Subject to Completion, Pricing Supplement dated April 4, 1997
PROSPECTUS Dated January 24, 1997 Pricing Supplement No. 23 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-18005
Dated January 24, 1997 Dated , 1997
Rule 424(b)(3)
$50,000,000
Morgan Stanley Group Inc.
MEDIUM-TERM NOTES, SERIES C
Senior Fixed Rate Notes
Reset Performance Equity-linked Redemption Quarterly-pay
Securities ("Reset PERQS")
% RESET PERQS DUE APRIL 15, 1999
Reset PERQS Mandatorily Exchangeable For Shares of Common Stock of
ADVANCED MICRO DEVICES, INC.
The % Reset PERQS due April 15, 1999 (the "Reset PERQS") 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 Reset PERQS being offered hereby will be
$ (the Market Price (as defined herein) of the common stock, $0.01 par
value, of Advanced Micro Devices, Inc. ("AMD") on , 1997) (the
"Initial Price"). The Reset PERQS will mature on April 15, 1999. Interest on
the Reset PERQS, at the rate of % of the principal amount per annum
(equivalent to $ per annum per Reset PERQS), is payable quarterly in
arrears on each January 15, April 15, July 15 and October 15, beginning July
15, 1997.
At maturity upon delivery of each Reset PERQS to the Trustee, each
$ principal amount of such Reset PERQS will be applied by the Company as
payment for a number of shares of the common stock of AMD (the "AMD Stock")
at the then applicable Exchange Ratio. The Exchange Ratio, initially set
at 1.0, is subject to adjustment on April 15, 1998 and at maturity in order
to cap the value of the AMD Stock to be received upon delivery of the Reset
PERQS at $ per $ principal amount of each Reset PERQS
( % of the Initial Price). Solely for purposes of adjustment upon
the occurrence of certain corporate events, the number of shares of AMD
Stock to be delivered will also be adjusted by an Exchange Factor,
initially set at 1.0. See "Exchange at Maturity," "Exchange Factor" and
"Antidilution Adjustments" in this Pricing Supplement.
If the Market Price per share of AMD Stock on April 15, 1998 (as defined
herein, the "First Year Closing Price") is less than or equal to % of
the Initial Price (the "First Year Cap Price"), no adjustment to the Exchange
Ratio will be made at such time. If the First Year Closing Price exceeds the
First Year Cap Price, the Exchange Ratio will be adjusted so that the new
Exchange Ratio will equal the product of (i) the existing Exchange Ratio and
(ii) a fraction the numerator of which will be the First Year Cap Price and
the denominator of which will be the First Year Closing Price. In addition,
on April 15, 1998, the Calculation Agent will establish the "Second Year Cap
Price" that will be equal to the greater of (x) % of the First Year
Closing Price and (y) the First Year Cap Price. If the Market Price at
maturity (as defined herein, the "Maturity Price") is less than or equal to
the Second Year Cap Price, no further adjustment to the Exchange Ratio will be
made. If the Maturity Price exceeds the Second Year Cap Price, the existing
Exchange Ratio will be adjusted so that the final Exchange Ratio will equal
the product of (i) the existing Exchange Ratio and (ii) a fraction the
numerator of which will be the Second Year Cap Price and the denominator of
which will be the Maturity Price. See "Exchange at Maturity" and "Hypothetical
Payments on the Reset PERQS" in this Pricing Supplement.
The opportunity for appreciation afforded by an investment in the Reset PERQS
is less than that afforded by an investment in the AMD Stock because at
maturity a holder may receive less than one share of AMD Stock per Reset PERQS
if the Exchange Ratio has been adjusted to cap the value of the AMD Stock to
be received upon delivery of the Reset PERQS. The value of the AMD Stock
received by a holder of the Reset PERQS upon exchange at maturity, determined
as described herein, may be more or less than the principal amount of the
Reset PERQS. See "Hypothetical Payments on the Reset PERQS" in this Pricing
Supplement.
AMD is not affiliated with the Company, is not involved in this offering of
Reset PERQS and will have no obligations with respect to the Reset PERQS. See
"Historical Information" in this Pricing Supplement for information on the
range of Market Prices for AMD Stock.
The Company will cause the Market Price, any adjustments to the Exchange
Ratio, the Exchange Factor and any other antidilution adjustments to be
determined by the Calculation Agent for The Chase Manhattan Bank, as Trustee
under the Senior Debt Indenture.
An investment in the Reset PERQS entails risks not associated with similar
investments in a conventional debt security, as described under "Risk Factors"
on PS-6 through PS-8 herein.
Application will be made to list the Reset PERQS on the American Stock
Exchange ("AMEX"), subject to meeting the AMEX listing requirements. It is
not possible to predict whether the Reset PERQS will meet the AMEX listing
requirements or trade in the secondary market or if such market will be liquid
or illiquid.
------------
PRICE $ A RESET PERQS
------------
Agent's Proceeds to
------------
Price to Public(1) Commissions(2) Company(1)
------------------- --------------- ------------
Per Reset PERQS.. $ $ $
Total............ $ $ $
- ------------
(1) Plus accrued interest, if any, from , 1997.
(2) The Company has agreed to indemnify the Agent against certain liabilities,
including liabilities under the Securities Act of 1933.
MORGAN STANLEY & CO.
Incorporated
INFORMATION CONTAINED IN THIS PRELIMINARY PRICING SUPPLEMENT IS SUBJECT TO
COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE DELIVERED PRIOR TO THE
TIME A FINAL PRICING SUPPLEMENT IS DELIVERED. THIS PRICING SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS AND PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY
SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
(This page intentionally left blank)
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE RESET PERQS OR THE AMD
STOCK. SPECIFICALLY, THE AGENT MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, THE RESET PERQS OR THE AMD STOCK IN THE OPEN
MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "SUPPLEMENTAL INFORMATION
CONCERNING PLAN OF DISTRIBUTION" AND "USE OF PROCEEDS AND HEDGING."
Capitalized terms not defined herein have the meanings given to such terms in
the accompanying Prospectus Supplement.
Principal Amount:............. $50,000,000
Maturity Date:................ April 15, 1999
Interest Rate:................ % per annum (equivalent to $ per annum
per Reset PERQS)
Interest Payment Dates:....... Each January 15, April 15, July 15 and
October 15, beginning July 15, 1997.
Specified Currency:........... U.S. Dollars
Issue Price:.................. $ a Reset PERQS
Original Issue Date
(Settlement Date):............ , 1997
CUSIP:........................ 617446455
Book Entry Note or
Certificated Note:............ Book Entry
Senior Note or Subordinated
Note:......................... Senior
Denominations:................ $ and integral multiples thereof
Trustee:...................... The Chase Manhattan Bank
Exchange at Maturity:......... At maturity (including as a result of
acceleration or otherwise), upon delivery of
each Reset PERQS to the Trustee, each $
principal amount of such Reset PERQS will be
applied by the Company as payment for a
number of shares of AMD Stock at the Exchange
Ratio. The Exchange Ratio, initially set at
1.0, is subject to adjustment on April 15,
1998 (or if such date is not a Trading Day on
which no Market Disruption Event occurs, the
immediately succeeding Trading Day on which
no Market Disruption Event occurs (the "First
Year Determination Date")) and at maturity in
order to cap the value of the AMD Stock to be
received upon delivery of the Reset PERQS at
$ per principal amount of each Reset
PERQS ( % of the Initial Price).
Solely for purposes of adjustment upon the
occurrence of certain corporate events, the
number of shares of AMD Stock to be delivered
at maturity will also be adjusted by an
Exchange Factor, initially set at 1.0. See
"Exchange Factor" and "Antidilution
Adjustments" below.
If on the First Year Determination Date the
First Year Closing Price is less than or
equal to % of the Initial Price (the
"First Year Cap Price"), no adjustment to the
Exchange Ratio will be made at such time. If
the First Year Closing Price exceeds the
First Year Cap Price, the Exchange Ratio will
be adjusted so that the new Exchange Ratio
will equal the product of (i) the existing
Exchange Ratio and (ii) a fraction the
numerator of which will be the First Year Cap
Price and the denominator of which will be the
First Year Closing Price. In addition, on
the First Year Determination Date, the
Calculation Agent will establish the "Second
Year Cap Price" that will be equal to the
greater of (x) % of the First Year
Closing Price and (y) the First Year Cap
Price. Notice of the Second Year Cap Price
and of any such adjustment to the Exchange
Ratio shall promptly be sent by first-class
mail to The Depository Trust Company, New
York, New York (the "Depositary"). If the
Maturity Price is less than or equal to the
Second Year Cap Price, no further adjustment
to the Exchange Ratio will be made. If the
Maturity Price exceeds the Second Year Cap
Price, the existing Exchange Ratio will be
adjusted so that the final Exchange Ratio
will equal the product of (i) the existing
Exchange Ratio and (ii) a fraction the
numerator of which will be the Second Year
Cap Price and the denominator of which will
be the Maturity Price. See "Hypothetical
Payments on the Reset PERQS" below.
All percentages resulting from any
calculation with respect to the Reset PERQS
(and the First Year Cap Price and the Second
Year Cap Price) 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 related to payments at maturity
resulting from such calculation will be
rounded to the nearest cent with one-half
cent being rounded upwards.
The Company shall, or shall cause the
Calculation Agent to, (i) provide written
notice to the Trustee and to the Depositary,
on or prior to 10:30 a.m. on the Trading Day
immediately prior to maturity of the Reset
PERQS, of the amount of AMD Stock to be
delivered with respect to each $
principal amount of each Reset PERQS and (ii)
deliver such shares of AMD Stock (and cash
in respect of interest and any fractional
shares of AMD Stock) to the Trustee for
delivery to the holders. The Calculation
Agent shall determine the Exchange Ratio
applicable at the maturity of the Reset PERQS
and calculate the Exchange Factor. References
to payment "per Reset PERQS" refer to each $
principal amount of any Reset PERQS.
No Fractional Shares: ........ Upon delivery of the Reset PERQS to the
Trustee at maturity (including as a result of
acceleration or otherwise), the Company will
pay cash in lieu of issuing fractional shares
of AMD Stock in an amount equal to the
corresponding fractional Market Price of such
fraction of a share of AMD Stock as
determined by the Calculation Agent as of the
second scheduled Trading Day prior to
maturity of the Reset PERQS.
Initial Price:................ $
First Year Closing Price:..... First Year Closing Price means the product of
(i) the Market Price of one share of AMD
Stock and (ii) the Exchange Factor, each
determined as of the First Year Determination
Date.
Maturity Price:............... Maturity Price means the product of (i) the
Market Price of one share of AMD Stock and
(ii) the Exchange Factor, each determined as
of the second scheduled Trading Day
immediately prior to maturity.
First Year Cap Price:......... $ ( % of the Initial Price)
Second Year Cap Price:........ Second Year Cap Price means the greater of
(x) % of the First Year Closing Price
and (y) the First Year Cap Price. See
"Exchange at Maturity" above.
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 scheduled
Trading Day immediately prior to maturity.
See "Antidilution Adjustments" below.
Market Price:................. If AMD 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 AMD Stock (or
one unit of any such other security) on any
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 AMD Stock (or 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 Trading
Day shall be the mean, as determined by the
Calculation Agent, of the bid prices for AMD
Stock (or 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.
Trading Day:.................. A day, as determined by the Calculation
Agent, on which trading is generally
conducted (i) on the New York Stock Exchange
("NYSE"), the AMEX and the NASDAQ NMS, (ii)
on the Chicago Mercantile Exchange, (iii) on
the Chicago Board of Options Exchange and
(iv) in the over-the-counter market for
equity securities in the United States.
Acceleration Event:........... If on any date the product of the Market
Price per share of AMD Stock and the Exchange
Factor is less than $2.00, the maturity date
of the Reset PERQS will be deemed to be
accelerated to such date, and each $
principal amount of each Reset PERQS will be
applied by the Company as payment for a
number of shares of AMD Stock at the then
current Exchange Ratio, as adjusted by the
then current Exchange Factor. See also
"Antidilution Adjustments" below.
Calculation Agent:............ Morgan Stanley & Co. Incorporated and its
successors ("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 Reset PERQS,
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 any
Market Price or whether a Market Disruption
Event has occurred. MS & Co. is obligated to
carry out its duties as Calculation Agent in
good faith using its reasonable judgment.
See "Antidilution Adjustments" and "Market
Disruption Event" below.
Risk Factors:................. An investment in the Reset PERQS entails
significant risks not associated with similar
investments in a conventional debt security,
including the following:
The Reset PERQS combine features of equity
and debt instruments. For example, the terms
of the Reset PERQS differ from those of debt
securities in that the value of the AMD Stock
that a holder of the Reset PERQS will receive
upon mandatory exchange of the principal
amount thereof at maturity is not fixed, but
is based on the price of the AMD Stock on the
First Year Determination Date and at maturity
of the Reset PERQS. Because the price of the
AMD Stock is subject to market fluctuations
and because the Exchange Ratio will be
adjusted to cap the value of the AMD Stock to
be received upon delivery of the Reset PERQS,
the value of the AMD Stock received by a
holder of Reset PERQS upon exchange at
maturity, determined as described herein, may
be more or less than the principal amount of
the Reset PERQS. The amount receivable upon
exchange will be less than the principal
amount of the Reset PERQS if the Maturity
Price of the AMD Stock is (x) less than the
Initial Price or (y) not sufficiently above
the Initial Price following any adjustment of
the Exchange Factor on the First Year
Determination Date. In either case, an
investment in the Reset PERQS would result in
a loss. See "Hypothetical Payments on the
Reset PERQS" below.
The opportunity for capital appreciation
afforded by an investment in the Reset PERQS
is less than that afforded by an investment in
AMD Stock because of the First and Second
Year Cap Prices and because at maturity a
holder may receive less than one share of AMD
Stock per Reset PERQS if the Exchange Ratio
has been adjusted to cap the value of the AMD
Stock to be received upon delivery of the
Reset PERQS. In addition, because the
Exchange Ratio and the Maturity Price are
determined as of the second scheduled Trading
Day prior to maturity of the Reset PERQS and
because the price of AMD Stock may fluctuate
after such Trading Day and prior to its
delivery at maturity, the value of any AMD
Stock delivered at maturity may be less than
the value of such AMD Stock on such Trading
Day. The amount payable at maturity with
respect to each Reset PERQS, determined as of
the second scheduled Trading Day prior to
maturity, will not under any circumstances
exceed $ per Reset PERQS.
Although the amount that holders of the Reset
PERQS 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 AMD Stock, including, without limitation,
the occurrence of a partial tender or
exchange offer for the AMD Stock by AMD or
any third party. Such other events may
adversely affect the market value of the
Reset PERQS.
There can be no assurance as to how the Reset
PERQS will trade in the secondary market or
whether such market will be liquid or
illiquid. Securities with characteristics
similar to the Reset PERQS are novel
securities, and there is currently no
secondary market for the Reset PERQS. The
market value for the Reset PERQS will be
affected by a number of factors in addition
to the creditworthiness of the Company and
the value of AMD Stock, including, but not
limited to, the volatility of AMD Stock, the
dividend rate on AMD Stock, market interest
and yield rates and the time remaining to the
maturity of the Reset PERQS. In addition,
the value of AMD 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 AMD is a part and
over which the Company has no control. The
market value of the Reset PERQS is expected
to depend primarily on changes in the Market
Price of AMD Stock. The price at which a
holder will be able to sell Reset PERQS 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 AMD Stock is below, equal to or not
sufficiently above the Initial Price. The
historical Market Prices of AMD Stock should
not be taken as an indication of AMD Stock's
future performance during the term of any
Reset PERQS.
The Company is not affiliated with AMD and,
although the Company as of the date of this
Pricing Supplement does not have any material
non-public information concerning AMD,
corporate events of AMD, including those
described below in "Antidilution
Adjustments," are beyond the Company's
ability to control and are difficult to
predict.
AMD is not involved in the offering of the
Reset PERQS and has no obligations with
respect to the Reset PERQS, including any
obligation to take the interests of the
Company or of holders of Reset PERQS into
consideration for any reason. AMD will not
receive any of the proceeds of the offering
of the Reset PERQS made hereby and is not
responsible for, and has not participated in,
the determination of the timing of, prices
for or quantities of, the Reset PERQS offered
hereby.
Holders of the Reset PERQS will not be
entitled to any rights with respect to the
AMD 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
AMD Stock in any partial tender or exchange
offer by AMD or any third party) until such
time as the Company shall deliver shares of
AMD Stock to holders of the Reset PERQS at
maturity.
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 Reset PERQS,
including with respect to certain adjustments
to the Exchange Factor and other antidilution
adjustments that may influence the
determination of the amount of AMD Stock or
other property receivable at the maturity of
the Reset PERQS. See "Antidilution
Adjustments" and "Market Disruption Event."
It is suggested that prospective investors
who consider purchasing the Reset PERQS
should reach an investment decision only after
carefully considering the suitability of the
Reset PERQS in light of their particular
circumstances.
Investors should also consider the tax
consequences of investing in the Reset PERQS.
No statutory, judicial or administrative
authority definitively addresses the
characterization for U.S. federal income tax
purposes of the Reset PERQS or instruments
similar to the Reset PERQS. As a result,
significant aspects of the U.S. federal
income tax treatment of an investment in the
Reset PERQS are uncertain. No ruling has
been or will be requested from the Internal
Revenue Service ("IRS") with respect to the
Reset PERQS and no assurance can be given
that the IRS or a court will agree with the
analysis set forth herein. See "United
States Federal Taxation" below.
Antidilution Adjustments:..... The Exchange Factor will be adjusted as
follows:
1. If AMD 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 AMD
Stock.
2. If AMD Stock is subject to a stock
dividend (issuance of additional shares of
AMD Stock) that is given ratably to all
holders of shares of AMD Stock, then once the
dividend has become effective and AMD 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 AMD 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 AMD
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 AMD Stock will be deemed to be an
"Extraordinary Dividend" if such dividend or
other distribution exceeds the immediately
preceding non-Extraordinary Dividend for AMD
Stock by an amount equal to at least 10% of
the Market Price of AMD Stock on the Trading
Day preceding the ex-dividend date for the
payment of such Extraordinary Dividend (the
"ex-dividend date"). If an Extraordinary
Dividend occurs with respect to AMD Stock, the
Exchange Factor with respect to AMD 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 Trading Day
preceding the ex-dividend date, and the
denominator of which is the amount by which
the Market Price on the Trading Day preceding
the ex-dividend date exceeds the
Extraordinary Dividend Amount. The
"Extraordinary Dividend Amount" with respect
to an Extraordinary Dividend for AMD 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 AMD 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 AMD Stock described in
clause (v) of paragraph 5 below that also
constitutes an Extraordinary Dividend shall
cause an adjustment to the Exchange Factor
pursuant only to clause (v) of paragraph 5.
4. If AMD issues rights or warrants to all
holders of AMD Stock to subscribe for or
purchase AMD Stock at an exercise price per
share less than the Market Price of the AMD
Stock on both (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 Reset PERQS, 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 AMD Stock outstanding immediately
prior to the issuance of such rights or
warrants plus the number of additional shares
of AMD Stock offered for subscription or
purchase pursuant to such rights or warrants
and the denominator of which shall be the
number of shares of AMD Stock outstanding
immediately prior to the issuance of such
rights or warrants plus the number of
additional shares of AMD Stock which the
aggregate offering price of the total number
of shares of AMD 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
of AMD Stock, (ii) AMD or any surviving
entity or subsequent surviving entity of AMD
(a "AMD Successor") has been subject to a
merger, combination or consolidation and is
not the surviving entity, (iii) any statutory
exchange of securities of AMD or any AMD
Successor with another corporation occurs
(other than pursuant to clause (ii) above),
(iv) AMD is liquidated, (v) AMD issues to all
of its shareholders equity securities of an
issuer other than AMD (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 AMD Stock (any
such event in clauses (i) through (vi) a
"Reorganization Event"), the method of
determining the amount payable upon exchange
at maturity for each Reset PERQS will be
adjusted to provide that each holder of Reset
PERQS will receive at maturity, in respect of
each $ principal amount of each Reset
PERQS, securities, cash or any other assets
distributed in any such Reorganization Event,
including, in the case of a Spin-off Event,
the share of AMD Stock with respect to which
the spun-off security was issued
(collectively, the "Exchange Property") in an
amount with a value equal to (a) if the
Exchange Ratio has not been adjusted prior to
maturity, the Transaction Value or (b) if the
Exchange Ratio has been adjusted, an amount
equal to the product of the final Exchange
Ratio and the Transaction Value. In
addition, following a Reorganization Event,
the method of determining the Maturity Price
will be adjusted so that the Maturity Price
will mean the Transaction Value as of the
second scheduled Trading Day immediately
prior to maturity, and if the Reorganization
Event occurs prior to the First Year
Determination Date, the First Year Closing
Price will mean the Transaction Value
determined as of the First Year Determination
Date. Notwithstanding the above, if the
Exchange Property received in any such
Reorganization Event consists only of cash,
the maturity date of the Reset PERQS will be
deemed to be accelerated to the date on which
such cash is distributed to holders of AMD
Stock and holders will receive in lieu of any
AMD Stock and as liquidated damages in full
satisfaction of the Company's obligations
under the Reset PERQS the product of (i) the
Transaction Value as of such date and (ii) the
then current Exchange Ratio adjusted as if
such date were the next to occur of either
the First Year Determination Date or the
second scheduled Trading Day prior to
maturity. If Exchange Property consists of
more than one type of property, holders of
Reset PERQS will receive at maturity a pro
rata share of each such type of Exchange
Property. "Transaction Value" at any date
means (i) for any cash received in any such
Reorganization Event, the amount of cash
received per share of AMD 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,
as determined by the Calculation Agent, as of
the date of receipt, of such Exchange
Property received for each share of AMD
Stock, as adjusted by the Exchange Factor and
(iii) for any security received in any such
Reorganization Event, an amount equal to the
Market Price, as of the date on which the
Transaction Value is determined, per share of
such security multiplied by the quantity of
such security received for each share of AMD
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 will be
required unless such adjustment would require
a change of at least 0.1% in the Exchange
Factor then in effect. The Exchange Factor
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
method of calculating the Exchange Ratio 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 AMD Stock, including, without
limitation, a partial tender or exchange
offer for the AMD Stock.
NOTWITHSTANDING THE FOREGOING, THE AMOUNT
PAYABLE BY THE COMPANY AT MATURITY WITH
RESPECT TO EACH RESET PERQS, DETERMINED AS OF
THE SECOND SCHEDULED TRADING DAY PRIOR TO
MATURITY, WILL NOT UNDER ANY CIRCUMSTANCES
EXCEED $ PER RESET PERQS OR AN AMOUNT OF
AMD STOCK HAVING AN EQUIVALENT VALUE AS OF
SUCH SECOND SCHEDULED TRADING DAY.
The Calculation Agent shall be solely
responsible for the determination and
calculation of any adjustments to the Exchange
Factor or method of calculating the Exchange
Ratio and of any related determinations and
calculations with respect to any
distributions of stock, other securities or
other property or assets (including cash) in
connection with any 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 method of calculating the
Exchange Ratio upon written request by any
holder of the Reset PERQS.
Market Disruption Event:...... "Market Disruption Event" means, with respect
to AMD Stock:
(i) a suspension, absence or material
limitation of trading of AMD Stock on the
primary market for AMD 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 AMD 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 Reset PERQS.
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 suspension,
absence or material limitation of trading,
(4) a suspension of trading in an options
contract on AMD 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 AMD Stock and (5) a
suspension, absence or material limitation of
trading on the primary securities market on
which options contracts related to AMD Stock
are traded will not include any time when such
securities market is itself closed for
trading under ordinary circumstances.
Alternate Exchange Calculation
in case of an Event of
Default:....................... In case an Event of Default with respect to
the Reset PERQS shall have occurred and be
continuing, holders will be entitled to
receive, upon any acceleration of the Reset
PERQS, an amount determined by MS & Co., as
Calculation Agent, equal to the Issue Price
of each Reset PERQS, plus any accrued
interest to, but not including, the date of
acceleration.
AMD Stock; Public
Information:................... AMD designs, develops, manufactures and
markets industry-standard integrated circuits
for use by manufacturers of a broad range of
electronic equipment and systems. AMD 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 AMD 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
RESET PERQS OFFERED HEREBY AND DOES NOT
RELATE TO AMD STOCK OR OTHER SECURITIES OF
AMD. ALL DISCLOSURES CONTAINED IN THIS
PRICING SUPPLEMENT REGARDING AMD 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 AMD IN CONNECTION WITH THE
OFFERING OF THE RESET PERQS. NEITHER THE
COMPANY NOR THE AGENT MAKES ANY
REPRESENTATION THAT SUCH PUBLICLY AVAILABLE
DOCUMENTS OR ANY OTHER PUBLICLY AVAILABLE
INFORMATION REGARDING AMD 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 AMD (AND THEREFORE THE
INITIAL PRICE, THE FIRST YEAR CAP PRICE AND
THE MAXIMUM APPRECIATION AMOUNT) HAVE BEEN
PUBLICLY DISCLOSED. SUBSEQUENT DISCLOSURE OF
ANY SUCH EVENTS OR THE DISCLOSURE OF OR
FAILURE TO DISCLOSE MATERIAL FUTURE EVENTS
CONCERNING AMD COULD AFFECT THE VALUE
RECEIVED AT MATURITY WITH RESPECT TO THE
RESET PERQS AND THEREFORE THE TRADING PRICES
OF THE RESET PERQS.
NEITHER THE COMPANY NOR ANY OF ITS AFFILIATES
MAKES ANY REPRESENTATION TO ANY PURCHASER OF
RESET PERQS AS TO THE PERFORMANCE OF AMD
STOCK.
The Company or its affiliates may presently
or from time to time engage in business with
AMD including extending loans to, or making
equity investments in, AMD or providing
advisory services to AMD, 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 AMD and, in addition, one or
more affiliates of the Company may publish
research reports with respect to AMD. The
Company does not make any representation to
any purchaser of Reset PERQS with respect to
any matters whatsoever relating to AMD. Any
prospective purchaser of a Reset PERQS should
undertake an independent investigation of AMD
as in its judgment is appropriate to make an
informed decision with respect to an
investment in AMD Stock.
Historical Information:....... The following table sets forth the high and
low Market Price during 1994, 1995, 1996 and
1997 through April 3, 1997. The Market Price
on April 3, 1997 was $ 37 7/8. The Market
Prices listed below were obtained from
Bloomberg Financial Markets and the Company
believes such information to be accurate. The
historical prices of AMD Stock should not be
taken as an indication of future performance,
and no assurance can be given that the price
of AMD Stock will not decrease so that the
beneficial owners of the Reset PERQS will
receive at maturity shares of AMD Stock worth
less than the principal amount of the Reset
PERQS. Nor can assurance be given that the
price of AMD Stock will increase above the
Initial Price so that at maturity the
beneficial owners of the Reset PERQS will
receive an amount in excess of the principal
amount of the Reset PERQS.
AMD High Low
--- ---- ---
(CUSIP 00790310)
1994:
First Quarter......... 31 1/4 17 5/8
Second Quarter........ 31 23 5/8
Third Quarter......... 30 24 5/8
Fourth Quarter........ 26 5/8 22 1/2
1995:
First Quarter......... 35 1/8 25 1/8
Second Quarter........ 38 5/8 32 7/8
Third Quarter......... 36 1/4 29 1/8
Fourth Quarter........ 29 16 1/2
1996:
First Quarter......... 21 16 1/2
Second Quarter........ 19 1/2 13 1/4
Third Quarter......... 16 10 1/2
Fourth Quarter........ 28 14 1/4
1997:
First Quarter......... 47 3/8 27 1/8
Second Quarter
(through April 3,
1997)............. 39 5/8 37 7/8
In 1995, AMD paid a cash dividend of $0.01
per share of AMD Stock to redeem preferred
stock purchase rights issued to the holders
of AMD Stock in 1990. The Company makes no
representation as to the amount of dividends,
if any, that AMD will pay in the future. In
any event, holders of the Reset PERQS will
not be entitled to receive dividends, if any,
that may be payable on AMD Stock.
Use of Proceeds and Hedging:.. The net proceeds to be received by the
Company from the sale of the Reset PERQS 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 Reset PERQS.
See also "Use of Proceeds" in the accompanying
Prospectus.
On or prior to the date of this Pricing
Supplement, the Company, through its
subsidiaries or others, may hedge its
anticipated exposure in connection with the
Reset PERQS by taking positions in AMD Stock,
in options contracts on AMD Stock listed on
major securities markets or positions in any
other instruments that it may wish to use in
connection with such hedging. In the event
that the Company pursues such a hedging
strategy, the price at which the Company is
able to purchase such positions may be a
factor in determining the pricing of the
Reset PERQS. Purchase activity could
potentially increase the price of AMD Stock,
and therefore effectively increase the level
to which AMD Stock must rise before a holder
of a Reset PERQS would receive at maturity an
amount of AMD Stock worth as much as or more
than the principal amount of the Reset PERQS.
Although the Company has no reason to believe
that its hedging activity will have a material
impact on the price of AMD Stock, there can
be no assurance that the Company will not
affect such price as a result of its hedging
activities. The Company, through its
subsidiaries, is likely to modify its hedge
position throughout the life of the Reset
PERQS by purchasing and selling the
securities and instruments listed above and
any other available securities and
instruments.
Supplemental Information
Concerning Plan of
Distribution:................. In order to facilitate the offering of the
Reset PERQS, the Agent may engage in
transactions that stabilize, maintain or
otherwise affect the price of the Reset PERQS
or the AMD Stock. Specifically, the Agent
may overallot in connection with the
offering, creating a short position in the
Reset PERQS for its own account. In
addition, to cover allotments or to stabilize
the price of the Reset PERQS, the Agent may
bid for, and purchase, the Reset PERQS or the
AMD Stock in the open market. See "Use of
Proceeds and Hedging" above.
United States Federal
Taxation:...................... The following discussion is based upon the
opinion of the Company's counsel, Shearman &
Sterling, as to certain of the material U.S.
federal income tax considerations with
respect to the acquisition, ownership and
disposition of Reset PERQS by an initial
purchaser thereof. This summary is based on
the provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), existing
and proposed Treasury regulations promulgated
thereunder, and administrative and judicial
interpretations thereof, all as currently in
effect and all of which are subject to change
(possibly with retroactive effect) and to
differing interpretations. Except as
specifically set forth herein, this summary
deals only with "U.S. Holders" (as defined
below) who or that purchase the Reset PERQS
at the issue price thereof and hold the Reset
PERQS as capital assets. Furthermore, this
summary does not discuss all aspects of U.S.
federal income taxation that may be
applicable to particular investors in light
of their individual circumstances, or to
investors subject to special treatment under
U.S. federal income tax law (including, for
example, life insurance companies, dealers
in securities, financial institutions,
tax-exempt organizations, persons having a
functional currency other than the U.S.
dollar, persons holding Reset PERQS as a
position in a "straddle" or conversion
transaction, or as part of a "synthetic
security," a hedging transaction or other
integrated financial transaction). This
summary also does not address the state,
local or foreign tax consequences of an
investment in Reset PERQS. As the tax law
in this area is technical and complex, the
discussion below necessarily represents only
a general summary.
As used herein, the term "U.S. Holder" means
an initial purchaser of a Reset PERQS who or
that is, for U.S. federal income tax
purposes, (i) a citizen or resident of the
United States, (ii) a corporation,
partnership or other entity created in or
organized under the laws of the United States
or of any political subdivision thereof,
(iii) an estate the income of which is
subject to U.S. federal income taxation
regardless of its source, or (iv) a trust if
both (A) a United States court is able to
exercise primary supervision over the
administration of the trust, and (B) one or
more United States trustees or fiduciaries
have the authority to control all substantial
decisions of the trust.
Under current U.S. federal income tax law, it
is unclear whether the Reset PERQS will be
treated, in whole or in part, as forward
contracts to purchase AMD Stock, as
indebtedness of the Company, as one or more
options or other derivative instruments, or
as a combination thereof. It is also unclear
how the stated interest on the Reset PERQS
will be characterized and, in particular, the
extent to which a U.S. Holder will be taxable
on the full amount of the stated interest on
the Reset PERQS. No statutory, judicial or
administrative authority definitively
addresses the characterization for U.S.
federal income tax purposes of the Reset
PERQS or instruments similar to the Reset
PERQS. As a result, significant aspects of
the U.S. federal income tax treatment of an
investment in the Reset PERQS are uncertain.
No ruling has been or will be requested from
the IRS with respect to the Reset PERQS and
no assurance can be given that the IRS or a
court will agree with the analysis set forth
herein. ACCORDINGLY, PROSPECTIVE INVESTORS
IN THE RESET PERQS SHOULD CONSULT THEIR OWN
TAX ADVISORS IN DETERMINING THE TAX
CONSEQUENCES OF INVESTMENTS IN THE RESET
PERQS IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES, INCLUDING THE APPLICATION OF
STATE, LOCAL OR OTHER TAX LAWS.
Pursuant to the terms of the Reset PERQS, the
Company and all holders of the Reset PERQS
agree (in the absence of an administrative
ruling or judicial determination to the
contrary) to treat the Reset PERQS as a
forward contract for the purchase of AMD
Stock at maturity (including as a result of
acceleration other than on an Event of
Default) coupled with an interest bearing cash
deposit pledged by the holders to the
Company. For this purpose, the Company has
determined that % of the stated interest
on the Reset PERQS is payable in respect of
such cash deposit. This determination is
based on the Company's judgment as to, among
other things, the Company's normal borrowing
cost and the value of the forward contract
and no assurance can be given that such
determination will not be challenged by the
IRS. On this basis, the remainder of the
stated interest on the Reset PERQS would
represent a payment which is attributable, in
whole or in part, to the holders having
entered into such forward contract. Under
this characterization, for U.S. federal
income tax purposes (i) the Company and each
holder of the Reset PERQS would treat the
Issue Price paid to the Company in respect of
the original issuance of the Reset PERQS as
allocable in its entirety to a cash deposit
attributable to such forward contract; (ii)
amounts denominated as interest on the Reset
PERQS would be treated (A) in part as
interest payable at a rate of % per
annum, compounded quarterly, on the amount of
such cash deposit (and includible annually in
the income of a U.S. Holder as interest
income in accordance with such holder's
method of accounting) and (B) in part as a
payment arising as a result of the forward
contract ("Excess Interest"); and (iii) a
U.S. Holder's tax basis in any Reset PERQS
would equal the Issue Price of the Reset PERQS
(increased by the amount, if any, which is
required to be included in income as a
non-cash payment for having entered into the
forward contract and decreased by that
portion, if any, of the stated interest on
the Reset PERQS which constitutes a nontaxable
return of capital). The Excess Interest
payable on the Reset PERQS may constitute
taxable income to a holder, a nontaxable
return of capital or combination thereof.
While the timing of the income inclusion, if
any, in respect to the Excess Interest is
uncertain, for IRS information reporting
purposes, the Company intends to take the
position that the full amount of the Excess
Interest on the Reset PERQS constitutes
taxable income to the holders upon payment.
In addition, under the characterization of
the Reset PERQS described above, a U.S.
Holder would recognize no gain or loss upon
the delivery of the AMD Stock at maturity,
other than capital gain or loss with respect
to any cash received in lieu of fractional
shares in an amount equal to the difference
between the cash received and the portion of
the tax basis of the Reset PERQS allocable to
such fractional shares. A U.S. Holder would
have a tax basis in the AMD Stock received
equal to such holder's tax basis in the Reset
PERQS less the portion thereof allocable to
the fractional shares. Alternatively, if, at
maturity, the Company is unable to deliver
the AMD Stock, a U.S. Holder would recognize
gain or loss, as the case may be, to the
extent that the portion of the Exchange
Property consisting of cash, if any, differs
in amount from such holder's tax basis in the
Reset PERQS allocable to such cash.
If a U.S. Holder sells or otherwise disposes
of a Reset PERQS prior to maturity, such
holder generally would, under the
characterization of the Reset PERQS described
above, recognize gain or loss equal to the
difference between the amount realized on the
sale or other disposition and the U.S.
Holder's tax basis in the Reset PERQS. Such
gain or loss would generally be capital gain
or loss (except to the extent attributable to
accrued but unpaid interest which would be
taxable as such) and would be long term
capital gain or loss if the U.S. Holder has
held the Reset PERQS for more than one year
at the time of disposition.
Although counsel does not believe that it is
more likely, it is possible that the Reset
PERQS would be treated as debt instruments,
the principal amount of which is dependent
upon the future value of AMD Stock. In such
case, the Reset PERQS would be subject to the
"original issue discount" provisions of the
Code and the Treasury regulations issued
thereunder, and a U.S. Holder would be
required to accrue interest income on the
Reset PERQS as set forth below. First, at
the time the Reset PERQS are issued, the
Company would be required to determine a
"comparable yield" for the Reset PERQS which
takes into account the yield at which the
Company would issue a fixed rate debt
instrument with terms similar to those of the
Reset PERQS (excluding any adjustments for
liquidity or for the riskiness of the
contingencies). Based on that comparable
yield and the Issue Price of the Reset PERQS,
a U.S. Holder (regardless of accounting
method) would be required to accrue as
original issue discount the product of the
comparable yield (adjusted to reflect the
length of the accrual periods) and the
"adjusted issue price" of the Reset PERQS,
for each accrual period. The adjusted issue
price of the Reset PERQS at the beginning of
the first accrual period would be the Issue
Price and for any accrual period thereafter
would generally equal (x) the sum of the
Issue Price of the Reset PERQS and the
accrued original issue discount for all prior
accrual periods minus (y) the amount of any
prior payments on the Reset PERQS. On a
sale, exchange or retirement of the Reset
PERQS, a U.S. Holder generally would treat
any gain as interest income and any loss as
ordinary loss to the extent of previous
interest inclusions and the balance as
capital loss.
It is also possible that the Reset PERQS
could be characterized in a manner that
results in tax consequences different from
those described above. Under alternative
characterizations of the Reset PERQS, it is
possible, for example, that (i) a U.S. Holder
could be taxable upon the receipt of AMD
Stock, rather than upon the sale of such
stock or (ii) the full amount of the stated
interest on the Reset PERQS could be treated
as a nontaxable return of capital.
DUE TO THE ABSENCE OF AUTHORITY AS TO THE
PROPER CHARACTERIZATION OF THE RESET PERQS, NO
ASSURANCE CAN BE GIVEN THAT THE IRS WILL
ACCEPT OR THAT A COURT WOULD UPHOLD ANY OF THE
CHARACTERIZATIONS DESCRIBED ABOVE.
Backup Withholding and Information Reporting
A holder of the Reset PERQS may be subject to
information reporting and to backup
withholding at a rate of 31 percent of
certain amounts paid to the holder unless
such holder provides proof of an applicable
exemption or a correct taxpayer
identification number, and otherwise complies
with applicable requirements of the backup
withholding rules. Any amounts withheld
under the backup withholding rules are not an
additional tax and may be refunded, or
credited against the U.S. Holder's U.S.
federal income tax liability, provided the
required information is furnished to the IRS.
Certain United States Federal Taxation
Considerations for Foreign Corporations
While not free from doubt, a holder of a
Reset PERQS that is a foreign corporation (a
"Non-U.S. Holder") that (i) does not own 10
percent or more of the total combined voting
power of all classes of stock of the Company
entitled to vote, (ii) is not a "controlled
foreign corporation" that is related,
directly or indirectly, to the Company and
(iii) complies with certain certification
requirements should not be subject to U.S.
withholding tax in respect of the delivery of
the AMD Stock at maturity and more likely
than not will not be subject to U.S.
withholding tax in respect of payments of
stated interest on the Reset PERQS. In
addition, pursuant to the terms of certain
income tax treaties entered into by the
United States (including those with The
United Kingdom, France and Germany), a
Non-U.S. Holder that is entitled to treaty
benefits will be exempt from U.S. withholding
tax on amounts paid by the Company in respect
of the Reset PERQS, provided that a completed
IRS Form 1001 (or a substitute form) was
furnished by such holder. THE COMPANY
CURRENTLY INTENDS TO DEDUCT U.S. WITHHOLDING
TAX FROM PAYMENTS OF STATED INTEREST MADE IN
RESPECT OF THE RESET PERQS TO NON-U.S.
HOLDERS THAT ARE NOT ENTITLED TO SUCH TREATY
BENEFITS. Payments in respect of the Reset
PERQS not exempt from U.S. withholding tax
will be subject to such tax at a rate of 30%
(as reduced by applicable treaty). A Non-U.S.
Holder that satisfies the requirements in (i)
to (iii) of this paragraph may apply for a
refund of any amount deducted by the Company
in respect of U.S. withholding tax. Any
capital gain realized upon the sale or other
disposition of the Reset PERQS by a Non-U.S.
Holder will generally not be subject to U.S.
federal income tax provided such gain is not
effectively connected with a U.S. trade or
business of such holder. Non-U.S. Holders
considering the purchase of Reset PERQS
should consult their own tax advisors with
regard to the application of U.S. withholding
tax with respect to payments on the Reset
PERQS.
HYPOTHETICAL PAYMENTS ON THE RESET PERQS
Based on an Initial Price of $40 per share of AMD Stock and a first year cap
of 133% and a second year cap of 133%, the following table illustrates, for a
range of First Year Closing Prices and Maturity Prices, the consequent
adjustments to the Exchange Ratio, Second Year Cap Prices, the Payments at
Maturity Based on AMD Stock for each $40 principal amount of Reset PERQS and
the total return including interest payments, based on a hypothetical interest
rate of 10.00% per annum, for each $40 principal amount of Reset PERQS. For
purposes of this table, all Adjusted Exchange Ratios are rounded to the
nearest one-hundredth of a percentage point with five one-hundredths of a
percentage point being rounded upwards.
<PAGE>
<TABLE>
<CAPTION>
4/15/98
Initial Adjusted
Exchange First Year First Year Exchange Second Year
Initial Price Ratio Cap Price Closing Price Ratio Cap Price
------------- -------- ---------- ------------- -------- -----------
<S> <C> <C> <C> <C> <C>
$40.00 1.00 $53.20 $68.00 0.7824 $90.44
$40.00 1.00 $53.20 $60.00 0.8867 $79.80
$40.00 1.00 $53.20 $60.00 0.8867 $79.80
$40.00 1.00 $53.20 $52.00 1.0000 $69.16
$40.00 1.00 $53.20 $54.00 0.9852 $71.82
$40.00 1.00 $53.20 $44.00 1.0000 $58.52
$40.00 1.00 $53.20 $40.00 1.0000 $53.20
$40.00 1.00 $53.20 $30.00 1.0000 $53.20
$40.00 1.00 $53.20 $20.00 1.0000 $53.20
$40.00 1.00 $53.20 $100.00 0.5320 $133.00
| |
133% of Greater of
Initial Price (x)
133% of
First Year
Closing
Price and
(y)
First Year
Cap Price
</TABLE>
<TABLE> Reset
<CAPTION> PERQS
Reset Payment
PERQS at Maturity
4/15/99 Payment plus 10.00%
Adjusted at Maturity Coupon
Exchange Based on ("Total Annual Stock
Maturity Price Ratio AMD Stock Payment") YTM(1) YTM(1)(2)
-------------- -------- ----------- ----------- ------ ---------
<S> <C> <C> <C> <C> <C>
$100.00 0.7076 $70.76 $78.76 43.12% 58.11%
$78.00 0.8867 $69.16 $77.16 41.62% 39.64%
$48.00 0.8867 $42.56 $50.56 13.49% 9.54%
$65.00 1.0000 $65.00 $73.00 37.62% 27.48%
$46.00 0.9852 $45.32 $53.32 16.74% 7.24%
$62.00 0.9439 $58.52 $66.52 31.13% 24.50%
$52.00 1.0000 $52.00 $60.00 24.25% 14.02%
$38.00 1.0000 $38.00 $46.00 7.89% (2.53)%
$16.00 1.0000 $16.00 $24.00 (25.37)% (36.75)%
$20.00 0.5320 $10.64 $18.64 (36.34)% (29.29)%
|
Maturity
Price Times
Adjusted
Exchange
Ratio
<FN>
- ------------
(1) Yield to maturity calculated on an annual money market-equivalent basis.
(2) Assumes no dividends on AMD stock.
</TABLE>
