The location of the principal executive office of the Trust is c/o Merrill Lynch & Co., Inc., WorldFinancial Center, North Tower, 250 Vesey Street, New York, New York 10281, and its telephone numberis (212) 449-1000.MERRILL LYNCH PREFERRED FUNDING V, L.P.Merrill Lynch Preferred Funding V, L.P. (the “Partnership”) is a limited partnership that wasformed under the Delaware Revised Uniform Limited Partnership Act, as amended (the “PartnershipAct”), on January 8, 1998 for the exclusive purposes of purchasing certain eligible debt securitiesof the Company and wholly-owned subsidiaries of the Company (the “Affiliate InvestmentInstruments”) with the proceeds from the sale of Partnership Preferred Securities to the Trust anda capital contribution from the Company in exchange for the general partner interest in thePartnership. Pursuant to the certificate of limited partnership, as amended, and the LimitedPartnership Agreement, the Company is the sole general partner of the Partnership (in such capacitythe “General Partner”). Upon the issuance of the Partnership Preferred Securities, which securitiesrepresent limited partner interests in the Partnership, the Trust will be the sole limited partnerof the Partnership. Contemporaneously with the issuance of the Partnership Preferred Securities,the General Partner will contribute capital to the Partnership in an amount sufficient to establishits initial capital account at an amount equal to at least 15% of the total capital of thePartnership.The Partnership is managed by the General Partner and exists for the sole purpose of (i)issuing its partnership interests, (ii) investing the proceeds thereof in Affiliate InvestmentInstruments and Eligible Debt Securities and (iii) engaging in only those other activitiesnecessary or incidental thereto. To the extent that aggregate payments to the Partnership on theAffiliate Investment Instruments and on Eligible Debt Securities exceed distributions accumulatedor payable with respect to the Partnership Preferred Securities, the Partnership may at times haveexcess funds which shall be allocated to and may, in the General Partner’s sole discretion, bedistributed to the General Partner.For so long as the Partnership Preferred Securities remain outstanding, the General Partnerwill covenant in the Limited Partnership Agreement (i) to remain the sole general partner of thePartnership and to maintain directly 100% ownership of the General Partner’s interest in thePartnership, which interest will at all times represent at least 1% of the total capital of thePartnership, (ii) to cause the Partnership to remain a limited partnership and not to voluntarilydissolve, liquidate, wind-up or be terminated, except as permitted by the Limited PartnershipAgreement and (iii) to use its commercially reasonable efforts to ensure that the Partnership willnot be (A) an “investment company” for purposes of the 1940 Act or (B) an association or a publiclytraded partnership taxable as a corporation for United States federal income tax purposes. TheCompany or the then General Partner may transfer its obligations as General Partner to awholly-owned direct or indirect subsidiary of the Company provided that (i) such successor entityexpressly accepts such transfer of the obligations as General Partner and (ii) prior to suchtransfer, the Company has received an opinion of nationally recognized independent counsel to thePartnership experienced in such matters to the effect that (A) the Partnership will be treated as apartnership for United States federal income tax purposes, (B) such transfer would not cause theTrust to be classified as an association taxable as a corporation for United States federal incometax purposes, (C) following such transfer, the Company and such successor entity will be incompliance with the 1940 Act without registering thereunder as an investment company, and (D) suchtransfer will not adversely affect the limited liability of the holders of the PartnershipPreferred Securities. The rights of the holders of the Partnership Preferred Securities, includingeconomic rights, rights to information and voting rights, are set forth in the Limited PartnershipAgreement and the Partnership Act. See “Description of the Partnership Preferred Securities”.
 
 

 
The Limited Partnership Agreement provides that the General Partner will have liability forthe fees and expenses of the Partnership (including any taxes, duties, assessments or governmentalcharges of whatever nature (other than withholding taxes) imposed by the United States or any otherdomestic taxing authority upon the Partnership) and be responsible for all debts and obligations ofthe Partnership (other than with respect to the Partnership Preferred Securities). Under Delawarelaw, assuming a limited partner in a Delaware limited partnership such as the Partnership (i.e., aholder of the Partnership Preferred Securities) does not participate in the control of the businessof the limited partnership, such limited partner will not be personally liable for the debts,obligations and liabilities of such limited partnership, whether arising in contract, tort orotherwise, solely by reason of being a limited partner of such limited partnership (subject to anyobligation such limited partner may have to repay any funds that may have been wrongfullydistributed to it). The Partnership’s business and affairs will be conducted by the GeneralPartner.The location of the principal executive offices of the Partnership is c/o Merrill Lynch & Co.,Inc., World Financial Center, North Tower, 250 Vesey Street, New York, New York 10281 and itstelephone number is (212) 449-1000.DESCRIPTION OF THE TRUST PREFERRED SECURITIESThe Trust Preferred Securities will be issued pursuant to the terms of the declaration. Thedeclaration will be qualified as an indenture under the Trust Indenture Act. The Property Trustee,The Chase Manhattan Bank, will act as trustee for the Trust Preferred Securities under thedeclaration for purposes of compliance with the provisions of the Trust Indenture Act. The terms ofthe Trust Preferred Securities will include those stated in the declaration and those made part ofthe declaration by the Trust Indenture Act. The following summary of the material terms andprovisions of the Trust Preferred Securities does not purport to be complete and is subject to, andqualified in its entirety by reference to, the declaration, a copy of which is filed as an exhibitto the registration statement of which this prospectus is a part, the Trust Act and the TrustIndenture Act.GENERALThe Trust Preferred Securities will be issued in fully registered form without coupons. TrustPreferred Securities will not be issued in bearer form. See “— Book-Entry Only Issuance — TheDepository Trust Company”.The declaration authorizes the Regular Trustees of the Trust to issue the Trust Securities,which represent undivided beneficial ownership interests in the assets of the Trust. Title to thePartnership Preferred Securities will be held by the Property Trustee for the benefit of theholders of the Trust Securities. The declaration does not permit the Trust to acquire any assetsother than the Partnership Preferred Securities or the issuance by the Trust of any securitiesother than the Trust Securities or the incurrence of any indebtedness by the Trust. The payment ofdistributions out of money held by the Trust, and payments out of money held by the Trust uponredemption of the Trust Preferred Securities or liquidation of the Trust, are guaranteed by theCompany to the extent described under “Description of the Trust Guarantee”. The Trust Guaranteewill be held by The Chase Manhattan Bank, the Trust Guarantee Trustee, for the benefit of theholders of the Trust Preferred Securities. The Trust Guarantee does not cover payment ofdistributions when the Trust does not have sufficient available funds to pay such distributions. Insuch event, holders of Trust Preferred Securities will have the remedies described below under “—Trust Enforcement Events”.DISTRIBUTIONSThe distribution rate on Trust Preferred Securities will be fixed at a rate per annum of 7.28% ofthe stated liquidation amount of $25 per Trust Preferred Security and will be paid if, as and whenthe Trust has funds available for payment. Distributions not paid on the scheduled payment datewill accumulate and compound quarterly at a rate per annum equal to 7.28%. The term “distribution” asused herein includes any such compounded amounts unless otherwise stated or thecontext otherwise requires. The amount of distributions payable for any period will be computed onthe basis of a 360-day year of twelve 30-day months.
 
 

 
Distributions on the Trust Preferred Securities will be cumulative, will accumulate from thedate of initial issuance and will be payable quarterly in arrears on each March 30, June 30,September 30 and December 30, commencing December 30, 1998, if, as and when available for payment,by the Property Trustee, except as otherwise described below. If distributions are not paid whenscheduled, the accumulated distributions shall be paid to the holders of record of Trust PreferredSecurities as they appear on the books and records of the Trust on the record date with respect tothe payment date for the Trust Preferred Securities which corresponds to the payment date fixed bythe Partnership with respect to the payment of cumulative distributions on the PartnershipPreferred Securities.Distributions on the Trust Preferred Securities will be made to the extent that the Trust hasfunds available for the payment of such distributions in the Property Account. Amounts available tothe Trust for distribution to the holders of the Trust Preferred Securities will be limited topayments received by the Trust from the Partnership with respect to the Partnership PreferredSecurities or from the Company on the Partnership Guarantee or the Trust Guarantee. Distributionson the Partnership Preferred Securities will be paid only if, as and when declared in the solediscretion of the Company, as the General Partner of the Partnership. Pursuant to the LimitedPartnership Agreement, the General Partner is not obligated to declare distributions on thePartnership Preferred Securities at any time, including upon or following a Partnership EnforcementEvent. See “Description of Partnership Preferred Securities — Partnership Enforcement Events”.The assets of the Partnership will consist only of Affiliate Investment Instruments (whichinitially will be the Debentures) and Eligible Debt Securities. To the extent that the issuers(and, where applicable, the Company, as guarantor) of the securities in which the Partnershipinvests defer or fail to make any payment in respect of such securities (or, if applicable, suchguarantees), the Partnership will not have sufficient funds to pay and will not declare or paydistributions on the Partnership Preferred Securities. If the Partnership does not declare and paydistributions on the Partnership Preferred Securities out of funds legally available fordistribution, the Trust will not have sufficient funds to make distributions on the Trust PreferredSecurities, in which event the Trust Guarantee will not apply to such distributions until the Trusthas sufficient funds available therefor. See “Description of the Partnership Preferred Securities— Distributions” and “Description of the Trust Guarantee”. In addition, as described under “RiskFactors — Insufficient Income or Assets Available to Partnership”, the Partnership may not havesufficient funds to pay current or liquidating distributions on the Partnership PreferredSecurities if (i) at any time that the Partnership is receiving current payments in respect of thesecurities held by the Partnership (including the Debentures), the General Partner, in its solediscretion, does not declare distributions on the Partnership Preferred Securities and thePartnership receives insufficient amounts to pay the additional compounded distributions that willaccumulate in respect of the Partnership Preferred Securities, (ii) the Partnership reinvests theproceeds received in respect of the Debentures upon their retirement or at their maturities inAffiliate Investment Instruments that do not generate income in an amount that is sufficient to payfull distributions in respect of the Partnership Preferred Securities or (iii) the Partnershipinvests in debt securities of Investment Affiliates that are not guaranteed by the Company and thatcannot be liquidated by the Partnership for an amount sufficient to pay such distributions in full.Distributions on the Trust Preferred Securities will be payable to the holders thereof as theyappear on the books and records of the Trust on the relevant record dates, which will be oneBusiness Day (as defined herein) prior to the relevant payment dates. Such distributions will bepaid through the Property Trustee who will hold amounts received in respect of the PartnershipPreferred Securities in the Property Account for the benefit of the holders of the TrustSecurities. Subject to any applicable laws and regulations and the provisions of the declaration,each such payment will be made as described under “— Book-Entry Only Issuance — The DepositoryTrust Company” below. In the event that the Trust Preferred Securities do not remain in book-entryonly form, the relevant record dates shall be the 15th day of the month of the relevant paymentdates. In the event that any date on which distributions are payable on the Trust PreferredSecurities is not a Business Day, payment of the distribution payable on such date will be made onthe next succeeding day which is a Business Day (without any interest or other paymentin respect of the distribution subject to such delay) except that, if such Business Day is in thenext succeeding calendar year, such payment shall be made on the immediately preceding BusinessDay, in each case with the same force and effect as if made on such date. A “Business Day” shallmean any day other than a day on which banking institutions in The City of New York are authorizedor required by law to close.
 
 

 
TRUST ENFORCEMENT EVENTSThe occurrence, at any time, of (i) arrearages on distributions on the Trust PreferredSecurities that shall exist for six consecutive quarterly distribution periods, (ii) a default bythe Company in respect of any of its obligations under the Trust Guarantee or (iii) a PartnershipEnforcement Event under the Limited Partnership Agreement, will constitute an enforcement eventunder the declaration with respect to the Trust Securities (a “Trust Enforcement Event”); provided,that pursuant to the declaration, the holder of the Trust Common Securities will be deemed to havewaived any Trust Enforcement Event with respect to the Trust Common Securities until all TrustEnforcement Events with respect to the Trust Preferred Securities have been cured, waived orotherwise eliminated. Until such Trust Enforcement Events with respect to the Trust PreferredSecurities have been so cured, waived or otherwise eliminated, the Property Trustee will be deemedto be acting solely on behalf of the holders of the Trust Preferred Securities and only the holdersof the Trust Preferred Securities will have the right to direct the Property Trustee with respectto certain matters under the declaration and, in the case of a Partnership Enforcement Event, theSpecial Representative with respect to certain matters under the Limited Partnership Agreement. See“Description of the Partnership Preferred Securities — Partnership Enforcement Events” for adescription of the events which will trigger the occurrence of a Partnership Enforcement Event.Upon the occurrence of a Trust Enforcement Event, (a) the Property Trustee, as the holder ofthe Partnership Preferred Securities, shall have the right to enforce the terms of the PartnershipPreferred Securities, including the right to direct the Special Representative to enforce (i) thePartnership’s creditors’ rights and other rights with respect to the Affiliate InvestmentInstruments and the Investment Guarantees, (ii) the rights of the holders of the PartnershipPreferred Securities under the Partnership Guarantee and (iii) the rights of the holders of thePartnership Preferred Securities to receive distributions (only if and to the extent declared outof funds legally available therefor) on the Partnership Preferred Securities, and (b) the TrustGuarantee Trustee shall have the right to enforce the terms of the Trust Guarantee, including theright to enforce the covenant restricting certain payments by the Company and Finance Subsidiaries.If the Property Trustee fails to enforce its rights under the Partnership Preferred Securitiesafter a holder of Trust Preferred Securities has made a written request, such holder of record ofTrust Preferred Securities may directly institute a legal proceeding against the Partnership andthe Special Representative to enforce the Property Trustee’s rights under the Partnership PreferredSecurities without first instituting any legal proceeding against the Property Trustee, the Trustor any other person or entity. In addition, for so long as the Trust holds any PartnershipPreferred Securities, if the Special Representative fails to enforce its rights on behalf of thePartnership under the Affiliate Investment Instruments after a holder of Trust Preferred Securitieshas made a written request, a holder of record of Trust Preferred Securities may on behalf of thePartnership directly institute a legal proceeding against the Investment Affiliates under theAffiliate Investment Instruments, without first instituting any legal proceeding against theProperty Trustee, the Trust, the Special Representative or the Partnership. In any event, for solong as the Trust is the holder of any Partnership Preferred Securities, if a Trust EnforcementEvent has occurred and is continuing and such event is attributable to the failure of an InvestmentAffiliate to make any required payment when due on any Affiliate Investment Instrument or thefailure of the Company to make any required payment when due on any Investment Guarantee, then aholder of Trust Preferred Securities may on behalf of the Partnership directly institute aproceeding against such Investment Affiliate with respect to such Affiliate Investment Instrumentor against the Company with respect to any such Investment Guarantee, in each case for enforcementof payment.
 
 

 
Under no circumstances, however, shall the Special Representative have authority to cause theGeneral Partner to declare distributions on the Partnership Preferred Securities. As a result,although the Special Representative may be able to enforce the Partnership’s creditors’ rights toaccelerate and receive payments in respect of the Affiliate Investment Instruments and theInvestment Guarantees, the Partnership would be entitled to reinvest such payments in additionalAffiliate Investment Instruments, subject to satisfying the reinvestment criteria described under“Description of the Partnership Preferred Securities — Partnership Investments”, and Eligible DebtSecurities, rather than declaring and making distributions on the Partnership Preferred Securities.The Company and the Trust are each required to file annually with the Property Trustee anofficer’s certificate as to its compliance with all conditions and covenants under the declaration.MANDATORY REDEMPTIONThe Partnership Preferred Securities may be redeemed by the Partnership at the option of theGeneral Partner, in whole or in part, at any time on or after September 30, 2008 or at any time in certaincircumstances upon the occurrence of a Partnership Special Event. Upon such redemption of thePartnership Preferred Securities (either at the option of the General Partner or pursuant to aPartnership Special Event), the proceeds from such repayment shall simultaneously be applied toredeem Trust Securities having an aggregate liquidation amount equal to the Partnership PreferredSecurities so redeemed at an amount per Trust Security equal to $25 plus accumulated and unpaiddistributions thereon; provided, that holders of the Trust Securities shall be given not less than30 nor more than 60 days notice of such redemption. See “Description of the Partnership PreferredSecurities — General” and “—  Optional Redemption”.TRUST SPECIAL EVENT REDEMPTION OR DISTRIBUTIONIf, at any time, a Trust Tax Event or a Trust Investment Company Event (each as hereinafterdefined, and each, a “Trust Special Event”) shall occur and be continuing, the Regular Trusteesshall, unless the Partnership Preferred Securities are redeemed in the limited circumstancesdescribed below, within 90 days following the occurrence of such Trust Special Event elect toeither (i) dissolve the Trust upon not less than 30 nor more than 60 days notice with the resultthat, after satisfaction of creditors of the Trust, if any, Partnership Preferred Securities wouldbe distributed on a pro rata basis to the holders of the Trust Preferred Securities and the TrustCommon Securities in liquidation of such holders’ interests in the Trust; provided, however, thatif at the time there is available to the Trust the opportunity to eliminate, within such 90- dayperiod, the Trust Special Event by taking some ministerial action, such as filing a form or makingan election, or pursuing some other similar reasonable measure which in the sole judgment of theCompany has or will cause no adverse effect on the Trust, the Partnership, the Company or theholders of the Trust Securities and will involve no material cost, the Trust will pursue suchmeasure in lieu of dissolution or (ii) cause the Trust Preferred Securities to remain outstanding,provided that in the case of this clause (ii), the Company shall pay any and all expenses incurredby or payable by the Trust attributable to the Trust Special Event. Furthermore, if in the case ofthe occurrence of a Trust Tax Event, the Regular Trustees have received an opinion (a “TrustRedemption Tax Opinion”) of nationally recognized independent tax counsel experienced in suchmatters that there is more than an insubstantial risk that interest payable by one or more of theInvestment Affiliates with respect to the Debentures issued by such Investment Affiliate is not, orwill not be, deductible by such Investment Affiliate for United States federal income tax purposes even if thePartnership Preferred Securities were distributed to the holders of the Trust Securities inliquidation of such holders’ interests in the Trust as described above, then the General Partnershall have the right, within 90 days following the occurrence of such Trust Tax Event, to elect tocause the Partnership to redeem the Partnership Preferred Securities in whole (but not in part) forcash upon not less than 30 nor more than 60 days notice and promptly following such redemption, theTrust Preferred Securities and Trust Common Securities will be redeemed by the Trust at theRedemption Price.
 
 

 
“Trust Tax Event” means that the Company shall have requested and received and shall havedelivered to the Regular Trustees an opinion of nationally recognized independent tax counselexperienced in such matters (a “Trust Dissolution Tax Opinion”) to the effect that there has been(a) an amendment to, change in or announced proposed change in the laws (or any regulationsthereunder) of the United States or any political subdivision or taxing authority thereof ortherein, (b) a judicial decision interpreting, applying, or clarifying such laws or regulations,(c) an administrative pronouncement or action that represents an official position (including aclarification of an official position) of the governmental authority or regulatory body making suchadministrative pronouncement or taking such action, or (d) a threatened challenge asserted inconnection with an audit of the Company or any of its subsidiaries, the Partnership, or the Trust,or a threatened challenge asserted in writing against any other taxpayer that has raised capitalthrough the issuance of securities that are substantially similar to the Debentures, thePartnership Preferred Securities, or the Trust Preferred Securities, which amendment or change isadopted or which proposed change, decision or pronouncement is announced or which action,clarification or challenge occurs on or after the date of this Prospectus (collectively a “TaxAction”), which Tax Action relates to any of the items described in (i) through (iii) below, andthat following the occurrence of such Tax Action there is more than an insubstantial risk that (i)the Trust is, or will be, subject to United States federal income tax with respect to incomeaccrued or received on the Partnership Preferred Securities, (ii) the Trust is, or will be, subjectto more than a de minimis amount of other taxes, duties or other governmental charges or (iii)interest payable by an Investment Affiliate with respect to the Affiliate Investment Instrumentissued by such Investment Affiliate is not, or will not be, deductible by such Investment Affiliatefor United States federal income tax purposes.Recently, the Internal Revenue Service (“IRS”) asserted that the interest payable on asecurity issued in circumstances with certain similarities to the issuance of the Debentures issuedby the Investment Affiliates to the Partnership was not deductible for United States federal incometax purposes. The taxpayer in that case has filed a petition in the United States Tax Courtchallenging the IRS’s position on this matter. If this matter were to be litigated and the TaxCourt were to sustain the IRS’s position on this matter, such judicial decision could constitute aTrust Tax Event, which could result in an early redemption of the Trust Preferred Securities.“Trust Investment Company Event” means that the Company shall have requested and received andshall have delivered to the Regular Trustees an opinion of nationally recognized independent legalcounsel experienced in such matters to the effect that as a result of the occurrence on or afterthe date hereof of a change in law or regulation or a change in interpretation or application oflaw or regulation by any legislative body, court, governmental agency or regulatory authority (a“Change in 1940 Act Law”), the Trust is or will be considered an “investment company” which isrequired to be registered under the 1940 Act.If the Partnership Preferred Securities are distributed to the holders of the Trust PreferredSecurities, the Company will use its best efforts to cause the Partnership Preferred Securities tobe listed on the NYSE or on such other national securities exchange or similar organization as theTrust Preferred Securities are then listed or quoted.On the date fixed for any distribution of Partnership Preferred Securities, upon dissolutionof the Trust, (i) the Trust Preferred Securities and the Trust Common Securities will no longer bedeemed to be outstanding and (ii) certificates representing Trust Securities will be deemed torepresent the Partnership Preferred Securities having a liquidation preference equal to the statedliquidation amount of such Trust Securities until such certificates are presented to the Company orits agent for transfer or reissuance.There can be no assurance as to the market price for the Partnership Preferred Securitieswhich may be distributed in exchange for Trust Preferred Securities if a dissolution andliquidation of the Trust were to occur. Accordingly, the Partnership Preferred Securities which aninvestor may subsequently receive on dissolution and liquidation of the Trust may trade at adiscount to the price of the Trust Preferred Securities exchanged.REDEMPTION PROCEDURESThe Trust may not redeem fewer than all of the outstanding Trust Preferred Securities unlessall accumulated and unpaid distributions have been paid on all Trust Preferred Securities for allquarterly distribution periods terminating on or prior to the date of redemption.
 
 

 
If the Trust gives a notice of redemption in respect of Trust Preferred Securities (whichnotice will be irrevocable), and if the Company has paid to the Property Trustee a sufficientamount of cash in connection with the related redemption of the Partnership Preferred Securities,then, by 12:00 noon, New York City time, on the redemption date, the Trust will irrevocably depositwith DTC funds sufficient to pay the amount payable on redemption of all book-entry certificatesand will give DTC irrevocable instructions and authority to pay such amount to holders of the TrustPreferred Securities. See “— Book-Entry Only Issuance — The Depository Trust Company”. If noticeof redemption shall have been given and funds are deposited as required, then upon the date of suchdeposit, all rights of holders of such Trust Preferred Securities so called for redemption willcease, except the right of the holders of such Trust Preferred Securities to receive the RedemptionPrice (the “Redemption Price”), but without interest on such Redemption Price. In the event thatany date fixed for redemption of Trust Preferred Securities is not a Business Day, then payment ofthe amount payable on such date will be made on the next succeeding day which is a Business Day(without any interest or other payment in respect of the amount payable subject to such delay),except that, if such Business Day falls in the next calendar year, such payment will be made on theimmediately preceding Business Day. In the event that payment of the Redemption Price in respect ofTrust Preferred Securities is improperly withheld or refused and not paid either by the Trust or bythe Company pursuant to the Trust Guarantee described under “Description of the Trust Guarantee”,distributions on such Trust Preferred Securities will continue to accumulate from the originalredemption date to the date of payment.In the event that fewer than all of the outstanding Trust Preferred Securities are to beredeemed, the Trust Preferred Securities will be redeemed in accordance with the procedures of DTC.See “— Book-Entry Only Issuance —  The Depository Trust Company”. In the event that the TrustPreferred Securities do not remain in book-entry only form and fewer than all of the outstandingTrust Preferred Securities are to be redeemed, the Trust Preferred Securities shall be redeemed ona pro rata basis or pursuant to the rules of any securities exchange on which the Trust PreferredSecurities are listed.Subject to the foregoing and applicable law (including, without limitation, United Statesfederal securities laws), the Company or its subsidiaries may at any time and from time to timepurchase outstanding Trust Preferred Securities by tender, in the open market or by privateagreement.SUBORDINATION OF TRUST COMMON SECURITIESPayment of amounts upon liquidation of the Trust Securities shall be made pro rata based onthe liquidation amount of the Trust Securities; provided, however, that upon (i) the occurrence ofan Investment Event of Default by an Investment Affiliate (including the Company) in respect of anyAffiliate Investment Instrument or (ii) default by the Company on any of its obligations under anyGuarantee, the holders of the Trust Preferred Securities will have a preference over the holders ofthe Trust Common Securities with respect to payments upon liquidation of the Trust.In the case of any Trust Enforcement Event, the holder of Trust Common Securities will bedeemed to have waived any such Trust Enforcement Event until all such Trust Enforcement Events withrespect to the Trust Preferred Securities have been cured, waived or otherwise eliminated. Untilall Trust Enforcement Events with respect to the Trust Preferred Securities have been so cured,waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the holders ofthe Trust Preferred Securities and not on behalf of the holder of the Trust Common Securities, andonly the holders of the Trust Preferred Securities will have the right to direct the PropertyTrustee to act on their behalf.LIQUIDATION DISTRIBUTION UPON DISSOLUTIONIn the event of any voluntary or involuntary liquidation, dissolution, winding-up ortermination of the Trust (each a “Trust Liquidation”), the holders of the Trust PreferredSecurities will be entitled to receive out of the assets of the Trust, after satisfaction ofliabilities to creditors, distributions in cash or other immediately available funds in an amountequal to the aggregate of the stated liquidation amount of $25 per Trust Preferred Security plusaccumulated and unpaid distributions thereon to the date of payment (the “Trust LiquidationDistribution”), unless, in connection with such Trust Liquidation, Partnership Preferred Securitieshave been distributed on a pro rata basis to the holders of the Trust Securities.
 
 

 
If, upon any such Trust Liquidation, the Trust Liquidation Distribution can be paid only inpart because the Trust has insufficient assets available to pay in full the aggregate TrustLiquidation Distribution, then the amounts payable directly by the Trust on the Trust PreferredSecurities shall be paid on a pro rata basis. The holders of the Trust Common Securities will beentitled to receive distributions upon any such liquidation pro rata with the holders of the TrustPreferred Securities, except in the limited circumstances described above under “— Subordinationof Trust Common Securities”.Pursuant to the declaration, the Trust shall terminate (i) upon the bankruptcy of the Company,(ii) upon the filing of a certificate of dissolution or the equivalent with respect to the Company,the filing of a certificate of cancellation with respect to the Trust after having obtained theconsent of at least a majority in liquidation amount of the Trust Securities, voting together as asingle class, to file such certificate of cancellation, or the revocation of the charter of theCompany and the expiration of 90 days after the date of revocation without a reinstatement thereof,(iii) upon the distribution of all of the Partnership Preferred Securities upon the occurrence of aTrust Special Event, (iv) upon the entry of a decree of a judicial dissolution of the Company orthe Trust, or (v) upon the redemption of all the Trust Securities.VOTING RIGHTSExcept as described herein, under the Trust Act, the Trust Indenture Act and under“Description of the Trust Guarantee — Amendments and Assignment”, and as otherwise required by lawand the declaration, the holders of the Trust Preferred Securities will have no voting rights.Subject to the requirement of the Property Trustee obtaining a tax opinion as set forth in thelast sentence of this paragraph, the holders of a majority in liquidation amount of the TrustPreferred Securities have the right to direct the time, method and place of conducting anyproceeding for any remedy available to the Property Trustee, or direct the exercise of any trust orpower conferred upon the Property Trustee under the declaration, including the right to direct theProperty Trustee, as holder of the Partnership Preferred Securities, to (i) exercise the remediesavailable to it under the Limited Partnership Agreement as a holder of the Partnership PreferredSecurities, including the right to direct the Special Representative to exercise its rights in themanner described above under “— Trust Enforcement Events” and (ii) consent to any amendment,modification, or termination of the Limited Partnership Agreement or the Partnership PreferredSecurities where such consent shall be required; provided, however, that where a consent or actionunder the Limited Partnership Agreement would require the consent or act of the holders of morethan a majority of the aggregate liquidation preference of Partnership Preferred Securitiesaffected thereby, only the holders of the percentage of the aggregate stated liquidation amount ofthe Trust Securities which is at least equal to the percentage required under the LimitedPartnership Agreement may direct the Property Trustee to give such consent or take such action onbehalf of the Trust. See “Description of the Partnership Preferred Securities — Voting Rights”.The Property Trustee shall notify all holders of the Trust Preferred Securities of any notice ofany Partnership Enforcement Event received from the General Partner with respect to the PartnershipPreferred Securities and the Affiliate Investment Instruments. Such notice shall state that suchPartnership Enforcement Event also constitutes a Trust Enforcement Event. Except with respect todirecting the time, method, and place of conducting a proceeding for a remedy as described above,the Property Trustee shall be under no obligation to take any of the actions described in clauses(i) or (ii) above unless the Property Trustee has obtained an opinion of independent tax counsel tothe effect that as a result of such action, the Trust will not fail to be classified as a grantortrust for United States federal income tax purposes and that after such action each holder of TrustSecurities will continue to be treated as owning an undivided beneficial ownership interest in thePartnership Preferred Securities.A waiver of a Partnership Enforcement Event with respect to the Partnership PreferredSecurities held by the Property Trustee will constitute a waiver of the corresponding TrustEnforcement Event.
 
 

 
Any required approval or direction of holders of Trust Preferred Securities may be given at aseparate meeting of holders of Trust Preferred Securities convened for such purpose, at a meetingof all of the holders of Trust Securities or pursuant to written consent. The Regular Trustees willcause a notice of any meeting at which holders of Trust Preferred Securities are entitled to vote,or of any matter upon which action by written consent of such holders is to be taken, to be mailedto each holder of record of Trust Preferred Securities. Each such notice will include a statementsetting forth the following information: (i) the date of such meeting or the date by which suchaction is to be taken; (ii) a description of any resolution proposed for adoption at such meetingon which such holders are entitled to vote or of such matter upon which written consent is sought;and (iii) instructions for the delivery of proxies or consents. No vote or consent of the holdersof Trust Preferred Securities will be required for the Trust to redeem and cancel Trust PreferredSecurities or distribute Partnership Preferred Securities in accordance with the declaration.Notwithstanding that holders of Trust Preferred Securities are entitled to vote or consentunder any of the circumstances described above, any of the Trust Securities that are beneficiallyowned at such time by the Company or any entity directly or indirectly controlled by, or underdirect or indirect common control with, the Company, except for Trust Preferred Securitiespurchased or acquired by the Company or its affiliates in connection with transactions effected byor for the account of customers of the Company or any of its subsidiaries or in connection with thedistribution or trading of such Trust Preferred Securities, shall not be entitled to vote orconsent and shall, for purposes of such vote or consent, be treated as if such Trust Securitieswere not outstanding; provided, however, that persons (other than affiliates of the Company) towhom the Company or any of its subsidiaries have pledged Trust Preferred Securities may vote orconsent with respect to such pledged Trust Preferred Securities pursuant to the terms of suchpledge.The procedures by which holders of Trust Preferred Securities represented by the globalcertificates may exercise their voting rights are described below. See “— Book-Entry Only Issuance— The Depository Trust Company”.Holders of the Trust Preferred Securities will have no rights to appoint or remove the RegularTrustees, who may be appointed, removed or replaced solely by the Company, as the holder of all ofthe Trust Common Securities.MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUSTThe Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey,transfer or lease its properties and assets substantially as an entirety to, any corporation orother entity, except as described below. The Trust may, with the consent of a majority of theRegular Trustees and without the consent of the holders of the Trust Securities, the PropertyTrustee or the Delaware Trustee consolidate, amalgamate, merge with or into, or be replaced by atrust organized as such under the laws of any State of the United States; provided, that (i) if theTrust is not the survivor, such successor entity either (x) expressly assumes all of theobligations of the Trust under the Trust Securities or (y) substitutes for the Trust PreferredSecurities other securities having substantially the same terms as the Trust Preferred Securities(the “Successor Securities”), so long as the Successor Securities rank the same as the TrustSecurities rank with respect to distributions, assets and payments, (ii) the Company expresslyacknowledges a trustee of such successor entity possessing the same powers and duties as theProperty Trustee as the holder of the Partnership Preferred Securities, (iii) the Trust PreferredSecurities or any Successor Securities are listed, or any Successor Securities will be listed uponnotification of issuance, on any national securities exchange or with another organization on whichthe Trust Preferred Securities are then listed or quoted, (iv) such merger, consolidation,amalgamation or replacement does not cause the Trust Preferred Securities (including any SuccessorSecurities) to be downgraded by any nationally recognized statistical rating organization, (v) suchmerger, consolidation, amalgamation or replacement does not adversely affect the rights,preferences and privileges of the holders of the Trust Preferred Securities (including anySuccessor Securities) in any material respect, (vi) such successor entity has a purposesubstantially identical to that of the Trust, (vii) the Company guarantees the obligations of suchsuccessor entity under the Successor Securities to the same extent as provided by the TrustGuarantee and (viii) prior to such merger, consolidation, amalgamation or replacement, the Company
 
 

 
has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that: (A) such merger, consolidation,amalgamation or replacement will not adversely affect the rights, preferences and privileges of theholders of the Trust Preferred Securities (including any Successor Securities) in any materialrespect (other than with respect to any dilution of the holders’ interest in the new entity), (B)following such merger, consolidation, amalgamation or replacement, neither the Trust nor suchsuccessor entity will be required to register as an investment company under the 1940 Act, (C)following such merger, consolidation, amalgamation or replacement, the Trust (or such successortrust) will not be classified as an association or a publicly traded partnership taxable as acorporation for United States federal income tax purposes and (D) following such merger,consolidation, amalgamation or replacement, the Partnership will not be classified as anassociation or a publicly traded partnership taxable as a corporation for United States federalincome tax purposes. Notwithstanding the foregoing, the Trust shall not, except with the consent ofholders of 100% in liquidation amount of the Trust Preferred Securities, consolidate, amalgamate,merge with or into, or be replaced by any other entity or permit any other entity to consolidate,amalgamate, merge with or into, or replace it, if such consolidation, amalgamation, merger orreplacement would cause the Trust or the successor entity to be classified as an association or apublicly traded partnership taxable as a corporation for United States federal income tax purposes.MODIFICATION OF THE DECLARATIONThe declaration may be modified and amended if approved by a majority of the Regular Trustees(and in certain circumstances the Property Trustee and the Delaware Trustee), provided, that if anyproposed amendment provides for, or the Regular Trustees otherwise propose to effect, (i) anyaction that would adversely affect the powers, preferences or special rights of the TrustSecurities, whether by way of amendment to the declaration or otherwise or (ii) the dissolution,winding-up or termination of the Trust other than pursuant to the terms of the declaration, thenthe holders of the Trust Securities voting together as a single class will be entitled to vote onsuch amendment or proposal and such amendment or proposal shall not be effective except with theapproval of at least a majority in liquidation amount of the Trust Securities affected thereby;provided, further that if any amendment or proposal referred to in clause (i) above would adverselyaffect only the Trust Preferred Securities or the Trust Common Securities, then only the affectedclass will be entitled to vote on such amendment or proposal and such amendment or proposal shallnot be effective except with the approval of a majority in liquidation amount of such class ofTrust Securities.The declaration may be amended without the consent of the holders of the Trust Securities to(i) cure any ambiguity, (ii) correct or supplement any provision in the declaration that may bedefective or inconsistent with any other provision of the declaration, (iii) add to the covenants,restrictions or obligations of the Sponsor, (iv) conform to any change in the 1940 Act, the TrustIndenture Act or the rules or regulations of either such Act and (v) modify, eliminate and add toany provision of the declaration to such extent as may be necessary or desirable; provided that nosuch amendment shall have a material adverse effect on the rights, preferences or privileges of theholders of the Trust Securities.Notwithstanding the foregoing, no amendment or modification may be made to the declaration ifsuch amendment or modification would (i) cause the Trust to fail to be classified as a grantortrust for United States federal income tax purposes, (ii) cause the Partnership to be classified asan association or publicly traded partnership taxable as a corporation for such purposes, (iii)reduce or otherwise adversely affect the powers of the Property Trustee or (iv) cause the Trust orthe Partnership to be deemed an “investment company” which is required to be registered under the1940 Act.BOOK-ENTRY ONLY ISSUANCE — THE DEPOSITORY TRUST COMPANYThe Depository Trust Company (“DTC”) will act as securities depository (the “Depository”) forthe Trust Preferred Securities and, to the extent distributed to the holders of Trust PreferredSecurities, the Partnership Preferred Securities. The Trust Preferred Securities will be issuedonly as fully-registered securities registered in the name of Cede & Co. (DTC’s nominee). One ormore fully-registered global Trust Preferred Securities certificates (“Global Certificates”),representing the total aggregate number of Trust Preferred Securities, will be issued and will bedeposited with DTC.
 
 

 
DTC is a limited-purpose trust company organized under the New York Banking Law, a “bankingorganization” within the meaning of the New York Banking Law, a member of the Federal ReserveSystem, 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. DTCholds securities that its participants (“Participants”) deposit with DTC. DTC also facilitates thesettlement among Participants of securities transactions, such as transfers and pledges, indeposited securities through electronic computerized book-entry changes in Participants’ accounts,thereby eliminating the need for physical movement of securities certificates. Participants in DTCinclude securities brokers and dealers, banks, trust companies, clearing corporations and certainother organizations. DTC is owned by a number of its Participants and by The New York StockExchange, Inc., the American Stock Exchange, Inc., and the National Association of SecuritiesDealers, Inc. Access to the DTC system is also available to others such as securities brokers anddealers, banks and trust companies that clear through or maintain a custodial relationship with aParticipant, either directly or indirectly (“Indirect Participants”). The rules applicable to DTCand its Participants are on file with the Commission.Purchases of Trust Preferred Securities within the DTC system must be made by or throughParticipants, which will receive a credit for the Trust Preferred Securities on DTC’s records. Theownership interest of each actual purchaser of Trust Preferred Securities (“Beneficial Owner”) isin turn to be recorded on the Participants’ and Indirect Participants’ records. Beneficial Ownerswill not receive written confirmation from DTC of their purchases, but Beneficial Owners areexpected to receive written confirmations providing details of the transactions, as well asperiodic statements of their holdings, from the Participants or Indirect Participants through whichthe Beneficial Owners purchased Trust Preferred Securities. Transfers of ownership interests in theTrust Preferred Securities are to be accomplished by entries made on the books of Participants andIndirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receivecertificates representing their ownership interests in Trust Preferred Securities, except in theevent that use of the book-entry system for the Trust Preferred Securities is discontinued.DTC has no knowledge of the actual Beneficial Owners of the Trust Preferred Securities; DTC’srecords reflect only the identity of the Participants to whose accounts such Trust PreferredSecurities are credited, which may or may not be the Beneficial Owners. The Participants andIndirect Participants will remain responsible for keeping account of their holdings on behalf oftheir customers.So long as DTC, or its nominee, is the registered owner or holder of a Global Certificate, DTCor such nominee, as the case may be, will be considered the sole owner or holder of the TrustPreferred Securities represented thereby for all purposes under the declaration and the TrustPreferred Securities. No beneficial owner of an interest in a Global Certificate will be able totransfer that interest except in accordance with DTC’s applicable procedures, in addition to thoseprovided for under the declaration.DTC has advised the Company that it will take any action permitted to be taken by a holder ofTrust Preferred Securities (including the presentation of Trust Preferred Securities for exchangeas described below) only at the direction of one or more Participants to whose account the DTCinterests in the Global Certificates are credited and only in respect of such portion of theaggregate liquidation amount of Trust Preferred Securities as to which such Participant orParticipants has or have given such direction. Also, if there is a Trust Enforcement Event underthe Trust Preferred Securities, DTC will exchange the Global Certificates for CertificatedSecurities, which it will distribute to its Participants in accordance with its customaryprocedures.Conveyance of notices and other communications by DTC to Participants, by Participants toIndirect Participants, and by Participants and Indirect Participants to Beneficial Owners will begoverned by arrangements among them, subject to any statutory or regulatory requirements as may bein effect from time to time.
 
 

 
Redemption notices in respect of the Trust Preferred Securities held in book-entry form willbe sent to Cede & Co. If less than all of the Trust Preferred Securities are being redeemed, DTCwill determine the amount of the interest of each Participant to be redeemed in accordance with itsprocedures.Although voting with respect to the Trust Preferred Securities is limited, in those caseswhere a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect toTrust Preferred Securities. Under its usual procedures, DTC would mail an Omnibus Proxy to theTrust as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consentingor voting rights to those Participants to whose accounts the Trust Preferred Securities areallocated on the record date (identified in a listing attached to the Omnibus Proxy).Distributions on the Trust Preferred Securities held in book-entry form will be made to DTC inimmediately available funds. DTC’s practice is to credit Participants’ accounts on the relevantpayment date in accordance with their respective holdings shown on DTC’s records unless DTC hasreason to believe that it will not receive payments on such payment date. Payments by Participantsand Indirect Participants to Beneficial Owners will be governed by standing instructions andcustomary practices and will be the responsibility of such Participants and Indirect Participantsand not of DTC, the Trust or the Company, subject to any statutory or regulatory requirements asmay be in effect from time to time. Payment of any distributions to DTC is the responsibility ofthe Trust, disbursement of such payments to Participants is the responsibility of DTC, anddisbursement of such payments to the Beneficial Owners is the responsibility of Participants andIndirect Participants.Except as described, a Beneficial Owner of an interest in a Global Certificate will not beentitled to receive physical delivery of Trust Preferred Securities. Accordingly, each BeneficialOwner must rely on the procedures of DTC to exercise any rights under the Trust PreferredSecurities.Although DTC has agreed to the foregoing procedures in order to facilitate transfers ofinterests in the Global Certificates among Participants of DTC, DTC is under no obligation toperform or continue to perform such procedures, and such procedures may be discontinued at anytime. Neither the Company nor the Trust will have any responsibility for the performance by DTC orits Participants or Indirect Participants under the rules and procedures governing DTC. DTC maydiscontinue providing its services as securities depository with respect to the Trust PreferredSecurities at any time by giving notice to the Trust. Under such circumstances, in the event that asuccessor securities depository is not obtained, Trust Preferred Security certificates are requiredto be printed and delivered to the Property Trustee. Additionally, the Trust (with the consent ofthe Company) may decide to discontinue use of the system of book-entry transfers through DTC or anysuccessor depository. In that event, certificates for the Trust Preferred Securities will beprinted and delivered to the Property Trustee. In each of the above circumstances, the Company willappoint a paying agent with respect to the Trust Preferred Securities.The laws of some jurisdictions require that certain purchasers of securities take physicaldelivery of securities in definitive form. Such laws may impair the ability to transfer beneficialinterests in the global Trust Preferred Securities as represented by a Global Certificate.PAYMENTPayments in respect of the Trust Preferred Securities represented by the Global Certificatesshall be made to DTC, which shall credit the relevant accounts at DTC on the scheduled paymentdates or, in the case of certificated securities, if any, such payments shall be made by checkmailed to the address of the holder entitled thereto as such address shall appear on the register.The Paying Agent shall be permitted to resign as Paying Agent upon 30 days written notice to theRegular Trustees. In the event that The Chase Manhattan Bank shall no longer be the Paying Agent,the Regular Trustees shall appoint a successor to act as Paying Agent (which shall be a bank ortrust company).
 
 

 
REGISTRAR, TRANSFER AGENT, AND PAYING AGENTThe Property Trustee will act as Registrar, Transfer Agent and Paying Agent for the TrustPreferred Securities.Registration of transfers of Trust Preferred Securities will be effected without charge by oron behalf of the Trust, but upon payment (with the giving of such indemnity as the Trust or theCompany may require) in respect of any tax or other government charges which may be imposed inrelation to it.The Trust will not be required to register or cause to be registered the transfer of TrustPreferred Securities after such Trust Preferred Securities have been called for redemption.INFORMATION CONCERNING THE PROPERTY TRUSTEEThe Property Trustee, prior to the occurrence of a default with respect to the TrustSecurities, undertakes to perform only such duties as are specifically set forth in the declarationand, after default, shall exercise the same degree of care as a prudent individual would exercisein the conduct of his or her own affairs. Subject to such provisions, the Property Trustee is underno obligation to exercise any of the powers vested in it by the declaration at the request of anyholder of Trust Preferred Securities, unless offered reasonable indemnity by such holder againstthe costs, expenses and liabilities which might be incurred thereby. The holders of Trust PreferredSecurities will not be required to offer such indemnity in the event such holders, by exercisingtheir voting rights, direct the Property Trustee to take any action following a Trust EnforcementEvent.GOVERNING LAWThe declaration and the Trust Preferred Securities will be governed by, and construed inaccordance with, the internal laws of the State of Delaware.MISCELLANEOUSThe Regular Trustees are authorized and directed to conduct the affairs of and to operate theTrust in such a way that the Trust will not be deemed to be an “investment company” required to beregistered under the 1940 Act or characterized as other than a grantor trust for United Statesfederal income tax purposes. In this connection, the Regular Trustees are authorized to take anyaction, not inconsistent with applicable law, the certificate of trust or the declaration that theRegular Trustees determine in their discretion to be necessary or desirable for such purposes aslong as such action does not adversely affect the interests of the holders of the Trust PreferredSecurities.Holders of the Trust Preferred Securities have no preemptive rights.
 
 

 
DESCRIPTION OF THE TRUST GUARANTEESet forth below is a summary of information concerning the Trust Guarantee which will beexecuted and delivered by the Company for the benefit of the holders from time to time of TrustPreferred Securities. The summary does not purport to be complete and is subject in all respects tothe provisions of, and is qualified in its entirety by reference to, the Trust Guarantee, which isfiled as an exhibit to the registration statement of which this prospectus is a part. The TrustGuarantee incorporates by reference the terms of, and will be qualified as an indenture under, theTrust Indenture Act. The Chase Manhattan Bank, as the Trust Guarantee Trustee, will hold the TrustGuarantee for the benefit of the holders of the Trust Preferred Securities and will act asindenture trustee for the purposes of compliance with the Trust Indenture Act.GENERALPursuant to the Trust Guarantee, the Company will irrevocably agree, on a subordinated basisand to the extent set forth therein, to pay in full to the holders of the Trust PreferredSecurities (except to the extent paid by the Trust), as and when due, regardless of any defense,right of set off or counterclaim which the Trust may have or assert, the following payments (the“Trust Guarantee Payments”), without duplication: (i) any accumulated and unpaid distributions onthe Trust Preferred Securities to the extent the Trust has funds available therefor, (ii) theRedemption Price with respect to any Trust Preferred Securities called for redemption by the Trust,to the extent the Trust has funds available therefor and (iii) upon a voluntary or involuntarydissolution, winding-up or termination of the Trust (other than in connection with the distributionof Partnership Preferred Securities to the holders of Trust Preferred Securities or the redemptionof all of the Trust Preferred Securities), the lesser of (a) the aggregate of the liquidationamount and all accumulated and unpaid distributions on the Trust Preferred Securities and (b) theamount of assets of the Trust remaining available for distribution to holders of Trust PreferredSecurities upon the liquidation of the Trust. The Company’s obligation to make a Trust GuaranteePayment may be satisfied by direct payment of the required amounts by the Company to the holders ofTrust Preferred Securities or by causing the Trust to pay such amounts to such holders.The Trust Guarantee will be a guarantee on a subordinated basis with respect to the TrustPreferred Securities from the time of issuance of such Trust Preferred Securities but will onlyapply to any payment of distributions or Redemption Price, or to payments upon the dissolution,winding-up or termination of the Trust, to the extent the Trust shall have funds availabletherefor. If the Partnership fails to declare distributions on Partnership Preferred Securities,the Trust would lack available funds for the payment of distributions or amounts payable onredemption of the Trust Preferred Securities or otherwise, and in such event holders of the TrustPreferred Securities would not be able to rely upon the Trust Guarantee for payment of suchamounts. Instead, holders of the Trust Preferred Securities will have the remedies described hereinunder “Description of the Trust Preferred Securities — Trust Enforcement Events”, including theright to direct the Trust Guarantee Trustee to enforce the covenant restricting certain payments bythe Company and Finance Subsidiaries. See “— Covenants of the Company” below.The Guarantees, when taken together with the Company Debenture and the Company’s obligationsto pay all fees and expenses of the Trust and the Partnership, constitute a guarantee to the extentset forth herein by the Company of the distribution, redemption and liquidation payments payable tothe holders of the Trust Preferred Securities. The Guarantees do not apply, however, to currentdistributions by the Partnership unless and until such distributions are declared by thePartnership out of funds legally available for payment or to liquidating distributions unless thereare assets available for payment in the Partnership, each as more fully described under “RiskFactors — Insufficient Income or Assets Available to Partnership”.
 
 

 
COVENANTS OF THE COMPANYThe Company will covenant in the Trust Guarantee that, if (a) for any distribution period,full distributions on a cumulative basis on any Trust Preferred Securities have not been paid, (b)an Investment Event of Default by any Investment Affiliate in respect of any Affiliate InvestmentInstrument has occurred and is continuing or (c) the Company is in default of its obligations underthe Trust Guarantee, the Partnership Guarantee or any Investment Guarantee,then, during such period (i) the Company shall not declare or pay dividends on, make distributionswith respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, anyof its capital stock or comparable equity interest (except for (x) dividends or distributions inshares of, or options, warrants or rights to subscribe for or purchase shares of, its capitalstock, and conversions or exchanges of common stock of one class into common stock of anotherclass, (y) redemptions or purchases of any rights pursuant to the Rights Agreement and the issuanceof preferred stock pursuant to such rights and (z) purchases or acquisitions by the Company or itsaffiliates in connection with transactions effected by or for the account of customers of theCompany or any of its subsidiaries or in connection with the distribution or trading of suchcapital stock or comparable equity interest) and (ii) the Company shall not make, permit anyFinance Subsidiary to make, or make any payments that would enable any Finance Subsidiary to make,any payment of any dividends on, any distribution with respect to, or any redemption, purchase orother acquisition of, or any liquidation payment with respect to, any preferred security orcomparable equity interest of any Finance Subsidiary.EVENTS OF DEFAULT; ENFORCEMENT OF TRUST GUARANTEEAn event of default under the Trust Guarantee will occur upon the failure of the Company toperform any of its payment or other obligations thereunder.The holders of a majority in liquidation amount of the Trust Preferred Securities have theright to direct the time, method and place of conducting any proceeding for any remedy available tothe Trust Guarantee Trustee or to direct the exercise of any trust or power conferred upon theTrust Guarantee Trustee under the Trust Guarantee. If the Trust Guarantee Trustee fails to enforceits rights under the Trust Guarantee after a holder of Trust Preferred Securities has made awritten request, such holder may institute a legal proceeding directly against the Company toenforce the Trust Guarantee Trustee’s rights under the Trust Guarantee, without first instituting alegal proceeding against the Trust, the Trust Guarantee Trustee or any other person or entity. Inany event, if the Company has failed to make a guarantee payment under the Trust Guarantee, aholder of Trust Preferred Securities may directly institute a proceeding in such holder’s own nameagainst the Company for enforcement of the Trust Guarantee for such payment.STATUS OF THE TRUST GUARANTEE; SUBORDINATIONThe Trust Guarantee will constitute an unsecured obligation of the Company and will ranksubordinate and junior in right of payment to all other liabilities of the Company and will rankpari passu with the most senior preferred stock, if any, issued from time to time by the Company,with similar guarantees issued by the Company in connection with the $275,000,000 aggregateliquidation amount of 7 3/4% Trust Originated Preferred Securities issued by Merrill LynchPreferred Capital Trust I, the $300,000,000 aggregate liquidation amount of 8% Trust OriginatedPreferred Securities issued by Merrill Lynch Preferred Capital Trust II, the $750,000,000 aggregateliquidation amount of 7% Trust Originated Preferred Securities issued by Merrill Lynch PreferredCapital Trust III, the $400,000,000 aggregate liquidation amount of 7.12% Trust OriginatedPreferred Securities issued by Merrill Lynch Preferred Capital Trust IV and with any guarantee nowor hereafter entered into by the Company in respect of any preferred stock of any other FinanceSubsidiary. “Finance Subsidiary” means Merrill Lynch Preferred Capital Trust I, Merrill LynchPreferred Capital Trust II, Merrill Lynch Preferred Capital Trust III, Merrill Lynch PreferredCapital Trust IV and any other wholly-owned subsidiary of the Company the principal purpose ofwhich is to raise capital for the Company by issuing securities that are guaranteed by the Companyand the proceeds of which are loaned to or invested in the Company or one or more of itsaffiliates. Accordingly, the rights of the holders of Trust Preferred Securities to receivepayments under the Trust Guarantee will be subject to the rights of the holders of any obligationsof the Company that are senior in priority to the obligations under the Trust Guarantee.Furthermore, the holders of obligations of the Company that are senior to the obligations under theTrust Guarantee (including, but not limited to, obligations constituting Senior Indebtedness) willbe entitled to the same rights upon payment default or dissolution, liquidation and reorganizationin respect of the Trust Guarantee that inure to the holders of Senior Indebtedness as against theholders of the Company Debenture. The terms of the Trust Preferred Securities provide that eachholder of Trust Preferred Securities, by acceptance thereof, agrees to the subordination provisionsand other terms of the Trust Guarantee.
 
 

 
The Trust Guarantee will constitute a guarantee of payment and not of collection (that is, theguaranteed party may directly institute a legal proceeding against the Company to enforce itsrights under the Trust Guarantee without instituting a legal proceeding against any other person orentity).AMENDMENTS AND ASSIGNMENTExcept with respect to any changes that do not materially adversely affect the rights ofholders of Trust Preferred Securities (in which case no vote will be required), the Trust Guaranteemay be amended only with the prior approval of the holders of at least a majority in liquidationamount of all the outstanding Trust Preferred Securities. The manner of obtaining any such approvalof holders of the Trust Preferred Securities will be as set forth under “Description of the TrustPreferred Securities — Voting Rights”. All guarantees and agreements contained in the TrustGuarantee shall bind the successors, assigns, receivers, trustees and representatives of theCompany and shall inure to the benefit of the holders of the Trust Preferred Securities thenoutstanding. Except in connection with permitted merger or consolidation of the Company with orinto another entity or permitted sale, transfer or lease of the Company’s assets to another entityin which the surviving corporation (if other than the Company) assumes the Company’s obligationsunder the Trust Guarantee, the Company may not assign its rights or delegate its obligations underthe Trust Guarantee without the prior approval of the holders of at least a majority of theaggregate stated liquidation amount of the Trust Preferred Securities then outstanding.TERMINATION OF THE TRUST GUARANTEEThe Trust Guarantee will terminate as to each holder of Trust Preferred Securities upon (i)full payment of the Redemption Price of all Trust Preferred Securities, (ii) distribution of thePartnership Preferred Securities held by the Trust to the holders of the Trust Preferred Securitiesor (iii) full payment of the amounts payable in accordance with the Declaration upon liquidation ofthe Trust. The Trust Guarantee will continue to be effective or will be reinstated, as the case maybe, if at any time any holder of Trust Preferred Securities must restore payment of any sum paidunder such Trust Preferred Securities or such Trust Guarantee.INFORMATION CONCERNING THE TRUST GUARANTEE TRUSTEEThe Trust Guarantee Trustee, prior to the occurrence of a default with respect to the TrustGuarantee, undertakes to perform only such duties as are specifically set forth in the TrustGuarantee and, after default with respect to the Trust Guarantee, shall exercise the same degree ofcare as a prudent man would exercise in the conduct of his own affairs. Subject to such provision,the Trust Guarantee Trustee is under no obligation to exercise any of the powers vested in it bythe Trust Guarantee at the request of any holder of Trust Preferred Securities unless it is offeredreasonable indemnity against the costs, expenses and liabilities that might be incurred thereby.GOVERNING LAWThe Trust Guarantee will be governed by, and construed in accordance with, the internal lawsof the State of New York.
 
 

 
DESCRIPTION OF THE PARTNERSHIP PREFERRED SECURITIESGENERALAll of the partnership interests in the Partnership, other than the Partnership PreferredSecurities acquired by the Trust, are owned directly by the Company. Initially, the Company will bethe sole General Partner of the Partnership. The Limited Partnership Agreement authorizes andcreates the Partnership Preferred Securities, which represent limited partner interests in thePartnership. The limited partner interests represented by the Partnership Preferred Securities willhave a preference with respect to distributions and amounts payable on redemption or liquidationover the General Partner’s interest in the Partnership. Except as otherwise described herein orprovided in the Limited Partnership Agreement, the Limited Partnership Agreement does not permitthe issuance of any additional partnership interests, or the incurrence of any indebtedness by thePartnership.The summary of certain material terms and provisions of the Partnership Preferred Securitiesset forth below does not purport to be complete and is subject to, and qualified in its entirety byreference to, the Limited Partnership Agreement, which is filed as an exhibit to the registrationstatement of which this prospectus is a part, and the Partnership Act.DISTRIBUTIONSHolders of Partnership Preferred Securities will be entitled to receive cumulative cashdistributions, if, as and when declared by the General Partner in its sole discretion out of assetsof the Partnership legally available for payment. The distributions payable on each PartnershipPreferred Security will be fixed at a rate per annum of 7.28% of the stated liquidation preference of$25 per Partnership Preferred Security. Distributions not paid on the scheduled payment date willaccumulate and compound quarterly at the rate per annum equal to 7.28%. The amount of distributionspayable for any period will be computed on the basis of a 360-day year of twelve 30-day months.Distributions on the Partnership Preferred Securities will be payable quarterly in arrears onMarch 30, June 30, September 30, and December 30 of each year, commencing December 30, 1998. Ifdistributions are not declared and paid when scheduled, the accumulated distributions shall be paidto the holders of record of Partnership Preferred Securities as they appear on the books andrecords of the Partnership on the record date with respect to the payment date for the PartnershipPreferred Securities.The Partnership’s earnings available for distribution to the holders of the PartnershipPreferred Securities will be limited to payments made on the Affiliate Investment Instruments andInvestment Guarantees and payments on Eligible Debt Securities in which the Partnership hasinvested from time to time. See “— Partnership Investments”. To the extent that the issuers (and,where applicable, the Company, as guarantor) of the securities in which the Partnership investsfail to make any payment in respect of such securities (or, if applicable, such guarantees), thePartnership will not have sufficient funds to pay and will not declare or pay distributions on thePartnership Preferred Securities, in which event the Partnership Guarantee will not apply to suchdistributions until the Partnership has sufficient funds available therefor. See “Description ofthe Partnership Guarantee”. In addition, distributions on the Partnership Preferred Securities maybe declared and paid only as determined in the sole discretion of the General Partner of thePartnership. If the Partnership fails to declare and pay distributions on the Partnership PreferredSecurities out of funds legally available for distribution, the Trust will not have sufficientfunds to make distributions on the Trust Preferred Securities, in which event the Trust Guaranteewill not apply to such distributions until the Trust has sufficient funds available therefor. Inaddition, as described under “Risk Factors — Insufficient Income or Assets Available toPartnership”, the Partnership may not have sufficient funds to pay current or liquidatingdistributions on the Partnership Preferred Securities if (i) at any time that the Partnership isreceiving current payments in respect of the securities held by the Partnership (including theDebentures), the General Partner, in its sole discretion, does not declare distributions on thePartnership Preferred Securities and the Partnership receives insufficient amounts to pay theadditional compounded distributions that will accumulate in respect of the Partnership PreferredSecurities, (ii) the Partnership reinvests the proceeds received in respect of the Debentures upontheir retirement or at theirmaturities in Affiliate Investment Instruments that do not generate income in an amount that issufficient to pay full distributions in respect of the Partnership Preferred Securities or (iii)the Partnership invests in debt securities of Investment Affiliates that are not guaranteed by theCompany and that cannot be liquidated by the Partnership for an amount sufficient to pay suchdistributions in full.
 
 

 
Distributions on the Partnership Preferred Securities will be payable to the holders thereofas they appear on the books and records of the Partnership on the relevant record dates, which, aslong as the Trust Preferred Securities remain (or, in the event that the Trust is liquidated inconnection with a Trust Special Event, as long as the Partnership Preferred Securities remain) inbook-entry only form, will be one Business Day prior to the relevant payment dates. In the eventthe Trust Preferred Securities (or in the event that the Trust is liquidated in connection with aTrust Special Event, the Partnership Preferred Securities) shall not continue to remain inbook-entry only form, the relevant record dates shall be the 15th day of the month of the relevantpayment dates. In the event that any date on which distributions are payable on the PartnershipPreferred Securities is not a Business Day, then payment of the distribution payable on such datewill be made on the next succeeding day that is a Business Day (and without any interest or otherpayment in respect of any such delay) except that, if such Business Day is in the next succeedingcalendar year, such payment shall be made on the immediately preceding Business Day, in each casewith the same force and effect as if made on such date.PARTNERSHIP ENFORCEMENT EVENTSIf one or more of the following events shall occur and be continuing (each a “PartnershipEnforcement Event”): (i) arrearages on distributions on the Partnership Preferred Securities shallexist for six consecutive quarterly distribution periods, (ii) the Company is in default on any ofits obligations under the Partnership Guarantee or any Investment Guarantee or (iii) an InvestmentEvent of Default occurs and is continuing on any Affiliate Investment Instrument, then the PropertyTrustee, for so long as the Partnership Preferred Securities are held by the Property Trustee, willhave the right, or holders of the Partnership Preferred Securities will be entitled by the vote ofa majority in aggregate liquidation preference of such holders (a) under the Limited PartnershipAgreement to enforce the terms of the Partnership Preferred Securities, including the right toappoint and authorize a special representative of the Partnership and the limited partners (a“Special Representative”) to enforce (1) the Partnership’s creditors’ rights and other rights withrespect to the Affiliate Investment Instruments and the Investment Guarantees, (2) the rights ofthe holders of the Partnership Preferred Securities under the Partnership Guarantee and (3) therights of the holders of the Partnership Preferred Securities to receive distributions (only if andto the extent declared out of funds legally available therefor) on the Partnership PreferredSecurities, and (b) under the Partnership Guarantee to enforce the terms of the PartnershipGuarantee, including the right to enforce the covenant restricting certain payments by the Companyand Finance Subsidiaries.If the Special Representative fails to enforce its rights under the Affiliate InvestmentInstruments after a holder of Partnership Preferred Securities has made a written request, suchholder of record of Partnership Preferred Securities may directly institute a legal proceedingagainst the Company to enforce the rights of the Special Representative and the Partnership underthe Affiliate Investment Instruments without first instituting any legal proceeding against theSpecial Representative, the Partnership or any other person or entity. In any event, if aPartnership Enforcement Event has occurred and is continuing and such event is attributable to thefailure of an Investment Affiliate to make any required payment when due on any AffiliateInvestment Instrument, then a holder of Partnership Preferred Securities may on behalf of thePartnership directly institute a proceeding against such Investment Affiliate with respect to suchAffiliate Investment Instrument for enforcement of payment. A holder of Partnership PreferredSecurities may also bring a direct action against the Company to enforce such holder’s right underthe Partnership Guarantee. See “Description of the Partnership Guarantee — Events of Default;Enforcement of Partnership Guarantee”.
 
 

 
Under no circumstances, however, shall the Special Representative have authority to cause theGeneral Partner to declare distributions on the Partnership Preferred Securities. As a result,although the Special Representative may be able to enforce the Partnership’s creditors’ rights toaccelerate and receive payments in respect of the Affiliate Investment Instruments andthe Investment Guarantees, the Partnership would be entitled to reinvest such payments inadditional Affiliate Investment Instruments, subject to satisfying the reinvestment criteriadescribed under “— Partnership Investments”, and Eligible Debt Securities, rather than declaringand making distributions on the Partnership Preferred Securities. The Special Representative shallnot, by virtue of acting in such capacity, be admitted as a general partner in the Partnership orotherwise be deemed to be a general partner in the Partnership and shall have no liability for thedebts, obligations or liabilities of the Partnership.PARTNERSHIP INVESTMENTSApproximately 99% of the proceeds from the issuance of the Partnership Preferred Securitiesand the General Partner’s contemporaneous capital contribution (the “Initial Partnership Proceeds”)will be used by the Partnership to purchase the Debentures and the remaining 1% of the InitialPartnership Proceeds will be used to purchase Eligible Debt Securities. The purchase of theDebentures by the Partnership will occur contemporaneously with the issuance of the PartnershipPreferred Securities.The initial Affiliate Investment Instruments purchased by the Partnership will consist of twoor more debt instruments (the “Debentures”). The Company anticipates that approximately 85% of theInitial Partnership Proceeds will be used to purchase a Debenture of the Company (the “CompanyDebenture”), and approximately 14% of the Initial Partnership Proceeds will be used to purchaseDebentures of one or more eligible controlled affiliates of the Company (the “AffiliateDebentures”). Each Debenture is expected to have a term of 20 years and to provide for interestpayable on March 30, June 30, September 30 and December 30 of each year, commencing December 30,1998, at market rates for such Debentures. The Debentures will be general unsecured debtobligations of the relevant issuer, except that the Company Debenture will rank subordinate andjunior to all Senior Indebtedness of the Company.The payment of interest on each of the Debentures may be deferred at any time, and from timeto time, by the relevant issuer for a period not exceeding six consecutive quarters. If an issuerwere to so defer the payment of interest, interest would continue to accrue and compound at thestated interest rate on such Debenture. The Debentures will contain covenants appropriate forunsecured debt securities issued or guaranteed by similar borrowers pursuant to a public offeringor private placement under Rule 144A of the Securities Act of a comparable debt security, includinga limitation on consolidation, merger and sale or conveyance of assets. The Debentures will containredemption provisions that correspond to the redemption provisions applicable to the PartnershipPreferred Securities, including an option to redeem the Debentures by the relevant issuer, in wholeor in part, from time to time, on or after September 30, 2008, and following the occurrence of aPartnership Special Event, in each case, in the same manner described under “— OptionalRedemption” and “— Partnership Special Event Redemption”. The Debentures, and any other AffiliateInvestment Instruments that are debt instruments acquired by the Partnership in the future, willalso contain customary events of default (the “Investment Events of Default”), including events ofdefault for defaults in payments on such securities when due (provided that no default shall occurupon a valid deferral of an interest payment by an issuer), defaults in the performance of therelevant issuer’s obligations under its Debenture or Affiliate Investment Instruments, as the casemay be, and certain bankruptcy, insolvency or reorganization events (subject to customaryexceptions and grace periods).The payment of interest and principal when due and other payment terms of the Debentures(other than the Company Debenture), will be guaranteed to the extent described herein (each, an“Investment Guarantee”) by the Company for the benefit of the holders of Partnership PreferredSecurities. See “—  Investment Guarantees”.Approximately 1% of the Initial Partnership Proceeds will be invested in Eligible DebtSecurities. “Eligible Debt Securities” means cash or book-entry securities, negotiable instruments,or other securities of entities not affiliated with the Company which evidence any of thefollowing: (a) any security issued or guaranteed as to principal or interest by the United States,or by a person controlled or supervised by and acting as an instrumentality of the Government ofthe United States pursuant to authority granted by the Congress of the United States, or anycertificate of deposit for any of the foregoing; (b) commercial paper issued pursuant to Section3(a)(3) of the Securities Act and having, at the time of the investment or contractual commitmentto invest therein, a rating
 
 

 
from each of Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc. (“S&P”) and Moody’s Investors Service, Inc.(“Moody’s”) in the highest investment rating category granted by such rating agency and having amaturity not in excess of nine months; (c) demand deposits, time deposits and certificates ofdeposit which are fully insured by the Federal Deposit Insurance Corporation (“FDIC”); (d)repurchase obligations with respect to any security that is a direct obligation of, or fullyguaranteed by, the Government of the United States of America or any agency or instrumentalitythereof, the obligations of which are backed by the full faith and credit of the United States ofAmerica, in either case entered into with a depository institution or trust company which is anEligible Institution (as defined herein) and the deposits of which are insured by the FDIC; and (e)any other security which is identified as a permitted investment of a finance subsidiary pursuantto Rule 3a-5 under the 1940 Act at the time it is acquired by the Partnership.“Eligible Institution” means (a) a depository institution organized under the laws of theUnited States or any one of the states thereof or the District of Columbia (or any domestic branchof a foreign bank), (1) (i) which has either (A) a long-term unsecured debt rating of AA or betterby S&P and Aa or better by Moody’s or (B) a short-term unsecured debt rating or a certificate ofdeposit rating of A-1+ by S&P and P-1 by Moody’s and (ii) whose deposits are insured by the FDIC or(2) (i) the parent of which has a long-term or short- term unsecured debt rating which signifiesinvestment grade and (ii) whose deposits are insured by the FDIC.The Partnership may, from time to time and subject to the restrictions described below,reinvest payments received with respect to the Affiliate Investment Instruments (including theDebentures) and the Eligible Debt Securities in additional Affiliate Investment Instruments andEligible Debt Securities. As of the date of this Prospectus, the Company, as the General Partner,does not intend to cause the Partnership to reinvest regularly scheduled, periodic payments ofinterest or dividends received by the Partnership in the manner described below, although there canbe no assurance that the General Partner’s intention in respect of such reinvestments will notchange in the future.The fairness of specific terms of all Affiliate Investment Instruments (including theDebentures) will be passed upon by a nationally recognized accounting firm, bank or investmentbanking firm that does not (and whose directors, officers, employees and affiliates do not) have adirect or indirect material equity interest in the Company or any of its subsidiaries (the“Independent Financial Advisor”).The Partnership may reinvest in additional Affiliate Investment Instruments only if certainprocedures and criteria are satisfied with respect to each such Affiliate Investment Instrument,including the satisfaction of the following conditions: (i) the Partnership did not hold debtsecurities of the issuer of the proposed Affiliate Investment Instrument within the three-yearperiod ending on the date of such proposed investment; (ii) there was never a default on any debtobligation of, or arrearages of dividends on preferred stock issued by, the issuer of the proposedAffiliate Investment Instrument that was previously or is currently owned by the Partnership; (iii)the applicable terms and provisions with respect to the proposed Affiliate Investment Instrumenthave been determined by the Independent Financial Advisor to be at least as favorable as termswhich could be obtained by the Partnership in a public offering or private placement under Rule144A of the Securities Act of a comparable security issued by the relevant Investment Affiliate andguarantees, if any, included therein; and (iv) the requesting Investment Affiliate shall not bedeemed to be an investment company by reason of Section 3(a) or 3(b) of the 1940 Act or isotherwise an eligible recipient of funds directly or indirectly from the Trust pursuant to an orderissued by the Commission. The term “Investment Affiliate” means the Company or any corporation,partnership, limited liability company or other entity (other than the Partnership or the Trust)that is controlled by the Company. If the Partnership is unable to reinvest payments and proceedsfrom Affiliate Investment Instruments in additional Affiliate Investment Instruments meeting theabove criteria, the Partnership may only invest such funds in Eligible Debt Securities (subject torestrictions of applicable law, including the 1940 Act).
 
 

 
INVESTMENT GUARANTEESGENERALThe Company will agree to execute and deliver an Investment Guarantee, on a subordinatedbasis, for the benefit of the holders of Partnership Preferred Securities with respect to eachDebenture issued by an Investment Affiliate (other than the Company Debenture) to the extent setforth below. The Investment Guarantees shall be enforceable regardless of any defense, right ofset-off or counterclaim that the Company may have or assert. The Investment Guarantees will be fulland unconditional guarantees, to the extent set forth therein, with respect to the applicableDebentures from the time of issuance. To the extent that, as described above, the Partnershipinvests in additional Affiliate Investment Instruments, the determination as to whether suchAffiliate Investment Instrument will contain an Investment Guarantee will be made at the date ofits issuance and will be based, among other things, upon its approval by the Independent FinancialAdvisor in accordance with the reinvestment criteria described above.The Investment Guarantees will constitute guarantees of payment and not of collection (thatis, the guaranteed party may directly institute a legal proceeding against the Company to enforceits rights under the applicable Investment Guarantee without instituting a legal proceeding againstany other person or entity). If no Special Representative has been appointed to enforce anyInvestment Guarantee, the General Partner has the right to enforce such Investment Guarantee onbehalf of the holders of the Partnership Preferred Securities. The holders of not less than amajority in aggregate liquidation preference of the Partnership Preferred Securities have the rightto direct the time, method and place of conducting any proceeding for any remedy available inrespect of any Investment Guarantee, including the giving of directions to the General Partner orthe Special Representative, as the case may be. If the General Partner or the SpecialRepresentative fails to enforce any Investment Guarantee as above provided, any holder of TrustPreferred Securities may institute its own legal proceeding to enforce such Investment Guarantee.No Investment Guarantee will be discharged except by payment in full of all amounts guaranteed bysuch Investment Guarantee (without duplication of amounts theretofore paid by the relevantInvestment Affiliate).AMENDMENTS AND ASSIGNMENTExcept with respect to any changes that do not adversely affect the rights of holders ofPartnership Preferred Securities (in which case no consent will be required), the InvestmentGuarantees may be amended only with the prior approval of the holders of not less than a majorityin liquidation preference of the outstanding Partnership Preferred Securities, provided that for solong as the Property Trustee of the Trust is the holder of the Partnership Preferred Securities,such amendment will not be effective without the prior written approval of a majority inliquidation amount of the outstanding Trust Preferred Securities. All guarantees and agreementscontained in the Investment Guarantees shall bind the successors, assigns, receivers, trustees andrepresentatives of the Company and shall inure to the benefit of the holders of PartnershipPreferred Securities. Except in connection with any permitted merger or consolidation of theCompany with or into another entity or any permitted sale, transfer or lease of the Company’sassets to another entity in which the surviving corporation (if other than the Company) assumes theCompany’s obligations under the Investment Guarantees, the Company may not assign its rights ordelegate its obligations under the Investment Guarantees without the prior approval of the holdersof at least a majority of the aggregate stated liquidation preference of the Partnership PreferredSecurities then outstanding.STATUS OF THE INVESTMENT GUARANTEESThe Company’s obligations under the Investment Guarantees will constitute unsecuredobligations of the Company and will rank subordinate and junior in right of payment to all otherliabilities of the Company and will rank pari passu with the most senior preferred stock, if any,issued from time to time by the Company, with similar guarantees issued by the Company inconnection with the $275,000,000 aggregate liquidation amount of 7 3/4% Trust Originated PreferredSecurities issued by Merrill Lynch Preferred Capital Trust I, the $300,000,000 aggregateliquidation amount of 8% Trust Originated Preferred Securities issued by Merrill Lynch PreferredCapital Trust II, the $750,000,000 aggregate liquidation amount of 7% Trust Originated PreferredSecurities issued by Merrill Lynch Preferred Capital Trust III, the $400,000,000 aggregateliquidation amount of 7.12% Trust Originated Preferred Securities issued by Merrill Lynch PreferredCapital Trust IV and with any guarantee now or hereafter entered into by the Company in respect ofany preferred stock of any other Finance Subsidiary. Accordingly, the rights of the holders of theDebentures to receive
 
 

 
 payments under the Investment Guarantees will be subject to the rights of the holders of any obligations that are senior in priority to theobligations under the Investment Guarantees. Furthermore, the holders of obligations of the Companythat are senior to the obligations under the Investment Guarantees (including, but not limited to,obligations constituting Senior Indebtedness) will be entitled to the same rights upon paymentdefault or dissolution, liquidation and reorganization in respect of the Investment Guarantees thatinure to the holders of Senior Indebtedness as against the holders of the Company Debenture. Theterms of the Debentures provide that each holder of Debentures, by acceptance thereof, agrees tothe subordination provisions and other terms of the Investment Guarantees.GOVERNING LAWThe Investment Guarantees will be governed by and construed in accordance with the internallaws of the State of New York.OPTIONAL REDEMPTIONThe Partnership Preferred Securities are redeemable, at the option of the General Partner, inwhole or in part, from time to time, on or after September 30, 2008, upon not less than 30 nor more than 60days notice, at an amount per Partnership Preferred Security equal to $25 plus accumulated andunpaid distributions thereon. If the Partnership redeems Partnership Preferred Securities inaccordance with the terms thereof, Trust Securities will be mandatorily redeemed at the RedemptionPrice. If a partial redemption would result in the delisting of the Trust Preferred Securities (or,if the Trust is liquidated in connection with a Trust Special Event, or if a partial redemptionwould result in the delisting of the Partnership Preferred Securities), the Partnership may onlyredeem the Partnership Preferred Securities in whole.PARTNERSHIP SPECIAL EVENT REDEMPTIONIf, at any time, a Partnership Tax Event or a Partnership Investment Company Event (each ashereinafter defined, and each a “Partnership Special Event”) shall occur and be continuing, theGeneral Partner shall, within 90 days following the occurrence of such Partnership Special Event,elect to either (i) redeem the Partnership Preferred Securities in whole (but not in part), uponnot less than 30 or more than 60 days notice at the Redemption Price, provided that, if at the timethere is available to the Partnership the opportunity to eliminate, within such 90-day period, thePartnership Special Event by taking some ministerial action, such as filing a form or making anelection, or pursuing some other similar reasonable such measure that in the sole judgment of theCompany has or will cause no adverse effect on the Partnership, the Trust or the Company, theGeneral Partner will pursue such measure in lieu of redemption; or (ii) cause the PartnershipPreferred Securities to remain outstanding, provided that in the case of this clause (ii), theGeneral Partner shall pay any and all costs and expenses incurred by or payable by the Partnershipattributable to the Partnership Special Event.“Partnership Tax Event” means that the General Partner shall have requested and received anopinion of nationally recognized independent tax counsel experienced in such matters to the effectthat there has been a Tax Action which affects any of the events described in (i) through (iii)below and that there is more than an insubstantial risk that (i) the Partnership is, or will be,subject to United States federal income tax with respect to income accrued or received on theAffiliate Investment Instruments or the Eligible Debt Securities, (ii) the Partnership is, or willbe, subject to more than a de minimis amount of other taxes, duties or other governmental chargesor (iii) interest payable by an Investment Affiliate with respect to the Affiliate InvestmentInstrument issued by such Investment Affiliate to the Partnership is not, or will not be,deductible by such Investment Affiliate for United States federal income tax purposes.Recently, the IRS asserted that the interest payable on a security issued in circumstanceswith certain similarities to the issuance of the Debentures issued by the Investment Affiliates tothe Partnership was not deductible for United States federal income tax purposes. The taxpayer inthat case has filed a petition in the United States Tax Court challenging the IRS’s position onthis matter. If this matter were to be litigated and the Tax Court were to sustain the IRS’sposition on this matter, such judicial decision could constitute a Partnership Tax Event, whichcould result in an early redemption of the Partnership Preferred Securities.
 
 

 
“Partnership Investment Company Event” means that the General Partner shall have requested andreceived an opinion of nationally recognized independent legal counsel experienced in such mattersto the effect that as a result of the occurrence on or after the date hereof of a Change in 1940Act Law, the Partnership is or will be considered an “investment company” which is required to beregistered under the 1940 Act.REDEMPTION PROCEDURESThe Partnership may not redeem fewer than all the outstanding Partnership Preferred Securitiesunless all accumulated and unpaid distributions have been paid on all Partnership PreferredSecurities for all quarterly distribution periods terminating on or prior to the date ofredemption.If the Partnership gives a notice of redemption in respect of Partnership Preferred Securities(which notice will be irrevocable) then, by 12:00 noon, New York City time, on the redemption date,the Partnership (i) if the Partnership Preferred Securities are in book entry form with DTC, willdeposit irrevocably with DTC funds sufficient to pay the applicable Redemption Price and will giveDTC irrevocable instructions and authority to pay the Redemption Price in respect of thePartnership Preferred Securities held through DTC in global form or (ii) if the PartnershipPreferred Securities are held in certificated form, will deposit with the paying agent for thePartnership Preferred Securities funds sufficient to pay such amount in respect of any PartnershipPreferred Securities in certificated form and will give such paying agent irrevocable instructionsand authority to pay such amounts to the holders of Partnership Preferred Securities upon surrenderof their certificates. See “Description of the Trust Preferred Securities — Book-Entry OnlyIssuance —  The Depository Trust Company”.If notice of redemption shall have been given and funds deposited as required, then upon thedate of such deposit, all rights of holders of such Partnership Preferred Securities so called forredemption will cease, except the right of the holders of such Partnership Preferred Securities toreceive the Redemption Price, but without interest on such Redemption Price. In the event that anydate fixed for redemption of Partnership Preferred Securities is not a Business Day, then paymentof the Redemption Price payable on such date will be made on the next succeeding day that is aBusiness Day (and without any interest or other payment in respect of any such delay) except that,if such Business Day falls in the next calendar year, such payment will be made on the immediatelypreceding Business Day, in each case with the same force and effect as if made on such date fixedfor redemption. In the event that payment of the Redemption Price in respect of PartnershipPreferred Securities is improperly withheld or refused and not paid either by the Partnership or bythe Company pursuant to the Partnership Guarantee described under “Description of the PartnershipGuarantee,” distributions on such Partnership Preferred Securities will continue to accumulate,from the original redemption date to the date of payment.Subject to the foregoing and applicable law (including, without limitation, United Statesfederal securities laws), the Company or any of its subsidiaries may at any time and from time totime purchase outstanding Partnership Preferred Securities by tender, in the open market or byprivate agreement.LIQUIDATION DISTRIBUTION UPON DISSOLUTIONIn the event of any voluntary or involuntary dissolution, winding-up or termination of thePartnership, the holders of the Partnership Preferred Securities at the time will be entitled toreceive out of the assets of the Partnership available for distribution to partners aftersatisfaction of liabilities of creditors as required by the Partnership Act, before anydistribution of assets is made to the General Partner, an amount equal to, in the case of holdersof Partnership Preferred Securities, the aggregate of the stated liquidation preference of $25 perPartnership Preferred Security plus accumulated and unpaid distributions thereon to the date ofpayment (such amount being the “Partnership Liquidation Distribution”).
 
 

 
Pursuant to the Limited Partnership Agreement, the Partnership shall be dissolved and itsaffairs shall be wound up: (i) upon the bankruptcy of the General Partner, (ii) upon the assignmentby the General Partner of its entire interest in the Partnership when the assignee is not admittedto the Partnership as a general partner of the Partnership in accordance with the LimitedPartnership Agreement, or the filing of a certificate of dissolution or its equivalentwith respect to the General Partner, or the revocation of the General Partner’s charter andthe expiration of 90 days after the date of notice to the General Partner of revocation without areinstatement of its charter, or if any other event occurs that causes the General Partner to ceaseto be a general partner of the Partnership under the Partnership Act, unless the business of thePartnership is continued in accordance with the Partnership Act, (iii) if the Partnership hasredeemed or otherwise purchased all the Partnership Preferred Securities, (iv) upon the entry of adecree of judicial dissolution or (v) upon the written consent of all partners of the Partnership.VOTING RIGHTSExcept as provided below and under “Description of the Partnership Guarantee — Amendments andAssignment” and as otherwise required by law and the Limited Partnership Agreement, the holders ofthe Partnership Preferred Securities will have no voting rights.Not later than 30 days after any Partnership Enforcement Event occurs, the General Partnerwill convene a meeting for the purpose of appointing a Special Representative. If the GeneralPartner fails to convene such meeting within such 30-day period, the holders of 10% in liquidationpreference of the outstanding Partnership Preferred Securities will be entitled to convene suchmeeting. The provisions of the Limited Partnership Agreement relating to the convening and conductof the meetings of the partners will apply with respect to any such meeting. In the event that, atany such meeting, holders of less than a majority in aggregate liquidation preference ofPartnership Preferred Securities entitled to vote for the appointment of a Special Representativevote for such appointment, no Special Representative shall be appointed. Any Special Representativeappointed shall cease to be a Special Representative of the Partnership and the limited partners if(1) the Partnership (or the Company pursuant to the Partnership Guarantee) shall have paid in fullall accumulated and unpaid distributions on the Partnership Preferred Securities, (2) suchInvestment Event of Default, as the case may be, shall have been cured, and (3) the Company is incompliance with all its obligations under the Partnership Guarantee and the Company, in itscapacity as the General Partner, shall continue the business of the Partnership withoutdissolution. Notwithstanding the appointment of any such Special Representative, the Company shallcontinue as General Partner and shall retain all rights under the Limited Partnership Agreement,including the right to declare, in its sole discretion, the payment of distributions on thePartnership Preferred Securities for which the failure of such declaration would not constitute adefault under the Limited Partnership Agreement.If any proposed amendment to the Limited Partnership Agreement provides for, or the GeneralPartner otherwise proposes to effect, (i) any action that would adversely affect the powers,preferences or special rights of the Partnership Preferred Securities, whether by way of amendmentto the Limited Partnership Agreement or otherwise (including, without limitation, the authorizationor issuance of any limited partner interests in the Partnership ranking, as to participation in theprofits or distributions or in the assets of the Partnership, senior to the Partnership PreferredSecurities), or (ii) the dissolution, winding-up or termination of the Partnership, other than (x)in connection with the occurrence of a Partnership Special Event or (y) as described under “Merger,Consolidation or Amalgamation of the Partnership” below, then the holders of outstandingPartnership Preferred Securities will be entitled to vote on such amendment or proposal of theGeneral Partner (but not on any other amendment or proposal) as a class, and such amendment orproposal shall not be effective except with the approval of the holders of a majority inliquidation preference of such outstanding Partnership Preferred Securities having a right to voteon the matter; provided, however, that if the Property Trustee on behalf of the Trust is the holderof the Partnership Preferred Securities, any such amendment or proposal not excepted by clauses (x)and (y) above shall not be effective without the prior or concurrent approval of the holders of amajority in liquidation amount of the outstanding Trust Preferred Securities having a right to voteon such matters.
 
 

 
The General Partner shall not (i) direct the time, method and place of conducting anyproceeding for any remedy available, (ii) waive any Investment Event of Default that is waivableunder the Affiliate Investment Instruments, (iii) exercise any right to rescind or annul adeclaration that the principal of any Affiliate Investment Instruments shall be due and payable,(iv) waive the breach of the covenant by the Company to restrict certain payments by the Company,or (v) consent to any amendment, modification or termination of any Affiliate InvestmentInstrument, where such consent shall be required from the investor, without, in each case,obtaining the prior approval of the holders of at least a majority in liquidation preferenceof the Partnership Preferred Securities; provided, however, that if the Property Trustee on behalfof the Trust is the holder of the Partnership Preferred Securities, such waiver, consent oramendment or other action shall not be effective without the prior or concurrent approval of atleast a majority in liquidation amount of the outstanding Trust Preferred Securities having a rightto vote on such matters. The General Partner shall not revoke any action previously authorized orapproved by a vote of the holders of the Partnership Preferred Securities without the approval ofsuch revocation by a majority in liquidation preference of the outstanding Partnership PreferredSecurities. The General Partner shall notify all holders of the Partnership Preferred Securities ofany notice of an Investment Event of Default received with respect to any Affiliate InvestmentInstrument.Any required approval of holders of Partnership Preferred Securities may be given at aseparate meeting of holders of Partnership Preferred Securities convened for such purpose, at ameeting of all of the partners in the Partnership or pursuant to written consent. The Partnershipwill cause a notice of any meeting at which holders of Partnership Preferred Securities areentitled to vote, or of any matter upon which action by written consent of such holders is to betaken, to be mailed to each holder of record of Partnership Preferred Securities. Each such noticewill include a statement setting forth (i) the date of such meeting or the date by which suchaction is to be taken, (ii) a description of any resolution proposed for adoption at such meetingon which such holders are entitled to vote or of such matters upon which written consent is soughtand (iii) instruction for the delivery of proxies or consents.No vote or consent of the holders of Partnership Preferred Securities will be required for thePartnership to redeem and cancel Partnership Preferred Securities in accordance with the LimitedPartnership Agreement.Notwithstanding that holders of Partnership Preferred Securities are entitled to vote orconsent under any of the circumstances described above, any of the Partnership Preferred Securitiesat such time that are beneficially owned by the Company or by any entity directly or indirectlycontrolled by, or under direct or indirect common control with, the Company, except for PartnershipPreferred Securities purchased or acquired by the Company or its affiliates in connection withtransactions effected by or for the account of customers of the Company or any of its subsidiariesor in connection with the distribution or trading of such Partnership Preferred Securities; shallnot be entitled to vote or consent and shall, for purposes of such vote or consent, be treated asif they were not outstanding, provided, however, that persons (other than affiliates of theCompany) to whom the Company or any of its subsidiaries have pledged Partnership PreferredSecurities may vote or consent with respect to such pledged Partnership Preferred Securitiespursuant to the terms of such pledge.Holders of the Partnership Preferred Securities will have no rights to remove or replace theGeneral Partner.MERGER, CONSOLIDATION OR AMALGAMATION OF THE PARTNERSHIPThe Partnership may not consolidate, amalgamate, merge with or into, or be replaced by, orconvey, transfer or lease its properties and assets substantially as an entirety to, anycorporation or other body, except as described below. The Partnership may, without the consent ofthe holders of the Partnership Preferred Securities, consolidate, amalgamate, merge with or into,or be replaced by a limited partnership, limited liability company or trust organized as such underthe laws of any state of the United States of America, provided that (i) such successor entityeither (x) expressly assumes all of the obligations of the Partnership under the PartnershipPreferred Securities or (y) substitutes for the Partnership Preferred Securities other securitieshaving substantially the same terms as the Partnership Preferred Securities (the “PartnershipSuccessor Securities”) so long as the Partnership Successor Securities are not junior to any otherequity securities of the successor entity, with respect to participation in the profits anddistributions, and in the assets, of the successor entity, (ii) the Investment Affiliates expresslyacknowledge such successor entity as the holder of the Affiliate Investment Instruments, (iii) thePartnership Preferred Securities or any Partnership Successor Securities are listed, or anyPartnership Successor Securities will be listed upon notification of issuance, on any nationalsecurities exchange or other organization on which the Partnership Preferred Securities, if solisted, are then listed, (iv) such merger, consolidation, amalgamation or
 
 

 
replacement does not cause the Trust Preferred Securities (or, in the event that the Trust isliquidated in connection with a Trust Special Event, the Partnership Preferred Securities(including any Partnership Successor Securities)) to be downgraded by any nationally recognizedstatistical rating organization, (v) such merger, consolidation, amalgamation or replacement doesnot adversely affect the powers, preferences and other special rights of the holders of the TrustPreferred Securities or Partnership Preferred Securities (including any Partnership SuccessorSecurities) in any material respect (other than, in the case of the Partnership PreferredSecurities, with respect to any dilution of the holders’ interest in the new resulting entity),(vi) such successor entity has a purpose substantially identical to that of the Partnership, (vii)prior to such merger, consolidation, amalgamation or replacement, the Company has received anopinion of nationally recognized independent counsel to the Partnership experienced in such mattersto the effect that (A) such successor entity will be treated as a partnership for United Statesfederal income tax purposes, (B) such merger, consolidation, amalgamation or replacement would notcause the Trust to be classified as an association taxable as a corporation for United Statesfederal income tax purposes, (C) following such merger, consolidation, amalgamation or replacement,the Company and such successor entity will be in compliance with the 1940 Act without registeringthereunder as an investment company, and (D) such merger, consolidation, amalgamation orreplacement will not adversely affect the limited liability of the holders of the PartnershipPreferred Securities and (viii) the Company guarantees the obligations of such successor entityunder the Partnership Successor Securities at least to the extent provided by the PartnershipGuarantee.BOOK-ENTRY AND SETTLEMENTIf the Partnership Preferred Securities are distributed to holders of Trust PreferredSecurities in connection with the involuntary or voluntary dissolution, winding-up or liquidationof the Trust as a result of the occurrence of a Trust Special Event, the Partnership PreferredSecurities will be issued in the form of one or more global certificates (each a “GlobalPartnership Security”) registered in the name of DTC as the depository or its nominee. For adescription of DTC and the specific terms of the Depository arrangements, see “Description of theTrust Preferred Securities — Book-Entry Only Issuance — The Depository Trust Company”. As of thedate of this Prospectus, the description therein of DTC’s book-entry system and DTC’s practices asthey relate to purchases, transfers, notices and payments with respect to the Trust PreferredSecurities apply in all material respects to any Partnership Preferred Securities represented byone or more Global Partnership Securities.REGISTRAR, TRANSFER AGENT AND PAYING AGENTThe General Partner will act as registrar, transfer agent and paying agent for the PartnershipPreferred Securities for so long as the Partnership Preferred Securities are held by the Trust or,if the Trust is liquidated in connection with a Trust Special Event, for so long as the PartnershipPreferred Securities remain in book-entry only form. In the event the Partnership PreferredSecurities are distributed in connection with a Trust Special Event and the book-entry system forthe Partnership Preferred Securities is discontinued, it is anticipated that The Chase ManhattanBank or one of its affiliates will act as registrar, transfer agent and paying agent for thePartnership Preferred Securities.Registration of transfers of Partnership Preferred Securities will be effected without chargeby or on behalf of the Partnership, but upon payment (with the giving of such indemnity as thePartnership or the General Partner may require) in respect of any tax or other governmental chargesthat may be imposed in relation to it.The Partnership will not be required to register or cause to be registered the transfer ofPartnership Preferred Securities after such Partnership Preferred Securities have been called forredemption.
 
 

 
MISCELLANEOUSThe General Partner is authorized and directed to conduct its affairs and to operate thePartnership in such a way that (i) the Partnership will not be deemed to be an “investment company”required to be registered under the 1940 Act or characterized as an association taxable as acorporation for United States federal income tax purposes, (ii) the Affiliate InvestmentInstruments will be treated as indebtedness of the issuer of such debt instruments for UnitedStates federal income tax purposes and (iii) the Partnership will not be treated as an associationor as a “publicly traded partnership” (within the meaning of Section 7704 of the Code) taxable as acorporation. In this connection, the General Partner is authorized to take any action, notinconsistent with applicable law, the certificate of limited partnership of the Partnership or theLimited Partnership Agreement, that the General Partner determines in its discretion to benecessary or desirable for such purposes as long as such action does not adversely affect theinterests of the holders of the Partnership Preferred Securities.DESCRIPTION OF THE PARTNERSHIP GUARANTEESet forth below is a summary of information concerning the Partnership Guarantee (the“Partnership Guarantee”) that will be executed and delivered by the Company for the benefit of theholders from time to time of Partnership Preferred Securities. The summary does not purport to becomplete and is subject in all respects to the provisions of, and is qualified in its entirety byreference to, the Partnership Guarantee, which is filed as an exhibit to the registration statementof which this prospectus is a part. The General Partner will hold the Partnership Guarantee for thebenefit of the holders of the Partnership Preferred Securities.GENERALPursuant to the Partnership Guarantee, the Company will irrevocably agree, on a subordinatedbasis to the extent set forth therein, to pay in full to the holders of the Partnership PreferredSecurities (without duplication of amounts theretofore paid by the Partnership), as and when due,regardless of any defense, right of set-off or counterclaim that the Partnership may have orassert, the following payments (the “Partnership Guarantee Payments”): (i) any accumulated andunpaid distributions that have theretofore been declared on the Partnership Preferred Securitiesout of funds legally available therefor, (ii) the redemption price with respect to any PartnershipPreferred Securities called for redemption by the Partnership out of funds legally availabletherefor, and (iii) upon a liquidation of the Partnership, the lesser of (a) the aggregate of theliquidation preference and all accumulated and unpaid distributions on the Partnership PreferredSecurities to the date of payment and (b) the amount of assets of the Partnership, aftersatisfaction of all liabilities, remaining available for distribution to holders of PartnershipPreferred Securities in liquidation of the Partnership. The Company’s obligation to make aPartnership Guarantee Payment may be satisfied by direct payment of the required amounts by theCompany to the holders of Partnership Preferred Securities or by causing the Partnership to paysuch amounts to such holders.The Partnership Guarantee will be a guarantee on a subordinated basis with respect to thePartnership Preferred Securities from the time of issuance of such Partnership Preferred Securitiesbut will not apply to any payment of distributions or Redemption Price, or to payments upon thedissolution, winding-up or termination of the Trust, except to the extent the Partnership shallhave funds available therefor. If Investment Affiliates (including, where applicable, the Company,as guarantor) of the Affiliate Investment Instruments in which the Partnership invests fail to makeany payment in respect of such securities (or, if applicable, guarantees), the Partnership may notdeclare or pay dividends on the Partnership Preferred Securities. In such event, holders of thePartnership Preferred Securities would not be able to rely upon the Partnership Guarantee forpayment of such amounts. Instead, holders of the Partnership Preferred Securities will have theremedies described herein under “Description of the Partnership Preferred Securities — PartnershipEnforcement Events”, including the right to direct the General Partner or the SpecialRepresentative, as the case may be, to enforce the covenant restricting certain payments by theCompany and Finance Subsidiaries. See “— Covenants of the Company” below.The Guarantees, when taken together with the Company Debenture and the Company’s obligationsto pay all fees and expenses of the Trust and the Partnership, constitute a guarantee to the extentset forth herein by the Company of the distribution, redemption and liquidation payments payable tothe holders of the Trust Preferred Securities. The Guarantees do not apply, however, to currentdistributions by the Partnership unless and until such distributions are declared by thePartnership out of funds legally available for payment or to liquidatingdistributions unless there are assets available for payment in the Partnership, each as more fullydescribed under “Risk Factors — Insufficient Income or Assets Available to Partnership”.
 
 

 
COVENANTS OF THE COMPANYThe Company will covenant in the Partnership Guarantee that if (a) for any distributionperiod, full distributions on a cumulative basis on any Partnership Preferred Securities have notbeen paid or declared and set apart for payment, (b) an Investment Event of Default by anyInvestment Affiliate in respect of any Affiliate Investment Instrument has occurred and iscontinuing or (c) the Company is in default of its obligations under the Trust Guarantee, thePartnership Guarantee or any Investment Guarantee, then, during such period (i) the Company shallnot declare or pay dividends on, make distributions with respect to, or redeem, purchase oracquire, or make a liquidation payment with respect to, any of its capital stock or comparableequity interest (except for (x) dividends or distributions in shares of, or options, warrants orrights to subscribe for or purchase shares of, its capital stock, and conversions or exchanges ofcommon stock of one class into common stock of another class, (y) redemptions or purchases of anyrights pursuant to the Rights Agreement and the issuance of preferred stock pursuant to such rightsand (z) purchases or acquisitions by the Company or its affiliates in connection with transactionseffected by or for the account of customers of the Company or any of its subsidiaries or inconnection with the distribution or trading of such capital stock or comparable equity interest)and (ii) the Company shall not make, permit any Finance Subsidiary to make, or make any paymentsthat would enable any Finance Subsidiary to make, any payment of any dividends on, any distributionwith respect to, or any redemption, purchase or other acquisition of, or any liquidation paymentwith respect to, any preferred security or comparable equity interest of any Finance Subsidiary.EVENTS OF DEFAULT; ENFORCEMENT OF PARTNERSHIP GUARANTEEAn event of default under the Partnership Guarantee will occur upon the failure of the Companyto perform any of its payment or other obligations thereunder.The holders of a majority in liquidation amount of the Partnership Preferred Securities havethe right to direct the time, method and place of conducting any proceeding for any remedyavailable to the Special Representative in respect of the Partnership Guarantee or to direct theexercise of any trust or power conferred upon the Special Representative under the PartnershipGuarantee. If the Special Representative fails to enforce its rights under the PartnershipGuarantee, after a holder of Partnership Preferred Securities has made a written request, suchholder of Partnership Preferred Securities may institute a legal proceeding directly against theCompany to enforce the Special Representative’s rights under the Partnership Guarantee withoutfirst instituting a legal proceeding against the Partnership, the Special Representative or anyother person or entity. Notwithstanding the foregoing, if the Company has failed to make aguarantee payment, a holder of Partnership Preferred Securities may directly institute a proceedingagainst the Company for enforcement of the Partnership Guarantee for such payment.STATUS OF THE PARTNERSHIP GUARANTEE; SUBORDINATIONThe Partnership Guarantee will constitute an unsecured obligation of the Company and will ranksubordinate and junior in right of payment to all other liabilities of the Company and will rankpari passu with the most senior preferred stock issued from time to time by the Company, withsimilar guarantees issued by the Company in connection with the $275,000,000 aggregate liquidationamount of 7 3/4% Trust Originated Preferred Securities issued by Merrill Lynch Preferred CapitalTrust I, the $300,000,000 aggregate liquidation amount of 8% Trust Originated Preferred Securitiesissued by Merrill Lynch Preferred Capital Trust II, the $750,000,000 aggregate liquidation amountof 7% Trust Originated Preferred Securities issued by Merrill Lynch Preferred Capital Trust III,the $400,000,000 aggregate liquidation amount of 7.12% Trust Originated Preferred Securities issuedby Merrill Lynch Preferred Capital Trust IV and with any guarantee now or hereafter entered into bythe Company in respect of any preferred stock of any other Finance Subsidiary. Accordingly, therights of the holders of Partnership Preferred Securities to receive payments under the PartnershipGuarantee will be subject to the rights of the holders of any obligations of the Company that aresenior in priority to the obligations under the Partnership Guarantee. Furthermore, the holders ofobligations of the Company that are senior to the obligations under the Partnership Guarantee(including, but not limited to,obligations constituting Senior Indebtedness) will be entitled to the same rights upon paymentdefault or dissolution, liquidation and reorganization in respect of the Partnership Guarantee thatinure to the holders of Senior Indebtedness as against the holders of the Company Debenture. TheLimited Partnership Agreement provides that each holder of Partnership Preferred Securities, byacceptance thereof, agrees to the subordination provisions and other terms of the PartnershipGuarantee.
 
 

 
The Partnership Guarantee will constitute a guarantee of payment and not of collection (thatis, the guaranteed party may directly institute a legal proceeding against the Company to enforceits rights under the Partnership Guarantee without instituting a legal proceeding against any otherperson or entity).The Partnership Guarantee will be deposited with the General Partner to be held for thebenefit of the holders of the Partnership Preferred Securities. In the event of the appointment ofa Special Representative to, among other things, enforce the Partnership Guarantee, the SpecialRepresentative may take possession of the Partnership Guarantee for such purpose. If no SpecialRepresentative has been appointed to enforce the Partnership Guarantee, the General Partner has theright to enforce the Partnership Guarantee on behalf of the holders of the Partnership PreferredSecurities.AMENDMENTS AND ASSIGNMENTExcept with respect to any changes that do not adversely affect the rights of holders ofPartnership Preferred Securities (in which case no consent will be required), the PartnershipGuarantee may be amended only with the prior approval of the holders of not less than a majority inliquidation preference of the outstanding Partnership Preferred Securities. All guarantees andagreements contained in the Partnership Guarantee shall bind the successors, assigns, receivers,trustees and representatives of the Company and shall inure to the benefit of the holders of thePartnership Preferred Securities then outstanding. Except in connection with any permitted mergeror consolidation of the Company with or into another entity or any permitted sale, transfer orlease of the Company’s assets to another entity in which the surviving corporation (if other thanthe Company) assumes the Company’s obligations under the Partnership Guarantee, the Company may notassign its rights or delegate its obligations under the Partnership Guarantee without the priorapproval of the holders of at least a majority of the aggregate stated liquidation preference ofthe Partnership Preferred Securities then outstanding.TERMINATION OF THE PARTNERSHIP GUARANTEEThe Partnership Guarantee will terminate and be of no further force and effect as to thePartnership Preferred Securities upon (i) full payment of the redemption price of all PartnershipPreferred Securities or (ii) full payment of the amounts payable in accordance with the LimitedPartnership Agreement upon liquidation of the Partnership. The Partnership Guarantee will continueto be effective or will be reinstated, as the case may be, if at any time any holder of PartnershipPreferred Securities must in accordance with the Partnership Act restore payment of any sums paidunder the Partnership Preferred Securities or the Partnership Guarantee. The Partnership Actprovides that a limited partner of a limited partnership who wrongfully receives a distribution maybe liable to the limited partnership for the amount of such distribution.GOVERNING LAWThe Partnership Guarantee will be governed by and construed in accordance with the internallaws of the State of New York.