<PAGE>
Filed pursuant to Rule 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)
$200,000,000
Merrill Lynch & Co., Inc.
Medium-Term Notes, Series B
0.25% Callable and Exchangeable Stock-Linked Notes due May 10, 2006
Linked to the performance of the common stock of Time Warner Inc.
----------------------
The notes:
. Issue price for each note equals $1,000, plus accrued interest, if any,
from May 10, 1999.
. We will pay you interest on the notes semi-annually at a rate per year
equal to 0.25%.
. We may redeem all of the notes, at our option, before their maturity for an
amount in U.S. dollars based on the formula described in this prospectus
supplement.
. You may exchange any number of notes you own, at your option, before
maturity. For each $1,000 principal amount of the notes you exchange, we
will deliver to you a number of shares of Time Warner common stock, and in
certain circumstances other securities, equal to the exchange ratio.
. At maturity, for each $1,000 principal amount of the notes you own, we will
pay you an amount in U.S. dollars based on the formula described in this
pricing supplement.
. The notes have been approved for listing on the American Stock Exchange
under the trading symbol "TWM.A".
Payment formula:
. For each $1,000 principal amount of the notes you own, the amount you will
receive at maturity will equal the greater of:
. the product of the exchange ratio and the average market price of the
common stock of Time Warner determined as described in this pricing
supplement; provided, however, that if the amount you receive at maturity
is based on this formula, you will not receive accrued interest from and
including November 10, 2005 through the maturity date; or
. $1,000 plus accrued and unpaid interest through but excluding the maturity
date.
. The exchange ratio initially equals 12.1517 and is subject to adjustment
from time to time as described in this pricing supplement.
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.
----------------------
Merrill Lynch & Co.
----------------------
The date of this pricing supplement is April 30, 1999.
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<TABLE>
<CAPTION>
Terms of the notes:
<S> <C>
Aggregate principal amount................... $200,000,000.
Issuer....................................... Merrill Lynch & Co., Inc.
References to "ML&Co." are to Merrill Lynch & Co., Inc.
Maturity date................................ May 10, 2006.
Interest rate................................ 0.25% 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....................... May 10 and November 10, commencing November 10, 1999.
Specified currency........................... U.S. dollars.
Issue price.................................. $1,000 per note.
Pricing date................................. April 30, 1999.
Original issue date.......................... May 10, 1999.
CUSIP number................................. 590188 JV1.
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 Time Warner 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 November 10, 2005
through the maturity date; or
. $1,000 plus accrued and unpaid interest through but
excluding the maturity date.
</TABLE>
PS-2
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<TABLE>
<S> <C>
ML&Co. redemption............................ We may redeem all of the notes, at any time, on any
Business Day after May 10, 2002, upon not 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.
Unless you have exchanged your notes prior to May 10,
2002, you will receive interest through and including
May 10, 2002 regardless of whether we redeem all of the
notes after May 10, 2002.
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 Time Warner 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........................ On any Trading Day during the period beginning May 10,
1999 and ending the earlier of (i) 15 scheduled Trading
Days before the maturity date or (ii) the redemption
notice date, upon written notice to the calculation
agent and the trustee, you may exchange your notes for a
number of shares of Time Warner common stock equal to
the exchange ratio, subject to certain adjustments as
described below in "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 your 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 Time Warner common stock equal to the exchange ratio
on the Business Day following the day the calculation
agent receives written notice of your intention
</TABLE>
PS-3
<PAGE>
<TABLE>
<S> <C>
to exchange your notes; 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 Amount may be
adjusted to include certain cash and/or securities in
addition to, or in lieu of, the Time Warner common stock.
Exchange ratio............................... The exchange ratio is equal to the product of 12.1517
and the share multiplier.
Share multiplier............................. The share multiplier initially will 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 on any
Trading Day means the official closing price, in the
afternoon session, as applicable, of one share of Time
Warner common stock as reported by the principal
exchange on which Time Warner 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 Time
Warner 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,
</TABLE>
PS-4
<PAGE>
<TABLE>
<S> <C>
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.
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.
</TABLE>
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 after
May 10, 2002, upon not more than 30 nor fewer 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
Time Warner 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 ML&Co. 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 Time Warner common stock and any
amounts payable or deliverable to you at maturity or upon any redemption or
exchange, as the case may be, does not take into consideration the value of cash
dividends, if any, paid on Time Warner 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 Time Warner 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
"TWM.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 Time Warner common stock. In
addition, it is unlikely that the secondary market price of the notes will
correlate exactly with the value of Time Warner 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 Time Warner 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
PS-6
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expected impact on the trading value of the notes given a change in a specific
factor, assuming all other conditions remain constant.
. Value of Time Warner common stock. The market value of the notes will depend
substantially on the value of Time Warner common stock. In general, the value
of the notes will decrease as the value of Time Warner common stock decreases
and the value of the notes will increase as the value of Time Warner common
stock increases. However, as the value of Time Warner 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 Time Warner 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 Time Warner common stock has appreciated by more than 17.50%
from the original pricing 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 Time Warner is a part, and
over which we have no control, may affect the value of Time Warner 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 Time Warner common stock. Rising interest rates may
lower the value of Time Warner common stock and, as a result, the value of
the notes. Falling interest rates may increase the value of Time Warner
common stock and, as a result, may increase the value of the notes.
. Volatility of Time Warner common stock. Volatility is the term used to
describe the size and frequency of market price and/or fluctuations.
Generally, if the volatility of Time Warner common stock increases, we expect
that the trading value of the notes will increase and if the volatility of
Time Warner common stock decreases, we expect that the trading value of the
notes will decrease.
. 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 Time Warner common stock. Generally, as the time remaining to
maturity decreases, including because of early redemption at our option, the
value of the notes will approach the amount that would be payable at maturity
or early redemption, as the case may be, based on the then-current value of
Time Warner common stock. As a result, as the time remaining to maturity, or
early redemption, 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 Time Warner
common stock increases, we expect that the value of the notes will decrease,
and conversely, if the dividend yield, if any, on Time Warner 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
PS-7
<PAGE>
the percentage increase in the value of the Time Warner common stock, an
improvement in our credit ratings will not reduce the investment risks
related to the notes.
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 Time Warner 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 exchange of the notes is subject to adjustment for the
specified corporate events affecting Time Warner and Time Warner 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 Time Warner 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 Time Warner
We are not affiliated with Time Warner, and Time Warner 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. Time Warner 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, Time Warner
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 Time
Warner common stock
Unless and until you receive shares upon exercising your exchange right,
you will not be entitled to any rights with respect to Time Warner common stock
including, without limitation, the right to receive dividends or other
distributions, if any, on, to vote or to tender or exchange Time Warner common
stock in any tender or exchange offer by Time Warner or any third party.
Purchases and sales of Time Warner common stock by us and our affiliates may
affect your return
We have entered into hedging arrangements related to Time Warner common
stock with one of our affiliates in connection with our obligations under the
notes. In connection therewith, our affiliate will purchase shares of Time
Warner common stock in the secondary market on or before the pricing date and
will purchase and sell shares of Time Warner 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 Time Warner 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 Time Warner 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.
PS-8
<PAGE>
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 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 of the Time Warner common stock. 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.
PS-9
<PAGE>
Time Warner Inc.
Time Warner Inc. ("Time Warner") also files reports, proxy statements and
other information with the SEC. Information provided to or filed with the SEC by
Time Warner pursuant to the Exchange Act can be located at the SEC's facilities
or accessed through the SEC's website by reference to SEC file number 1-12259.
You may also inspect Time Warner's SEC reports and other information at the New
York Stock Exchange. In addition, information regarding Time Warner 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 Time Warner 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 Time Warner 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 Time Warner common stock is subject to a stock dividend, i.e., issuance
of additional shares of Time Warner common stock, that is given ratably to all
holders of shares of Time Warner 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 Time Warner common stock issued with respect
to one share of Time Warner 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 Time Warner 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 Time Warner common stock to the extent such
dividend or other distribution exceeds the immediately preceding non-
Extraordinary Dividend for Time Warner common stock by an amount equal to at
least 10% of the market price of Time Warner common stock on the Trading Day
preceding the ex-dividend date with respect to such Extraordinary Dividend (the
"ex-dividend date"). If an Extraordinary Dividend occurs with respect to Time
Warner common stock, the share multiplier will be adjusted on the ex-dividend
date with respect to such Extraordinary Dividend so that the new share
multiplier will equal the product of:
PS-10
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. the then-current share multiplier, multiplied by
. a fraction, the numerator of which is the closing price per share of
Time Warner common stock on the Trading Day preceding the ex-dividend
date, and the denominator of which is the 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 Time Warner 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 Time Warner 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 Time Warner issues transferable rights or warrants to all holders of
Time Warner common stock to subscribe for or purchase Time Warner common stock,
including new or existing rights to purchase Time Warner common stock pursuant
to a shareholder's rights plan or arrangement, once a triggering event shall
have occurred thereunder, at an exercise price per share less than the closing
price of one share of Time Warner 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 Time Warner common stock outstanding
immediately prior to such issuance plus the number of additional shares of Time
Warner 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 Time
Warner common stock outstanding immediately prior to such issuance plus the
number of additional shares of Time Warner common stock which the aggregate
offering price of the total number of shares of Time Warner common stock so
offered for subscription or purchase pursuant to such rights or warrants would
purchase at the closing price of one share of Time Warner 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,
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(a) there occurs any reclassification or change of Time Warner common stock,
(b) Time Warner, or any surviving entity or subsequent surviving entity of Time
Warner (a "Successor Entity"), has been subject to a merger, combination or
consolidation and is not the surviving entity,
(c) any statutory exchange of securities of Time Warner or any Successor Entity
with another corporation occurs, other than pursuant to clause (b) above,
(d) Time Warner is liquidated,
(e) Time Warner issues to all of its shareholders equity securities of an
issuer other than Time Warner, 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
Time Warner (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, date of early
redemption or upon exchange, as the case may be, 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 Time
Warner common stock multiplied by the share multiplier in effect
on the date all of the holders of shares of Time Warner 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 Time Warner 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 average market price per share of such
security for the five scheduled Trading Days ending on and
including the third scheduled Trading Day immediately prior to
the maturity date or date of early redemption, as the case may
be, multiplied by (b) the quantity of such security received for
each share of Time Warner common stock multiplied by the then
current share multiplier, and
PS-12
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(4) for any security received in the case of a Spin-off Event, in
addition to the shares of Time Warner common stock, an amount equal
to (a) the average market price per share of such security for the
five scheduled Trading Days ending on and including the third
scheduled Trading Day immediately prior to the maturity date, or
date of early redemption, as the case may be, multiplied by (b) the
quantity of such security received for each share of Time Warner
common stock multiplied by the then current share multiplier. The
share multiplier with respect to any such securities shall equal
the product of the share multiplier in effect for the Time Warner
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 Time Warner common stock. The share
multiplier of any such securities will be subject to the same
adjustments as that of the share multiplier of the Time Warner
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 Time Warner 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 Time Warner 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 Time Warner 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 Time Warner
common stock. The share multiplier of any such securities will be
subject to the same adjustments as that of the share multiplier of
the Time Warner common stock.
. If Time Warner, 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 Time Warner, then the Exchange Amount shall be calculated
to include securities, if any, received in any such event instead of
the Time Warner common stock. The share multiplier with respect to
any such securities shall equal the product of the share multiplier
in effect for the Time Warner 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 Time Warner
common stock. The share multiplier of any such securities will be
subject to the same adjustments as that of the share multiplier of
the Time Warner common stock.
PS-13
<PAGE>
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 Time Warner 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 price of Time Warner
common stock, including, without limitation, a partial tender or exchange offer
for Time Warner 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
Time Warner common stock by Time Warner for cash or in connection with
acquisitions or the occurrence of a partial tender or exchange offer for Time
Warner common stock by Time Warner 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 Time Warner 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 Time Warner 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 Time Warner
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 Time Warner
common stock,
(4) a suspension of trading in an options contract on Time Warner
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 Time Warner common stock and
(5) a suspension, absence or material limitation of trading on the
primary securities market on which options contracts related to Time Warner
common stock are traded will not include any time when such securities
market is itself closed for trading under ordinary circumstances.
If the Transaction Value includes securities other than Time Warner common
stock, then the above definition shall be revised to include each such security
in the same manner as Time Warner common stock is considered in determining
whether a Market Disruption Event exists. The definition of Market Disruption
Event shall only consider those securities included in determining the
Transaction Value, and thus if Time Warner common stock is not included in the
determination of the Transaction Value, then the Time Warner common stock shall
not be considered in determining whether a Market Disruption Event exists.
PS-15
<PAGE>
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 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 TIME WARNER COMMON STOCK
The following information has been derived from publicly-available
documents published by Time Warner. We make no representation or warranty as to
the accuracy or completeness of the following information: Time Warner Inc.,
together with its consolidated and unconsolidated subsidiaries is one of the
world's leading media and entertainment companies. The Company maintains its
principal executive offices in New York City, New York and is incorporated in
Delaware. Time Warner classifies its business interests into four fundamental
areas and operates as a holding company which derives its operating income and
cash flow from investments in its subsidiaries. The four subsidiary groups are
as follows: (1) cable networks, consisting principally of interests in cable
television programming, (2) publishing, consisting principally of interests in
magazine publishing, book publishing and direct marketing, (3) entertainment,
consisting principally of interests in filmed entertainment, television
production, television broadcasting, recorded music and music publishing, and
(4) cable, consisting principally of interests in cable television systems. All
four of these industries are highly competitive. As of December 31, 1998, Time
Warner and its subsidiaries employed approximately 67,500 employees.
Information provided to or filed with the SEC by Time Warner can be located
at the SEC's facilities or through the SEC's website by reference to SEC file
number 1-12259 for Time Warner. 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.
The selection of Time Warner common stock is not a recommendation to buy or
sell Time Warner common stock and neither ML&Co. nor any of its affiliates make
any representation to any purchaser of notes as to the performance of the Time
Warner common stock.
ML&Co. is not affiliated with Time Warner and Time Warner does not have any
obligations with respect to the notes. This pricing supplement relates only to
the notes offered hereby and does not relate to Time Warner common stock or
other securities of Time Warner. All disclosures contained in this pricing
supplement regarding Time Warner 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 Time Warner 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 Time
Warner 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
Time Warner common stock
PS-16
<PAGE>
have been publicly disclosed. Subsequent disclosure of any such events or the
disclosure of or failure to disclose material future events concerning Time
Warner 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 Time Warner common stock.
ML&Co. or its affiliates may presently or from time to time engage in
business, directly or indirectly, with Time Warner including extending loans to,
or making equity investments in, Time Warner or providing investment banking or
advisory services to Time Warner, 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 Time Warner and, in addition, one or more
affiliates of ML&Co. may publish research reports with respect to Time Warner.
Any prospective purchaser of a note should undertake an independent
investigation of Time Warner as in its judgment is appropriate to make an
informed decision with respect to an investment in the notes.
PS-17
<PAGE>
Historical Data
Time Warner 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 April 30, 1999. On April 30, 1999, the closing price of
Time Warner common stock was $70.00 per share. The closing prices and dividends
per share listed below were obtained from Bloomberg Financial Markets. The
historical prices of Time Warner common stock should not be taken as an
indication of future performance, and no assurance can be given that the price
of Time Warner common stock will not decrease. Nor can assurance be given that
the price of Time Warner 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)
-------------- ------------- -----------------
Time Warner Inc.
1996
<S> <C> <C> <C>
First Quarter........................................ 22 1/2 18 15/16 0.045
Second Quarter....................................... 21 1/8 19 1/16 0.045
Third Quarter........................................ 19 7/8 16 1/16 0.045
Fourth Quarter....................................... 20 15/16 18 1/2 0.045
1997
First Quarter........................................ 22 7/16 18 1/4 0.045
Second Quarter....................................... 25 20 3/8 0.045
Third Quarter........................................ 28 5/32 22 11/16 0.045
Fourth Quarter....................................... 31 26 7/8 0.045
1998
First Quarter........................................ 37 21/32 29 21/32 0.045
Second Quarter....................................... 44 3/16 36 19/32 0.045
Third Quarter........................................ 49 13/16 40 3/16 0.045
Fourth Quarter....................................... 62 3/8 39 0.045
1999
First Quarter........................................ 72 7/16 58 7/8 0.045
Second Quarter (through April 30, 1999).............. 78 1/4 62 0.045
</TABLE>
______________
(1) ML&Co. makes no representation as to the amount of dividends, if any,
that Time Warner will pay in the future. Holders of the notes will not be
entitled to receive dividends, if any, that may be payable on Time Warner common
stock.
PS-18
<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 Time Warner common stock with an affiliate
of ML&Co. In connection therewith, such affiliate has purchased shares of Time
Warner 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 Time Warner 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 Time Warner 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-19
<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 $1,505.81 per $1,000
of principal amount of the notes ("Projected Redemption Amount"). This
represents an estimated yield on the notes equal to 6.13% 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 May
10, 2006, in the event that the amount payable upon maturity (the "Actual
Redemption Amount") exceeds $1,505.81 or every $1,000 note, a U.S. holder will
be required to include the excess of the Actual Redemption Amount over $1,505.81
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 $1,505.81 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-20
<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 6.13% 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>
May 10, 1999 through November 10, 1999........................... $30.65 $ 30.65
November 11, 1999 through May 10, 2000........................... $31.55 $ 62.20
May 11, 2000 through November 10, 2000........................... $32.48 $ 94.68
November 11, 2000 through May 10, 2001........................... $33.44 $128.12
May 11, 2001 through November 10, 2001........................... $34.42 $162.54
November 11, 2001 through May 10, 2002........................... $35.44 $197.98
May 11, 2002 through November 10, 2002........................... $36.49 $234.47
November 11, 2002 through May 10, 2003........................... $37.57 $272.04
May 11, 2003 through November 10, 2003........................... $38.68 $310.72
November 11, 2003 through May 10, 2004........................... $39.83 $350.55
May 11, 2004 through November 10, 2004........................... $41.01 $391.56
November 11, 2004 through May 10, 2005........................... $42.23 $433.79
May 11, 2005 through November 10, 2005........................... $43.49 $477.28
November 11, 2005 through May 10, 2006........................... $44.78 $522.06
</TABLE>
_______________
Projected Redemption Amount = $1,505.81 per $1,000 principal amount of notes.
PS-21
