an opinion of a nationally recognized
independent counsel to the Trust experienced in such matters to the effect
that: (A) such merger, consolidation, amalgamation or replacement will not
adversely affect the rights, preferences and privileges of the holders of the
Trust Preferred Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity), (B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor such successor entity will
be required to register as an investment company under the 1940 Act, (C)
following such merger, consolidation, amalgamation or replacement, the Trust
(or such successor trust) will not be classified as an association or a
publicly traded partnership taxable as a corporation for United States federal
income tax purposes and (D) following such merger, consolidation, amalgamation
or replacement, the Partnership will not be classified as an association or a
publicly traded partnership taxable as a corporation for United States federal
income tax purposes. Notwithstanding the foregoing, the Trust shall not,
except with the consent of holders of 100% in liquidation amount of the Trust
Preferred Securities, consolidate, amalgamate, merge with or into, or be
replaced by any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it, if such consolidation,
amalgamation, merger or replacement would cause the Trust or the successor
entity to be classified as an association or a publicly traded partnership
taxable as a corporation for United States federal income tax purposes.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by a majority of the
Regular Trustees (and in certain circumstances the Property Trustee and the
Delaware Trustee), "provided", that if any proposed amendment provides for, or
the Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to the Declaration or otherwise or
(ii) the dissolution, winding-up or termination of the Trust other than
pursuant to the terms of the Declaration, then the holders of the Trust
Securities voting together as a single class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of at least a majority in liquidation amount of the
Trust Securities affected thereby; "provided, further" that if any amendment or
proposal referred to in clause (i) above would adversely affect only the Trust
Preferred Securities or the Trust Common Securities, then only the affected
class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of a
majority in liquidation amount of such class of Trust Securities.
The Declaration may be amended without the consent of the holders of the
Trust Securities to (i) cure any ambiguity, (ii) correct or supplement any
provision in the Declaration that may be defective or inconsistent with any
other provision of the Declaration, (iii) add to the covenants, restrictions
or obligations of the Sponsor, (iv) conform to any change in the 1940 Act, the
Trust Indenture Act or the rules or regulations of either such Act and (v)
modify, eliminate and add to any provision of the Declaration to such extent
as may be necessary or desirable; "provided" that no such amendment shall have a
material adverse effect on the rights, preferences or privileges of the
holders of the Trust Securities.
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Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
fail to be classified as a grantor trust for United States federal income tax
purposes, (ii) cause the Partnership to be classified as an association or
publicly traded partnership taxable as a corporation for such purposes, (iii)
reduce or otherwise adversely affect the powers of the Property Trustee or
(iv) cause the Trust or the Partnership to be deemed an "investment company"
which is required to be registered under the 1940 Act.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depository (the
"Depository") for the Trust Preferred Securities and, to the extent
distributed to the holders of Trust Preferred Securities, the Partnership
Preferred Securities. The Trust Preferred Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global Trust Preferred Securities
certificates ("Global Certificates"), representing the total aggregate number
of Trust Preferred Securities, will be issued and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Participants in DTC
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of its
Participants and by The New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain
a custodial relationship with a Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants
are on file with the Commission.
Purchases of Trust Preferred Securities within the DTC system must be made
by or through Participants, which will receive a credit for the Trust
Preferred Securities on DTC's records. The ownership interest of each actual
purchaser of Trust Preferred Securities ("Beneficial Owner") is in turn to be
recorded on the Participants' and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Participants or Indirect Participants through which the Beneficial
Owners purchased Trust Preferred Securities. Transfers of ownership interests
in the Trust Preferred Securities are to be accomplished by entries made on
the books of Participants and Indirect Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Trust Preferred Securities, except
in the event that use of the book-entry system for the Trust Preferred
Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Trust Preferred
Securities; DTC's records reflect only the identity of the Participants to
whose accounts such Trust Preferred Securities are credited, which may or may
not be the Beneficial Owners. The Participants and Indirect Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Trust Preferred Securities
represented thereby for all purposes under the Declaration and the Trust
Preferred Securities. No beneficial owner of an interest in a Global
Certificate will be able to transfer that interest except in accordance with
DTC's applicable procedures, in addition to those provided for under the
Declaration.
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DTC has advised the Company that it will take any action permitted to be
taken by a holder of Trust Preferred Securities (including the presentation of
Trust Preferred Securities for exchange as described below) only at the
direction of one or more Participants to whose account the DTC interests in
the Global Certificates are credited and only in respect of such portion of
the aggregate liquidation amount of Trust Preferred Securities as to which
such Participant or Participants has or have given such direction. Also, if
there is a Trust Enforcement Event under the Trust Preferred Securities, DTC
will exchange the Global Certificates for Certificated Securities, which it
will distribute to its Participants in accordance with its customary
procedures.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices in respect of the Trust Preferred Securities held in
book-entry form will be sent to Cede & Co. If less than all of the Trust
Preferred Securities are being redeemed, DTC will determine the amount of the
interest of each Participant to be redeemed in accordance with its procedures.
Although voting with respect to the Trust Preferred Securities is limited,
in those cases where a vote is required, neither DTC nor Cede & Co. will
itself consent or vote with respect to Trust Preferred Securities. Under its
usual procedures, DTC would mail an Omnibus Proxy to the Trust as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Participants to whose accounts the Trust
Preferred Securities are allocated on the record date (identified in a listing
attached to the Omnibus Proxy).
Distributions on the Trust Preferred Securities held in book-entry form will
be made to DTC in immediately available funds. DTC's practice is to credit
Participants' accounts on the relevant payment date in accordance with their
respective holdings shown on DTC's records unless DTC has reason to believe
that it will not receive payments on such payment date. Payments by
Participants and Indirect Participants to Beneficial Owners will be governed
by standing instructions and customary practices and will be the
responsibility of such Participants and Indirect Participants and not of DTC,
the Trust or the Company, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of any distributions to DTC is
the responsibility of the Trust, disbursement of such payments to Participants
is the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners is the responsibility of Participants and Indirect
Participants.
Except as described, a Beneficial Owner of an interest in a Global
Certificate will not be entitled to receive physical delivery of Trust
Preferred Securities. Accordingly, each Beneficial Owner must rely on the
procedures of DTC to exercise any rights under the Trust Preferred Securities.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificates among Participants of DTC,
DTC is under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. Neither the Company nor
the Trust will have any responsibility for the performance by DTC or its
Participants or Indirect Participants under the rules and procedures governing
DTC. DTC may discontinue providing its services as securities depository with
respect to the Trust Preferred Securities at any time by giving notice to the
Trust. Under such circumstances, in the event that a successor securities
depository is not obtained, Trust Preferred Security certificates are required
to be printed and delivered to the Property Trustee. Additionally, the Trust
(with the consent of the Company) may decide to discontinue use of the system
of book-entry transfers through DTC or any successor depository. In that
event, certificates for the Trust Preferred Securities will be printed and
delivered to the Property Trustee. In each of the above circumstances, the
Company will appoint a paying agent with respect to the Trust Preferred
Securities.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global Trust Preferred
Securities as represented by a Global Certificate.
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PAYMENT
Payments in respect of the Trust Preferred Securities represented by the
Global Certificates shall be made to DTC, which shall credit the relevant
accounts at DTC on the scheduled payment dates or, in the case of certificated
securities, if any, such payments shall be made by check mailed to the address
of the holder entitled thereto as such address shall appear on the register.
The Paying Agent shall be permitted to resign as Paying Agent upon 30 days
written notice to the Regular Trustees. In the event that The Chase Manhattan
Bank shall no longer be the Paying Agent, the Regular Trustees shall appoint a
successor to act as Paying Agent (which shall be a bank or trust company).
REGISTRAR, TRANSFER AGENT, AND PAYING AGENT
The Property Trustee will act as Registrar, Transfer Agent and Paying Agent
for the Trust Preferred Securities.
Registration of transfers of Trust Preferred Securities will be effected
without charge by or on behalf of the Trust, but upon payment (with the giving
of such indemnity as the Trust or the Company may require) in respect of any
tax or other government charges which may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Trust Preferred Securities after such Trust Preferred Securities
have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities, undertakes to perform only such duties as are
specifically set forth in the Declaration and, after default, shall exercise
the same degree of care as a prudent individual would exercise in the conduct
of his or her own affairs. Subject to such provisions, the Property Trustee is
under no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of Trust Preferred Securities, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The holders of Trust Preferred
Securities will not be required to offer such indemnity in the event such
holders, by exercising their voting rights, direct the Property Trustee to
take any action following a Trust Enforcement Event.
GOVERNING LAW
The Declaration and the Trust Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to conduct the affairs of
and to operate the Trust in such a way that the Trust will not be deemed to be
an "investment company" required to be registered under the 1940 Act or
characterized as other than a grantor trust for United States federal income
tax purposes. In this connection, the Regular Trustees are authorized to take
any action, not inconsistent with applicable law, the certificate of trust or
the Declaration that the Regular Trustees determine in their discretion to be
necessary or desirable for such purposes as long as such action does not
adversely affect the interests of the holders of the Trust Preferred
Securities.
Holders of the Trust Preferred Securities have no preemptive rights.
DESCRIPTION OF THE TRUST GUARANTEE
Set forth below is a summary of information concerning the Trust Guarantee
which will be executed and delivered by the Company for the benefit of the
holders from time to time of Trust Preferred Securities. The summary does not
purport to be complete and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the Trust Guarantee, which
is filed as an exhibit to the Registration Statement of which
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this Prospectus is a part. The Trust Guarantee incorporates by reference the
terms of, and will be qualified as an indenture under, the Trust Indenture
Act. The Chase Manhattan Bank, as the Trust Guarantee Trustee, will hold the
Trust Guarantee for the benefit of the holders of the Trust Preferred
Securities and will act as indenture trustee for the purposes of compliance
with the Trust Indenture Act.
GENERAL
Pursuant to the Trust Guarantee, the Company will irrevocably agree, on a
subordinated basis and to the extent set forth therein, to pay in full to the
holders of the Trust Preferred Securities (except to the extent paid by the
Trust), as and when due, regardless of any defense, right of set off or
counterclaim which the Trust may have or assert, the following payments (the
"Trust Guarantee Payments"), without duplication: (i) any accumulated and
unpaid distributions on the Trust Preferred Securities to the extent the Trust
has funds available therefor, (ii) the Redemption Price with respect to any
Trust Preferred Securities called for redemption by the Trust, to the extent
the Trust has funds available therefor and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Trust (other than in
connection with the distribution of Partnership Preferred Securities to the
holders of Trust Preferred Securities or the redemption of all of the Trust
Preferred Securities), the lesser of (a) the aggregate of the liquidation
amount and all accumulated and unpaid distributions on the Trust Preferred
Securities and (b) the amount of assets of the Trust remaining available for
distribution to holders of Trust Preferred Securities upon the liquidation of
the Trust. The Company's obligation to make a Trust Guarantee Payment may be
satisfied by direct payment of the required amounts by the Company to the
holders of Trust Preferred Securities or by causing the Trust to pay such
amounts to such holders.
The Trust Guarantee will be a guarantee on a subordinated basis with respect
to the Trust Preferred Securities from the time of issuance of such Trust
Preferred Securities but will only apply to any payment of distributions or
Redemption Price, or to payments upon the dissolution, winding-up or
termination of the Trust, to the extent the Trust shall have funds available
therefor. If the Partnership fails to declare distributions on Partnership
Preferred Securities, the Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the Trust Preferred
Securities or otherwise, and in such event holders of the Trust Preferred
Securities would not be able to rely upon the Trust Guarantee for payment of
such amounts. Instead, holders of the Trust Preferred Securities will have the
remedies described herein under "Description of the Trust Preferred
Securities -- Trust Enforcement Events", including the right to direct the
Trust Guarantee Trustee to enforce the covenant restricting certain payments
by the Company and Finance Subsidiaries. See "-- Covenants of the Company"
below.
The Guarantees, when taken together with the Company Debenture and the
Company's obligations to pay all fees and expenses of the Trust and the
Partnership, constitute a guarantee to the extent set forth herein by the
Company of the distribution, redemption and liquidation payments payable to
the holders of the Trust Preferred Securities. The Guarantees do not apply,
however, to current distributions by the Partnership unless and until such
distributions are declared by the Partnership out of funds legally available
for payment or to liquidating distributions unless there are assets available
for payment in the Partnership, each as more fully described under "Risk
Factors -- Insufficient Income or Assets Available to Partnership".
COVENANTS OF THE COMPANY
The Company will covenant in the Trust Guarantee that, if (a) for any
distribution period, full distributions on a cumulative basis on any Trust
Preferred Securities have not been paid, (b) an Investment Event of Default by
any Investment Affiliate in respect of any Affiliate Investment Instrument has
occurred and is continuing or (c) the Company is in default of its obligations
under the Trust Guarantee, the Partnership Guarantee or any Investment
Guarantee, then, during such period (i) the Company shall not declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital
stock or comparable equity interest (except for (x) dividends or distributions
in shares of, or options, warrants or rights to subscribe for or purchase
shares of, its capital stock, and conversions or exchanges of common stock of
one class into common stock of another class, (y) redemptions or purchases of
any rights
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pursuant to the Rights Agreement and the issuance of preferred stock pursuant
to such rights and (z) purchases or acquisitions by the Company or its
affiliates in connection with transactions effected by or for the account of
customers of the Company or any of its subsidiaries or in connection with the
distribution or trading of such capital stock or comparable equity interest)
and (ii) the Company shall not make, permit any Finance Subsidiary to make, or
make any payments that would enable any Finance Subsidiary to make, any
payment of any dividends on, any distribution with respect to, or any
redemption, purchase or other acquisition of, or any liquidation payment with
respect to, any preferred security or comparable equity interest of any
Finance Subsidiary.
EVENTS OF DEFAULT; ENFORCEMENT OF TRUST GUARANTEE
An event of default under the Trust Guarantee will occur upon the failure of
the Company to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the Trust Preferred
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trust Guarantee Trustee or to
direct the exercise of any trust or power conferred upon the Trust Guarantee
Trustee under the Trust Guarantee. If the Trust Guarantee Trustee fails to
enforce its rights under the Trust Guarantee after a holder of Trust Preferred
Securities has made a written request, such holder may institute a legal
proceeding directly against the Company to enforce the Trust Guarantee
Trustee's rights under the Trust Guarantee, without first instituting a legal
proceeding against the Trust, the Trust Guarantee Trustee or any other person
or entity. In any event, if the Company has failed to make a guarantee payment
under the Trust Guarantee, a holder of Trust Preferred Securities may directly
institute a proceeding in such holder's own name against the Company for
enforcement of the Trust Guarantee for such payment.
STATUS OF THE TRUST GUARANTEE; SUBORDINATION
The Trust Guarantee will constitute an unsecured obligation of the Company
and will rank subordinate and junior in right of payment to all other
liabilities of the Company and will rank "pari passu" with the most senior
preferred stock, if any, issued from time to time by the Company, with similar
guarantees issued by the Company in connection with the $275,000,000 aggregate
liquidation amount of 7 3/4% Trust Originated Preferred Securities issued by
Merrill Lynch Preferred Capital Trust I, the $300,000,000 aggregate
liquidation amount of 8% Trust Originated Preferred Securities issued by
Merrill Lynch Preferred Capital Trust II, the $750,000,000 aggregate
liquidation amount of 7% Trust Originated Preferred Securities issued by
Merrill Lynch Preferred Capital Trust III and with any guarantee now or
hereafter entered into by the Company in respect of any preferred stock of any
other Finance Subsidiary. Accordingly, the rights of the holders of Trust
Preferred Securities to receive payments under the Trust Guarantee will be
subject to the rights of the holders of any obligations of the Company that
are senior in priority to the obligations under the Trust Guarantee.
Furthermore, the holders of obligations of the Company that are senior to the
obligations under the Trust Guarantee (including, but not limited to,
obligations constituting Senior Indebtedness) will be entitled to the same
rights upon payment default or dissolution, liquidation and reorganization in
respect of the Trust Guarantee that inure to the holders of Senior
Indebtedness as against the holders of the Company Debenture. The terms of the
Trust Preferred Securities provide that each holder of Trust Preferred
Securities, by acceptance thereof, agrees to the subordination provisions and
other terms of the Trust Guarantee.
The Trust Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may directly institute a legal
proceeding against the Company to enforce its rights under the Trust Guarantee
without instituting a legal proceeding against any other person or entity).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of Trust Preferred Securities (in which case no vote
will be required), the Trust Guarantee may be amended only with the prior
approval of the holders of at least a majority in liquidation amount of all
the outstanding Trust Preferred
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Securities. The manner of obtaining any such approval of holders of the Trust
Preferred Securities will be as set forth under "Description of the Trust
Preferred Securities -- Voting Rights". All guarantees and agreements
contained in the Trust Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of the Trust Preferred Securities then outstanding.
Except in connection with permitted merger or consolidation of the Company
with or into another entity or permitted sale, transfer or lease of the
Company's assets to another entity in which the surviving corporation (if
other than the Company) assumes the Company's obligations under the Trust
Guarantee, the Company may not assign its rights or delegate its obligations
under the Trust Guarantee without the prior approval of the holders of at
least a majority of the aggregate stated liquidation amount of the Trust
Preferred Securities then outstanding.
TERMINATION OF THE TRUST GUARANTEE
The Trust Guarantee will terminate as to each holder of Trust Preferred
Securities upon (i) full payment of the Redemption Price of all Trust
Preferred Securities, (ii) distribution of the Partnership Preferred
Securities held by the Trust to the holders of the Trust Preferred Securities
or (iii) full payment of the amounts payable in accordance with the
Declaration upon liquidation of the Trust. The Trust Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
holder of Trust Preferred Securities must restore payment of any sum paid
under such Trust Preferred Securities or such Trust Guarantee.
INFORMATION CONCERNING THE TRUST GUARANTEE TRUSTEE
The Trust Guarantee Trustee, prior to the occurrence of a default with
respect to the Trust Guarantee, undertakes to perform only such duties as are
specifically set forth in the Trust Guarantee and, after default with respect
to the Trust Guarantee, shall exercise the same degree of care as a prudent
man would exercise in the conduct of his own affairs. Subject to such
provision, the Trust Guarantee Trustee is under no obligation to exercise any
of the powers vested in it by the Trust Guarantee at the request of any holder
of Trust Preferred Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby.
GOVERNING LAW
The Guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
DESCRIPTION OF THE PARTNERSHIP PREFERRED SECURITIES
GENERAL
All of the partnership interests in the Partnership, other than the
Partnership Preferred Securities acquired by the Trust, are owned directly by
the Company. Initially, the Company will be the sole General Partner of the
Partnership. The Limited Partnership Agreement authorizes and creates the
Partnership Preferred Securities, which represent limited partner interests in
the Partnership. The limited partner interests represented by the Partnership
Preferred Securities will have a preference with respect to distributions and
amounts payable on redemption or liquidation over the General Partner's
interest in the Partnership. Except as otherwise described herein or provided
in the Limited Partnership Agreement, the Limited Partnership Agreement does
not permit the issuance of any additional partnership interests, or the
incurrence of any indebtedness by the Partnership.
The summary of certain material terms and provisions of the Partnership
Preferred Securities set forth below does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Limited
Partnership Agreement, which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part, and the Partnership Act.
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DISTRIBUTIONS
Holders of Partnership Preferred Securities will be entitled to receive
cumulative cash distributions, if, as and when declared by the General Partner
in its sole discretion out of assets of the Partnership legally available for
payment. The distributions payable on each Partnership Preferred Security will
be fixed at a rate per annum of 7.12% of the stated liquidation preference of
$25 per Partnership Preferred Security. Distributions not paid on the
scheduled payment date will accumulate and compound quarterly at the rate per
annum equal to 7.12%. The amount of distributions payable for any period will
be computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the Partnership Preferred Securities will be payable
quarterly in arrears on March 30, June 30, September 30, and December 30 of
each year, commencing September 30, 1998. If distributions are not declared
and paid when scheduled, the accumulated distributions shall be paid to the
holders of record of Partnership Preferred Securities as they appear on the
books and records of the Partnership on the record date with respect to the
payment date for the Partnership Preferred Securities.
The Partnership's earnings available for distribution to the holders of the
Partnership Preferred Securities will be limited to payments made on the
Affiliate Investment Instruments and Investment Guarantees and payments on
Eligible Debt Securities in which the Partnership has invested from time to
time. See "-- Partnership Investments". To the extent that the issuers (and,
where applicable, the Company, as guarantor) of the securities in which the
Partnership invests fail to make any payment in respect of such securities
(or, if applicable, such guarantees), the Partnership will not have sufficient
funds to pay and will not declare or pay distributions on the Partnership
Preferred Securities, in which event the Partnership Guarantee will not apply
to such distributions until the Partnership has sufficient funds available
therefor. See "Description of the Partnership Guarantee". In addition,
distributions on the Partnership Preferred Securities may be declared and paid
only as determined in the sole discretion of the General Partner of the
Partnership. If the Partnership fails to declare and pay distributions on the
Partnership Preferred Securities out of funds legally available for
distribution, the Trust will not have sufficient funds to make distributions
on the Trust Preferred Securities, in which event the Trust Guarantee will not
apply to such distributions until the Trust has sufficient funds available
therefor. In addition, as described under "Risk Factors -- Insufficient Income
or Assets Available to Partnership", the Partnership may not have sufficient
funds to pay current or liquidating distributions on the Partnership Preferred
Securities if (i) at any time that the Partnership is receiving current
payments in respect of the securities held by the Partnership (including the
Debentures), the General Partner, in its sole discretion, does not declare
distributions on the Partnership Preferred Securities and the Partnership
receives insufficient amounts to pay the additional compounded distributions
that will accumulate in respect of the Partnership Preferred Securities, (ii)
the Partnership reinvests the proceeds received in respect of the Debentures
upon their retirement or at their maturities in Affiliate Investment
Instruments that do not generate income in an amount that is sufficient to pay
full distributions in respect of the Partnership Preferred Securities or (iii)
the Partnership invests in debt securities of Investment Affiliates that are
not guaranteed by the Company and that cannot be liquidated by the Partnership
for an amount sufficient to pay such distributions in full.
Distributions on the Partnership Preferred Securities will be payable to the
holders thereof as they appear on the books and records of the Partnership on
the relevant record dates, which, as long as the Trust Preferred Securities
remain (or, in the event that the Trust is liquidated in connection with a
Trust Special Event, as long as the Partnership Preferred Securities remain)
in book-entry only form, will be one Business Day prior to the relevant
payment dates. In the event the Trust Preferred Securities (or in the event
that the Trust is liquidated in connection with a Trust Special Event, the
Partnership Preferred Securities) shall not continue to remain in book-entry
only form, the relevant record dates shall be the 15th day of the month of the
relevant payment dates. In the event that any date on which distributions are
payable on the Partnership Preferred Securities is not a Business Day, then
payment of the distribution payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date.
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PARTNERSHIP ENFORCEMENT EVENTS
If one or more of the following events shall occur and be continuing (each a
"Partnership Enforcement Event"): (i) arrearages on distributions on the
Partnership Preferred Securities shall exist for six consecutive quarterly
distribution periods, (ii) the Company is in default on any of its obligations
under the Partnership Guarantee or any Investment Guarantee or (iii) an
Investment Event of Default occurs and is continuing on any Affiliate
Investment Instrument, then the Property Trustee, for so long as the
Partnership Preferred Securities are held by the Property Trustee, will have
the right, or holders of the Partnership Preferred Securities will be entitled
by the vote of a majority in aggregate liquidation preference of such holders
(a) under the Limited Partnership Agreement to enforce the terms of the
Partnership Preferred Securities, including the right to appoint and authorize
a special representative of the Partnership and the limited partners (a
"Special Representative") to enforce (1) the Partnership's creditors' rights
and other rights with respect to the Affiliate Investment Instruments and the
Investment Guarantees, (2) the rights of the holders of the Partnership
Preferred Securities under the Partnership Guarantee and (3) the rights of the
holders of the Partnership Preferred Securities to receive distributions (only
if and to the extent declared out of funds legally available therefor) on the
Partnership Preferred Securities, and (b) under the Partnership Guarantee to
enforce the terms of the Partnership Guarantee, including the right to enforce
the covenant restricting certain payments by the Company and Finance
Subsidiaries.
If the Special Representative fails to enforce its rights under the
Affiliate Investment Instruments after a holder of Partnership Preferred
Securities has made a written request, such holder of record of Partnership
Preferred Securities may directly institute a legal proceeding against the
Company to enforce the rights of the Special Representative and the
Partnership under the Affiliate Investment Instruments without first
instituting any legal proceeding against the Special Representative, the
Partnership or any other person or entity. In any event, if a Partnership
Enforcement Event has occurred and is continuing and such event is
attributable to the failure of an Investment Affiliate to make any required
payment when due on any Affiliate Investment Instrument, then a holder of
Partnership Preferred Securities may on behalf of the Partnership directly
institute a proceeding against such Investment Affiliate with respect to such
Affiliate Investment Instrument for enforcement of payment. A holder of
Partnership Preferred Securities may also bring a direct action against the
Company to enforce such holder's right under the Partnership Guarantee. See
"Description of the Partnership Guarantee -- Events of Default; Enforcement of
Partnership Guarantee".
Under no circumstances, however, shall the Special Representative have
authority to cause the General Partner to declare distributions on the
Partnership Preferred Securities. As a result, although the Special
Representative may be able to enforce the Partnership's creditors' rights to
accelerate and receive payments in respect of the Affiliate Investment
Instruments and the Investment Guarantees, the Partnership would be entitled
to reinvest such payments in additional Affiliate Investment Instruments,
subject to satisfying the reinvestment criteria described under "--
Partnership Investments", and Eligible Debt Securities, rather than declaring
and making distributions on the Partnership Preferred Securities. The Special
Representative shall not, by virtue of acting in such capacity, be admitted as
a general partner in the Partnership or otherwise be deemed to be a general
partner in the Partnership and shall have no liability for the debts,
obligations or liabilities of the Partnership.
PARTNERSHIP INVESTMENTS
Approximately 99% of the proceeds from the issuance of the Partnership
Preferred Securities and the General Partner's contemporaneous capital
contribution (the "Initial Partnership Proceeds") will be used by the
Partnership to purchase the Debentures and the remaining 1% of the Initial
Partnership Proceeds will be used to purchase Eligible Debt Securities. The
purchase of the Debentures by the Partnership will occur contemporaneously
with the issuance of the Partnership Preferred Securities.
The initial Affiliate Investment Instruments purchased by the Partnership
will consist of two or more debt instruments (the "Debentures"). The Company
anticipates that approximately 85% of the Initial Partnership Proceeds will be
used to purchase a Debenture of the Company (the "Company Debenture"), and
approximately 14% of the Initial Partnership Proceeds will be used to purchase
Debentures of one or more eligible controlled
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affiliates of the Company (the "Affiliate Debentures"). Each Debenture is
expected to have a term of 20 years and to provide for interest payable on
March 30, June 30, September 30 and December 30 of each year, commencing
September 30, 1998 at market rates for such Debentures. The Debentures will be
general unsecured debt obligations of the relevant issuer, except that the
Company Debenture will rank subordinate and junior to all Senior Indebtedness
of the Company.
The payment of interest on each of the Debentures may be deferred at any
time, and from time to time, by the relevant issuer for a period not exceeding
six consecutive quarters. If an issuer were to so defer the payment of
interest, interest would continue to accrue and compound at the stated
interest rate on such Debenture. The Debentures will contain covenants
appropriate for unsecured debt securities issued or guaranteed by similar
borrowers pursuant to a public offering or private placement under Rule 144A
of the Securities Act of a comparable debt security, including a limitation on
consolidation, merger and sale or conveyance of assets. The Debentures will
contain redemption provisions that correspond to the redemption provisions
applicable to the Partnership Preferred Securities, including an option to
redeem the Debentures by the relevant issuer, in whole or in part, from time
to time, on or after June 30, 2008, and following the occurrence of a
Partnership Special Event, in each case, in the same manner described under
"-- Optional Redemption" and "-- Partnership Special Event Redemption". The
Debentures, and any other Affiliate Investment Instruments that are debt
instruments acquired by the Partnership in the future, will also contain
customary events of default (the "Investment Events of Default"), including
events of default for defaults in payments on such securities when due
(provided that no default shall occur upon a valid deferral of an interest
payment by an issuer), defaults in the performance of the relevant issuer's
obligations under its Debenture or Affiliate Investment Instruments, as the
case may be, and certain bankruptcy, insolvency or reorganization events
(subject to customary exceptions and grace periods).
The payment of interest and principal when due and other payment terms of
the Debentures (other than the Company Debenture), will be guaranteed to the
extent described herein (each, an "Investment Guarantee") by the Company for
the benefit of the holders of Partnership Preferred Securities. See "--
Investment Guarantees".
Approximately 1% of the Initial Partnership Proceeds will be invested in
Eligible Debt Securities. "Eligible Debt Securities" means cash or book-entry
securities, negotiable instruments, or other securities of entities not
affiliated with the Company which evidence any of the following: (a) any
security issued or guaranteed as to principal or interest by the United
States, or by a person controlled or supervised by and acting as an
instrumentality of the Government of the United States pursuant to authority
granted by the Congress of the United States, or any certificate of deposit
for any of the foregoing; (b) commercial paper issued pursuant to Section
3(a)(3) of the Securities Act and having, at the time of the investment or
contractual commitment to invest therein, a rating from each of Standard &
Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc. ("S&P")
and Moody's Investors Service, Inc. ("Moody's") in the highest investment
rating category granted by such rating agency and having a maturity not in
excess of nine months; (c) demand deposits, time deposits and certificates of
deposit which are fully insured by the Federal Deposit Insurance Corporation
("FDIC"); (d) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the Government of the United
States of America or any agency or instrumentality thereof, the obligations of
which are backed by the full faith and credit of the United States of America,
in either case entered into with a depository institution or trust company
which is an Eligible Institution (as defined herein) and the deposits of which
are insured by the FDIC; and (e) any other security which is identified as a
permitted investment of a finance subsidiary pursuant to Rule 3a-5 under the
1940 Act at the time it is acquired by the Partnership.
"Eligible Institution" means (a) a depository institution organized under
the laws of the United States or any one of the states thereof or the District
of Columbia (or any domestic branch of a foreign bank), (1) (i) which has
either (A) a long-term unsecured debt rating of AA or better by S&P and Aa or
better by Moody's or (B) a short-term unsecured debt rating or a certificate
of deposit rating of A-1+ by S&P and P-1 by Moody's and (ii) whose deposits
are insured by the FDIC or (2) (i) the parent of which has a long-term or
short-term unsecured debt rating which signifies investment grade and (ii)
whose deposits are insured by the FDIC.
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The Partnership may, from time to time and subject to the restrictions
described below, reinvest payments received with respect to the Affiliate
Investment Instruments (including the Debentures) and the Eligible Debt
Securities in additional Affiliate Investment Instruments and Eligible Debt
Securities. As of the date of this Prospectus, the Company, as the General
Partner, does not intend to cause the Partnership to reinvest regularly
scheduled, periodic payments of interest or dividends received by the
Partnership in the manner described below, although there can be no assurance
that the General Partner's intention in respect of such reinvestments will not
change in the future.
The fairness of specific terms of all Affiliate Investment Instruments
(including the Debentures) will be passed upon by a nationally recognized
accounting firm, bank or investment banking firm that does not (and whose
directors, officers, employees and affiliates do not) have a direct or
indirect material equity interest in the Company or any of its subsidiaries
(the "Independent Financial Advisor").
The Partnership may reinvest in additional Affiliate Investment Instruments
only if certain procedures and criteria are satisfied with respect to each
such Affiliate Investment Instrument, including the satisfaction of the
following conditions: (i) the Partnership did not hold debt securities of the
issuer of the proposed Affiliate Investment Instrument within the three-year
period ending on the date of such proposed investment; (ii) there was never a
default on any debt obligation of, or arrearages of dividends on preferred
stock issued by, the issuer of the proposed Affiliate Investment Instrument
that was previously or is currently owned by the Partnership; (iii) the
applicable terms and provisions with respect to the proposed Affiliate
Investment Instrument have been determined by the Independent Financial
Advisor to be at least as favorable as terms which could be obtained by the
Partnership in a public offering or private placement under Rule 144A of the
Securities Act of a comparable security issued by the relevant Investment
Affiliate and guarantees, if any, included therein; and (iv) the requesting
Investment Affiliate shall not be deemed to be an investment company by reason
of Section 3(a) or 3(b) of the 1940 Act or is otherwise an eligible recipient
of funds directly or indirectly from the Trust pursuant to an order issued by
the Commission. The term "Investment Affiliate" means the Company or any
corporation, partnership, limited liability company or other entity (other
than the Partnership or the Trust) that is controlled by the Company. If the
Partnership is unable to reinvest payments and proceeds from Affiliate
Investment Instruments in additional Affiliate Investment Instruments meeting
the above criteria, the Partnership may only invest such funds in Eligible
Debt Securities (subject to restrictions of applicable law, including the 1940
Act).
INVESTMENT GUARANTEES
"General"
The Company will agree to execute and deliver an Investment Guarantee, on a
subordinated basis, for the benefit of the holders of Partnership Preferred
Securities with respect to each Debenture issued by an Investment Affiliate
(other than the Company Debenture) to the extent set forth below. The
Investment Guarantees shall be enforceable regardless of any defense, right of
set-off or counterclaim that the Company may have or assert. The Investment
Guarantees will be full and unconditional guarantees, to the extent set forth
therein, with respect to the applicable Debentures from the time of issuance.
To the extent that, as described above, the Partnership invests in additional
Affiliate Investment Instruments, the determination as to whether such
Affiliate Investment Instrument will contain an Investment Guarantee will be
made at the date of its issuance and will be based, among other things, upon
its approval by the Independent Financial Advisor in accordance with the
reinvestment criteria described above.
The Investment Guarantees will constitute guarantees of payment and not of
collection (that is, the guaranteed party may directly institute a legal
proceeding against the Company to enforce its rights under the applicable
Investment Guarantee without instituting a legal proceeding against any other
person or entity). If no Special Representative has been appointed to enforce
any Investment Guarantee, the General Partner has the right to enforce such
Investment Guarantee on behalf of the holders of the Partnership Preferred
Securities. The holders of not less than a majority in aggregate liquidation
preference of the Partnership Preferred Securities have the right to direct
the time, method and place of conducting any proceeding for any remedy
available in
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respect of any Investment Guarantee, including the giving of directions to the
General Partner or the Special Representative, as the case may be. If the
General Partner or the Special Representative fails to enforce any Investment
Guarantee as above provided, any holder of Trust Preferred Securities may
institute its own legal proceeding to enforce such Investment Guarantee. No
Investment Guarantee will be discharged except by payment in full of all
amounts guaranteed by such Investment Guarantee (without duplication of
amounts theretofore paid by the relevant Investment Affiliate).
"Amendments and Assignment"
Except with respect to any changes that do not adversely affect the rights
of holders of Partnership Preferred Securities (in which case no consent will
be required), the Investment Guarantees may be amended only with the prior
approval of the holders of not less than a majority in liquidation preference
of the outstanding Partnership Preferred Securities, "provided" that for so long
as the Property Trustee of the Trust is the holder of the Partnership
Preferred Securities, such amendment will not be effective without the prior
written approval of a majority in liquidation amount of the outstanding Trust
Preferred Securities. All guarantees and agreements contained in the
Investment Guarantees shall bind the successors, assigns, receivers, trustees
and representatives of the Company and shall inure to the benefit of the
holders of Partnership Preferred Securities. Except in connection with any
permitted merger or consolidation of the Company with or into another entity
or any permitted sale, transfer or lease of the Company's assets to another
entity in which the surviving corporation (if other than the Company) assumes
the Company's obligations under the Investment Guarantees, the Company may not
assign its rights or delegate its obligations under the Investment Guarantees
without the prior approval of the holders of at least a majority of the
aggregate stated liquidation preference of the Partnership Preferred
Securities then outstanding.
"Status of the Investment Guarantees"
The Company's obligations under the Investment Guarantees will constitute
unsecured obligations of the Company and will rank subordinate and junior in
right of payment to all other liabilities of the Company and will rank "pari
passu" with the most senior preferred stock, if any, issued from time to time
by the Company, with similar guarantees issued by the Company in connection
with the $275,000,000 aggregate liquidation amount of 7 3/4% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust I, the
$300,000,000 aggregate liquidation amount of 8% Trust Originated Preferred
Securities issued by Merrill Lynch Preferred Capital Trust II, and the
$750,000,000 aggregate liquidation amount of 7% Trust Originated Preferred
Securities issued by Merrill Lynch Preferred Capital Trust III, and with any
guarantee now or hereafter entered into by the Company in respect of any
preferred stock of any other Finance Subsidiary. Accordingly, the rights of
the holders of the Debentures to receive payments under the Investment
Guarantees will be subject to the rights of the holders of any obligations
that are senior in priority to the obligations under the Investment
Guarantees. Furthermore, the holders of obligations of the Company that are
senior to the obligations under the Investment Guarantees (including, but not
limited to, obligations constituting Senior Indebtedness) will be entitled to
the same rights upon payment default or dissolution, liquidation and
reorganization in respect of the Investment Guarantees that inure to the
holders of Senior Indebtedness as against the holders of the Company
Debenture. The terms of the Debentures provide that each holder of Debentures,
by acceptance thereof, agrees to the subordination provisions and other terms
of the Investment Guarantees.
"Governing Law"
The Investment Guarantees will be governed by and construed in accordance
with the internal laws of the State of New York.
OPTIONAL REDEMPTION
The Partnership Preferred Securities are redeemable, at the option of the
General Partner, in whole or in part, from time to time, on or after June 30,
2008, upon not less than 30 nor more than 60 days notice, at an amount per
Partnership Preferred Security equal to $25 plus accumulated and unpaid
distributions thereon. If the
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Partnership redeems Partnership Preferred Securities in accordance with the
terms thereof, Trust Securities will be mandatorily redeemed at the Redemption
Price. If a partial redemption would result in the delisting of the Trust
Preferred Securities (or, if the Trust is liquidated in connection with a
Trust Special Event, or if a partial redemption would result in the delisting
of the Partnership Preferred Securities), the Partnership may only redeem the
Partnership Preferred Securities in whole.
PARTNERSHIP SPECIAL EVENT REDEMPTION
If, at any time, a Partnership Tax Event or a Partnership Investment Company
Event (each as hereinafter defined, and each a "Partnership Special Event")
shall occur and be continuing, the General Partner shall, within 90 days
following the occurrence of such Partnership Special Event, elect to either
(i) redeem the Partnership Preferred Securities in whole (but not in part),
upon not less than 30 or more than 60 days notice at the Redemption Price,
"provided" that, if at the time there is available to the Partnership the
opportunity to eliminate, within such 90-day period, the Partnership Special
Event by taking some ministerial action, such as filing a form or making an
election, or pursuing some other similar reasonable such measure that in the
sole judgment of the Company has or will cause no adverse effect on the
Partnership, the Trust or the Company, the General Partner will pursue such
measure in lieu of redemption; or (ii) cause the Partnership Preferred
Securities to remain outstanding, "provided" that in the case of this clause
(ii), the General Partner shall pay any and all costs and expenses incurred by
or payable by the Partnership attributable to the Partnership Special Event.
"Partnership Tax Event" means that the General Partner shall have requested
and received an opinion of nationally recognized independent tax counsel
experienced in such matters to the effect that there has been a Tax Action
which affects any of the events described in (i) through (iii) below and that
there is more than an insubstantial risk that (i) the Partnership is, or will
be, subject to United States federal income tax with respect to income accrued
or received on the Affiliate Investment Instruments or the Eligible Debt
Securities, (ii) the Partnership is, or will be, subject to more than a "de
minimis" amount of other taxes, duties or other governmental charges or (iii)
interest payable by an Investment Affiliate with respect to the Debenture
issued by such Investment Affiliate to the Partnership is not, or will not be,
deductible by such Investment Affiliate for United States federal income tax
purposes.
Recently, the IRS asserted that the interest payable on a security issued in
circumstances with certain similarities to the issuance of the Debentures
issued by the Investment Affiliates to the Partnership was not deductible for
United States federal income tax purposes. The taxpayer in that case has filed
a petition in the United States Tax Court challenging the IRS's position on
this matter. If this matter were to be litigated and the Tax Court were to
sustain the IRS's position on this matter, such judicial decision could
constitute a Partnership Tax Event, which could result in an early redemption
of the Partnership Preferred Securities.
"Partnership Investment Company Event" means that the General Partner shall
have requested and received an opinion of nationally recognized independent
legal counsel experienced in such matters to the effect that as a result of
the occurrence on or after the date hereof of a Change in 1940 Act Law, the
Partnership is or will be considered an "investment company" which is required
to be registered under the 1940 Act.
REDEMPTION PROCEDURES
The Partnership may not redeem fewer than all the outstanding Partnership
Preferred Securities unless all accumulated and unpaid distributions have been
paid on all Partnership Preferred Securities for all quarterly distribution
periods terminating on or prior to the date of redemption.
If the Partnership gives a notice of redemption in respect of Partnership
Preferred Securities (which notice will be irrevocable) then, by 12:00 noon,
New York City time, on the redemption date, the Partnership (i) if the
Partnership Preferred Securities are in book entry form with DTC, will deposit
irrevocably with DTC funds sufficient to pay the applicable Redemption Price
and will give DTC irrevocable instructions and authority to pay the Redemption
Price in respect of the Partnership Preferred Securities held through DTC in
global form or
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(ii) if the Partnership Preferred Securities are held in certificated form,
will deposit with the paying agent for the Partnership Preferred Securities
funds sufficient to pay such amount in respect of any Partnership Preferred
Securities in certificated form and will give such paying agent irrevocable
instructions and authority to pay such amounts to the holders of Partnership
Preferred Securities upon surrender of their certificates. See "Description of
the Trust Preferred Securities -- Book-Entry Only Issuance -- The Depository
Trust Company".
If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of holders of such
Partnership Preferred Securities so called for redemption will cease, except
the right of the holders of such Partnership Preferred Securities to receive
the Redemption Price, but without interest on such Redemption Price. In the
event that any date fixed for redemption of Partnership Preferred Securities
is not a Business Day, then payment of the Redemption Price payable on such
date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay) except
that, if such Business Day falls in the next calendar year, such payment will
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date fixed for redemption. In the event
that payment of the Redemption Price in respect of Partnership Preferred
Securities is improperly withheld or refused and not paid either by the
Partnership or by the Company pursuant to the Partnership Guarantee described
under "Description of the Partnership Guarantee," distributions on such
Partnership Preferred Securities will continue to accumulate, from the
original redemption date to the date of payment.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or any of its subsidiaries
may at any time and from time to time purchase outstanding Partnership
Preferred Securities by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution, winding-up or
termination of the Partnership, the holders of the Partnership Preferred
Securities at the time will be entitled to receive out of the assets of the
Partnership available for distribution to partners after satisfaction of
liabilities of creditors as required by the Partnership Act, before any
distribution of assets is made to the General Partner, an amount equal to, in
the case of holders of Partnership Preferred Securities, the aggregate of the
stated liquidation preference of $25 per Partnership Preferred Security plus
accumulated and unpaid distributions thereon to the date of payment (such
amount being the "Partnership Liquidation Distribution").
Pursuant to the Limited Partnership Agreement, the Partnership shall be
dissolved and its affairs shall be wound up: (i) upon the bankruptcy of the
General Partner, (ii) upon the assignment by the General Partner of its entire
interest in the Partnership when the assignee is not admitted to the
Partnership as a general partner of the Partnership in accordance with the
Limited Partnership Agreement, or the filing of a certificate of dissolution
or its equivalent with respect to the General Partner, or the revocation of
the General Partner's charter and the expiration of 90 days after the date of
notice to the General Partner of revocation without a reinstatement of its
charter, or if any other event occurs that causes the General Partner to cease
to be a general partner of the Partnership under the Partnership Act, unless
the business of the Partnership is continued in accordance with the
Partnership Act, (iii) if the Partnership has redeemed or otherwise purchased
all the Partnership Preferred Securities, (iv) upon the entry of a decree of
judicial dissolution or (v) upon the written consent of all partners of the
Partnership.
VOTING RIGHTS
Except as provided below and under "Description of the Partnership
Guarantee -- Amendments and Assignment" and as otherwise required by law and
the Limited Partnership Agreement, the holders of the Partnership Preferred
Securities will have no voting rights.
Not later than 30 days after any Partnership Enforcement Event occurs, the
General Partner will convene a meeting for the purpose of appointing a Special
Representative. If the General Partner fails to convene such
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meeting within such 30-day period, the holders of 10% in liquidation
preference of the outstanding Partnership Preferred Securities will be
entitled to convene such meeting. The provisions of the Limited Partnership
Agreement relating to the convening and conduct of the meetings of the
partners will apply with respect to any such meeting. In the event that, at
any such meeting, holders of less than a majority in aggregate liquidation
preference of Partnership Preferred Securities entitled to vote for the
appointment of a Special Representative vote for such appointment, no Special
Representative shall be appointed. Any Special Representative appointed shall
cease to be a Special Representative of the Partnership and the limited
partners if (1) the Partnership (or the Company pursuant to the Partnership
Guarantee) shall have paid in full all accumulated and unpaid distributions on
the Partnership Preferred Securities, (2) such Investment Event of Default, as
the case may be, shall have been cured, and (3) the Company is in compliance
with all its obligations under the Partnership Guarantee and the Company, in
its capacity as the General Partner, shall continue the business of the
Partnership without dissolution. Notwithstanding the appointment of any such
Special Representative, the Company shall continue as General Partner and
shall retain all rights under the Limited Partnership Agreement, including the
right to declare, in its sole discretion, the payment of distributions on the
Partnership Preferred Securities for which the failure of such declaration
would not constitute a default under the Limited Partnership Agreement.
If any proposed amendment to the Limited Partnership Agreement provides for,
or the General Partner otherwise proposes to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Partnership
Preferred Securities, whether by way of amendment to the Limited Partnership
Agreement or otherwise (including, without limitation, the authorization or
issuance of any limited partner interests in the Partnership ranking, as to
participation in the profits or distributions or in the assets of the
Partnership, senior to the Partnership Preferred Securities), or (ii) the
dissolution, winding-up or termination of the Partnership, other than (x) in
connection with the occurrence of a Partnership Special Event or (y) as
described under "Merger, Consolidation or Amalgamation of the Partnership"
below, then the holders of outstanding Partnership Preferred Securities will
be entitled to vote on such amendment or proposal of the General Partner (but
not on any other amendment or proposal) as a class, and such amendment or
proposal shall not be effective except with the approval of the holders of a
majority in liquidation preference of such outstanding Partnership Preferred
Securities having a right to vote on the matter; "provided, however", that if
the Property Trustee on behalf of the Trust is the holder of the Partnership
Preferred Securities, any such amendment or proposal not excepted by clauses
(x) and (y) above shall not be effective without the prior or concurrent
approval of the holders of a majority in liquidation amount of the outstanding
Trust Preferred Securities having a right to vote on such matters.
The General Partner shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available, (ii) waive any Investment
Event of Default that is waivable under the Affiliate Investment Instruments,
(iii) exercise any right to rescind or annul a declaration that the principal
of any Affiliate Investment Instruments shall be due and payable, (iv) waive
the breach of the covenant by the Company to restrict certain payments by the
Company, or (v) consent to any amendment, modification or termination of any
Affiliate Investment Instrument, where such consent shall be required from the
investor, without, in each case, obtaining the prior approval of the holders
of at least a majority in liquidation preference of the Partnership Preferred
Securities; "provided, however", that if the Property Trustee on behalf of the
Trust is the holder of the Partnership Preferred Securities, such waiver,
consent or amendment or other action shall not be effective without the prior
or concurrent approval of at least a majority in liquidation amount of the
outstanding Trust Preferred Securities having a right to vote on such matters.
The General Partner shall not revoke any action previously authorized or
approved by a vote of the holders of the Partnership Preferred Securities
without the approval of such revocation by a majority in liquidation
preference of the outstanding Partnership Preferred Securities. The General
Partner shall notify all holders of the Partnership Preferred Securities of
any notice of an Investment Event of Default received with respect to any
Affiliate Investment Instrument.
Any required approval of holders of Partnership Preferred Securities may be
given at a separate meeting of holders of Partnership Preferred Securities
convened for such purpose, at a meeting of all of the partners in the
Partnership or pursuant to written consent. The Partnership will cause a
notice of any meeting at which holders
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of Partnership Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Partnership Preferred Securities. Each such
notice will include a statement setting forth (i) the date of such meeting or
the date by which such action is to be taken, (ii) a description of any
resolution proposed for adoption at such meeting on which such holders are
entitled to vote or of such matters upon which written consent is sought and
(iii) instruction for the delivery of proxies or consents.
No vote or consent of the holders of Partnership Preferred Securities will
be required for the Partnership to redeem and cancel Partnership Preferred
Securities in accordance with the Limited Partnership Agreement.
Notwithstanding that holders of Partnership Preferred Securities are
entitled to vote or consent under any of the circumstances described above,
any of the Partnership Preferred Securities at such time that are beneficially
owned by the Company or by any entity directly or indirectly controlled by, or
under direct or indirect common control with, the Company, except for
Partnership Preferred Securities purchased or acquired by the Company or its
affiliates in connection with transactions effected by or for the account of
customers of the Company or any of its subsidiaries or in connection with the
distribution or trading of such Partnership Preferred Securities; shall not be
entitled to vote or consent and shall, for purposes of such vote or consent,
be treated as if they were not outstanding, "provided, however", that persons
(other than affiliates of the Company) to whom the Company or any of its
subsidiaries have pledged Partnership Preferred Securities may vote or consent
with respect to such pledged Partnership Preferred Securities pursuant to the
terms of such pledge.
Holders of the Partnership Preferred Securities will have no rights to
remove or replace the General Partner.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE PARTNERSHIP
The Partnership may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other body, except as
described below. The Partnership may, without the consent of the holders of
the Partnership Preferred Securities, consolidate, amalgamate, merge with or
into, or be replaced by a limited partnership, limited liability company or
trust organized as such under the laws of any state of the United States of
America, "provided" that (i) such successor entity either (x) expressly assumes
all of the obligations of the Partnership under the Partnership Preferred
Securities or (y) substitutes for the Partnership Preferred Securities other
securities having substantially the same terms as the Partnership Preferred
Securities (the "Partnership Successor Securities") so long as the Partnership
Successor Securities are not junior to any other equity securities of the
successor entity, with respect to participation in the profits and
distributions, and in the assets, of the successor entity, (ii) the Investment
Affiliates expressly acknowledge such successor entity as the holder of the
Affiliate Investment Instruments, (iii) the Partnership Preferred Securities
or any Partnership Successor Securities are listed, or any Partnership
Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Partnership
Preferred Securities, if so listed, are then listed, (iv) such merger,
consolidation, amalgamation or replacement does not cause the Trust Preferred
Securities (or, in the event that the Trust is liquidated in connection with a
Trust Special Event, the Partnership Preferred Securities (including any
Partnership Successor Securities)) to be downgraded by any nationally
recognized statistical rating organization, (v) such merger, consolidation,
amalgamation or replacement does not adversely affect the powers, preferences
and other special rights of the holders of the Trust Preferred Securities or
Partnership Preferred Securities (including any Partnership Successor
Securities) in any material respect (other than, in the case of the
Partnership Preferred Securities, with respect to any dilution of the holders'
interest in the new resulting entity), (vi) such successor entity has a
purpose substantially identical to that of the Partnership, (vii) prior to
such merger, consolidation, amalgamation or replacement, the Company has
received an opinion of nationally recognized independent counsel to the
Partnership experienced in such matters to the effect that (A) such successor
entity will be treated as a partnership for United States federal income tax
purposes, (B) such merger, consolidation, amalgamation or replacement would
not cause the Trust to be classified as an association taxable as a
corporation for United States federal income tax purposes, (C) following such
merger, consolidation, amalgamation or replacement, the Company and such
successor entity will be in compliance with the 1940 Act
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without registering thereunder as an investment company, and (D) such merger,
consolidation, amalgamation or replacement will not adversely affect the
limited liability of the holders of the Partnership Preferred Securities and
(viii) the Company guarantees the obligations of such successor entity under
the Partnership Successor Securities at least to the extent provided by the
Partnership Guarantee.
BOOK-ENTRY AND SETTLEMENT
If the Partnership Preferred Securities are distributed to holders of Trust
Preferred Securities in connection with the involuntary or voluntary
dissolution, winding-up or liquidation of the Trust as a result of the
occurrence of a Trust Special Event, the Partnership Preferred Securities will
be issued in the form of one or more global certificates (each a "Global
Partnership Security") registered in the name of DTC as the depository or its
nominee. For a description of DTC and the specific terms of the Depository
arrangements, see "Description of the Trust Preferred Securities -- Book-Entry
Only Issuance -- The Depository Trust Company". As of the date of this
Prospectus, the description therein of DTC's book-entry system and DTC's
practices as they relate to purchases, transfers, notices and payments with
respect to the Trust Preferred Securities apply in all material respects to
any Partnership Preferred Securities represented by one or more Global
Partnership Securities.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
The General Partner will act as registrar, transfer agent and paying agent
for the Partnership Preferred Securities for so long as the Partnership
Preferred Securities are held by the Trust or, if the Trust is liquidated in
connection with a Trust Special Event, for so long as the Partnership
Preferred Securities remain in book-entry only form. In the event the
Partnership Preferred Securities are distributed in connection with a Trust
Special Event and the book-entry system for the Partnership Preferred
Securities is discontinued, it is anticipated that The Chase Manhattan Bank or
one of its affiliates will act as registrar, transfer agent and paying agent
for the Partnership Preferred Securities.
Registration of transfers of Partnership Preferred Securities will be
effected without charge by or on behalf of the Partnership, but upon payment
(with the giving of such indemnity as the Partnership or the General Partner
may require) in respect of any tax or other governmental charges that may be
imposed in relation to it.
The Partnership will not be required to register or cause to be registered
the transfer of Partnership Preferred Securities after such Partnership
Preferred Securities have been called for redemption.
MISCELLANEOUS
The General Partner is authorized and directed to conduct its affairs and to
operate the Partnership in such a way that (i) the Partnership will not be
deemed to be an "investment company" required to be registered under the 1940
Act or characterized as an association taxable as a corporation for United
States federal income tax purposes, (ii) the Affiliate Investment Instruments
will be treated as indebtedness of the issuer of such debt instruments for
United States federal income tax purposes and (iii) the Partnership will not
be treated as an association or as a "publicly traded partnership" (within the
meaning of Section 7704 of the Code) taxable as a corporation. In this
connection, the General Partner is authorized to take any action, not
inconsistent with applicable law, the certificate of limited partnership of
the Partnership or the Limited Partnership Agreement, that the General Partner
determines in its discretion to be necessary or desirable for such purposes as
long as such action does not adversely affect the interests of the holders of
the Partnership Preferred Securities.
DESCRIPTION OF THE PARTNERSHIP GUARANTEE
Set forth below is a summary of information concerning the Partnership
Guarantee that will be executed and delivered by the Company for the benefit
of the holders from time to time of Partnership Preferred Securities. The
summary does not purport to be complete and is subject in all respects to the
provisions of, and is qualified in its entirety by reference to, the
Partnership Guarantee, which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The General Partner will hold
the Partnership Guarantee for the benefit of the holders of the Partnership
Preferred Securities.
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GENERAL
Pursuant to the Partnership Guarantee, the Company will irrevocably agree,
on a subordinated basis to the extent set forth therein, to pay in full to the
holders of the Partnership Preferred Securities (without duplication of
amounts theretofore paid by the Partnership), as and when due, regardless of
any defense, right of set-off or counterclaim that the Partnership may have or
assert, the following payments (the "Partnership Guarantee Payments"): (i) any
accumulated and unpaid distributions that have theretofore been declared on
the Partnership Preferred Securities out of funds legally available therefor,
(ii) the redemption price with respect to any Partnership Preferred Securities
called for redemption by the Partnership out of funds legally available
therefor, and (iii) upon a liquidation of the Partnership, the lesser of (a)
the aggregate of the liquidation preference and all accumulated and unpaid
distributions on the Partnership Preferred Securities to the date of payment
and (b) the amount of assets of the Partnership, after satisfaction of all
liabilities, remaining available for distribution to holders of Partnership
Preferred Securities in liquidation of the Partnership. The Company's
obligation to make a Partnership Guarantee Payment may be satisfied by direct
payment of the required amounts by the Company to the holders of Partnership
Preferred Securities or by causing the Partnership to pay such amounts to such
holders.
The Partnership Guarantee will be a guarantee on a subordinated basis with
respect to the Partnership Preferred Securities from the time of issuance of
such Partnership Preferred Securities but will not apply to any payment of
distributions or Redemption Price, or to payments upon the dissolution,
winding-up or termination of the Trust, except to the extent the Partnership
shall have funds available therefor. If Investment Affiliates (including,
where applicable, the Company, as guarantor) of the Affiliate Investment
Instruments in which the Partnership invests fail to make any payment in
respect of such securities (or, if applicable, guarantees), the Partnership
may not declare or pay dividends on the Partnership Preferred Securities. In
such event, holders of the Partnership Preferred Securities would not be able
to rely upon the Partnership Guarantee for payment of such amounts. Instead,
holders of the Partnership Preferred Securities will have the remedies
described herein under "Description of the Partnership Preferred Securities --
Partnership Enforcement Events", including the right to direct the General
Partner or the Special Representative, as the case may be, to enforce the
covenant restricting certain payments by the Company and Finance Subsidiaries.
See "-- Covenants of the Company" below.
The Guarantees, when taken together with the Company Debenture and the
Company's obligations to pay all fees and expenses of the Trust and the
Partnership, constitute a guarantee to the extent set forth herein by the
Company of the distribution, redemption and liquidation payments payable to
the holders of the Trust Preferred Securities. The Guarantees do not apply,
however, to current distributions by the Partnership unless and until such
distributions are declared by the Partnership out of funds legally available
for payment or to liquidating distributions unless there are assets available
for payment in the Partnership, each as more fully described under "Risk
Factors -- Insufficient Income or Assets Available to Partnership".
COVENANTS OF THE COMPANY
The Company will covenant in the Partnership Guarantee that if (a) for any
distribution period, full distributions on a cumulative basis on any
Partnership Preferred Securities have not been paid or declared and set apart
for payment, (b) an Investment Event of Default by any Investment Affiliate in
respect of any Affiliate Investment Instrument has occurred and is continuing
or (c) the Company is in default of its obligations under the Trust Guarantee,
the Partnership Guarantee or any Investment Guarantee, then, during such
period (i) the Company shall not declare or pay dividends on, make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock or comparable
equity interest (except for (x) dividends or distributions in shares of, or
options, warrants or rights to subscribe for or purchase shares of, its
capital stock, and conversions or exchanges of common stock of one class into
common stock of another class, (y) redemptions or purchases of any rights
pursuant to the Rights Agreement and the issuance of preferred stock pursuant
to such rights and (z) purchases or acquisitions by the Company or its
affiliates in connection with transactions effected by or for the account of
customers of the Company or any of its subsidiaries or in connection with the
distribution or trading of such capital stock or comparable equity interest)
and (ii) the
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Company shall not make, permit any Finance Subsidiary to make, or make any
payments that would enable any Finance Subsidiary to make, any payment of any
dividends on, any distribution with respect to, or any redemption, purchase or
other acquisition of, or any liquidation payment with respect to, any
preferred security or comparable equity interest of any Finance Subsidiary.
EVENTS OF DEFAULT; ENFORCEMENT OF PARTNERSHIP GUARANTEE
An event of default under the Partnership Guarantee will occur upon the
failure of the Company to perform any of its payment or other obligations
thereunder.
The holders of a majority in liquidation amount of the Partnership Preferred
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Special Representative in
respect of the Partnership Guarantee or to direct the exercise of any trust or
power conferred upon the Special Representative under the Partnership
Guarantee. If the Special Representative fails to enforce its rights under the
Partnership Guarantee, after a holder of Partnership Preferred Securities has
made a written request, such holder of Partnership Preferred Securities may
institute a legal proceeding directly against the Company to enforce the
Special Representative's rights under the Partnership Guarantee without first
instituting a legal proceeding against the Partnership, the Special
Representative or any other person or entity. Notwithstanding the foregoing,
if the Company has failed to make a guarantee payment, a holder of Partnership
Preferred Securities may directly institute a proceeding against the Company
for enforcement of the Partnership Guarantee for such payment.
STATUS OF THE PARTNERSHIP GUARANTEE; SUBORDINATION
The Partnership Guarantee will constitute an unsecured obligation of the
Company and will rank subordinate and junior in right of payment to all other
liabilities of the Company and will rank pari passu with the most senior
preferred stock issued from time to time by the Company, with similar
guarantees issued by the Company in connection with the $275,000,000 aggregate
liquidation amount of 7 3/4% Trust Originated Preferred Securities issued by
Merrill Lynch Preferred Capital Trust I, the $300,000,000 aggregate
liquidation amount of 8% Trust Originated Preferred Securities issued by
Merrill Lynch Preferred Capital Trust II, the $750,000,000 aggregate
liquidation amount of 7% Trust Originated Preferred Securities issued by
Merrill Lynch Preferred Capital Trust III and with any guarantee now or
hereafter entered into by the Company in respect of any preferred stock of any
other Finance Subsidiary. Accordingly, the rights of the holders of
Partnership Preferred Securities to receive payments under the Partnership
Guarantee will be subject to the rights of the holders of any obligations of
the Company that are senior in priority to the obligations under the
Partnership Guarantee. Furthermore, the holders of obligations of the Company
that are senior to the obligations under the Partnership Guarantee (including,
but not limited to, obligations constituting Senior Indebtedness) will be
entitled to the same rights upon payment default or dissolution, liquidation
and reorganization in respect of the Partnership Guarantee that inure to the
holders of Senior Indebtedness as against the holders of the Company
Debenture. The Limited Partnership Agreement provides that each holder of
Partnership Preferred Securities, by acceptance thereof, agrees to the
subordination provisions and other terms of the Partnership Guarantee.
The Partnership Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may directly institute a legal
proceeding against the Company to enforce its rights under the Partnership
Guarantee without instituting a legal proceeding against any other person or
entity).
The Partnership Guarantee will be deposited with the General Partner to be
held for the benefit of the holders of the Partnership Preferred Securities.
In the event of the appointment of a Special Representative to, among other
things, enforce the Partnership Guarantee, the Special Representative may take
possession of the Partnership Guarantee for such purpose. If no Special
Representative has been appointed to enforce the Partnership Guarantee, the
General Partner has the right to enforce the Partnership Guarantee on behalf
of the holders of the Partnership Preferred Securities.
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AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Partnership Preferred Securities (in which case no consent will
be required), the Partnership Guarantee may be amended only with the prior
approval of the holders of not less than a majority in liquidation preference
of the outstanding Partnership Preferred Securities. All guarantees and
agreements contained in the Partnership Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of the Company and shall
inure to the benefit of the holders of the Partnership Preferred Securities
then outstanding. Except in connection with any permitted merger or
consolidation of the Company with or into another entity or any permitted
sale, transfer or lease of the Company's assets to another entity in which the
surviving corporation (if other than the Company) assumes the Company's
obligations under the Partnership Guarantee, the Company may not assign its
rights or delegate its obligations under the Partnership Guarantee without the
prior approval of the holders of at least a majority of the aggregate stated
liquidation preference of the Partnership Preferred Securities then
outstanding.
TERMINATION OF THE PARTNERSHIP GUARANTEE
The Partnership Guarantee will terminate and be of no further force and
effect as to the Partnership Preferred Securities upon (i) full payment of the
redemption price of all Partnership Preferred Securities or (ii) full payment
of the amounts payable in accordance with the Limited Partnership Agreement
upon liquidation of the Partnership. The Partnership Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
holder of Partnership Preferred Securities must in accordance with the
Partnership Act restore payment of any sums paid under the Partnership
Preferred Securities or the Partnership Guarantee. The Partnership Act
provides that a limited partner of a limited partnership who wrongfully
receives a distribution may be liable to the limited partnership for the
amount of such distribution.
GOVERNING LAW
The Partnership Guarantee will be governed by and construed in accordance
with the internal laws of the State of New York.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
In the opinion of Brown & Wood LLP, tax counsel to the Company, the Trust
and the Partnership ("Tax Counsel"), the following summary accurately
describes the material United States federal income tax consequences that may
be relevant to the purchase, ownership and disposition of Trust Preferred
Securities. Unless otherwise stated, this summary deals only with Trust
Preferred Securities held as capital assets by United States Persons (defined
herein) who purchase the Trust Preferred Securities upon original issuance. As
used herein, a "United States Person" means a person that is a citizen or
resident of the United States, a corporation or a partnership (including an
entity treated as a corporation or partnership for United States federal
income tax purposes) created or organized in or under the laws of the United
States, any state thereof or the District of Columbia (unless, in the case of
a partnership, Treasury regulations are adopted that provide otherwise), or an
estate or trust as defined in section 7701(a)(30) of the Internal Revenue Code
of 1986, as amended (the "Code"). The tax treatment of a holder may vary
depending on its particular situation. This summary does not address all the
tax consequences that may be relevant to holders who may be subject to special
tax treatment, such as banks, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or
currencies, tax-exempt investors, or foreign investors. This summary does not
include any description of any alternative minimum tax consequences or the tax
laws of any state or local government or of any foreign government that may be
applicable to the Trust Preferred Securities. This summary is based on the
Code, the Treasury regulations promulgated thereunder and administrative and
judicial interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis.
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The Trust Preferred Securities are not being marketed to persons that are
not United States Persons ("non-United States Persons") and, consequently, the
following discussion does not discuss the tax consequences that might be
relevant to non-United States Persons. Moreover, in order to protect the Trust
and the Partnership from potential adverse consequences, non-United States
Persons will be subject to withholding on distributions on the Trust Preferred
Securities held by such non-United States Persons at a rate of 30%. In
determining a holder's status, the United States entity otherwise required to
withhold taxes may rely on an IRS form W-8, an IRS form W-9, or a holder's
certification of its non-foreign status signed under penalty of perjury. NON-
UNITED STATES PERSONS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP, AND
DISPOSITION OF TRUST PREFERRED SECURITIES.
Tax Counsel has advised that there is no authority directly on point dealing
with securities such as the Trust Preferred Securities or transactions of the
type described herein and that the opinions of Tax Counsel are not binding on
the IRS or the courts, either of which could take a contrary position. No
rulings have been or will be sought from the IRS. Accordingly, there can be no
assurance that the IRS will not challenge the opinions expressed herein or
that a court would not sustain such a challenge. Nevertheless, Tax Counsel has
advised that it is of the view that, if challenged, the opinions expressed
herein would be sustained by a court with jurisdiction in a properly presented
case.
HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE TRUST
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED
STATES FEDERAL OR OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE REDEMPTION
OF THE TRUST PREFERRED SECURITIES OR REDEMPTION OF THE PARTNERSHIP PREFERRED
SECURITIES UPON THE OCCURRENCE OF CERTAIN TAX EVENTS SEE "DESCRIPTION OF THE
TRUST PREFERRED SECURITIES -- TRUST SPECIAL EVENT REDEMPTION OR DISTRIBUTION"
AND "DESCRIPTION OF THE PARTNERSHIP PREFERRED SECURITIES -- PARTNERSHIP
SPECIAL EVENT REDEMPTION" RESPECTIVELY.
CLASSIFICATION OF THE TRUST
Tax Counsel is of the opinion that, under current law, and based on certain
representations, facts and assumptions set forth in such opinion, the Trust
will be classified for United States federal income tax purposes as a grantor
trust and not as an association taxable as a corporation. Accordingly, for
United States federal income tax purposes, each holder of Trust Preferred
Securities will be considered the owner of an undivided interest in the
Partnership Preferred Securities held by the Trust, and each holder will be
required to include in its gross income its distributive share of income
attributable to the Partnership, which generally will be equal to such
holder's allocable share of amounts accrued on the Partnership Preferred
Securities. No amount included in income with respect to the Trust Preferred
Securities will be eligible for the corporate dividends-received deduction.
CLASSIFICATION OF THE PARTNERSHIP
Tax Counsel is of the opinion that, under current law, and based on certain
representations, facts and assumptions set forth in such opinion, the
Partnership will be classified for United States federal income tax purposes
as a partnership and not as an association or publicly traded partnership
taxable as a corporation.
Tax Counsel's opinion is based on certain factual assumptions relating to
the organization and operation of the Partnership and is conditioned upon
certain representations made by the General Partner and the Partnership as to
factual matters, such as the organization and the operation of the Partnership
and the type and frequency of investments made by the Partnership.
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The General Partner has represented that it intends to operate the
Partnership in a manner such that it will continue to constitute a partnership
for all future taxable periods in which any Partnership Preferred Securities
remain outstanding. In particular, pursuant to the Limited Partnership
Agreement, the General Partner is prohibited from taking any action that would
cause the Partnership to constitute a "publicly traded partnership" taxable as
a corporation under section 7704(a) of the Code. Accordingly, it is expected
that the Partnership will continue to qualify as a partnership, and therefore
will not constitute a publicly traded partnership taxable as a corporation,
for all taxable years in which the Partnership Preferred Securities remain
outstanding.
CLASSIFICATION OF THE DEBENTURES
The Partnership, the Company, the relevant Investment Affiliates and the
holders of the Trust Securities (by acceptance of a beneficial interest in a
Trust Security) will agree to treat the Debentures as indebtedness of the
relevant issuer for all United States tax purposes. In connection with the
issuance of the Debentures, Tax Counsel will issue its opinion that, under
current law, and based on certain representations, facts and assumptions set
forth in such opinion, the Debentures will be classified as indebtedness of
the relevant issuer for United States federal income tax purposes.
INCOME AND DEDUCTIONS
A holder's distributive share of income attributable to the Partnership
generally will be substantially equal to the amount of the cash distributions
that accumulate with respect to the Trust Preferred Securities. Accordingly,
if quarterly distributions on the Trust Preferred Securities are paid
currently, the amount of income recognized by a holder during a taxable year
generally will be substantially equal to the cash distributions received by
the holder with respect to its Trust Preferred Securities.
The nature and timing of the income that is allocated to holders of Trust
Preferred Securities will, however, depend on the United States federal income
tax characterization of the investments held by the Partnership during the
period in question. Because the Partnership will be an accrual basis taxpayer
for United States federal income tax purposes, income will accrue on the Trust
Preferred Securities and will be allocated to holders of Trust Preferred
Securities on a daily accrual basis, generally at a rate that is expected to
be equal to (and that will not be greater than) the distribution rate on the
Trust Preferred Securities, regardless of the holders' method of accounting.
Actual cash distributions on the Trust Preferred Securities will not, however,
be separately reported as taxable income to the holders at the time they are
received.
If distributions on the Partnership Preferred Securities are not made
currently, the corresponding distributions on the Trust Preferred Securities
will not be made currently. Because the Partnership is an accrual basis
taxpayer it can be expected that during a period in which interest payments on
the Debentures or distributions on the Partnership Preferred Securities are
deferred (for whatever reason), holders will generally recognize income in
advance of their receipt of any cash distributions with respect to their Trust
Preferred Securities. The amount of income that will be allocated to holders
of Trust Preferred Securities during any such deferral period will equal their
pro rata share of the amount of distributions accruing on the Partnership
Preferred Securities during such deferral period.
The Partnership does not presently intend to make an election under Section
754 of the Code. Accordingly, a subsequent purchaser of Trust Preferred
Securities will not be permitted to adjust the tax basis in his allocable
share of the Partnership's assets so as to reflect any difference between his
purchase price for the Trust Preferred Securities and his share of the
Partnership's underlying tax basis in its assets. As a result, a holder of
Trust Preferred Securities may be required to report a larger or smaller
amount of income from holding the Trust Preferred Securities than would
otherwise be appropriate based upon the holder's purchase price for the Trust
Preferred Securities.
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RECEIPT OF PARTNERSHIP PREFERRED SECURITIES UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
the Trust Preferred Securities-- Trust Special Event Redemption or
Distribution", Partnership Preferred Securities may be distributed to holders
of Trust Preferred Securities in exchange for their Trust Preferred Securities
and in liquidation of the Trust. Unless the liquidation of the Trust occurs as
a result of the Trust being subject to United States federal income tax with
respect to income accrued or received on the Partnership Preferred Securities,
such a distribution to holders would, for United States federal income tax
purposes, be treated as a nontaxable event to each holder, each holder would
receive an aggregate tax basis in the Partnership Preferred Securities equal
to such holder's aggregate tax basis in its Trust Preferred Securities, and a
holder's holding period in the Partnership Preferred Securities so received in
liquidation of the Trust would include the period during which the Trust
Preferred Securities were held by such holder. If, however, the liquidation of
the Trust were to occur because the Trust is subject to United States federal
income tax with respect to income accrued or received on the Partnership
Preferred Securities, the distribution of Partnership Preferred Securities to
holders by the Trust would likely be a taxable event to each holder, and a
holder would recognize gain or loss as if the holder had exchanged its Trust
Preferred Securities for the Partnership Preferred Securities it received upon
the liquidation of the Trust. Such gain or loss would be equal to the
difference between the holder's aggregate tax basis in its Trust Preferred
Securities surrendered in the exchange and the aggregate fair market value of
the Partnership Preferred Securities received in the exchange.
REDEMPTION OF TRUST PREFERRED SECURITIES FOR CASH
Under certain circumstances, as described under the caption "Description of
the Trust Preferred Securities-- Mandatory Redemption", "Description of the
Trust Preferred Securities -- Trust Special Event Redemption or Distribution"
and "Description of the Partnership Preferred Securities -- Partnership
Special Event Redemption", the General Partner may cause the Partnership to
redeem the Partnership Preferred Securities for cash, in which event the Trust
shall simultaneously apply the proceeds of such redemption to redeem the Trust
Preferred Securities. Under current law, such a redemption would constitute,
for United States federal income tax purposes, a taxable disposition, and a
holder would recognize gain or loss as if it sold the holder's proportionate
interest in the redeemed Partnership Preferred Securities for an amount of
cash equal to the proceeds received upon redemption. See "-- Disposition of
Trust Preferred Securities".
DISPOSITION OF TRUST PREFERRED SECURITIES
A holder that sells Trust Preferred Securities will recognize gain or loss
equal to the difference between the amount realized on the sale of the Trust
Preferred Securities and the holder's adjusted tax basis in such Trust
Preferred Securities. Such gain or loss will be a capital gain or loss and
will be a long-term capital gain or loss if the Trust Preferred Securities
have been held for more than one year at the time of the sale. A holder will
be required to include accumulated but unpaid distributions on the Partnership
Preferred Securities through the date of disposition in income as ordinary
income, and to add such amount to the adjusted tax basis of its Trust
Preferred Securities.
A holder's tax basis in its Trust Preferred Securities generally will equal
(i) the amount paid by such holder for its Trust Preferred Securities, (ii)
increased by the amount includible in income by such holder with respect to
its Trust Preferred Securities, and (iii) reduced by the amount of cash or
other property distributed to such holder with respect to its Trust Preferred
Securities. A holder who acquires Trust Preferred Securities at different
prices may be required to maintain a single aggregate adjusted tax basis in
all of his Trust Preferred Securities and, upon sale or other disposition of
some of such Trust Preferred Securities, to allocate a "pro rata" portion of
such aggregate tax basis to the Trust Preferred Securities sold (rather than
maintaining a separate tax basis in each Trust Preferred Security for purposes
of computing gain or loss on a sale of that Trust Preferred Security).
On August 5, 1997, the Taxpayer Relief Act of 1997 (the "Tax Act"), was
enacted into law. The Tax Act reduces the maximum rates on long-term capital
gains recognized on capital assets held by individual taxpayers
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for more than eighteen months as of the date of disposition and would further
reduce the maximum rates on such gains in the year 2001 and thereafter for
certain individual taxpayers who meet specified conditions. Prospective
investors should consult their own tax advisers concerning these tax law
changes.
OTHER PARTNERSHIP PROVISIONS
"Section 708". Under Section 708 of the Code, the Partnership will be deemed
to terminate for United States federal income tax purposes if 50% or more of
the capital and profits interests in the Trust are sold or exchanged within a
12-month period. Pursuant to final Treasury regulations issued on May 9, 1997,
if such a deemed termination were to occur, the Partnership would be
considered to have contributed its assets to a new partnership in return for
partnership interests therein and then to have distributed those new
partnership interests to the partners of the old partnership in liquidation
thereof.
"Section 701". The Department of Treasury has promulgated regulations under
Section 701 of the Code that generally permit it to recast a transaction or
disregard a partnership if a partnership is formed or availed of in connection
with a transaction a principal purpose of which is to reduce substantially the
present value of the partners' aggregate federal tax liability in a manner
that is inconsistent with the intent of the partnership provisions of the Code
or to treat a partnership as an aggregate of its partners as appropriate to
carry out the purpose of any provision of the Code or the Treasury regulations
thereunder. The Partnership has been formed for, and will engage in,
activities typical for partnerships. Although there is no precedent that
applies to the transactions contemplated herein, Tax Counsel believes that the
Partnership is not of the type intended to fall within the scope of these
regulations.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Income on the Trust Preferred Securities will be reported to holders on an
IRS Form 1099, which form should be mailed to holders of Trust Preferred
Securities by January 31 following each calendar year. Payments made on and
proceeds from the sale of Trust Preferred Securities may be subject to a
"back-up" withholding tax of 31% unless the holder complies with certain
identification requirements. Any withheld amount generally will be allowed as
a credit against the holder's United States federal income tax, provided the
required information is timely filed with the IRS.
NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the "New
Regulations") which make certain modifications to the back-up withholding and
information reporting rules described above. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
49
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Trust has agreed to sell to each of the
Underwriters named below, and each of the Underwriters, for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated, A.G. Edwards & Sons, Inc.,
PaineWebber Incorporated, Prudential Securities Incorporated and Smith Barney
Inc. are acting as representatives (the "Representatives"), has severally
agreed to purchase the number of Trust Preferred Securities set forth opposite
its name below. In the Purchase Agreement, the several Underwriters have
agreed, subject to the terms and conditions set forth therein, to purchase all
the Trust Preferred Securities offered hereby if any of the Trust Preferred
Securities are purchased. In the event of default by an Underwriter, the
Purchase Agreement provides that, in certain circumstances, the purchase
commitments of the non-defaulting Underwriters may be increased or the
Purchase Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF TRUST
UNDERWRITERS PREFERRED SECURITIES
------------ --------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................. 2,256,000
A.G. Edwards & Sons, Inc. ............................ 2,256,000
PaineWebber Incorporated.............................. 2,256,000
Prudential Securities Incorporated.................... 2,256,000
Smith Barney Inc. .................................... 2,256,000
ABN AMRO Incorporated................................. 160,000
BT Alex. Brown Incorporated........................... 160,000
Robert W. Baird & Co. Incorporated.................... 160,000
Bear, Stearns & Co. Inc. ............................. 160,000
CIBC Oppenheimer Corp. ............................... 160,000
Cowen & Company....................................... 160,000
Dain Rauscher Wessels................................. 160,000
Donaldson, Lufkin & Jenrette Securities Corporation... 160,000
EVEREN Securities, Inc. .............................. 160,000
Goldman, Sachs & Co. ................................. 160,000
Legg Mason Wood Walker, Incorporated.................. 160,000
Olde & Co., Incorporated.............................. 160,000
Piper Jaffray Inc. ................................... 160,000
Raymond James & Associates, Inc. ..................... 160,000
Tucker Anthony Incorporated........................... 160,000
Wheat First Securities, Inc. ......................... 160,000
Blaylock & Partners, L.P. ............................ 80,000
J.C. Bradford & Co. .................................. 80,000
Craigie Incorporated.................................. 80,000
Crowell, Weedon & Co. ................................ 80,000
Fahnestock & Co. Inc. ................................ 80,000
Fidelity Capital Markets, a Division of Nat'l. Finc'l.
Svs. Corp. .................................. 80,000
First Albany Corporation.............................. 80,000
Gibraltar Securities Co. ............................. 80,000
Gruntal & Co., L.L.C. ................................ 80,000
Hilliard Lyons Inc. .................................. 80,000
Wayne Hummer Investments LLC.......................... 80,000
Interstate/Johnson Lane Corporation................... 80,000
Janney Montgomery Scott Inc. ......................... 80,000
Kirkpatrick, Pettis, Smith, Polian Inc. .............. 80,000
McDonald & Company Securities, Inc. .................. 80,000
McGinn, Smith & Co., Inc. ............................ 80,000
Mesirow Financial, Inc. .............................. 80,000
Morgan Keegan & Company, Inc. ........................ 80,000
The Ohio Company...................................... 80,000
Parker/Hunter Incorporated............................ 80,000
The Robinson-Humphrey Company, LLC.................... 80,000
Roney Capital Markets, a division of First Chicago
Capital Markets, Inc. ....................... 80,000
Scott & Stringfellow, Inc. ........................... 80,000
Stephens Inc. ........................................ 80,000
Stifel, Nicolaus & Company, Incorporated.............. 80,000
Stone & Youngberg..................................... 80,000
Trilon International Inc. ............................ 80,000
----------
Total............................................ 16,000,000
==========
</TABLE>
50
<PAGE>
The Underwriters propose initially to offer the Trust Preferred Securities
to the public at the public offering price set forth on the cover page of this
Prospectus, and, to certain dealers at such price less a concession not in
excess of $.50 per Trust Preferred Security; provided, that such concession
for sales of 10,000 or more Trust Preferred Securities to any single purchaser
will be $.30 per Trust Preferred Security. The Underwriters may allow, and
such dealers may reallow, a discount not in excess of $.45 per Trust Preferred
Security to certain other dealers. After the Trust Preferred Securities are
released for sale to the public, the public offering price, concession and
discount may be changed.
In view of the fact that the proceeds of the sale of the Trust Preferred
Securities will ultimately be used to purchase the investment instruments of
the Company and its subsidiaries, the Purchase Agreement provides that the
Company will pay as compensation (the "Underwriters' Compensation") to the
Underwriters, an amount in immediately available funds of $.7875 per Trust
Preferred Security (or $12,600,000 in the aggregate) for the accounts of the
several Underwriters; provided that, such compensation for sales of 10,000 or
more Trust Preferred Securities to any single purchaser will be $.50 per Trust
Preferred Security. Therefore, to the extent of such sales, the actual amount
of Underwriters' Compensation will be less than the aggregate amount specified
in the preceding sentence.
The Trust Preferred Securities have been approved for listing on the NYSE,
subject to official notice of issuance. Trading of the Trust Preferred
Securities on the NYSE is expected to commence within a 30-day period after
the initial delivery of the Trust Preferred Securities. The Representatives
have advised the Trust that they intend to make a market in the Trust
Preferred Securities prior to the commencement of trading on the NYSE. The
Representatives will have no obligation to make a market in the Trust
Preferred Securities, however, and may cease market-making activities, if
commenced, at any time.
Prior to this offering there has been no public market for the Trust
Preferred Securities. In order to meet one of the requirements for listing the
Trust Preferred Securities on the NYSE, the Underwriters will undertake to
sell lots of 100 or more Trust Preferred Securities to a minimum of 400
beneficial holders, that there will be at least one million units of Trust
Preferred Securities outstanding and that the Trust Preferred Securities will
have a minimum market value of $4,000,000.
The Trust, the Company and the Partnership have agreed to indemnify the
Underwriters against, or contribute to payments that the Underwriters may be
required to make in respect of, certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
Because MLPF&S, one of the Underwriters in the offering, is an affiliate of
the Company and a member of the National Association of Securities Dealers,
Inc. ("NASD"), the offering of Trust Preferred Securities will be conducted
pursuant to the applicable sections of Rule 2810 of the Conduct Rules of the
NASD. The Underwriters may not confirm sales to any discretionary account
without the prior specific written approval of the customer.
The Underwriters are permitted to engage in certain transactions that
stabilize the price of the Trust Preferred Securities. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Trust Preferred Securities.
If an Underwriter creates a short position in the Trust Preferred Securities
in connection with the offering, i.e., if it sells more Units of the Trust
Preferred Securities than are set forth on the cover page of this Prospectus,
the Underwriter may reduce that short position by purchasing Units of the
Trust Preferred Securities in the open market.
The Underwriters may also impose a penalty bid on certain Underwriters and
selling group members. This means that if an Underwriter purchases Units of
the Trust Preferred Securities in the open market to reduce the Underwriter's
short position or to stabilize the price of the Trust Preferred Securities,
they may reclaim the amount of the selling concession from the Underwriters
and selling group members who sold those Units as part of the offering.
51
<PAGE>
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Trust Preferred
Securities. In addition, neither the Company nor any of the Underwriters makes
any representation that the Underwriters will engage in such transactions or
that such transactions, once commenced, will not be discontinued without
notice.
MLPF&S may use this Prospectus for offers and sales related to market-making
transactions in the Trust Preferred Securities. MLPF&S may act as principal or
agent in these transactions, and the sales will be made at prices related to
prevailing market prices at the time of sale.
LEGAL MATTERS
Certain matters of Delaware law relating to the legality of the Trust
Preferred Securities, the validity of the Trust Agreement, the formation of
the Trust and the Partnership and the legality under state law of the Trust
Preferred Securities and the Partnership Preferred Securities are being passed
upon by Skadden, Arps, Slate, Meagher & Flom (Delaware), special Delaware
counsel to the Trust, the Partnership and the Company. The legality under
state law of the Trust Guarantee, the Partnership Guarantee, the Company
Debenture and the Investment Guarantees with respect to the Affiliate
Debentures will be passed upon on behalf of the Trust, the Partnership and the
Company by Brown & Wood LLP, New York, New York. The validity of the Trust
Preferred Securities, the Partnership Preferred Securities, the Trust
Guarantee and the Partnership Guarantee will be passed upon on behalf of the
Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York,
counsel to the Underwriters.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included in the Company's 1997
Annual Report on Form 10-K, and incorporated by reference in this Prospectus,
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports incorporated by reference herein. The Selected Financial Data
under the captions "Operating Results", "Financial Position" and "Common Share
Data" for each of the five years in the period ended December 26, 1997
included in the 1997 Annual Report to Stockholders of the Company and
incorporated by reference herein, has been derived from consolidated financial
statements audited by Deloitte & Touche LLP, as set forth in their reports
included as an exhibit to the Registration Statement or incorporated by
reference herein. Such consolidated financial statements and related financial
statement schedules, and such Selected Financial Data incorporated by
reference in this Prospectus and the Registration Statement of which this
Prospectus is a part, have been incorporated herein by reference in reliance
upon such reports of Deloitte & Touche LLP given upon their authority as
experts in accounting and auditing. The balance sheets of Merrill Lynch
Preferred Funding IV, L.P. and Merrill Lynch Preferred Capital Trust IV
included in this Prospectus have also been audited by Deloitte & Touche LLP
and have been included 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 period
included in the Quarterly Report on Form 10-Q which is incorporated herein by
reference, Deloitte & Touche LLP have applied limited procedures in accordance
with professional standards for a review of such information. However, as
stated in their report included in such Quarterly Report on Form 10-Q and
incorporated by reference herein, they did not audit and they do not express
an opinion on such interim financial information. Accordingly, the degree of
reliance on their report on such information should be restricted in light of
the limited nature of the review procedures applied. Deloitte & Touche LLP are
not subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report is
not a "report" or a "part" of the registration statement prepared or certified
by an accountant within the meaning of Sections 7 and 11 of the Act.
52
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERMS PAGE NO.
- - ------------- --------
<S> <C>
Affiliate Debentures................................................... 35
Affiliate Investment Instruments....................................... 17
Beneficial Owner....................................................... 27
Business Day........................................................... 20
Change in 1940 Act Law................................................. 22
Code................................................................... 45
Commission............................................................. 4
Company................................................................ 1
Company Debenture...................................................... 34
Debentures............................................................. 34
Declaration............................................................ 16
Delaware Trustee....................................................... 16
Depository............................................................. 27
DTC.................................................................... 1, 27
Eligible Institution................................................... 35
Eligible Debt Securities............................................... 35
Exchange Act........................................................... 5
FDIC................................................................... 35
Finance Subsidiary..................................................... 3
General Partner........................................................ 1, 17
Global Certificates.................................................... 27
Global Partnership Security............................................ 42
Guarantees............................................................. 2
Independent Financial Advisor.......................................... 36
Indirect Participants.................................................. 27
Initial Partnership Proceeds........................................... 34
Investment Affiliate................................................... 36
Investment Events of Default........................................... 35
Investment Guarantee................................................... 35
IRS.................................................................... 22
Limited Partnership Agreement.......................................... 16
Merrill Lynch.......................................................... 1
MLPF&S................................................................. 1
Moody's................................................................ 35
NASD................................................................... 51
New Regulations........................................................ 49
1940 Act............................................................... 10
1997 Form 10-K......................................................... 5
NYSE................................................................... 1
Non-United States Persons.............................................. 46
Participants........................................................... 27
Partnership............................................................ 1, 17
Partnership Act........................................................ 17
Partnership Enforcement Event.......................................... 34
Partnership Guarantee.................................................. 2
Partnership Guarantee Payments......................................... 43
Partnership Investment Company Event................................... 38
Partnership Liquidation Distribution................................... 39
Partnership Preferred Securities....................................... 1
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERMS PAGE NO.
- - ------------- --------
<S> <C>
Partnership Special Event.............................................. 38
Partnership Successor Securities....................................... 41
Partnership Tax Event.................................................. 38
Property Account....................................................... 17
Property Trustee....................................................... 16
Purchase Agreement..................................................... 50
Redemption Price....................................................... 4
Registration Statement................................................. 4
Regular Trustees....................................................... 16
Representatives........................................................ 50
Rights Agreement....................................................... 3
S&P.................................................................... 35
Securities Act......................................................... 4
Senior Indebtedness.................................................... 2
Special Event.......................................................... 13
Special Representative................................................. 34
Successor Securities................................................... 26
Tax Act................................................................ 48
Tax Action............................................................. 22
Tax Counsel............................................................ 45
TOPrS.................................................................. 1
Trust.................................................................. 1, 16
Trust Act.............................................................. 16
Trust Common Securities................................................ 1
Trust Dissolution Tax Opinion.......................................... 22
Trust Enforcement Event................................................ 20
Trust Guarantee........................................................ 2
Trust Guarantee Payments............................................... 30
Trust Guarantee Trustee................................................ 16
Trust Indenture Act.................................................... 16
Trust Investment Company Event......................................... 22
Trust Liquidation...................................................... 24
Trust Liquidation Distribution......................................... 8
Trust Preferred Securities............................................. 1
Trust Redemption Tax Opinion........................................... 22
Trust Securities....................................................... 1
Trust Special Event.................................................... 21
Trust Tax Event........................................................ 22
Trustees............................................................... 16
Underwriters' Compensation............................................. 1
United States Person................................................... 45
</TABLE>
54
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
MERRILL LYNCH PREFERRED FUNDING IV, L.P.
Independent Auditors' Report......................................... F-2
Balance Sheet........................................................ F-3
Notes to Balance Sheet............................................... F-3
MERRILL LYNCH PREFERRED CAPITAL TRUST IV
Independent Auditors' Report......................................... F-4
Balance Sheet........................................................ F-5
Notes to Balance Sheet............................................... F-5
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the General Partner and Initial Limited Partner of
Merrill Lynch Preferred Funding IV, L.P.
We have audited the accompanying balance sheet of Merrill Lynch Preferred
Funding IV, L.P. (the "Partnership") as of March 27, 1998. This balance sheet
is the responsibility of the Partnership's management. Our responsibility is
to express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of the Partnership as of March 27,
1998, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
June 15, 1998
New York, New York
F-2
<PAGE>
BALANCE SHEET OF
MERRILL LYNCH PREFERRED FUNDING IV, L.P.
BALANCE SHEET
MARCH 27, 1998
<TABLE>
<S> <C>
Assets........................................................... $ --
=====
Partnership securities
Limited partner interest....................................... $ 85
General partner interest....................................... 15
-----
$ 100
Less: Receivables from partners for subscribed partnership inter-
ests............................................................ (100)
-----
--
=====
</TABLE>
NOTES TO BALANCE SHEET OF MERRILL LYNCH PREFERRED FUNDING IV, L.P.
Merrill Lynch Preferred Funding IV, L.P. (the "Partnership") is a limited
partnership that was formed under the Delaware Revised Uniform Limited
Partnership Act on December 19, 1997 for the exclusive purposes of purchasing
certain eligible debt instruments of Merrill Lynch & Co., Inc. (the "Company")
and wholly owned subsidiaries of the Company (the "Affiliate Investment
Instruments") with the proceeds from the sale of Partnership Preferred
Securities (the "Partnership Preferred Securities") to Merrill Lynch Preferred
Capital Trust IV (the "Trust") and a capital contribution from the Company in
exchange for the general partnership interest in the Partnership
(collectively, the "Partnership Proceeds").
The Partnership Preferred Securities will be redeemable for cash, at the
option of the Partnership, in whole or in part, from time to time, after a
certain date to be determined. Except as provided in the Limited Partnership
Agreement and Partnership Preferred Securities Guarantee Agreement, and as
otherwise provided by law, the holders of the Partnership Preferred Securities
will have no voting rights.
The Partnership Proceeds will be used initially to purchase debt instruments
from the Company and certain domestic wholly owned subsidiaries of the
Company, retaining 1% in unaffiliated debt securities. The Partnership shall
have a perpetual existence subject to certain termination events. The Company
serves as the sole general partner of the Partnership. The Company, in its
capacity as General Partner of the Partnership, has agreed to pay all fees and
expenses related to the organization and operations of the Partnership
(including any taxes, duties, assessments or government charges of whatever
nature (other than withholding taxes) imposed by the United States or any
other domestic taxing authority upon the Partnership) and the offering of the
Partnership Preferred Securities and be responsible for all debts and other
obligations of the Partnership (other than with respect to the Partnership
Preferred Securities). The General Partner has agreed to indemnify certain
officers and agents of the Partnership.
F-3
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of
Merrill Lynch Preferred Capital Trust IV
We have audited the accompanying balance sheet of Merrill Lynch Preferred
Capital Trust IV (the "Trust"), as of March 27, 1998. This balance sheet is
the responsibility of the Trust's management. Our responsibility is to express
an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of the Trust as of March 27, 1998,
in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
June 15, 1998
New York, New York
F-4
<PAGE>
BALANCE SHEET OF MERRILL LYNCH PREFERRED CAPITAL TRUST IV
BALANCE SHEET
MARCH 27, 1998
<TABLE>
<S> <C>
Assets................................................................ $0
===
Trust securities...................................................... $0
===
</TABLE>
NOTES TO BALANCE SHEET OF MERRILL LYNCH PREFERRED CAPITAL TRUST IV
Merrill Lynch Preferred Capital Trust IV (the "Trust") is a statutory
business trust formed on December 19, 1997 under the laws of the State of
Delaware for the exclusive purposes of (i) issuing the Trust Originated
Preferred Securities (the "Trust Preferred Securities") and the Trust Common
Securities (together with the Trust Preferred Securities, the "Trust
Securities") representing undivided beneficial ownership interests in the
assets of the Trust, (ii) purchasing Partnership Preferred Securities (the
"Partnership Preferred Securities") representing the limited partnership
interests of Merrill Lynch Preferred Funding IV, L.P. (the "Partnership") with
the proceeds from the sale of the Trust Securities, and (iii) engaging in only
those other activities necessary or incidental thereto. The Trust has a
perpetual existence, subject to certain termination events as provided in the
Declaration of Trust under which it was formed. Subsequent to March 27, 1998,
the Trust intends to issue and sell its Trust Preferred Securities in a public
offering and to issue and sell its Trust Common Securities to Merrill Lynch &
Co., Inc. (the "Company"). No Trust Preferred Securities have been issued as
of March 27, 1998.
The proceeds from the Trust's sale of the Trust Securities will be used to
purchase the Partnership Preferred Securities from the Partnership. The
Partnership Preferred Securities will be redeemable for cash, at the option of
the Partnership, in whole or in part, from time to time, after a certain date
to be determined. Upon any redemption of the Partnership Preferred Securities,
the Trust Preferred Securities will be redeemed, in whole or in part, as
applicable. Holders of the Trust Preferred Securities will have limited voting
rights and will not be entitled to vote to appoint, remove or replace, or to
increase or decrease the number of, Trustees, which voting rights are vested
exclusively in the holder of the Trust Common Securities.
The Company will be obligated to pay compensation to the underwriters of the
offering of the Trust Preferred Securities. The Company will pay all fees and
expenses related to the organization and operations of the Trust (including
any taxes, duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed by the United States or any other
domestic taxing authority upon the Trust) and the offering of the Trust
Preferred Securities and be responsible for all debts and other obligations of
the Trust (other than the Trust Securities). The Company has also agreed to
indemnify the Trustees and certain other persons.
F-5
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE TRUST PREFERRED SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 4
Incorporation of Certain Documents by Reference............................ 5
Summary.................................................................... 6
Risk Factors............................................................... 12
The Company................................................................ 15
Use of Proceeds............................................................ 15
Ratio of Earnings to Fixed Charges......................................... 16
Merrill Lynch Preferred Capital Trust IV................................... 16
Merrill Lynch Preferred Funding IV, L.P.................................... 17
Description of the Trust Preferred Securities.............................. 18
Description of the Trust Guarantee......................................... 29
Description of the Partnership Preferred Securities........................ 32
Description of the Partnership Guarantee................................... 42
Certain Federal Income Tax Considerations.................................. 45
Underwriting............................................................... 50
Legal Matters.............................................................. 52
Experts.................................................................... 52
Index of Defined Terms..................................................... 53
Index to Financial Statements.............................................. F-1
</TABLE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
[LOGO]
16,000,000
TRUST PREFERRED SECURITIES
MERRILL LYNCH PREFERRED
CAPITAL TRUST IV
7.12% TRUST ORIGINATED
PREFERRED SECURITIES /SM/ ("TOPRS /SM/")
GUARANTEED TO THE EXTENT SET
FORTH HEREIN BY
MERRILL LYNCH & CO., INC.
---------------
PROSPECTUS
---------------
MERRILL LYNCH & CO.
A.G. EDWARDS & SONS, INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
JUNE 16, 1998
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
