PROSPECTUS Dated June 2, 1997 Pricing Supplement No. 57
PROSPECTUS SUPPLEMENT Registration Statement No. 333-27919
Dated June 2, 1997 Dated February 26, 1998
Rule 424(b)(3)
Morgan Stanley, Dean Witter, Discover & Co.
MEDIUM-TERM NOTES, SERIES C
Senior Fixed Rate Notes
6.09% REset Put Securities due 2011 (the "REPS[SM]")
The 6.09% REset Put Securities due 2011 (the "REPS[SM]") of
Morgan Stanley, Dean Witter, Discover & Co. (the "Company") are further
described under "Description of Notes--Fixed Rate Notes" in the accompanying
Prospectus Supplement, subject to and as modified by the Coupon Reset Process
and other provisions described below.
The REPS will be redeemable in whole, but not in part, at the
option of the Company or its assignee (the "Callholder") upon not less than
15 calendar days notice on March 9, 2001 (the "Coupon Reset Date"). Whether
by operation of the Call Option or the Put Option as described below, holders
of the REPS prior to the Coupon Reset Date will be required to tender their
REPS on such date.
Although the United States federal income tax treatment of the
REPS is not certain, the terms of the REPS provide that the Company and all
holders of the REPS agree to treat the REPS as fixed rate debt instruments
that mature on the Coupon Reset Date for United States federal income tax
purposes. See "United States Federal Taxation" below.
Principal Amount: $350,000,000
Maturity Date: March 9, 2011. See "Other Provisions -- Call
Option" "--Put Option" below.
Date of Issuance and
Settlement Date: March 9, 1998
Interest Accrual Date: March 9, 1998
Issue Price: 99.984%
See "Plan of Distribution"
below.
Redemption Dates: Redeemable in whole, but not in part, at the
option of the Callholder upon not less than 15
calendar days notice on the Coupon Reset Date.
See "Other Provisions -- Call Option" below.
Redemption Price: 100.00%
Annual Redemption
Percentage Reduction: N/A
Total Amount of OID: N/A
Original Yield to Maturity: N/A
Initial Accrual Period OID: N/A
Interest Rate: From and including March 9, 1998 to but excluding
the Coupon Reset Date: 6.09%. From and
including the Coupon Reset Date to but
excluding March 9, 2011: the Coupon Reset Rate,
as described in "Other Provisions -- Coupon
Reset Process" below and subject to the
exercise of the Call Option and payment of the
Call Price, as described in "Other Provisions
-- Call Option" below.
Interest Payment Dates: Each March 9 and September 9, commencing September
9, 1998.
Interest Payment
Period: Semi-annually
Applicability of Modified
Payment upon
Acceleration: N/A
If Yes, State Issue Price: N/A
Optional Repayment Date(s): The Coupon Reset Date. See "Other Provisions --
Put Option" below.
Denominations: $1,000
Calculation Agent: ABN AMRO Bank N.V. (Chicago Branch)
CUSIP: 61745ELY5
Capitalized terms not defined above have the meanings given to such terms in
the accompanying Prospectus Supplement.
MORGAN STANLEY DEAN WITTER
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, SPECIFICALLY,
THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID
FOR AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES SEE "PLAN OF DISTRIBUTION" HEREIN AND IN THE ACCOMPANYING
PROSPECTUS SUPPLEMENT AND PROSPECTUS.
OTHER PROVISIONS:
Call Option: Upon notice as described below (the "Call Notice"), the
Callholder, may call the REPS, in whole but not in part (the "Call Option"),
on the Coupon Reset Date, at a price equal to 100% of the principal amount
thereof (the "Call Price"). The Callholder (if other than the Company) will
not be obligated to pay accrued but unpaid interest to but excluding the
Coupon Reset Date. Such interest will be paid by the Company on the Coupon
Reset Date to the holders of the REPS as of the most recent Record Date. The
Call Notice shall be given to the Trustee, in writing, prior to 4:00 p.m., New
York time, no later than 15 calendar days prior to the Coupon Reset Date. The
Call Notice may be revoked by the Callholder at any time prior to 2:00 p.m.,
New York time, on the Business Day prior to the Coupon Reset Date.
If the Callholder exercises its rights under the Call Option, unless
terminated in accordance with its terms, then (i) not later than 2:00 p.m.,
New York time, on the Business Day prior to the Coupon Reset Date, the
Callholder will deliver the Call Price in immediately available funds to the
Trustee for payment of the Call Price on the Coupon Reset Date and (ii) the
holders of REPS will be required to deliver and will be deemed to have
delivered the REPS to the Callholder against payment of the Call Price
therefor on the Coupon Reset Date through the facilities of The Depository
Trust Company, New York, New York (the "Depositary"). No holder of any REPS
or any interest therein will have any right or claim against the Callholder as
a result of the Callholder's decision whether or not to exercise the Call
Option or performance or nonperformance of its obligations with respect
thereto or against the Callholder with respect to any failure by the Company
to pay the interest above on the Coupon Reset Date or any other date.
Except as otherwise specified in clause (i) below, the Call Option will
automatically and immediately terminate, no payment will be due thereunder
from the Callholder and the Coupon Reset Process will terminate, if any of the
following occurs: (i) an Event of Default occurs under Section 5.1 clauses
(a), (b), (c), (f), (g) or (h) of the Senior Indenture (in such event,
termination is at the Callholder's option) or under Section 5.1 clauses (d) or
(e) of the Senior Indenture (in such event, termination is automatic); (ii)
the Callholder fails to deliver the Call Notice to the Trustee prior to 4:00
p.m., New York time, on the fifteenth calendar day prior to the Coupon Reset
Date or revokes the Call Notice as aforesaid; (iii) on the Bid Date, fewer
than two Dealers submit timely Bids (each as defined below) substantially as
provided below; or (iv) the Callholder fails to pay the Call Price by 2:00
p.m., New York time, on the Business Day prior to the Coupon Reset Date. See
"Other Provisions -- Coupon Reset Process" below.
Upon any termination of the Call Option (as set forth above), notice of such
termination will be promptly given in writing to the Trustee by the Callholder
(with respect to clause (ii) or (iv) above), by the Calculation Agent (with
respect to clause (iii) above) or the Company (with respect to clause (i)
above). If the Call Option is not exercised or if the Call Option otherwise
terminates, the Trustee will be required to exercise the Put Option described
below.
Immediately following the Settlement Date of the REPS, the "Callholder" will
be ABN AMRO Bank N.V. (Chicago Branch). Thereafter, the Callholder from time
to time may assign all (but not less than all) its rights and obligations
under the Call Option to a substitute Callholder, in each case without notice
to or consent of the holders of the REPS but with notice to the Trustee.
Put Option: If the Call Option is not exercised or if the Call Option
otherwise terminates, the Trustee will be obligated to exercise the right of
the holders of the REPS to require the Company to purchase the REPS, in whole
but not in part (the "Put Option"), on the Coupon Reset Date at a price equal
to 100% of the principal amount thereof (the "Put Price"), plus accrued but
unpaid interest to but excluding such Coupon Reset Date, such interest to be
paid by the Company on the Coupon Reset Date to the holders of the REPS as of
the most recent record date. If the Trustee exercises the Put Option, then the
Company shall deliver the Put Price in immediately available funds to the
Trustee by no later than 10:00 a.m., New York time, on the Coupon Reset Date,
and the holders of the REPS will be required to deliver and will be deemed to
have delivered the REPS to the Company against payment of the Put Price
therefor on the Coupon Reset Date through the facilities of the Depositary.
REPS that have been paid pursuant to the Put Option shall be canceled and no
REPS may be issued in lieu of or in exchange therefor. By its purchase of
REPS, each holder irrevocably agrees that the Trustee shall exercise the Put
Option for or on behalf of such holder as provided herein. No holder of any
REPS or any interest therein has the right to consent or object to the
exercise of the Trustee's duties under the Put Option. If the Call Option is
not exercised or otherwise terminates, the Put Option shall be deemed
exercised by the Trustee without any requirement of notice to or consent of
the Company or the holders of the REPS.
The transactions described above will be executed on the Coupon Reset Date
through the Depositary in accordance with the procedures of the Depositary,
and the accounts of participants will be debited and credited and the REPS
delivered by book-entry as necessary to effect the purchases and sales
thereof. For further information with respect to transfers and settlement
through the Depositary, see "Description of the Notes -- Book-Entry System" in
the Prospectus Supplement and "Global Securities" in the Prospectus.
Notice to Holders by Trustee: In anticipation of the exercise of the Call
Option or the Put Option on the Coupon Reset Date, the Trustee will notify the
holders of the REPS, not less than 30 days nor more than 60 days prior to the
Coupon Reset Date, that all REPS shall be delivered on the Coupon Reset Date
through the facilities of the Depositary against payment of the Call Price by
the Callholder under the Call Option or payment of the Put Price by the
Company under the Put Option.
Coupon Reset Process: In the event the Call Option has been exercised with
respect to the REPS, the interest rate to be paid on the REPS from and
including the Coupon Reset Date to but excluding the Maturity Date (provided
that the Call Price has been paid) will be determined in accordance with the
provisions described below (the "Coupon Reset Process"). The Company and the
Calculation Agent will use reasonable efforts to complete the Coupon Reset
Process in as timely a manner as possible.
(a) No later than five Business Days prior to the Coupon Reset
Date, the Company will provide the Calculation Agent with (i) a list (the
"Dealer List"), containing the names and addresses of three dealers, none of
which shall be an affiliate of the Company, from which the Company wishes the
Calculation Agent to obtain Bids for the purchase of the REPS and (ii) such
other material as may reasonably be requested by the Calculation Agent to
facilitate a successful Coupon Reset Process.
(b) Within one Business Day following receipt by the
Calculation Agent of the Dealer List, the Calculation Agent will provide to
each dealer ( a "Dealer") on the Dealer List (i) a copy of the Pricing
Supplement dated February 26, 1998, together with the Prospectus Supplement
dated June 2, 1997 and Prospectus dated June 2, 1997, relating to the offering
of the REPS (collectively, the "Pricing Supplement"), (ii) a copy of the form
of REPS and (iii) a written request that each Dealer submit a Bid to the
Calculation Agent by 12:00 noon, New York time, on the third Business Day
prior to the Coupon Reset Date (the "Bid Date"). "Bid" means an irrevocable
written offer given by a Dealer for the purchase of all of the REPS, settling
on the Coupon Reset Date, and shall be quoted by such Dealer as a stated yield
to maturity on REPS ("Yield to Maturity"). Within one Business Day following
receipt by the Calculation Agent of the Dealer List, each Dealer shall also be
provided by the Calculation Agent with (i) the name of the Company, (ii) an
estimate of the Purchase Price (which shall be stated as a US dollar amount
and be calculated by the Calculation Agent in accordance with paragraph (c)
below), (iii) the principal amount and maturity of the REPS and (iv) the
method by which interest will be calculated on the REPS.
(c) The purchase price for the REPS in connection with the
exercise of the Call Option (the "Purchase Price") shall be equal to (i) the
principal amount of the outstanding REPS, plus (ii) a premium (the "REPS
Premium") which shall be equal to the excess, if any, of (A) the discounted
present value to the Coupon Reset Date of a bond with a maturity of March 9,
2011 which has an interest rate of 5.627% per annum, semi-annual interest
payments on each March 9 and September 9, commencing September 9, 2001 and a
principal amount equal to the principal amount of the outstanding REPS, and
assuming a discount rate equal to the Treasury Rate over (B) the principal
amount of the outstanding REPS. The "Treasury Rate" means the per annum rate
equal to the offer side yield to maturity of the current on-the-run 10-year
United States Treasury Security per Telerate page 500, or any successor page,
at 11:00 am., New York time, on the Bid Date (or such other time or date that
may be agreed upon by the Company and the Calculation Agent) or, if such rate
does not appear on Telerate page 500, or any successor page, at such time, the
rates on GovPX End-of-Day Pricing at 3:00 p.m., New York time, on the Bid Date
(or such other time or date that may be agreed upon by the Company and the
Calculation Agent).
(d) The Calculation Agent will provide written notice to the
Company by 2:00 p.m., New York time, on the Bid Date, setting forth (i) the
names of each of the Dealers from whom the Calculation Agent received Bids on
the Bid Date, (ii) the Bid submitted by each such Dealer and (iii) the
Purchase Price as determined pursuant to paragraph (c) above. Except as
provided below, the Calculation Agent will thereafter select from the Bids
received the Bid with the lowest Yield to Maturity (the "Selected Bid");
provided, however, that (i) if the Calculation Agent has not received a Bid
from a Dealer by 12:00 noon New York time on the Bid Date, the Selected Bid
shall be the lowest of all Bids received by such time, (ii) if any two or more
of the lowest Bids submitted are equivalent, the Company shall in its sole
discretion select any of such equivalent Bids (and such selected Bid shall be
the Selected Bid) and (iii) the Callholder or any of its affiliates will have
the right to match the Bid with the lowest Yield to Maturity, in which case
such Bid shall be the Selected Bid. The Calculation Agent will set the Coupon
Reset Rate equal to the interest rate that will amortize the REPS Premium
fully over the term of the REPS at the Yield to Maturity indicated by the
Selected Bid. The Calculation Agent will notify the Dealer that submitted the
Selected Bid by 4:00 p.m., New York time, on the Bid Date.
(e) Immediately after calculating the Coupon Reset Rate for the
REPS, the Calculation Agent will provide written notice to the Company and the
Trustee, setting forth the Coupon Reset Rate. The Coupon Reset Rate for the
REPS will be effective from and including the Coupon Reset Date to but
excluding the Maturity Date.
(f) Unless the Callholder or one of its affiliates submitted
the Selected Bid, the Callholder will sell the REPS to the Dealer that made
the Selected Bid at the Purchase Price, such sale to be settled on the Coupon
Reset Date in immediately available funds.
The Calculation Agency Agreement provides that the Calculation Agent for the
REPS may resign at any time as Calculation Agent, such resignation to be
effective ten Business Days after the delivery to the Company and the Trustee
of notice of such resignation. In such case, the Company may appoint a
successor Calculation Agent for the REPS.
The Calculation Agent, in its individual capacity, may buy, sell, hold and
deal in the REPS and may exercise any vote or join in any action which any
holder of the REPS may be entitled to exercise or take as if it were not the
Calculation Agent. The Calculation Agent, in its individual capacity, may also
engage in any transaction with the Company as if it were not the Calculation
Agent.
UNITED STATES FEDERAL TAXATION:
The following is based on the advice of Davis Polk & Wardwell, special tax
counsel to the Company ("Tax Counsel") and is a general discussion of the
principal potential U.S. federal income tax consequences of ownership and
disposition of the REPS to initial holders purchasing REPS at the "issue
price." The "issue price" of a REPS will equal the first price to the public
(not including bond houses, brokers or similar persons or organizations acting
in the capacity of underwriters, placement agents or wholesalers) at which a
substantial amount of the REPS is sold for money. This summary is based on
the Internal Revenue Code of 1986, as amended (the "Code"), and existing and
proposed Treasury regulations, revenue rulings, administrative
interpretations and judicial decisions, all as currently in effect, any of
which are subject to change, possibly on a retroactive basis. Moreover, it
deals only with purchasers who hold REPS as "capital assets" within the
meaning of Section 1221 of the Code, and does not purport to deal with persons
in special tax situations, such as financial institutions, insurance
companies, regulated investment companies, dealers in securities or currencies,
persons holding REPS as a hedge against currency risk or as a position in a
"straddle," "conversion" or another integrated transaction for tax purposes,
or U.S. Holders (as defined below) whose functional currency is not the U.S.
dollar. In addition, because the Company intends to treat the REPS as
maturing on the Coupon Reset Date, as discussed below, this discussion only
addresses the U.S. federal income tax consequences of the REPS until the
Coupon Reset Date.
As used herein, the term "U.S. Holder" means a beneficial owner of REPS that
is, for U.S. federal income tax purposes, (i) a citizen or resident of the
United States, (ii) a corporation created or organized in or under the laws of
the United States or of any political subdivision thereof, or (iii) an estate
or trust whose income is subject to U.S. federal income tax regardless of its
source. As used herein, the term "non-U.S. Holder" means a beneficial owner
of a REPS that is, for U.S. federal income tax purposes, (i) a nonresident
alien individual, (ii) a foreign corporation, (iii) a nonresident alien
fiduciary of a foreign estate or trust or (iv) a foreign partnership one or
more of the members of which is, for U.S. federal income tax purposes, a
nonresident alien individual, a foreign corporation or a nonresident alien
fiduciary of a foreign estate or trust.
Because the REPS are subject to exercise of the Call Option or the Put Option
on the Coupon Reset Date, the Company intends to treat the REPS as maturing on
the Coupon Reset Date for U.S. federal income tax purposes and as being
reissued on the Coupon Reset Date should the Coupon Reset Process be
completed. By purchasing the REPS, a holder agrees (in the absence of an
administrative determination or judicial ruling to the contrary) to follow
such treatment for U.S. federal income tax purposes. Because no debt
instrument closely comparable to the REPS has been the subject of any Treasury
regulation, revenue ruling or judicial decision, the U.S. federal income tax
treatment of the REPS is not certain. No ruling on any of the issues
discussed below will be sought from the Internal Revenue Service ("IRS"). Due
to the absence of authorities that directly address instruments that are
similar to the REPS, Tax Counsel has rendered no opinion as to the proper U.S.
federal income tax characterization of the REPS. Accordingly, significant
aspects of the U.S. federal income tax consequences of an investment in the
REPS are uncertain, and no assurance can be given that the IRS or the courts
will agree with the characterization described above. PROSPECTIVE PURCHASERS
ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISERS REGARDING THE U.S. FEDERAL
INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE REPS (INCLUDING ALTERNATIVE
CHARACTERIZATIONS OF THE REPS). EXCEPT WHERE INDICATED TO THE CONTRARY, THE
FOLLOWING DISCUSSION ASSUMES THAT THE COMPANY'S TREATMENT OF THE REPS WILL BE
RESPECTED FOR U.S. FEDERAL INCOME TAX PURPOSES. PROSPECTIVE PURCHASERS SHOULD
ALSO CONSULT THEIR TAX ADVISERS WITH RESPECT TO ANY TAX CONSEQUENCES ARISING
UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
Treatment of U.S. Holders
Assuming the characterization of the REPS as maturing on the Coupon Reset
Date, Tax Counsel is of the opinion that the following U.S. federal income tax
consequences would result with respect to U.S. Holders.
Payments of Interest. Interest on the REPS would be taxable as ordinary
income for U.S. federal income tax purposes when received or accrued by a U.S.
Holder in accordance with its method of accounting. The Company does not
anticipate that the initial issuance of the REPS would result in original
issue discount ("OID"), generally defined as the excess of the stated
redemption price at the maturity of the REPS over its issue price. However,
if a REPS is issued with OID and such OID is greater than the statutory de
minimis amount (generally, 1/4 of one percent of the REPS' stated redemption
price at the Coupon Reset Date multiplied by the number of complete years to
the Coupon Reset Date from the issue date), the holder of a REPS will be
required to recognize as ordinary income the amount of OID on the REPS as such
discount accrues, in accordance with a constant yield method.
Sale, Exchange or Redemption. When a REPS is sold or redeemed, the U.S.
Holder will recognize gain or loss equal to the difference between the amount
realized on the sale or redemption (excluding any amount attributable to
accrued interest not previously included in income) and the adjusted basis in
its REPS. The adjusted basis of the REPS generally would equal the U.S.
Holder's cost, increased by any OID previously includable in the U.S. Holder's
income with respect to the REPS and reduced by any principal payments received
by the U.S. Holder and, in the case of a REPS with OID, by the amount of any
other payments that do not constitute qualified stated interest. Gain or loss
on sale or redemption of a REPS would generally be capital gain or loss.
Capital gains of individuals derived with respect to capital assets held for
more than one year are eligible for reduced rates of taxation depending upon
the holding period of such capital assets. The deductibility of capital
losses is subject to certain limitations.
Alternative Characterization
There can be no assurance that the IRS will agree with, or that a court will
uphold, the Company's treatment of the REPS as maturing on the Coupon Reset
Date and as thereafter being reissued upon completion of the Coupon Reset
Process, and it is possible that the IRS could assert another
characterization. In particular, the IRS could seek to treat the REPS as
maturing on the Maturity Date and possibly also to treat the issue price of
the REPS as including the value of the Call Option. Because of the possible
Coupon Reset Process, if the REPS were treated as maturing on the Maturity
Date, Treasury regulations relating to contingent payment debt obligations (the
"Contingent Payment Debt Regulations") would apply. In such case, the timing
and character of income on the REPS would be significantly affected. Among
other things, U.S. Holders, regardless of their usual method of tax
accounting, would be required to accrue income annually as OID, subject to the
adjustments described below, at a "comparable yield" on the adjusted issue
price, which could be higher than the actual cash payments received on the
REPS in a taxable year. In addition, the Contingent Payment Debt Regulations
require that a projected payment schedule be determined, and that adjustments
to income accruals be made to account for differences between actual payments
and projected payments. Furthermore, any gain realized with respect to the
REPS would generally be treated as ordinary income, and any loss realized
would generally be treated as ordinary loss to the extent of the U.S. Holder's
ordinary income inclusions with respect to the REPS. Any remaining loss
generally would be treated as capital loss. In particular, upon the sale of a
REPS (other than through the exercise of the Call Option), the IRS could take
the position that the gain or loss with respect to the Call Option and the
gain or loss with respect to the debt obligation must be separately
determined, in which case any deemed loss with respect to the Call Option
would be treated as capital loss, and a corresponding amount of additional
ordinary income would need to be recognized by the U.S. Holder with respect to
the sale. The ability to use capital losses to offset ordinary income in
determining taxable income is generally limited.
Prospective purchasers are strongly urged to consult their tax advisers
regarding the U.S. federal income tax consequences of an investment in the
REPS.
Treatment of non-U.S. Holders
A non-U.S. Holder will not be subject to U.S. federal income or withholding
tax on payments of principal, premium (if any) or interest (including original
issue discount and accruals under the Contingent Payment Debt Regulations, if
any) on a REPS, unless such non-U.S. Holder owns actually or constructively
10% or more of the total combined voting power of the Company or is a
controlled foreign corporation related to the Company through stock ownership.
Sections 871(h) and 881(c) of the Code, and applicable Treasury regulations,
require that, in order to obtain the exemption from withholding tax described
above, either the beneficial owner of the REPS, or a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution") and that is holding the REPS on behalf of such beneficial owner,
file a statement with the withholding agent to the effect that the beneficial
owner of the REPS is not a U.S. person. In general, such requirement will be
fulfilled if the beneficial owner of a REPS certifies on IRS Form W-8, under
penalties of perjury, that it is not a U.S. person and provides its name and
address, and any Financial Institution holding the REPS on behalf of the
beneficial owner files a statement with the withholding agent to the effect
that it has received such statement from the Holder (and furnishes the
withholding agent with a copy thereof).
Generally, a non-U.S. Holder will not be subject to U.S. federal income tax on
any amount which constitutes gain upon retirement or disposition of a REPS,
provided the gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
adviser in this regard.
If a non-U.S. Holder of a REPS is engaged in a trade or business in the United
States, and if interest (including OID, if any) or gain on the REPS is
effectively connected with the conduct of such trade or business, the non-U.S.
Holder, although exempt from the withholding tax discussed above, will
generally be subject to regular U.S. income tax on interest and on any gain
realized on the sale, exchange or other disposition of a REPS in the same
manner as if it were a U.S. Holder. In lieu of the statement described above,
such Holder will be required to provide to the Company a properly executed
Form 4224 (or successor form) in order to claim an exemption from withholding
tax. In addition, if such non-U.S. Holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% (or such lower rate provided by
an applicable treaty) of its effectively connected earnings and profits for
the taxable year, subject to certain adjustments. For purposes of the branch
profits tax, interest on and any gain recognized on the sale, exchange or other
disposition of a REPS will be included in the effectively connected earnings
and profits of such non-U.S. Holder if such interest or gain, as the case may
be, is effectively connected with the conduct by the non-U.S. Holder of a
trade or business in the United States.
The REPS will not be includable in the estate of a non-U.S. Holder unless the
individual is a direct or indirect 10% or greater shareholder of the Company
or, at the time of such individual's death, payments in respect of the REPS
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
Information Reporting and Backup Withholding
A holder may be subject to backup withholding at the rate of 31% of the
interest and other "reportable payments" (including, under certain
circumstances, principal payments and sales proceeds) paid with respect to the
REPS if, in general, the holder fails to comply with certain certification
procedures and is not an exempt recipient under applicable provisions of the
Code.
On October 6, 1997, the Treasury Department issued new regulations (the "New
Regulations") which make modifications to the withholding, backup withholding
and information reporting rules described above. The New Regulations will
generally be effective for payments made after December 31, 1998, subject to
certain transition rules. Prospective investors are urged to consult their
own tax advisers regarding the New Regulations.
PLAN OF DISTRIBUTION:
On February 26, 1998, the Company agreed to sell to the underwriters listed
below (the "Underwriters"), and the Underwriters severally agreed to
purchase, the principal amount of Notes set forth opposite their respective
names below at a net price of 99.634%. In addition, in consideration for the
assignment of the Call Option, as described above, ABN AMRO Bank N.V. (Chicago
Branch) will pay to the Company, on the Settlement Date, an amount equal to
2.525% of the principal amount of the REPS. Consequently, the net proceeds to
the Company will be $357,556,500, or 102.159% of the principal amount of the
REPS.
Principal Amount of
Name Notes
---- -------------------
Morgan Stanley & Co. Incorporated............ $349,000,000
ABN AMRO Incorporated........................ $ 1,000,000
Total................................... $350,000,000
============
The REPS are a new issue of securities with no established trading market.
While the Company has been advised by the Underwriters that the Underwriters
intend to make a market in the REPS, the Underwriters are not obligated to do
so. Thus, there can be no assurance as to whether there will be a secondary
market in the REPS or if there were to be such a secondary market, whether
such market would be liquid or illiquid.
In connection with the offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the REPS.
Specifically, the Underwriters may overallot in connection with the offering,
creating a syndicate short position. In addition, the Underwriters may bid
for, and purchase, REPS in the open market to cover such syndicate short
positions or stabilize the price of the REPS. Finally, the underwriting
syndicate may reclaim selling concessions allowed for distributing the REPS in
the offering if the syndicate repurchases previously distributed REPS in
syndicate covering transactions, in stabilization transactions or otherwise.
Any of these activities may stabilize or maintain the market price of the REPS
above independent market levels. The Underwriters are not required to engage
in these activities, and may end any of these activities at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments the Underwriters may be required to make in respect thereof.
