PROSPECTUS SUPPLEMENT
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(To prospectus dated February 25, 2005)
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Merrill Lynch & Co., Inc.
12,000,000 Depositary Shares
Each Representing a 1/1200th Interest in a Share of
Floating Rate Non-Cumulative Preferred Stock, Series 4
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Each of the 12,000,000 depositary shares offered hereby represents a
1/1200th ownership interest in a share of perpetual Floating Rate
Non-Cumulative Preferred Stock, Series 4 ("Series 4 Preferred Stock"), $30,000
liquidation preference per share, of Merrill Lynch & Co., Inc. ("ML&Co."),
deposited with JPMorgan Chase Bank, N.A., as depositary. Each such depositary
share entitles the holder, through the depositary, to all proportional rights
and preferences of the Series 4 Preferred Stock represented thereby. The
depositary shares are evidenced by depositary receipts.
The depositary shares offered hereby have terms and conditions
identical to, and will be part of the series of, 9,600,000 other depositary
shares which were issued by ML&Co. on November 17, 2005 and which also
represent a 1/1200th interest in shares of Series 4 Preferred Stock.
Concurrent with the closing of the sale of the depositary shares offered
hereby, ML&Co. will sell an additional 2,400,000 depositary shares in a
separate public offering, and these additional depositary shares will also
have terms and conditions identical to, and will be part of the series of, the
depositary shares which represent a 1/1200th interest in shares of Series 4
Preferred Stock.
The Series 4 Preferred Stock is not redeemable prior to November 28,
2010. On and after that date, the Series 4 Preferred Stock will be redeemable
at our option, in whole at any time or in part from time to time, at a
redemption price equal to $30,000 per share (equivalent to $25 per depositary
share), plus declared and unpaid dividends.
Dividends on the Series 4 Preferred Stock, if declared, will be
payable quarterly, in arrears, on February 28, May 28, August 28 and November
28 of each year at a floating rate per annum equal to three-month U.S. dollar
LIBOR plus 0.75%; but such dividends, if declared, will be payable at a rate
of not less than 4.00% per annum. Subject to the foregoing, for the first
dividend period relevant to the depositary shares offered hereby, which will
be from and including February 28, 2006 to but excluding May 30, 2006 (the New
York and London business day next succeeding May 28, 2006), the per annum rate
for the dividend, if declared, will be equal to the sum of three-month U.S.
dollar LIBOR, as determined on February 24, 2006, and 0.75%. The term
"Dividend Period" means the period from and including each dividend payment
date to but excluding the next succeeding dividend payment date.
Dividends on the Series 4 Preferred Stock will not be cumulative.
Accordingly, if for any reason our board of directors does not declare a
dividend on the Series 4 Preferred Stock for a Dividend Period, we will not
pay a dividend for that Dividend Period on the quarterly payment date or at
any future time, whether or not our board of directors declares dividends on
the Series 4 Preferred Stock for any future Dividend Period. However, with
certain exceptions, we may not declare or pay dividends on or redeem or
purchase our common stock at any time if we have not declared, paid or set
aside for payment full dividends on the Series 4 Preferred Stock for the
immediately preceding Dividend Period.
The depositary shares are listed and trade on the New York Stock
Exchange.
The underwriter will sell depositary shares to certain investment
entities at a price or prices relating to prevailing market prices at the time
of sale. We will receive proceeds of 101% of the liquidation preference of the
Series 4 Preferred Stock represented by the depositary shares ($25.25 per
depositary share), which equals proceeds of $303,000,000 before deducting
expenses payable by us, estimated at $6,000,000 ($0.50 per depositary share).
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus supplement or the accompanying prospectus to
which it relates is truthful or complete. Any representation to the contrary
is a criminal offense.
The depositary shares will be ready for delivery in book-entry form
only through The Depository Trust Company on or about February 28, 2006.
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Merrill Lynch & Co.
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The date of this prospectus supplement is February 27, 2006.
TABLE OF CONTENTS
Prospectus Supplement
Summary of Terms........................................................ S-3
Description of the Series 4 Preferred Stock............................. S-6
Description of the Depositary Shares.................................... S-12
United States Federal Income Tax Consequences........................... S-15
Where You Can Find More Information..................................... S-18
Underwriting............................................................ S-19
Validity of the Securities ............................................. S-19
Experts................................................................. S-20
Prospectus
Merrill Lynch & Co., Inc................................................. 2
Use of Proceeds.......................................................... 2
Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends................... 3
The Securities........................................................... 3
Description of Debt Securities........................................... 4
Description of Debt Warrants............................................. 15
Description of Currency Warrants......................................... 17
Description of Index Warrants............................................ 18
Description of Preferred Stock........................................... 24
Description of Depositary Shares......................................... 29
Description of Preferred Stock Warrants.................................. 33
Description of Common Stock.............................................. 35
Description of Common Stock Warrants..................................... 38
Plan of Distribution..................................................... 41
Where You Can Find More Information...................................... 42
Incorporation of Information We File With the SEC........................ 42
Experts.................................................................. 43
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You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus.
Neither we nor the underwriters have authorized any other person to provide
you with different or additional information. If anyone provides you with
different or additional information, you should not rely on it. Neither we nor
the underwriters are making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should not assume
that the information contained or incorporated by reference in this prospectus
supplement and the accompanying prospectus is accurate as of any date other
than the date on the cover of this prospectus supplement.
S-2
SUMMARY OF TERMS
This summary highlights the principal terms of the Series 4 Preferred
Stock and the depositary shares. It does not contain all of the information
that you need to consider in making your investment decision. To understand
all of the terms of the offering of the Series 4 Preferred Stock and the
depositary shares, you should read carefully this prospectus supplement and
the accompanying prospectus.
Securities offered 12,000,000 depositary shares each representing a 1/1200th
interest in a share of perpetual Floating Rate Non-Cumulative
Preferred Stock, Series 4, $1.00 par value, with a liquidation
preference of $30,000 per share (equivalent to $25 per
depositary share) of Merrill Lynch & Co., Inc., which we refer
to as "ML&Co." Each holder of a depositary share will be
entitled, through the depositary in proportion to the applicable
fraction of a share of Series 4 Preferred Stock represented by
such depositary share, to all the rights and preferences of the
Series 4 Preferred Stock represented thereby (including
dividend, voting, redemption and liquidation rights).
The depositary shares offered by this prospectus supplement and
the accompanying prospectus, have terms and conditions identical
to, and will be part of the series of, 9,600,000 other
depositary shares representing a 1/1200th interest in shares of
Series 4 Preferred Stock issued by ML&Co. on November 17, 2005.
Concurrent with the closing of the sale of the depositary shares
offered hereby, ML&Co. will sell an additional 2,400,000
depositary shares in a separate public offering, and these
additional depositary shares will also have terms and conditions
identical to, and will be part of the series of, the depositary
shares which represent a 1/1200th interest in shares of Series 4
Preferred Stock.
Dividends Non-cumulative dividends, payable quarterly in arrears, at a
floating rate per annum equal to three-month U.S. dollar LIBOR
plus 0.75%; but such dividends, if declared, will be payable at
a rate of not less than 4.00% per annum. For the first dividend
period from and including February 28, 2006 to but excluding May
30, 2006 (the New York and London business day next succeeding
May 28, 2006), the per annum rate for the initial dividend, if
declared, will be equal to the sum of three-month U.S. dollar
LIBOR, as determined on February 24, 2006, and 0.75%.
Dividends on the Series 4 Preferred Stock will not be
cumulative. Accordingly, if for any reason our board of
directors does not declare a dividend on the Series 4 Preferred
Stock for a Dividend Period, we will not pay a dividend for that
Dividend Period on the quarterly payment date or at any future
time, whether or not our board of directors declares dividends
on the Series 4 Preferred Stock for any future Dividend Period.
We may not, at any time, 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 our common
stock or any other of our stock ranking as to dividends or
distribution of assets junior to the Series 4 Preferred Stock,
unless full dividends on all outstanding shares of Series 4
Preferred Stock have been declared or paid or set aside for
payment for the immediately preceding Dividend
S-3
Period (except for (x) dividends or distributions paid in shares
of, or options, warrants or rights to subscribe for or purchase
shares of, our common stock or other of our capital stock
ranking junior to the Series 4 Preferred Stock as to dividends
and distribution of assets upon dissolution, liquidation or
winding up of ML&Co., (y) redemptions or purchases of any rights
pursuant to our Rights Agreement or by conversion or exchange
for our capital stock ranking junior to the Series 4 Preferred
Stock as to dividends and distribution of assets upon
dissolution, liquidation or winding up of ML&Co. and (z)
purchases by us or our affiliates in connection with
transactions effected by or for the account of customers of
ML&Co. or customers of any of our subsidiaries or in connection
with the distribution or trading of such capital stock).
We may not declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire (except for purchases
by us or our affiliates in connection with transactions effected
by or for the account of customers of ML&Co. or customers of any
of our subsidiaries or in connection with the distribution or
trading of such stock), or make a liquidation payment with
respect to, any of our preferred stock or any other of our stock
ranking as to dividends or distribution of assets equal with the
Series 4 Preferred Stock, unless, for such Dividend Period, full
or pro rata dividends on all outstanding shares of Series 4
Preferred Stock have been declared, paid or set aside for
payment.
We may not declare or pay dividends on, or set dividends aside
for payment on, any shares of Series 4 Preferred Stock, if at
the time of such declaration, payment or setting aside for
payment any arrears exists in the payment of dividends on any
outstanding class or series of our stock ranking senior to the
Series 4 Preferred Stock as to the payment of dividends.
Payment dates February 28, May 28, August 28 and November 28 of each year,
beginning May 30, 2006 (the New York and London business day
next succeeding May 28, 2006), when, as and if declared by our
board of directors in its sole discretion, but only out of
assets of ML&Co. legally available for payment.
If any date on which dividends would otherwise be payable is not
a New York business day and London business day (each as defined
below), then the dividend payment date will be the next
succeeding day that is a New York business day and London
business day unless such day falls in the next calendar month,
in which case the dividend payment date will be the immediately
preceding day that is a New York business day and London
business day.
Redemption The Series 4 Preferred Stock is not redeemable prior to November
28, 2010. On and after that date, the Series 4 Preferred Stock
will be redeemable at our option, in whole at any time or in
part from time to time, at a redemption price equal to $30,000
per share (equivalent to $25 per depositary share), plus
declared and unpaid dividends, without accumulation of any
undeclared dividends. Holders of Series 4 Preferred Stock will
have no right to require the redemption of the Preferred Stock.
S-4
Liquidation rights In the event of any voluntary or involuntary liquidation,
dissolution or winding up of ML&Co., the holders of shares of
Series 4 Preferred Stock are entitled to receive out of assets
of ML&Co. available for distribution to stockholders, before any
distribution of assets is made to holders of common stock or of
any of our other shares of stock ranking as to such a
distribution junior to the shares of Series 4 Preferred Stock, a
liquidating distribution in the amount of $30,000 per share
(equivalent to $25 per depositary share) plus declared and
unpaid dividends, without accumulation of any undeclared
dividends.
Voting rights None, except with respect to certain changes in the terms of the
Series 4 Preferred Stock and in the case of certain dividend
arrearages. See "Description of the Series 4 Preferred
Stock--Voting Rights."
In addition, holders of depositary shares have voting rights
with respect to certain amendments to the deposit agreement. See
"Description of the Depositary Shares--Amendment and Termination
of the Deposit Agreement."
Ranking The Series 4 Preferred Stock will rank senior, as to payment of
dividends and distribution of assets upon dissolution,
liquidation or winding up of ML&Co., to our common stock (or any
of our other shares of stock ranking junior to the Series 4
Preferred Stock). The Series 4 Preferred Stock will rank on a
parity as to payment of dividends and distribution of assets
upon dissolution, liquidation or winding up of ML&Co. with each
other outstanding series of preferred stock of ML&Co. As of the
date hereof, our Floating Rate Non-Cumulative Preferred Stock,
Series 1, Floating Rate Non-Cumulative Preferred Stock, Series
2, 6.375% Non-Cumulative Preferred Stock, Series 3 and Series 4
Preferred Stock that was already issued and is outstanding or is
being issued concurrently, are the only issued and outstanding
series of preferred stock that will rank on a parity with this
issue of Series 4 Preferred Stock.
Preemptive and conversion rights None.
NYSE listing The depositary shares are listed and trade on the New York Stock
Exchange (the "NYSE") under the symbol "MER PrJ".
Transfer agent and registrar JPMorgan Chase Bank, N.A.
Depositary JPMorgan Chase Bank, N.A.
S-5
DESCRIPTION OF THE SERIES 4 PREFERRED STOCK
The following description of certain terms of the Series 4 Preferred
Stock offered hereby supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of preferred
stock set forth in the accompanying prospectus, to which description reference
is hereby made. The following summary of the terms and provisions of the
Series 4 Preferred Stock is qualified by reference to the Certificate of
Designations for the Series 4 Preferred Stock and is not intended to be
complete. A copy of the Certificate of Designations is included as an exhibit
to a Form 8-K filed with the SEC.
References in this prospectus supplement to "ML&Co.", "we", "us" and
"our" are to Merrill Lynch & Co., Inc.
General
The Series 4 Preferred Stock is part of a single series of authorized
preferred stock consisting of 8,000 shares of Series 4 Preferred Stock issued
on November 17, 2005, 10,000 shares of Series 4 Preferred Stock being offered
hereby and (if issued) an additional 2,000 shares of Series 4 Preferred Stock
which ML&Co. expects to issue concurrently with this offering. We may from
time to time, without notice to or the consent of holders of the Series 4
Preferred Stock offered hereby, issue additional shares of the Series 4
Preferred Stock. The holders of Series 4 Preferred Stock will have no
preemptive rights. The Series 4 Preferred Stock, upon issuance against full
payment of the purchase price therefor, will be fully paid and nonassessable.
The Series 4 Preferred Stock will, on the date of original issuance,
rank on a parity as to payment of dividends and distribution of assets upon
dissolution, liquidation or winding up of ML&Co. with our Floating Rate
Non-Cumulative Preferred Stock, Series 1, our Floating Rate Non-Cumulative
Preferred Stock, Series 2, our 6.375% Non-Cumulative Preferred Stock, Series 3
and our Series 4 Preferred Stock that was already issued and is outstanding or
is being issued concurrently, and will rank senior to any Series A junior
preferred stock when issued as described under "Description of Common
Stock--Rights to Purchase Series A Junior Preferred Stock" in the accompanying
prospectus. The Series 4 Preferred Stock, together with each other series of
preferred stock, will rank senior to the common stock and any other stock of
ML&Co. that is expressly made junior to such series of preferred stock as to
the payment of dividends and distribution of assets upon dissolution,
liquidation or winding up of ML&Co. We may from time to time, without notice
to or consent from the holders of the depositary shares, create and issue
additional shares of preferred stock ranking on an equal basis to the Series 4
Preferred Stock as to dividends and upon dissolution, liquidation or winding
up.
The Series 4 Preferred Stock will not be convertible into, or
exchangeable for, shares of any other class or series of stock or other
securities of ML&Co., and will not be subject to any sinking fund or other
obligation of ML&Co. to repurchase the Series 4 Preferred Stock.
FACTORS IN ADDITION TO THE FLOATING RATE DIVIDEND ARE EXPECTED TO AFFECT
THE TRADING PRICES OF THE SERIES 4 PREFERRED STOCK, AND MAY CAUSE THE SERIES 4
PREFERRED STOCK TO TRADE IN THE SECONDARY MARKET AT EITHER A PREMIUM TO OR A
DISCOUNT FROM ITS PURCHASE PRICE. Such factors are expected to include our
actual and perceived creditworthiness, expectations regarding interest rate
trends, the expected interest rate and preferred dividend yields for
securities issued by companies having credit ratings similar to our own, the
supply and demand for securities similar to the Series 4 Preferred Stock, and
the economic, financial, political and regulatory environment that affects us
and the financial markets generally. We expect that the trading prices of the
Series 4 Preferred Stock would be adversely affected by any decision of our
board of directors not to declare dividends on the Series 4 Preferred Stock
for one or more Dividend Periods.
Dividends
Dividends on shares of the Series 4 Preferred Stock will not be
mandatory. Holders of shares of Series 4 Preferred Stock will be entitled to
receive, if and when declared by our board of directors or a duly authorized
committee of the board of directors, out of assets of ML&Co. legally available
under Delaware law for payment, non-cumulative cash dividends, payable
quarterly in arrears, at a floating rate per annum equal to three-month U.S.
dollar LIBOR plus 0.75%; but in no event will such dividends, if declared, be
payable at a rate of less than 4.00% per annum, of the $30,000 liquidation
preference per share (equivalent to $25 per depositary share). For the first
dividend period from and including February 28, 2006 to but excluding May 30,
2006 (the New York and London business day next succeeding May 28, 2006), the
per annum rate for the initial dividend, if declared, will be equal to the sum
of three-month U.S. dollar LIBOR, as determined on February 24, 2006, and
0.75%.
S-6
Three-month U.S. dollar LIBOR, with respect to a Dividend Period,
means the rate (expressed as a percentage per annum) for deposits in U.S.
dollars for a three month period that normally appears on Moneyline Telerate
Page 3750, as displayed on page "BBAM" (British Bankers Association Official
BBA LIBOR Fixings) in the Bloomberg Professional Service (or any other service
that may replace Moneyline Telerate, Inc. on page BBAM or any other page that
may replace page BBAM on the Bloomberg Professional Service or a successor
service, in each case, for the purpose of displaying London interbank offered
rates of major banks) as of 11:00 a.m. (London time) on the second London
business day immediately preceding the first day of such Dividend Period.
A "London business day" means a day other than a Saturday or Sunday on
which dealings in deposits in U.S. dollars are transacted, or with respect to
any future date are expected to be transacted, in the London interbank market.
If three-month U.S. dollar LIBOR cannot be determined as described
above, we will select four major banks in the London interbank market. We will
request that the principal London offices of those four selected banks provide
their offered quotations to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on the second London business day
immediately preceding the first day of such Dividend Period. These quotations
will be for deposits in U.S. dollars for a three month period. Offered
quotations must be based on a principal amount equal to an amount that is
representative of a single transaction in U.S. dollars in the market at the
time.
If two or more quotations are provided, three-month U.S. dollar LIBOR
for the Dividend Period will be the arithmetic mean of the quotations. If
fewer than two quotations are provided, we will select three major banks in
New York City and will then determine three-month U.S. dollar LIBOR for the
Dividend Period as the arithmetic mean of rates quoted by those three major
banks in New York City to leading European banks at approximately 3:00 p.m.,
New York City time, on the second London business day immediately preceding
the first day of such Dividend Period. The rates quoted will be for loans in
U.S. dollars, for a three month period. Rates quoted must be based on a
principal amount equal to an amount that is representative of a single
transaction in U.S. dollars in the market at the time. If fewer than three New
York City banks selected by us are quoting rates, three-month U.S. dollar
LIBOR for the applicable period will be the same as for the immediately
preceding Dividend Period.
The term "Dividend Period" means the period from and including each
dividend payment date for the Series 4 Preferred Stock to but excluding the
next succeeding dividend payment date.
If declared, we will pay dividends on the Series 4 Preferred Stock
quarterly, in arrears, on February 28, May 28, August 28 and November 28 of
each year, with the first dividend payment date relevant to the depositary
shares offered hereby being May 30, 2006 (the New York and London business day
next succeeding May 28, 2006). We will pay dividends to holders of record as
they appear on our stock books on each record date, not more than 30 days nor
less than 10 days preceding the applicable payment date, as shall be fixed by
the board of directors or a duly authorized committee of the board of
directors. If any date on which dividends would otherwise be payable is not a
New York business day and London business day, then the dividend payment date
will be the next succeeding day that is a New York business day and London
business day unless such day falls in the next calendar month, in which case
the dividend payment date will be the immediately preceding day that is a New
York business day and London business day. "New York business day" means any
day that is not a Saturday or Sunday and that, in New York City, is not a day
on which banking institutions generally are authorized or obligated by law or
executive order to be closed. See "Description of the Depositary
Shares--Dividends and Other Distributions" about the deferral of distribution
of amounts that are fractions of one cent ($0.01).
Dividends on shares of the Series 4 Preferred Stock will not be
cumulative. If the board of directors of ML&Co., or a duly authorized
committee of the board of directors, does not declare a dividend on the Series
4 Preferred Stock for any Dividend Period, we will not pay a dividend for that
Dividend Period on the quarterly payment date or at any future time, whether
or not dividends on the Series 4 Preferred Stock are declared for any future
Dividend Period.
We will calculate dividends on the Series 4 Preferred Stock on the
basis of a 360-day year and the actual number of days elapsed in each Dividend
Period. Accordingly, the amount of dividends payable per share for each
Dividend Period for the Series 4 Preferred Stock shall (if and when declared)
equal the product of (i) the applicable dividend rate, (ii) $30,000 and (iii)
a fraction (A) the numerator of which will be the actual number of days
elapsed in such Dividend Period, and (B) the denominator of which will be 360.
Dividends will cease to accrue after the redemption date on shares of the
Series 4 Preferred Stock unless we default in the payment of the redemption
price of the shares called for redemption.
S-7
We may not, at any time, 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 our common stock or any other of
our stock ranking as to dividends or distribution of assets junior to the
Series 4 Preferred Stock, unless full dividends on all outstanding shares of
Series 4 Preferred Stock have been declared or paid or set aside for payment
for the immediately preceding Dividend Period (except for (x) dividends or
distributions paid in shares of, or options, warrants or rights to subscribe
for or purchase shares of, our common stock or other of our capital stock
ranking junior to the Series 4 Preferred Stock as to dividends and
distribution of assets upon dissolution, liquidation or winding up of ML&Co.,
(y) redemptions or purchases of any rights pursuant to our Rights Agreement or
by conversion or exchange for our capital stock ranking junior to Series 4
Preferred Stock as to dividends and distribution of assets upon dissolution,
liquidation or winding up of ML&Co. and (z) purchases by us or our affiliates
in connection with transactions effected by or for the account of customers of
ML&Co. or customers of any of our subsidiaries or in connection with the
distribution or trading of such capital stock).
We may not declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire (except for purchases by us or our
affiliates in connection with transactions effected by or for the account of
customers of ML&Co. or customers of any of our subsidiaries or in connection
with the distribution or trading of such stock), or make a liquidation payment
with respect to, any of our preferred stock or any other of our stock ranking
as to dividends equal with the Series 4 Preferred Stock, unless for such
Dividend Period, full or pro rata dividends on all outstanding shares of
Series 4 Preferred Stock and any of our preferred stock and any other of our
stock ranking as to dividends equal with the Series 4 Preferred Stock (whether
cumulative or non-cumulative) have been declared, paid or set aside for
payment (but without, for any pro rata dividends, accumulation of unpaid
dividends for prior Dividend Periods in the case of any non-cumulative
preferred stock).
We may not declare or pay dividends on, or set dividends aside for
payment on, any shares of Series 4 Preferred Stock if at the time of such
declaration, payment or setting aside for payment any arrears exists in the
payment of dividends on any outstanding class or series of our stock ranking
senior to the Series 4 Preferred Stock as to the payment of dividends.
Liquidation Rights
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of ML&Co., the holders of shares of Series 4 Preferred Stock are
entitled to receive out of assets of ML&Co. available for distribution to
stockholders, before any distribution of assets is made to holders of common
stock or of any of our other shares of stock ranking as to such a distribution
junior to the shares of Series 4 Preferred Stock, a liquidating distribution
in the amount of $30,000 per share (equivalent to $25 per depositary share)
plus declared and unpaid dividends, without accumulation of any undeclared
dividends. If, upon any event of voluntary or involuntary liquidation,
dissolution or winding up of ML&Co., the assets of ML&Co., or the proceeds
from such, assets are insufficient to pay in full the aforementioned
liquidating distribution and liquidating payments on shares of ML&Co.
preferred stock ranking equally as to payment upon dissolution, liquidation or
winding up, then ML&Co.'s assets, or proceeds from such assets, will be
distributed among the shares of the Series 4 Preferred Stock and any such
other shares of ML&Co.'s preferred stock ratably in accordance with the
respective amounts which would be payable on such shares of Series 4 Preferred
Stock and such other shares of preferred stock if all amounts payable thereon
were paid in full.
After payment of such a liquidating distribution, the holders of
shares of Series 4 Preferred Stock will not be entitled to any further
participation in any distribution of assets by ML&Co.
A consolidation or merger of ML&Co. with one or more corporations will
not be deemed to be a voluntary or involuntary liquidation, dissolution or
winding up of ML&Co.
Because ML&Co. is a holding company, its rights and the rights of its
creditors and its shareholders, including the holders of shares of the Series
4 Preferred Stock, to participate in the assets of any subsidiary of ML&Co.
upon such subsidiary's liquidation or recapitalization may be subject to the
prior claims of the subsidiary's creditors, except to the extent that ML&Co.
may itself be a creditor with recognized claims against the subsidiary.
Redemption
The Series 4 Preferred Stock is not subject to any mandatory
redemption, sinking fund or other similar provisions. The Series 4 Preferred
Stock is not redeemable prior to November 28, 2010. On and after that date,
the Series 4 Preferred Stock will be redeemable at our option, in whole at any
time or in part from time to time, upon not less than 30
S-8
days nor more than 60 days notice, at a redemption price equal to $30,000 per
share (equivalent to $25 per depositary share), plus declared and unpaid
dividends, without accumulation of any undeclared dividends. Holders of Series
4 Preferred Stock will have no right to require the redemption of the
Preferred Stock.
If shares of the Series 4 Preferred Stock are to be redeemed, the
notice of redemption shall be given by first class mail to the holders of
record of the Series 4 Preferred Stock to be redeemed, mailed not less than 30
days nor more than 60 days prior to the date fixed for redemption thereof.
Each notice of redemption will include a statement setting forth: (i) the
redemption date, (ii) the number of shares of the Series 4 Preferred Stock to
be redeemed and, if less than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder, (iii) the
redemption price and (iv) the place or places where holders may surrender
certificates evidencing shares of Series 4 Preferred Stock for payment of the
redemption price.
Terms Dependent on Regulatory Changes
If, (a) ML&Co. (by election or otherwise) is subject to any law, rule,
regulation or guidance (together, "regulations") relating to its capital
adequacy which regulation (x) provides for a type or level of capital
characterized as "Tier 1" in, or pursuant to regulations of any governmental
agency, authority or body having regulatory jurisdiction over ML&Co. and
implementing, the capital standards published by the Basel Committee on
Banking Supervision, the Securities and Exchange Commission, the Board of
Governors of the Federal Reserve System, or any other United States national
governmental agency, authority or body, or (y) provides for a type or level of
capital that in the judgment of ML&Co. (after consultation with counsel of
recognized standing) is substantially equivalent to such "Tier 1" capital
(such capital described in either (x) or (y) is referred to below as "Tier 1
Capital"), and (b) ML&Co. affirmatively elects to qualify the Series 4
Preferred Stock for such Tier 1 Capital treatment without any sublimit or
other quantitative restriction on the inclusion of such Series 4 Preferred
Stock in Tier 1 Capital (other than any limitation requiring that common
equity or a specified form of common equity constitute the dominant form of
Tier 1 Capital) under such regulations, then, upon such affirmative election,
the terms of the Series 4 Preferred Stock will automatically be amended to
reflect the following modifications (without any action or consent by the
holders of the Series 4 Preferred Stock or any other vote of stockholders of
ML&Co.):
o If and to the extent such modification is a Required Unrestricted
Tier 1 Provision (as defined below), ML&Co.'s right to redeem the
Series 4 Preferred Stock on or after November 28, 2010 will be
restricted (such restrictions including but not limited to any
requirement that ML&Co. receive prior approval for such
redemption from any applicable regulator or that such redemption
be prohibited);
o If and to the extent such modification is a Required Unrestricted
Tier 1 Provision, ML&Co.'s right to make distributions with
respect to, or redeem, purchase or acquire or make payments on,
securities junior to the Series 4 Preferred Stock (upon a
non-payment of dividends on the Series 4 Preferred Stock) will
become subject to additional restrictions pursuant to the terms
of the Series 4 Preferred Stock; and
o If and to the extent such modification is a Required Unrestricted
Tier 1 Provision, any other new provisions or terms will be added
to the Series 4 Preferred Stock, or existing terms will be
modified; provided, however, that no such provision or term will
be added, and no such modification will be made pursuant to the
terms of this third sub-section, if it would alter or change the
rights, powers or preferences of the shares of the Series 4
Preferred Stock so as to affect the shares of the Series 4
Preferred Stock adversely.
As used above, the term "Required Unrestricted Tier 1 Provision" means a term
which is, in the written opinion of counsel of recognized standing and
delivered to ML&Co., required for the Series 4 Preferred Stock to be treated
as Tier 1 Capital of ML&Co. without any sublimit or other quantitative
restriction on the inclusion of such Series 4 Preferred Stock in Tier 1
Capital (other than any limitation requiring that common equity or a specified
form of common equity constitute the dominant form of Tier 1 Capital) pursuant
to the applicable regulations. ML&Co. will provide notice to holders of any
Series 4 Preferred Stock of any such changes in the terms of the Series 4
Preferred Stock made pursuant to the terms of this paragraph on or about the
date of effectiveness of any such modification. A copy of the relevant
regulations will be on file at the principal offices of ML&Co. and, upon
request, will be made available to such holders.
The Certificate of Designations provides that, for the avoidance of
doubt, "amend", "modify", "change" and words of similar effect in the
provision described in this section mean that the Series 4 Preferred Stock
shall have such
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additional or different rights, powers and preferences, and such
qualifications, limitations and restrictions as may be established by ML&Co.
as described above, subject to the limitations noted above.
Voting Rights
Except as provided below, the holders of Series 4 Preferred Stock will
have no voting rights.
Whenever dividends payable on the Series 4 Preferred Stock have not
been declared or paid for a number of Dividend Periods, whether or not
consecutive, which in the aggregate is equivalent to six Dividend Periods (a
"Nonpayment"), the holders of outstanding shares of the Series 4 Preferred
Stock, voting as a class with holders of shares of all other series of
preferred stock ranking equal with the Series 4 Preferred Stock either as to
dividends or the distribution of assets upon liquidation, dissolution or
winding up and upon which like voting rights have been conferred and are
exercisable (to the extent such other series of preferred stock are entitled
to vote pursuant to the terms thereof), will be entitled to vote for the
election of two additional directors on the terms set forth below. These
voting rights with respect to the Series 4 Preferred Stock will continue until
all dividends on the shares of Series 4 Preferred Stock are paid in full for
at least four Dividend Periods following the Nonpayment. Upon payment in full
of these dividends, the voting rights will terminate except as expressly
provided by law. These voting rights are subject to re-vesting in the event of
each and every subsequent Nonpayment. In the event that the holders of shares
of the Series 4 Preferred Stock are entitled to vote as described in this
paragraph, the board of directors of ML&Co. will be increased by two
directors, and the holders of the Series 4 Preferred Stock will have the right
as members of that class, as outlined above, to elect two directors at the
next annual meeting of stockholders.
Upon termination of the right of the holders of the Series 4 Preferred
Stock to vote for directors as discussed in the preceding paragraph, the term
of office of all directors then in office elected by only those holders will
terminate immediately. Whenever the term of office of the directors elected by
those holders ends and the related special voting rights expire, the number of
directors will automatically be decreased to the number of directors as would
otherwise prevail.
So long as any shares of Series 4 Preferred Stock remain outstanding,
we will not, without the affirmative vote or consent of the holders of at
least two-thirds of the shares of the Series 4 Preferred Stock outstanding at
the time, voting as a class with all other series of preferred stock ranking
equal with the Series 4 Preferred Stock either as to dividends or the
distribution of assets upon liquidation, dissolution or winding up and upon
which like voting rights have been conferred and are exercisable, given in
person or by proxy, either in writing or at a meeting:
o authorize, create or issue, or increase the authorized or issued
amount of, any class or series of stock ranking senior to the
Series 4 Preferred Stock with respect to payment of dividends or
the distribution of assets upon liquidation, dissolution or
winding up of ML&Co.; or
o amend, alter or repeal, whether by merger, consolidation or
otherwise, the provisions of ML&Co.'s restated certificate of
incorporation or the certificate of designation of the Series 4
Preferred Stock so as to adversely affect any right, preference,
privilege or voting power of the Series 4 Preferred Stock or the
holders of the Series 4 Preferred Stock;
provided, however, that any increase in the amount of issued Series 4
Preferred Stock or authorized preferred stock or the creation and issuance, or
an increase in the authorized or issued amount, of other series of preferred
stock ranking equal with or junior to the Series 4 Preferred Stock with
respect to the payment of dividends (whether such dividends were cumulative or
non-cumulative) and the distribution of assets upon liquidation, dissolution
or winding up of ML&Co. will not be deemed to adversely affect these rights,
preferences, privileges or voting powers. If an amendment, alteration or
repeal would adversely affect one or more but not all other series of
preferred stock ranking equally with the Series 4 Preferred Stock, then only
the series affected shall vote as a class in lieu of all other such series of
preferred stock.
Without the consent of the holders of the Series 4 Preferred Stock, so
long as such action does not adversely affect the interests of holders of
Series 4 Preferred Stock, we may amend, alter, supplement or repeal any terms
of the Series 4 Preferred Stock:
o to cure any ambiguity, or to cure, correct or supplement any
provision contained in the certificate of designation for the
Series 4 Preferred Stock that may be defective or inconsistent;
or
o to make any provision with respect to matters or questions
arising with respect to the Series 4 Preferred Stock that is not
inconsistent with the provisions of the certificate of
designation.
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On matters requiring their consent or approval, holders of Series 4
Preferred Stock will be entitled to three votes per share of Series 4
Preferred Stock.
Transfer Agent and Registrar
JPMorgan Chase Bank, N.A. will be the transfer agent, registrar,
dividend disbursing agent and redemption agent for the Series 4 Preferred
Stock.
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DESCRIPTION OF THE DEPOSITARY SHARES
General
Each depositary share will represent a 1/1200th ownership interest in
a share of Series 4 Preferred Stock. The shares of Series 4 Preferred Stock
represented by depositary shares will be deposited under a deposit agreement
among ML&Co., JPMorgan Chase Bank, N.A., as the depositary and the holders
from time to time of the depositary receipts evidencing the depositary shares.
Subject to the terms of the deposit agreement, each owner of a depositary
share will be entitled, in proportion to the applicable fraction of a share of
Series 4 Preferred Stock represented by such depositary share, to all the
rights and preferences of the Series 4 Preferred Stock represented thereby
(including dividend, voting, redemption and liquidation rights).
The depositary shares will be evidenced by depositary receipts issued
pursuant to the deposit agreement. Immediately following this issuance of the
Series 4 Preferred Stock, we will deposit the Series 4 Preferred Stock with
the depositary, which will then issue the depositary shares to the
underwriters. Copies of the forms of deposit agreement and the depositary
receipt may be obtained from us upon request, and the following summary is
qualified in its entirety by reference thereto.
Dividends and Other Distributions
The depositary will distribute all cash dividends and other
distributions received in respect of the Series 4 Preferred Stock to the
record holders of depositary shares in proportion to the number of such
depositary shares owned by such holders. In the event of a distribution other
than in cash, the depositary will distribute property received by it to the
record holders of depositary shares entitled thereto, unless the depositary
determines that it is not feasible to make such distribution, in which case
the depositary may, with our approval, sell such property and distribute the
net proceeds from such sale to such holders.
The depositary will distribute all cash dividends and other
distributions received in respect of the Series 4 Preferred Stock only in an
amount that can be distributed without attributing to any holder of depositary
shares a fraction of one cent ($0.01). Any balance not so distributable will
be held by the depositary and will be added to the next sum received by the
depositary for distribution. The depositary will not be liable for interest on
amounts held for later distribution.
Withdrawal of Stock
Upon surrender of the depositary receipts at the corporate trust
office of the depositary (unless the related depositary shares have previously
been called for redemption), the holder of the depositary shares evidenced
thereby is entitled to delivery of the number of whole shares of the Series 4
Preferred Stock and any money or other property represented by such depositary
shares. Holders of depositary shares will be entitled to receive whole shares
of the Series 4 Preferred Stock on the basis of one share of Series 4
Preferred Stock for each one thousand two hundred (1,200) depositary shares,
but holders of such whole shares of Series 4 Preferred Stock will not
thereafter be entitled to receive depositary shares in exchange therefor. If
the depositary receipts delivered by the holder evidence a number of
depositary shares in excess of the number of depositary shares representing
the number of whole shares of Series 4 Preferred Stock to be withdrawn, the
depositary will deliver to such holder at the same time a new depositary
receipt evidencing such excess number of depositary shares. In no event will
fractional shares of Series 4 Preferred Stock be delivered upon surrender of
depositary receipts to the depositary.
Redemption of Depositary Shares
If we redeem the Series 4 Preferred Stock represented by the
depositary shares, the depositary shares will be redeemed from the proceeds
received by the depositary resulting from the redemption, in whole or in part,
of Series 4 Preferred Stock held by the depositary. The redemption price per
depositary share will be equal to 1/1200th of the redemption price per share
payable with respect to the Series 4 Preferred Stock. Whenever we redeem
shares of Series 4 Preferred Stock held by the depositary, the depositary will
redeem as of the same redemption date the number of depositary shares
representing shares of Series 4 Preferred Stock so redeemed. If less than all
the depositary shares are to be redeemed, the depositary shares to be redeemed
will be selected by lot or pro rata as may be determined by the depositary.
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Voting the Series 4 Preferred Stock
Upon receipt of notice of any meeting at which holders of the Series 4
Preferred Stock are entitled to vote, the depositary will mail the information
contained in such notice of meeting to the record holders of the depositary
shares relating to Series 4 Preferred Stock. Each record holder of such
depositary shares on the record date (which will be the same date as the
record date for the Series 4 Preferred Stock) will be entitled to instruct the
depositary as to the exercise of the voting rights pertaining to the amount of
Series 4 Preferred Stock represented by such holder's depositary shares. The
depositary will endeavor, insofar as practicable, to vote the amount of Series
4 Preferred Stock represented by such depositary shares in accordance with
such instructions, and we will agree to take all action which may be deemed
necessary by the depositary in order to enable the depositary to do so. The
depositary will abstain from voting shares of Series 4 Preferred Stock to the
extent it does not receive specific instructions from the holders of
depositary shares representing Series 4 Preferred Stock.
Amendment and Termination of the Deposit Agreement
The form of depositary receipt evidencing the depositary shares and
any provision of the deposit agreement may at any time be amended by agreement
between us and the depositary. However, any amendment which materially and
adversely alters the rights of the holders of depositary receipts will not be
effective unless such amendment has been approved by the holders of depositary
receipts representing at least a majority (or, in the case of amendments
relating to or affecting rights to receive dividends or distributions, or
voting or redemption rights, two-thirds) of the depositary shares then
outstanding. The deposit agreement may be terminated by us or the depositary
only if (i) all outstanding depositary shares have been redeemed, (ii) there
has been a final distribution in respect of the Series 4 Preferred Stock in
connection with any liquidation, dissolution or winding up of ML&Co. and such
distribution has been distributed to the holders of depositary receipts, or
(iii) upon consent of holders of depositary receipts representing not less
than two-thirds of the depositary shares then outstanding.
Taxes and Other Charges
We will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. We will pay
charges of the depositary in connection with the initial deposit of the Series
4 Preferred Stock and any redemption of the Series 4 Preferred Stock. Holders
of depositary receipts will pay all other transfer and other taxes and
governmental charges and such other charges as are expressly provided in the
deposit agreement to be for their accounts and as a result the amount paid as
dividends or otherwise distributable by the depositary with respect to the
depositary shares or the underlying Series 4 Preferred Stock will be reduced
by any amounts required to be withheld by us or the depositary on account of
taxes or other governmental charges. The depositary may refuse to make any
payment or distribution on, or to effect any transfer of a depositary receipt
or any withdrawal of shares of Series 4 Preferred Stock evidenced thereby
until all such taxes and other governmental charges with respect to such
depositary receipt or such shares of Series 4 Preferred Stock are paid by the
holder thereof.
Miscellaneous
The depositary will forward to the holders of depositary shares all
reports and communications from us which are delivered to the depositary and
which we are required to furnish to the holders of the Series 4 Preferred
Stock.
Neither the depositary nor we will be liable if the depositary is
prevented or delayed by law or any circumstances beyond its control in
performing its obligations under the deposit agreement. Our obligations and
the obligations of the depositary under the deposit agreement will be limited
to performance in good faith of their duties thereunder and we and the
depositary will not be obligated to prosecute or defend any legal proceeding
in respect of any depositary shares or Series 4 Preferred Stock unless
satisfactory indemnity is furnished. We and the depositary may rely on written
advice of counsel or accountants, or information provided by persons
presenting Series 4 Preferred Stock for deposit, holders of depositary shares
or other persons believed to be competent and on documents believed to be
genuine.
Resignation and Removal of Depositary
The depositary may resign at any time by delivering to us notice of
its election to do so, and we may at any time remove the depositary. Any such
resignation or removal will take effect upon the appointment of a successor
depositary, which successor depositary must be appointed within 60 days after
delivery of the notice of resignation or removal and
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must be a bank or trust company having its principal office in the United
States and having a combined capital and surplus of at least $50,000,000.
Transfer Agent and Registrar
JPMorgan Chase Bank, N.A. will be the transfer agent, registrar,
dividend disbursing agent and redemption agent for the depositary shares.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following describes the material United States federal income tax
considerations related to the ownership of depositary shares each representing
a 1/1200th interest in a share of Series 4 Preferred Stock as of the date
hereof. Holders of depositary shares will be treated as if they own an
interest in the underlying shares of Series 4 Preferred Stock for United
States federal income tax purposes. Except where noted, this discussion deals
only with depositary shares purchased in this offering and held as a capital
asset and does not deal with special situations, such as those of dealers in
securities or currencies, financial institutions, regulated investment
companies, real estate investment trusts, tax-exempt entities, insurance
companies, persons holding depositary shares as a part of a hedging,
integrated, conversion or constructive sale transaction or as part of a
straddle, traders in securities that elect to use a mark-to-market method of
accounting for their securities holdings, persons liable for alternative
minimum tax, persons owning, actually or constructively, 10% or more of our
stock for United States federal income tax purposes, investors in pass-through
entities or United States holders (as defined below) of the depositary shares
whose "functional currency" is not the United States dollar. Furthermore, this
discussion is based upon the provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), and regulations, rulings and judicial decisions
thereunder as of the date hereof, and such authorities may be repealed,
revoked or modified so as to result in United States federal income tax
consequences different from those discussed below. In addition, this
discussion does not address taxes imposed by any state, local or foreign
taxing jurisdiction. Persons considering the purchase, ownership or
disposition of depositary shares should consult their own tax advisors
concerning the United States federal income tax consequences in light of their
particular situations as well as any consequences arising under the laws of
any other taxing jurisdiction.
For purposes of this discussion, "United States holder" generally
means a beneficial owner of a depositary share representing a 1/1200th
interest in a share of Series 4 Preferred Stock that is for United States
federal income tax purposes (1) a citizen or resident of the United States,
(2) a corporation (including an entity treated as a corporation 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, (3) an
estate the income of which is subject to United States federal income taxation
regardless of its source, or (4) a trust if (x) a court within the United
States is able to exercise primary supervision over its administration and one
or more United States persons have the authority to control all substantial
decisions of the trust or (y) it has a valid election in effect under
applicable United States Treasury regulations to be treated as a United States
person. As used herein, the term "non-United States holder" means a beneficial
owner of a depositary share representing a 1/1200th interest in a share of
Series 4 Preferred Stock that is not a United States holder.
United States Holders
Dividends. Dividends paid on shares of the Series 4 Preferred Stock
will be treated as dividends for United States federal income tax purposes to
the extent paid out of ML&Co.'s current or accumulated earnings and profits,
as determined for United States federal income tax purposes. Although ML&Co.
expects that its current and accumulated earnings and profits will be such
that all dividends paid with respect to shares of the Series 4 Preferred Stock
will qualify as dividends for United States federal income tax purposes,
ML&Co. cannot guarantee that result. ML&Co.'s accumulated earnings and profits
and its current earnings and profits in future years will depend in
significant part on its future profits or losses, which it cannot accurately
predict. To the extent that the amount of any dividend paid on shares of the
Series 4 Preferred Stock exceeds ML&Co.'s current and accumulated earnings and
profits, the dividend will be treated first as a return of capital and will be
applied against and reduce your adjusted tax basis (but not below zero) in
your interest in such shares of the Series 4 Preferred Stock. This reduction
in tax basis would increase any gain, or reduce any loss realized by you on
the subsequent sale, redemption or other disposition of your interest in
shares of the Series 4 Preferred Stock. The amount of any such dividend in
excess of your adjusted tax basis will then be taxed as capital gain. For
purposes of the remainder of this discussion, it is assumed that dividends
paid on shares of the Series 4 Preferred Stock will constitute dividends for
United States federal income tax purposes.
If you are a corporation, dividends that are received by you will
generally be eligible for a 70% dividends-received deduction under the Code.
However, the Code disallows this dividends-received deduction in its entirety
if the interest in the share of Series 4 Preferred Stock with respect to which
the dividend is paid is held by you for less than 46 days, excluding any day
that is more than 45 days before or after the ex-dividend date. A 91-day
minimum holding period applies to certain dividend arrearages.
Under current law, if you are an individual, dividends received by you
generally will be subject to a reduced maximum tax rate of 15% through
December 31, 2008, after which the rate applicable to dividends is scheduled
to return to
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the tax rate generally applicable to ordinary income. The rate reduction will
not apply to dividends received to the extent that you elect to treat the
dividends as "investment income," which may be offset by investment expense.
Furthermore, the rate reduction will also not apply to dividends that are paid
to you with respect to an interest in any share of the Series 4 Preferred
Stock that is held by you for less than 61 days, excluding any day that is
more than 60 days before or after the ex-dividend date. A 91-day minimum
holding period applies to certain dividend arrearages.
In general, for purposes of meeting the holding period requirements
for both the dividends-received deduction and the reduced maximum tax rate on
dividends described above, you may not count towards your holding period any
period in which you (a) have the option to sell, are under a contractual
obligation to sell, or have made (and not closed) a short sale of shares of
Series 4 Preferred Stock or substantially identical stock or securities, (b)
are the grantor of an option to buy shares of Series 4 Preferred Stock or
substantially identical stock or securities or (c) otherwise have diminished
your risk of loss by holding one or more other positions with respect to
substantially similar or related property. The United States Treasury
regulations provide that a taxpayer has diminished its risk of loss on stock
by holding a position in substantially similar or related property if the
taxpayer is the beneficiary of a guarantee, surety agreement, or similar
arrangement that provides for payments that will substantially offset
decreases in the fair market value of the stock. In addition, the Code
disallows the dividends-received deduction as well as the reduced maximum tax
rate on dividends if the recipient of a dividend is obligated to make related
payments with respect to positions in substantially similar or related
property. This disallowance applies even if the minimum holding period has
been met. You are advised to consult your own tax advisor regarding the
implications of these rules in light of your particular circumstances.
If you are a corporation, you should consider the effect of section
246A of the Code, which reduces the dividends-received deduction allowed with
respect to "debt-financed portfolio stock." The Code also imposes a 20%
alternative minimum tax on corporations. In some circumstances, the portion of
dividends subject to the dividends-received deduction will serve to increase a
corporation's minimum tax base for purposes of the determination of the
alternative minimum tax. In addition, a corporate shareholder may be required
to reduce its tax basis in stock with respect to certain "extraordinary
dividends", as provided under section 1059 of the Code. You should consult
your own tax advisor in determining the application of these rules in light of
your particular circumstances.
Dispositions, including Redemptions. A sale, exchange, redemption or
other disposition of an interest in a share of Series 4 Preferred Stock will
generally result in gain or loss equal to the difference between the amount
realized upon the disposition and your adjusted tax basis in such interest in
a share of Series 4 Preferred Stock. Such gain or loss will be capital gain or
loss and will be long-term capital gain or loss if your holding period for the
interest in the share of Series 4 Preferred Stock exceeds one year. Under
current law, if you are an individual, net capital gain realized by you is
subject to a reduced maximum tax rate of 15%. After December 31, 2008, the
maximum rate is scheduled to return to the previously effective 20% rate. The
deduction of capital losses is subject to limitations.
Information Reporting and Backup Withholding. In general, information
reporting requirements will apply to dividends paid on shares of the Series 4
Preferred Stock, and the proceeds of a sale of an interest in shares of the
Series 4 Preferred Stock to United States holders other than certain exempt
recipients (such as corporations). A backup withholding tax at the applicable
statutory rate will apply to such payments if the United States holder fails
to provide in the required manner a taxpayer identification number or
certification of other exempt status or fails to report in full dividend and
interest income.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against such holder's United States federal
income tax liability provided the required information is furnished to the
Internal Revenue Service (the "IRS").
Non-United States Holders
The following is a summary of certain United States federal income and
estate tax consequences that will apply to you if you are a non-United States
holder of a depositary share representing a 1/1200th interest in a share of
Series 4 Preferred Stock. Special rules may apply to certain non-United States
holders, such as "controlled foreign corporations," "passive foreign
investment companies" and corporations that accumulate earnings to avoid
United States federal income tax, that are subject to special treatment under
the Code. These entities should consult their own tax advisors to determine
the United States federal, state, local and other tax consequences that may be
relevant to them.
Dividends. In general, dividends paid to you will be subject to
withholding of United States federal income tax at a 30% rate or a lower rate
if so specified by an applicable income tax treaty. However, dividends that
are effectively
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connected with your conduct of a trade or business within the United States
are generally exempt from the withholding tax. Instead, these dividends are
subject to United States federal income tax on a net income basis at
applicable graduated individual or corporate rates (assuming, if required by
an applicable treaty, the dividends are attributable to a permanent
establishment maintained by you within the United States). You must comply
with certification and disclosure requirements (e.g., IRS Form W-8ECI) in
order for effectively connected income to be exempt from withholding. If you
are a foreign corporation, any effectively connected dividends you receive may
also be subject to an additional branch profits tax at a 30% rate or a lower
rate if so specified by an applicable income tax treaty.
A non-United States holder who wishes to claim the benefit of an
applicable income tax treaty rate, and avoid backup withholding as discussed
below, will be required to satisfy the certification requirements (e.g., IRS
Form W-8BEN) of applicable United States Treasury regulations. Special rules
apply to claims for treaty benefits made by non-United States persons that are
entities rather than individuals and to beneficial owners of dividends paid to
entities in which such beneficial owners are interest holders. The application
of these rules depends upon your particular circumstances and, therefore, you
should consult your own tax advisor regarding your eligibility for such
benefits.
If you are eligible for a reduced rate of United States withholding
tax pursuant to an income tax treaty, you may be entitled to obtain a refund
of any excess amounts withheld by filing an appropriate claim for refund with
the IRS.
Dispositions, including Redemptions. You generally will not be subject
to United States federal income tax with respect to gain recognized on a sale,
exchange, redemption or other disposition of an interest in a share of the
Series 4 Preferred Stock unless:
o the gain is effectively connected with your conduct of a trade or
business in the United States, and, where a tax treaty applies,
is attributable to a United States permanent establishment;
o you are an individual who is present in the United States for 183
or more days in the taxable year of the sale, exchange,
redemption or other disposition and certain other conditions are
met; or
o we are or have been a "United States real property holding
corporation" for United States federal income tax purposes. We
believe that we are not currently and do not anticipate becoming
a "United States real property holding corporation" for United
States federal income tax purposes.
In general, gain that is effectively connected with the conduct of a
trade or business within the United States will be subject to the United
States federal income tax imposed on net income on the same basis that applies
to United States persons generally, and, for corporate non-United States
holders and under some circumstances, the branch profits tax, but will not be
subject to withholding. Non-United States holders should consult any
applicable income tax treaties that may provide for different rules.
United States Federal Estate Taxes. If you are an individual,
interests in shares of the Series 4 Preferred Stock owned by you at the time
of your death will be included in your gross estate for United States federal
estate tax purposes, unless an applicable treaty provides otherwise.
Information Reporting and Backup Withholding. We will be required to
report annually to the IRS and to you the amount of dividends paid to you and
any tax withheld from dividend payments made to you, regardless of whether
withholding was required. We may make available to the tax authorities in the
country in which you reside under the provisions of an applicable income tax
treaty copies of the information returns reporting the dividends and
withholding.
Backup withholding at the applicable statutory rate generally will
apply to dividends paid to you unless you satisfy the certification
requirements (e.g., by providing an IRS Form W-8BEN) of applicable United
States Treasury regulations or otherwise establish an exemption.
Payment of the proceeds of a sale of an interest in a share of the
Series 4 Preferred Stock to you within the United States or conducted through
certain United States related financial intermediaries will be subject to both
backup withholding and information reporting unless (1)(a) you certify under
penalties of perjury that you are a non-United States holder (e.g., on an IRS
Form W-8BEN) and (b) the payor does not have actual knowledge that you are a
United States person or (2) you otherwise establish an exemption.
Any amounts withheld under the backup withholding rules may be allowed
as a refund or credit against your United States federal income tax liability
provided the required information is provided to the IRS.
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WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC.
Our SEC filings are available over the Internet at the SEC's website at
http://www.sec.gov. The address of the SEC's Internet site is provided solely
for the information of prospective investors and is not intended to be an
active link. You may also read and copy any document we file at the SEC's
public reference rooms at 100 F Street, N.E., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for more information on the public reference
rooms and their copy charges. 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 depositary shares, the Series 4 Preferred Stock and other
securities. For further information on us and the depositary shares, you
should refer to our registration statement and its exhibits. The prospectus
accompanying this prospectus supplement summarizes our restated certificate of
incorporation and 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.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not, and the underwriters have 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 the
underwriters are 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
supplement and the accompanying prospectus is accurate as of the date on the
front cover of this prospectus supplement only. Our business, financial
condition and results of operations may have changed since that date.
S-18
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated, or MLPF&S, the
underwriter of the offering, has agreed, subject to the terms and conditions
of the underwriting agreement, to purchase from ML&Co. depositary shares, each
representing a 1/1200th ownership interest in a share of Series 4 Preferred
Stock. The underwriting agreement provides that the obligation of the
underwriter is subject to certain conditions and that the underwriter will be
obligated to purchase all of the depositary shares if any are purchased.
ML&Co. will sell the depositary shares offered hereby to the
underwriter at a price of $24.75 per depositary share. The underwriter expects
to resell such depositary shares to certain investment entities at a price or
prices relating to prevailing market prices at the time of resale, as
determined by the underwriter at the time of such sales. The underwriter is
offering the depositary shares subject to receipt and acceptance and subject
to the underwriter's right to reject any order in whole or in part.
MLPF&S, a broker-dealer subsidiary of ML&Co., is a member of the
National Association of Securities Dealers, Inc. and will participate in the
distribution of the depositary shares. Accordingly, the offering of the
depositary shares will conform to the requirements of Rule 2720 of the Conduct
Rules of the NASD.
If the underwriter creates a short position in the depositary shares
in connection with the offering, i.e., if it sells more depositary shares than
are set forth on the cover page of this prospectus supplement, the underwriter
may reduce that short position by purchasing the depositary shares in the open
market. 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 these purchases. "Naked" short sales
are sales in excess of the number of depositary shares an underwriter has
agreed to purchase from the issuer. Neither ML&Co. nor the underwriter make
any representation or prediction as to the direction or magnitude of any
effect that the transactions described above may have on the price of the
depositary shares. In addition, neither ML&Co. nor the underwriter make any
representation that the underwriter will engage in these transactions or that
these transactions, once commenced, will not be discontinued without notice.
Subject to obtaining the approval of the NYSE, MLPF&S in the course of
its business as a broker-dealer may engage in market-making transactions in
the depositary shares. MLPF&S may use this prospectus supplement and the
accompanying prospectus for offers and sales related to any market-making
transactions. 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.
The underwriter may not confirm sales to any account over which it
exercises discretionary authority without the prior written approval of the
customer.
The depositary shares are listed and trade on the NYSE.
We expect the delivery of the depositary shares will be made against
payment therefor on or about the thirteenth business day following the date of
this prospectus supplement (this settlement cycle being referred to as
"T+13"). Under Rule 15c6-1 of the Securities Exchange Act of 1934, as amended,
trades in the secondary market generally are required to settle in three
business days after the date the securities are priced, unless the parties to
any such trade expressly agree otherwise. Accordingly, purchasers who wish to
trade the depositary shares on the date of pricing or on the next succeeding
business day will be required, by virtue of the fact that the depositary
shares will settle in T+13, to specify an alternative settlement cycle at the
time of any such trade to prevent a failed settlement. Those purchasers should
also consult their own advisors in this regard.
We have agreed to indemnify the underwriter against, or contribute to
payments that the underwriter may be required to make in respect of, certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act").
The underwriter may engage in transactions with and perform services
for ML&Co. in the ordinary course of business.
VALIDITY OF THE SECURITIES
The validity of the Series 4 Preferred Stock and the depositary shares
will be passed upon for ML&Co. and for the underwriters by Sidley Austin LLP,
New York, New York.
S-19
EXPERTS
The consolidated financial statements, the related financial statement
schedule, and management's report on the effectiveness of internal control
over financial reporting incorporated in the prospectus supplemented by this
prospectus supplement by reference from Merrill Lynch & Co., Inc.'s Annual
Report on Form 10-K for the year ended December 31, 2004 have been audited by
Deloitte & Touche LLP, an independent registered public accounting firm, as
stated in their reports, 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 the unaudited interim condensed consolidated financial
information for the three-month periods ended April 1, 2005 and March 26,
2004, the three-month and six-month periods ended July 1, 2005 and June 25,
2004 and the three-month and nine-month periods ended September 30, 2005 and
September 24, 2004 which is incorporated herein by reference, Deloitte &
Touche LLP, an independent registered public accounting firm, have applied
limited procedures in accordance with the standards of the Public Company
Accounting Oversight Board (United States) for reviews of such information.
However, as stated in their reports included in Merrill Lynch & Co., Inc.'s
Quarterly Reports on Form 10-Q for the quarters ended April 1, 2005, July 1,
2005 and September 30, 2005 and incorporated by reference herein, they did not
audit and they do not express opinions on that interim financial information.
Accordingly, the degree of reliance on their reports on such information
should be restricted in light of the limited nature of the review procedures
applied. Deloitte & Touche LLP are not subject to the liability provisions of
Section 11 of the Securities Act of 1933 for their reports on the unaudited
interim condensed consolidated financial information because those reports are
not "reports" or a "part" of the registration statement prepared or certified
by an accountant within the meaning of Sections 7 and 11 of the Act.
S-20
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Merrill Lynch & Co., Inc.
12,000,000 Depositary Shares
Each Representing a 1/1200th Interest in a Share of
Floating Rate Non-Cumulative Preferred Stock, Series 4
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PROSPECTUS SUPPLEMENT
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Merrill Lynch & Co.
February 27, 2006
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