Subject to Completion, Pricing Supplement dated April 28, 1999
PROSPECTUS Dated March 26, 1998 Pricing Supplement No. 80 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-46935
Dated March 26, 1998 Dated , 1999
Rule 424(b)(3)
$25,000,000
Morgan Stanley Dean Witter & Co.
MEDIUM-TERM NOTES, SERIES C
Senior Fixed Rate Notes
--------------
6% Reset PERQS due May 30, 2001
Mandatorily Exchangeable For
Shares of Common Stock of SUN MICROSYSTEMS, INC.
Reset Performance Equity-linked Redemption Quarterly-pay Securities(SM)
("Reset PERQS(SM)")
The Reset PERQS will pay 6% interest per year but do not guarantee any return
of principal at maturity. Instead the Reset PERQS will pay at maturity a
number of shares of Sun Microsystems common stock based on the closing prices
of Sun Microsystems common stock after one year and at maturity, in each case
subject to a cap price.
o The principal amount and issue price of each Reset PERQS is $ ,
which is one-tenth of the closing price of Sun Microsystems common stock on
the day we offer the Reset PERQS for initial sale to the public.
o We will pay 6% interest (equivalent to $ per year) on the $
principal amount of each Reset PERQS. Interest will be paid quarterly,
beginning August 30, 1999.
o At maturity you will receive shares of Sun Microsystems common stock in
exchange for each Reset PERQS at an exchange ratio. The initial exchange
ratio is one-tenth of a share of Sun Microsystems common stock per Reset
PERQS. However, if the price of Sun Microsystems common stock
appreciates above the first year cap price for May 30, 2000 or the second
year cap price for May 25, 2001, the exchange ratio will be adjusted
downward, and you will receive an amount of Sun Microsystems common stock
per Reset PERQS that is less than one-tenth of a share.
o The first year cap price is $ , or % of the closing price of
Sun Microsystems common stock on the day we offer the Reset PERQS for
initial sale to the public. If on May 30, 2000, the price of Sun
Microsystems common stock is higher than the closing price of Sun
Microsystems common stock on the day we offer the Reset PERQS for initial
sale to the public, we will raise the cap price to % of the closing
price of Sun Microsystems common stock on May 30, 2000. Otherwise the
cap price will remain unchanged in the second year. The maximum you can
receive at maturity is Sun Microsystems common stock worth $ per Reset
PERQS.
o Investing in Reset PERQS is not equivalent to investing in Sun Microsystems
common stock.
o Sun Microsystems, Inc. is not involved in this offering of Reset PERQS in
any way and will have no financial obligation with respect to the Reset
PERQS.
o We will apply to list the Reset PERQS to trade on the American Stock
Exchange, Inc. under the proposed AMEX symbol "RPS," but it is not
possible to predict whether the Reset PERQS will meet the AMEX listing
requirements.
You should read the more detailed description of the Reset PERQS in this
Pricing Supplement. In particular, you should review and understand the
descriptions in"Summary of Pricing Supplement" and "Description of Reset
PERQS." "Reset Performance Equity-linked Redemption Quarterly-pay Securities"
and "Reset PERQS" are our service marks.
The Reset PERQS are riskier than ordinary debt securities. See "Risk Factors"
beginning on PS-6.
-----------------
PRICE $ PER RESET PERQS
-----------------
Agent's Proceeds to
Price to Public Commissions the Company
--------------- ----------- -----------
Per Reset PERQS.... $ $ $
Total.............. $ $ $
If you purchase at least 500,000 Reset PERQS in any single transaction and you
comply with the holding period requirement described under "Supplemental
Information Concerning Plan of Distribution" in this Pricing Supplement, the
price will be $ per Reset PERQS (98.625% of the Issue Price). In that
case, the underwriting discounts and commissions will be $ per Reset
PERQS.
The information in this pricing supplement is not complete and may be changed.
We may not deliver these securities until a final pricing supplement is
delivered. This pricing supplement and the accompanying prospectus and
prospectus supplement do not constitute an offer to sell these securities and
they are not soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
MORGAN STANLEY DEAN WITTER
(This page intentionally left blank)
SUMMARY OF PRICING SUPPLEMENT
The following summary describes the Reset PERQS we are offering
to you in general terms only. You should read the summary together with the
more detailed information that is contained in the rest of this pricing
supplement and in the accompanying prospectus and prospectus supplement. You
should carefully consider, among other things, the matters set forth in "Risk
Factors."
The Reset PERQS offered are medium-term debt securities of
Morgan Stanley Dean Witter & Co. The return on the Reset PERQS is linked to
the performance of Sun Microsystems, Inc. common stock, which we refer to as
Sun Microsystems Stock. The Reset PERQS also provide fixed quarterly payments
at an annual rate of 6% based on the principal amount of each Reset PERQS.
Unlike ordinary debt securities, Reset PERQS do not guarantee the return of
principal at maturity. Instead the Reset PERQS pay a number of shares of Sun
Microsystems Stock at maturity based on the performance of this stock, either
up or down, subject to a maximum value in each year. We may not redeem the
Reset PERQS prior to maturity.
Each Reset PERQS We, Morgan Stanley Dean Witter & Co., are offering
costs $ 6% Reset Performance Equity-linked Redemption
Quarterly-pay Securities[SM] due May 30, 2001,
which we refer to as the Reset PERQS[SM]. The
principal amount and issue price of each Reset
PERQS is $ , which is one-tenth of the closing
price of Sun Microsystems Stock on the day we
offer the Reset PERQS for initial sale to the
public.
No guaranteed Unlike ordinary debt securities, the Reset PERQS
return of principal do not guarantee any return of principal at
maturity. Instead the Reset PERQS will pay an
amount of Sun Microsystems Stock based on the
market price of Sun Microsystems Stock, either up
or down, after one year and at maturity, in each
case subject to a cap price. Investing in Reset
PERQS is not equivalent to investing in Sun
Microsystems Stock.
6% interest on the We will pay interest on the Reset PERQS, at the
principal amount rate of 6% of the principal amount per year,
quarterly on each February 28, May 30, August 30,
and November 30, beginning August 30, 1999. The
interest rate we pay on the Reset PERQS is more
than the current dividend rate on the Sun
Microsystems Stock. The Reset PERQS will mature
on May 30, 2001.
Your appreciation The appreciation potential of each Reset PERQS is
potential is capped limited in each year by the cap price. The
cap price in year one is $ , or % of the
closing market price of Sun Microsystems Stock on
the day we offer the Reset PERQS for initial sale
to the public ("First Year Cap Price"). The cap
price in year two ("Second Year Cap Price") will
be the higher of % of the closing market price of
Sun Microsystems Stock on May 30, 2000 and the
First Year Cap Price. The maximum you can receive
at maturity is Sun Microsystems Stock worth $ per
Reset PERQS.
Payment at Maturity At maturity, for each $ principal amount of
Reset PERQS you hold, we will give to you a number
of shares of Sun Microsystems Stock equal to the
exchange ratio. The initial exchange ratio is
one-tenth of a share of Sun Microsystems Stock per
Reset PERQS and may be adjusted as follows:
First Year Adjustment
The exchange ratio will be adjusted downward if
the market price of Sun Microsystems Stock exceeds
the First Year Cap Price on May 30, 2000.
The adjusted exchange ratio will be calculated as
follows:
First Year Cap Price
New Exchange = Initial Exchange x ------------------------------------
Ratio Ratio Sun Microsystems Stock closing price
on May 30, 2000
If the market price of Sun Microsystems Stock on
May 30, 2000 is the same as or less than the First
Year Cap Price, we will not adjust the exchange
ratio at the end of the first year.
Second Year Adjustment
The exchange ratio may be adjusted downward again
at maturity, but only if the market price of Sun
Microsystems Stock at maturity exceeds the Second
Year Cap Price. The final exchange ratio will
then be calculated as follows:
Second Year Cap Price
Final Exchange = Existing Exchange x ------------------------------
Ratio Ratio Sun Microsystems Stock closing
price at maturity
If the market price of Sun Microsystems Stock at
maturity is the same as or less than the Second
Year Cap Price, we will not adjust the Exchange
Ratio at maturity.
On the next page, we have provided a table titled
"Hypothetical Payments on the Reset PERQS." The
table demonstrates the effect of these adjustments
to the exchange ratio under a variety of
hypothetical price scenarios. You should examine
the table for examples of how the payout on the
Reset PERQS could be affected under these or other
potential price scenarios. This table does not
show every situation that may occur.
You can review the prices of Sun Microsystems
Stock for the last three years in the "Historical
Information" section of this Pricing Supplement.
During the life of the Reset PERQS, Morgan Stanley
& Co. Incorporated or its successors, which we
refer to as MS & Co., acting as calculation agent,
will also make adjustments to the effective
exchange ratio to reflect the occurrence of
certain corporate events that could affect the
market price of Sun Microsystems Stock. You
should read about these adjustments in the
sections called "Description of Reset PERQS--
Exchange at Maturity," "--Exchange Factor" and "--
Antidilution Adjustments."
The Calculation Agent We have appointed MS & Co. to act as calculation
agent for The Chase Manhattan Bank, the trustee
for our senior notes. As calculation agent, MS &
Co. will determine the exchange ratio and the cap
prices and calculate the amount of Sun
Microsystems Stock that you will receive at
maturity.
No affiliation with Sun Microsystems, Inc. is not an affiliate of ours
Sun Microsystems, Inc. and is not involved with this offering in any
way. The obligations represented by the Reset
PERQS are obligations of Morgan Stanley Dean
Witter & Co. and not of Sun Microsystems, Inc.
More information on The Reset PERQS are senior notes issued as part of
the Reset PERQS our Series C medium-term note program. You can
find a general description of our Series C medium-
term note program in the accompanying Prospectus
Supplement dated March 26, 1998. We describe the
basic features of this type of note in the
sections called "Description of Reset PERQS--Fixed
Rate Notes" and "--Exchangeable Notes." For a
detailed description of terms of the Reset PERQS
including the specific mechanics and timing of the
exchange ratio adjustments, you should read the
"Description of Reset PERQS" section in this
Pricing Supplement. You should also read about
some of the risks involved in investing in Reset
PERQS in the section called "Risk Factors."
How to reach us You may contact your local Morgan Stanley
Dean Witter branch office or our principal
executive offices at 1585 Broadway, New York, New
York, telephone number (212) 761-4000.
HYPOTHETICAL PAYMENTS ON THE RESET PERQS
Based on a hypothetical Initial Sun Microsystems Price of
$62.00 per share of Sun Microsystems Stock, a hypothetical initial price per
Reset PERQS of $6.20, and a first year cap of 141% and a second year cap of
141%, the following table illustrates, for a range of First Year Closing
Prices and Maturity Prices, the adjustments we would make to the Exchange
Ratio, Second Year Cap Prices, the Payments at Maturity based on Sun
Microsystems Stock for each $6.20 principal amount of Reset PERQS and the
total return including interest payments, based on a hypothetical interest
rate of 6% per annum and a maturity of two years, for each $6.20 principal
amount of Reset PERQS.
<TABLE>
<CAPTION>
Initial Sun Initial
Initial Price of Microsystems Exchange First Year First Year Closing 5/30/00 Exchange
Reset PERQS Price Ratio Cap Price Price Ratio
- ---------------- ------------ -------- ---------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
$6.20 $62.00 0.10000 $87.42 $50.00 0.10000
$6.20 $62.00 0.10000 $87.42 $50.00 0.10000
$6.20 $62.00 0.10000 $87.42 $50.00 0.10000
$6.20 $62.00 0.10000 $87.42 $85.00 0.10000
$6.20 $62.00 0.10000 $87.42 $85.00 0.10000
$6.20 $62.00 0.10000 $87.42 $85.00 0.10000
$6.20 $62.00 0.10000 $87.42 $100.00 0.08742
$6.20 $62.00 0.10000 $87.42 $100.00 0.08742
$6.20 $62.00 0.10000 $87.42 $100.00 0.08742
$6.20 $62.00 0.10000 $87.42 $87.42 0.10000
141% of
Initial Sun
Microsystems
Price
<CAPTION>
Reset PERQS Reset PERQS
Payment at Payment at Maturity
Sun Microsystems Maturity Based on plus
Second Year Stock Maturity Exchange Ratio Sun Microsystems 6% Coupon ("Total
Cap Price Price(1) at Maturity Stock Price Payment")
----------- ---------------- -------------- ----------------- -------------------
<S> <C> <C> <C> <C>
$87.42 $100.00 0.08742 $8.74 $9.48
$87.42 $85.00 0.10000 $8.50 $9.24
$87.42 $40.00 0.10000 $4.00 $4.74
$119.85 $135.00 0.08878 $11.99 $12.73
$119.85 $115.00 0.10000 $11.50 $12.24
$119.85 $75.00 0.10000 $7.50 $8.24
$141.00 $150.00 0.08217 $12.33 $13.07
$141.00 $125.00 0.08742 $10.93 $11.67
$141.00 $50.00 0.08742 $4.37 $5.11
$123.26 $123.26 0.10000 $12.33 $13.07
Greater of (x) Maturity Price
141% of First times Adjusted
Year Closing Exchange Ratio
Price and (y)
First Year Cap
Price
(1) The Sun Microsystems Stock Maturity Price does not include any dividend
payments that may have been paid to holders of Sun Microsystems Stock.
</TABLE>
RISK FACTORS
The Reset PERQS are not secured debt and are riskier than
ordinary debt securities. Because the return to investors is linked to the
performance of Sun Microsystems Stock, there is no guaranteed return of
principal. To the extent that the final market price of Sun Microsystems Stock
at maturity is either less than today's market price or not sufficiently above
today's market price to compensate for a downward adjustment of the exchange
ratio, if any, at May 30, 2000, investors will lose money on their investment.
Investing in Reset PERQS is not equivalent to investing directly in Sun
Microsystems Stock. This section describes the most significant risks relating
to the Reset PERQS. You should carefully consider whether the Reset PERQS are
suited to your particular circumstances before you decide to purchase them.
Reset PERQS Are Not The Reset PERQS combine features of
Ordinary Senior Notes -- equity and debt. The terms of the
No guaranteed return of Reset PERQS differ from those of
principal ordinary debt securities in that we
will not pay you a fixed amount at
maturity. Our payment to you at
maturity will be a number of shares of
Sun Microsystems Stock based on the
market price of Sun Microsystems Stock
on May 30, 2000 and at maturity. If
the final market price of Sun
Microsystems Stock at maturity is
either less than today's market price
or not sufficiently above today's
market price to compensate for a
downward adjustment of the exchange
ratio, if any, at May 30, 2000, we will
pay you an amount of Sun Microsystems
Stock with a value less than the
principal amount of the Reset PERQS.
See "Hypothetical Payments on the Reset
PERQS" above.
Your Appreciation The appreciation potential of the Reset
Potential Is Limited PERQS is limited because of the cap
prices. Even though the $ issue
price of one Reset PERQS is equal to
today's market price of one share of
Sun Microsystems Stock multiplied by
the initial exchange ratio, you may
receive a lessor fractional amount of
Sun Microsystems Stock per Reset PERQS
at maturity if the initial exchange
ratio of one-tenth of a share has been
adjusted downwards. If the price of
Sun Microsystems Stock appreciates
above both the cap price for May 30,
2000 and the cap price for May 25,
2001, the initial exchange ratio of
one-tenth of a share of Sun
Microsystems Stock per Reset PERQS will
be reduced twice.
The exchange ratio and the final market
price of Sun Microsystems Stock at
maturity will be determined on May 25,
2001, which is two trading days prior
to maturity of the Reset PERQS. If the
price of Sun Microsystems Stock is
lower on the actual maturity date than
it was on May 25, 2001, the value of
any Sun Microsystems Stock you receive
will be less. Under no circumstances
will you receive an amount of Sun
Microsystems Stock for each Reset PERQS
worth more than $ as of such second
scheduled trading day prior to
maturity.
Secondary Trading There may be little or no secondary
May Be Limited market for the Reset PERQS. Although
we will apply to list the Reset PERQS
on the American Stock Exchange, Inc.,
we may not meet the requirements for
listing. Even if there is a secondary
market, it may not provide significant
liquidity. Morgan Stanley & Co.
currently intends to act as a market
maker for Reset PERQS but is not
required to do so.
Market Price of the Reset Several factors, many of which are beyond
PERQS Influenced by Many our control, will influence the value
Unpredictable Factors of the Reset PERQS. We expect that
generally the market price of the Sun
Microsystems Stock on any day will
affect the value of the Reset PERQS
more than any other single factor.
Because adjustments to the exchange
ratio for the Reset PERQS are tied to
the closing stock prices on two
specific days, however, the Reset PERQS
may trade differently from the
underlying stock. Other factors that
may influence the value of the Reset
PERQS include:
o the volatility (frequency and
magnitude of changes in price) of
the Sun Microsystems Stock
o the dividend rate on Sun Microsystems
Stock
o economic, financial and political
events that affect stock markets
generally and which may affect the
market price of the Sun Microsystems
Stock
o interest and yield rates in the
market
o the time remaining to the maturity of
the Reset PERQS
o our creditworthiness
These factors will influence the price
you will receive if you sell your Reset
PERQS prior to maturity. For example,
you may have to sell your Reset PERQS
at a substantial discount from the
principal amount if the market price of
the Sun Microsystems Stock is at,
below, or not sufficiently above the
initial market price.
You cannot predict the future
performance of Sun Microsystems Stock
based on its historical performance.
The price of Sun Microsystems Stock may
decrease so that you will receive at
maturity shares of Sun Microsystems
Stock worth less than the principal
amount of the Reset PERQS. We cannot
guarantee that the price of Sun
Microsystems Stock will increase so
that you will receive at maturity an
amount in excess of the principal
amount of the Reset PERQS.
No Affiliation with Sun We are not affiliated with Sun
Microsystems, Inc. Microsystems, Inc. ("Sun
Microsystems"). Although we do not
have any non-public information about
Sun Microsystems as of the date of this
Pricing Supplement, we or our
affiliates may presently or from time
to time engage in business with Sun
Microsystems, including extending loans
to, or making equity investments in,
Sun Microsystems or providing advisory
services to Sun Microsystems, including
merger and acquisition advisory
services. Moreover, we have no ability
to control or predict the actions of
Sun Microsystems, including any
corporate actions of the type that
would require the calculation agent to
adjust the payment to you at maturity.
Sun Microsystems is not involved in the
offering of the Reset PERQS in any way
and has no obligation to consider your
interest as a holder of Reset PERQS in
taking any corporate actions that might
affect the value of your Reset PERQS.
None of the money you pay for the Reset
PERQS will go to Sun Microsystems.
You Have No As a holder of Reset PERQS, you will not
Shareholder Rights have voting rights or rights to receive
dividends or other distributions or any
other rights with respect to the Sun
Microsystems Stock.
Limited Antidilution MS & Co., as calculation agent, will
Adjustments adjust the amount payable at maturity
for certain events affecting the Sun
Microsystems Stock, such as stock
splits and stock dividends, and certain
other corporate actions involving Sun
Microsystems, such as mergers.
However, the calculation agent is not
required to make an adjustment for
every corporate event that can affect
the Sun Microsystems Stock. For
example, the calculation agent is not
required to make any adjustments if Sun
Microsystems or anyone else makes a
partial tender or partial exchange
offer for the Sun Microsystems Stock.
If an event occurs that does not
require the calculation agent to adjust
the amount payable at maturity, the
market price of the Reset PERQS may be
materially and adversely affected.
Potential Conflicts of Interest As calculation agent, MS & Co. will
between You and the calculate the payment to you at
Calculation Agent maturity of the Reset PERQS. MS & Co.
and other affiliates may also carry out
hedging activities related to Reset
PERQS, including trading in Sun
Microsystems Stock as well as in other
instruments related to Sun Microsystems
Stock. MS & Co. and some of our other
subsidiaries also trade Sun
Microsystems Stock and other financial
instruments related to Sun Microsystems
Stock on a regular basis as part of
their general broker dealer and other
businesses. Any of these activities
could influence MS & Co.'s
determination of adjustments made to
Reset PERQS and, accordingly, could
affect your payout on the Reset PERQS.
Tax Treatment You should also consider the tax
consequences of investing in the Reset
PERQS. There is no direct legal
authority as to the proper tax
treatment of the Reset PERQS, and
therefore significant aspects of the
tax treatment of the Reset PERQS are
uncertain. We do not plan to request a
ruling from the Internal Revenue
Service ("IRS") regarding the tax
treatment of the Reset PERQS, and the
IRS or a court may not agree with the
tax treatment described in this Pricing
Supplement. Please read carefully the
section "Description of Reset PERQS--
United States Federal Income Taxation"
in this Pricing Supplement.
DESCRIPTION OF RESET PERQS
Capitalized terms not defined herein have the meanings given to
such terms in the accompanying prospectus supplement. The term "Reset PERQS"
refers to each $ principal amount of our 6% Reset PERQS due May 30, 2001,
Mandatorily Exchangeable For Shares of Common Stock of Sun Microsystems, Inc.
In this pricing supplement, "MSDW," "we," "us," and "our" refer to Morgan
Stanley Dean Witter & Co.
Principal Amount.............. $25,000,000
Maturity Date................. May 30, 2001
Interest Rate................. 6% per annum (equivalent to $ per annum
per Reset PERQS)
Interest Payment Dates........ Each February 28, May 30, August 30, and
November 30, beginning August 30, 1999.
Specified Currency............ U.S. Dollars
Issue Price................... $ per Reset PERQS
Initial Sun Microsystems Price $
Original Issue Date
(Settlement Date)........... May , 1999
CUSIP......................... 617446240
Denominations................. $ and integral multiples thereof
First Year Cap Price.......... $ ( % of the Initial Sun Microsystems
Price)
First Year Determination Date. May 30, 2000 (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).
First Year Closing Price...... First Year Closing Price means the product of
(i) the Market Price of one share of Sun
Microsystems Stock and (ii) the Exchange
Factor, each determined as of the First Year
Determination Date.
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" below.
Maturity Price................ Maturity Price means the product of (i) the
Market Price of one share of Sun Microsystems
Stock and (ii) the Exchange Factor, each
determined as of the second scheduled Trading
Day immediately prior to maturity.
Exchange at Maturity.......... At maturity (including as a result of
acceleration under the terms of the
indenture), upon delivery of each Reset PERQS
to the Trustee, we will apply each $
principal amount of such Reset PERQS as
payment for a number of shares of Sun
Microsystems Stock at the Exchange Ratio.
The initial Exchange Ratio, initially set at
0.1, is subject to adjustment on the First
Year Determination Date and at maturity in
order to cap the value of the Sun
Microsystems Stock to be received upon
delivery of the Reset PERQS at $ per
Reset PERQS ( % of the Issue Price).
Solely for purposes of adjustment upon the
occurrence of certain corporate events, the
number of shares of Sun Microsystems 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 the First Year Closing Price is less than
or equal to 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 then 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. Please review each
example in the table called "Hypothetical
Payments on the Reset PERQS" on PS-5.
All calculations with respect to the Exchange
Ratios for the Reset PERQS will be rounded to
the nearest one hundred-thousandth, with five
one-millionths rounded upwards (e.g. .876545
would be rounded to .87655); all
calculations with respect to the Second
Year Cap Price will be rounded to the
nearest ten-thousandth, with five one-
hundred-thousandths rounded upwards (e.g.
$12.34567 would be rounded to $12.3457);
and all dollar amounts related to payments
at maturity resulting from such
calculations will be rounded to the
nearest cent with one-half cent being
rounded upwards.
We 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 Sun Microsystems Stock to be
delivered with respect to each $
principal amount of each Reset PERQS and (ii)
deliver such shares of Sun Microsystems Stock
(and cash in respect of interest and any
fractional shares of Sun Microsystems 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.
No Fractional Shares.......... Upon delivery of the Reset PERQS to the
Trustee at maturity (including as a result of
acceleration under the terms of the
indenture), we will deliver the aggregate
number of shares of Sun Microsystems Stock
due with respect to all of such Reset PERQS,
as described above, but we will pay cash in
lieu of delivering any fractional share of
Sun Microsystems Stock in an amount equal to
the corresponding fractional Market Price of
such fraction of a share of Sun Microsystems
Stock as determined by the Calculation Agent
as of the second scheduled Trading Day prior
to maturity of the Reset PERQS.
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
affecting the Sun Microsystems Stock through
and including the second scheduled Trading
Day immediately prior to maturity. See
"Antidilution Adjustments" below.
Market Price.................. If Sun Microsystems 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 Sun Microsystems 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 Sun
Microsystems 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 Trading Day shall be the mean, as
determined by the Calculation Agent, of the
bid prices for Sun Microsystems Stock (or any
such other security) obtained from as many
dealers in such stock (which may include MS &
Co. or any of our other subsidiaries or
affiliates), but not exceeding three, as will
make such bid prices available to the
Calculation Agent. A "security of the NASDAQ
NMS" 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 on the New York Stock Exchange
("NYSE"), the AMEX, the NASDAQ NMS, the
Chicago Mercantile Exchange, and the Chicago
Board of Options Exchange and 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 Sun Microsystems Stock and
the Exchange Factor is less than $4.00, the
maturity date of the Reset PERQS will be
deemed to be accelerated to such date, and we
will apply each $ principal amount of
each Reset PERQS as payment for a number of
shares of Sun Microsystems Stock at the then
current Exchange Ratio, as adjusted by the
then current Exchange Factor. See also
"Antidilution Adjustments" below.
Optional Redemption........... We will not redeem the Reset PERQS prior
to the Maturity Date.
Book Entry Note or
Certificated Note........... Book Entry
Senior Note or
Subordinated Note........... Senior
Trustee....................... The Chase Manhattan Bank
Agent......................... Morgan Stanley & Co. Incorporated
Calculation Agent............. MS & Co.
Because the Calculation Agent is our
affiliate, potential conflicts of interest
may exist between the Calculation Agent and
you as a holder 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. See
"Antidilution Adjustments" and "Market
Disruption Event" below. MS & Co. is
obligated to carry out its duties as
Calculation Agent in good faith using its
reasonable judgment.
Antidilution Adjustments...... The Exchange Factor will be adjusted as
follows:
1. If Sun Microsystems 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 Sun
Microsystems Stock.
2. If Sun Microsystems Stock is
subject (i) to a stock dividend (issuance
of additional shares of Sun Microsystems
Stock) that is given ratably to all
holders of shares of Sun Microsystems
Stock or (ii) to a distribution of Sun
Microsystems Stock as a result of the
triggering of any provision of the
corporate charter of Sun Microsystems,
then once the dividend has become
effective and Sun Microsystems 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 Sun Microsystems 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 Sun Microsystems 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 Sun Microsystems Stock will be
deemed to be an "Extraordinary Dividend"
if such dividend or other distribution
exceeds the immediately preceding non-
Extraordinary Dividend for Sun
Microsystems Stock by an amount equal to
at least 10% of the Market Price of Sun
Microsystems Stock (as adjusted for any
subsequent corporate event requiring an
adjustment hereunder, such as a stock
split or reverse stock split) 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 Sun Microsystems Stock, the Exchange
Factor with respect to Sun Microsystems
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 Sun
Microsystems Stock will equal (i) in the
case of cash dividends or other
distributions that constitute regular
dividends, the amount per share of such
Extraordinary Dividend minus the amount
per share of the immediately preceding
non-Extraordinary Dividend for Sun
Microsystems Stock or (ii) in the case of
cash dividends or other distributions that
do not constitute regular 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 Sun Microsystems 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 Sun Microsystems issues rights
or warrants to all holders of Sun
Microsystems Stock to subscribe for or
purchase Sun Microsystems Stock at an
exercise price per share less than the
Market Price of the Sun Microsystems 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 Sun
Microsystems Stock outstanding immediately
prior to the issuance of such rights or
warrants plus the number of additional
shares of Sun Microsystems Stock offered
for subscription or purchase pursuant to
such rights or warrants and the
denominator of which shall be the number
of shares of Sun Microsystems Stock
outstanding immediately prior to the
issuance of such rights or warrants plus
the number of additional shares of Sun
Microsystems Stock which the aggregate
offering price of the total number of
shares of Sun Microsystems 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 Sun Microsystems
Stock, (ii) Sun Microsystems or any
surviving entity or subsequent surviving
entity of Sun Microsystems (a "Sun
Microsystems Successor") has been subject
to a merger, combination or consolidation
and is not the surviving entity, (iii) any
statutory exchange of securities of Sun
Microsystems or any Sun Microsystems
Successor with another corporation occurs
(other than pursuant to clause (ii)
above), (iv) Sun Microsystems is
liquidated, (v) Sun Microsystems issues
to all of its shareholders equity
securities of an issuer other than Sun
Microsystems (other than in a transaction
described in clauses (ii), (iii) or (iv)
above) (a "Spin-off Event") or (vi) a
tender or exchange offer or going-private
transaction is consummated for all the
outstanding shares of Sun Microsystems
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 Sun Microsystems
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 Sun
Microsystems Stock and holders will
receive in lieu of any Sun Microsystems
Stock and as liquidated damages in full
satisfaction of MSDW'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. If
Exchange Property includes a cash
component, holders will not receive any
interest accrued on such cash component.
"Transaction Value" at any date means (i)
for any cash received in any such
Reorganization Event, the amount of cash
received per share of Sun Microsystems
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 Sun
Microsystems 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 Sun
Microsystems Stock, as adjusted by the
Exchange Factor.
For purposes of paragraph 5 above, in the
case of a consummated tender or exchange
offer or going-private transaction involving
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 or
going-private transaction). In the event of
a tender or exchange offer or a going-private
transaction 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 hundred-thousandth with five
one-millionths 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 Sun Microsystems Stock, including, without
limitation, a partial tender or exchange
offer for the Sun Microsystems Stock.
Notwithstanding the foregoing, the amount
payable by us 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 an amount
of Sun Microsystems Stock having a market
price of $ 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 Sun Microsystems Stock:
(i) a suspension, absence or material
limitation of trading of Sun Microsystems
Stock on the primary market for Sun
Microsystems Stock for more than two hours
of trading or during the one-half hour
period preceding the close of trading in
such market; or a breakdown or failure in
the price and trade reporting systems of
the primary market for Sun Microsystems
Stock as a result of which the reported
trading prices for Sun Microsystems Stock
during the last one-half hour preceding the
closing of trading in such market are
materially inaccurate; or the suspension,
absence or material limitation on the
primary market for trading in options
contracts related to Sun Microsystems
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
MSDW 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
NYSE, 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 Sun
Microsystems 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 Sun Microsystems Stock and (5) a
suspension, absence or material limitation of
trading on the primary securities market on
which options contracts related to Sun
Microsystems Stock are traded will not
include any time when such securities market
is itself closed for trading under ordinary
circumstances.
Sun Microsystems Stock;
Public Information.......... Sun Microsystems is a leading
supplier of enterprise network computing
products including desktop systems, servers,
storage subsystems, network switches,
software, microprocessors, and a full range
of services and support. Sun Microsystems
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 can be inspected and copied at the
public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 or at its
Regional Offices located at Suite 1400,
Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661 and at Seven World
Trade Center, 13th Floor, New York, New York
10048, and copies of such material can be
obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
In addition, information provided to or filed
with the Commission electronically can be
accessed through a Website maintained by the
Commission. The address of the Commission's
Website is http://www.sec.gov. Information
provided to or filed with the Commission by
Sun Microsystems pursuant to the Exchange Act
of 1934 can be located by reference to
Commission file number 0-15086. In addition,
information regarding Sun Microsystems may
be obtained from other sources including, but
not limited to, press releases, newspaper
articles and other publicly disseminated
documents. We make no representation or
warranty as to the accuracy or completeness
of such reports.
This pricing supplement relates only to the
Reset PERQS offered hereby and does not
relate to Sun Microsystems Stock or other
securities of Sun Microsystems. We have
derived all disclosures contained in this
pricing supplement regarding Sun Microsystems
from the publicly available documents
described in the preceding paragraph.
Neither we nor the Agent has participated in
the preparation of such documents or made any
due diligence inquiry with respect to Sun
Microsystems in connection with the offering
of the Reset PERQS. Neither we nor the Agent
makes any representation that such publicly
available documents or any other publicly
available information regarding Sun
Microsystems are accurate or complete.
Furthermore, we cannot give any 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 Sun Microsystems Stock (and
therefore the Initial Sun Microsystems 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
Sun Microsystems could affect the value
received at maturity with respect to the
Reset PERQS and therefore the trading prices
of the Reset PERQS.
Neither we nor any of our affiliates makes
any representation to you as to the
performance of Sun Microsystems stock.
We, or our affiliates, may presently or from
time to time engage in business with Sun
Microsystems, including extending loans to, or
making equity investments in, Sun
Microsystems or providing advisory services
to Sun Microsystems, including merger and
acquisition advisory services. In the course
of such business, we, or our affiliates, may
acquire non-public information with respect to
Sun Microsystems and, in addition, one or
more of our affiliates may publish research
reports with respect to Sun Microsystems. The
statement in the preceding sentence is not
intended to affect the right of holders of
the Reset PERQS under the securities laws.
As a prospective purchaser of a Reset PERQS,
you should undertake an independent
investigation of Sun Microsystems as in your
judgment is appropriate to make an informed
decision with respect to an investment in Sun
Microsystems Stock.
Historical Information........ The following table sets forth the high and
low Market Price during 1996, 1997, 1998 and
1999 through April 28, 1999. The Market
Price on April 28, 1999 was $61 7/16. We
obtained the Market Prices listed below from
Bloomberg Financial Markets and we believe
such information to be accurate. You should
not take the historical prices of Sun
Microsystems Stock as an indication of future
performance. The price of Sun Microsystems
Stock may decrease so that you will receive
at maturity shares of Sun Microsystems Stock
worth less than the principal amount of the
Reset PERQS. We cannot give you any
assurance that the price of Sun Microsystems
Stock will increase so that at maturity you
will receive an amount in excess of the
principal amount of the Reset PERQS. Because
your return is linked to the Market Price of
Sun Microsystems Stock on May 30, 2000 and May
25, 2001, there is no guaranteed return of
principal. To the extent that the Maturity
Price of Sun Microsystems Stock is less than
the Initial Sun Microsystems Price or not
sufficiently above the Initial Sun
Microsystems Price to compensate for a
downward adjustment of the Exchange Ratio, if
any, at May 30, 2000 and the shortfall is not
offset by the coupon paid on the Reset PERQS,
you will lose money on your investment.
Sun Microsystems High Low
---------------- ---- ---
(CUSIP 866810104)
1996
First Quarter................ 14 1/32 9 11/32
Second Quarter............... 16 21/32 11 13/32
Third Quarter................ 16 1/4 11 31/32
Fourth Quarter............... 17 1/2 12 27/32
1997
First Quarter................ 17 1/2 13 5/32
Second Quarter............... 18 31/32 13 7/16
Third Quarter................ 26 21/32 18 9/32
Fourth Quarter............... 23 3/8 15 7/8
1998
First Quarter................ 24 15/16 18 57/64
Second Quarter............... 22 9/16 19 13/32
Third Quarter................ 26 3/8 19 13/16
Fourth Quarter............... 43 7/16 20
1999
First Quarter................ 62 31/32 44 27/32
Second Quarter
(through April 28, 1999)... 71 1/2 50 1/8
Historical prices have been adjusted for two
2 for 1 stock splits of Sun Microsystems
Stock, which became effective in the fourth
quarter of 1996 and the second quarter of
1999, respectively.
We make no representation as to the amount of
dividends, if any, that Sun Microsystems will
pay in the future. In any event, as a holder
of the Reset PERQS, you will not be entitled
to receive dividends, if any, that may be
payable on Sun Microsystems Stock.
Use of Proceeds and Hedging... The net proceeds we receive from the sale of
the Reset PERQS will be used for general
corporate purposes and, in part, by us or by
one or more of our affiliates in connection
with hedging our obligations under the Reset
PERQS. See also "Use of Proceeds" in the
accompanying Prospectus.
On or prior to the date of this Pricing
Supplement, we, through our subsidiaries or
others, may hedge our anticipated exposure in
connection with the Reset PERQS by taking
positions in Sun Microsystems Stock, in
options contracts on Sun Microsystems Stock
listed on major securities markets or
positions in any other instruments that we
may wish to use in connection with such
hedging. In the event that we pursue such a
hedging strategy, the price at which we are
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 Sun
Microsystems Stock, and therefore effectively
increase the level to which Sun Microsystems
Stock must rise before you would receive at
maturity an amount of Sun Microsystems Stock
worth as much as or more than the principal
amount of the Reset PERQS. Although we have
no reason to believe that our hedging
activity will have a material impact on the
price of Sun Microsystems Stock, we cannot
give any assurance that we will not affect
such price as a result of our hedging
activities. Through our subsidiaries, we are
likely to modify our hedge position
throughout the life of the Reset PERQS,
including on the First Year Determination
Date, by purchasing and selling the
securities and instruments listed above and
any other available securities and
instruments that we may wish to use in
connection with such hedging.
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 Sun Microsystems 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
Sun Microsystems Stock in the open market.
See "Use of Proceeds and Hedging" above.
The Agent proposes initially to offer the
Reset PERQS directly to the public at the
public offering price set forth on the cover
page hereof plus accrued interest, if any,
from the Original Issue Date; provided that
the price will be $ per Reset PERQS and
the underwriting discounts and commissions
will be $ per Reset PERQS for
purchasers of greater than or equal to
500,000 Reset PERQS in any case single
transaction, subject to the holding period
requirements described below.
Delivery of approximately 98.625% of the
Reset PERQS to a purchaser of 500,000 or more
Reset PERQS at the reduced price (the
"Delivered Reset PERQS") will be made on the
date of delivery of the Reset PERQS referred
to on the cover of this Pricing Supplement.
The balance of approximately 1.375% of the
Reset PERQS (the "Escrowed Reset PERQS")
purchased by each such investor will be held
in escrow at MS & Co. for the benefit of the
investor and delivered to such investor if
the investor and any accounts in which the
investor may have deposited any of its
Delivered Reset PERQS have held all of the
Delivered Reset PERQS for 45 calendar days
following the date of the Pricing Supplement
or any shorter period deemed appropriate by
the Agent. If an investor or any account in
which the investor has deposited any of its
Delivered Reset PERQS fails to satisfy the
holding period requirement, as determined by
the Agent, all of the investor's Escrowed
Reset PERQS will be forfeited by the investor
and not delivered to it. The Escrowed Reset
PERQS will instead be delivered to the Agent
for sale to investors. This forfeiture will
have the effect of increasing the purchase
price per Reset PERQS for such investors to
100% of the principal amount of the Reset
PERQS. Should investors who are subject to
the holding period requirement sell their
Reset PERQS once the holding period is no
longer applicable, the market price of the
Reset PERQS may be adversely affected. See
also "Plan of Distribution" in the
accompanying Prospectus Supplement.
ERISA Matters for Pension Plans
and Insurance Companies..... We and certain of our affiliates, including
MS & Co. and Dean Witter Reynolds Inc.
("DWR"), may each be considered a "party in
interest" within the meaning of the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), or a "disqualified person"
within the meaning of the Internal Revenue
Code of 1986, as amended (the "Code") with
respect to many employee benefit plans.
Prohibited transactions within the meaning of
ERISA or the Code may arise, for example, if
the Reset PERQS are acquired by or with the
assets of a pension or other employee benefit
plan with respect to which MS & Co., DWR or
any of their affiliates is a service
provider, unless the Reset PERQS are acquired
pursuant to an exemption from the prohibited
transaction rules.
The acquisition of the Reset PERQS may be
eligible for one of the exemptions noted
below if such acquisition:
(a) (i) is made solely with the assets of a
bank collective investment fund and (ii)
satisfies the requirements and conditions of
Prohibited Transaction Class Exemption
("PTCE") 91-38 issued by the Department of
Labor ("DOL");
(b) (i) is made solely with assets of an
insurance company pooled separate account and
(ii) satisfies the requirements and
conditions of PTCE 90-1 issued by the DOL;
(c) (i) is made solely with assets managed
by a qualified professional asset manager and
(ii) satisfies the requirements and
conditions of PTCE 84-14 issued by the DOL;
(d) is made solely with assets of a
governmental plan (as defined in Section
3(32) of ERISA) which is not subject to the
provisions of Section 401 of the Code;
(e) (i) is made solely with assets of an
insurance company general account and (ii)
satisfies the requirements and conditions of
PTCE 95-60 issued by the DOL; or
(f) (i) is made solely with assets managed
by an in-house asset manager and (ii)
satisfies the requirements and conditions of
PTCE 96-23 issued by the DOL.
Under ERISA the assets of a pension or other
employee benefit plan may include assets held
in the general account of an insurance
company which has issued an insurance policy
to such plan or assets of an entity in which
the plan has invested. In addition, employee
benefit plans subject to ERISA (or insurance
companies deemed to be investing ERISA plan
assets) purchasing Reset PERQS should
consider the possible implications of owning
the Sun Microsystems Stock. Thus, any
insurance company, pension or employee benefit
plan or entity holding assets of such a plan
proposing to invest in the Reset PERQS should
consult with its legal counsel prior to such
investment.
United States Federal
Income Taxation............. The following summary is based on the
advice of Davis Polk & Wardwell, special tax
counsel to MSDW ("Tax Counsel"), and is a
general discussion of the principal potential
U.S. federal income tax consequences to U.S.
Holders (as defined below) who are initial
holders of the Reset PERQS purchasing the
Reset PERQS at the Issue Price, and who will
hold the Reset PERQS as capital assets within
the meaning of Section 1221 of the Code.
This summary is based on the Code,
administrative pronouncements, judicial
decisions and currently effective and
proposed Treasury Regulations, changes to any
of which subsequent to the date of this
Pricing Supplement may affect the tax
consequences described herein. This summary
does not address all aspects of the U.S.
federal income taxation that may be relevant
to a particular holder in light of its
individual circumstances or to certain types
of holders subject to special treatment under
the U.S. federal income tax laws (e.g.,
certain financial institutions, tax-exempt
organizations, dealers in options or
securities, or persons who hold a Reset PERQS
as a part of a hedging transaction, straddle,
conversion or other integrated transaction).
As the law applicable to the U.S. federal
income taxation of instruments such as the
Reset PERQS is technical and complex, the
discussion below necessarily represents only
a general summary. Moreover, the effect of
any applicable state, local or foreign tax
laws is not discussed.
As used herein, the term "U.S. Holder" means
an owner of a Reset PERQS that is, for U.S.
federal income tax purposes, (i) a citizen or
resident of the United States, (ii) a
corporation or other entity created or
organized under the laws of the United States
or any political subdivision thereof or (iii)
an estate or trust the income of which is
subject to United States federal income
taxation regardless of its source.
General
Pursuant to the terms of the Reset PERQS,
MSDW and every holder of a Reset PERQS agree
(in the absence of an administrative
determination or judicial ruling to the
contrary) to characterize a Reset PERQS for
all tax purposes as an investment unit
consisting of the following components (the
"Components"): (i) a contract (the "Forward
Contract") that requires the holder of the
Reset PERQS to purchase, and MSDW to sell,
for an amount equal to $ (the
"Forward Price"), the Sun Microsystems Stock
at maturity (or, alternatively, upon an
earlier redemption of the Reset PERQS), and
(ii) a deposit with MSDW of a fixed amount of
cash, equal to the Issue Price, to secure the
holder's obligation to purchase the Sun
Microsystems Stock (the "Deposit"). For this
purpose, MSDW has determined that, of the
quarterly payments on the Reset PERQS, %
is attributable to interest on the Deposit.
This determination is based on MSDW's
judgment as to, among other things, MSDW's
normal borrowing cost and the value of the
Forward Contract. Under this
characterization, the remainder of the
quarterly payments on the Reset PERQS
represents payments attributable to the
holders' entry into the Forward Contract (the
"Contract Fees"). Furthermore, based on
MSDW's determination of the relative fair
market values of the Components at the time
of issuance of the Reset PERQS, MSDW will
allocate 100% of the Issue Price of the
Reset PERQS to the Deposit and none to the
Forward Contract. MSDW's allocation of the
Issue Price among the Components will be
binding on a holder of the Reset PERQS,
unless such holder timely and explicitly
discloses to the Internal Revenue Service
(the "IRS") that its allocation is different
from MSDW's. The treatment of the Reset
PERQS described above and MSDW's allocation
are not, however, binding on the IRS or the
courts. No statutory, judicial or
administrative authority directly addresses
the characterization of the Reset PERQS or
instruments similar to the Reset PERQS for
U.S. federal income tax purposes, and no
ruling is being requested from the IRS with
respect to the Reset PERQS. Due to the
absence of authorities that directly address
instruments that are similar to the Reset
PERQS, tax counsel is unable to render an
opinion as to the proper U.S. federal income
tax characterization of the Reset PERQS. As
a result, significant aspects of the U.S.
federal income tax consequences of an
investment in the Reset PERQS are not
certain, and no assurance can be given that
the IRS or the courts will agree with the
characterization described herein.
Accordingly, prospective purchasers are urged
to consult their tax advisors regarding the
U.S. federal income tax consequences of an
investment in the Reset PERQS (including
alternative characterizations of the Reset
PERQS) and with respect to any tax
consequences arising under the laws of any
state, local or foreign taxing jurisdiction.
Unless otherwise stated, the following
discussion is based on the treatment and the
allocation described above.
Tax Treatment of the Reset PERQS
Assuming the characterization of the Reset
PERQS and the allocation of the Issue Price
as set forth above, Tax Counsel believes that
the following U.S. federal income tax
consequences should result.
Quarterly Payments on the Reset PERQS. To
the extent attributable to the interest on
the Deposit, quarterly payments on the Reset
PERQS will generally be taxable to a U.S.
Holder as ordinary income at the time accrued
or received in accordance with the U.S.
Holder's method of accounting for U.S.
federal income tax purposes. Although the
federal income tax treatment of the Contract
Fees is uncertain, MSDW intends to take the
position that the Contract Fees constitute
taxable income to the holders at the time
accrued or received in accordance with the
U.S. Holder's method of accounting for U.S.
federal income tax purposes.
Tax Basis. Based on MSDW's determination set
forth above, the U.S. Holder's tax basis in
the Forward Contract will be zero, and the
U.S. Holder's tax basis in the Deposit will
be 100% of the Issue Price.
Settlement of the Forward Contract. Upon the
maturity of the Forward Contract, a U.S.
Holder would, pursuant to the Forward
Contract, be deemed to have applied the
Forward Price toward the purchase of Sun
Microsystems Stock, and a U.S. Holder would
not recognize any gain or loss with respect
to any Sun Microsystems Stock received
thereon. With respect to any cash received
upon maturity, a U.S. Holder would recognize
gain or loss. The amount of such gain or
loss would be the extent to which the amount
of such cash received differs from the pro
rata portion of the Forward Price allocable
to the cash. Any such gain or loss would
generally be capital gain or loss, as the
case may be. With respect to any Sun
Microsystems Stock received upon maturity,
the U.S. Holder would have an adjusted tax
basis in such Sun Microsystems Stock equal to
the pro rata portion of the Forward Price
allocable thereto. The allocation of the
Forward Price between cash and Sun
Microsystems Stock should be based on the
amount of the cash received and the relative
fair market value, as of the maturity, of the
Sun Microsystems Stock. The U.S. Holder's
holding period of any Sun Microsystems Stock
received would start on the day after the
maturity of the Reset PERQS.
Sale or Exchange of the Reset PERQS. Upon a
sale or exchange of a Reset PERQS prior to
the maturity of the Reset PERQS, a U.S.
Holder would recognize taxable gain or loss
equal to the difference between the amount
realized on such sale or exchange and such
U.S. Holder's tax basis in the Reset PERQS so
sold or exchanged. Any such gain or loss
would generally be capital gain or loss, as
the case may be. Such U.S. Holder's tax
basis in the Reset PERQS would generally
equal the U.S. Holder's tax basis in the
Deposit. For these purposes, the amount
realized does not include any amount
attributable to accrued but unpaid interest
payments on the Deposit, which would be taxed
as described under "--Quarterly Payments on
the Reset PERQS" above. It is uncertain
whether the amount realized includes any
amount attributable to accrued but unpaid
Contract Fees. U.S. Holders should consult
their tax advisers regarding the treatment of
accrued but unpaid Contract Fees upon the
sale or exchange of a Reset PERQS.
Possible Alternative Tax Treatments of an
Investment in the Reset PERQS
Due to the absence of authorities that
directly address the proper characterization
of the Reset PERQS, no assurance can be given
that the IRS will accept, or that a court
will uphold, the characterization and tax
treatment described above. In particular,
the IRS could seek to analyze the U.S.
federal income tax consequences of owning a
Reset PERQS under Treasury regulations
governing contingent payment debt instruments
(the "Contingent Payment Regulations").
If the IRS were successful in asserting that
the Contingent Payment Regulations applied to
the Reset PERQS, the timing and character of
income thereon would be significantly
affected. Among other things, a U.S. Holder
would be required to accrue as original issue
discount income, subject to adjustments, at a
"comparable yield" on the Issue Price.
Furthermore, any gain realized with respect
to the Reset PERQS would generally be treated
as ordinary income.
Even if the Contingent Payment Regulations do
not apply to the Reset PERQS, other
alternative federal income tax
characterizations or treatments of the Reset
PERQS are also possible, and if applied could
also affect the timing and the character of
the income or loss with respect to the Reset
PERQS. It is possible, for example, that a
Reset PERQS could be treated as constituting
a prepaid forward contract. Other alternative
characterizations are also possible.
Accordingly, prospective purchasers are urged
to consult their tax advisors regarding the
U.S. federal income tax consequences of an
investment in the Reset PERQS.
Backup Withholding and Information Reporting
A U.S. Holder of a Reset PERQS may be subject
to information reporting and to backup
withholding at a rate of 31 percent of the
amounts paid to the U.S. Holder, unless such
U.S. Holder provides proof of an applicable
exemption or a correct taxpayer identification
number, and otherwise complies with
applicable requirements of the backup
withholding rules. The 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.
In addition, the effective date of the New
Regulations (as defined in "United States
Federal Taxation -- Backup Withholding" in the
accompanying Prospectus Supplement) has been
changed so that the New Regulations will
apply to payments made after December 31,
1999.
