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
WE ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
Subject to Completion, Pricing Supplement dated May 30, 2000
PROSPECTUS Dated May 18, 2000 Pricing Supplement No. 5 to
PROSPECTUS SUPPLEMENT Registration Statement No. 333-34392
Dated May 18, 2000 Dated , 2000
Rule 424(b)(3)
$25,000,000
Morgan Stanley Dean Witter & Co.
MEDIUM-TERM NOTES, SERIES C
Senior Fixed Rate Notes
-----------------------
10% Reset PERQS due June 28, 2002
Mandatorily Exchangeable For
Shares of Common Stock of JDS UNIPHASE CORPORATION
Reset Performance Equity-linked Redemption Quarterly-pay SecuritiesSM
("Reset PERQS(SM)")
The Reset PERQS will pay 10% 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 JDS Uniphase common stock based on the closing prices of JDS
Uniphase common stock in June of 2001 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-fifth of the closing price of JDS Uniphase common stock on the day we
offer the Reset PERQS for initial sale to the public.
o We will pay 10% interest (equivalent to $ per year) on the
$ principal amount of each Reset PERQS. Interest will be paid
quarterly, beginning September 28, 2000.
o At maturity you will receive shares of JDS Uniphase common stock in
exchange for each Reset PERQS at an exchange ratio. The initial exchange
ratio is one-fifth of a share of JDS Uniphase common stock per Reset
PERQS. However, if the price of JDS Uniphase common stock appreciates
above the first year cap price for June 29, 2001 or the second year cap
price for June 26, 2002, the exchange ratio will be adjusted downward, and
you will receive an amount of JDS Uniphase common stock per Reset PERQS
that is less than one-fifth of a share.
o The first year cap price is $ , or % of the closing price of JDS
Uniphase common stock on the day we offer the Reset PERQS for initial sale
to the public. If on June 29, 2001, the price of JDS Uniphase common stock
is higher than the closing price of JDS Uniphase 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 JDS Uniphase common stock on June
29, 2001. Otherwise the cap price will remain unchanged in the second
year. The maximum you can receive at maturity is JDS Uniphase common stock
worth $ per Reset PERQS.
o Investing in Reset PERQS is not equivalent to investing in JDS Uniphase
common stock.
o JDS Uniphase 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 We will apply to list the Reset PERQS to trade under the proposed symbol
"RPJ" on the American Stock Exchange LLC.
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 $ PER RESET PERQS
---------------------------
Price to Agent's Proceeds to
Public(1) Commissions the Company(1)
--------------------------------------------------
Per Reset PERQS............... $ $ $
Total......................... $ $ $
------------------
(1) Plus accrued interest, if any, from the Original 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 $ per Reset PERQS (98.25% of the Issue Price). In that case, the
underwriting discounts and commissions will be $ 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
JDS Uniphase Corporation common stock, which we refer to as JDS Uniphase Stock.
The Reset PERQS also provide fixed quarterly payments at an annual rate of 10%
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 JDS Uniphase 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 $ 10% Reset Performance Equity-linked Redemption
Quarterly-pay Securities(sm) due June 28, 2002,
which we refer to as the Reset PERQS(sm). The
principal amount and issue price of each Reset
PERQS is $ , which is one-fifth of the closing
price of JDS Uniphase 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 JDS Uniphase Stock based on the market
price of JDS Uniphase Stock, either up or down,
on June 29, 2001 and at maturity, in each case
subject to a cap price. Investing in Reset PERQS
is not equivalent to investing in JDS Uniphase
Stock.
10% interest on the We will pay interest on the Reset PERQS, at the
principal amount rate of 10% of the per principal amount year,
quarterly on each March 28, June 28, September 28
and December 28, beginning September 28, 2000.
The interest rate we pay on the Reset PERQS is
more than the current dividend rate on the JDS
Uniphase Stock. The Reset PERQS will mature on
June 28, 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 June 29, 2001 is $ , or % of
the closing price of JDS Uniphase Stock on the day
we offer 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 % of the closing
price of JDS Uniphase Stock on June 29, 2001 and
the First Year Cap Price. The maximum you can
receive at maturity is JDS Uniphase Stock worth $
per Reset PERQS.
Payout at Maturity At maturity, for each $ principal amount of Reset
PERQS you hold, we will give to you a number of
shares of JDS Uniphase Stock equal to the
exchange ratio. The initial exchange ratio is
one-fifth of a share of JDS Uniphase 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 JDS Uniphase Stock exceeds
the First Year Cap Price on June 29, 2001.
The adjusted exchange ratio will be calculated as
follows:
<TABLE>
<S> <C> <C> <C>
New Initial
Exchange = Exchange x First Year Cap Price
Ratio Ratio ----------------------------------------------
JDS Uniphase Stock closing price on June 29, 2001
</TABLE>
If the market price of JDS Uniphase Stock on
June 29, 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 JDS Uniphase Stock at maturity
exceeds the Second Year Cap Price. The final
exchange ratio will then be calculated as
follows:
<TABLE>
<S> <C> <C> <C>
Final Existing Second Year Cap Price
Exchange = Exchange x --------------------------------------------
Ratio Ratio JDS Uniphase Stock closing price at maturity
</TABLE>
If the market price of JDS Uniphase 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 JDS Uniphase 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 JDS Uniphase 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 JDS Uniphase
Stock that you will receive at maturity.
No affiliation with JDS Uniphase Corporation is not an affiliate of
JDS Uniphase Corporation ours 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 JDS Uniphase Corporation.
More information on The Reset PERQS are senior notes issued as part of
the Reset PERQS out 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 18, 2000. 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. The following assumptions were
made:
<TABLE>
<S> <C> <C>
o Initial Price of Reset PERQS: $16.00
o Initial JDS Uniphase Stock Price: $80.00
o First Year Cap Price: 152.50% of the Initial JDS Uniphase Stock Price
o Second Year Cap Price: Greater of (x) 152.50% of the First Year Closing Price and (y) First Year Cap Price
o Interest Rate: 10% per year
o Maturity: 24 months
</TABLE>
<TABLE>
Reset
PERQS
Payout at
Maturity Reset
Initial Based on PERQS
Initial JDS First on JDS Payout at
Price Uniphase Inital Year 5/30/01 Second Exchange Uniphase Maturity
of Reset Stock Exchange First Year Closing Exchange Year Maturity Ratio at Stock plus 10%
Number PERQS Price Ratio Cap Price Price(1) Ratio Cap Price Price(1) Maturity Price Coupon
------ -------- -------- -------- ---------- --------- -------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $16.00 $80.00 0.20000 $122.00 $60.00 0.20000 $122.0000 $40.0000 0.20000 $8.00 $11.29
2 $16.00 $80.00 0.20000 $122.00 $60.00 0.20000 $122.0000 $100.0000 0.20000 $20.00 $23.29
3 $16.00 $80.00 0.20000 $122.00 $60.00 0.20000 $122.0000 $140.0000 0.17429 $24.40 $27.69
4 $16.00 $80.00 0.20000 $122.00 $110.00 0.20000 $167.7500 $70.0000 0.20000 $14.00 $17.29
5 $16.00 $80.00 0.20000 $122.00 $110.00 0.20000 $167.7500 $140.0000 0.20000 $28.00 $31.29
6 $16.00 $80.00 0.20000 $122.00 $110.00 0.20000 $167.7500 $180.0000 0.18639 $33.55 $36.84
7 $16.00 $80.00 0.20000 $122.00 $160.00 0.15250 $244.0000 $70.0000 0.15250 $10.68 $13.97
8 $16.00 $80.00 0.20000 $122.00 $160.00 0.15250 $244.0000 $180.0000 0.15250 $27.45 $30.74
9 $16.00 $80.00 0.20000 $122.00 $160.00 0.15250 $244.0000 $245.0000 0.15188 $37.21 $40.50
10 $16.00 $80.00 0.20000 $122.00 $122.00 0.20000 $186.0500 $186.0500 0.20000 $37.21 $40.50
^ ^ ^
152.50% Greater of (x) Maturity Price times
of Initial 152.50% of First Adjusted Exchange
JDS Year Closing Ratio
Uniphase Price and (y) First
Stock Price Year Cap Price
</TABLE>
The above table illustrates an important feature of the Reset PERQS - the
payout at maturity is not determined merely by the price of JDS Uniphase Stock
at maturity, but will depend on the timing and magnitude of changes in the JDS
Uniphase Stock price. For example, in both the fourth and seventh illustrations
shown above, the Maturity Price is $70.00, but in the seventh illustration the
Payout at Maturity is $13.97 compared to $17.29 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 Second Year Exchange Ratio. Similarly, in both the ninth and tenth
illustrations, the Payout at Maturity is $40.50, but in the ninth illustration,
the Maturity Price had to equal or exceed $245.00 to produce that payout, but
in the tenth illustration, a Maturity Price of only $186.05 was required.
-------------------
1. The First Year Closing Price and the Maturity Price do not include any
dividend payments that may have been paid to holders of JDS Uniphase Stock.
PS-5
<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 JDS
Uniphase Stock, there is no guaranteed return of principal. Investing in Reset
PERQS is not equivalent to investing directly in JDS Uniphase 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
Ordinary Senior Notes -- debt. The terms of the Reset PERQS differ from
No guaranteed return of those of ordinary debt securities in that we will
principal not pay you a fixed amount at maturity. Our payout
to you at maturity will be a number of shares of
JDS Uniphase Stock based on the market price of
JDS Uniphase Stock on June 29, 2001 and at
maturity. If the final market price of JDS
Uniphase 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 June
29, 2001, we will pay you an amount of JDS
Uniphase 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
$ issue price of one Reset PERQS is equal to
today's market price of one share of JDS Uniphase
Stock multiplied by the initial exchange ratio,
you may receive a lesser fractional amount of JDS
Uniphase 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 JDS
Uniphase Stock appreciates above both the cap
price for June 29, 2001 and the cap price for
June 26, 2002, the initial exchange ratio of
one-fifth of a share of JDS Uniphase Stock per
Reset PERQS will be reduced twice.
The exchange ratio and the final market price of
JDS Uniphase Stock at maturity will be determined
on June 26, 2002, which is two trading days prior
to maturity of the Reset PERQS. If the price of
JDS Uniphase Stock is lower on the actual
maturity date than it was on June 26, 2002, the
value of any JDS Uniphase Stock you receive will
be less. Under no circumstances will you receive
an amount of JDS Uniphase 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 market for the
May Be Limited Reset PERQS. Although we will apply to list the
Reset PERQS on the American Stock Exchange LLC,
which we refer to as the AMEX, we may not meet
the requirements for listing. 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 Reset Several factors, many of which are beyond our
PERQS Influenced by Many control, will influence the value of the Reset
Unpredictable Factors PERQS. We expect that generally the market price
of the JDS Uniphase 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 JDS Uniphase Stock
o the dividend rate on JDS Uniphase 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 JDS
Uniphase 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 JDS Uniphase Stock is at, below, or
not sufficiently above the initial market price.
You cannot predict the future performance of JDS
Uniphase Stock based on its historical
performance. The price of JDS Uniphase Stock may
decrease so that you will receive at maturity
shares of JDS Uniphase Stock worth less than the
principal amount of the Reset PERQS. We cannot
guarantee that the price of JDS Uniphase 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 JDS Uniphase
JDS Uniphase Corporation Corporation. Although we do not have any
non-public information about JDS Uniphase as of
the date of this pricing supplement, we or our
subsidiaries may presently or from time to time
engage in business with JDS Uniphase, including
extending loans to, or making equity investments
in, JDS Uniphase or providing advisory services
to JDS Uniphase, including merger and acquisition
advisory services. Moreover, we have no ability
to control or predict the actions of JDS
Uniphase, including any corporate actions of the
type that would require the calculation agent to
adjust the payout to you at maturity. JDS
Uniphase 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 JDS
Uniphase.
You Have No As an owner of Reset PERQS, you will not have
Shareholder Rights voting rights or rights to receive dividends or
other distributions or any other rights with
respect to the JDS Uniphase Stock.
Limited Antidilution MS & Co., as calculation agent, will adjust the
Adjustments amount payable at maturity for certain events
affecting the JDS Uniphase Stock, such as stock
splits and stock dividends, and certain other
corporate actions involving JDS Uniphase, such as
mergers. However, the calculation agent is not
required to make an adjustment for every
corporate event that can affect the JDS Uniphase
Stock. For example, the calculation agent is not
required to make any adjustments if JDS Uniphase
or anyone else makes a partial tender or partial
exchange offer for the JDS Uniphase Stock. If an
event occurs that does not require the
calculation agent to adjust the amount of JDS
Uniphase 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 and the payout to you at maturity of the Reset PERQS. MS
Calculation Agent & Co. and other affiliates may
also carry out hedging activities related to
Reset PERQS or to other instruments, including
trading in JDS Uniphase Stock as well as in other
instruments related to JDS Uniphase Stock. MS &
Co. and some of our other subsidiaries also trade
JDS Uniphase Stock and other financial
instruments related to JDS Uniphase 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 JDS Uniphase 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 $
principal amount of our 10% Reset PERQS due June 28, 2002, Mandatorily
Exchangeable For Shares of Common Stock of JDS Uniphase Corporation. In this
pricing supplement, the terms "MSDW," "we," "us," and "our" refer to Morgan
Stanley Dean Witter & Co.
Principal Amount.............. $25,000,000
Maturity Date................. June 28, 2002
Interest Rate................. 10% per annum (equivalent to $ per annum
per Reset PERQS)
Interest Payment Dates........ Each March 28, June 28, September 28 and
December 28, beginning September 28, 2000.
Specified Currency............ U.S. Dollars
Issue Price................... $ per Reset PERQS
Initial JDS Uniphase Stock
Price....................... $
Original Issue Date
(Settlement Date)........... June , 2000
CUSIP......................... 61744Y769
Denominations................. $ and integral multiples thereof
First Year Cap Price.......... $ ( % of the Initial JDS
Uniphase Stock Price)
First Year Determination Date. June 29, 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 JDS
Uniphase 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 JDS Uniphase
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 $
principal amount of such Reset PERQS as
payment for a number of shares of JDS
Uniphase Stock at the Exchange Ratio. The
initial Exchange Ratio, initially set at
0.20, is subject to adjustment on the First
Year Determination Date and at maturity in
order to cap the value of the JDS Uniphase
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
PS-9
<PAGE>
of JDS Uniphase 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 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 JDS Uniphase Stock to be delivered
with respect to each $ principal amount of
each Reset PERQS and (ii) deliver such
shares of JDS Uniphase Stock (and cash in
respect of interest and any fractional
shares of JDS Uniphase 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 JDS Uniphase
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 JDS Uniphase Stock in an amount
equal to the corresponding fractional Market
Price of such fraction of a share of
PS-10
<PAGE>
JDS Uniphase 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 JDS Uniphase Stock through and
including the second scheduled Trading Day
immediately prior to maturity. See
"Antidilution Adjustments" below.
Market Price.................. If JDS Uniphase 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 JDS Uniphase 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 JDS
Uniphase 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 JDS Uniphase 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 JDS
Uniphase 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 JDS Uniphase 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 JDS Uniphase 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
PS-11
<PAGE>
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 JDS Uniphase 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 JDS Uniphase Stock.
2. If JDS Uniphase Stock is subject (i)
to a stock dividend (issuance of additional
shares of JDS Uniphase Stock) that is given
ratably to all holders of shares of JDS
Uniphase Stock or (ii) to a distribution of
JDS Uniphase Stock as a result of the
triggering of any provision of the corporate
charter of JDS Uniphase, then once the
dividend has become effective and JDS
Uniphase 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 JDS Uniphase 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 JDS
Uniphase Stock other than distributions
described in clauses (i) and (v) of
paragraph 5 below and Extraordinary
Dividends as described below. A cash
dividend or other distribution with respect
to JDS Uniphase Stock will be deemed to be
an "Extraordinary Dividend" if such dividend
or other distribution exceeds the
immediately preceding non-Extraordinary
Dividend for JDS Uniphase Stock by an amount
equal to at least 10% of the Market Price of
JDS Uniphase 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
PS-12
<PAGE>
Extraordinary Dividend (the "ex-dividend
date"). If an Extraordinary Dividend occurs
with respect to JDS Uniphase Stock, the
Exchange Factor with respect to JDS Uniphase
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 JDS
Uniphase 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 JDS
Uniphase 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 JDS Uniphase 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 JDS Uniphase issues rights or
warrants to all holders of JDS Uniphase
Stock to subscribe for or purchase JDS
Uniphase Stock at an exercise price per
share less than the Market Price of the JDS
Uniphase 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 JDS
Uniphase Stock outstanding immediately prior
to the issuance of such rights or warrants
plus the number of additional shares of JDS
Uniphase Stock offered for subscription or
purchase pursuant to such rights or warrants
and the denominator of which shall be the
number of shares of JDS Uniphase Stock
outstanding immediately prior to the
issuance of such rights or warrants plus the
number of additional shares of JDS Uniphase
Stock which the aggregate offering price of
the total number of shares of JDS Uniphase
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 JDS Uniphase
Stock, including, without limitation, as a
result of the issuance of any tracking stock
by JDS Uniphase, (ii) JDS Uniphase or any
surviving entity or subsequent surviving
entity of JDS Uniphase (an "JDS Uniphase
Successor") has been subject to a merger,
combination or consolidation and is not the
surviving entity, (iii) any statutory
exchange of securities of JDS Uniphase or
any JDS
PS-13
<PAGE>
Uniphase Successor with another corporation
occurs (other than pursuant to clause (ii)
above), (iv) JDS Uniphase is liquidated, (v)
JDS Uniphase issues to all of its
shareholders equity securities of an issuer
other than JDS Uniphase (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 JDS Uniphase 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 to holders of JDS
Uniphase Stock in any such Reorganization
Event, including, in the case of the
issuance of tracking stock, the reclassified
share of JDS Uniphase Stock and, in the case
of a Spin-off Event, the share of JDS
Uniphase 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 JDS Uniphase Stock and holders
will receive in lieu of any JDS Uniphase
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 JDS Uniphase 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 JDS Uniphase 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
JDS Uniphase 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 JDS Uniphase Stock,
including, without limitation, a partial
tender or exchange offer for the JDS
Uniphase 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 JDS Uniphase Stock
having a market value 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 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 JDS Uniphase Stock:
(i) a suspension, absence or material
limitation of trading of JDS Uniphase
Stock on the primary market for JDS
Uniphase 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 JDS Uniphase
Stock as a result of which the reported
trading prices for JDS Uniphase
PS-15
<PAGE>
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 or material
limitation on the primary market for
trading in options contracts related to
JDS Uniphase 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 JDS
Uniphase 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 JDS Uniphase Stock and
(5) a suspension, absence or material
limitation of trading on the primary
securities market on which options contracts
related to JDS Uniphase 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 JDS Uniphase 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.
JDS Uniphase Stock; Public
Information................. JDS Uniphase Corporation is a provider of
advanced fiberoptic components and modules.
JDS Uniphase 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
JDS Uniphase pursuant to the Exchange Act
can be located by reference to Commission
file number 0-22874. In addition,
information regarding JDS Uniphase 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 JDS Uniphase Stock or other
securities of JDS Uniphase. We have derived
all disclosures contained in this pricing
supplement regarding JDS Uniphase 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 JDS Uniphase 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 JDS Uniphase 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 JDS Uniphase Stock (and therefore
the Initial JDS Uniphase 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 JDS
Uniphase 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 JDS Uniphase Stock.
We and/or our subsidiaries may presently or
from time to time engage in business with
JDS Uniphase, including extending loans to,
or making equity investments in, JDS
Uniphase or providing advisory services to
JDS Uniphase, 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 JDS Uniphase and, in addition,
one or more of our affiliates may publish
research reports with respect to JDS
Uniphase. The statement in the preceding
PS-17
<PAGE>
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 JDS Uniphase as
in your judgment is appropriate to make an
informed decision with respect to an
investment in JDS Uniphase Stock.
Historical Information........ The following table sets forth the high and
low Market Price during 1997, 1998, 1999 and
2000 through May 26, 2000. The Market Price
on May 26, 2000 was $80 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 JDS Uniphase
Stock as an indication of future
performance. The price of JDS Uniphase Stock
may decrease so that you will receive at
maturity shares of JDS Uniphase Stock worth
less than the principal amount of the Reset
PERQS. We cannot give you any assurance that
the price of JDS Uniphase 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 JDS
Uniphase Stock on June 29, 2001 and June 26,
2002, there is no guaranteed return of
principal. To the extent that the Maturity
Price of JDS Uniphase Stock is less than the
Initial JDS Uniphase Stock Price or not
sufficiently above the Initial JDS Uniphase
Stock Price to compensate for a downward
adjustment of the Exchange Ratio, if any, at
June 29, 2001 and the shortfall is not
offset by the coupon paid on the Reset
PERQS, you will lose money on your
investment.
High Low
---- ----
(CUSIP 46612J101)
1997
First Quarter............ 3 3/32 1 84/85
Second Quarter........... 3 15/19 2 8/41
Third Quarter............ 5 2/85 3 50/81
Fourth Quarter........... 5 13/16 3 9/16
1998
First Quarter............ 5 40/77 4 4/27
Second Quarter........... 7 7/8 5 5/64
Third Quarter............ 7 7/8 4 45/64
Fourth Quarter........... 8 43/64 4 19/64
1999
First Quarter............ 14 25/64 7 15/16
Second Quarter........... 20 3/4 13 13/64
Third Quarter............ 29 9/64 19 50/79
Fourth Quarter........... 83 13/16 28 13/16
2000
First Quarter............146 17/32 74 7/8
Second Quarter 121 7/8 79
(through May 26, 2000).
Historical prices have been adjusted for
four 2 for 1 stock splits of JDS Uniphase
Stock, which became effective in the fourth
quarter of 1997, the third quarter of 1999,
the fourth quarter of 1999 and the first
quarter of 2000, respectively.
JDS Uniphase has not paid cash dividends on
JDS Uniphase Stock to date. We make no
representation as to the amount of
dividends, if any, that JDS Uniphase will
pay in the future. In any event, as a
PS-18
<PAGE>
holder of the Reset PERQS, you will not be
entitled to receive dividends, if any, that
may be payable on JDS Uniphase 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 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 JDS Uniphase Stock, in options
contracts on JDS Uniphase 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 JDS Uniphase Stock, and therefore
effectively increase the level to which JDS
Uniphase Stock must rise before you would
receive at maturity an amount of JDS
Uniphase 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 JDS Uniphase 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 JDS Uniphase 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 JDS
Uniphase 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 100,000 Reset PERQS
in any single transaction, subject to the
holding period requirements described below.
Delivery of approximately 98.25% 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
PS-19
<PAGE>
the Reset PERQS referred to on the cover of
this pricing supplement. The balance of
approximately 1.75% 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 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;
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(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 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 JDS Uniphase
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 $ (the "Forward Price"),
the JDS Uniphase 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
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holder's obligation to purchase the JDS
Uniphase Stock (the "Deposit"), which
Deposit bears an annual yield of % per
annum, which yield is based on our cost of
borrowing. Under this characterization, it
is possible that less than the full
quarterly payments on the Reset PERQS will
be attributable to the yield on the Deposit.
If this is the case, the excess of the
quarterly payments on the Reset PERQS over
the portion of those payments attributable
to the yield on the Deposit would 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. 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.
U.S. HOLDERS
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 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.
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 and Original Issue
Discount on the Reset PERQS. If the Forward
Price exceeds the Issue Price by at least
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0.25% of the Forward Price multiplied by the
number of complete years to maturity, the
Deposit will be subject to the "original
issue discount" rules, and a U.S. Holder
will include "qualified stated interest"
equal to the stated interest on the Reset
PERQS in income in accordance with the U.S.
Holder's method of accounting for federal
income tax purposes. Additionally, each U.S.
Holder, including a taxpayer who otherwise
uses the cash method of accounting, will be
required to include original issue discount
("OID") on the Deposit (in an aggregate
amount equal to the Forward Price less the
Issue Price) in income as it accrues, in
accordance with a constant yield method
based on a compounding of interest. Under
these circumstances, the amount of income
recognized by a U.S. Holder will generally
be more than the stated interest paid to the
U.S. Holder and will increase during the
term of the Reset PERQS.
If the Forward Price of the Reset PERQS
exceeds the Issue Price by less than 0.25%
of the Forward Price multiplied by the
number of complete years to maturity, such
excess will be treated as de minimis OID,
and will be taxable to the holder at
maturity as capital gain (unless the holder
elects to accrue such de minimis OID on a
current basis). 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.
However, if the Forward Price does not
exceed the Issue Price, then to the extent
attributable to the yield 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. As discussed
above, any excess of the quarterly payments
over the portion thereof attributable to the
yield on the Deposit will be treated as
Contract Fees. Although the federal income
tax treatment of Contract Fees is uncertain,
we intend to take the position that any
Contract Fees with respect to the Reset
PERQS constitute taxable income to a U.S.
Holder 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. The U.S.
Holder's tax basis in the Deposit will be
subsequently increased by any OID accrued
with respect thereto.
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 JDS
Uniphase Stock, and a U.S. Holder would not
recognize any gain or loss with respect to
any JDS Uniphase Stock received thereon.
However, as stated above, any de minimis OID
on the Deposit that the holder has not
previously included in income will be
taxable to the holder at the maturity of the
Deposit and the concurrent settlement of the
Forward Contract. With respect to any cash
received upon maturity, a U.S. Holder would
recognize gain or
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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 JDS Uniphase Stock
received upon maturity, the U.S. Holder
would have an adjusted tax basis in such JDS
Uniphase Stock equal to the pro rata portion
of the Forward Price allocable thereto. The
allocation of the Forward Price between cash
and JDS Uniphase Stock should be based on
the amount of the cash received and the
relative fair market value, as of the
maturity, of the JDS Uniphase Stock. U.S.
Holders should note that the holding period
of any JDS Uniphase Stock received would
start on the day after the maturity of the
Reset PERQS.
U.S. Holders should note that while any
accrued but unpaid interest on the Deposit
and any Contract Fees would be taxable as
ordinary income, any gain or loss recognized
upon the final settlement of the Forward
Contract generally would be capital gain or
loss. The distinction between capital gain
or loss and ordinary gain or loss is
potentially significant in several respects.
For example, limitations apply to a U.S.
Holder's ability to offset capital losses
against ordinary income, and certain U.S.
Holders may be subject to lower U.S. federal
income tax rates with respect to long-term
capital gain than with respect to ordinary
gain. U.S. Holders should consult their tax
advisors with respect to the treatment of
capital gain or loss on a 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 interest on the
Deposit, which would be taxed as described
under "--Quarterly Payments and Original
Issue Discount 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").
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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. In addition, a U.S. Holder
would recognize income upon maturity of the
Reset PERQS to the extent that the value of
JDS Uniphase Stock and cash (if any)
received exceeds the adjusted 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.
Constructive Ownership
Section 1260 of the Code treats a taxpayer
owning certain types of derivative positions
in property as having "constructive
ownership" in that property, with the result
that all or a portion of the long term
capital gain recognized or deemed to be
recognized (as described below) by such
taxpayer with respect to the derivative
position would be recharacterized as
ordinary income. Although Section 1260 in
its current form does not apply to the Reset
PERQS, Section 1260 authorizes the Treasury
Department to promulgate regulations
(possibly with retroactive effect) to expand
the application of the "constructive
ownership" regime. There is no assurance
that the Treasury Department will not
promulgate regulations to apply the regime
to the Reset PERQS. If Section 1260 were to
apply to the Reset PERQS, the effect on a
U.S. Holder would be to treat all or a
portion of the long term capital gain (if
any) recognized by such U.S. Holder on sale
or maturity of a Reset PERQS as ordinary
income, but only to the extent such long
term capital gain exceeds the long term
capital gain that would have been recognized
by such U.S. Holder if the U.S. Holder had
acquired the underlying stock itself on the
issue date of the Reset PERQS and disposed
of the underlying stock upon disposition
(including retirement) of the Reset PERQS.
Section 1260, if applicable, would require a
U.S. Holder that receives shares of JDS
Uniphase Stock at maturity to recognize as
ordinary income the amount that would have
been treated as ordinary income according to
the rule described in the preceding
sentence, if the U.S. Holder had sold the
Reset PERQS at maturity for fair market
value. In addition, Section 1260 would
impose an interest charge on the gain (or
deemed gain) that was recharacterized on the
sale or maturity of the Reset PERQS.
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<PAGE>
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.
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MORGAN STANLEY DEAN WITTER & CO.
CLF #80815
