Amendment No. 1 to
PROSPECTUS Dated May 1, 1996 Pricing Supplement No. 18 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-01655
Dated May 1, 1996 Dated June 21, 1996
Rule 424(b)(3)
$117,000,000
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES C
Senior Fixed Rate Notes
4.00% MANDATORILY EXCHANGEABLE NOTES DUE DECEMBER 15, 1997
Mandatorily Exchangeable For the Cash Value of Shares of Common Stock
of
UNUM CORPORATION
The 4.00% Mandatorily Exchangeable Notes due December 15, 1997 (the "Notes")
are Medium-Term Notes, Series C (Senior Fixed Rate Notes) of Morgan Stanley
Group Inc. (the "Company"), as further described below and in the Prospectus
Supplement under "Description of Notes - Fixed Rate Notes."
The principal amount of each of the Notes being offered hereby will be $58.50
(the "Initial Price"). The Notes will mature on December 15, 1997. Interest
on the Notes, at the rate of 4.00% of the principal amount per annum, is
payable quarterly in arrears on each March 15, June 15, September 15 and
December 15, beginning September 15, 1996.
At maturity (including as a result of acceleration or otherwise), the
principal amount of each Note will be mandatorily exchanged by the Company
into cash with a value equal to the Maturity Price (as defined herein) of a
number of shares of the common stock, $0.10 par value per share (the "UNUM
Stock"), of UNUM Corporation ("UNUM") at the Exchange Rate. The Exchange Rate
is equal to, subject to certain adjustments, (a) if the Maturity Price is
greater than or equal to $62.712 (the "Threshold Appreciation Price"),
0.9328358 of the product of the Exchange Factor (as defined herein) and one
share of UNUM Stock per Note, (b) if the Maturity Price is less than the
Threshold Appreciation Price but is greater than the Initial Price, a fraction
of the product of the Exchange Factor and one share of UNUM Stock so that the
value of such fraction (determined at the Maturity Price) equals the Initial
Price and (c) if the Maturity Price is less than or equal to the Initial
Price, the product of the Exchange Factor and one share of UNUM Stock per
Note. The Exchange Factor will be set initially at 1.0, but will be subject to
adjustment upon the occurrence of certain corporate events. Because the
Exchange Rate varies depending on the Maturity Price, holders of the Notes
will not necessarily receive at maturity an amount equal to the principal
amount thereof. See "Exchange at Maturity," "Exchange Factor" and
"Antidilution Adjustments" in this Pricing Supplement.
Interest on the Notes will accrue at a higher rate than the rate at which
dividends have been paid on the UNUM Stock. The opportunity for equity
appreciation afforded by an investment in the Notes is less than that afforded
by an investment in the UNUM Stock because at maturity a holder may receive
cash in an amount that is less than the Maturity Price of one share of UNUM
Stock per Note if the Maturity Price has appreciated above the Initial Price.
The amount of cash received by a holder of the Notes upon exchange at
maturity, determined as described herein, may be more or less than the
principal amount of the Notes.
UNUM is not affiliated with the Company, is not involved in this offering of
Notes and will have no obligations with respect to the Notes. See "Historical
Information" in this Pricing Supplement for information on the range of Market
Prices for UNUM Stock.
The Company will cause the Maturity Price, any adjustments to the Exchange
Factor and any other antidilution adjustments to be determined by the
Calculation Agent for Chemical Bank, as Trustee under the Senior Debt
Indenture.
THIS NOTE IS SUBJECT TO RESTRICTIONS ON TRANSFER AND MAY ONLY BE TRANSFERRED
WITH THE PRIOR APPROVAL OF THE COMPANY. SEE "RESTRICTIONS ON TRANSFER" ON
PS-4 AND PS-5 IN THIS PRICING SUPPLEMENT.
An investment in the Notes entails risks not associated with similar
investments in a conventional debt security, as described under "Risk Factors"
on PS-5 through PS-7 herein.
PRICE 100% AND ACCRUED INTEREST
Agent's Proceeds to
Price to Public(1) Commissions(2) Company(1)
-------------------- ---------------- --------------
Per Note.... 100% 0.25% 99.75%
Total....... $117,000,000 $292,500 $116,707,500
_______________
(1) Plus accrued interest, if any, from June 27, 1996.
(2) The Company has agreed to indemnify the Agent against certain liabilities,
including liabilities under the Securities Act of 1933.
MORGAN STANLEY & CO.
Incorporated
Capitalized terms not defined herein have the meanings given to such terms in
the accompanying Prospectus Supplement.
Principal Amount:.............. $117,000,000
Maturity Date:................. December 15, 1997
Interest Rate:................. 4.00% per annum
Interest Payment Dates......... March 15, June 15, September 15 and December
15, beginning September 15, 1996
Specified Currency:............ U.S. Dollars
Issue Price:................... 100%
Original Issue Date (Settlement
Date):....................... June 27, 1996
Book Entry Note or Certificated
Note: ....................... Certificated
Senior Note or Subordinated
Note: ....................... Senior
Denominations:................. $58.50 and integral multiples thereof
Trustee:....................... Chemical Bank
Exchange at Maturity:.......... At maturity (including as a result of
acceleration or otherwise), the principal
amount of each Note will be mandatorily
exchanged by the Company, upon delivery of
such Note to the Trustee, into cash with a
value equal to the Maturity Price of a number
of shares of UNUM Stock at the Exchange Rate.
The Exchange Rate is equal to (a) if the
Maturity Price is greater than or equal to
$62.712 (the "Threshold Appreciation Price"),
0.9328358 of the product of the Exchange
Factor and one share of UNUM Stock per Note,
(b) if the Maturity Price is less than the
Threshold Appreciation Price but is greater
than the Initial Price, a fraction of the
product of the Exchange Factor and one share
of UNUM Stock so that the value of such
fraction (determined at the Maturity Price)
equals the Initial Price and (c) if the
Maturity Price is less than or equal to the
Initial Price, the product of the Exchange
Factor and one share of UNUM Stock per Note,
subject in each case to any applicable
antidilution adjustments as set forth under
"Antidilution Adjustments" below.
The Company shall, or shall cause the
Calculation Agent to, deliver cash to the
Trustee for delivery to the holders. The
Calculation Agent shall calculate the
Maturity Price and the Exchange Factor and
determine the Exchange Rate applicable at the
maturity of the Notes. References to payment
"per Note" refer to each $58.50 principal
amount of any Note.
Exchange Factor:............... The Exchange Factor will be set initially at
1.0, but will be subject to adjustment upon
the occurrence of certain corporate events
through and including the second NYSE Trading
Day immediately prior to maturity. See
"Antidilution Adjustments" below.
Initial Price:................. $58.50
Maturity Price:................ The Maturity Price of the Notes will be
determined by the Calculation Agent and will
equal the arithmetic average of the products
(each a "Product") of (i) the Market Price of
one share of UNUM Stock and (ii) the Exchange
Factor, each as determined on the 15
scheduled NYSE Trading Days during the
Calculation Period (each a "Determination
Date"); provided that, if a Market Disruption
Event (as defined below) occurs on any such
Determination Date (consequently, a
"Non-Determination Date"), then the
Calculation Agent shall disregard such
Non-Determination Date and shall weight the
Product for each succeeding Determination
Date during the Calculation Period to ratably
distribute the intended weight of such
Non-Determination Date across the remaining
Determination Dates. Accordingly, if a
Market Disruption Event occurs during the
Calculation Period, the weightings of the
Products for the Determination Dates will be
calculated as follows: (A) each Determination
Date preceding the first Market Disruption
Event will receive a weighting of 1/15 and
(B) each Determination Date following a
Market Disruption Event will receive a
weighting that equals a fraction (i) the
numerator of which will be the fraction that
equals 1 minus the sum of the weights of all
preceding Determination Dates and (ii) the
denominator of which will be the number of
scheduled Determination Dates from and
including such Determination Date to and
including the last scheduled Determination
Date in the Calculation Period. If there is
no succeeding NYSE Trading Day on which a
Market Disruption Event has not occurred, the
product shall be determined on the last NYSE
Trading Day in the Calculation Period
notwithstanding the occurrence of a Market
Disruption Event on such NYSE Trading Day
and, if any scheduled NYSE Trading Day during
the Calculation Period is not an actual NYSE
Trading Day, the Market Price of UNUM Stock
for such scheduled NYSE Trading Day shall be
determined as of the earliest practicable
time (which may be after such scheduled NYSE
Trading Day).
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.
Calculation Period:............ The period from and including November 20,
1997 to and including the second scheduled
NYSE Trading Day immediately preceding the
Maturity Date.
Market Price:.................. If UNUM Stock (or any other security for
which a Market Price must be determined)
is listed on a national securities
exchange, is a security of The Nasdaq
National Market ("NASDAQ NMS") or is
included in the OTC Bulletin Board Service
("OTC Bulletin Board") operated by the
National Association of Securities
Dealers, Inc. (the "NASD"), the Market
Price for one share of UNUM Stock (or one
unit of any such other security) on any
NYSE Trading Day means (i) the last
reported sale price, regular way, on such
day on the principal United States
securities exchange registered under the
Securities Exchange Act of 1934, as
amended (the "Exchange Act"), on which
UNUM Stock (or any such other security) is
listed or admitted to trading or (ii) if
not listed or admitted to trading on any
such securities exchange or if such last
reported sale price is not obtainable, the
last reported sale price on the over-the-
counter market as reported on the NASDAQ
NMS or OTC Bulletin Board on such day. If
the last reported sale price is not
available pursuant to clause (i) or (ii)
of the preceding sentence, the Market
Price for any NYSE Trading Day shall be
the mean, as determined by the Calculation
Agent, of the bid prices for UNUM Stock
(or any such other security) obtained from
as many dealers in such stock, but not
exceeding three, as will make such bid
prices available to the Calculation Agent.
The term "NASDAQ NMS security" shall
include a security included in any
successor to such system and the term "OTC
Bulletin Board Service" shall include any
successor service thereto.
NYSE Trading Day:.............. A day on which trading is generally conducted
in the over-the-counter market for equity
securities in the United States and on the
New York Stock Exchange, as determined by the
Calculation Agent.
Calculation Agent:............. Morgan Stanley & Co. Incorporated ("MS &
Co.")
Because the Calculation Agent is an
affiliate of the Company, potential
conflicts of interest may exist between
the Calculation Agent and the holders of
the Notes, including with respect to
certain determinations and judgments that
the Calculation Agent must make in making
adjustments to the Exchange Factor or
other antidilution adjustments or
determining the Maturity Price or any
Market Price or whether a Market
Disruption Event has occurred. See
"Maturity Price" above and "Antidilution
Adjustments" and "Market Disruption Event"
below. MS & Co. is obligated to carry out
its duties and functions as Calculation
Agent in good faith and using its
reasonable judgment.
Restrictions on Transfer:...... EACH HOLDER OF A NOTE MUST HAVE A VALID
BUSINESS PURPOSE FOR INVESTING IN THE NOTE,
AND ITS INVESTMENT IN THE NOTE MUST BE
CONSISTENT WITH ITS OVERALL INVESTMENT
STRATEGY. ANY RESALE, PLEDGE OR OTHER
TRANSFER OF THE NOTE MAY BE MADE ONLY WITH
THE COMPANY'S PRIOR APPROVAL AND WILL BE MADE
ONLY AFTER THE DELIVERY BY THE HOLDER,
PLEDGEE OR TRANSFEREE TO THE COMPANY OF (1) A
CERTIFICATE TO THE EFFECT THAT SUCH HOLDER,
PLEDGEE OR TRANSFEREE HAS A VALID BUSINESS
PURPOSE FOR INVESTING IN THE NOTE AND THAT
ITS INVESTMENT IN THE NOTE IS CONSISTENT WITH
ITS OVERALL INVESTMENT STRATEGY AND (2) SUCH
OTHER INFORMATION, CERTIFICATION OR
DOCUMENTATION AS THE COMPANY MAY REASONABLY
REQUEST TO EVIDENCE OR SUPPORT THE ACCURACY
OF SUCH CERTIFICATE AND THE AUTHORITY OF THE
PERSON SIGNING SUCH CERTIFICATE. THE COMPANY
MAY GRANT OR WITHHOLD ITS APPROVAL OF ANY
RESALE, PLEDGE OR OTHER TRANSFER IN ITS SOLE
DISCRETION, BASED ON ITS EVALUATION OF THE
VALIDITY OF THE BUSINESS PURPOSE AND THE
ADEQUACY OF EVIDENCE OF SUCH BUSINESS PURPOSE.
Risk Factors:.................. An investment in the Notes entails
significant risks not associated with similar
investments in a conventional debt security,
including the following:
The Notes combine features of equity and debt
instruments. Accordingly, the terms of the
Notes differ from those of ordinary debt
securities in that the value of the UNUM
Stock that a holder of the Notes will receive
upon mandatory exchange of the principal
amount thereof at maturity is not fixed, but
is based on the price of the UNUM Stock and
the Exchange Rate as determined at such
price. Because the price of the UNUM Stock
is subject to market fluctuations, the amount
of cash received by a holder of Notes upon
exchange at maturity, determined as described
herein, may be more or less than the
principal amount of the Notes. If the
Maturity Price of the UNUM Stock is less than
the Initial Price, the amount of cash
receivable upon exchange will be less than
the principal amount of the Notes, in which
case an investment in the Notes may result in
a loss. Because the Maturity Price will be
based upon an average of closing values of
UNUM Stock on specified days (the
Determination Dates), a significant increase
in the value of UNUM Stock as measured on the
final Determination Date, or any earlier
Determination Date, may be substantially or
entirely mitigated by the values of UNUM
Stock on the other Determination Dates.
The opportunity for equity appreciation
afforded by an investment in the Notes is
less than that afforded by an investment in
the UNUM Stock because at maturity a holder
will receive cash in an amount that is less
than the Maturity Price of one share of UNUM
Stock per Note if the Maturity Price of such
UNUM Stock has appreciated above the Initial
Price.
Although the amount that holders of the Notes
are entitled to receive at maturity is
subject to adjustment for certain corporate
events, such adjustments do not cover all
events that could affect the Market Price of
the UNUM Stock, including, without
limitation, the occurrence of a partial
tender or exchange offer for the UNUM Stock
by UNUM or any third party. Such other
events may adversely affect the market value
of the Notes.
There can be no assurance as to whether the
Notes will trade in the secondary market or,
if there is such a secondary market, whether
such market will be liquid or illiquid.
Securities with characteristics similar to
the Notes are novel securities, and there is
currently no secondary market for the Notes.
Transfer restrictions on the Notes will
further impact the liquidity of the market.
The Notes may be transferred only to
investors with a valid business purpose for
investing in the Notes and only if the
Company has granted its approval of the
transfer. See "Restrictions on Transfer"
above.
The market value for the Notes will be
affected by a number of factors in addition
to the creditworthiness of the Company and the
value of UNUM Stock, including, but not
limited to, the volatility of UNUM Stock, the
dividend rate on UNUM Stock, market interest
and yield rates and the time remaining to the
maturity of the Notes. In addition, the
value of UNUM Stock depends on a number of
interrelated factors, including economic,
financial and political events, that can
affect the capital markets generally and the
market segment of which UNUM is a part and
over which the Company has no control. The
market value of the Notes is expected to
depend primarily on changes in the Market
Price of UNUM Stock. The price at which a
holder will be able to sell Notes prior to
maturity may be at a discount, which could be
substantial, from the principal amount
thereof, if, at such time, the Market Price
of UNUM Stock is below, equal to or not
sufficiently above the Initial Price. The
historical Market Prices of UNUM Stock should
not be taken as an indication of UNUM Stock's
future performance during the term of any
Note.
The Notes will not be listed on any national
securities exchange or accepted for quotation
on a trading market and, as a result, pricing
information for the Notes may be difficult to
obtain.
The Company is not affiliated with UNUM and,
although the Company as of the date of this
Pricing Supplement does not have any material
non-public information concerning UNUM,
corporate events of UNUM, including those
described below in "Antidilution
Adjustments," are beyond the Company's
ability to control and are difficult to
predict.
UNUM is not involved in the offering of the
Notes and has no obligations with respect to
the Notes, including any obligation to take
the interests of the Company or of holders of
Notes into consideration for any reason.
UNUM 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 of the timing of,
prices for or quantities of, the Notes
offered hereby.
Holders of the Notes will not be entitled to
any rights with respect to the UNUM Stock
(including, without limitation, voting
rights, the rights to receive any dividends
or other distributions in respect thereof and
the right to tender or exchange UNUM Stock in
any partial tender or exchange offer by UNUM
or any third party).
Because the Calculation Agent is an affiliate
of the Company, potential conflicts of
interest may exist between the Calculation
Agent and the holders of the Notes, including
with respect to certain adjustments to the
Exchange Factor and other antidilution
adjustments that may influence the
determination of the amount of cash
receivable at the maturity of the Notes. See
"Antidilution Adjustments" and "Market
Disruption Event."
It is suggested that prospective investors
who consider purchasing the Notes should
reach an investment decision only after
carefully considering the suitability of the
Notes in light of their particular
circumstances.
Investors should also consider the tax
consequences of investing in the Notes. See
"United States Federal Taxation" below.
Antidilution Adjustments:...... The Exchange Factor (and, in the case of
paragraph 5 below, the determination of the
Exchange Rate) will be adjusted as follows:
1. If UNUM Stock is subject to a stock
split or reverse stock split, then once
such split has become effective, the
Exchange Factor will be adjusted to equal
the product of the prior Exchange Factor
and the number of shares issued in such
stock split or reverse stock split with
respect to one share of UNUM Stock.
2. If UNUM Stock is subject (i) to a stock
dividend (issuance of additional shares of
UNUM Stock) that is given ratably to all
holders of shares of UNUM Stock or (ii) to a
distribution of UNUM Stock as a result of the
triggering of any provision of the corporate
charter of UNUM by any shareholder that is
not a holder of the Notes, then once the
dividend has become effective and UNUM Stock
is trading ex-dividend, the Exchange Factor
will be adjusted so that the new Exchange
Factor shall equal the prior Exchange Factor
plus the product of (i) the number of shares
issued with respect to one share of UNUM
Stock and (ii) the prior Exchange Factor.
3. There will be no adjustments to the
Exchange Factor to reflect cash dividends or
other distributions paid with respect to UNUM
Stock other than distributions described in
clause (v) of paragraph 5 below and
Extraordinary Dividends as described below.
A cash dividend or other distribution with
respect to UNUM Stock will be deemed to be an
"Extraordinary Dividend" if (i) such dividend
or other distribution exceeds the immediately
preceding non-Extraordinary Dividend for UNUM
Stock by an amount equal to at least 3% of
the Market Price of UNUM Stock on the NYSE
Trading Day preceding the ex-dividend date
for the payment of such Extraordinary
Dividend (the "ex-dividend date") or (ii) UNUM
publicly declares such cash dividend or other
distribution to be extraordinary or non
recurring. If an Extraordinary Dividend
occurs with respect to UNUM Stock, the
Exchange Factor with respect to UNUM Stock
will be adjusted on the ex-dividend date with
respect to such Extraordinary Dividend so
that the new Exchange Factor will equal the
product of (i) the then current Exchange
Factor and (ii) a fraction, the numerator of
which is the Market Price on the NYSE Trading
Day preceding the ex-dividend date, and the
denominator of which is the amount by which
the Market Price on the NYSE Trading Day
preceding the ex-dividend date exceeds the
Extraordinary Dividend Amount. The
"Extraordinary Dividend Amount" with respect
to an Extraordinary Dividend for UNUM Stock
will equal (i) in the case of cash dividends
or other distributions that constitute
quarterly dividends, the amount per share of
such Extraordinary Dividend minus the amount
per share of the immediately preceding
non-Extraordinary Dividend for UNUM Stock or
(ii) 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 the UNUM Stock described in
clause (v) of paragraph 5 below that also
constitutes an Extraordinary Dividend shall
only cause an adjustment to the Exchange
Factor pursuant to clause (v) of paragraph 5.
4. If UNUM issues rights or warrants to all
holders of UNUM Stock to subscribe for or
purchase UNUM Stock at an exercise price per
share less than the Market Price of the UNUM
Stock on (i) the date the exercise price of
such rights or warrants is determined and
(ii) the expiration date of such rights or
warrants, and if the expiration date of such
rights or warrants precedes the maturity of
the Notes, then the Exchange Factor will be
adjusted to equal the product of the prior
Exchange Factor and a fraction, the numerator
of which shall be the number of shares of
UNUM Stock outstanding immediately prior to
such issuance plus the number of additional
shares of UNUM Stock offered for subscription
or purchase pursuant to such rights or
warrants and the denominator of which shall
be the number of shares of UNUM Stock
outstanding immediately prior to such
issuance plus the number of additional shares
of UNUM Stock which the aggregate offering
price of the total number of shares of UNUM
Stock so offered for subscription or purchase
pursuant to such rights or warrants would
purchase at the Market Price 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 Market Price.
5. If (i) there occurs any reclassification
or change of UNUM Stock, (ii) UNUM, or any
surviving entity or subsequent surviving
entity of UNUM (a "UNUM Successor") has been
subject to a merger, combination or
consolidation and is not the surviving entity,
(iii) any statutory exchange of securities of
UNUM or any UNUM Successor with another
corporation occurs (other than pursuant to
clause (ii) above), (iv) UNUM is liquidated,
(v) UNUM issues to all of its shareholders
equity securities of an issuer other than UNUM
(other than in a transaction described in
clauses (ii), (iii) or (iv) above) (a
"Spin-off Event") or (vi) a tender or
exchange offer is consummated for all the
outstanding shares of UNUM Stock (any such
event in clauses (i) through (vi) a
"Reorganization Event"), the method of
determining the Exchange Rate in respect of
the amount payable upon exchange at maturity
for each Note will be adjusted to provide
that each holder of Notes will receive at
maturity, in respect of the principal amount
of each Note, cash in an amount equal to (a)
if the Transaction Value (as defined below)
is greater than or equal to the Threshold
Appreciation Price, 0.9328358 multiplied by
the Transaction Value, (b) if the Transaction
Value is less than the Threshold Appreciation
Price but greater than the Initial Price, the
Initial Price and (c) if the Transaction
Value is less than or equal to the Initial
Price, the Transaction Value; provided that,
if the Exchange Property (as defined below)
received in any such Reorganization Event
consists only of cash, the maturity date of
the Notes will be deemed to be accelerated to
the date on which such cash is distributed to
holders of UNUM 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 UNUM Stock with respect
to which the spun-off security was issued.
"Transaction Value" means (i) for any cash
received in any such Reorganization Event,
the amount of cash received per share of UNUM
Stock, as adjusted by the Exchange Factor,
(ii) for any property other than cash or
securities received in any such
Reorganization Event, the market value of
such Exchange Property received for each
share of UNUM Stock at the date of the
receipt of such Exchange Property, as
adjusted by the Exchange Factor, as
determined by the Calculation Agent and (iii)
for any security received in any such
Reorganization Event, an amount equal to the
Market Price per share of such security at
the maturity of the Notes multiplied by the
quantity of such security received for each
share of UNUM Stock, as adjusted by the
Exchange Factor.
For purposes of paragraph 5 above, in the
case of a consummated tender or exchange
offer for all Exchange Property of a
particular type, Exchange Property shall be
deemed to include the amount of cash or other
property paid by the offeror in the tender or
exchange offer with respect to such Exchange
Property (in an amount determined on the
basis of the rate of exchange in such tender
or exchange offer). In the event of a tender
or exchange offer with respect to Exchange
Property in which an offeree may elect to
receive cash or other property, Exchange
Property shall be deemed to include the kind
and amount of cash and other property received
by offerees who elect to receive cash.
No adjustments to the Exchange Factor or
Exchange Rate will be required unless such
adjustment would require a change of at least
0.1% in the Exchange Factor or Exchange Rate
then in effect. The Exchange Factor or
Exchange Rate 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 Exchange Factor or
Exchange Rate will be made other than those
specified above. The adjustments specified
above do not cover all events that could
affect the Market Price of the UNUM Stock,
including, without limitation, a partial
tender or exchange offer for the UNUM Stock.
The Calculation Agent shall be solely
responsible for the determination and
calculation of any adjustments to the Exchange
Factor or Exchange Rate 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 in paragraph 5
above, and its determinations and
calculations with respect thereto shall be
conclusive.
The Calculation Agent will provide
information as to any adjustments to the
Exchange Factor or Exchange Rate upon written
request by any holder of the Notes.
Market Disruption Event:....... "Market Disruption Event" means, with respect
to UNUM Stock:
(i) a suspension, absence or material
limitation of trading of UNUM Stock on the
primary market for UNUM Stock for more than
two hours of trading or during the one-half
hour period preceding the close of trading in
such market; or the suspension or material
limitation on the primary market for trading
in options contracts related to UNUM Stock,
if available, during the one-half hour period
preceding the close of trading in the
applicable market, in each case as determined
by the Calculation Agent in its sole
discretion; and
(ii) a determination by the Calculation
Agent in its sole discretion that the event
described in clause (i) above materially
interfered with the ability of the Company or
any of its affiliates to unwind all or a
material portion of the hedge with respect to
the Notes.
For purposes of determining whether a Market
Disruption Event has occurred: (1) a
limitation on the hours or number of days of
trading will not constitute a Market
Disruption Event if it results from an
announced change in the regular business
hours of the relevant exchange, (2) a
decision to permanently discontinue trading
in the relevant option contract will not
constitute a Market Disruption Event, (3)
limitations pursuant to New York Stock
Exchange Rule 80A (or any applicable rule or
regulation enacted or promulgated by the New
York Stock Exchange, any other self-regulatory
organization or the Securities and Exchange
Commission of similar scope as determined by
the Calculation Agent) on trading during
significant market fluctuations shall
constitute a Market Disruption Event, (4) a
suspension of trading in an options contract
on UNUM Stock by the primary securities
market trading in such options, if available,
by reason of (x) a price change exceeding
limits set by such securities exchange or
market, (y) an imbalance of orders relating
to such contracts or (z) 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 UNUM Stock and (5) a "suspension,
absence or material limitation of trading" on
the primary securities market on which
options contracts related to UNUM Stock are
traded will not include any time when such
securities market is itself closed for
trading under ordinary circumstances.
UNUM Stock; Public Information. UNUM Stock is registered under the Exchange
Act. Companies with securities registered
under the Exchange Act are required to file
periodically certain financial and other
information specified by the Securities and
Exchange Commission (the "Commission").
Information provided to or filed with the
Commission is available at the offices of the
Commission specified under "Available
Information" in the accompanying Prospectus.
In addition, information regarding UNUM may
be obtained from other sources including, but
not limited to, press releases, newspaper
articles and other publicly disseminated
documents. The Company makes no
representation or warranty as to the accuracy
or completeness of such reports.
THIS PRICING SUPPLEMENT RELATES ONLY TO THE
NOTES OFFERED HEREBY AND DOES NOT RELATE TO
UNUM STOCK OR OTHER SECURITIES OF UNUM. ALL
DISCLOSURES CONTAINED IN THIS PRICING
SUPPLEMENT REGARDING UNUM ARE DERIVED FROM
THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN
THE PRECEDING PARAGRAPH. NEITHER THE COMPANY
NOR THE AGENT HAS PARTICIPATED IN THE
PREPARATION OF SUCH DOCUMENTS OR MADE ANY DUE
DILIGENCE INQUIRY WITH RESPECT TO UNUM.
NEITHER THE COMPANY NOR THE AGENT MAKES ANY
REPRESENTATION THAT SUCH PUBLICLY AVAILABLE
DOCUMENTS OR ANY OTHER PUBLICLY AVAILABLE
INFORMATION REGARDING UNUM 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 UNUM STOCK (AND THEREFORE
THE INITIAL PRICE, THE THRESHOLD APPRECIATION
PRICE AND THE EXCHANGE RATE APPLICABLE ABOVE
THE THRESHOLD APPRECIATION PRICE) HAVE BEEN
PUBLICLY DISCLOSED. SUBSEQUENT DISCLOSURE OF
ANY SUCH EVENTS OR THE DISCLOSURE OF OR
FAILURE TO DISCLOSE MATERIAL FUTURE EVENTS
CONCERNING UNUM COULD AFFECT THE VALUE
RECEIVED AT MATURITY WITH RESPECT TO THE
NOTES AND THEREFORE THE TRADING PRICES OF THE
NOTES.
NEITHER THE COMPANY NOR ANY OF ITS AFFILIATES
MAKE ANY REPRESENTATION TO ANY PURCHASER OF
NOTES AS TO THE PERFORMANCE OF UNUM STOCK.
The Company or its affiliates may presently
or from time to time engage in business with
UNUM including extending loans to, or making
equity investments in, UNUM or providing
advisory services to UNUM, including merger
and acquisition advisory services. In the
course of such business, the Company or its
affiliates may acquire non-public information
with respect to UNUM and, in addition, one or
more affiliates of the Company may publish
research reports with respect to UNUM. The
Company does not make any representation to
any purchaser of Notes with respect to any
matters whatsoever relating to UNUM. Any
prospective purchaser of a Note should
undertake an independent investigation of
UNUM as in its judgment is appropriate to
make an informed decision with respect to an
investment in UNUM Stock.
Historical Information......... The following table sets forth the high and
low Market Price during 1993, 1994, 1995, and
during 1996 through June 21, 1996. The
Market Price on June 21, 1996 was $58 1/2.
The Market Prices and Dividends Per Share
listed below were obtained from Bloomberg
Financial Markets and the Company believes
such information to be accurate. However,
neither the Company nor the Agent makes any
representation as to the accuracy of such
information. The historical prices of UNUM
Stock should not be taken as an indication of
future performance, and no assurance can be
given that the price of UNUM Stock will not
decrease so that the beneficial owners of the
Notes will receive at maturity cash in an
amount that is less than the principal amount
of the Notes. Nor can assurance be given
that the price of UNUM Stock will increase
above the Threshold Appreciation 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.
===================================================================
Dividends
UNUM High Low Per Share*
---- ---- --- ----------
(CUSIP #90319210)
1993:
First Quarter....... $57 3/4 $50 7/8 .165
Second Quarter...... 56 3/8 51 5/8 .2
Third Quarter....... 59 3/4 53 5/8 .2
Fourth Quarter...... 54 48 .2
1994:
First Quarter....... 57 1/4 48 3/8 .2
Second Quarter...... 56 1/8 44 3/4 .24
Third Quarter....... 50 43 1/8 .24
Fourth Quarter...... 46 3/4 36 1/4 .24
1995:
First Quarter....... 46 38 1/4 .24
Second Quarter...... 47 7/8 40 1/8 .265
Third Quarter....... 53 7/8 45 7/8 .265
Fourth Quarter...... 56 3/8 50 7/8 .265
1996:
First Quarter....... 61 7/8 55 7/8 .265
Second Quarter
Through June,
21, 1996........... 63 56 .275
===================================================================
* The Company makes no representation as to the amount of dividends, if
any, that UNUM will pay in the future. In any event, holders of the Notes
will not be entitled to receive dividends, if any, that may be payable on
UNUM Stock.
Use of Proceeds and Hedging:... The net proceeds to be received by the
Company from the sale of the Notes will be
used for general corporate purposes and, in
part, by the Company or one or more of its
affiliates in connection with hedging the
Company's obligations under the Notes. See
also "Use of Proceeds" in the accompanying
Prospectus.
On the date of this Pricing Supplement, the
Company, through its subsidiaries and others,
hedged its anticipated exposure in connection
with the Notes by taking positions in UNUM
Stock. Such hedging was carried out in a
manner designed to minimize any impact on the
price of UNUM Stock. Purchase activity could
potentially have increased the price of UNUM
Stock, and therefore effectively increase the
level to which UNUM Stock must rise before a
holder of a Note would receive at maturity
cash in an amount that is equal to or greater
than the principal amount of the Notes. The
Company, through its subsidiaries, is likely
to modify its hedge position throughout the
life of the Notes by purchasing and selling
UNUM Stock, options contracts on UNUM Stock
listed on major securities markets or
positions in any other instruments that it
may wish to use in connection with such
hedging. Although the Company has no reason
to believe that its hedging activity had or
will have a material impact on the price of
UNUM Stock, there can be no assurance that
the Company did not, or in the future will
not, affect such price as a result of its
hedging activities.
United States Federal Taxation: The Company currently intends to treat gain
upon a retirement of a Note at maturity, to
the extent attributable to the exchange at
maturity feature, as interest income and to
report such amounts accordingly.
See also "United States Federal Taxation" in
the accompanying Prospectus Supplement.
Recent Developments - Legal
Proceedings: ................ On June 11, 1996, an adversary proceeding
was commenced by Orange County, California
and its Treasurer-Tax Collector against
Morgan Stanley in the United States
Bankruptcy Court for the Central District
of California in County of Orange and
Moorlach v. Morgan Stanley & Co., Inc.
The adversary proceeding is related to
Orange County's Chapter 9 bankruptcy
proceeding pending before the same court.
The complaint asserts that Orange County,
acting through its former Treasurer-Tax
Collector, entered into various reverse
repurchase agreements and other
transactions with Morgan Stanley which
were beyond the County's authority or
ultra vires and, therefore, void. The
complaint also asserts that Morgan Stanley
allowed Orange County to enter into
unsuitable transactions. In addition, the
complaint alleges that Morgan Stanley
violated the automatic stay provisions of
the Bankruptcy Code when it liquidated the
County's collateral and closed out certain
reverse repurchase transactions subsequent
to the County's December 6, 1994
bankruptcy filing. The complaint asserts
claims based on ultra vires, setoff,
equitable subordination, restitution,
enforcement of the automatic stay,
avoidance of post-petition transfers and
negligence and seeks compensatory damages
in an unspecified amount, declaratory and
injunctive relief, restitution, interest,
various costs and attorney's fees.
