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RULE NO. 424(b)(3)
REGISTRATION NO. 333-59997
PRICING SUPPLEMENT
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(To prospectus supplement dated February 17, 1999 and prospectus dated July 30,
1998)
$8,000,000
Merrill Lynch & Co., Inc.
Medium-Term Notes, Series B
1% Callable and Exchangeable Stock-Linked Notes due April 19, 2004
Linked to the performance of the common stock of GTE Corporation
----------------------
The notes: Payment formula:
. Issue price for each note equals . For each $1,000 principal amount
$1,000, plus accrued interest, of the notes you own, the amount
if any, from April 19, 1999. you will receive at maturity will
equal the greater of:
. We will pay you interest on the
notes semi-annually at a rate . the product of the exchange ratio
per year equal to 1%. and the average market price of
the common stock of GTE Corporation
. We may redeem the notes, at our determined as described
option, before their maturity for in this pricing supplement;
an amount in U.S. Dollars based provided, however, that if the
on the formula described in this amount you receive at maturity is
prospectus supplement. based on this formula, you will
not receive accrued interest from
. You may exchange any number of notes and including October 19, 2003
you own, at your option, before through the maturity date; or
maturity. For each $1,000 principal
amount of the notes you exchange, we . $1,000 plus accrued and unpaid
will deliver to you a number of interest through but excluding
shares of GTE common stock, and in the maturity date.
certain circumstances other securities,
equal to the Exchange Ratio. . The exchange ratio initially
equals 14.3499 and is subject
. At maturity, for each $1,000 principal to adjustment from time to
amount of the notes you own, we will time as described in this
pay you an amount in U.S. Dollars based pricing supplement.
on the formula described in this
pricing supplement.
. The notes have been approved for listing
on the American Stock Exchange under
the trading symbol "GTM.A".
Investing in the notes involves risks.
See "Risk Factors" beginning on page PS-6 of this pricing supplement.
Neither the SEC nor any state securities commission has approved these
securities or passed upon the adequacy or accuracy of this pricing supplement or
the accompanying prospectus supplement and prospectus. Any representation to the
contrary is a criminal offense.
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Merrill Lynch & Co.
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The date of this pricing supplement is April 12, 1999.
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Terms of the notes:
Aggregate principal amount................... $8,000,000.
Issuer....................................... Merrill Lynch & Co., Inc.
References to "ML&Co." are to
Merrill Lynch & Co., Inc.
Maturity date................................ April 19, 2004.
Interest rate................................ 1% per year. Interest on the note
will be computed on the basis of
a 360-day year of twelve 30-day
months.
Interest payment dates....................... April 19 and October 19,
commencing October 19, 1999.
Specified currency........................... U.S. dollars.
Issue price.................................. $1,000 per note.
Pricing date................................. April 12, 1999.
Original issue date.......................... April 19, 1999.
CUSIP........................................ 590188 JU3.
Form of notes................................ Book-entry only.
Denominations................................ We will issue and sell the notes
in denominations of $1,000 and
integral multiples of $1,000
only.
Trustee...................................... The Chase Manhattan Bank.
Amount payable at maturity................... At maturity, whether as a result
of acceleration or otherwise, you
will receive for each $1,000
principal amount of the notes, an
amount in U.S. Dollars equal to
the greater of:
. the product of the exchange
ratio and the average market
price of the GTE common stock
for the five scheduled Trading
Days ending on and including
the third scheduled Trading Day
immediately prior to maturity;
provided, however, that if the
payment at maturity is based on
this formula, you will not
receive accrued interest from
and including October 19, 2003
through the maturity date; or
. $1,000 plus accrued and unpaid
interest through but excluding
the maturity date.
ML&Co. redemption............................ We may redeem all of the notes,
at any time, on a Business Day
beginning on April 19, 2002, upon
not
PS-2
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more than 30 nor fewer than 15
calendar days notice to you.
Any date on which we give you
notice that we are redeeming the
notes is referred to as a
redemption notice date.
If we redeem the notes, for each
$1,000 principal amount of the
notes you own, we will pay you an
amount in U.S. Dollars equal to
the greater of:
. the product of the exchange
ratio and the average market
price of GTE common stock for
the five Trading Days
immediately following the
applicable redemption notice
date; provided, however, that
if the amount you receive is
based on this formula, you
will not receive accrued
interest from and including
the immediately preceding
interest payment date through
the date of redemption; or
. $1,000 plus accrued and unpaid
interest on your notes through
but excluding the date of
redemption.
If we redeem the notes, you are
precluded from exercising the
holder exchange right as of the
redemption notice date.
Holder exchange right........................ At any time beginning June 21,
1999 and ending 15 scheduled
Trading Days before the maturity
date, upon written notice to the
calculation agent and the
trustee, you may exchange your
notes for the Exchange Amount.
Any date on which you give us
notice to cause us to exchange
your notes is referred to as the
exchange notice date. If the
calculation agent receives your
notice after 3:00 p.m. on any
Trading Day, the calculation
agent will consider your notice
as received on the following
Trading Day.
If you choose to exercise your
holder exchange right, ML&Co. may
no longer redeem the notes as of
the applicable exchange notice
date.
Exchange Amount.............................. For each $1,000 principal amount
of the notes you exchange, the
Exchange Amount will be a number
of shares of GTE common stock
equal in value to the exchange
ratio; provided, however, you
will not receive accrued interest
from and including the
immediately preceding interest
payment date through the date of
exchange. We will deliver these
shares to you on the applicable
settlement date; provided,
however, that we will pay you
cash in lieu of delivering
fractional shares, in an amount
as determined by the calculation
agent. In the event of certain
Market Disruption Events, the
delivery of these shares may be
delayed as described in the
section entitled "Market
Disruption Event". In the event
of certain reorganization events,
the Exchange
PS-3
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Amount may be adjusted to include
certain securities in addition
to, or in lieu of, the GTE common
stock.
Exchange ratio............................... The exchange ratio is equal to
the product of 14.3499 and the
share multiplier.
Share multiplier............................. The share multiplier will
initially be set at 1.0, but will
be subject to adjustment upon the
occurrence of certain corporate
events described in the section
entitled "Dilution and
Reorganization Adjustments".
Market price................................. The market price for any date of
determination means the official
closing price, in the afternoon
session, as applicable, of one
share of GTE common stock as
reported by the principal
exchange on which GTE common
stock is traded on that date.
If the official closing price is
not available for any reason,
including, without limitation,
the occurrence of a Market
Disruption Event, the market
price for GTE common stock for
any date will be the arithmetic
mean, as determined by the
calculation agent, of the bid
prices for the security obtained
from as many dealers in the
security, but not exceeding
three, as have made the bid
prices available to the
calculation agent after 3:00
p.m., local time in the principal
market, on such date.
Trading Day.................................. A day on which the New York Stock
Exchange, the AMEX and the Nasdaq
Stock Market 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.
Calculation agent............................ Merrill Lynch, Pierce, Fenner &
Smith Incorporated.
References to "MLPF&S" are to
Merrill Lynch, Pierce, Fenner &
Smith Incorporated.
All determinations made by the
calculation agent shall be at the
sole discretion of the
calculation agent and, absent
manifest error, shall be
conclusive for all purposes and
binding on ML&Co. and beneficial
owners of the notes.
PS-4
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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.
PS-5
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RISK FACTORS
Your investment in the notes will involve certain risks, including risks
not associated with similar investments in a conventional debt security. You
should consider carefully the following discussion of risks before you decide
that an investment in the notes is suitable for you.
The notes are subject to redemption before their maturity
We may elect to redeem all of the notes on any Business Day beginning on
April 19, 2002, upon not more than 30 nor less than 15 calendar days notice to
you. In the event that we elect to redeem the notes, you may receive an amount
that is less than the amount to which you would otherwise have been entitled had
you held the notes until maturity.
Your yield may be lower than the yield on a standard debt security of comparable
maturity
The amount we pay you at maturity may be less than the return you could
earn on other investments. The terms of the notes differ from the terms of
ordinary debt securities because the amount payable at maturity in excess of the
principal amount is based substantially on the appreciation in price, if any, of
GTE common stock on five Trading Days shortly before the stated maturity date.
Your yield may be less than the yield you would earn if you bought a standard
senior non-callable debt security of Merrill Lynch & Co., Inc. with the same
stated maturity date. Your investment may not reflect the full opportunity cost
to you when you consider the effect of factors that affect the time value of
money.
Your return on the notes will not reflect the payment of dividends
The calculation of the market price of GTE common stock and any amounts
payable or deliverable to you at maturity or upon any redemption or repurchase,
as the case may be, does not take into consideration the value of cash
dividends, if any, paid on GTE common stock, other than as described in the
section entitled "Dilution and Reorganization Adjustments". Your return will
not be the same as the return you could earn by owning GTE common stock directly
and receiving the dividends, if any, paid on that stock.
There may be an uncertain trading market for the notes
The notes have been approved for listing on the AMEX under the symbol
"GTM.A", subject to official notice of issuance. There is no historical
information to indicate how the notes will trade in the secondary market.
Listing the notes on the AMEX does not necessarily ensure that a liquid trading
market will develop for the notes. The development of a liquid trading market
for the notes will depend on our financial performance and other factors such as
the appreciation, if any, in the price of GTE common stock. In addition, it is
unlikely that the secondary market price of the notes will correlate exactly
with the value of GTE common 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 the maturity date. This may affect the price you receive
upon such sale.
There are many factors affecting trading value of the notes
The value of GTE common stock and a number of other factors will affect the
trading value of the notes. Some of these factors are interrelated in complex
ways; as a result, the effect of any one factor may offset or magnify the effect
of another factor. The following paragraphs describe the expected impact on
PS-6
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the trading value of the notes given a change in a specific factor, assuming all
other conditions remain constant.
. Value of GTE common stock. The market value of the notes will depend
substantially on the value of GTE common stock. In general, the value of the
notes will decrease as the value of GTE common stock decreases and the value
of the notes will increase as the value of GTE common stock increases.
However, as the value of GTE common stock increases or decreases, the value
of the notes is not expected to increase or decrease at the same rate as the
change in value of GTE common stock. You should understand that for each
$1,000 principal amount of the notes that you own, you will not receive more
than $1,000 on the maturity date unless the market price of GTE common stock
has appreciated by more than 18% from the original issue date to the period
in which the calculation agent calculates the amount payable at maturity on
the notes. Additionally, political, economic and other developments that can
affect the capital markets generally and the market segment of which GTE is a
part, and over which we have no control, may affect the value of GTE common
stock and, consequently, may also affect the value of the notes.
. Interest rates. In general, we anticipate that if U.S. interest rates
increase, the trading value of the notes will decrease, and conversely, if
U.S. interest rates decrease, the trading value of the notes will increase.
Generally, fluctuations in interest rates will affect the U.S. economy and,
in turn, the value of GTE common stock. Rising interest rates may lower the
value of GTE common stock and, as a result, the value of the notes. Falling
interest rates may increase the value of GTE common stock and, as a result,
may increase the value of the notes.
. Volatility of GTE common stock. Volatility is the term used to describe the
size and frequency of market price and/or fluctuations. Generally, if the
volatility of GTE common stock increases, we expect that the trading value of
the notes will increase and if the volatility of GTE common stock decreases,
we expect that the trading value of the notes will decrease. In the event the
pending merger between GTE and Bell Atlantic Corporation as described in the
section entitled "The GTE Common Stock" is not consummated, the price of GTE
common stock may fall to, or below, its price prior to the merger
announcement.
. Time remaining to maturity. We believe that before the maturity date the
notes will trade at a value above that which would be expected based on the
value of GTE common stock. Generally, as the time remaining to maturity
decreases, the value of the notes will approach the amount that would be
payable at maturity based on the then-current value of GTE common stock. As a
result, as the time remaining to maturity decreases, any premium attributed
to the trading value of the notes will diminish, decreasing the trading value
of the notes, as applicable.
. Dividend yields. Generally, if the dividend yield, if any, on GTE common
stock increases, we expect that the value of the notes will decrease, and
conversely, if the dividend yield, if any, on GTE common stock decreases, we
expect that the value of the notes will increase.
. Changes in our credit ratings. Our credit ratings are an assessment of our
ability to pay our obligations. Consequently, real or anticipated changes in
our credit ratings may affect the trading value of the notes. However,
because your return on your notes is dependent upon factors in addition to
our ability to pay our obligations under the notes, such as the percentage
increase in the value of the GTE common stock, an improvement in our credit
ratings will not reduce the investment risks related to the notes.
PS-7
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It is important for you to understand that a decrease in the trading value
of the notes resulting from the effect of one of the factors specified above,
such as an increase in interest rates, may offset some or all of any increase in
the trading value of the notes attributable to another factor, such as an
increase in the value of GTE common stock.
In general, assuming all relevant factors are held constant, we expect that
the effect on the trading value of the notes of a given change in most of the
factors listed above will be less if it occurs later in the term of the notes
than if it occurs earlier in the term of the notes.
The amount payable at maturity is not subject to adjustment for all corporate
events
The amount that you are entitled to receive on the maturity date or upon
earlier redemption or repurchase of the notes is subject to adjustment for the
specified corporate events affecting GTE and GTE common stock described in the
section entitled "Dilution and Reorganization Adjustments". However, these
adjustments do not cover all corporate events that could affect the market price
of GTE common stock. The occurrence of any other event not described under
"Dilution and Reorganization Adjustments" may adversely affect the determination
of the market price and the trading value of the notes.
No affiliation between ML&Co. and GTE
We are not affiliated with GTE, and GTE has no obligations with respect to
the notes or amounts to be paid to you, including any obligation to take the
needs of ML&Co. or of beneficial owners of the notes into consideration for any
reason. GTE 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 on the maturity date. In addition, GTE 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.
As a holder of the notes, you have no stockholder rights with respect to GTE
common stock
Until you receive shares upon exercising your exchange right, you will not
be entitled to any rights with respect to GTE common stock including, without
limitation, the right to receive dividends or other distributions, if any, on,
to vote or to tender or exchange GTE common stock in any tender or exchange
offer by GTE or any third party.
Purchases and sales of GTE common stock by us and our affiliates may affect your
return
We have entered into hedging arrangements related to GTE common stock with
one of our affiliates in connection with our obligations under the notes. In
connection therewith, our affiliate will purchase shares of GTE common stock in
the secondary market on or before the pricing date and will purchase and sell
shares of GTE common stock in the secondary market during the term of the notes.
We or any of our affiliates, including MLPF&S, may from time to time buy or sell
GTE common stock for our own accounts for business reasons or in connection with
hedging our obligations under the notes. These transactions could affect the
price of GTE common stock, including during the period when the amount payable
at maturity is determined, in a manner that would be adverse to your investment
in the notes.
Amounts payable on the notes may be limited by state law
New York State laws govern the 1993 Indenture under which the notes will be
issued. New York has certain usury laws that limit the amount of interest that
can be charged and paid on loans, which
PS-8
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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 we believe that New York law would be given effect by a state or
Federal court sitting outside of New York, many other states also have laws that
regulate the amount of interest that may be charged to and paid by a borrower.
We will promise, for your benefit, to the extent permitted by law, not to
voluntarily claim the benefits of any laws concerning usurious rates of
interest.
Potential conflicts of interests
The calculation agent for the notes is one of our subsidiaries. Under
certain circumstances, MLPF&S's role as our subsidiary and its responsibilities
as calculation agent for the notes could give rise to conflicts of interests
between the calculation agent and the holders of the notes. These conflicts
could occur, for instance, in connection with the calculation agent's
determination as to whether a Market Disruption Event (as defined below) has
occurred or in connection with judgments that the calculation agent would be
required to make with respect to certain anti-dilution and reorganization
adjustments to the market price. MLPF&S is required to carry out its duties as
calculation agent in good faith and using its reasonable judgment. However, you
should be aware that because we control MLPF&S, potential conflicts of interest
could arise.
We anticipate entering into an arrangement with one of our subsidiaries to
hedge the market risks associated with our obligation to pay the amounts due
under the notes. Our subsidiary expects to make a profit in connection with this
arrangement. We did not seek competitive bids for this arrangement from
unaffiliated parties.
Uncertain tax consequences
You should also consider the tax consequences of investing in the notes,
certain aspects of which are uncertain. See "United States Federal Income
Taxation" below.
WHERE YOU CAN FIND MORE INFORMATION
ML&Co.
We file reports, proxy statements and other information with the SEC. Our
SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for more information
on the public reference rooms and their copying charges. You may also inspect
our SEC reports and other information at the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005.
We will send you copies of our SEC filings, excluding exhibits, at no cost
upon request. Please address your request to Lawrence M. Egan, Jr., Corporate
Secretary's Office, Merrill Lynch & Co., Inc., 100 Church Street, 12th Floor,
New York, New York 10080-6512; telephone number (212) 602-8439.
The GTE Corporation
GTE Corporation ("GTE Corp." or "GTE") also files reports, proxy statements
and other information with the SEC. Information provided to or filed with the
SEC by GTE pursuant to the Exchange Act can be located at the SEC's facilities
or accessed through the SEC's website by reference
PS-9
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to SEC file number 1-02755. You may also inspect GTE's SEC reports and other
information at the New York Stock Exchange. In addition, information regarding
GTE may be obtained from other sources including, but not limited to, press
releases, newspaper articles and other publicly disseminated documents. We make
no representation or warranty as to the accuracy or completeness of any such
information or reports.
DILUTION AND REORGANIZATION ADJUSTMENTS
The share multiplier used to calculate the exchange ratio on any date of
determination is subject to adjustment by the calculation agent as a result of
the dilution and reorganization adjustments described in this section.
Stock Splits and Reverse Stock Splits
If GTE common stock is subject to a stock split or reverse stock split,
then once any split has become effective, the share multiplier will be adjusted
to equal the product of the prior share multiplier and the number of shares
which a holder of one share of GTE common stock before the effective date of
that stock split or reverse stock split would have owned or been entitled to
receive immediately following the applicable effective date.
Stock Dividends
If GTE common stock is subject to a stock dividend, i.e., issuance of
additional shares of GTE common stock, that is given ratably to all holders of
shares of GTE common stock, then once such shares are trading ex-dividend, the
share multiplier will be adjusted so that the new share multiplier shall equal
the prior share multiplier plus the product of:
. the number of shares of GTE common stock issued with respect to one share of
GTE common stock, and
. the prior share multiplier.
Extraordinary Dividends
There will be no adjustments to the share multiplier to reflect cash
dividends or distributions paid, if any, with respect to GTE common stock other
than distributions described under clause (e) of the section entitled "--
Reorganization Events" below and Extraordinary Dividends as described below.
An "Extraordinary Dividend" means, with respect to a cash dividend or other
distribution with respect to GTE common stock to the extent such dividend or
other distribution exceeds the immediately preceding non-Extraordinary Dividend
for GTE common stock by an amount equal to at least 5% of the market price of
GTE common stock on the Trading Day preceding the ex-dividend date for the
payment of such Extraordinary Dividend. If an Extraordinary Dividend occurs
with respect to GTE common stock, the share multiplier will be adjusted on the
Trading Day preceding the payment of any dividend, the payment of which caused
an Extraordinary Dividend to be paid (the "ex-dividend date"), so that the new
share multiplier will equal the product of:
. the then-current share multiplier, and
. a fraction, the numerator of which is the closing price per share of GTE
common stock on the Trading Day preceding the ex-dividend date, and the
denominator of which is the
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amount by which the closing 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 the GTE common stock will equal:
. 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, or
. in the case of cash dividends or other distributions that do not constitute
quarterly dividends, the amount per 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 GTE common stock described
in clause (e) of the section entitled "--Reorganization Events" below that also
constitutes an Extraordinary Dividend shall cause an adjustment to the share
multiplier pursuant only to clause (e) under the section entitled "--
Reorganization Events".
Issuance of Transferable Rights or Warrants
If GTE issues transferable rights or warrants to all holders of GTE common
stock to subscribe for or purchase GTE common stock, including new or existing
rights to purchase GTE common stock pursuant to a shareholders rights plan or
arrangement, once a triggering event shall have occurred thereunder, at an
exercise price per share less that the closing price of one share of GTE common
stock on:
. the date the exercise price of such rights or warrants is determined and
. the expiration date of such rights or warrants,
then, in each case, if the expiration date of such rights or warrants precedes
the maturity date, then the share multiplier will be adjusted to equal the
product of the prior share multiplier and a fraction, the numerator of which
shall be the number of shares of GTE common stock outstanding immediately prior
to such issuance plus the number of additional shares of GTE common stock
offered for subscription or purchase pursuant to such rights or warrants and the
denominator of which shall be the number of shares of GTE common stock
outstanding immediately prior to such issuance plus the number of additional
shares of GTE common stock which the aggregate offering price of the total
number of shares of GTE common stock so offered for subscription or purchase
pursuant to such rights or warrants would purchase at the closing price of one
share of GTE common stock on the expiration date of such rights or warrants,
which shall be determined by multiplying such total number of shares offered by
the exercise price of such rights or warrants and dividing the product so
obtained by such closing price.
Reorganization Events
If before the maturity date of the notes,
(a) there occurs any reclassification or change of GTE common stock,
(b) GTE, or any surviving entity or subsequent surviving entity of GTE (a
"Successor Entity"), has been subject to a merger, combination or
consolidation and is not the surviving entity,
PS-11
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(c) any statutory exchange of securities of GTE or any Successor Entity
with another corporation occurs, other than pursuant to clause (b)
above,
(d) GTE is liquidated,
(e) GTE issues to all of its shareholders equity securities of an issuer
other than GTE, other than in a transaction described in clauses (b),
(c) or (d) above (a "Spin-off Event"), or
(f) a tender or exchange offer is consummated for all the outstanding
shares of GTE (any such event in clauses (a) through (f) a
"Reorganization Event"),
the Market Price shall be equal to the Reorganization Event Value.
The "Reorganization Event Value" shall be determined by the calculation
agent and shall equal:
. the Transaction Value related to the relevant Reorganization Event, plus
. in the event described in clause (1) below only, interest on such
Transaction Value accruing from the date of the payment or delivery of the
consideration, if any, received in connection with such Reorganization
Event until the stated maturity date or upon earlier redemption at a fixed
interest rate determined on the date of such payment or delivery equal to
the interest rate that would be paid on a standard senior non-callable
debt security of ML&Co. with a term equal to the remaining term of the
notes.
"Transaction Value" means the sum of the following:
(1) for any cash received in any such Reorganization Event, an amount
equal to the amount of cash received per share of GTE common stock
multiplied by the share multiplier in effect on the date all of the
holders of shares of GTE common stock have agreed or have become
irrevocably obligated to exchange such shares,
(2) 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 property received for each share of GTE
common stock at the date of the receipt of such property multiplied
by the then current share multiplier,
(3) for any security received in any such Reorganization Event, an
amount equal to (a) the closing price per share of such security on
the fifth Trading Day prior to the maturity date, or the fifth
Trading Day prior to early redemption, multiplied by (b) the
quantity of such security received for each share of GTE common
stock multiplied by the then current share multiplier, and
(4) for any security received in the case of a Spin-off Event, an amount
equal to (a) the closing price per share of such security on the
fifth Trading Day prior to the maturity date, or the fifth Trading
Day prior to early redemption, multiplied by (b) the quantity of
such security received for each share of GTE common stock multiplied
by the then current share multiplier, in addition to the shares of
GTE common stock. The share multiplier with respect to any such
securities shall equal the product of the share multiplier in effect
for the GTE common stock at the time of the issuance of such
securities multiplied by the number of shares of such securities
issued with respect to one share of GTE common stock. The share
multiplier of any such securities will be
PS-12
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subject to the same adjustments as that of the share multiplier of
the GTE common stock.
"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 GTE common stock with respect to which the spun-off
security was issued.
For purposes of this section, 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.
Notwithstanding anything to the contrary in the document, if you elect to
exchange your notes, the Exchange Amount will be adjusted in the following
manner:
. In the case of a Spin-off Event, the Exchange Amount shall be
calculated so as to include any securities received in any such Spin-
off Event in addition to the shares of GTE common stock already
included in the Exchange Amount. The share multiplier with respect to
any such securities shall equal the product of the share multiplier
in effect for the GTE common stock at the time of the issuance of
such securities multiplied by the number of shares of such securities
issued with respect to one share of GTE common stock. The share
multiplier of any such securities will be subject to the same
adjustments as that of the share multiplier of the GTE common stock.
. If GTE, or any Successor Entity, has been subject to a merger,
combination or consolidation and is not the surviving entity, or a
tender or exchange offer is consummated for all the outstanding
shares of GTE, then the Exchange Amount shall be calculated to
include securities, if any, received in any such event instead of the
GTE common stock. The share multiplier with respect to any such
securities shall equal the product of the share multiplier in effect
for the GTE common stock at the time of the issuance of such
securities multiplied by the number of shares of such securities
issued with respect to one share of GTE common stock. The share
multiplier of any such securities will be subject to the same
adjustments as that of the share multiplier of the GTE common stock.
Adjustments to the share multiplier
No adjustments to the share multiplier will be required unless such share
multiplier adjustment would require a change of at least 0.1% in the share
multiplier then in effect. The share multiplier 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 multiplier will be required other than those
specified above. However, ML&Co. may, at its sole discretion, cause the
calculation agent to make additional adjustments to the share multiplier to
reflect changes occurring in relation to GTE common stock or any other Exchange
Property in other circumstances where ML&Co. determines that it is appropriate
to reflect such changes. The required adjustments specified above do not cover
all events that could affect the closing
PS-13
<PAGE>
price of GTE common stock, including, without limitation, a partial tender or
exchange offer for GTE common stock.
MLPF&S, as calculation agent, shall be solely responsible for the
determination and calculation of any adjustments to the share multiplier 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 corporate event described above, and its determinations and
calculations with respect thereto shall be conclusive absent manifest error.
No adjustments will be made for certain other events, such as offerings of
GTE common stock by GTE for cash or in connection with acquisitions or the
occurrence of a partial tender or exchange offer for GTE common stock by GTE or
any third party.
ML&Co. will, within ten Business Days following the occurrence of an event
that requires an adjustment to the share multiplier, or if ML&Co. is not aware
of such occurrence, as soon as practicable after becoming so aware, provide
written notice to the Trustee, which shall provide notice to the holders of the
notes of the occurrence of such event and, if applicable, a statement in
reasonable detail setting forth the adjusted share multiplier.
PS-14
<PAGE>
MARKET DISRUPTION EVENT
"Market Disruption Event" means:
(1) a suspension, absence (including the absence of an official closing
price) or material limitation of trading of GTE common 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; or the suspension or material limitation on the primary
market for trading in options contracts related to GTE common stock, if
available, during the one-half hour period preceding or at the close of trading
in the applicable market, in each case as determined by the calculation agent in
its sole discretion; and
(2) a determination by the calculation agent in its sole discretion that
the event described in clause (1) above materially interfered with the ability
of ML&Co. or any of its affiliates to unwind all or a material portion of the
hedge with respect to the notes or to purchase GTE common stock for the purpose
of delivering the Exchange Amount.
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,
(2) a decision to permanently discontinue trading in the relevant options
contract will not constitute a Market Disruption Event,
(3) 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 GTE common stock,
(4) a suspension of trading in an options contract on GTC common stock by
the primary securities market trading in such options, if available, by reason
of (a) a price change exceeding limits set by such securities exchange or
market, (b) an imbalance of orders relating to such contracts or (c) a disparity
in bid and ask quotes relating to such contracts will constitute a suspension or
material limitation of trading in options contracts related to GTE common stock
and
(5) a suspension, absence or material limitation of trading on the primary
securities market on which options contracts related to GTE common stock are
traded will not include any time when such securities market is itself closed
for trading under ordinary circumstances.
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 principal amount of the note plus accrued but unpaid
interest thereon to but excluding the date of early repayment, if applicable,
calculated as though the date of early repayment were the stated maturity date
of the notes. If a bankruptcy proceeding is commenced in respect of ML&Co., the
claim of the beneficial owner of a note may be limited, under
PS-15
<PAGE>
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 GTE COMMON STOCK
The following information has been derived from publicly-available
documents published by GTE. We make no representation or warranty as to the
accuracy or completeness of the following information: GTE Corporation,
including its subsidiaries, is one of the largest telecommunications companies
in the world and maintains its principal executive offices in Irving, Texas. The
telecommunications business in which it is engaged is highly competitive. As of
December 31, 1997, GTE and its subsidiaries had approximately 114,000 employees
and served 27.7 million access lines through subsidiaries in the United States,
Canada, and the Dominican Republic and an affiliate in Venezuela. On July 28,
1998, GTE and Bell Atlantic Corporation ("Bell Atlantic") announced a "merger of
equals" among GTE, Bell Atlantic and Beta Gamma Corporation, a wholly owned
subsidiary of Bell Atlantic. Beta Gamma Corporation shall be merged with and
into GTE which will continue as a surviving corporation and shall be a wholly-
owned subsidiary of Bell Atlantic. Under the terms of the agreement and plan of
merger, GTE stockholders will receive 1.22 shares of Bell Atlantic stock for
each GTE share they own. The merger is subject to the approval of the GTE and
Bell Atlantic shareholders, expiration of the applicable Hart-Scott-Rodino
waiting period, government approvals and customary closing conditions.
No assurance can be given that merger will occur. ML&Co makes no
representation as to the effect of such merger on GTE's business or financial
performance if it does occur.
Information provided to or filed with the SEC by GTE and Bell Atlantic can
be located at the SEC's facilities or through the SEC's website by reference to
SEC file number 1-02755 for GTE and SEC file number 1-08606 for Bell Atlantic.
See "Where You Can Find More Information". ML&Co. makes no representation or
warranty as to the accuracy or completeness of any such information or reports.
ML&Co. is not affiliated with GTE or Bell Atlantic and neither GTE nor Bell
Atlantic has any obligations with respect to the notes. This pricing supplement
relates only to the notes offered hereby and does not relate to GTE common stock
or other securities of GTE. All disclosures contained in this pricing
supplement regarding GTE are derived from the publicly available documents
described in the preceding paragraph. Neither ML&Co. nor MLPF&S has
participated in the preparation of such documents or made any due diligence
inquiry with respect to GTE in connection with the offering of the notes.
Neither ML&Co. nor MLPF&S makes any representation that such publicly available
documents or any other publicly available information regarding GTE 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 GTE common stock have been
publicly disclosed. Subsequent disclosure of any such events or the disclosure
of or failure to disclose material future events concerning GTE could affect the
amount received at maturity with respect to the notes and therefore the trading
prices of the notes. Neither ML&Co. nor any of its affiliates make any
representation to any purchaser of the notes as to the performance of the GTE
common stock.
ML&Co. or its affiliates may presently or from time to time engage in
business, directly or indirectly, with GTE including extending loans to, or
making equity investments in, GTE or providing investment banking or advisory
services to GTE, including merger and acquisition advisory services. In the
course of such business, ML&Co. or its affiliates may acquire non-public
information with respect to
PS-16
<PAGE>
GTE and, in addition, one or more affiliates of ML&Co. may publish research
reports with respect to GTE.
Any prospective purchaser of a note should undertake an independent
investigation of GTE or Bell Atlantic as in its judgment is appropriate to make
an informed decision with respect to an investment in the notes.
Historical Data
GTE common stock is principally traded on the NYSE. The following table
sets forth the high and low closing price during 1996, 1997, 1998 and during
1999 through March 31, 1999. On April 12, 1999, the closing price of GTE common
stock was $65.00 per share. The closing prices and dividends per share listed
below were obtained from Bloomberg Financial Markets. The historical prices of
GTE common stock should not be taken as an indication of future performance, and
no assurance can be given that the price of GTE common stock will not decrease.
Nor can assurance be given that the price of GTE common 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)
------------- ------------- -----------------
<S> <C> <C> <C>
The GTE Corp.
1996
First Quarter........................................ 48 5/8 41 1/4 $0.47
Second Quarter....................................... 45 1/4 41 5/8 $0.47
Third Quarter........................................ 44 3/4 38 $0.47
Fourth Quarter....................................... 46 3/8 38 5/8 $0.47
1997
First Quarter........................................ 49 1/4 43 1/4 $0.47
Second Quarter....................................... 46 1/4 41 5/8 $0.47
Third Quarter........................................ 47 11/16 43 11/16 $0.47
Fourth Quarter....................................... 52 1/4 41 7/8 $0.47
1998
First Quarter........................................ 59 7/8 49 1/2 $0.47
Second Quarter....................................... 62 55 5/8 $0.47
Third Quarter........................................ 58 1/16 47 13/16 $0.47
Fourth Quarter....................................... 70 13/16 55 $0.47
1999
First Quarter........................................ 68 3/4 57 3/16 $0.47
</TABLE>
______________
(1) ML&Co. makes no representation as to the amount of dividends, if any,
that GTE will pay in the future. Holders of the notes will not be entitled to
receive dividends, if any, that may be payable on GTE common stock.
PS-17
<PAGE>
USE OF PROCEEDS AND HEDGING
The net proceeds to be received by ML&Co. from the sale of the notes will
be used for general corporate purposes and, in part, by ML&Co. or one or more of
its affiliates in connection with hedging ML&Co.'s obligations under the notes.
See also "Use of Proceeds" in the accompanying prospectus.
In connection with ML&Co.'s obligations under the notes, ML&Co. has entered
into hedging arrangements related to GTE common stock with an affiliate of
ML&Co. In connection therewith, such affiliate has purchased shares of GTE
common stock in secondary market transactions at or before the time of the
pricing of the notes. ML&Co., MLPF&S and other affiliates of ML&Co. may from
time to time buy or sell GTE common stock for their own accounts, for business
reasons or in connection with hedging ML&Co.'s obligations under the notes.
These transactions could affect the price of GTE common stock.
UNITED STATES FEDERAL INCOME TAXATION
General
There are no statutory provisions, regulations, published rulings or
judicial decisions addressing or involving the characterization, for United
States federal income tax purposes, of the notes or securities with terms
substantially the same as the notes. However, although the matter is not free
from doubt, under current law, each note should be treated as a debt instrument
of ML&Co. for United States federal income tax purposes. ML&Co. currently
intends to treat each note as a debt instrument of ML&Co. for United States
federal income tax purposes and, where required, intends to file information
returns with the Internal Revenue Service ("IRS") in accordance with such
treatment, in the absence of any change or clarification in the law, by
regulation or otherwise, requiring a different characterization of the notes.
Prospective investors in the notes should be aware, however, that the IRS is not
bound by ML&Co.'s characterization of the notes as indebtedness, and the IRS
could possibly take a different position as to the proper characterization of
the notes for United States federal income tax purposes. The following
discussion of the principal United States federal income tax consequences of the
purchase, ownership and disposition of the notes is based upon the assumption
that each note will be treated as a debt instrument of ML&Co. for United States
federal income tax purposes. If the notes are not in fact treated as debt
instruments of ML&Co. for United States federal income tax purposes, then the
United States federal income tax treatment of the purchase, ownership and
disposition of the notes could differ from the treatment discussed below with
the result that the timing and character of income, gain or loss recognized in
respect of a note could differ from the timing and character of income, gain or
loss recognized in respect of a note had the notes in fact been treated as debt
instruments of ML&Co. for United States federal income tax purposes.
U.S. holders
On June 11, 1996, the Treasury Department issued final regulations (the
"Final Regulations") concerning the proper United States federal income tax
treatment of contingent payment debt instruments such as the notes, which apply
to debt instruments issued on or after August 13, 1996 and, accordingly, will
apply to the notes. In general, the Final Regulations cause the timing and
character of income, gain or loss reported on a contingent payment debt
instrument to substantially differ from the timing and character of income, gain
or loss reported on a contingent payment debt instrument under general
principles of prior United States federal income tax law. Specifically, the
Final Regulations generally require a U.S. holder of such an instrument to
include future contingent and noncontingent interest payments in income as such
interest accrues based upon a projected payment schedule. Moreover, in
PS-18
<PAGE>
general, under the Final Regulations, any gain recognized by a U.S. holder on
the sale, exchange, or retirement of a contingent payment debt instrument is
treated as ordinary income, and all or a portion of any loss realized could be
treated as ordinary loss as opposed to capital loss, depending upon the
circumstances. The Final Regulations provide no definitive guidance as to
whether or not an instrument is properly characterized as a debt instrument for
United States federal income tax purposes.
In particular, solely for purposes of applying the Final Regulations to the
notes, ML&Co. has determined that the projected payment schedule for the notes
will consist of the stated interest payments on the note (other than the final
stated interest payment) and a payment at maturity equal to $1,274.44 per $1,000
of principal amount of the notes ("Projected Redemption Amount"). This
represents an estimated yield on the notes equal to 5.73% per annum, compounded
semiannually. Accordingly, during the term of the notes, a U.S. holder of a
note will be required to include in income the sum of the daily portions of
interest on the note that are deemed to accrue at this estimated yield for each
day during the taxable year, or portion of the taxable year, on which the U.S.
holder holds such note. The amount of interest that will be deemed to accrue in
any accrual period, i.e., generally each six-month period during which the notes
are outstanding, will equal the product of this estimated yield, properly
adjusted for the length of the accrual period, and the note's adjusted issue
price at the beginning of the accrual period. The daily portions of interest
will be determined by allocating to each day in the accrual period the ratable
portion of the interest that is deemed to accrue during the accrual period. In
general, for these purposes a note's adjusted issue price will equal the note's
issue price, increased by the interest previously accrued on the note and
reduced by interest payments received on the notes. As a result of the
foregoing rules, a U.S. holder will not be required to include in income the
stated interest payments received on its notes. Upon maturity of a note on
April 19, 2004, in the event that the amount payable upon maturity (the "Actual
Redemption Amount") exceeds $1,274.44 for every $1,000 note, a U.S. holder will
be required to include the excess of the Actual Redemption Amount over $1,274.44
per $1,000 (i.e., the Projected Redemption Amount) in income as ordinary
interest on the maturity date. Alternatively, in the event that the Actual
Redemption Amount is less than $1,274.44 per $1,000 of principal amount of notes
(i.e., the Projected Redemption Amount), the excess of the Projected Redemption
Amount over the Actual Redemption Amount will be treated first as an offset to
any interest otherwise includible in income by the U.S. holder with respect to
the note for the taxable year in which the maturity date occurs to the extent of
the amount of such includible interest. A U.S. holder will be permitted to
recognize and deduct, as an ordinary loss that is not subject to the limitations
applicable to miscellaneous itemized deductions, any remaining portion of the
excess of the Projected Redemption Amount over the Actual Redemption Amount that
is not treated as an interest offset pursuant to the foregoing rules. U.S.
holders purchasing a note at a price that differs from the adjusted issue price
of the note as of the purchase date (e.g., subsequent purchasers) will be
subject to special rules providing for certain adjustments to the foregoing
rules, and such U.S. holders should consult their own tax advisors concerning
these rules.
Upon the sale, redemption or exchange of a note prior to the maturity of
the note, a U.S. holder will be required to recognized taxable gain or loss in
an amount equal to the difference, if any, between the amount realized by the
U.S. holder upon such sale and the U.S. holder's adjusted tax basis in the note.
A U.S. holder's adjusted tax basis in a note generally will equal such U.S.
holder's initial investment in the note increased by any interest previously
included in income with respect to the note by the U.S. holder and reduced by
interest payments received on the note. Any such taxable gain will be treated
as ordinary income. Any such taxable loss will be treated as ordinary loss to
the extent of the U.S. holder's total interest inclusions on the note. Any
remaining loss generally will be treated as long-term or short-term capital
loss, depending upon the U.S. holder's holding period for the note. All amounts
includible in income by a U.S. holder as ordinary interest pursuant to the Final
Regulations will be treated as original issue discount.
PS-19
<PAGE>
Prospective investors in the notes should consult their own tax advisors
concerning the application of the Final Regulations to their investment in the
notes. Investors in the notes may also obtain the projected payment schedule, as
determined by ML&Co. for purposes of the application of the Final Regulations to
the notes, by submitting a written request for such information to Merrill Lynch
& Co., Inc., Attn: Darryl W. Colletti, Corporate Secretary's Office, 100
Church Street, 12th Floor, New York, New York 10080-6512.
The projected payment schedule, including both the Projected Redemption
Amount and the estimated yield on the notes, has been determined solely for
United States federal income tax purposes, i.e., for purposes of applying the
Final Regulations to the notes, and is neither a prediction nor a guarantee of
what the Actual Redemption Amount will be.
The following table sets forth the amount of interest that will be deemed
to have accrued with respect to each $1,000 principal amount of the notes during
each accrual period over the term of the notes based upon the projected payment
schedule for the notes, including both the Projected Redemption Amount and the
estimated yield equal to 5.73% per annum (compounded semiannually), as
determined by ML&Co. for purposes of applying the Final Regulations to the
notes:
<TABLE>
<CAPTION>
Total Interest
Deemed to
Have Accrued
Interest Deemed on the Notes
to as of the End
Accrue During of
Accrual Period Accrual Period
Accrual Period (per $1,000) (per $1,000)
-------------- ---------------- ----------------
<S> <C> <C>
April 19, 1999 through October 19, 1999.......................... $28.65 $ 28.65
October 20, 1999 through April 19, 2000.......................... $29.33 $ 57.98
April 20, 2000 through October 19, 2000.......................... $30.02 $ 88.00
October 20, 2000 through April 19, 2001.......................... $30.74 $118.74
April 20, 2001 through October 19, 2001.......................... $31.48 $150.22
October 20, 2001 through April 19, 2002.......................... $32.24 $182.46
April 20, 2002 through October 19, 2002.......................... $33.02 $215.48
October 20, 2002 through April 19, 2003.......................... $33.82 $249.30
April 20, 2003 through October 19, 2003.......................... $34.65 $283.95
October 20, 2003 through April 19, 2004.......................... $35.49 $319.44
</TABLE>
_______________
Projected Redemption Amount = $1,274.44 per $1,000 principal amount of notes.
PS-20
