PROSPECTUS Dated May 5, 1999 Pricing Supplement No. 53 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-75289
Dated May 6, 1999 Dated March 30, 2000
Rule 424(b)(3)
$90,570,901
Morgan Stanley Dean Witter & Co.
MEDIUM-TERM NOTES, SERIES C
Senior Fixed Rate Notes
-----------------------
8% Reset PERQS due April 30, 2002
Mandatorily Exchangeable For
Shares of Common Stock of EMC CORPORATION
Reset Performance Equity-linked Redemption Quarterly-pay SecuritiesSM
("Reset PERQSSM")
The Reset PERQS will pay 8% 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 EMC common stock based on the closing prices of EMC common stock
on April 20, 2001 and at maturity, in each case subject to a cap price.
o The principal amount and issue price of each Reset PERQS is $25.90, which
is one-fifth of the closing price of EMC common stock on March 30, 2000,
the day we offered the Reset PERQS for initial sale to the public.
o We will pay 8% interest (equivalent to $2.072 per year) on the $25.90
principal amount of each Reset PERQS. Interest will be paid quarterly,
beginning July 30, 2000.
o At maturity you will receive shares of EMC common stock in exchange for
each Reset PERQS at an exchange ratio. The initial exchange ratio is
one-fifth of a share of EMC common stock per Reset PERQS. However, if the
price of EMC common stock appreciates above the first year cap price for
April 20, 2001 or the second year cap price for April 26, 2002, the
exchange ratio will be adjusted downward, and you will receive an amount
of EMC common stock per Reset PERQS that is less than one-fifth of a
share.
o The first year cap price is $176.12, or 136% of the closing price of EMC
common stock on March 30, 2000, the day we offered the Reset PERQS for
initial sale to the public. If on April 20, 2001, the price of EMC common
stock is higher than the closing price of EMC common stock on March 30,
2000, we will raise the cap price to 136% of the closing price of EMC
common stock on April 20, 2001. Otherwise the cap price will remain
unchanged in the second year. The maximum you can receive at maturity is
EMC common stock worth $47.90 per Reset PERQS.
o Investing in Reset PERQS is not equivalent to investing in EMC common
stock.
o EMC Corporation 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 The Reset PERQS have been approved for listing on the American Stock
Exchange LLC, subject to official notice of issuance. The AMEX listing
symbol for the Reset PERQS is "RME."
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." "Performance Equity-linked Redemption Quarterly-pay Securities" and
"PERQS" are our service marks.
The Reset PERQS are riskier than ordinary debt securities. See "Risk Factors"
beginning on PS-6.
-----------------------
PRICE $25.90 PER RESET PERQS
-----------------------
Agent's Proceeds to
Price to Public(1) Commission the Company(1)
------------------ ------------- --------------
Per Reset PERQS.......... $25.90 $0.36 $25.54
Total.................... $90,570,901.40 $1,258,900.56 $89,312,000.84
- ------------------
(1) Plus accrued interest, if any, from the Issue Date
If you purchase at least 100,000 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 $25.543875 per Reset PERQS (98.625% of the Issue Price). In that
case, the underwriting discounts and commissions will be $0.003875 per Reset
PERQS.
MORGAN STANLEY DEAN WITTER
<PAGE>
(This page intentionally left blank)
PS-2
<PAGE>
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
EMC Corporation common stock, which we refer to as EMC Stock. The Reset PERQS
also provide fixed quarterly payments at an annual rate of 8% 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 EMC 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 8%
costs $25.90 Reset Performance Equity-linked Redemption Quarterly-
pay Securities(sm) due April 30, 2002, which we refer
to as the Reset PERQS(sm). The principal amount and
issue price of each Reset PERQS is $25.90, which is
one-fifth of the closing price of EMC Stock on March
30, 2000, the day we offered the Reset PERQS for
initial sale to the public.
No guaranteed Unlike ordinary debt securities, the Reset PERQS do not
return of principal guarantee any return of principal at maturity. Instead
the Reset PERQS will pay an amount of EMC Stock based
on the market price of EMC Stock, either up or down,
on April 20, 2001 and at maturity, in each case
subject to a cap price. Investing in Reset PERQS is
not equivalent to investing in EMC Stock.
8% interest on the We will pay interest on the Reset PERQS, at the rate of
principal amount 8% of the per principal amount year, quarterly on each
January 30, April 30, July 30 and October 30,
beginning July 30, 2000. The interest rate we pay on
the Reset PERQS is more than the current dividend rate
on the EMC Stock. The Reset PERQS will mature on April
30, 2002.
Your appreciation The appreciation potential of each Reset PERQS is
potential is capped limited in each year by the cap price. The cap price
through April 20, 2001 is $176.12, or 136 % of the
closing price of EMC Stock on the day we offered the
Reset PERQS for initial sale to the public ("First
Year Cap Price"). The cap price thereafter until
maturity ("Second Year Cap Price") will be the higher
of 136% of the closing price of EMC Stock on April 20,
2001 and the First Year Cap Price. The maximum you can
receive at maturity is EMC Stock worth $47.90 per
Reset PERQS.
Payout at Maturity At maturity, for each $25.90 principal amount of Reset
PERQS you hold, we will give to you a number of shares
of EMC Stock equal to the exchange ratio. The initial
exchange ratio is one-fifth of a share of EMC 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 EMC Stoc exceeds the First
Year Cap Price on April 20, 2001.
The adjusted exchange ratio will be calculated as
follows:
New Exchange = Initial Exchange x First Year Cap Price
Ratio Ratio -----------------------------------------
EMC Stock closing price on April 20, 2001
If the market price of EMC Stock on April 20,
2001 is the same as or less than the First Year
Cap Price, we will not adjust the exchange ratio
at that time.
PS-3
<PAGE>
Second Year Adjustment
The exchange ratio may be adjusted downward
again at maturity, but only if the market price
of EMC Stock at maturity exceeds the Second Year
Cap Price. The final exchange ratio will then be
calculated as follows:
Final Exchange = Existing Exchange x Second Year Cap Price
Ratio Ratio -----------------------------------
EMC Stock closing price at maturity
If the market price of EMC 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 Payouts 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 EMC 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 EMC 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 EMC Stock that you will
receive at maturity.
No affiliation with EMC Corporation is not an affiliate of ours and is not
EMC Corporation 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 EMC
Corporation.
More information on The Reset PERQS are senior notes issued as part of our
the Reset PERQS 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 May 6, 1999. We describe the basic features of
this type of note in the sections called "Description
of Notes--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." The tax and accounting
treatment of investments in equity- linked notes such
as the Reset PERQS may differ from that of investments
in ordinary debt securities or common stock. We urge
you to consult with your investment, legal, tax,
accounting and other advisors with regard to any
proposed or actual investment in the Reset PERQS.
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, 10036 (telephone
number (212) 761-4000).
PS-4
<PAGE>
HYPOTHETICAL PAYOUTS ON THE RESET PERQS
For each Reset PERQS, the following table illustrates, for a range of
First Year Closing Prices and Maturity Prices, any adjustments we would make to
the Exchange Ratio and the Second Year Cap Price and the resulting payout at
maturity and total return on each Reset PERQS.
<TABLE>
Reset PERQS Reset PERQS
Initial Initial First First Second EMC Exchange Payout Payoout at
Price EMC Initial Year Year 4/20/01 Year Stock Ratio at Maturity Mautrity
Illustration of Reset Stock Exchange Cap Closing Exchange Cap Maturity at Based on EMC plus
Number PERQS Price Ratio Price Price(1) Ratio Price Price(1) Maturity Stock Price 8% Coupon
- ------------ -------- ------- -------- ------- -------- -------- --------- --------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $25.90 $129.50 0.20000 $176.12 $100.00 0.20000 $176.1200 $75.0000 0.20000 $15.00 $19.29
2 $25.90 $129.50 0.20000 $176.12 $100.00 0.20000 $176.1200 $165.0000 0.20000 $33.00 $37.29
3 $25.90 $129.50 0.20000 $176.12 $100.00 0.20000 $176.1200 $225.0000 0.15655 $35.22 $39.51
4 $25.90 $129.50 0.20000 $176.12 $150.00 0.20000 $204.0000 $110.0000 0.20000 $22.00 $26.29
5 $25.90 $129.50 0.20000 $176.12 $150.00 0.20000 $204.0000 $200.0000 0.20000 $40.00 $44.29
6 $25.90 $129.50 0.20000 $176.12 $150.00 0.20000 $204.0000 $225.0000 0.18133 $40.80 $45.09
7 $25.90 $129.50 0.20000 $176.12 $200.00 0.17612 $272.0000 $110.0000 0.17612 $19.37 $23.66
8 $25.90 $129.50 0.20000 $176.12 $200.00 0.17612 $272.0000 $250.0000 0.17612 $44.03 $48.32
9 $25.90 $129.50 0.20000 $176.12 $200.00 0.17612 $272.0000 $300.0000 0.15968 $47.90 $52.19
10 $25.90 $129.50 0.20000 $176.12 $176.12 0.20000 $239.5232 $239.5232 0.20000 $47.90 $52.19
^ ^ ^
| | |
| | |
136% Greater of (x) Maturity Price
of Initial 136% of First Year times Adjusted
EMC Stock Closing Price and Exchange Ratio
Price (y) First Year Cap
Price
The above table illustrates an important feature of the Reset PERQS - the payout at maturity is not determined merely by
the price of EMC Stock at maturity, but will depend on the timing and magnitude of changes in the EMC Stock price. For example, in
both the fourth and seventh illustrations shown above, the EMC Stock Maturity Price is $110.00, but in the seventh illustration
the Payout at Maturity is $23.66 compared to $26.29 in the fourth illustration. The difference in the seventh illustration arises
because the First Year Closing Price exceeded the First Year Cap Price, resulting in a downward adjustment in the Exchange Ratio at
April 20, 2001. Similarly, in both the ninth and tenth illustrations, the Payout at Maturity is $52.19, but in the ninth
illustration, the EMC Stock Maturity Price had to equal or exceed $272.00 to produce that payout, but in the tenth illustration, an
EMC Stock Maturity Price of only $239.5232 was required.
- ------------------------------------
1 The First Year Closing Price and the EMC Stock Maturity Price do not include any dividend payments that may have been paid to
holders of EMC Stock.
</TABLE>
<PAGE>
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 EMC
Stock, there is no guaranteed return of principal. Investing in Reset PERQS is
not equivalent to investing directly in EMC 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 equity and debt.
Ordinary Senior Notes -- The terms of the Reset PERQS differ from those of
No guaranteed return of ordinary debt securities in that we will not pay you a
principal fixed amount at maturity. Our payout to you at maturity
will be a number of shares of EMC Stock based on the
market price of EMC Stock on April 20, 2001 and at
maturity. If the final market price of EMC 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 April 20, 2001, we will pay you an
amount of EMC Stock with a value less than the
principal amount of the Reset PERQS. See "Hypothetical
Payouts on the Reset PERQS" above.
Your Appreciation The appreciation potential of the Reset PERQS is
Potential Is Limited limited because of the cap prices. Even though the
$25.90 issue price of one Reset PERQS is equal to
today's market price of one share of EMC Stock
multiplied by the initial exchange ratio, you may
receive a lesser fractional amount of EMC Stock per
Reset PERQS at maturity if the initial exchange ratio
of one-fifth of a share has been adjusted downwards.
If the price of EMC Stock appreciates above both the
cap price for April 20, 2001 and the cap price for
April 26, 2002, the initial exchange ratio of
one-fifth of a share of EMC Stock per Reset PERQS will
be reduced twice.
The exchange ratio and the final market price of EMC
Stock at maturity will be determined on April 26,
2002, which is two trading days prior to maturity of
the Reset PERQS. If the price of EMC Stock is lower on
the actual maturity date than it was on April 26,
2002, the value of any EMC Stock you receive will be
less. Under no circumstances will you receive an
amount of EMC Stock for each Reset PERQS worth more
than $47.90 as of such second scheduled trading day
prior to maturity.
Secondary Trading There may be little or no secondary market for the
May Be Limited Reset PERQS. Although the Reset PERQS have been
approved for listing on the American Stock Exchange
LLC, which we refer to as the AMEX, it is not possible
to predict whether the Reset PERQS will trade in the
secondary market. Even if there is a secondary market,
it may not provide significant liquidity. MS & Co.
currently intends to act as a market maker for Reset
PERQS but is not required to do so.
Market Price of the Several factors, many of which are beyond our control,
Reset PERQS Influenced by will influence the value of the Reset PERQS. We
Many Unpredictable expect that generally the market price of the EMC Stock
Factors 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 EMC Stock
o the dividend rate on EMC Stock
PS-6
<PAGE>
o economic, financial, political and regulatory or
judicial events that affect stock markets generally
and which may affect the market price of the EMC
Stock
o interest and yield rates in the market o the time
remaining to the maturity of the Reset PERQS
o our creditworthiness Some or all of 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 EMC Stock is at, below, or not
sufficiently above the initial market price.
You cannot predict the future performance of EMC Stock
based on its historical performance. The price of EMC
Stock may decrease so that you will receive at maturity
shares of EMC Stock worth less than the principal
amount of the Reset PERQS. We cannot guarantee that the
price of EMC 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 We are not affiliated with EMC Corporation ("EMC").
EMC Corporation Although we do not have any non-public information
about EMC as of the date of this pricing supplement,
we or our subsidiaries may presently or from time to
time engage in business with EMC, including extending
loans to, or making equity investments in, EMC or
providing advisory services to EMC, including merger
and acquisition advisory services. Moreover, we have
no ability to control or predict the actions of EMC,
including any corporate actions of the type that would
require the calculation agent to adjust the payout to
you at maturity. EMC is not involved in the offering
of the Reset PERQS in any way and has no obligation to
consider your interest as an owner 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 EMC.
You Have No As an owner of Reset PERQS, you will not have voting
Shareholder Rights rights or rights to receive dividends or other
distributions or any other rights with respect to the
EMC Stock.
Limited Antidilution MS & Co., as calculation agent, will adjust the amount
Adjustments payable at maturity for certain events affecting the
EMC Stock, such as stock splits and stock dividends,
and certain other corporate actions involving EMC,
such as mergers. However, the calculation agent is not
required to make an adjustment for every corporate
event that can affect the EMC Stock. For example, the
calculation agent is not required to make any
adjustments if EMC or anyone else makes a partial
tender or partial exchange offer for the EMC Stock. If
an event occurs that does not require the calculation
agent to adjust the amount of EMC Stock payable at
maturity, the market price of the Reset PERQS may be
materially and adversely affected.
PS-7
<PAGE>
Potential Conflicts of As calculation agent, MS & Co. will calculate the
Interest between You payout to you at maturity of the Reset PERQS. MS & Co.
and the Calculation and other affiliates may also carry out hedging
Agent activities related to Reset PERQS or to other
instruments, including trading in EMC Stock as well as
in other instruments related to EMC Stock. MS & Co.
and some of our other subsidiaries also trade EMC
Stock and other financial instruments related to EMC
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 any such trading
activity could potentially affect the price of EMC
Stock 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.
PS-8
<PAGE>
DESCRIPTION OF RESET PERQS
Terms not defined herein have the meanings given to such terms in the
accompanying prospectus supplement. The term "Reset PERQS" refers to each
$25.90 principal amount of our 8% Reset PERQS due April 30, 2002, Mandatorily
Exchangeable For Shares of Common Stock of EMC Corporation. In this pricing
supplement, the terms "MSDW," "we," "us," and "our" refer to Morgan Stanley
Dean Witter & Co.
<TABLE>
<S> <C>
Principal Amount............................ $90,570,901.40
Maturity Date............................... April 30, 2002
Interest Rate............................... 8% per annum (equivalent to $2.072 per annum per Reset PERQS)
Interest Payment Dates...................... Each January 30, April 30, July 30 and October 30, beginning
July 30, 2000.
Specified Currency.......................... U.S. Dollars
Issue Price................................. $25.90 per Reset PERQS
Initial EMC Stock Price..................... $129.50
Original Issue Date (Settlement Date)....... April 4, 2000
CUSIP....................................... 61744Y835
Denominations............................... $25.90 and integral multiples thereof
First Year Cap Price........................ $176.12 (136% of the Initial EMC Stock Price)
First Year Determination Date............... April 20, 2001 (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 EMC 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) 136% 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 EMC Stock and (ii) the Exchange Factor, each determined as of the
second scheduled Trading Day immediately prior to maturity.
Exchange at Maturity........................ At maturity, upon delivery of each Reset PERQS to the Trustee, we
will apply each $25.90 principal amount of such Reset PERQS as
payment for a number of shares of EMC Stock at the Exchange Ratio.
The initial Exchange Ratio, initially set at 0.2, is subject to adjustment
on the First Year Determination Date and at maturity in order to cap
the value of the EMC Stock to be received upon delivery of the Reset
PERQS at $47.90 per Reset PERQS (184.94% of the Issue Price).
Solely for purposes of adjustment upon the occurrence of certain
corporate events, the number of shares of EMC Stock to be delivered
PS-9
<PAGE>
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)
136% 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 inal 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
Payouts 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 payouts 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 EMC Stock to
be delivered with respect to each $25.90 principal amount of each Reset PERQS and
(ii) deliver such shares of EMC Stock (and cash in respect of interest and any
fractional shares of EMC 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 senior
indenture), we will deliver the aggregate number of shares of EMC
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 EMC Stock in an amount equal to the corresponding fractional
Market Price of such fraction of a share of EMC Stock as determined
PS-10
<PAGE>
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 EMC Stock through and including the second scheduled Trading
Day immediately prior to maturity. See "Antidilution Adjustments"
below.
Market Price................................ If EMC 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 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 EMC Stock (or one unit of any such other
security) on any Trading Day means (i) the last reported sale price,
regular way, of the principal trading session 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 EMC 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
(even if EMC Stock (or any such other security) is listed or admitted
to trading on such securities exchange), the last reported sale price of
the principal trading session on the over-the-counter market as
reported on the Nasdaq National Market or OTC Bulletin Board on
such day. If the last reported sale price of the principal trading
session is not available pursuant to clause (i) or (ii) of the preceding
sentence because of a Market Disruption Event or otherwise, the
Market Price for any Trading Day shall be the mean, as determined
by the Calculation Agent, of the bid prices for EMC 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
National Market" 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
National Market, 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 EMC
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 $25.90 principal amount of each Reset PERQS as
payment for a number of shares of EMC 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.
PS-11
<PAGE>
Book Entry Note or Certificated Note........ Book Entry
Senior Note or Subordinated Note............ Senior
Trustee..................................... The Chase Manhattan Bank
Agent for the underwritten offering of
Reset PERQS............................ MS & Co.
Calculation Agent........................... MS & Co.
All determinations made by the Calculation Agent will be at the sole discretion
of the Calculation Agent and will, in the absence of manifest error, be
conclusive for all purposes and binding on you and on us.
Because the Calculation Agent is our affiliate, potential conflicts of interest
may exist between the Calculation Agent and you as an owner 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 and
functions as Calculation Agent in good faith and using its reasonable judgment.
Antidilution Adjustments.................... The Exchange Factor will be adjusted as follows:
1. If EMC Stock is subject to a stock split or reverse
stock split, then once suc 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 EMC Stock.
2. If EMC Stock is subject (i) to a stock dividend
(issuance of additional shares of EMC Stock) that is given
ratably to all holders of shares of EMC Stock or (ii) to
a distribution of EMC Stock as a result of the triggering of
any provision of the corporate charter of EMC, then once the
dividend has become effective and EMC 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 EMC 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 EMC Stock other
than distributions describe in clauses (i) and (v) of
paragraph 5 below and Extraordinary Dividends as
described below. A cash dividend or other distribution
with respect to EMC Stock will be deemed to be an
"Extraordinary Dividend" if such dividend or other
distribution exceeds the immediately preceding non-
Extraordinary Dividend for EMC Stock by an amount equal to at
least 10% of the Market Price of EMC Stock (as adjusted for
any subsequent corporate event requiring an adjustment
hereunder, such
PS-12
<PAGE>
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 EMC Stock, the
Exchange Factor with respect to EMC 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 EMC
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 EMC 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 EMC Stock described in clause (i) or clause (v) of
paragraph 5 below that also constitutes an Extraordinary
Dividend shall cause an adjustment to the Exchange Factor
pursuant only to clause (i) or clause (v) of paragraph 5, as
applicable.
4. If EMC issues rights or warrants to all holders of EMC
Stock to subscribe for or purchase EMC Stock at an exercise
price per share less than the Market Price of the EMC 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 EMC Stock outstanding
immediately prior to the issuance of such rights or warrants
plus the number of additional shares of EMC Stock offered for
subscription or purchase pursuant to such rights or warrants
and the denominator of which shall be the number of shares of
EMC Stock outstanding immediately prior to the issuance of
such rights or warrants plus the number of additional shares
of EMC Stock which the aggregate offering price of the total
number of shares of EMC Stock so offered for subscription or
purchase pursuant to such rights or warrants would purchase at
the Market Price on the expiration date of such rights or
warrants, which shall be determined by multiplying such total
number of shares offered by the exercise price of such rights
or warrants and dividing the product so obtained by such
Market Price.
5. If (i) there occurs any reclassification or change of EMC
Stock, including, without limitation, as a result of the
issuance of any tracking stock by EMC, (ii) EMC or any
surviving entity or subsequent surviving entity of EMC (an
"EMC Successor") has been subject to a merger, combination or
consolidation and is not the surviving entity, (iii) any
statutory exchange of securities of EMC or
PS-13
<PAGE>
any EMC Successor with another corporation occurs (other than
pursuant to clause (ii) above), (iv) EMC is liquidated, (v)
EMC issues to all of its shareholders equity securities of an
issuer other than EMC (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 EMC 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 $25.90 principal amount of each
Reset PERQS, securities, cash or any other assets distributed
to holders of EMC Stock in any such Reorganization Event,
including, in the case of the issuance of tracking stock, the
reclassified share of EMC Stock and, in the case of a Spin-off
Event, the share of EMC Stock with respect to which the
spun-off security was issued (collectively, the "Exchange
Property") in an amount with a value 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 EMC Stock and holders will receive
in lieu of any EMC 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
EMC Stock, as adjusted by the Exchange Factor at the time of
such Reorganization Event, (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 EMC Stock, as adjusted by the Exchange Factor at
the time of such Reorganization Event 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 EMC Stock, as adjusted by the Exchange Factor at the
time of such Reorganization Event. In the event Exchange
Property consists of securities, those securities will, in
turn, be subject to the antidilution adjustments set forth in
paragraphs 1 through 5.
PS-14
<PAGE>
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 EMC Stock,
including, without limitation, a partial tender or exchange
offer for the EMC 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 EMC Stock having a
market value of $47.90 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 in the absence of manifest error.
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 EMC Stock:
(i) a suspension, absence or material limitation of
trading of EMC Stock on the primary market for EMC Stock
for more than two hours of trading or during the one-half
hour period preceding the close of the principal trading
session in such market; or a breakdown or failure in the
price and trade reporting systems of the primary market
for EMC Stock as a result of which the reported trading
prices for EMC Stock during the last one-half hour
preceding the closing of the principal trading session in
such market are materially inaccurate; or the suspension,
absence
PS-15
<PAGE>
or material limitation on the primary market for trading
in options contracts related to EMC Stock, if available,
during the one-half hour period preceding the close of the
principal trading session 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 any event described in clause (i) above
materially interfered with the ability of MSDW or any of
its affiliates to unwind or adjust 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 NYSE 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
EMC 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 EMC Stock and (5) a
suspension, absence or material limitation of trading on the
primary securities market on which options contracts related
to EMC Stock are traded will not include any time when such
securities market is itself closed for trading under ordinary
circumstances.
Alternate Exchange Calculation
in case of an Event of Default.............. In case an event of default with respect to the Reset PERQS shall
have occurred and be continuing, the amount declared due and
payable upon any acceleration of the Reset PERQS shall be
determined by the Calculation Agent and shall be equal to the product
of (i) the Market Price of EMC Stock as of the date of such
acceleration and (ii) the then current Exchange Ratio adjusted as if
such date were the second scheduled Trading Day prior to maturity
and, if such date occurs prior to the First Year Determination Date,
the First Year Determination Date.
EMC Stock; Public Information............... EMC and its subsidiaries design, manufacture, market and support a
wide range of hardware, software and service products for the
enterprise storage market. EMC 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
PS-16
<PAGE>
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 EMC pursuant to the Exchange Act can be located
by reference to Commission file number 1-9853. In addition,
information regarding EMC 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 information.
This pricing supplement relates only to the Reset PERQS
offered hereby and does not relate to EMC Stock or other
securities of EMC. We have derived all disclosures contained
in this pricing supplement regarding EMC 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 EMC 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 EMC is 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 EMC Stock (and therefore the
Initial EMC Stock Price, the First Year Cap Price, the Second
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 EMC 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 EMC Stock.
We and/or our subsidiaries may presently or from time to time
engage in business with EMC, including extending loans to, or
making equity investments in, EMC or providing advisory
services to EMC, including merger and acquisition advisory
services. In the course of such business, we and/or our
subsidiaries may acquire non-public information with respect
to EMC and, in addition, one or more of our affiliates may
publish research reports with respect to EMC. 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
PS-17
<PAGE>
independent investigation of EMC as in your judgment is
appropriate to make an informed decision with respect to an
investment in EMC Stock.
Historical Information...................... The following table sets forth the high and low Market Price during
1997, 1998, 1999 and 2000 through March 30, 2000. The Market
Price on March 30, 2000 was $129 1/2. 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 EMC Stock as an indication of future
performance. The price of EMC Stock may decrease so that you will
receive at maturity shares of EMC Stock worth less than the principal
amount of the Reset PERQS. We cannot give you any assurance that
the price of EMC 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 EMC
Stock on April 20, 2001 and April 26, 2002, there is no guaranteed
return of principal. To the extent that the Maturity Price of EMC
Stock is less than the Initial EMC Stock Price or not sufficiently
above the Initial EMC Stock Price to compensate for a downward
adjustment of the Exchange Ratio, if any, at April 20, 2001 and the
shortfall is not offset by the coupon paid on the Reset PERQS, you
will lose money on your investment.
EMC High Low
--- ---- ---
(CUSIP 268648102)
1997
First Quarter............................... $ 9 13/16 $ 8 1/32
Second Quarter.............................. 10 5/32 8 1/8
Third Quarter............................... 15 7/16 9 51/64
Fourth Quarter.............................. 16 1/4 11 13/16
1998
First Quarter............................... 19 13/32 12 19/32
Second Quarter.............................. 23 1/2 17 31/32
Third Quarter............................... 30 15/16 22 7/32
Fourth Quarter.............................. 42 1/2 22 19/32
1999
First Quarter............................... 64 15/16 43 1/2
Second Quarter.............................. 67 15/32 47 3/4
Third Quarter............................... 74 5/8 53 5/8
Fourth Quarter.............................. 109 1/4 63
2000
First Quarter 142 99 5/8
(through March 30, 2000)..................
Historical prices have been adjusted for two 2 for 1 stock
splits of EMC stock, which became effective in the fourth
quarter of 1997 and the second quarter of 1999, respectively.
EMC has not paid cash dividends on EMC Stock to date. We make
no representation as to the amount of dividends, if any, that
EMC 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 EMC 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 subsidiaries in connection with hedging our
PS-18
<PAGE>
obligations under the Reset PERQS. See also "Use of Proceeds" in
the accompanying prospectus.
On the date of this pricing supplement, we, through our
subsidiaries or others, hedged our anticipated exposure in
connection with the Reset PERQS by taking positions in EMC
Stock and other instruments. Purchase activity could have
potentially increased the price of EMC Stock, and therefore
effectively have increased the level to which EMC Stock must
rise before you would receive at maturity an amount of EMC
Stock worth as much as or more than the principal amount of
the Reset PERQS. 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 EMC Stock, options contracts on EMC
Stock listed on major securities markets or positions in any
other available securities or instruments that we may wish to
use in connection with such hedging activity. Although we have
no reason to believe that our hedging activity had or will
have a material impact on the price of EMC Stock, we cannot
give any assurance that we did not, or in the future will not,
affect such price as a result of our hedging activities.
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 EMC 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 EMC
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
$25.543875 per Reset PERQS and the underwriting discounts and
commissions will be $0.003875 per Reset PERQS for purchasers
of greater than or equal to 100,000 Reset PERQS in any single
transaction, subject to the holding period requirements
described below.
Delivery of approximately 98.625% of the Reset PERQS to a
purchaser of 100,000 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
PS-19
<PAGE>
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 subsidiaries and 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 to considering
PS-20
<PAGE>
the consequences of owning the Reset PERQS, 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 EMC 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, our special tax counsel ("Tax Counsel"), and is a general
discussion of the principal potential U.S. federal income tax
consequences to initial holders of the Reset PERQS purchasing the
Reset PERQS at the Issue Price, 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.
General
Pursuant to the terms of the Reset PERQS, we 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 us to
sell, for an amount equal to $25.90 (the "Forward Price"), the
EMC Stock at maturity (or, alternatively, upon an earlier
redemption of the Reset PERQS), and (ii) a deposit with us of
a fixed amount of cash, equal to the Issue Price, to secure
the holder's obligation to purchase the EMC Stock (the
"Deposit"), which Deposit bears an annual yield of 7.40% per
annum, which yield is based on our cost of borrowing. Under
this characterization, less than the full quarterly payments
on the Reset PERQS will be attributable to the yield on the
Deposit. Accordingly, the excess of the quarterly payments on
the Reset PERQS over the portion of those payments
attributable to the yield on the Deposit will represent
payments attributable to the holders' entry into the Forward
Contract (the "Contract Fees"). Furthermore, based on our
determination of the relative fair market values of the
Components at the time of issuance of the Reset PERQS, we will
allocate 100% of the Issue Price of the Reset PERQS to the
Deposit and none to the Forward Contract.
PS-21
<PAGE>
Our 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 IRS that its allocation
is different from ours. The treatment of the Reset PERQS
described above and our 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, you are urged to consult your tax advisor
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, we intend 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 our 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 EMC Stock, and a U.S. Holder would not
recognize any gain or loss with respect to any EMC 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
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or loss would generally be capital gain or loss, as the case
may be. With respect to any EMC Stock received upon maturity,
the U.S. Holder would have an adjusted tax basis in such EMC
Stock equal to the pro rata portion of the Forward Price
allocable thereto. The allocation of the Forward Price between
cash and EMC Stock should be based on the amount of the cash
received and the relative fair market value, as of the
maturity, of the EMC Stock. The U.S. Holder's holding period
of any EMC 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
advisors 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 or a
combination of a prepaid forward contract and one or more
options. Other alternative characterizations are also
possible. Accordingly, prospective purchasers are urged to
consult their tax advisors
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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.
</TABLE>
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MORGAN STANLEY DEAN WITTER & CO.
