-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IYEMwuzZP8OmdUpvNapZgVmHBDEc1N97R3/Xn4fhWKxH4mlE/7T6599WXmfs3eTf q/imlnJOmFMexEcAvisI5w== 0000950103-96-000954.txt : 19960627 0000950103-96-000954.hdr.sgml : 19960627 ACCESSION NUMBER: 0000950103-96-000954 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960626 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY GROUP INC /DE/ CENTRAL INDEX KEY: 0000789625 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 132838811 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 424B3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-01655 FILM NUMBER: 96586318 BUSINESS ADDRESS: STREET 1: 1585 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2127034000 424B3 1 PROSPECTUS Dated May 1, 1996 Pricing Supplement No. 18 to PROSPECTUS SUPPLEMENT Registration Statement No. 333-01655 Dated May 1, 1996 Dated June 21, 1996 Rule 424(b)(3) $117,000,000 Morgan Stanley Group Inc. MEDIUM-TERM NOTES, SERIES C Senior Fixed Rate Notes 4.00% MANDATORILY EXCHANGEABLE NOTES DUE DECEMBER 15, 1997 Mandatorily Exchangeable For the Cash Value of Shares of Common Stock of UNUM CORPORATION The 4.00% Mandatorily Exchangeable Notes due December 15, 1997 (the "Notes") are Medium-Term Notes, Series C (Senior Fixed Rate Notes) of Morgan Stanley Group Inc. (the "Company"), as further described below and in the Prospectus Supplement under "Description of Notes - Fixed Rate Notes." The principal amount of each of the Notes being offered hereby will be $58.50 (the "Initial Price"). The Notes will mature on December 15, 1997. Interest on the Notes, at the rate of 4.00% of the principal amount per annum, is payable quarterly in arrears on each March 15, June 15, September 15 and December 15, beginning September 15, 1996. At maturity (including as a result of acceleration or otherwise), the principal amount of each Note will be mandatorily exchanged by the Company into cash with a value equal to the Maturity Price (as defined herein) of a number of shares of the common stock, $0.10 par value per share (the "UNUM Stock"), of UNUM Corporation ("UNUM") at the Exchange Rate. The Exchange Rate is equal to, subject to certain adjustments, (a) if the Maturity Price is greater than or equal to $62.712 (the "Threshold Appreciation Price"), 0.9328358 of the product of the Exchange Factor (as defined herein) and one share of UNUM Stock per Note, (b) if the Maturity Price is less than the Threshold Appreciation Price but is greater than the Initial Price, a fraction of the product of the Exchange Factor and one share of UNUM Stock so that the value of such fraction (determined at the Maturity Price) equals the Initial Price and (c) if the Maturity Price is less than or equal to the Initial Price, the product of the Exchange Factor and one share of UNUM Stock per Note. The Exchange Factor will be set initially at 1.0, but will be subject to adjustment upon the occurrence of certain corporate events. Because the Exchange Rate varies depending on the Maturity Price, holders of the Notes will not necessarily receive at maturity an amount equal to the principal amount thereof. See "Exchange at Maturity," "Exchange Factor" and "Antidilution Adjustments" in this Pricing Supplement. Interest on the Notes will accrue at a higher rate than the rate at which dividends have been paid on the UNUM Stock. The opportunity for equity appreciation afforded by an investment in the Notes is less than that afforded by an investment in the UNUM Stock because at maturity a holder may receive cash in an amount that is less than the Maturity Price of one share of UNUM Stock per Note if the Maturity Price has appreciated above the Initial Price. The amount of cash received by a holder of the Notes upon exchange at maturity, determined as described herein, may be more or less than the principal amount of the Notes. UNUM is not affiliated with the Company, is not involved in this offering of Notes and will have no obligations with respect to the Notes. See "Historical Information" in this Pricing Supplement for information on the range of Market Prices for UNUM Stock. The Company will cause the Maturity Price, any adjustments to the Exchange Factor and any other antidilution adjustments to be determined by the Calculation Agent for Chemical Bank, as Trustee under the Senior Debt Indenture. THIS NOTE IS SUBJECT TO RESTRICTIONS ON TRANSFER AND MAY ONLY BE TRANSFERRED WITH THE PRIOR APPROVAL OF THE COMPANY. SEE "RESTRICTIONS ON TRANSFER" ON PS-4 AND PS-5 IN THIS PRICING SUPPLEMENT. An investment in the Notes entails risks not associated with similar investments in a conventional debt security, as described under "Risk Factors" on PS-5 through PS-7 herein. ------------ PRICE 100% AND ACCRUED INTEREST ------------ Agent's Proceeds to -------------- Price to Public(1) Commissions(2) Company(1) -------------------- ---------------- -------------- Per Note.... 100% 0.25% 99.75% Total....... $117,000,000 $292,500 $116,707,500 _______________ (1) Plus accrued interest, if any, from June 27, 1996. (2) The Company has agreed to indemnify the Agent against certain liabilities, including liabilities under the Securities Act of 1933. MORGAN STANLEY & CO. Incorporated Capitalized terms not defined herein have the meanings given to such terms in the accompanying Prospectus Supplement. Principal Amount:.............. $117,000,000 Maturity Date:................. December 15, 1997 Interest Rate:................. 4.00% per annum Interest Payment Dates......... March 15, June 15, September 15 and December 15, beginning September 15, 1996 Specified Currency:............ U.S. Dollars Issue Price:................... 100% Original Issue Date (Settlement Date):............. June 27, 1996 Book Entry Note or Certificated Note:............. Certificated Senior Note or Subordinated Note:.......................... Senior Denominations:................. $58.50 and integral multiples thereof Trustee:....................... Chemical Bank Exchange at Maturity:.......... At maturity (including as a result of acceleration or otherwise), the principal amount of each Note will be mandatorily exchanged by the Company, upon delivery of such Note to the Trustee, into cash with a value equal to the Maturity Price of a number of shares of UNUM Stock at the Exchange Rate. The Exchange Rate is equal to (a) if the Maturity Price is greater than or equal to $62.712 (the "Threshold Appreciation Price"), 0.9328358 of the product of the Exchange Factor and one share of UNUM Stock per Note, (b) if the Maturity Price is less than the Threshold Appreciation Price but is greater than the Initial Price, a fraction of the product of the Exchange Factor and one share of UNUM Stock so that the value of such fraction (determined at the Maturity Price) equals the Initial Price and (c) if the Maturity Price is less than or equal to the Initial Price, the product of the Exchange Factor and one share of UNUM Stock per Note, subject in each case to any applicable antidilution adjustments as set forth under "Antidilution Adjustments" below. The Company shall, or shall cause the Calculation Agent to, deliver cash to the Trustee for delivery to the holders. The Calculation Agent shall calculate the Maturity Price and the Exchange Factor and determine the Exchange Rate applicable at the maturity of the Notes. References to payment "per Note" refer to each $58.50 principal amount of any Note. Exchange Factor:............... The Exchange Factor will be set initially at 1.0, but will be subject to adjustment upon the occurrence of certain corporate events through and including the second NYSE Trading Day immediately prior to maturity. See "Antidilution Adjustments" below. Initial Price:................. $58.50 Maturity Price:................ The Maturity Price of the Notes will be determined by the Calculation Agent and will equal the arithmetic average of the products (each a "Product") of (i) the Market Price of one share of UNUM Stock and (ii) the Exchange Factor, each as determined on the 15 scheduled NYSE Trading Days during the Calculation Period (each a "Determination Date"); provided that, if a Market Disruption Event (as defined below) occurs on any such Determination Date (consequently, a "Non-Determination Date"), then the Calculation Agent shall disregard such Non-Determination Date and shall weight the Product for each succeeding Determination Date during the Calculation Period to ratably distribute the intended weight of such Non-Determination Date across the remaining Determination Dates. Accordingly, if a Market Disruption Event occurs during the Calculation Period, the weightings of the Products for the Determination Dates will be calculated as follows: (A) each Determination Date preceding the first Market Disruption Event will receive a weighting of 1/15 and (B) each Determination Date following a Market Disruption Event will receive a weighting that equals a fraction (i) the numerator of which will be the fraction that equals 1 minus the sum of the weights of all preceding Determination Dates and (ii) the denominator of which will be the number of scheduled Determination Dates from and including such Determination Date to and including the last scheduled Determination Date in the Calculation Period. If there is no succeeding NYSE Trading Day on which a Market Disruption Event has not occurred, the product shall be determined on the last NYSE Trading Day in the Calculation Period notwithstanding the occurrence of a Market Disruption Event on such NYSE Trading Day and, if any scheduled NYSE Trading Day during the Calculation Period is not an actual NYSE Trading Day, the Market Price of UNUM Stock for such scheduled NYSE Trading Day shall be determined as of the earliest practicable time (which may be after such scheduled NYSE Trading Day), except that if such Market Price cannot be determined before the close of business in New York City on the second scheduled NYSE Trading day prior to the Maturity Date, the Market Price for UNUM Stock for such scheduled NYSE Trading Day shall be deemed to be zero. All percentages resulting from any calculation on the Notes will be rounded to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent with one-half cent being rounded upwards. Calculation Period:............ The period from and including November 20, 1997 to and including the second scheduled NYSE Trading Day immediately preceding the Maturity Date. Market Price:.................. If UNUM Stock (or any other security for which a Market Price must be determined) is listed on a national securities exchange, is a security of The Nasdaq National Market ("NASDAQ NMS") or is included in the OTC Bulletin Board Service ("OTC Bulletin Board") operated by the National Association of Securities Dealers, Inc. (the "NASD"), the Market Price for one share of UNUM Stock (or one unit of any such other security) on any NYSE Trading Day means (i) the last reported sale price, regular way, on such day on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on which UNUM Stock (or any such other security) is listed or admitted to trading or (ii) if not listed or admitted to trading on any such securities exchange or if such last reported sale price is not obtainable, the last reported sale price on the over-the-counter market as reported on the NASDAQ NMS or OTC Bulletin Board on such day. If the last reported sale price is not available pursuant to clause (i) or (ii) of the preceding sentence, the Market Price for any NYSE Trading Day shall be the mean, as determined by the Calculation Agent, of the bid prices for UNUM Stock (or any such other security) obtained from as many dealers in such stock, but not exceeding three, as will make such bid prices available to the Calculation Agent. The term "NASDAQ NMS security" shall include a security included in any successor to such system and the term "OTC Bulletin Board Service" shall include any successor service thereto. NYSE Trading Day:.............. A day on which trading is generally conducted in the over-the-counter market for equity securities in the United States and on the New York Stock Exchange, as determined by the Calculation Agent. Calculation Agent:............. Morgan Stanley & Co. Incorporated ("MS & Co.") Because the Calculation Agent is an affiliate of the Company, potential conflicts of interest may exist between the Calculation Agent and the holders of the Notes, 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 the Maturity Price or any Market Price or whether a Market Disruption Event has occurred. See "Maturity Price" above and "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. Restrictions on Transfer:...... EACH HOLDER OF A NOTE MUST HAVE A VALID BUSINESS PURPOSE FOR INVESTING IN THE NOTE, AND ITS INVESTMENT IN THE NOTE MUST BE CONSISTENT WITH ITS OVERALL INVESTMENT STRATEGY. ANY RESALE, PLEDGE OR OTHER TRANSFER OF THE NOTE MAY BE MADE ONLY WITH THE COMPANY'S PRIOR APPROVAL AND WILL BE MADE ONLY AFTER THE DELIVERY BY THE HOLDER, PLEDGEE OR TRANSFEREE TO THE COMPANY OF (1) A CERTIFICATE TO THE EFFECT THAT SUCH HOLDER, PLEDGEE OR TRANSFEREE HAS A VALID BUSINESS PURPOSE FOR INVESTING IN THE NOTE AND THAT ITS INVESTMENT IN THE NOTE IS CONSISTENT WITH ITS OVERALL INVESTMENT STRATEGY AND (2) SUCH OTHER INFORMATION, CERTIFICATION OR DOCUMENTATION AS THE COMPANY MAY REASONABLY REQUEST TO EVIDENCE OR SUPPORT THE ACCURACY OF SUCH CERTIFICATE AND THE AUTHORITY OF THE PERSON SIGNING SUCH CERTIFICATE. THE COMPANY MAY GRANT OR WITHHOLD ITS APPROVAL OF ANY RESALE, PLEDGE OR OTHER TRANSFER IN ITS SOLE DISCRETION, BASED ON ITS EVALUATION OF THE VALIDITY OF THE BUSINESS PURPOSE AND THE ADEQUACY OF EVIDENCE OF SUCH BUSINESS PURPOSE. Risk Factors:.................. An investment in the Notes entails significant risks not associated with similar investments in a conventional debt security, including the following: The Notes combine features of equity and debt instruments. Accordingly, the terms of the Notes differ from those of ordinary debt securities in that the value of the UNUM Stock that a holder of the Notes will receive upon mandatory exchange of the principal amount thereof at maturity is not fixed, but is based on the price of the UNUM Stock and the Exchange Rate as determined at such price. Because the price of the UNUM Stock is subject to market fluctuations, the amount of cash received by a holder of Notes upon exchange at maturity, determined as described herein, may be more or less than the principal amount of the Notes. If the Maturity Price of the UNUM Stock is less than the Initial Price, the amount of cash receivable upon exchange will be less than the principal amount of the Notes, in which case an investment in the Notes may result in a loss. Because the Maturity Price will be based upon an average of closing values of UNUM Stock on specified days (the Determination Dates), a significant increase in the value of UNUM Stock as measured on the final Determination Date, or any earlier Determination Date, may be substantially or entirely mitigated by the values of UNUM Stock on the other Determination Dates. The opportunity for equity appreciation afforded by an investment in the Notes is less than that afforded by an investment in the UNUM Stock because at maturity a holder will receive cash in an amount that is less than the Maturity Price of one share of UNUM Stock per Note if the Maturity Price of such UNUM Stock has appreciated above the Initial Price. Although the amount that holders of the Notes are entitled to receive at maturity is subject to adjustment for certain corporate events, such adjustments do not cover all events that could affect the Market Price of the UNUM Stock, including, without limitation, the occurrence of a partial tender or exchange offer for the UNUM Stock by UNUM or any third party. Such other events may adversely affect the market value of the Notes. There can be no assurance as to whether the Notes will trade in the secondary market or, if there is such a secondary market, whether such market will be liquid or illiquid. Securities with characteristics similar to the Notes are novel securities, and there is currently no secondary market for the Notes. Transfer restrictions on the Notes will further impact the liquidity of the market. The Notes may be transferred only to investors with a valid business purpose for investing in the Notes and only if the Company has granted its approval of the transfer. See "Restrictions on Transfer" above. The market value for the Notes will be affected by a number of factors in addition to the creditworthiness of the Company and the value of UNUM Stock, including, but not limited to, the volatility of UNUM Stock, the dividend rate on UNUM Stock, market interest and yield rates and the time remaining to the maturity of the Notes. In addition, the value of UNUM Stock depends on a number of interrelated factors, including economic, financial and political events, that can affect the capital markets generally and the market segment of which UNUM is a part and over which the Company has no control. The market value of the Notes is expected to depend primarily on changes in the Market Price of UNUM Stock. The price at which a holder will be able to sell Notes prior to maturity may be at a discount, which could be substantial, from the principal amount thereof, if, at such time, the Market Price of UNUM Stock is below, equal to or not sufficiently above the Initial Price. The historical Market Prices of UNUM Stock should not be taken as an indication of UNUM Stock's future performance during the term of any Note. The Notes will not be listed on any national securities exchange or accepted for quotation on a trading market and, as a result, pricing information for the Notes may be difficult to obtain. The Company is not affiliated with UNUM and, although the Company as of the date of this Pricing Supplement does not have any material non-public information concerning UNUM, corporate events of UNUM, including those described below in "Antidilution Adjustments," are beyond the Company's ability to control and are difficult to predict. UNUM is not involved in the offering of the Notes and has no obligations with respect to the Notes, including any obligation to take the interests of the Company or of holders of Notes into consideration for any reason. UNUM will not receive any of the proceeds of the offering of the Notes made hereby and is not responsible for, and has not participated in, the determination of the timing of, prices for or quantities of, the Notes offered hereby. Holders of the Notes will not be entitled to any rights with respect to the UNUM Stock (including, without limitation, voting rights, the rights to receive any dividends or other distributions in respect thereof and the right to tender or exchange UNUM Stock in any partial tender or exchange offer by UNUM or any third party). Because the Calculation Agent is an affiliate of the Company, potential conflicts of interest may exist between the Calculation Agent and the holders of the Notes, including with respect to certain adjustments to the Exchange Factor and other antidilution adjustments that may influence the determination of the amount of cash receivable at the maturity of the Notes. See "Antidilution Adjustments" and "Market Disruption Event." It is suggested that prospective investors who consider purchasing the Notes should reach an investment decision only after carefully considering the suitability of the Notes in light of their particular circumstances. Investors should also consider the tax consequences of investing in the Notes. See "United States Federal Taxation" below. Antidilution Adjustments:...... The Exchange Factor (and, in the case of paragraph 5 below, the determination of the Exchange Rate) will be adjusted as follows: 1. If UNUM 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 UNUM Stock. 2. If UNUM Stock is subject to a stock dividend (issuance of additional shares of UNUM Stock) that is given ratably to all holders of shares of UNUM Stock, then once the dividend has become effective and UNUM 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 UNUM 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 UNUM Stock other than distributions described in clause (v) of paragraph 5 below and Extraordinary Dividends as described below. A cash dividend or other distribution with respect to UNUM Stock will be deemed to be an "Extraordinary Dividend" if such dividend or other distribution exceeds the immediately preceding non-Extraordinary Dividend for UNUM Stock by an amount equal to at least 3% of the Market Price of UNUM Stock on the NYSE 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 UNUM Stock, the Exchange Factor with respect to UNUM 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 NYSE Trading Day preceding the ex-dividend date, and the denominator of which is the amount by which the Market Price on the NYSE Trading Day preceding the ex-dividend date exceeds the Extraordinary Dividend Amount. The "Extraordinary Dividend Amount" with respect to an Extraordinary Dividend for UNUM Stock will equal (i) in the case of cash dividends or other distributions that constitute quarterly dividends, the amount per share of such Extraordinary Dividend minus the amount per share of the immediately preceding non-Extraordinary Dividend for UNUM Stock or (ii) in the case of cash dividends or other distributions that do not constitute quarterly dividends, the amount per share of such Extraordinary Dividend. To the extent an Extraordinary Dividend is not paid in cash, the value of the non-cash component will be determined by the Calculation Agent, whose determination shall be conclusive. A distribution on the UNUM Stock described in clause (v) of paragraph 5 below that also constitutes an Extraordinary Dividend shall only cause an adjustment to the Exchange Factor pursuant to clause (v) of paragraph 5. 4. If UNUM issues rights or warrants to all holders of UNUM Stock to subscribe for or purchase UNUM Stock at an exercise price per share less than the Market Price of the UNUM Stock on (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 Notes, 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 UNUM Stock outstanding immediately prior to such issuance plus the number of additional shares of UNUM Stock offered for subscription or purchase pursuant to such rights or warrants and the denominator of which shall be the number of shares of UNUM Stock outstanding immediately prior to such issuance plus the number of additional shares of UNUM Stock which the aggregate offering price of the total number of shares of UNUM 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 UNUM Stock, (ii) UNUM, or any surviving entity or subsequent surviving entity of UNUM (a "UNUM Successor") has been subject to a merger, combination or consolidation and is not the surviving entity, (iii) any statutory exchange of securities of UNUM or any UNUM Successor with another corporation occurs (other than pursuant to clause (ii) above), (iv) UNUM is liquidated, (v) UNUM issues to all of its shareholders equity securities of an issuer other than UNUM (other than in a transaction described in clauses (ii), (iii) or (iv) above) (a "Spin-off Event") or (vi) a tender or exchange offer is consummated for all the outstanding shares of UNUM Stock (any such event in clauses (i) through (vi) a "Reorganization Event"), the method of determining the Exchange Rate in respect of the amount payable upon exchange at maturity for each Note will be adjusted to provide that each holder of Notes will receive at maturity, in respect of the principal amount of each Note, cash in an amount equal to (a) if the Transaction Value (as defined below) is greater than or equal to the Threshold Appreciation Price, 0.9328358 multiplied by the Transaction Value, (b) if the Transaction Value is less than the Threshold Appreciation Price but greater than the Initial Price, the Initial Price and (c) if the Transaction Value is less than or equal to the Initial Price, the Transaction Value; provided that, if the Exchange Property (as defined below) received in any such Reorganization Event consists only of cash, the maturity date of the Notes will be deemed to be accelerated to the date on which such cash is distributed to holders of UNUM Stock. "Exchange Property" means the securities, cash or any other assets distributed in any such Reorganization Event, including, in the case of a Spin-off Event, the share of UNUM Stock with respect to which the spun-off security was issued. "Transaction Value" means (i) for any cash received in any such Reorganization Event, the amount of cash received per share of UNUM Stock, as adjusted by the Exchange Factor, (ii) for any property other than cash or securities received in any such Reorganization Event, the market value of such Exchange Property received for each share of UNUM Stock at the date of the receipt of such Exchange Property, as adjusted by the Exchange Factor, as determined by the Calculation Agent and (iii) for any security received in any such Reorganization Event, an amount equal to the Market Price per share of such security at the maturity of the Notes multiplied by the quantity of such security received for each share of UNUM Stock, as adjusted by the Exchange Factor. For purposes of paragraph 5 above, in the case of a consummated tender or exchange offer for all Exchange Property of a particular type, Exchange Property shall be deemed to include the amount of cash or other property paid by the offeror in the tender or exchange offer with respect to such Exchange Property (in an amount determined on the basis of the rate of exchange in such tender or exchange offer). In the event of a tender or exchange offer with respect to Exchange Property in which an offeree may elect to receive cash or other property, Exchange Property shall be deemed to include the kind and amount of cash and other property received by offerees who elect to receive cash. No adjustments to the Exchange Factor or Exchange Rate will be required unless such adjustment would require a change of at least 0.1% in the Exchange Factor or Exchange Rate then in effect. The Exchange Factor or Exchange Rate resulting from any of the adjustments specified above will be rounded to the nearest one thousandth with five ten-thousandths being rounded upward. No adjustments to the Exchange Factor or Exchange Rate 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 UNUM Stock, including, without limitation, a partial tender or exchange offer for the UNUM Stock. The Calculation Agent shall be solely responsible for the determination and calculation of any adjustments to the Exchange Factor or Exchange Rate and of any related determinations and calculations with respect to any distributions of stock, other securities or other property or assets (including cash) in connection with any corporate event described in paragraph 5 above, and its determinations and calculations with respect thereto shall be conclusive. The Calculation Agent will provide information as to any adjustments to the Exchange Factor or Exchange Rate upon written request by any holder of the Notes. Market Disruption Event:....... "Market Disruption Event" means, with respect to UNUM Stock: (i) a suspension, absence or material limitation of trading of UNUM Stock on the primary market for UNUM Stock for more than two hours of trading or during the one-half hour period preceding the close of trading in such market; or the suspension or material limitation on the primary market for trading in options contracts related to UNUM Stock, if available, during the one-half hour period preceding the close of trading in the applicable market, in each case as determined by the Calculation Agent in its sole discretion; and (ii) a determination by the Calculation Agent in its sole discretion that the event described in clause (i) above materially interfered with the ability of the Company or any of its affiliates to unwind all or a material portion of the hedge with respect to the Notes. For purposes of determining whether a Market Disruption Event has occurred: (1) a limitation on the hours or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of the relevant exchange, (2) a decision to permanently discontinue trading in the relevant option contract will not constitute a Market Disruption Event, (3) limitations pursuant to New York Stock Exchange Rule 80A (or any applicable rule or regulation enacted or promulgated by the New York Stock Exchange, any other self-regulatory organization or the Securities and Exchange Commission of similar scope as determined by the Calculation Agent) on trading during significant market fluctuations shall constitute a Market Disruption Event, (4) a suspension of trading in an options contract on UNUM 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 UNUM Stock and (5) a "suspension, absence or material limitation of trading" on the primary securities market on which options contracts related to UNUM Stock are traded will not include any time when such securities market is itself closed for trading under ordinary circumstances. UNUM Stock; Public Information. UNUM Stock is registered under the Exchange Act. Companies with securities registered under the Exchange Act are required to file periodically certain financial and other information specified by the Securities and Exchange Commission (the "Commission"). Information provided to or filed with the Commission is available at the offices of the Commission specified under "Available Information" in the accompanying Prospectus. In addition, information regarding UNUM may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. The Company makes no representation or warranty as to the accuracy or completeness of such reports. THIS PRICING SUPPLEMENT RELATES ONLY TO THE NOTES OFFERED HEREBY AND DOES NOT RELATE TO UNUM STOCK OR OTHER SECURITIES OF UNUM. ALL DISCLOSURES CONTAINED IN THIS PRICING SUPPLEMENT REGARDING UNUM ARE DERIVED FROM THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN THE PRECEDING PARAGRAPH. NEITHER THE COMPANY NOR THE AGENT HAS PARTICIPATED IN THE PREPARATION OF SUCH DOCUMENTS OR MADE ANY DUE DILIGENCE INQUIRY WITH RESPECT TO UNUM. NEITHER THE COMPANY NOR THE AGENT MAKES ANY REPRESENTATION THAT SUCH PUBLICLY AVAILABLE DOCUMENTS OR ANY OTHER PUBLICLY AVAILABLE INFORMATION REGARDING UNUM ARE ACCURATE OR COMPLETE. FURTHERMORE, THERE CAN BE NO ASSURANCE THAT ALL EVENTS OCCURRING PRIOR TO THE DATE HEREOF (INCLUDING EVENTS THAT WOULD AFFECT THE ACCURACY OR COMPLETENESS OF THE PUBLICLY AVAILABLE DOCUMENTS DESCRIBED IN THE PRECEDING PARAGRAPH) THAT WOULD AFFECT THE TRADING PRICE OF UNUM STOCK (AND THEREFORE THE INITIAL PRICE, THE THRESHOLD APPRECIATION PRICE AND THE EXCHANGE RATE APPLICABLE ABOVE THE THRESHOLD APPRECIATION PRICE) HAVE BEEN PUBLICLY DISCLOSED. SUBSEQUENT DISCLOSURE OF ANY SUCH EVENTS OR THE DISCLOSURE OF OR FAILURE TO DISCLOSE MATERIAL FUTURE EVENTS CONCERNING UNUM COULD AFFECT THE VALUE RECEIVED AT MATURITY WITH RESPECT TO THE NOTES AND THEREFORE THE TRADING PRICES OF THE NOTES. NEITHER THE COMPANY NOR ANY OF ITS AFFILIATES MAKE ANY REPRESENTATION TO ANY PURCHASER OF NOTES AS TO THE PERFORMANCE OF UNUM STOCK. The Company or its affiliates may presently or from time to time engage in business with UNUM including extending loans to, or making equity investments in, UNUM or providing advisory services to UNUM, including merger and acquisition advisory services. In the course of such business, the Company or its affiliates may acquire non-public information with respect to UNUM and, in addition, one or more affiliates of the Company may publish research reports with respect to UNUM. The Company does not make any representation to any purchaser of Notes with respect to any matters whatsoever relating to UNUM. Any prospective purchaser of a Note should undertake an independent investigation of UNUM as in its judgment is appropriate to make an informed decision with respect to an investment in UNUM Stock. Historical Information......... The following table sets forth the high and low Market Price during 1993, 1994, 1995, and during 1996 through June 21, 1996. The Market Price on June 21, 1996 was $58 1/2. The Market Prices and Dividends Per Share listed below were obtained from Bloomberg Financial Markets and the Company believes such information to be accurate. However, neither the Company nor the Agent makes any representation as to the accuracy of such information. The historical prices of UNUM Stock should not be taken as an indication of future performance, and no assurance can be given that the price of UNUM Stock will not decrease so that the beneficial owners of the Notes will receive at maturity cash in an amount that is less than the principal amount of the Notes. Nor can assurance be given that the price of UNUM Stock will increase above the Threshold Appreciation Price so that at maturity the beneficial owners of the Notes will receive cash in an amount in excess of the principal amount of the Notes. ============================================================================== Dividends UNUM High Low Per Share* - -------------------- ---------- --------- ---------------- (CUSIP #90319210) 1993: First Quarter....... $57 3/4 $50 7/8 .165 Second Quarter...... 56 3/8 51 5/8 .2 Third Quarter....... 59 3/4 53 5/8 .2 Fourth Quarter...... 54 48 .2 1994: First Quarter....... 57 1/4 48 3/8 .2 Second Quarter...... 56 1/8 44 3/4 .24 Third Quarter....... 50 43 1/8 .24 Fourth Quarter...... 46 3/4 36 1/4 .24 1995: First Quarter....... 46 38 1/4 .24 Second Quarter...... 47 7/8 40 1/8 .265 Third Quarter....... 53 7/8 45 7/8 .265 Fourth Quarter...... 56 3/8 50 7/8 .265 1996: First Quarter....... 61 7/8 55 7/8 .265 Second Quarter Through June, 21, 1996........... 63 56 .275 ============================================================================== * The Company makes no representation as to the amount of dividends, if any, that UNUM will pay in the future. In any event, holders of the Notes will not be entitled to receive dividends, if any, that may be payable on UNUM Stock. Use of Proceeds and Hedging:... The net proceeds to be received by the Company from the sale of the Notes will be used for general corporate purposes and, in part, by the Company or one or more of its affiliates in connection with hedging the Company's obligations under the Notes. See also "Use of Proceeds" in the accompanying Prospectus. On the date of this Pricing Supplement, the Company, through its subsidiaries and others, hedged its anticipated exposure in connection with the Notes by taking positions in UNUM Stock. Such hedging was carried out in a manner designed to minimize any impact on the price of UNUM Stock. Purchase activity could potentially have increased the price of UNUM Stock, and therefore effectively increase the level to which UNUM Stock must rise before a holder of a Note would receive at maturity cash in an amount that is equal to or greater than the principal amount of the Notes. The Company, through its subsidiaries, is likely to modify its hedge position throughout the life of the Notes by purchasing and selling UNUM Stock, options contracts on UNUM Stock listed on major securities markets or positions in any other instruments that it may wish to use in connection with such hedging. Although the Company has no reason to believe that its hedging activity had or will have a material impact on the price of UNUM Stock, there can be no assurance that the Company did not, or in the future will not, affect such price as a result of its hedging activities. United States Federal Taxation: The Company currently intends to treat gain upon a retirement of a Note at maturity, to the extent attributable to the exchange at maturity feature, as interest income and to report such amounts accordingly. See also "United States Federal Taxation" in the accompanying Prospectus Supplement. Recent Developments - Legal Proceedings:................... On June 11, 1996, an adversary proceeding was commenced by Orange County, California and its Treasurer-Tax Collector against Morgan Stanley in the United States Bankruptcy Court for the Central District of California in County of Orange and Moorlach v. Morgan Stanley & Co., Inc. The adversary proceeding is related to Orange County's Chapter 9 bankruptcy proceeding pending before the same court. The complaint asserts that Orange County, acting through its former Treasurer-Tax Collector, entered into various reverse repurchase agreements and other transactions with Morgan Stanley which were beyond the County's authority or ultra vires and, therefore, void. The complaint also asserts that Morgan Stanley allowed Orange County to enter into unsuitable transactions. In addition, the complaint alleges that Morgan Stanley violated the automatic stay provisions of the Bankruptcy Code when it liquidated the County's collateral and closed out certain reverse repurchase transactions subsequent to the County's December 6, 1994 bankruptcy filing. The complaint asserts claims based on ultra vires, setoff, equitable subordination, restitution, enforcement of the automatic stay, avoidance of post-petition transfers and negligence and seeks compensatory damages in an unspecified amount, declaratory and injunctive relief, restitution, interest, various costs and attorney's fees. -----END PRIVACY-ENHANCED MESSAGE-----