<PAGE>
PRICING SUPPLEMENT
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(To Prospectus Supplement and Prospectus dated July 30, 1998)
$69,237,000
Merrill Lynch & Co., Inc.
Medium-Term Notes, Series B
Single Stock Linked Notes due August 13, 1999
(Linked to the performance of the Common Stock of Case Corporation)
Aggregate Principal Amount: $69,237,000
Initial Public Offering Price: $32.97 per Note, plus accrued interest, if any,
from August 14, 1998
Interest Rate: 3% per annum, plus an amount (the "Cash Dividend
Amount") equal to cash dividends, if any,
payable by Case Corporation ("Case") on a number
of shares of its common stock, par value $.01
per share, (the "Case Stock") equal to the Share
Ratio. The Cash Dividend Amount with respect to
cash dividends of Case, the record date of which
occurs from and including August 12, 1998 to but
excluding the first Interest Payment Date, shall
be paid on the first Interest Payment Date.
Thereafter the Cash Dividend Amount with respect
to cash dividends of Case, the record date of
which occurs from and including the previous
Interest Payment Date to but excluding the next
following Interest Payment Date, shall be paid
on such following Interest Payment Date.
Interest Payment Dates: November 13, 1998, February 12, 1999, May 13,
1999, and August 13, 1999
Share Ratio: Initially 1.0, subject to adjustment upon the
occurrence of certain Case corporate events
Maturity Date: August 13, 1999
Redemption: The Notes are not redeemable prior to maturity.
Other Provisions:
The Single Stock Linked Notes due August 13, 1999 (the "Notes") are
Floating Rate Notes as described in the attached Prospectus Supplement dated
March 12, 1998 with other provisions as described herein.
The principal amount of each Note being offered hereby will be $32.97 (the
"Issue Price"). The Notes will mature on August 13, 1999. Interest on the Notes,
at the rate of 3% per annum, plus the Cash Dividend Amount, if any, is payable
quarterly in arrears on November 13, 1998, February 12, 1999, May 13, 1999, and
August 13, 1999.
At maturity (whether as a result of acceleration or otherwise), the Company
will, with respect to each $32.97 principal amount of any Note, pay to the
holder thereof an amount in U.S. Dollars (the "Cash Amount") determined in
accordance with the following formula, subject to certain adjustments: the Final
Price multiplied by the Share Ratio. The Share Ratio will be subject to certain
adjustments as described herein. The "Final Price", as described herein, will be
based upon the Market Prices (as defined herein) of the Case Stock on the
Trading Days (as defined herein) from and including July 21, 1999 to but
excluding August 11, 1999 (the "Calculation Period"), each as determined by the
Calculation Agent. The Case Stock is traded on the New York Stock Exchange (the
"NYSE") under the symbol "CSE." On August 7, 1998, the Market Price of the Case
Stock was $3111/16 per share. See "Amount Payable at Maturity", "Dilution and
Reorganization Adjustments" and "The Case Stock" in this Pricing Supplement.
The Notes will be issued and sold in denominations of $32.97, and integral
multiples thereof.
AS A RESULT OF THE FORMULA FOR DETERMINING THE AMOUNT PAYABLE AT THE
MATURITY OF THE NOTES, A HOLDER MAY RECEIVE AT MATURITY MORE OR LESS THAN THE
ISSUE PRICE PER NOTE. IF THE FINAL PRICE IS LESS THAN THE ISSUE PRICE, THE
AMOUNT PAYABLE AT MATURITY OF THE NOTES WILL BE LESS THAN THE ISSUE PRICE PER
NOTE, IN WHICH CASE AN INVESTMENT IN THE NOTES WILL RESULT IN A LOSS. IN
ADDITION, AN INVESTMENT IN THE NOTES ENTAILS RISKS NOT ASSOCIATED WITH SIMILAR
INVESTMENTS IN A CONVENTIONAL DEBT SECURITY.
BEFORE YOU DECIDE TO INVEST IN THE NOTES, CAREFULLY READ THIS PRICING
SUPPLEMENT, THE PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, ESPECIALLY THE RISK
FACTORS BEGINNING ON PAGE PS-5 OF THIS PRICING SUPPLEMENT.
-------------------
It is expected that the Notes will be ready for delivery in certificated
form only on or about August 14, 1998.
-------------------
MERRILL LYNCH & CO.
-------------------
The date of this Pricing Supplement is August 7, 1998.
<PAGE>
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Capitalized terms not defined herein have the meanings given to such terms
in the accompanying Prospectus Supplement.
Aggregate Principal Amount................... $69,237,000
Issuer....................................... Merrill Lynch & Co., Inc. (the
"Company")
Maturity Date................................ August 13, 1999
Interest Rate................................ 3% per annum, plus an amount (the
"Cash Dividend Amount") equal to
cash dividends, if any, payable
by Case Corporation ("Case") on a
number of shares of its common
stock, par value $.01 per share
(the "Case Stock") equal to the
Share Ratio. The Cash Dividend
Amount with respect to cash
dividends of Case, the record
date of which occurs from and
including August 12, 1998 to but
excluding the first Interest
Payment Date, shall be paid on
the first Interest Payment Date.
Thereafter the Cash Dividend
Amount with respect to cash
dividends of Case, the record
date of which occurs from and
including the previous Interest
Payment Date to but excluding the
next following Interest Payment
Date, shall be paid on such
following Interest Payment Date.
Interest Payment Dates....................... November 13, 1998, February 12,
1999, May 13, 1999, and August
13, 1999
Specified Currency........................... U.S. Dollars
Issue Price.................................. $32.97 per Note
Pricing Date................................. August 7, 1998
Original Issue Date (Settlement Date)........ August 14, 1998
CUSIP........................................ 59018SN26
Book-Entry Note or Certificated Note......... Certificated Note
Denominations................................ The Notes will be issued and sold
in denominations of $32.97, and
integral multiples thereof.
Trustee...................................... The Chase Manhattan Bank
Agent........................................ Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("MLPF&S")
Amount Payable at Maturity................... At maturity (whether as a result
of acceleration or otherwise),
the Company will, with respect to
the principal amount of each
Note, upon delivery of such Note
to the Trustee, deliver, or cause
the delivery of, the Cash Amount.
References to payment "per Note"
refer to
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PS-2
<PAGE>
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each $ 32.97 principal amount of
any Note.
Cash Amount.................................. For each $32.97 principal amount
of the Notes, an amount in U.S.
Dollars determined in accordance
with the following formula,
subject to certain adjustments:
the Final Price multiplied by the
Share Ratio
Final Price.................................. The sum of the Market Prices of
the Case Stock on the Trading
Days from and including July 21,
1999 to but excluding August 11,
1999 (the "Calculation Period")
for which the Market Prices are
available, each multiplied by a
Multiplier (as defined below),
each as determined by the
Calculation Agent.
Multiplier................................... The Multiplier for the
Calculation Period shall
initially be set at 1 divided by
the number of scheduled Trading
Days in the Calculation Period,
and for any other period for
which Market Prices of such
security are to be determined
shall initially be set as a
fraction, the numerator of which
is one and the denominator of
which is the specified number of
Trading Days in such period (such
Calculation Period and other
period referred to as the
"Applicable Period"). In the
event the Market Price for any
security for any date in the
Applicable Period cannot be
determined (a "Price
Unavailability Date"), the
Multiplier for each subsequent
date in the Applicable Period for
which the Market Price can be
determined (a "Price Availability
Date") shall be adjusted so that
the new Multiplier is the prior
Multiplier multiplied by a
fraction, the numerator of which
is the remaining Trading Days in
the Applicable Period, including
such Price Unavailability Date,
and the denominator of which is
the remaining Trading Days in the
Applicable Period, excluding such
Price Unavailability Date. If the
final Trading Day of the
Applicable Period is a Price
Unavailability Date, the Market
Price for such day shall be the
market value of such security as
determined by the Calculation
Agent, and the Multiplier for
such Market Price shall be
computed as if such day were a
Price Availability Date.
Share Ratio.................................. The Share Ratio will initially be
set at 1.0, but will be subject
to adjustment upon the occurrence
of certain corporate events
through and including the
Maturity Date. See "Dilution and
Reorganization Adjustments"
below.
Market Price................................. The Market Price for any security
for any date means the official
closing price (afternoon session,
as applicable) of such security
as reported by the principal
exchange on which such security
is traded on such date. If the
official closing price is not
available for any reason
(including,
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PS-3
<PAGE>
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without limitation, the
occurrence of a Market Disruption
Event), the Market Price for such
security for any date shall be
the mean, as determined by the
Calculation Agent, of the bid
prices for such security obtained
from as many dealers in such
security, but not exceeding
three, as will make such bid
prices available to the
Calculation Agent after 3:00 p.m.
(local time in such principal
market) on such date.
Trading Day.................................. A day on which the NYSE, the
American Stock Exchange and the
NASDAQ National Market System are
open for trading, as determined
by the Calculation Agent.
Business Day................................. Any day other than a Saturday or
Sunday that is neither a legal
holiday nor a day on which
banking institutions are
authorized or required by law or
regulation to close in The City
of New York and that is a Trading
Day.
Calculation Agent............................ MLPF&S
For potential conflicts of
interest that may exist between
the Calculation Agent and the
holders of the Notes, see "Risk
Factors" below. All
determinations made by the
Calculation Agent shall be at the
sole discretion of the
Calculation Agent and, absent a
manifest error, shall be
conclusive for all purposes and
binding on the Company and
beneficial owners of the Notes.
All percentages resulting from
any calculation on the Notes will
be rounded to the nearest one
hundred-thousandth of a
percentage point, with five one-
millionths of a percentage point
rounded upwards (e.g., 9.876545%
(or .09876545) would be rounded
to 9.87655% (or .0987655)), and
all dollar amounts used in or
resulting from such calculation
will be rounded to the nearest
cent with one-half cent being
rounded upwards.
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PS-4
<PAGE>
RISK FACTORS
Your investment in the Notes will involve certain risks. As a result of the
formula for determining the amount payable at the maturity of the Notes, you may
receive at maturity more or less than the Issue Price per Note. If the Final
Price is less than the Issue Price, the amount payable at maturity of the Notes
will be less than the Issue Price per Note, in which case an investment in the
Notes will result in a loss. In addition, an investment in the Notes entails
risks not associated with similar investments in a conventional debt security.
You should carefully consider the following discussion of risks before deciding
whether an investment in the Notes is suitable for you.
General
The Notes combine features of equity and debt instruments. For example,
holders of Notes, in addition to quarterly interest payments at the rate of 3%
per annum, will be entitled to receive the Cash Dividend Amount, reflecting cash
dividends, if any, that may be payable on the Case Stock. In addition, the terms
of the Notes differ from those of ordinary debt securities in that the amount
due at maturity is not fixed, but is based on the price of the Case Stock used
to determine the Final Price. Because the price of the Case Stock is subject to
market fluctuations, the amount of cash based on the value of the Case Stock
received by a holder of the Notes at maturity, determined as described herein,
may be more or less than the principal amount of the Notes.
If the Final Price is less than the Issue Price, holders of the Notes will
realize the entire decline in value of the Case Stock and the amount of cash
receivable upon maturity will be less than the principal amount of the Notes, in
which case an investment in the Notes may result in a loss.
Although the amount that holders of the Notes are entitled to receive at
maturity is subject to adjustment for certain corporate events, such adjustments
do not cover all events that could affect the Market Price of the Case Stock,
including, without limitation, the occurrence of a partial tender or exchange
offer for the Case Stock by Case or any third party. Such other events may
adversely affect the market value of the Notes.
Comparable Yield on Notes
The amount holders of the Notes receive at maturity may, in addition to the
payments of the interest and the Cash Dividend Amount, be less than the return
they could earn on other investments. The yield on the Notes may be less than
the yield that could be earned on a standard senior debt security of the Company
with the same maturity date. An investment in the Notes may not reflect the full
opportunity cost considering the effect of factors that affect the time value of
money.
Uncertain Trading Market
The Notes will not be listed on any securities exchange. There is no
precedent to indicate how the Notes will trade in the secondary market. You
cannot assume that a trading market will develop for the Notes. If such a
trading market does develop, there can be no assurance that there will be
liquidity in the trading market. The development of a trading market for the
Notes will depend on the financial performance of the Company, and other factors
such as the appreciation, if any, of the price of the Case Stock.
If the trading market for the Notes is limited, there may be a limited
number of buyers when you decide to sell your Notes if you do not wish to hold
your investment until maturity. This may affect the price you receive.
PS-5
<PAGE>
Factors Affecting Trading Value of the Notes
The market value for the Notes will be affected by a number of factors in
addition to the creditworthiness of the Company and the value of the Case Stock,
including, but not limited to, the dividend rate on the Case Stock, market
interest and yield rates and the time remaining to the maturity of the Notes.
In addition, the value of the Case Stock depends on a number of interrelated
factors, including economic, financial and political events, that can affect the
capital markets generally and the market segment of which Case is a part and
over which the Company has no control. The market value of the Notes is
expected to depend primarily on changes in the Market Price of the Case Stock.
The price at which a holder will be able to sell the Notes prior to maturity may
be at a discount, which could be substantial, from the principal amount thereof,
if, at such time, such Market Price is below, equal to or not sufficiently above
the Issue Price. The historical Market Prices of the Case Stock should not be
taken as an indication of its future performance during the term of any Note.
No Affiliation Between the Company and Case
The Company has no affiliation with Case, and Case has no obligations with
respect to the Notes or amounts to be paid to beneficial owners thereof,
including any obligation to take the needs of the Company or of beneficial
owners of the Notes into consideration for any reason. Case will not receive
any of the proceeds of the offering of the Notes made hereby and is not
responsible for, and has not participated in, the determination or calculation
of the amount receivable by beneficial owners of the Notes at maturity. In
addition, Case is not involved with the administration or trading of the Notes
and has no obligations with respect to the amount receivable by beneficial
owners of the Notes.
No Stockholder's Rights
Holders of the Notes will not be entitled to any rights with respect to the
Case Stock (including, without limitation, the right to receive dividends or
other distributions, voting rights and the right to tender or exchange the Case
Stock in any partial tender or exchange offer by Case or any third party). The
right to receive the Cash Dividend Amount is solely an obligation of the
Company.
Purchases and Sales of the Case Stock
In connection with the Company's obligations under the Notes, the Company
has entered into hedging arrangements related to the Case Stock with an
affiliate of the Company. In connection therewith, such affiliate has purchased
shares of the Case Stock in secondary market transactions at or before the time
of the pricing of the Notes. The Company, MLPF&S and other affiliates of the
Company may from time to time buy or sell the Case Stock for their own accounts
for business reasons or in connection with hedging the Company's obligations
under the Notes. These transactions could affect the price of the Case Stock.
State Law Limits on Interest Paid
New York State laws govern the 1993 Indenture, as hereinafter defined. New
York has certain usury laws that limit the amount of interest that can be
charged and paid on loans, which includes debt securities like the Notes. Under
present New York law, the maximum rate of interest is 25% per annum on a simple
interest basis. This limit may not apply to debt securities in which $2,500,000
or more has been invested.
While the Company believes that New York law would be given effect by a
state or Federal court sitting outside of New York, many other states also have
laws that regulate the amount of interest that
PS-6
<PAGE>
may be charged to and paid by a borrower. The Company will promise, for the
benefit of the holders of the Notes, to the extent permitted by law, not to
voluntarily claim the benefits of any laws concerning usurious rates of
interest.
Potential Conflicts
Because the Calculation Agent is an affiliate of the Company, potential
conflicts of interest may exist between the Calculation Agent and the holders of
the Notes, including with respect to certain adjustments to the Share Ratio and
other antidilution adjustments that may influence the determination of the
amount of cash receivable at the maturity of the Notes. See "Dilution and
Reorganization Adjustments" and "Market Disruption Event" below.
Uncertain Tax Consequences
Investors should also consider the tax consequences of investing in the
Notes, certain aspects of which are uncertain. See "United States Federal
Income Taxation" below.
DILUTION AND REORGANIZATION ADJUSTMENTS
The Share Ratio (and, in the case of paragraph 5 below, the determination
of the Cash Amount) will be adjusted as follows:
1. If the Case Stock is subject to a stock split or reverse stock
split, then once such split has become effective, the Share Ratio will be
adjusted to equal the product of the prior Share Ratio and the number of
shares issued in such stock split or reverse stock split with respect to
one share of Case Stock.
2. If the Case Stock is subject to a stock dividend (issuance of
additional shares of Case Stock) that is given ratably to all holders of
shares of Case Stock, then once the Case Stock begins trading ex-dividend,
the Share Ratio will be adjusted so that the new Share Ratio shall equal
the prior Share Ratio plus the product of (i) the number of shares issued
with respect to one share of Case Stock and (ii) the prior Share Ratio.
3. There will be no adjustments to the Share Ratio to reflect cash
dividends or other distributions paid with respect to Case Stock other than
distributions described in clause (v) of paragraph 5 below and
Extraordinary Dividends as described below. A cash dividend or other
distribution with respect to Case Stock will be deemed to be an
"Extraordinary Dividend" if such dividend or other distribution exceeds the
immediately preceding non-Extraordinary Dividend for Case Stock by an
amount equal to at least 10% of the Market Price of Case Stock on the
Trading Day preceding the ex-dividend date for the payment of such
Extraordinary Dividend (the "ex-dividend date"). If an Extraordinary
Dividend occurs with respect to Case Stock, the Share Ratio with respect to
Case Stock will be adjusted on the ex-dividend date with respect to such
Extraordinary Dividend so that the new Share Ratio will equal the product
of (i) the then current Share Ratio and (ii) a fraction, the numerator of
which is the Market Price on the Trading Day preceding the ex-dividend
date, and the denominator of which is the amount by which the Market Price
on the Trading Day preceding the ex-dividend date exceeds the Extraordinary
Dividend Amount. The "Extraordinary Dividend Amount" with respect to an
Extraordinary Dividend for Case Stock will equal (i) in the case of cash
dividends or other distributions that constitute quarterly dividends, the
amount per share of such Extraordinary Dividend minus the amount per share
of the immediately preceding non-Extraordinary Dividend for Case Stock or
(ii) in the case of cash dividends or other distributions that do not
constitute quarterly dividends, the amount per
PS-7
<PAGE>
share of such Extraordinary Dividend. To the extent an Extraordinary Dividend is
not paid in cash, the value of the non-cash component will be determined by the
Calculation Agent, whose determination shall be conclusive. A distribution on
the Case Stock described in clause (v) of paragraph 5 below that also
constitutes an Extraordinary Dividend shall cause an adjustment to the Share
Ratio pursuant only to clause (v) of paragraph 5.
4. If Case issues transferable rights or warrants to all holders of the
Case Stock to subscribe for or purchase Case Stock (including new or existing
rights to purchase Case Stock pursuant to a shareholders rights plan or
arrangement, once a triggering event shall have occurred thereunder), then the
method of determining the amount payable at maturity for each Note will be
adjusted to provide that each holder of Notes will receive at maturity, in
respect of the principal amount of each Note, in addition to the Cash Amount,
cash in an amount equal to the Rights Value (as defined below) plus accrued
interest thereon from the third Trading Day following the last day of the Rights
Calculation Period (as defined below) to the maturity date at LIBOR (as defined
below), reset monthly on the first Trading Day of each month. The "Rights Value"
shall be (i) if the rights or warrants expire before the Calculation Period, the
sum of the Market Prices of such rights or warrants on the 15 Trading Days
immediately following receipt by holders of Case Stock of such rights or
warrants, each multiplied by the applicable Multiplier; (ii) if the rights or
warrants expire after the Calculation Period, the sum of the Market Prices of
such rights or warrants on the Trading Days in the Calculation Period, each
multiplied by the applicable Multiplier; or (iii) if the rights or warrants
expire during the Calculation Period, the sum of the Market Prices of such
rights or warrants on the Trading Days in the Calculation Period prior to such
expiration date, each multiplied by the applicable Multiplier (the Trading Days
utilized in determining the Rights Value is referred to as the "Rights Valuation
Period"). "LIBOR" shall be the rate for deposits in U.S. Dollars for a period of
one month which appears on the Reuters Screen ISDA Page as of 11:00 a.m., London
time, on the day that is two Trading Days preceding the reset date, or in the
case of the initial determination of LIBOR, on the second Trading Day preceding
last day of the Rights Calculation Period.
5. If (i) there occurs any reclassification or change of the Case Stock,
(ii) Case, or any surviving entity or subsequent surviving entity of Case (a
"Case Successor") has been subject to a merger, combination or consolidation and
is not the surviving entity, (iii) any statutory exchange of securities of Case
or any Case Successor with another corporation occurs (other than pursuant to
clause (ii) above), (iv) Case is liquidated, (v) Case issues to all of its
shareholders equity securities of an issuer other than Case (other than in a
transaction described in clauses (ii), (iii) or (iv) above) (a "Spin-off Event")
or (vi) a tender or exchange offer is consummated for all the outstanding shares
of Case Stock (any such event in clauses (i) through (vi) a "Reorganization
Event"), the method of determining the amount payable at maturity for each Note
will be adjusted to provide that each holder of Notes will receive at maturity,
in respect of the principal amount of each Note and in lieu of the Cash Amount,
cash in an amount equal to the Transaction Value (as defined below); provided
that, if the Exchange Property (as defined below) received in any such
Reorganization Event consists only of cash, the maturity date of the Notes will
be deemed to be accelerated to the date on which such cash is distributed to
holders of Case Stock, and the method of determining the amount payable at
maturity for each Note will be adjusted to provide that each holder of Notes
will receive at maturity, in respect of the principal amount of each Note and in
lieu of the Cash Amount, cash in an amount equal to the sum of (A) the
Transaction Value and (B) the sum of the present values of the remaining
interest payments on the Notes, in each case discounted from their respective
scheduled payment dates to the accelerated maturity date on a quarterly basis at
the Swap Rate (as defined below). "Exchange Property" means the securities, cash
or any other assets distributed in any such Reorganization Event, including, in
the case of a Spin-off Event, the share of Case Stock with respect to which the
spun-off security was issued.
PS-8
<PAGE>
"Transaction Value" means (i) for any cash received in any such
Reorganization Event, the amount of cash received per share of Case Stock
multiplied by the then current Share Ratio, (ii) for any property other
than cash or securities received in any such Reorganization Event, the
market value (as determined by the Calculation Agent) of such Exchange
Property received for each share of Case Stock at the date of the receipt
of such Exchange Property multiplied by the then current Share Ratio and
(iii) for any security received in any such Reorganization Event, an amount
equal to the sum of the Market Prices per share of such security each
multiplied by the applicable Multiplier during the Calculation Period,
multiplied by the quantity of such security received for each share of Case
Stock and multiplied by the then current Share Ratio. The "Swap Rate" shall
be the rate for U.S. Dollar swaps with a one month maturity, expressed as a
percentage, which appears on the Reuters Screen ISDA FIX 1 Page as of 11:00
a.m., New York City time on the reset date, or, in the case of the initial
determination of the Swap Rate, on the second preceding Trading Day.
6. If there occurs a cash tender offer for at least 25% but less
than all of the Case Stock then outstanding at a price per share in excess
of the Market Price of the Case Stock on the date such offer is announced
(the "Announcement Date"), the maturity date of the Notes will be deemed to
be accelerated to the 18th scheduled Trading Day after the Announcement
Date and the method of determining the amount payable at maturity for each
Note will be adjusted to provide that each holder of Notes will receive at
maturity, in respect of the principal amount of each Note and in lieu of
the Cash Amount, cash in an amount equal to the sum of (i) the "Tender
Value", which shall be the sum of the Market Prices of the Case Stock each
multiplied by the applicable Multiplier during the period ending on the
15th scheduled Trading Day following the Announcement Date plus (ii) the
sum of the present values of the remaining interest payments on the Notes,
in each case discounted from their respective scheduled payment dates to
the accelerated maturity date on a quarterly basis at the Swap Rate (as
defined above).
For purposes of paragraph 5 above, in the case of a consummated tender or
exchange offer for all Exchange Property of a particular type, Exchange Property
shall be deemed to include the amount of cash or other property paid by the
offeror in the tender or exchange offer with respect to such Exchange Property
(in an amount determined on the basis of the rate of exchange in such tender or
exchange offer). In the event of a tender or exchange offer with respect to
Exchange Property in which an offeree may elect to receive cash or other
property, Exchange Property shall be deemed to include the kind and amount of
cash and other property received by offerees who elect to receive cash.
No adjustments to the Share Ratio will be required unless such Share Ratio
adjustment would require a change of at least 0.1% in the Share Ratio then in
effect. The Share Ratio resulting from any of the adjustments specified above
will be rounded to the nearest one thousandth with five ten-thousandths being
rounded upward.
No adjustments to the Share Ratio or to the amount payable at maturity of
the Notes will be required other than those specified above. However, the
Company may, at its sole discretion and in good faith, cause the Calculation
Agent to make additional adjustments to the Share Ratio to reflect changes
occurring in relation to the Case Stock or any other Exchange Property in other
circumstances where the Company determines that it is appropriate to reflect
such changes. The required adjustments specified above do not cover all events
that could affect the Market Price of the Case Stock, including, without
limitation, a partial tender or exchange offer for the Case Stock.
The Calculation Agent shall be solely responsible for the determination and
calculation of any adjustments to the Share Ratio and of any related
determinations and calculations with respect to any distributions of stock,
other securities or other property or assets (including cash) in connection with
any
PS-9
<PAGE>
corporate event described in paragraph 5 above, and its determinations and
calculations with respect thereto shall be conclusive.
The Calculation Agent will provide information as to any adjustments to the
Share Ratio upon written request by any holder of the Notes.
MARKET DISRUPTION EVENT
"Market Disruption Event" means:
(i) a suspension, absence (including the absence of an official
closing price) or material limitation of trading of the Case Stock on the
NYSE for more than two hours of trading or during the one-half hour period
preceding or at the close of trading in such market, as determined by the
Calculation Agent in its sole discretion; and
(ii) a determination by the Calculation Agent in its sole discretion
that the event described in clause (i) above materially interfered with the
ability of the Company or any of its affiliates to unwind all or a material
portion of the hedge with respect to the Notes.
For purposes of determining whether a Market Disruption Event has occurred:
(1) a limitation on the hours or number of days of trading will not constitute a
Market Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange, and (2) limitations pursuant to any
rule or regulation enacted or promulgated by the NYSE (or other regulatory
organization with jurisdiction over the NYSE) on trading during significant
market fluctuations will constitute a suspension or material limitation of
trading in the Case Stock.
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Notes shall have occurred
and be continuing, the amount payable to a beneficial owner of a Note upon any
acceleration permitted by the Notes will be determined by the Calculation Agent
and will be equal to the Cash Amount determined on the basis of a Final Price
equal to the sum of the Market Prices of the Case Stock on the 15 Trading Days
immediately preceding the date of acceleration each multiplied by the applicable
Multiplier, plus any accrued but unpaid interest and Cash Dividend Amount to but
not including the date of acceleration. If a bankruptcy proceeding is commenced
in respect of the Company, the claim of the beneficial owner of a Note may be
limited, under Section 502(b)(2) of Title 11 of the United States Code, to the
principal amount of the Note plus an additional amount of contingent interest
calculated as though the date of the commencement of the proceeding were the
maturity date of the Notes.
THE CASE STOCK
Case, a Delaware corporation, is a leading worldwide designer,
manufacturer, marketer and distributor of farm equipment and light- to medium-
sized construction equipment. Case's market position is particularly
significant in several product categories including loader/backhoes, skid steer
loaders, large, high-horsepower farm tractors and self-propelled combines. Case
also manufactures and distributes replacement parts for various models of its
farm and construction equipment, many of which are proprietary, to support
products it has sold. Case distributes these parts to dealers and distributors
through a network of parts depots throughout the world.
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The Case Stock is registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Companies with securities registered under the
Exchange Act are required to file periodically certain financial and other
information specified by the Securities and Exchange Commission (the
"Commission"). Information provided to or filed with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 or at
its Regional Office located at Suite 1400, Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661 and at Seven World Trade Center, 13th Floor, New
York, New York 10048, and copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, information provided to or filed
with the Commission electronically can be accessed through a Website maintained
by the Commission. The address of the Commission's Website is http:/www.sec.gov.
Information provided to or filed with the Commission by Case pursuant to the
Exchange Act can be located by reference to Commission file number 001-13098. In
addition, information regarding Case may be obtained from other sources
including, but not limited to, press releases, newspaper articles and other
publicly disseminated documents. The Company makes no representation or warranty
as to the accuracy or completeness of such reports.
THE COMPANY IS NOT AFFILIATED WITH CASE, AND CASE HAS NO OBLIGATIONS WITH
RESPECT TO THE NOTES. THIS PRICING SUPPLEMENT RELATES ONLY TO THE NOTES OFFERED
HEREBY AND DOES NOT RELATE TO THE CASE STOCK OR OTHER SECURITIES OF CASE. ALL
DISCLOSURES CONTAINED IN THIS PRICING SUPPLEMENT REGARDING CASE ARE DERIVED FROM
THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN THE PRECEDING PARAGRAPH. NEITHER
THE COMPANY NOR THE AGENT HAS PARTICIPATED IN THE PREPARATION OF SUCH DOCUMENTS
OR MADE ANY DUE DILIGENCE INQUIRY WITH RESPECT TO CASE IN CONNECTION WITH THE
OFFERING OF THE NOTES. NEITHER THE COMPANY NOR THE AGENT MAKES ANY
REPRESENTATION THAT SUCH PUBLICLY AVAILABLE DOCUMENTS OR ANY OTHER PUBLICLY
AVAILABLE INFORMATION REGARDING CASE ARE ACCURATE OR COMPLETE. FURTHERMORE,
THERE CAN BE NO ASSURANCE THAT ALL EVENTS OCCURRING PRIOR TO THE DATE HEREOF
(INCLUDING EVENTS THAT WOULD AFFECT THE ACCURACY OR COMPLETENESS OF THE PUBLICLY
AVAILABLE DOCUMENTS DESCRIBED IN THE PRECEDING PARAGRAPH) THAT WOULD AFFECT THE
TRADING PRICE OF THE CASE STOCK (AND THEREFORE THE ISSUE PRICE) HAVE BEEN
PUBLICLY DISCLOSED. SUBSEQUENT DISCLOSURE OF ANY SUCH EVENTS OR THE DISCLOSURE
OF OR FAILURE TO DISCLOSE MATERIAL FUTURE EVENTS CONCERNING CASE COULD AFFECT
THE VALUE RECEIVED AT MATURITY WITH RESPECT TO THE NOTES AND THEREFORE THE
TRADING PRICES OF THE NOTES. NEITHER THE COMPANY NOR ANY OF ITS AFFILIATES MAKE
ANY REPRESENTATION TO ANY PURCHASER OF THE NOTES AS TO THE PERFORMANCE OF THE
CASE STOCK.
The Company or its affiliates may presently or from time to time engage in
business, directly or indirectly, with Case including extending loans to, or
making equity investments in, Case or providing investment banking or advisory
services to Case, including merger and acquisition advisory services. In the
course of such business, the Company or its affiliates may acquire non-public
information with respect to Case and, in addition, one or more affiliates of the
Company may publish research reports with respect to Case.
ANY PROSPECTIVE PURCHASER OF A NOTE SHOULD UNDERTAKE AN INDEPENDENT
INVESTIGATION OF CASE AS IN ITS JUDGMENT IS APPROPRIATE TO MAKE AN INFORMED
DECISION WITH RESPECT TO AN INVESTMENT IN THE NOTES AND THE CASE STOCK.
PS-11
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DATA ON THE CASE STOCK
The Case Stock is principally traded on the NYSE. The following table sets
forth the high and low Market Price during 1995, 1996, 1997, and during 1998
through August 7, 1998. On August 7, 1998, the Market Price of the Case Stock
was $31 11/16 per share. The Market Prices and Dividends Per Share listed below
were obtained from Bloomberg Financial Markets. The historical prices of Case
Stock should not be taken as an indication of future performance, and no
assurance can be given that the price of Case Stock will not decrease so that
the beneficial owners of the Notes will receive at maturity cash in an amount
that is less than the principal amount of the Notes. Nor can assurance be given
that the price of Case Stock will increase above the Issue Price so that at
maturity the beneficial owners of the Notes will receive cash in an amount in
excess of the principal amount of the Notes.
<TABLE>
<CAPTION>
DIVIDENDS PER
HIGH LOW SHARE(1)
------------- ------------- -----------------
Case
<S> <C> <C> <C>
1995
First Quarter........................................ 25 3/8 20 5/8 .05
Second Quarter....................................... 29 7/8 24 5/8 .05
Third Quarter........................................ 40 7/8 29 3/4 .05
Fourth Quarter....................................... 45 7/8 35 1/8 .05
1996
First Quarter........................................ 56 40 3/8 .05
Second Quarter....................................... 54 7/8 45 1/2 .05
Third Quarter........................................ 49 5/8 43 .05
Fourth Quarter....................................... 55 1/8 45 3/4 .05
1997
First Quarter........................................ 58 7/8 49 3/8 .05
Second Quarter....................................... 68 7/8 50 3/8 .05
Third Quarter........................................ 70 1/2 61 1/2 .05
Fourth Quarter....................................... 72 9/16 57 3/4 .05
1998
First Quarter........................................ 70 1/4 55 7/16 .05
Second Quarter....................................... 70 5/16 47 1/8 .05
Third Quarter (through August 7, 1998)............... 48 1/4 31 11/16 --
</TABLE>
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(1) The Company makes no representation as to the amount of dividends, if any,
that Case will pay in the future. Holders of the Notes will not be entitled
to receive dividends, if any, that may be payable on the Case Stock. The
right to receive the Cash Dividend Amount is solely an obligation of the
Company.
PS-12
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USE OF PROCEEDS AND HEDGING
The net proceeds to be received by the Company from the sale of the Notes
will be used for general corporate purposes and, in part, by the Company or one
or more of its affiliates in connection with hedging the Company's obligations
under the Notes. See also "Use of Proceeds" in the accompanying Prospectus.
In connection with the Company's obligations under the Notes, the Company
has entered into hedging arrangements related to the Case Stock with an
affiliate of the Company. In connection therewith, such affiliate has purchased
shares of the Case Stock in secondary market transactions at or before the time
of the pricing of the Notes. The Company, MLPF&S and other affiliates of the
Company may from time to time buy or sell the Case Stock for their own accounts
for business reasons or in connection with hedging the Company's obligations
under the Notes. These transactions could affect the price of the Case Stock.
UNITED STATES FEDERAL INCOME TAXATION
The following discussion, which is based on the advice of Brown & Wood llp,
counsel to the Company ("Tax Counsel"), supplements and, to the extent
inconsistent with, replaces the discussion contained in the accompanying
Prospectus Supplement under the heading "Certain United States Federal Income
Tax Considerations." As the law applicable to the U.S. federal income taxation
of instruments such as the Notes is technical and complex, the discussion below
necessarily represents only a general summary. The following discussion also
only addresses initial purchasers of the Notes. Moreover, the effect of any
applicable state, local or foreign tax laws is not discussed.
General
There are no statutory provisions, regulations, published rulings or
judicial decisions addressing or involving the characterization and treatment,
for U.S. federal income tax purposes, of the Notes or securities with terms
substantially the same as the Notes. Accordingly, the proper U.S. federal
income tax characterization and treatment of the Notes is uncertain. Pursuant
to the terms of the Notes, the Company and every holder of a Note agree (in the
absence of an administrative determination or judicial ruling to the contrary)
to characterize a Note for all tax purposes as an investment unit consisting of
the following components (the "Components"): (i) a debt instrument of the
Company (the "Debt Instrument") with a fixed principal amount unconditionally
payable on the Maturity Date equal to the Principal Amount of the Notes and
bearing stated interest at the Interest Rate and (ii) a contract (the "Forward
Contract") pursuant to which the holder agrees to use the principal payment due
on the Debt Instrument to make a payment to the Company in exchange for the
right to receive the Cash Amount payable at maturity. Furthermore, based on the
Company's determination of the relative fair market values of the Components at
the time of issuance of the Notes, the Company will allocate 97.32% of the Issue
Price of the Notes to the Debt Instrument and 2.68% of the Issue Price to the
Forward Contract. In the opinion of Brown & Wood llp, counsel to the Company,
such characterization and tax treatment of the Notes, although not the only
reasonable characterization and tax treatment, is based on reasonable
interpretations of law currently in effect and, even if successfully challenged
by the Internal Revenue Service (the "IRS"), will not result in the imposition
of penalties. The Company's allocation of the Issue Price among the Components
will be binding on a U.S. Holder (as defined in the accompanying Prospectus
Supplement) of a Note, unless such U.S. Holder timely and explicitly discloses
to the IRS that its allocation is different from the Company's. The treatment
of the Notes described above and the Company's allocation are not, however,
binding on the IRS or the courts. No statutory, judicial or administrative
authority directly addresses the characterization of the Notes or instruments
similar to the Notes for U.S. federal income tax purposes, and no ruling is
being requested from the IRS with respect to the Notes. Due to the absence of
authorities that
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directly address instruments that are similar to the Notes, significant aspects
of the U.S. federal income tax consequences of an investment in the Notes are
not certain, and no assurance can be given that the IRS or the courts will agree
with the characterization described above. Accordingly, prospective purchasers
are urged to consult their tax advisors regarding the U.S. federal income tax
consequences of an investment in a Note (including alternative characterizations
of a Note) and with respect to any tax consequences arising under the laws of
any state, local or foreign taxing jurisdiction. Unless otherwise stated, the
following discussions are based on the assumption that the treatment and the
allocation described above are accepted for U.S. federal income tax purposes.
Tax Treatment of a Note
Interest on the Debt Instrument. As described above, the Debt Instrument
is treated as bearing interest at a stated rate of 3.0% per annum plus the Cash
Dividend Amount and 97.32% of the Issue Price has been allocated by the Company
to the Debt Instrument. The Debt Instrument will be treated as a Short-Term
Note (as defined in the accompanying Prospectus Supplement) and will be treated
as having been issued with original issue discount ("OID"). In general, because
the yield on the Debt Instrument is higher than the Interest Rate, the amount of
income recognized by a U.S. Holder that uses the accrual method of tax
accounting will generally be more than the stated interest paid to the U.S.
Holder. U.S Holders should review the accompanying Prospectus Supplement for a
discussion of the U.S. federal income tax treatment of Short-Term Notes.
Tax Basis
Based on the Company's determination set forth above, the U.S. Holder's tax
basis in the Debt Instrument would initially be 97.32% of the Issue Price. The
U.S. Holder's tax basis in the Debt Instrument will be subsequently increased by
OID accrued with respect thereto.
Settlement of the Forward Contract. Upon the final settlement of the
Forward Contract, a U.S. Holder would, pursuant to the Forward Contract, be
deemed to have applied an amount (the "Forward Contract Payment Amount") equal
to the sum of the principal amount of the Debt Instrument (which includes the
amount of OID accrued) plus 2.68% of the Issue Price (which has been allocated
to the Forward Contract) toward the exchange for the cash payment at maturity,
and a U.S. Holder would recognize gain or loss. The amount of such gain or loss
would be the extent to which the amount of such cash received differs from the
Forward Contract Payment Amount.
U.S. Holders should note that while the accrued but unpaid OID on the Debt
Instrument would be taxable as ordinary income, it is uncertain whether any gain
or loss recognized upon the final settlement of the Forward Contract would be
short-term capital gain or loss or ordinary income or loss. The distinction
between capital gain or loss and ordinary income or loss is potentially
significant in several respects. For example, limitations apply to a U.S.
Holder's ability to offset capital losses against ordinary income. U.S. Holders
should consult their tax advisors with respect to the treatment of gain or loss
on a Note.
Sale or Exchange of the Notes
Upon a sale or exchange of a Note prior to the maturity of the Notes, a
U.S. Holder would recognize taxable gain or loss equal to the difference between
the amount realized on such sale or exchange (as allocated among the Components
in accordance with their relative fair market values) and such U.S. Holder's tax
basis in the Components deemed so sold or exchanged. Any such gain or loss
would generally be short-term capital gain or loss, as the case may be.
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Possible Alternative Tax Treatments of an Investment in a Note
Due to the absence of authorities that directly address the proper
characterization of the Notes, no assurance can be given that the IRS will
accept, or that a court will uphold, the characterization and tax treatment
described above. Other alternative U.S. federal income characterizations or
treatments of the Notes are possible, which may affect the timing and the
character of the income or loss with respect to the Notes. Accordingly,
prospective purchasers are urged to consult their tax advisors regarding the
U.S. federal income tax consequences of an investment in a Note.
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