RULE NO. 424(b)(5)
REGISTRATION NO. 333-68747
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
S&P MIDCAP 400 COMPOSITE STOCK PRICE INDEX
STOCK MARKET ANNUAL RESET TERM SM NOTES DUE DECEMBER 31, 1999
(SERIES A)
"SMART NOTES SM"
This prospectus is to be used by Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, our wholly-owned subsidiary, when making
offers and sales related to market-making transactions in the SMART Notes.
THE SMART NOTES:
o 100% principal protection at maturity
o Interest payment on each June 30 and December 30
o We will pay interest on the SMART Notes at a rate equal to the
product of 65% and the percentage increase, if any, in the S&P
MidCap 400 Composite Stock Price Index.
o For each $1,000 principal amount of the SMART Notes that you
own, on each payment date, you will receive not less than $30
and not more than $100
o The SMART Notes are listed on the New York Stock Exchange
under the symbol "MERIQ99"
INVESTING IN THE SMART NOTES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
---------------------
MERRILL LYNCH & CO.
---------------------
The date of this prospectus is June 24, 1999.
"SMART Notes" and "Stock Market Annual Reset Term" are registered service
marks of Merrill Lynch & Co., Inc.
TABLE OF CONTENTS
PAGE
----
RISK FACTORS..............................................................3
MERRILL LYNCH & CO., INC..................................................7
RATIO OF EARNINGS TO FIXED CHARGES........................................8
DESCRIPTION OF THE SMART NOTES............................................9
THE STANDARD & POOR'S MIDCAP 400 COMPOSITE STOCK PRICE INDEX.............18
OTHER TERMS..............................................................20
WHERE YOU CAN FIND MORE INFORMATION......................................23
INCORPORATION OF INFORMATION WE FILE WITH THE SEC........................24
PLAN OF DISTRIBUTION.....................................................25
EXPERTS..................................................................25
RISK FACTORS
Your investment in the SMART Notes will involve risks. You should
carefully consider the following discussion of risks before investing in the
SMART Notes. In addition, you should reach an investment decision with regard to
the SMART Notes only after consulting with your legal and tax advisers and
considering the suitability of the SMART Notes in the light of your particular
circumstances.
YOU MAY NOT EARN A RETURN ON YOUR INVESTMENT
If the closing value of the S&P MidCap 400 Composite Stock Price Index
applicable to a December payment date as described in this prospectus does not
exceed the starting value of the index applicable to that December payment date
as described in this prospectus by more than approximately 4.62%, you will
receive only $30 for each $1,000 principal amount of your SMART Notes on that
December payment date. This will be true even if at some point during the time
the calculation agent determines the interest payable on the SMART Notes for
each December payment date, the value of the S&P MidCap 400 Composite Stock
Price Index for that year exceeded the starting value of the S&P MidCap 400
Stock Price Index for that year by more than 4.62%. The amount we will pay you
annually on the SMART Notes is limited to the product of 65% and the percentage
increase in S&P MidCap Composite Stock Price Index during the period between the
date of the determination of the starting value of the index for that year and
the date of the determination of the applicable closing value of the index for
that year, and in no event will that amount exceed only $100 for each $1,000
principal amount of your SMART Notes. If the closing value of the index for a
December payment date exceeds the starting value for that December payment date
by more than approximately 15.38%, you would receive no more than $100 for each
$1,000 principal amount of your SMART Notes for that payment period.
You will receive no less than the $30 for each $1,000 principal amount
of your SMART Notes, and we will repay you 100% of the principal amount of the
SMART Notes at maturity. Therefore, the amount that we pay you at maturity may
be less than the return you could earn on other investments. Your yield may be
less than the yield you would earn if you bought a senior non-callable debt
security of Merrill Lynch & Co., Inc. with the same maturity date. The payment
of additional amounts on the SMART Notes is subject to the conditions described
under "Description of Notes--Interest Payments". Your investment may not reflect
the full opportunity cost to you when you take into account factors that affect
the time value of money.
The amount payable on the SMART Notes based on the S&P MidCap 400
Composite Stock Price Index will not produce the same return as if you purchased
the stocks underlying the S&P MidCap 400 Composite Stock Price Index and held
them for a similar period because of the following:
o the S&P MidCap 400 Composite Stock Price Index does not
reflect the payment of dividends on the stocks underlying the
index,
o the annual amount we will pay you on the SMART Notes reflects only
the change in the S&P MidCap 400 Composite Stock Price Index for
the period between the determination of the starting value and the
closing value of the S&P MidCap 400 Composite Stock Price Index
applicable to each December payment date, and
o the annual amount we will pay you is limited to 65% of the
percentage increase, if any, in the S&P MidCap Composite Stock
Price 400 Index during any relevant period, but will not be less
than $30 per $1,000 principal amount of the SMART Notes or more
than $100 per $1,000 principal amount of the SMART Notes.
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR THE SMART NOTES IN THE FUTURE
Although the SMART Notes are listed on the New York Stock Exchange
under the symbol "MERIQ 99", you cannot assume that a market for the notes will
continue to exist. If a market continues to exist, there can be no assurance
that there will be liquidity in the trading market. The continued existence of a
trading market for the notes will depend on our financial performance, and other
factors, such as the increase, if any, in the value of the index. We expect that
the secondary market for the SMART Notes, including prices in that market, will
likely be affected by our creditworthiness and by a number of other factors. It
is possible to view the SMART Notes as the economic equivalent of a debt
obligation plus a series of cash settlement options; however, the SMART Notes
may trade in the secondary market at a discount from the aggregate value of
these economic components, if these economic components were valued and capable
of being traded separately.
If the trading market for the SMART Notes is limited and you do not
wish to hold your investment until maturity, there may be a limited number of
buyers for your SMART Notes. This may affect the price you receive if you sell
before maturity.
MANY FACTORS AFFECT THE TRADING VALUE OF THE SMART NOTES; THESE FACTORS
INTERRELATE IN COMPLEX WAYS AND THE EFFECT OF ANY ONE FACTOR MAY OFFSET OR
MAGNIFY THE EFFECT OF ANOTHER FACTOR
The trading value of the SMART Notes will be effected by factors that
interrelate in complex ways. It is important for you to understand that the
effect of one factor may offset the increase in the trading value of the SMART
Notes caused by another factor and that the effect of one factor may magnify the
decrease in the trading value of the SMART Notes caused by another factor. For
example, an increase in U.S. interest rates may offset some or all of any
increase in the trading value of the SMART Notes attributable to another factor,
such as an increase in the value of the index. The following paragraphs describe
the expected impact on the trading value of the SMART Notes given a change in a
specific factor, assuming all other conditions remain constant.
RELATIVE LEVEL OF THE S&P MIDCAP 400 INDEX. We expect that the trading
value of the SMART Notes will depend significantly on the extent of the excess
of the expected average of the closing value of the S&P MidCap Composite Stock
Price Index for a calendar year over the closing value of the S&P MidCap 400
Composite Stock Price Index on the last business day of the preceding calendar
year. If, however, you sell your SMART Notes at a time this excess exists, the
sale price may nevertheless be at a discount from the amount expected to be
payable if this excess were to prevail until the next December payment date.
Furthermore, the price at which you will be able to sell SMART Notes before a
December payment date may be at a discount, which could be substantial, from the
principal amount of your SMART Notes, if, at that time, the S&P MidCap 400
Composite Stock Price Index is below, equal to or not sufficiently above the
closing value of the S&P MidCap 400 Composite Stock Price Index on the last
business day of the immediately preceding calendar year before that December
payment date. The value of the SMART Notes may also be affected by the fact that
the maximum interest payment for any year is $100 for each $1,000 principal
amount of the SMART Notes.
CHANGES IN THE VOLATILITY OF THE INDEX ARE EXPECTED TO AFFECT THE
TRADING VALUE OF THE SMART NOTES. If the volatility of S&P MidCap 400 Composite
Stock Price Index increases, we expect the trading value of the SMART Notes to
increase. If the volatility of the S&P MidCap 400 Composite Stock Price Index
decreases, we expect the trading value of the SMART Notes to decrease.
CHANGES IN THE LEVEL OF U.S. INTEREST RATES ARE EXPECTED TO AFFECT THE
VALUE OF THE SMART NOTES. In general, if U.S. interest rates increase, we expect
the value of the SMART Notes to decrease. If U.S. interest rates decrease, we
expect the value of the Notes to increase. Interest rates may also affect the
U.S. economy, and, in turn, the level of the S&P MidCap 400 Composite Stock
Price Index. Rising interest rates may lower the level of the S&P MidCap 400
Composite Stock Price Index and, thus, the value of the SMART Notes. Falling
interest rates may increase the level of the S&P MidCap 400 Composite Stock
Price Index and, thus, may increase the value of the SMART Notes.
THE TIME REMAINING TO DECEMBER PAYMENT DATES. We anticipate that before
each December payment date, the SMART Notes may trade at a value above that
which may be inferred from the level of U.S. interest rates and the S&P MidCap
400 Composite Stock Price Index. This difference will reflect a "time premium"
due to expectations concerning the level of the S&P MidCap 400 Composite Stock
Price Index during the period before each December payment date. As the time
remaining to each December payment date decreases, however, this time premium
may decrease, thus decreasing the trading value of the SMART Notes.
AS THE TIME REMAINING TO MATURITY OF THE SMART NOTES DECREASES, THE
"TIME PREMIUM" ASSOCIATED WITH THE SMART NOTES WILL DECREASE. As the number of
remaining December payment dates decreases, the cumulative value of all the
annual rights to receive an amount that reflects participation in the payments
in excess of the minimum annual interest payment of $30 per $1,000 principal
amount will decrease, thus decreasing the value of the SMART Notes. Furthermore,
as the time to maturity decreases, the value of the right to receive the Minimum
Annual Payment and the principal amount is expected to increase, thus increasing
the value of the Note.
CHANGES IN DIVIDEND RATES OF THE STOCKS INCLUDED IN THE INDEX ARE
EXPECTED TO AFFECT THE TRADING VALUE OF THE SMART NOTES. A number of complex
relationships between the relative values of the SMART Notes and dividend rates
are likely to exist. If dividend rates on the stocks comprising the S&P MidCap
400 Composite Stock Price Index increase, the value of the annual right to
receive an amount that reflects participation in the appreciation of the S&P
MidCap 400 Index above the Starting Annual Value is expected to decrease, and
consequently we expect the value of the SMART Notes to decrease. Conversely, if
dividend rates on the stocks comprising the S&P MidCap 400 Composite Stock Price
Index decrease, the value of the annual right to receive this amount is expected
to increase and, therefore, the value of the SMART Notes is expected to
increase. In general, however, rising U.S. corporate dividend rates may increase
the S&P MidCap 400 Composite Stock Price Index and, in turn, increase the value
of the SMART Notes. Conversely, falling U.S. dividend rates may decrease the S&P
MidCap 400 Composite Stock Price Index and, in turn, decrease the value of the
SMART Notes.
CHANGES IN OUR CREDIT RATINGS MAY AFFECT THE TRADING VALUE OF THE SMART
NOTES. Our credit ratings are an assessment of our ability to pay our
obligations. Consequently, real or anticipated changes in our credit ratings may
affect the trading value of the SMART Notes. However, because your return on
your SMART Notes is dependent upon factors in addition to our ability to pay our
obligations under the SMART Notes, such as the percentage increase in the value
of the index at maturity, an improvement in our credit ratings will not reduce
investment risks related to the SMART Notes.
In general, assuming all relevant factors are held constant, we expect
that the effect on the trading value of the SMART Notes of a given change in
most of the factors listed above will be less if it occurs later in the term of
the SMART Notes than if it occurs earlier in the term of the SMART Notes.
However, we expect that the effect on the trading value of the SMART Notes of a
given increase in the value of the index will be greater if it occurs later in
the term of the SMART Notes than if it occurs earlier in the term of the SMART
Notes.
AMOUNTS PAYABLE ON THE SMART NOTES MAY BE LIMITED BY STATE LAW
The indenture under which the SMART Notes are issued is governed by New
York State law. New York has usury laws that limit the amount of interest that
can be charged and paid on loans, which includes debt securities like the SMART
Notes. Under present New York law, the maximum rate of interest is 25% per annum
on a simple interest basis. This limit may not apply to debt securities in which
$2,500,000 or more has been invested.
While we believe that New York law would be given effect by a state or
Federal court sitting outside of New York, many other states also have laws that
regulate the amount of interest that may be charged to and paid by a borrower.
We will promise, for the benefit of the holders of the SMART Notes, to the
extent permitted by law, not to voluntarily claim the benefits of any laws
concerning usurious rates of interest.
MERRILL LYNCH & CO., INC.
We are a holding company that, through our U.S. and non-U.S.
subsidiaries and affiliates such as Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Merrill Lynch Government Securities Inc., Merrill Lynch Capital
Services, Inc., Merrill Lynch International, Merrill Lynch Capital Markets Bank
Ltd., Merrill Lynch Asset Management L.P. and Merrill Lynch Mercury Asset
Management, provides investment, financing, advisory, insurance, and related
products on a global basis, including:
o securities brokerage, trading and underwriting;
o investment banking, strategic services, including mergers and
acquisitions and other corporate finance advisory activities;
o asset management and other investment advisory and recordkeeping
services;
o trading and brokerage of swaps, options, forwards, futures and
other derivatives;
o securities clearance services;
o equity, debt and economic research;
o banking, trust and lending services, including mortgage lending
and related services; and
o insurance sales and underwriting services.
We provide these products and services to a wide array of clients, including
individual investors, small businesses, corporations, governments, governmental
agencies and financial institutions.
Our principal executive office is located at World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281; our telephone number is
(212) 449-1000.
If you want to find more information about us, please see the sections
entitled "Where You Can Find More Information" and "Incorporation of Information
We File with the SEC" in this prospectus.
In this prospectus, "ML&Co.", "we", "us" and "our" refer specifically
to Merrill Lynch & Co., Inc., the holding company. ML&Co. is the issuer of the
SMART Notes described in this prospectus.
RATIO OF EARNINGS TO FIXED CHARGES
In 1998, we acquired the outstanding shares of Midland Walwyn Inc., in
a transaction accounted for as a pooling-of-interests. The following information
for the fiscal years 1994 through 1997 has been restated as if the two entities
had always been combined.
The following table sets forth our historical ratios of earnings to
fixed charges for the periods indicated:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1994 1995 1996 1997 1998 MARCH 26, 1999
---- ---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(a) 1.2 1.2 1.2 1.2 1.1 1.3
</TABLE>
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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, excluding capitalized interest and preferred security
dividend requirements of subsidiaries. "Fixed charges" consist of interest
costs, the interest factor in rentals, amortization of debt issuance costs,
preferred security dividend requirements of subsidiaries, and capitalized
interest.
DESCRIPTION OF THE SMART NOTES
The SMART Notes were issued as a series of senior debt securities under
the 1983 Indenture which is more fully described in this prospectus.
The SMART Notes will mature, and the principal of the SMART Notes will
be repayable at par, on December 31, 1999.
The SMART Notes are not subject to redemption before maturity by ML&Co.
or at the option of any beneficial owner. Upon the occurrence of an Event of
Default with respect to the SMART Notes, however, beneficial owners of the SMART
Notes or the trustee may accelerate the maturity of the SMART Notes, as
described under "Description of Notes--Events of Default and Acceleration" and
"Other Terms--Events of Default" in this prospectus.
The SMART Notes were issued in denominations of $1,000 and integral
multiples of $1,000.
Interest Payments
For each full calendar year, ML&Co. will pay interest in an amount
equal to the following for each $1,000 principal amount of SMART Notes:
$1,000 X Annual Percent Appreciation X Participation Rate
provided, however, that the per annum amount payable as a result of the
foregoing on the SMART Notes will not be less than the Minimum Annual Payment or
greater than the Maximum Annual Payment. The table below specifies the Minimum
Annual Payment and the Maximum Annual Payment on a per annum basis or 2% per
annum per $1,000 principal amount of SMART Notes as well as the Participation
Rate.
Minimum Annual Payment............................... $30 (3%)
Maximum Annual Payment............................... $100 (10%)
Participation Rate................................... 65%
The "ANNUAL PERCENT APPRECIATION" applicable to the determination of
the amount payable in any year will equal:
o the Ending Annual Value minus the Starting Annual Value, divided by
o the Starting Annual Value.
The "STARTING ANNUAL VALUE" applicable to the determination of the
amount payable in a calendar year will equal the closing value of the S&P MidCap
400 Composite Stock Price Index on the first NYSE Business Day in that year on
which a Market Disruption Event has not occurred as determined by State Street
Bank and Trust Company, the calculation agent; provided, however, that if a
Market Disruption Event shall have occurred on each of the first ten NYSE
Business Days in any year, then, the "STARTING ANNUAL VALUE" applicable to the
determination of the amount payable in that year will equal the closing value of
the S&P MidCap 400 Composite Stock Price Index on the tenth NYSE Business Day
regardless of whether a Market Disruption Event occurs on that day.
The "ENDING ANNUAL VALUE" applicable to the determination of the amount
payable in a calendar year will equal the closing value of the S&P MidCap 400
Composite Stock Price Index on the seventh scheduled NYSE Business Day preceding
the end of that year, including December 31 if it is a scheduled NYSE Business
Day, as determined by the calculation agent, unless a Market Disruption Event
has occurred on that day. In the event that a Market Disruption Event has
occurred on the seventh scheduled NYSE Business Day preceding the end of that
year, the "ENDING ANNUAL VALUE" applicable to the determination of the amount
payable in that year will equal the closing value of the S&P MidCap 400
Composite Stock Price Index on the sixth scheduled NYSE Business Day preceding
the end of that year regardless of whether that day is a NYSE Business Day or a
Market Disruption Event occurs on that day. The calculation agent will determine
the seventh scheduled NYSE Business Day, and, if necessary, the sixth scheduled
NYSE Business Day before each December payment date.
If the Ending Annual Value applicable to that December payment date
does not exceed the Starting Annual Value applicable to that December payment
date by more than approximately 4.62%, beneficial owners of the SMART Notes will
receive only the Minimum Annual Payment on that December payment date, even if
the value of the S&P MidCap 400 Index at some point between the determination of
the applicable Starting Annual Value and the determination of the applicable
Ending Annual Value exceeded that Starting Annual Value by more than
approximately 4.62%. If the Ending Annual Value applicable to a December payment
date exceeds the Starting Annual Value applicable to that December payment date
by more than approximately 15.38%, the beneficial owners of the SMART Notes
would receive only the Maximum Annual Payment for the applicable payment period.
"CALCULATION DAY" is any day on which a Starting Annual Value or an
Ending Annual Value is required to be calculated.
A "NYSE BUSINESS DAY" is a day on which The New York Stock Exchange is
open for trading. All determinations made by the calculation agent shall be at
the sole discretion of the calculation agent and, in the absence of manifest
error, shall be conclusive for all purposes and binding on ML&Co. and beneficial
owners of the SMART Notes.
All percentages resulting from any calculation on the SMART Notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five one-millionths of a percentage point rounded upward, e.g., 9.876545%, or
.09876545, would be rounded to 9.87655%, or, .0987655, and all dollar amounts
used in or resulting from that calculation will be rounded to the nearest cent
with one-half cent being rounded upwards.
"MARKET DISRUPTION EVENT" means either of the following events, as
determined by the calculation agent:
(a) the suspension or material limitation on trading during
significant market fluctuations shall be considered "material"
for purposes of this definition, in each case, for more than
two hours of trading in 80 or more of the securities included
in the S&P MidCap 400 Index, or
(b) the suspension or material limitation, in each case for more
than two hours of trading in
(1) futures contracts related to the S&P MidCap 400 Composite
Stock Price Index which are traded on the Chicago Mercantile
Exchange or
(2) option contracts related to the S&P MidCap 400 Composite Stock
Price Index which are traded on the American Stock Exchange.
For the purposes of clause (a) above, any limitations on trading during
significant market fluctuations under New York Stock Exchange Rule 80A, or any
applicable rule or regulation enacted or promulgated by the NYSE or any other
self regulatory organization or the SEC of similar scope as determined by the
calculation agent, will be considered "material".
For the purposes of this definition, a limitation on the hours in a
trading day and/or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular business
hours of the relevant exchange.
Interest Payment Dates
ML&Co. will make semiannual interest payments on the SMART Notes on
June 30 and December 31 of each year ("June Payment Dates" and "December Payment
Dates", respectively), except as described in this prospectus, to the persons in
whose names the SMART Notes are registered on the next preceding June 29 or
December 30. For each SMART Note, ML&Co. will pay half of the Minimum Annual
Payment for each calendar year on the June Payment Date, and will pay the
balance of the annual amount payable on each SMART Note for that year on the
December Payment Date.
Notwithstanding the foregoing, if it is known at least three Business
Days before December 31 that December 31 will not be a Business Day, the amount
payable by ML&Co. with respect to a December Payment Date for Series A SMART
Notes will be made on the Business Day immediately preceding that December 31 to
the persons in whose names the SMART Notes are registered on the second Business
Day immediately preceding that December 31.
S&P MidCap 400 Index
The following table illustrates hypothetical annual payments on the
SMART Notes using assumed changes in the S&P MidCap 400 Composite Stock Price
Index. The numbers below are shown for illustrative purposes only and are not
intended to predict either the future levels of the S&P MidCap 400 Index or the
payments to be received on the SMART Notes.
HYPOTHETICAL SMART NOTE PAYMENTS
<TABLE>
<CAPTION>
HYPOTHETICAL
HYPOTHETICAL INDEX ANNUALIZED
STARTING HYPOTHETICAL ENDING PERCENT PARTICIPATION SMART
YEAR ANNUAL VALUE(1) ANNUAL VALUE(2) CHANGE RATE NOTE PAYMENT RATE(3)
- ----- --------------- ------------------- --------- ------------- --------------------
<S> <C> <C> <C> <C> <C>
1 ............. 163 180 10.43% 65% 6.78%
2 ............. 178 206 15.73% 65% 10.00%**
3 ............. 208 174 -16.35% 65% 3.00%*
4 ............. 174 218 25.29% 65% 10.00%**
5 ............. 217 216 -0.46% 65% 3.00%*
6 ............. 219 284 29.68% 65% 10.00%**
7 ............. 283 310 9.54% 65% 6.20%
</TABLE>
(1) Assumed closing value of the S&P MidCap 400 Index on the first NYSE
Business Day of each year.
(2) Assumed closing value of the S&P MidCap 400 Index on the seventh
scheduled NYSE Business Day before the end of each year.
(3) Simple interest basis.
* Minimum Annual Payment, $30 per $1,000 principal amount (3% per annum).
** Maximum Annual Payment, $100 per $1,000 principal amount (10% per annum).
The above figures are for purposes of illustration only. The actual
amount payable in any year on the SMART Notes will depend entirely on the
Starting Annual Value and Ending Annual Value applicable to that year determined
by the calculation agent as provided in this prospectus and the Minimum Annual
Payment, Maximum Annual Payment and Participation Rate.
You should review the historical performance of the S&P MidCap 400
Composite Stock Price Index. The historical performance of the S&P MidCap 400
Composite Stock Price Index should not be taken as an indication of future
performance, and no assurance can be given that the S&P MidCap 400 Composite
Stock Price Index will increase sufficiently during any calendar year to cause
the beneficial owners of the SMART Notes to receive an amount in excess of the
Minimum Annual Payment during any that calendar year.
DISCONTINUANCE OF THE S&P MIDCAP 400 COMPOSITE STOCK PRICE INDEX
If S&P discontinues publication of the S&P MidCap 400 Index and S&P or
another entity publishes a successor or substitute index that the calculation
agent determines, in its sole discretion, to be comparable to the S&P MidCap 400
Composite Stock Price Index (that index being referred to in this prospectus as
a "SUCCESSOR INDEX"), then, upon the calculation agent's notification of its
determination to the trustee and ML&Co., the calculation agent will substitute
the Successor Index as calculated by S&P or that other entity for the S&P MidCap
400 Composite Stock Price Index and calculate the Starting Annual Value and/or
the Ending Annual Value as described above. Upon any selection by the
calculation agent of a Successor Index, ML&Co. shall cause notice to be
published in The Wall Street Journal or another newspaper of general circulation
within three Business Days of that selection.
If the S&P MidCap 400 Composite Stock Price Index is unavailable or S&P
discontinues publication of the S&P MidCap 400 Index and a Successor Index is
not selected by the calculation agent or is no longer published on any of the
Calculation Days, the value to be substituted for the S&P MidCap 400 Composite
Stock Price Index for that Calculation Day used to calculate the Starting Annual
Value or Ending Annual Value, as the case may be, will be calculated as
described below.
If a Successor Index is selected or the calculation agent calculates a
value as a substitute for the S&P MidCap 400 Composite Stock Price Index as
described below, the Successor Index or value shall be substituted for the S&P
MidCap 400 Composite Stock Price Index for all purposes.
If at any time the method of calculating the S&P MidCap 400 Composite
Stock Price Index, or its value, is changed in a material respect, or if the S&P
MidCap 400 Composite Stock Price Index is in any other way modified so that the
Index does not, in the opinion of the calculation agent, fairly represent the
value of the S&P MidCap 400 Composite Stock Price Index had the changes or
modifications not been made, then, from and after that time, the calculation
agent shall, at the close of business in New York, New York, on each Calculation
Date, make any adjustments as, in the good faith judgment of the calculation
agent, may be necessary in order to arrive at a calculation of a value of a
stock index comparable to the S&P MidCap 400 Composite Stock Price Index as if
the changes or modifications had not been made, and calculate the closing value
with reference to the S&P MidCap 400 Composite Stock Price Index, as adjusted.
Accordingly, if the method of calculating the S&P MidCap 400 Composite Stock
Price Index is modified so that the value of the Index is a fraction or a
multiple of what it would have been if it had not been modified, e.g., due to a
split in the Index, then the calculation agent shall adjust the Index in order
to arrive at a value of the S&P MidCap 400 Composite Stock Price Index as if it
had not been modified, e.g., as if the split had not occurred.
If the S&P MidCap 400 Composite Stock Price Index is unavailable or the
publication of the S&P MidCap 400 Composite Stock Price Index is discontinued
and S&P or another entity does not publish a Successor Index on any of the
Calculation Days, the value to be substituted for the S&P MidCap 400 Composite
Stock Price Index for any Calculation Day will be the value computed by the
calculation agent for each that Calculation Day in accordance with the following
procedures:
(a) identifying the component stocks of the S&P MidCap 400
Composite Stock Price Index or any Successor Index as of the
last date on which either of the indices was calculated by S&P
or another entity and published by S&P or that other entity
(each component stock is a "LAST COMPONENT STOCK");
(b) for each Last Component Stock, calculating as of each that
NYSE Business Day the product of the market price per share
and the number of the then outstanding shares (that product
referred to as the "MARKET VALUE" of that stock), by reference
to
o the closing market price per share of that Last Component
Stock as quoted by the New York Stock Exchange or the American
Stock Exchange or any other registered national securities
exchange that is the primary market for that Last Component
Stock, or if no quotation is available, then the closing
market price as quoted by any other registered national
securities exchange or the National Association of Securities
Dealers Automated Quotation National Market System, or if no
price is quoted, then the market price from the best available
source as determined by the calculation agent and
o the most recent publicly available statement of the number of
outstanding shares of that Last Component Stock;
(c) aggregating the Market Values obtained in clause (b) for all
Last Component Stocks;
(d) ascertaining the Base Value, as defined below under "The
Standard & Poor's MidCap 400 Index--Computation of the S&P
MidCap 400 Index", in effect as of the last day on which
either the S&P MidCap 400 Index or any Successor Index was
published by S&P or another entity, adjusted as described
below;
(e) dividing the aggregate Market Value of all Last Component
Stocks by the Base Value, adjusted as described above;
(f) multiplying the resulting quotient, expressed in decimals,
by 100.
If any Last Component Stock is no longer publicly traded on any
registered national securities exchange or in the over-the-counter market, the
last available market price per share for that Last Component Stock as quoted by
any registered national securities exchange or in the over-the-counter market,
and the number of outstanding shares at that time, will be used in computing the
last available Market Value of that Last Component Stock. That Market Value will
be used in all computations of the S&P MidCap 400 Index thereafter.
If a company that has issued a Last Component Stock and another company
that has issued a Last Component Stock are consolidated to form a new company,
the common stock of the new company will be considered a Last Component Stock
and the common stocks of the constituent companies will no longer be considered
Last Component Stocks. If any company that has issued a Last Component Stock
merges with, or acquires, a company that has not issued a Last Component Stock,
the common stock of the surviving corporation will, upon the effectiveness of
that merger or acquisition, be considered a Last Component Stock. In each that
case, the Base Value will be adjusted so that the Base Value immediately after
that consolidation, merger or acquisition will equal:
o the Base Value immediately before that event, multiplied by
o the quotient of the aggregate Market Value of all Last Component
Stocks immediately after that event, divided by the aggregate
Market Value for all Last Component Stocks immediately before that
event.
If a company that has issued a Last Component Stock issues a stock
dividend, declares a stock split or issues new shares pursuant to the
acquisition of another company, then, in each case, the Base Value will be
adjusted in accordance with the formula described below so that the Base Value
immediately after the time the particular Last Component Stock commences trading
ex-dividend, the effectiveness of the stock split or the time new shares of that
Last Component Stock commence trading equals:
o the Base Value immediately before that event, multiplied by
o the quotient of the aggregate Market Value for all Last Component
Stocks immediately after that event, divided by the aggregate
Market Value of all Last Component Stocks immediately before that
event.
The Base Value used by the calculation agent to calculate the value described
above will not necessarily be adjusted in all cases in which S&P, in its
discretion, might adjust the Base Value, as described below under "The Standard
& Poor's MidCap 400 Composite Stock Price Index--Computation of the S&P MidCap
400 Composite Stock Price Index".
If S&P discontinues publication of the S&P MidCap 400 Composite Stock
Price Index before the period during which the amount payable with respect to
any year is to be determined and the calculation agent determines that no
Successor Index is available at that time, then on each NYSE Business Day until
the earlier to occur of
o the determination of the amount payable with respect to that year
or
o a determination by the calculation agent that a Successor Index is
available, the calculation agent shall determine the value that
would be used in computing the amount payable with respect to that
year by reference to the method set forth in clauses (a) through
(f) in the fourth preceding paragraph above as if that day were a
Calculation Day. The calculation agent will cause notice of each
value to be published not less often than once each month in the
Wall Street Journal or another newspaper of general circulation,
and arrange for information with respect to these values to be
made available by telephone. Notwithstanding these alternative
arrangements, discontinuance of the publication of the S&P MidCap
400 Composite Stock Price Index may adversely affect trading
in the SMART Notes.
Events of Default and Acceleration
In case an Event of Default with respect to any SMART Notes has
occurred and is continuing, the amount payable to a beneficial owner of a SMART
Note upon any acceleration permitted by the SMART Notes, will equal:
o the principal amount of the SMART Note, plus
o an additional amount, if any, of interest calculated as though the
date of early repayment were a December payment date and prorated
through that date of early repayment based on the ratio of the
number of days from and including the date the Starting Annual
Value applicable to that year is determined to but excluding the
date of early repayment, computed on the basis of a year
consisting of 360 days of twelve 30-day months, divided by 360.
If a bankruptcy proceeding is commenced in respect of ML&Co., the claim
of the beneficial owner of a Note may be limited, under Section 502(b)(2) of
Title 11 of the United States Code, to the principal amount of the Note plus an
additional amount, if any, of contingent interest calculated as though the date
of the commencement of the proceeding were the maturity date of the Notes.
Global Securities
Description of the Global Securities
Beneficial owners of the SMART Notes may not receive physical delivery
of the securities nor may they be entitled to have the securities registered in
their names. The SMART Notes are represented by one or more fully registered
global securities. Each global security has been deposited with, or on behalf
of, The Depository Trust Company or DTC (DTC, together with any successor, being
a "depositary"), as depositary, registered in the name of Cede & Co, DTC's
partnership nominee. Unless and until it is exchanged in whole or in part for
SMART Notes in definitive form, no global security may be transferred except as
a whole by the depositary to a nominee of the depositary or by a nominee of the
depositary to that depositary or another nominee of the depositary or by the
depositary or any nominee to a successor of the depositary or a nominee of that
successor.
So long as DTC, or its nominee, is a registered owner of a global
security, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the SMART Notes represented by a global security for all
purposes under the 1983 Indenture. Except as provided below, the beneficial
owners of the securities represented by a global security are not entitled to
have the SMART Notes represented by the global security registered in their
names, will not receive or be entitled to receive physical delivery of the SMART
Notes in definitive form and are not considered the owners or holders under the
1983 Indenture, including for purposes of receiving any reports delivered by
ML&Co. or the trustee under the 1983 Indenture. Accordingly, each person owning
a beneficial interest in a global security must rely on the procedures of DTC
and, if that person is not a participant of DTC on the procedures of the
participant through which that person owns its interest, to exercise any rights
of a holder under the 1983 Indenture. ML&Co. understands that under existing
industry practices, in the event that ML&Co. requests any action of holders or
that an owner of a beneficial interest in a global security desires to give or
take any action which a holder is entitled to give or take under the 1983
Indenture, DTC would authorize the participants holding the relevant beneficial
interests to give or take action, and those participants would authorize
beneficial owners owning through those participants to give or take action or
would otherwise act upon the instructions of beneficial owners. Conveyance of
notices and other communications by DTC to participants, by participants to
indirect participants and by participants and indirect participants to
beneficial owners are governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time.
DTC Procedures
The following is based on information furnished by DTC:
DTC is the securities depositary for the securities. The securities
have been issued as fully registered securities registered in the name of Cede &
Co., DTC's partnership nominee. One or more fully registered global securities
have been issued for the SMART Notes in the aggregate principal amount of that
issue, and has been 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 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. Direct participants of DTC include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. DTC is owned by a number of its direct
participants and by the NYSE, the AMEX and the National Association of
Securities Dealers, Inc. Access to DTC's system is also available to others such
as securities brokers and dealers, banks and trust companies that clear through
or maintain a custodial relationship with a direct participant, either directly
or indirectly. The rules applicable to DTC and its participants are on file with
the SEC.
Purchases of securities under DTC's system must be made by or through
direct participants, which will receive a credit for the securities on DTC's
records. The ownership interest of each beneficial owner is in turn to be
recorded on the records of direct and indirect participants. Beneficial owners
will not receive written confirmation from DTC of their purchase, but beneficial
owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the direct
participants or indirect participants through which the beneficial owner entered
into the transaction. Transfers of ownership interests in the securities are to
be accomplished by entries made on the books of participants acting on behalf of
beneficial owners.
To facilitate subsequent transfers, all securities deposited with DTC
are registered in the name of DTC's partnership nominee, Cede & Co. The deposit
of securities with DTC and their registration in the name of Cede & Co. effect
no change in beneficial ownership. DTC has no knowledge of the actual beneficial
owners of the securities; DTC's records reflect only the identity of the direct
participants to whose accounts the securities are credited, which may or may not
be the beneficial owners. The participants are responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct and
indirect participants to beneficial owners are governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the
securities. Under its usual procedures, DTC mails an omnibus proxy to ML&Co. as
soon as possible after the applicable record date. The omnibus proxy assigns
Cede & Co.'s consenting or voting rights to those direct participants identified
in a listing attached to the omnibus proxy to whose accounts the securities are
credited on the record date.
Principal, premium, if any, and/or interest, if any, payments on the
SMART Notes will be made in immediately available funds to DTC. DTC's practice
is to credit direct participants' accounts on the applicable payment date in
accordance with their respective holdings shown on the depositary's records
unless DTC has reason to believe that it will not receive payment on that date.
Payments by participants to beneficial owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name", and
will be the responsibility of that participant and not of DTC, the trustee or
ML&Co., subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of principal, premium, if any, and/or interest, if
any, to DTC is the responsibility of ML&Co. or the trustee, disbursement of
these payments to direct participants is the responsibility of DTC, and
disbursement of these payments to the beneficial owners is the responsibility of
direct and indirect participants.
Exchange for Certificated Securities
(a) If the depositary is at any time unwilling or unable to
continue as depositary and a successor depositary is not
appointed by ML&Co. within 60 days,
(b) ML&Co. executes and delivers to the trustee a company order to
the effect that the global securities shall be exchangeable,
and
(c) an Event of Default under the 1983 Indenture has occurred and
is continuing with respect to the securities,
the global securities will be exchangeable for securities in definitive form of
like tenor and of an equal aggregate principal amount, in denominations of
$1,000 and integral multiples of $1,000. The definitive securities will be
registered in the name or names as the depositary shall instruct the trustee. It
is expected that these instructions may be based upon directions received by the
depositary from participants with respect to ownership of beneficial interests
in the global securities.
In addition, ML&Co. may decide to discontinue use of the system of
book-entry transfers through the depositary. In that event, SMART Notes in
definitive form will be printed and delivered.
The information in this section concerning DTC and DTC's system has
been obtained from sources that ML&Co. believes to be reliable, but ML&Co.
takes no responsibility for its accuracy.
THE STANDARD & POOR'S MIDCAP 400 COMPOSITE STOCK PRICE INDEX
All disclosure contained in this prospectus regarding the S&P MidCap
400 Composite Stock Price Index, including, without limitation, its make-up,
method of calculation and changes in its components, is derived from publicly
available information prepared by S&P as of April 16, 1993. Neither ML&Co. nor
MLPF&S take any responsibility for that information.
The S&P MidCap 400 Composite Stock Price Index is published by S&P and
is intended to provide an indication of the pattern of price movements of common
stocks of corporations having mid-market capitalization. The calculation of the
value of the S&P MidCap 400 Composite Stock Price Index is based on the relative
value of the aggregate Market Value of the common stocks of 400 companies as of
a particular time as compared to the aggregate average Market Value of the
common stocks of 400 substantially similar companies on December 31, 1990.
The 400 companies are not the largest companies listed on The New York
Stock Exchange.
S&P chooses companies for inclusion in the S&P MidCap 400 Composite
Stock Price Index with the aim of achieving for companies of mid-market
capitalization a distribution by broad industry groupings that approximates the
distribution of these groupings in the common stock population of the NYSE,
which S&P uses as an assumed model for the composition of the total market with
respect to these mid-market corporations. Relevant criteria employed by S&P in
selecting companies for the S&P MidCap 400 Composite Stock Price Index include
the viability of the particular company, the extent to which that company
represents the industry group to which it is assigned, the extent to which the
market price of that company's common stock is generally responsive to changes
in the affairs of the respective industry and the Market Value and trading
activity of the common stock of that company.
The value of the S&P MidCap 400 Composite stock Price Index is
available through S&P's website located at http://www.spglobal.com.
Computation of the S&P MidCap 400 Composite Stock Price Index
As of April 16, 1993, S&P computed the S&P MidCap 400 Composite Stock
Price Index as of a particular time as follows:
(a) the Market Value of each component stock is determined
as of that time;
(b) the Market Values of all component stocks as of that time,
as determined under clause (1) above, are aggregated;
(c) the Market Values as of December 31, 1990 (the "BASE
PERIOD") of the common stock of each company in a group of 400
substantially similar companies is determined;
(d) the Market Values of all common stocks as of the Base
Period, as determined under clause (c) above, are aggregated, the
aggregate amount being referred to as the "Base Value";
(e) the aggregate Market Value of all component stocks as of
that time, as determined under clause (b) above, is divided by the Base
Value; and
(f) the resulting quotient or expressed in decimals is
multiplied by 100.
While S&P currently employs the above methodology to calculate the S&P
MidCap 400 Composite Stock Price Index, no assurance can be given that S&P will
not modify or change the methodology in a manner that may affect the amounts
payable on any December Payment Date to beneficial owners of the SMART Notes.
S&P adjusts the foregoing formula to negate the effect of changes in
the Market Value of a component stock that are determined by S&P to be arbitrary
or not due to true market fluctuations. These changes may result from events
including the issuance of stock dividends, the granting to shareholders of
rights to purchase additional shares of stock, the purchase of additional shares
of stock by employees pursuant to employee benefit plans, certain consolidations
and acquisitions, the granting to shareholders of rights to purchase other
securities of ML&Co., the substitution by S&P of particular component stocks in
the S&P MidCap 400 Composite Stock Price Index and other reasons. In all these
cases, S&P first recalculates the aggregate Market Value of all component
stocks, after taking account of the new market price per share of the particular
component stock or the new number of outstanding shares of that component stock
or both, as the case may be, and then determines the New Base Value in
accordance with the following formula:
Old Base Value X ( New Market Value ) = New Base Value
( ------------------- )
( Old Market Value )
The result is that the Base Value is adjusted in proportion to any change in the
aggregate Market Value of all component stocks resulting from the causes
referred to above to the extent necessary to negate the effects of these causes
upon the S&P MidCap 400 Composite Stock Price Index.
You should review the historical performance of the S&P MidCap 400
Composite Stock Price Index. The historical performance of the S&P MidCap 400
Composite Stock Price Index should not be taken as an indication of future
performance, and no assurance can be given that the S&P MidCap 400 Composite
Stock Price Index will increase sufficiently to cause the beneficial owners of
the SMART Notes to receive an amount in excess of the principal amount at the
maturity of the SMART Notes.
License Agreement
S&P and Merrill Lynch Capital Services, Inc. have entered into a
non-exclusive license agreement providing for the license to Merrill Lynch
Capital Services, Inc., in exchange for a fee, of the right to use indices owned
and published by S&P in connection with certain securities, including the Notes,
and ML&Co. is an authorized sub-licensee of S&P.
The license agreement between S&P and Merrill Lynch Capital Services,
Inc. provides that the following language must be stated in this prospectus:
"The Notes are not sponsored, endorsed, sold or promoted by S&P.
S&P makes no representation or warranty, express or implied, to
the Holders of the Notes or any member of the public regarding the
advisability of investing in securities generally or in the Notes
particularly or the ability of the S&P MidCap 400 Index to track
general stock market performance. S&P's only relationship to
Merrill Lynch Capital Services, Inc. and ML&Co., other than
transactions entered into in the ordinary course of business, is
the licensing of certain service marks and trade names of S&P and
of the S&P MidCap 400 Index which is determined, composed and
calculated by S&P without regard to ML&Co. or the SMART Notes. S&P
has no obligation to take the needs of ML&Co. or the Holders of
the Notes into consideration in determining, composing or
calculating the S&P MidCap 400 Composite Stock Price Index. S&P is
not responsible for and has not participated in the determination
or calculation of the equation by which the Notes are to be
converted into cash. S&P has no obligation or liability in
connection with the administration, marketing or trading of the
Notes."
S&P does not guarantee the accuracy and/or the completeness of the S&P
MidCap 400 Index or any data included in the S&P MidCap 400 Index. S&P makes no
warranty, express or implied, as to results to be obtained by ML&Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, holders of the SMART Notes, or any
other person or entity from the use of the S&P MidCap 400 Index or any data
included therein in connection with the rights licensed under the license
agreement described herein or for any other use. S&P makes no express or implied
warranties, and hereby expressly disclaims all warranties of merchantability or
fitness for a particular purpose with respect to the S&P MidCap 400 Index or any
data included in the S&P MidCap 400 Index without limiting any of the foregoing,
in no event shall S&P have any liability for any special, punitive, indirect or
consequential damages, including lost profits, even if notified of the
possibility of such damages.
OTHER TERMS
ML&Co. issued the SMART Notes as a series of senior debt securities
under the 1983 Indenture, dated as of April 1, 1983, as amended and restated,
between ML&Co. and The Chase Manhattan Bank, as trustee. A copy of the 1983
Indenture is filed as an exhibit to the registration statement relating to the
SMART Notes of which this prospectus is a part. The following summaries of the
material provisions of the 1983 Indenture are not complete and are subject to,
and qualified in their entirety by reference to, all provisions of the 1983
Indenture, including the definitions of terms in the 1983 Indenture.
ML&Co. may issue series of senior debt securities from time to time
under the 1983 Indenture, without limitation as to aggregate principal amount,
in one or more series and upon terms as ML&Co. may establish under the
provisions of the 1983 Indenture.
The 1983 Indenture and the SMART Notes are governed by and are
construed in accordance with the laws of the State of New York.
ML&Co. may issue senior debt securities with terms different from those
of senior debt securities previously issued, and issue additional senior debt
securities of a previously issued series of senior debt securities.
The senior debt securities are unsecured and rank equally with all
other unsecured and unsubordinated indebtedness of ML&Co. However, because
ML&Co. is a holding company, the rights of ML&Co. and its creditors, including
the holders of senior debt securities, to participate in any distribution of the
assets of any subsidiary upon its liquidation or reorganization or otherwise are
necessarily subject to the prior claims of creditors of the subsidiary, except
to the extent that a bankruptcy court may recognize claims of ML&Co. itself as a
creditor of the subsidiary. In addition, dividends, loans and advances from
certain subsidiaries, including MLPF&S, to ML&Co. are restricted by net capital
requirements under the Exchange Act, and under rules of exchanges and other
regulatory bodies.
LIMITATIONS UPON LIENS
ML&Co. may not, and may not permit any majority-owned subsidiary to,
create, assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance, other than those liens
specifically permitted by the 1983 Indenture, on the Voting Stock owned directly
or indirectly by ML&Co. of any majority-owned subsidiary, other than a
majority-owned subsidiary which, at the time of the incurrence of the secured
indebtedness, has a net worth of less than $3,000,000, unless the outstanding
senior debt securities are secured equally and ratably with the secured
indebtedness.
"Voting Stock" is defined in the 1983 Indenture as the stock of the
class or classes having general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation provided that, for the purposes of the 1983 Indenture, stock that
carries only the right to vote conditionally on the occurrence of an event is
not considered voting stock whether or not the event has happened.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
ML&Co. may not sell, transfer or otherwise dispose of any Voting Stock
of MLPF&S or permit MLPF&S to issue, sell or otherwise dispose of any of its
Voting Stock, unless, after giving effect to any transaction, MLPF&S remains a
Controlled Subsidiary.
"Controlled Subsidiary" is defined in the 1983 Indenture to mean a
corporation more than 80% of the outstanding shares of Voting Stock of which are
owned directly or indirectly by ML&Co.
In addition, ML&Co. may not permit MLPF&S to:
o merge or consolidate, unless the surviving company is a Controlled
Subsidiary, or
o convey or transfer its properties and assets substantially as an
entirety, except to one or more Controlled Subsidiaries.
MERGER AND CONSOLIDATION
ML&Co. may consolidate or merge with or into any other corporation and
ML&Co. may sell, lease or convey all or substantially all of its assets to any
corporation, provided that:
o the resulting corporation, if other than ML&Co., is a corporation
organized and existing under the laws of the United States of
America or any U.S. state and assumes all of ML&Co.'s obligations
o pay any amounts due and payable or deliverable with respect
to all the senior debt securities; and
o perform and observe all of ML&Co.'s obligations under the
1983 Indenture, and
o ML&Co. or the successor corporation, as the case may be, is not,
immediately after any consolidation or merger, in default under the
1983 Indenture.
MODIFICATION AND WAIVER
ML&Co. and the trustee may modify and amend the 1983 Indenture with the
consent of holders of at least 66 2/3% in principal amount of each outstanding
series of senior debt securities affected. However, without the consent of each
holder of any outstanding senior debt security affected, no amendment or
modification to the 1983 Indenture may:
o change the stated maturity date of the principal of, or any
installment of interest or Additional Amounts payable on, any
senior debt security or any premium payable on redemption, or
change the redemption price;
o reduce the principal amount of, or the interest or Additional
Amounts payable on, any senior debt security or reduce the amount
of principal which could be declared due and payable before the
stated maturity date;
o change the place or currency of any payment of principal or any
premium, interest or Additional Amounts payable on any senior debt
security;
o impair the right to institute suit for the enforcement of any
payment on or with respect to any senior debt security;
o reduce the percentage in principal amount of the outstanding
senior debt securities of any series, the consent of whose holders
is required to modify or amend the 1983 Indenture; or
o modify the foregoing requirements or reduce the percentage of
outstanding senior debt securities necessary to waive any past
default to less than a majority.
No modification or amendment of ML&Co.'s Subordinated Indenture or any
Subsequent Indenture for subordinated debt securities may adversely affect the
rights of any holder of ML&Co.'s senior indebtedness without the consent of each
holder affected. The holders of at least a majority in principal amount of
outstanding senior debt securities of any series may, with respect to that
series, waive past defaults under the 1983 Indenture and waive compliance by
ML&Co. with provisions in the 1983 Indenture, except as described under
"--Events of Default".
EVENTS OF DEFAULT
Each of the following will be Events of Default with respect to senior
debt securities of any series:
o default in the payment of any interest or Additional Amounts
payable when due and continuing for 30 days;
o default in the payment of any principal or premium when due;
o default in the deposit of any sinking fund payment, when due;
o default in the performance of any other obligation of ML&Co.
contained in the 1983 Indenture for the benefit of that series or
in the senior debt securities of that series, continuing for 60
days after written notice as provided in the 1983 Indenture;
o specified events in bankruptcy, insolvency or reorganization of
ML&Co.; and
o any other Event of Default provided with respect to senior debt
securities of that series which are not inconsistent with the 1983
Indenture.
If an Event of Default occurs and is continuing for any series of
senior debt securities, other than as a result of the bankruptcy, insolvency or
reorganization of ML&Co., the trustee or the holders of at least 25% in
principal amount of the outstanding senior debt securities of that series may
declare all amounts, or any lesser amount provided for in the senior debt
securities, due and payable or deliverable immediately. At any time after a
declaration of acceleration has been made with respect to senior debt securities
of any series but before the trustee has obtained a judgment or decree for
payment of money, the holders of a majority in principal amount of the
outstanding senior debt securities of that series may rescind any declaration of
acceleration and its consequences, if all payments due, other than those due as
a result of acceleration, have been made and all Events of Default have been
remedied or waived.
The holders of a majority in principal amount or aggregate issue price
of the outstanding senior debt securities of that series may waive any Event of
Default with respect to that series, except a default:
o in the payment of any amounts due and payable or deliverable under
the debt securities of that series; or
o in respect of an obligation or provision of the 1983 Indenture
which cannot be modified under the terms of that Indenture without
the consent of each holder of each outstanding security of each
series of senior debt securities affected.
The holders of a majority in principal amount of the outstanding senior
debt securities of a series may direct the time, method and place of conducting
any proceeding for any remedy available to the trustee or exercising any trust
or power conferred on the trustee with respect to those senior debt securities,
provided that any direction shall not be in conflict with any rule of law or the
1983 Indenture. Before proceeding to exercise any right or power under the 1983
Indenture at the direction of the holders, the trustee shall be entitled to
receive from the holders reasonable security or indemnification against the
costs, expenses and liabilities which might be incurred by it in complying with
any direction.
The SMART Notes and other series of senior debt securities issued under
the 1983 Indenture do not have the benefit of any cross-default provisions with
other indebtedness of ML&Co.
ML&Co. is required to furnish to the trustee annually a statement as to
the fulfillment by ML&Co. of all of its obligations under the 1983 Indenture.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC.
Our SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file by visiting
the SEC's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
about the public reference rooms. You may also inspect our SEC reports and other
information at the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
We have filed a registration statement on Form S-3 with the SEC
covering the SMART Notes and other securities. For further information on ML&Co.
and the SMART Notes, you should refer to our registration statement and its
exhibits. This prospectus summarizes material provisions of contracts and other
documents that we refer you to. Because the prospectus may not contain all the
information that you may find important, you should review the full text of
these documents. We have included copies of these documents as exhibits to our
registration statement of which this prospectus is a part.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file
with them, which means:
o incorporated documents are considered part of the prospectus;
o we can disclose important information to you by referring you to
those documents; and
o information that we file with the SEC will automatically update
and supersede this incorporated information.
We incorporate by reference the documents listed below which were filed
with the SEC under the Exchange Act:
o annual report on Form 10-K for the year ended December 25, 1998;
o quarterly report on Form 10-Q for the period ended March 26, 1999;
and
o current reports on Form 8-K dated December 28, 1998, January 19,
1999, February 17, 1999, February 18, 1999, February 22, 1999,
February 23, 1999, March 26, 1999, April 13, 1999, April 19, 1999,
May 26, 1999, May 28, 1999 and June 1, 1999.
We also incorporate by reference each of the following documents that we will
file with the SEC after the date of this prospectus until this offering is
completed:
o reports filed under Sections 13(a) and (c) of the Exchange Act;
o definitive proxy or information statements filed under Section 14
of the Exchange Act in connection with any subsequent
stockholders' meeting; and
o any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by
reference in this prospectus. We have not, and MLPF&S has not, authorized any
other person to provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely on it. We are
not, and MLPF&S is not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Mr. Lawrence
M. Egan, Jr., Corporate Secretary's Office, Merrill Lynch & Co., Inc., 100
Church Street, New York, New York 10080-6512, Telephone: (212) 602-8435.
PLAN OF DISTRIBUTION
This prospectus has been prepared in connection with secondary sales of
the SMART Notes and is to be used by MLPF&S when making offers and sales related
to market-making transactions in the SMART Notes.
MLPF&S may act as principal or agent in these market-making
transactions.
The SMART Notes may be offered on the NYSE or off the exchange in
negotiated transactions or otherwise.
The distribution of the SMART Notes will conform to the requirements
set forth in the applicable sections of Rule 2720 of the Conduct Rules of the
NASD.
EXPERTS
The consolidated financial statements and the related financial
statement schedule incorporated in this prospectus by reference from the Annual
Report on Form 10-K of Merrill Lynch & Co., Inc. and subsidiaries have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports (which express an unqualified opinion and which report on the
consolidated financial statements includes an explanatory paragraph for the
change in accounting method for certain internal-use software development
costs), which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in the Quarterly Reports on Form 10-Q which are incorporated herein by
reference, Deloitte & Touche LLP have applied limited procedures in accordance
with professional standards for a review of such information. However, as stated
in their reports included in such Quarterly Reports on Form 10-Q and
incorporated by reference herein, they did not audit and they do not express an
opinion on such interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. Deloitte & Touche LLP is
not subject to the liability provisions of Section 11 of the Securities 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
Securities Act.
