SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
Salomon Inc
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(Exact name of registrant as specified in its charter)
Delaware 22-1660266
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(State of incorporation or (I.R.S. Employer Identification No.)
organization)
7 World Trade Center
New York, New York 10048
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(Address of principal (Zip Code)
executive offices)
If this Form relates to the registration of a class of debt securities
and is effective upon filing pursuant to General Instruction A(c)(1),
please check the following box. [X]
If this Form relates to the registration of a class of debt securities
and is to become effective simultaneously with the effectiveness of a
concurrent registration statement under the Securities Act of 1933
pursuant to General Instruction A(c)(2), please check the following
box. [ ]
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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3,450,000 % Exchangeable Notes
Due February 1, 2001 (DECS) New York Stock Exchange
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Securities to be registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
<PAGE>
Item 1. Description of Registrant's Securities To Be Registered.
For a description of the securities to be registered
hereunder, reference is made to the information under the headings
"Description of Debt Securities" in the registrant's Prospectus dated
April 5, 1996 (Registration No. 333-01807), as supplemented by the
information under the heading "Description of the DECS" in the
registrant's Prospectus Supplement, dated November , 1996, filed on
November , 1996, which information is hereby incorporated herein by
reference and made part of this application in its entirety.
Item 2. Exhibits.
1. Proposed form of Note (See Exhibit A to the Ninth Supplemental
Indenture attached as Exhibit 2 hereto).
2. Senior Debt Indenture, dated as of December 1, 1988, between
Salomon Inc and Citibank, N.A., as Trustee (incorporated by
reference to Exhibit 8 to the Company's Current Report on
Form 8-K dated December 29, 1988), First Supplemental Indenture
dated as of September 7, 1990 to Senior Debt Indenture dated as
of December 1, 1988 between Salomon Inc and Citibank, N.A.
(incorporated by reference to Exhibit 4(b) to Registration
Statement No. 33-39502), Second Supplemental Indenture dated
June 12, 1991 to Senior Debt Indenture dated as of December 1,
1988 between Salomon Inc and Citibank, N.A. (incorporated by
reference to Exhibit 4(c) to Registration Statement
No. 33-41209), Third Supplemental Indenture dated as of July 1,
1992 to Senior Debt Indenture, dated as of December 1, 1988
between Salomon Inc and Citibank, N.A. (incorporated by reference
to Exhibit 4(d) to Registration Statement No. 33-49136), Fourth
Supplemental Indenture, dated as of October 29, 1992, between
Salomon Inc and Citibank, N.A. (incorporated by reference to
Exhibit 4(e) to Registration Statement No. 33-57922), Fifth
Supplemental Indenture dated as of December 14, 1993, between
Salomon Inc and Citibank, N.A. (incorporated by reference to
Exhibit 4(f) to Registration Statement No. 33-51269), Sixth
Supplemental Indenture dated as of December 29, 1994 between
Salomon Inc and Citibank, N.A. (incorporated by reference to
Exhibit 4(j) to Registration Statement No. 333-01807), Seventh
Supplemental Indenture dated as of February 1, 1996 between
Salomon Inc and Citibank, N.A. (incorporated by reference to
Exhibit 4(k) to Registration Statement No. 333-01807), Eighth
Supplemental Indenture dated as of May 8, 1996 between Salomon
Inc and Citibank, N.A. (incorporated by reference to Exhibit 4 to
Form 8-K filed with the Securities and Exchange Commission on
May 16, 1996) and form of Ninth Supplemental Indenture dated as of
November , 1996 between Salomon Inc and Citibank, N.A.
3. Prospectus Supplement, dated November , 1996, to the Prospectus
dated April 5, 1996 (which supplement includes therein the
Prospectus dated April 5, 1996).
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereto duly
authorized.
November 14, 1996 SALOMON INC
By:
/s/ Richard J. Carbone
---------------------
Richard J. Carbone
Principal Accounting
Officer and Controller
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit
1. Proposed form of Note (See Exhibit A to the
Ninth Supplemental Indenture attached as
Exhibit 2 hereto).
2. Senior Debt Indenture, dated as of December
1, 1988, between Salomon Inc and Citibank,
N.A., as Trustee (incorporated by reference
to Exhibit 8 to the Company's Current Report
on Form 8-K dated December 29, 1988), First
Supplemental Indenture dated as of September
7, 1990 to Senior Debt Indenture dated as of
December 1, 1988 between Salomon Inc and
Citibank, N.A. (incorporated by reference to
Exhibit 4(b) to Registration Statement No.
33-39502), Second Supplemental Indenture
dated June 12, 1991 to Senior Debt Indenture
dated as of December 1, 1988 between Salomon
Inc and Citibank, N.A. (incorporated by
reference to Exhibit 4(c) to Registration
Statement No. 33-41209), Third Supplemental
Indenture dated as of July 1, 1992 to Senior
Debt Indenture, dated as of December 1, 1988
between Salomon Inc and Citibank, N.A.
(incorporated by reference to Exhibit 4(d) to
Registration Statement No. 33-49136), Fourth
Supplemental Indenture, dated as of October
29, 1992, between Salomon Inc and Citibank,
N.A. (incorporated by reference to Exhibit
4(e) to Registration Statement No. 33-57922),
Fifth Supplemental Indenture dated as of
December 14, 1993, between Salomon Inc and
Citibank, N.A. (incorporated by reference to
Exhibit 4(f) to Registration Statement No.
33-51269), Sixth Supplemental Indenture dated
as of December 29, 1994 between Salomon Inc
and Citibank, N.A. (incorporated by reference
to Exhibit 4(j) to Registration Statement No.
333-01807), Seventh Supplemental Indenture
dated as of February 1, 1996 between Salomon
Inc and Citibank, N.A. (incorporated by
reference to Exhibit 4(k) to Registration
Statement No. 333-01807), Eighth
Supplemental Indenture dated as of May 8,
1996 between Salomon Inc and Citibank, N.A.
(incorporated by reference to Exhibit 4 to
Form 8-K filed with the Securities and
Exchange Commission on May 16, 1996) and form of
Ninth Supplemental Indenture dated as of November ,
1996 between Salomon Inc and Citibank, N.A.
3. Prospectus Supplement, dated November , 1996,
to the Prospectus dated April 5, 1996 (which
supplement includes therein the Prospectus
dated April 5, 1996).
CGSH Draft: 11/14/96
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SALOMON INC
TO
CITIBANK, N.A.
Trustee
---------------------------------
NINTH SUPPLEMENTAL INDENTURE
Dated as of November , 1996
Supplemental to Indenture dated as of December 1, 1988
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<PAGE>
This Ninth Supplemental Indenture (the "Supplemental
Indenture") is made and entered into as of November , 1996 between
Salomon Inc, a Delaware corporation (the "Company"), and Citibank,
N.A., a national banking association (the "Trustee"), as Trustee under
the Indenture dated as of December 1, 1988, as amended by the First
Supplemental Indenture dated September 7, 1990, the Second
Supplemental Indenture thereto dated June 12, 1991, the Third
Supplemental Indenture thereto dated July 1, 1992, the Fourth
Supplemental Indenture thereto dated October 29, 1992, the Fifth
Supplemental Indenture thereto dated December 14, 1993, the Sixth
Supplemental Indenture thereto dated December 29, 1994, the Seventh
Supplemental Indenture thereto dated February 1, 1996 and the Eighth
Supplemental Indenture thereto dated May 8, 1996 between the Company
and the Trustee (as amended to the date hereof, the "Indenture").
WHEREAS, the parties hereto previously entered into the
Indenture to provide for the issuance and sale by the Company from
time to time of its Senior Debt Securities (the "Debt Securities");
and
WHEREAS, Sections 1101(2), (5) and (6) of the Indenture
provide that the Company, when authorized by a Board Resolution, and
the Tr ustee, at any time and from time to time, may enter into an
indenture supplemental to the Indenture, in form satisfactory to the
Trustee, without the consent of any holder of Debt Securities, (a) to
add to the covenants of the Company, for the benefit of all or any
series of Debt Securities and the Coupons, if any, pertaining thereto
(and, if such covenants are to be for the benefit of less than all
such series, stating that such covenants are expressly being included
solely for the benefit of such series), (b) to change or eliminate any
of the provisions of the Indenture, provided that any such change or
elimination shall become effective only when there is no Outstanding
Debt Security or Coupon (as such terms are defined in the Indenture)
of any series created prior to the execution of such supplemental
indenture that is entitled to the benefit of such provision and as to
which such supplemental indenture would apply and (c) to establish the
form or terms of Debt Securities and Coupons, if any, of any series
as permitted by Section 201 and 301 of the Indenture; and
WHEREAS, the Company has duly authorized the creation of a
series of its Debt Securities denominated its " % Exchangeable Notes
Due February 1, 2001" representing up to of its "Debt Exchangeable for
Common StockSM" (such Debt Securities being referred to herein as the
"DECSSM"), the principal amount of which is mandatorily exchangeable
at Maturity into Common Shares, par value $1.00 per share (the
"Cincinnati Bell Common Shares"), of Cincinnati Bell Inc. an Ohio
corporation ("Cincinnati Bell"), or, at the option of the Company
under certain circumstances, cash, in either case at the Exchange Rate
(as defined herein) and/or other securities or cash as described here
in; and
WHEREAS, the entry into this Supplemental Indenture by the
parties hereto is in all respects authorized by the provisions of the
Indenture; and
WHEREAS the Company has duly authorized the execution and
delivery of this Supplemental Indenture, and all things necessary have
been done to make the DECS, when executed by the Company and
authenticated and delivered hereunder and duly issued by the
<PAGE>
Company, the valid obligations of the Company, and to make this
Supplemental Indenture a valid agreement of the Company, in accordance
with their and its terms.
NOW, THEREFORE:
For and in consideration of the premises and purchase of the
Debt Securities of any series issued hereunder by the Holders thereof,
it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Debt Securities of any such
series, as follows:
ARTICLE I
Certain Provisions of General Application
SECTION 1.01. Definitions.
For all purposes of the Indenture and this Supplemental
Indenture, except as otherwise expressly provided or unless the
context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article;
(2) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to the Indenture and this Supplemental
Indenture as a whole and not to any particular Article, Section or
other subdivision; and
(3) capitalized terms used but not defined herein are used as
they are defined in the Indenture.
"Adjustment Event" has the meaning set forth in Section
2.04(b).
"Business Day" means any day that is not a Saturday, a
Sunday or a day on which the NYSE or banking institutions or trust
companies in The City of New York are authorized or obligated by law
or executive order to close.
"Cincinnati Bell Common Shares" has the meaning set forth in
the recitals to this Supplemental Indenture.
"Closing Price" of any security on any date of determination
means (a) the closing sale price (or, if no closing sale price is
reported, the last reported sale price) of such security (regular way)
on the NYSE on such date, (b) if such security is not listed for
trading on the NYSE on any such date, as reported in the composite
transactions for the principal United States securities exchange on
which such security is so listed, (c) if such security is not so
listed on a United States national or regional securities exchange, as
reported by the Nasdaq Stock Market of the National Association of
Securities Dealers, Inc. Automated Quotation System, (d) if such
<PAGE>
security is not so reported, the last quoted bid price for such
security in the over-the-counter market as reported by the National
Quotation Bureau or similar organization or (e) if such security is
not so quoted, the average of the mid-point of the last bid and ask
prices for such security from each of at least three nationally
recognized investment banking firms selected for this purpose by the
Company.
"Current Market Price" means, as of any date of
determination, the average Closing Price per Cincinnati Bell Common
Share on the 20 Trading Days immediately prior to the date of
determination; provided, however, that if there are not 20 Trading
Days for the Cincinnati Bell Common Shares occurring after the 60th
calendar day immediately prior to, but not including, such date, the
Current Market Price shall be determined as the market value per
Cincinnati Bell Common Share as of such date as determined by a
nationally recognized investment banking firm retained for this
purpose by the Company.
"DECS" has the meaning set forth in the recitals to this
Supplemental Indenture.
"Dilution Event" has the meaning set forth in Section
2.05(a)(ii).
"Exchange Rate" means a rate equal to (a) if the Maturity
Price is greater than or equal to $ (the "Threshold Appreciation
Price"), Cincinnati Bell Common Shares per DECS, (b) if the Maturity
Price is less than the Threshold Appreciation Price but is greater
than the Initial Price, (i) a fraction equal to the Initial Price
divided by the Maturity Price of (ii) one Cincinnati Bell Common Share
per DECS (such fractional share being calculated to the nearest
1/10,000th of a share or, if there is not a nearest 1/10,000th of a
share, to the next higher 1/10,000th of a share) and (c) if the
Maturity Price is less than or equal to the Initial Price, one
Cincinnati Bell Common Share per DECS; provided, however, that the
Exchange Rate is subject to adjustment from time to time pursuant to
Section 2.04(a).
"Initial Price" means $ per Cincinnati Bell Common Share.
"Maturity Price" means the average Closing Price per
Cincinnati Bell Common Share on the 20 Trading Days immediately prior
to, but not including, the date of Maturity, which price shall be
determined by the Company and notified to the Trustee; provided,
however, that if there are not 20 Trading Days for the Cincinnati Bell
Common Shares occurring later than the 60th calendar day immediately
prior to, but not including, the date of Maturity, Maturity Price
means the market value per Cincinnati Bell Common Share as of Maturity
as determined by a nationally recognized investment banking firm
retained for this purpose by the Company.
"NYSE" means the New York Stock Exchange, Inc.
"Ordinary Cash Dividend" has the meaning set forth in
subparagraph (b)(5) of Section 2.04.
"Ordinary Share Dividend" has the meaning set forth in
subparagraph (b)(5) of Section 2.04.
<PAGE>
"Reported Securities" has the meaning set forth in
subparagraph (b)(3) of Section 2.04.
"Share Components" means the ratios of Cincinnati Bell
Common Shares per DECS specified in clauses (a), (b)(ii) and (c) of
the definition of "Exchange Rate" set forth in this Article.
"Threshold Appreciation Price" has the meaning specified in
the definition of "Exchange Rate" set forth in this Article.
"Trading Day" means a Business Day on which the security the
Closing Price of which is being determined (a) is not suspended from
trading on any national or regional securities exchange or association
or over-the-counter market at the close of business and (b) has traded
at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for
the trading of such security.
"Transaction Value" means (a) for any cash received in any
Adjustment Event, the amount of cash received per Cincinnati Bell
Common Share, (b) for any Reported Securities received in any
Adjustment Event, an amount equal to (x) the average Closing Price per
security of such Reported Securities on the 20 Trading Days
immediately prior to Maturity multiplied by (y) the number of such
Reported Securities (as adjusted pursuant to subparagraph (b)(4) of
Section 2.04) received per Cincinnati Bell Common Share and (c) for
any property received in any Adjustment Event other than cash or such
Reported Securities, an amount equal to the fair market value of the
property received per Cincinnati Bell Common Share on the date such
property is received, as determined by a nationally recognized
investment banking firm retained for this purpose by the Company;
provided, however, that in the case of clause (b), (i) with respect to
securities that are Reported Securities by virtue of only clause (iv)
of the definition of Reported Securities, Transaction Value with
respect to such Reported Security means the average of the mid-point
of the last bid and ask prices for such Reported Security as of
Maturity from each of at least three nationally recognized investment
banking firms retained for such purpose by the Company multiplied by
the number of such Reported Securities (as adjusted) received per
Cincinnati Bell Common Share and (ii) with respect to all other
Reported Securities, if there are not 20 Trading Days for any
particular Reported Security occurring after the 60th calendar day
immediately prior to, but not including, the date of Maturity,
Transaction Value with respect to such Reported Security means the
market value per security of such Reported Security as of Maturity as
determined by a nationally recognized investment banking firm retained
for such purpose by the Company multiplied by the number of such
Reported Securities (as adjusted) received per Cincinnati Bell Common
Share. For purposes of calculating Transaction Value, any cash,
Reported Securities or other property receivable in an Adjustment
Event shall be deemed to have been received immediately prior to the
close of business on the record date for such Adjustment Event or, if
there is no record date for such Adjustment Event, immediately prior
to the close of business on the effective date of such Adjustment
Event.
<PAGE>
SECTION 1.02. Effect of Headings.
The Article and Section headings herein are for convenience
only and shall not affect the construction hereof.
SECTION 1.03. Successors and Assigns.
All covenants and agreements in this Supplemental Indenture
by the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 1.04. Separability.
In case any provision in this Supplemental Indenture or the
DECS shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 1.05. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this
Supplemental Indenture by any of the provisions of the Trust Indenture
Act of 1939, as amended, such required provision shall control.
SECTION 1.06. Benefits of Supplemental Indenture.
Nothing in this Supplemental Indenture, expressed or
implied, shall give to any person, other than the parties hereto and
their successors hereunder, and the Holders of the DECS any benefit or
any legal or equitable right, remedy or claim under this Supplemental
Indenture.
SECTION 1.07. Application of Supplemental Indenture.
This Supplemental Indenture shall take effect on the date
hereof, and shall apply only to the DECS. This Supplemental Indenture
shall have no effect on any other Debt Securities, whether originally
issued prior to the date hereof or thereafter.
SECTION 1.08. Governing Law.
THIS SUPPLEMENTAL INDENTURE AND THE DECS SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND THIS
SUPPLEMENTAL INDENTURE AND EACH SUCH DECS SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
ARTICLE II
The DECS
SECTION 2.01. Title and Terms.
There is hereby created under the Indenture a series of Debt
Securities known and designated as the " % Exchangeable Notes Due
February 1, 2001" of the Company. The aggregate principal amount of
DECS that may be authenticated and delivered under this Indenture is
limited to $ , except for DECS authenticated and delivered upon
reregistration of, transfer of, or in exchange for, or in lieu of,
other DECS pursuant to Section 304, 305, 306, 1106 or 1308 of the
Indenture.
The Stated Maturity for payment of principal of the DECS
shall be February 1, 2001 and the DECS shall bear interest at the rate
of % per annum, from the date of original issuance or the most recent
Interest Payment Date to which interest has been paid or duly provided
for, payable quarterly in arrears on February 1, May 1, August 1 and
November 1 of each year (commencing February 1, 1997), to the persons
in whose names the DECS (or any predecessor securities) are registered
at the close of business on the fifteenth day of the calendar month
immediately preceding such interest payment date, until principal
thereof is paid or made available for payment.
The DECS shall be issuable in denominations of $[the Initial
Price] and any integral multiple thereof.
The DECS shall not be issued as Discount Securities.
The DECS shall be initially issued in the form of a Global
Security and the Depositary for the DECS shall be the Depository Trust
Company, New York, New York.
The DECS shall be issuable as Registered Securities only,
without coupons.
The Company shall not be obligated to pay any additional
amount on the DECS in respect of taxes, except as otherwise provided
in Sections 2.06 and 3.02.
The form of DECS attached hereto as Exhibit A is hereby
adopted, pursuant to Section 1101(6) of the Indenture, as a form of
Debt Securities of a series that consists of DECS.
The DECS shall be mandatorily exchangeable as provided in
Section 2.02.
SECTION 2.02. Exchange at Maturity.
Subject to Sections 2.04(b) and (c), at Maturity the
principal amount of each DECS shall be mandatorily exchanged by the
Company into a number of Cincinnati Bell Common Shares at the Exchange
Rate; provided, however, that, pursuant to Section 2.03, no fraction
of a Cincinnati Bell Common Share shall be issued. The Holders of the
DECS shall be
<PAGE>
responsible for the payment of any and all brokerage costs upon the
subsequent sale of such shares. The Company may, at its option, in
lieu of delivering Cincinnati Bell Common Shares, deliver cash in an
amount (calculated to the nearest 1/100th of a dollar per DECS or, if
there is not a nearest 1/100th of a dollar, then to the next higher
1/100th of a dollar) equal to the product of the number of Cincinnati
Bell Common Shares otherwise deliverable on the date of Maturity
multiplied by the Maturity Price; provided, however, that if such
option is exercised, the Company shall deliver cash with respect to
all, but not less than all, of the Cincinnati Bell Common Shares that
would otherwise be deliverable. In determining the amount of cash
deliverable in exchange for the DECS in lieu of Cincinnati Bell Common
Shares pursuant to the prior sentence hereof, if more than one DECS
shall be surrendered for exchange at one time by the same Holder, the
amount of cash which shall be delivered upon exchange shall be
computed on the basis of the aggregate number of DECS so surrendered
at Maturity.
SECTION 2.03. No Fractional Shares.
If more than one DECS shall be surrendered for exchange
pursuant to Section 2.02 at one time by the same Holder, the number of
full Cincinnati Bell Common Shares which shall be delivered upon such
exchange, in whole or in part, as the case may be, shall be computed
on the basis of the aggregate number of DECS surrendered. No
fractional shares or scrip representing fractional Cincinnati Bell
Common Shares shall be issued or delivered upon any exchange pursuant
to Section 2.02 of any DECS. In lieu of any fractional Cincinnati Bell
Common Share which, but for the immediately preceding sentence, would
otherwise be deliverable upon such exchange, the Company, through any
applicable Paying Agent, shall make a cash payment in respect of such
fractional interest in an amount equal to the value of such fractional
share at the Maturity Price. The Company shall, upon such exchange of
any DECS, provide cash to any applicable Paying Agent in an amount
equal to the cash payable with respect to any fractional Cincinnati
Bell Common Shares deliverable upon such exchange, and the Company
shall retain such fractional Cincinnati Bell Common Share.
SECTION 2.04. Adjustment of Exchange Rate.
(a) Adjustment for Distributions, Reclassifications, etc.
The Exchange Rate shall be subject to adjustment from time to time as
follows:
(i) If Cincinnati Bell shall:
(A) pay a dividend (other than an Ordinary Share
Dividend) or make a distribution, in either case, with
respect to Cincinnati Bell Common Shares in such shares;
(B) subdivide or split the outstanding Cincinnati Bell
Common Shares into a greater number of shares;
<PAGE>
(C) combine the outstanding Cincinnati Bell Common
Shares into a smaller number of shares; or
(D) issue by reclassification (other than a
reclassification pursuant to clause (ii), (iii), (iv) or (v)
of the definition of Adjustment Event in paragraph (b) of
this Section) of Cincinnati Bell Common Shares any common
shares of Cincinnati Bell;
then, in any such event, the Exchange Rate shall be adjusted by
adjusting each of the Share Components of the Exchange Rate in
effect immediately prior to such event so that a Holder of any
DECS shall be entitled to receive, upon mandatory exchange
pursuant to Section 2.02 of the principal amount of such DECS at
Maturity, the number of Cincinnati Bell Common Shares (or, in the
case of a reclassification referred to in clause (D) of this
sentence, the number of other common shares of Cincinnati Bell
issued pursuant thereto) which such Holder of such DECS would
have owned or been entitled to receive immediately following such
event had such DECS been exchanged immediately prior to such
event or any record date with respect thereto. Each such
adjustment shall become effective at the opening of business on
the Business Day next following the record date for determination
of holders of Cincinnati Bell Common Shares entitled to receive
such dividend or distribution in the case of a dividend or
distribution and shall become effective immediately after the
effective date in the case of a subdivision, split, combination
or reclassification. Each such adjustment shall be made
successively.
(ii) If Cincinnati Bell shall, after the date hereof,
issue rights or warrants to all holders of Cincinnati Bell Common
Shares entitling them to subscribe for or purchase Cincinnati
Bell Common Shares (other than rights to purchase Cincinnati Bell
Common Shares pursuant to a plan for the reinvestment of
dividends or interest) at a price per share less than the Current
Market Price of Cincinnati Bell Common Shares on the Business Day
next following the record date for the determination of holders
of Cincinnati Bell Common Shares entitled to receive such rights
or warrants, then in each case the Exchange Rate shall be
adjusted by multiplying each of the Share Components of the
Exchange Rate in effect on the record date for the issuance of
such rights or warrants by a fraction, of which the numerator
shall be (A) the number of Cincinnati Bell Common Shares
outstanding on the record date for the issuance of such rights or
warrants, plus (B) the number of additional Cincinnati Bell
Common Shares offered for subscription or purchase pursuant to
such rights or warrants, and of which the denominator shall be
(x) the number of Cincinnati Bell Common Shares outstanding on
the record date for the issuance of such rights or warrants, plus
(y) the number of additional Cincinnati Bell Common Shares which
the aggregate offering price of the total number of Cincinnati
Bell Common Shares so offered for subscription or purchase
pursuant to such rights or warrants would purchase at such
Current Market Price, which number of additional shares shall be
determined by multiplying such total number of shares by the
exercise price of such rights or warrants and dividing the
product so obtained by such Current Market Price. Such adjustment
shall become effective at the
<PAGE>
opening of business on the Business Day next following the record
date for the determination of holders of Cincinnati Bell Common
Shares entitled to receive such rights or warrants. To the extent
that such rights or warrants expire prior to the Maturity of the
DECS and Cincinnati Bell Common Shares are not delivered pursuant
to such rights or warrants prior to such expiration, the Exchange
Rate shall be readjusted to the Exchange Rate which would then be
in effect had such adjustments for the issuance of such rights or
warrants been made upon the basis of delivery of only the number
of Cincinnati Bell Common Shares actually delivered pursuant to
such rights or warrants. Each such adjustment shall be made
successively.
(iii) Any Cincinnati Bell Common Shares issuable in
payment of a dividend shall be deemed to have been issued
immediately prior to the close of business on the record date for
such dividend for purposes of calculating the number of
outstanding Cincinnati Bell Common Shares under paragraph (a)(ii)
of this Section.
(iv) All adjustments to the Exchange Rate shall be
calculated to the nearest 1/10,000th of a Cincinnati Bell Common
Share (or if there is not a nearest 1/10,000th of a share, to the
next lower 1/10,000th of a share). No adjustment in the Exchange
Rate shall be required unless such adjustment would require an
increase or decrease of at least one percent therein; provided,
however, that any adjustments which by reason of this paragraph
(a)(iv) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. If an adjustment
is made to the Exchange Rate pursuant to paragraph (a)(i) or
(a)(ii) of this Section, an adjustment shall also be made to the
Maturity Price as such term is used throughout the definition of
Exchange Rate set forth in Section 1.01. The required adjustment
to the Maturity Price shall be made at Maturity by multiplying
the Maturity Price by the cumulative number or fraction
determined under paragraphs (a)(i) and/or (a)(ii) of this Section
by which the original Exchange Rate was multiplied to adjust such
rate. In the case of the reclassification of any Cincinnati Bell
Common Shares into any common shares of Cincinnati Bell other
than Cincinnati Bell Common Shares, such common shares shall be
deemed Cincinnati Bell Common Shares solely to determine the
Maturity Price and to apply the Exchange Rate at Maturity. Each
such adjustment to the Exchange Rate and the Maturity Price shall
be made successively.
(b) Other Adjustment Events. In the event of (i) any
dividend or distribution by Cincinnati Bell to all holders of
Cincinnati Bell Common Shares of evidences of its indebtedness or
other assets (excluding any Ordinary Share Dividends and other
dividends or distributions referred to in clause (A) of paragraph
(a)(i) of this Section, any common shares issued pursuant to a
reclassification referred to in clause (D) of paragraph (a)(i) of this
Section and any Ordinary Cash Dividends or any issuance by Cincinnati
Bell to all holders of Cincinnati Bell Common Shares
<PAGE>
of rights or warrants to subscribe for or purchase any of its
securities (other than rights or warrants referred to in paragraph
(a)(ii) of this Section), (ii) any consolidation or merger of
Cincinnati Bell with or into another entity (other than a merger or
consolidation in which Cincinnati Bell is the continuing corporation
and in which the Cincinnati Bell Common Shares outstanding immediately
prior to the merger or consolidation are not exchanged for cash,
securities or other property of Cincinnati Bell or another
corporation), (iii) any sale, transfer, lease or conveyance to another
corporation of the property of Cincinnati Bell as an entirety or
substantially as an entirety, (iv) any statutory exchange of
securities of Cincinnati Bell with another corporation (other than in
connection with a merger or acquisition) or (v) any liquidation,
dissolution or winding up of Cincinnati Bell (any such event, an
"Adjustment Event"), the property receivable by Holders of DECS at
Maturity shall be subject to adjustment from time to time as follows:
(1) Each Holder of a DECS will receive at Maturity, in
lieu of or (in the case of an Adjustment Event described in
clause (i) of this paragraph (b)) in addition to, each Cincinnati
Bell Common Share that it would otherwise receive as required by
Section 2.02, cash in an amount equal to (A) if the Maturity
Price is greater than or equal to the Threshold Appreciation
Price, multiplied by the Transaction Value, (B) if the
Maturity Price is less than the Threshold Appreciation Price but
greater than the Initial Price, the product of (x) the Initial
Price divided by the Maturity Price multiplied by (y) the
Transaction Value and (C) if the Maturity Price is less than or
equal to the Initial Price, the Transaction Value.
(2) Following an Adjustment Event, the Maturity Price,
as such term is used throughout the definition of Exchange Rate
and in subparagraph (b)(1) above, shall be deemed to equal (A)
the Maturity Price of the Cincinnati Bell Common Shares, as
adjusted pursuant to the provisions of paragraph (a)(iv) of this
Section, plus (B) the Transaction Value.
(3) Notwithstanding the foregoing, with respect to any
securities received in such Adjustment Event (A)(i) that are
listed on a United States national securities exchange, (ii) that
are reported on a United States national securities system
subject to last sale reporting, (iii) that are traded in the
over-the-counter market and reported on the National Quotation
Bureau or similar organization or (iv) for which bid and ask
prices are available from at least three nationally recognized
investment banking firms and (B) that are either (x) perpetual
equity securities or (y) non-perpetual equity securities or debt
securities with a stated maturity after the Stated Maturity
("Reported Securities"), the Company may, at its option, in lieu
of delivering the amount of cash deliverable in respect of
Reported Securities received in an Adjustment Event, determined
in accordance with subparagraph (b)(1), deliver a number of such
Reported Securities with a value equal to such cash amount, as
determined in accordance with clause (b) of the definition of
Transaction Value set forth in Section 1.01; provided, however,
that (i) if such option is exercised, the Company shall deliver
Reported Securities in respect of all, but not less than all,
cash amounts that would otherwise be deliverable in respect of
Reported Securities received in an Adjustment Event, (ii) the
Company may not exercise such option if the Company has elected
to deliver cash in lieu of Cincinnati Bell Common Shares, if any,
deliverable upon Maturity or if such Reported Securities have not
yet been delivered to the holders entitled thereto following such
<PAGE>
Adjustment Event or any record date with respect thereto and
(iii) subject to clause (ii) of this proviso, the Company must
exercise such option if the Company does not elect to deliver
cash in lieu of Cincinnati Bell Common Shares, if any,
deliverable upon Maturity. If the Company elects to deliver
Reported Securities, each Holder of a DECS will be responsible
for the payment of any and all brokerage and other transaction
costs upon the sale of such Reported Securities. If, following
any Adjustment Event, any Reported Security ceases to qualify as
a Reported Security, then (x) the Company may no longer elect to
deliver such Reported Security in lieu of an equivalent amount of
cash and (y) notwithstanding clause (b) of the definition of
Transaction Value, the Transaction Value of such Reported
Security shall mean the fair market value of such Reported
Security on the date such security ceases to qualify as a
Reported Security, as determined by a nationally recognized
investment banking firm retained for this purpose by the Company.
(4) The amount of cash and/or the kind and number of
securities into which the DECS shall be exchangeable after an
Adjustment Event shall be subject to adjustment following the
date of such Adjustment Event in the same manner and upon the
occurrence of the same type of events as described in paragraphs
(a) and (b) of this Section with respect to Cincinnati Bell
Common Shares and Cincinnati Bell.
(5) For purposes of the foregoing, the term "Ordinary
Cash Dividend" means, with respect to any consecutive 365-day
period, any dividend with respect to Cincinnati Bell Common
Shares paid in cash to the extent that the amount of such
dividend, together with (i) the aggregate amount of all other
dividends on the Cincinnati Bell Common Shares paid in cash plus
(ii) the aggregate value of all Ordinary Share Dividends on
Cincinnati Bell Common Shares (with Ordinary Share Dividends
valued at the Current Market Price of Cincinnati Bell Common
Shares on the record date for such dividend) during such 365-day
period, does not exceed on a per share basis 10% of the average
of the Closing Prices of the Cincinnati Bell Common Shares over
such 365-day period. The term "Ordinary Share Dividend" means,
with respect to any calendar quarter, any dividend with respect
to Cincinnati Bell Common Shares paid in such shares to the
extent that the value of such dividend, together with (i) the
aggregate amount of all dividends on the Cincinnati Bell Common
Shares paid in cash plus (ii) the aggregate value of all other
dividends on Cincinnati Bell Common Shares paid in such shares
(with each share dividend valued at the Current Market Price of
Cincinnati Bell Common Shares on the record date for such
dividend) during such calendar quarter, does not exceed on a per
share basis 0.4% of the average of the Closing Prices of the
Common Shares over such calendar quarter. For purposes of this
subparagraph (b)(5), any dividend, whether in cash or shares,
shall be deemed to be paid as of the record date for such
dividend.
<PAGE>
SECTION 2.05. Notice of Adjustments and Certain Other
Events.
(a) Whenever the Exchange Rate is adjusted as herein
provided or an Adjustment Event occurs, the Company shall:
(i) forthwith compute the adjusted Exchange Rate (or
Transaction Value) in accordance with Section 2.04 and prepare a
certificate signed by an officer of the Company setting forth the
adjusted Exchange Rate (or Transaction Value), the method of
calculation thereof in reasonable detail and the facts requiring
such adjustment and upon which such adjustment is based, which
certificate shall be conclusive, final and binding evidence of
the correctness of the adjustment, and file such certificate
forthwith with the Trustee; and
(ii) within ten Business Days following the occurrence
of an event that permits or requires an adjustment to the
Exchange Rate pursuant to Section 2.04(a) (each, a "Dilution
Event") or an Adjustment Event that permits or requires a change
in the consideration to be received by Holders pursuant to
Section 2.04(b) (or, in any case, if the Company is not aware of
such occurrence, as soon as practicable after becoming so aware),
provide written notice to the Trustee and to the Holders of the
outstanding DECS of the occurrence of such Dilution Event or
Adjustment Event including a statement in reasonable detail
setting forth the method by which any adjustment to the Exchange
Rate or change in the consideration to be received was determined
and setting forth the revised Exchange Rate or consideration, as
the case may be, per DECS; provided, however, that in respect of
any adjustment to the Maturity Price, such notice need only
disclose the factor by which the Maturity Price is to be
multiplied pursuant to Section 2.04(a)(iv) in order to determine
which clause of the definition of the Exchange Rate will apply at
Maturity, it being understood that, until Maturity, the Exchange
Rate itself cannot be determined.
(b) In case at any time while any of the DECS are
outstanding the Company receives notice that:
(i) Cincinnati Bell shall declare a dividend (or any
other distribution) on or in respect of the Cincinnati Bell
Common Shares to which Section 2.04(a)(i) or (ii) shall apply
(other than any cash dividends and distributions, if any, paid
from time to time by Cincinnati Bell that constitute Ordinary
Cash Dividends);
(ii) Cincinnati Bell shall authorize the issuance to
all holders of Cincinnati Bell Common Shares of rights or
warrants to subscribe for or purchase Cincinnati Bell Common
Shares or of any other subscription rights or warrants;
(iii) there shall occur any conversion or
reclassification of Cincinnati Bell Common Shares (other than a
subdivision or combination of such outstanding Cincinnati Bell
Common Shares) or any consolidation, merger or reorganization to
which Cincinnati
<PAGE>
Bell is a party and for which approval of any shareholders of
Cincinnati Bell is required, or the sale or transfer of all or
substantially all of the assets of Cincinnati Bell; or
(iv) there shall occur the voluntary or involuntary
dissolution, liquidation or winding up of Cincinnati Bell;
then the Company shall promptly cause to be delivered to the Trustee
and any applicable Paying Agent and filed at the office or agency
maintained for the purpose of exchange of DECS at Maturity in the
Borough of Manhattan, in The City of New York by the Trustee (or any
applicable Paying Agent), and shall promptly cause to be mailed to the
Holders of DECS at their last addresses as they shall appear upon the
registration books of the Security Registrar, at least eight days
before the date hereinafter specified (or the earlier of the dates
hereinafter specified, in the event that more than one is specified),
a notice stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution or grant of rights or warrants
or, if a record is not to be taken, the date as of which the holders
of Cincinnati Bell Common Shares of record to be entitled to such
dividend, distribution or grant of rights or warrants are to be
determined, or (y) the date, if known by the Company, on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective. Following
any Adjustment Event, the provisions of this paragraph (b) shall apply
with respect to any Reported Securities in the same manner as with
respect to Cincinnati Bell and the Cincinnati Bell Common Shares.
(c) On or prior to four Business Days preceding the Stated
Maturity of the DECS, the Company shall provide notice to the Holders
of record of the DECS and to the Trustee and will publish a notice in
a daily newspaper of national circulation stating whether the Company
will deliver, in accordance with Section 2.02, Cincinnati Bell Common
Shares or cash (and/or, in accordance with Section 2.04(b), cash or
Reported Securities) upon the mandatory exchange of the principal
amount of the DECS. After the close of business on the Business Day
immediately preceding the Stated Maturity of the DECS, the Company
shall notify the Trustee in writing of the number of Cincinnati Bell
Common Shares and/or Reported Securities, or the amount of cash to be
paid per DECS.
SECTION 2.06. Taxes.
(a) The Company will pay any and all documentary, stamp,
transfer or similar taxes that may be payable in respect of the
transfer and delivery of Cincinnati Bell Common Shares (or Reported
Securities) pursuant hereto; provided, however, that the Company shall
not be required to pay any such tax which may be payable in respect of
any transfer involved in the delivery of Cincinnati Bell Common Shares
(or Reported Securities) in a name other than that in which the DECS
so exchanged were registered, and no such transfer or delivery shall
be made unless and until the person requesting such transfer has paid
to the Company the amount of any such tax, or has established, to the
satisfaction of the Company, that such tax has been paid.
<PAGE>
(b) The parties hereto hereby agree, and each Holder of a
DECS by its purchase of a DECS hereby agrees:
(i) to treat, for U.S. federal income tax purposes,
each DECS as a forward purchase contract to purchase Cincinnati
Bell Common Shares at Maturity (including as a result of
acceleration or otherwise) (the "forward purchase contract
characterization"), under the terms of which contract (a) at the
time of issuance of the DECS the Holder deposits irrevocably with
the Company a fixed amount of cash equal to the purchase price of
the DECS to assure the fulfillment of the Holder's purchase
obligation described in clause (c) below, which deposit will
unconditionally and irrevocably be applied at Maturity to satisfy
such obligation, (b) until Maturity the Company will be obligated
to pay interest on such deposit at a rate equal to the stated
rate of interest on the DECS as compensation to the Holder for
the Company's use of such cash deposit during the term of the
DECS, and (c) at Maturity such cash deposit unconditionally and
irrevocably will be applied by the Company in full satisfaction
of the Holder's obligation under the forward purchase contract,
and the Company will deliver to the Holder the number of
Cincinnati Bell Common Shares that the Holder is entitled to
receive at that time pursuant to the terms of the DECS (subject
to the Company's right to deliver cash in lieu of the Cincinnati
Bell Common Shares);
(ii) to treat, consistent with the above
characterization, (x) amounts paid to the Company in respect of
the original issue of a DECS as allocable in their entirety to
the amount of the cash deposit attributable to such DECS, and (y)
amounts denominated as interest that are payable with respect to
the DECS as interest payable on the amount of such deposit,
includible annually in the income of the Holder as interest
income in accordance with its method of accounting; and
(iii) to file all U.S. federal, state and local income
and franchise tax returns consistent with the forward purchase
contract characterization (unless required otherwise by an
applicable taxing authority).
SECTION 2.07. Delivery of Securities upon Maturity.
All Cincinnati Bell Common Shares and Reported Securities
deliverable to Holders upon the Maturity of the DECS shall be
delivered to such Holders, whenever practicable, in such manner (such
as by book-entry transfer) so as to assure same-day transfer of such
securities to Holders and otherwise in the manner customary at such
time for delivery of such securities and securities of the same type.
<PAGE>
ARTICLE III
Covenants
SECTION 3.01. Shares Free and Clear.
With respect to the DECS only and for the benefit of only
the holders thereof, the Company covenants and warrants that upon
exchange of a DECS at Maturity pursuant to the Indenture and this
Supplemental Indenture, the Holder of a DECS shall receive valid title
to the Cincinnati Bell Common Shares (and, in the event an Adjustment
Event has occurred, the Reported Securities) for which such DECS is at
such time exchangeable pursuant to this Indenture, free and clear of
any and all liens, claims, charges and encumbrances whatsoever. Except
as provided in Section 2.06(a), the Company shall pay all taxes and
charges with respect to the delivery of Cincinnati Bell Common Shares
(and Reported Securities) delivered in exchange for DECS hereunder. In
addition, the Company further warrants that any Cincinnati Bell Common
Shares (and Reported Securities) delivered in exchange for DECS
hereunder shall be free of any transfer restrictions (other than such
as are solely attributable to any Holder's status as an affiliate of
Cincinnati Bell or the issuer of such Reported Securities).
Section 3.02. Discharge of Indenture.
With respect to the DECS only and for the benefit of only
the holders thereof, the Company surrenders all rights and powers
conferred on it by subclause (B)(ii) or (iii) of clause (1) of Section
401 of the Indenture. With respect to the DECS only and for the
benefit of only the holders thereof, the Company shall have the right
to discharge the Indenture pursuant to and in accordance with the
remaining provisions of Section 401 of the Indenture if, instead of
depositing with the Trustee Currency, the Company deposits Cincinnati
Bell Common Shares, Reported Securities and/or cash sufficient to pay
and discharge the entire indebtedness on the DECS for principal and
interest to the date of Stated Maturity.
ARTICLE IV
Miscellaneous
SECTION 4.01. Confirmation of Indenture.
The Indenture, as supplemented and amended by this
Supplemental Indenture and all other indentures supplemental thereto,
is in all respects ratified and confirmed, and the Indenture, this
Supplemental Indenture and all indentures supplemental thereto shall
be read, taken and construed as one and the same instrument.
<PAGE>
SECTION 4.02. Concerning the Trustee.
The Trustee assumes no duties, responsibilities or
liabilities by reason of this Supplemental Indenture other than as set
forth in the Indenture.
-----------------
This Supplemental Indenture may be executed in any number of
counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed, and their respective
corporate seals to be hereunto affixed and attested, all as of the day
and year first above written.
SALOMON INC
By:
---------------------------
Name:
Title:
Attest:
---------------------
Name:
Title:
CITIBANK, N.A., as Trustee
By:
---------------------------
Name:
Title:
Attest:
---------------------
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the day of , 1996, before me personally came ,
to me known, who, being by me duly sworn, did depose and say that
she/he is the of SALOMON INC, one of the corporations
described in and which executed the foregoing instrument; that
she/he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that
she/he signed her/his name thereto by like authority.
------------------------
Notary Public
SEAL
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the day of , 1996, before me personally came ,
to me known, who, being by me duly sworn, did depose and say that
he is the of CITIBANK, N.A., one of the corporations described in
and which executed the foregoing instrument; that she/he knows the
seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that she/he signed
her/his name thereto by like authority.
------------------------
Notary Public
SEAL
<PAGE>
Exhibit A
This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of the
Depositary or a nominee of the Depositary. Unless and until it is
exchanged in whole or in part for the individual Debt Securities
represented hereby, this Global Security may not be transferred except
as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary.
Unless this Security is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New
York, New York) to the Company or its agent for registration of
transfer, exchange or payment, and any security issued is registered
in the name of Cede & Co., or such other name as requested by an
authorized representative of the Depository Trust Company and any
payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the
registered owner hereof, Cede & Co., has an interest herein.
NO.--------------- CUSIP NO. 79549 B 867
[Form of Face of DECS]
SALOMON INC
DECS SM
(Debt Exchangeable for Common Stock SM)
% Exchangeable Note Due February 1, 2001
(Subject to Exchange at Maturity into Common Shares,
Par Value $1.00 Per Share, of Cincinnati Bell Inc.)
Salomon Inc, a Delaware corporation (hereinafter called the
"Company", which term includes any successor corporation under the
Indenture hereinafter referred to), for value received, hereby
promises to pay to Cede & Co. or registered assigns, the principal sum
of Dollars (or $ for each Debt Exchangeable for Common
Stock (each, a "DECS") represented by this note) on February 1, 2001
(subject to the mandatory exchange provisions at Maturity described
below), and to pay interest (computed on the basis of a 360-day year
of twelve 30-day months) on such principal amount from the date of
original issuance or from the most recent Interest Payment Date (as
defined below) to which interest has been paid or duly provided for,
quarterly on February 1, May 1, August 1 and November 1 of each year
(each, an "Interest Payment Date" and, collectively, the "Interest
Payment Dates"), commencing February 1, 1997, at the rate per annum
specified in the title of this note, until the principal
F-1
<PAGE>
hereof is paid or made available for payment. The interest so payable,
and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in said Indenture, be paid to the person in whose
name this DECS (or the DECS in exchange or substitution for which this
DECS was issued) is registered at the close of business on the Regular
Record Date (as defined below) for interest payable on such Interest
Payment Date. The Regular Record Date for any interest payment is the
close of business on the fifteenth day of the calendar month
immediately preceding the relevant Interest Payment Date, whether or
not a Business Day (as defined below), provided that interest payable
at Maturity shall be payable to the person to whom the principal
hereof is payable. In any case where such Interest Payment Date shall
not be a Business Day, then (notwithstanding any other provision of
said Indenture or this DECS) payment of such interest need not be made
on such date, but may be made on the next succeeding Business Day with
the same force and effect as if made on such Interest Payment Date,
and, if such payment is so made, no interest shall accrue for the
period from and after such Interest Payment Date. Any such interest
not so punctually paid or duly provided for shall forthwith cease to
be payable to the registered Holder on such Regular Record Date, and
may be paid to the person in whose name this DECS (or the DECS in
exchange or substitution for which this DECS was issued) is registered
at the close of business on a record date for the payment of such
interest to be fixed by the Trustee for the DECS, notice whereof shall
be given to Holders of the DECS not less than ten days prior to such
record date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which
the DECS may be listed and not deemed impracticable by the Trustee,
and upon such notice as may be required by such exchange.
At Maturity, the principal amount of this DECS will be
mandatorily exchanged into a number of common shares, par value $1.00
per share (the "Cincinnati Bell Common Shares"), of Cincinnati Bell
Inc. ("Cincinnati Bell") at the Exchange Rate (as defined below). The
"Exchange Rate" is equal to (a) if the Maturity Price (as defined
below) is greater than or equal to $ (the "Threshold Appreciation
Price"), Cincinnati Bell Common Shares per DECS, (b) if the
Maturity Price is less than the Threshold Appreciation Price but is
greater than $ (the "Initial Price"), (i) a fraction equal to the
Initial Price divided by the Maturity Price of (ii) one Cincinnati
Bell Common Share per DECS (such fractional share being calculated to
the nearest 1/10,000th of a share or, if there is not a nearest
1/10,000th of a share, to the next higher 1/10,000th of a share) and
(c) if the Maturity Price is less than or equal to the Initial Price,
one Cincinnati Bell Common Share per DECS. ACCORDINGLY, THE VALUE OF
THE CINCINNATI BELL COMMON SHARE TO BE RECEIVED BY HOLDERS OF THE DECS
(OR, AS DISCUSSED BELOW, THE CASH EQUIVALENT THAT MAY BE RECEIVED IN
LIEU OF SUCH SHARES) AT MATURITY WILL NOT NECESSARILY EQUAL THE
PRINCIPAL AMOUNT OF SUCH DECS. Any Cincinnati Bell Common Shares
delivered by the Company to the Holders of the DECS that are not
affiliated with Cincinnati Bell shall be free of any transfer
restrictions, and the holders of DECS will be responsible for the
payment of any and all brokerage costs upon the subsequent sale of
such shares. No fractional Cincinnati Bell Common Shares will be
issued at Maturity as provided in the Indenture.
F-2
<PAGE>
The Company may at its option, in lieu of delivering
Cincinnati Bell Common Shares, deliver cash in an amount equal to the
value of such number of Cincinnati Bell Common Shares at the Maturity
Price as provided in the Indenture; provided, however, that if such
option is exercised, the Company shall deliver cash with respect to
all, but not less than all, of the Cincinnati Bell Common Shares that
would otherwise be deliverable.
Notwithstanding the foregoing, (i) in the case of certain
dilution events, the Exchange Rate will be subject to adjustment and
(ii) in the case of certain adjustment events, the consideration
received by Holders of DECS at Maturity will be Cincinnati Bell Common
Shares, other securities and/or cash, each as provided in the
Indenture.
The "Maturity Price" is defined as the average Closing Price
per Cincinnati Bell Common Share on the 20 Trading Days immediately
prior to (but not including) the date of Maturity or, under certain
circumstances, the market value per Cincinnati Bell Common Share as of
the date of Maturity as determined by a nationally recognized
investment banking firm retained for this purpose by the Company, as
provided in the Indenture. The "Closing Price" of any security on any
date of determination means (i) the closing sale price (or, if no
closing sale price is reported, the last reported sale price) of such
security (regular way) on the New York Stock Exchange (the "NYSE") on
such date, (ii) if such security is not listed for trading on the NYSE
on any such date, as reported in the composite transactions for the
principal United States securities exchange on which such security is
so listed, (iii) if such security is not so listed on a United States
national or regional securities exchange, as reported by the Nasdaq
Stock Market, (iv) if such security is not so reported, the last
quoted bid price for such security in the over-the-counter market as
reported by the National Quotation Bureau or similar organization or
(v) if such security is not so quoted, the average of the mid-point of
the last bid and ask prices for such security from each of at least
three nationally recognized investment banking firms selected for this
purpose by the Company. A "Trading Day" is defined as a Business Day
on which the security the Closing Price of which is being determined
(i) is not suspended from trading on any national or regional
securities exchange or association or over-the-counter market at the
close of business and (ii) has traded at least once on the national or
regional securities exchange or association or over-the-counter market
that is the primary market for the trading of such security. "Business
Day" means any day that is not a Saturday, a Sunday or a day on which
the NYSE or banking institutions or trust companies in The City of New
York, New York are authorized or obligated by law or executive order
to close.
Interest on this DECS will be payable, and delivery of
Cincinnati Bell Common Shares (or, at the Company's option, cash in an
amount equal to the value of such Cincinnati Bell Common Shares and/or
such other consideration as permitted or required herein) in exchange
for the principal amount of this DECS at Maturity will be made upon
surrender of this DECS, at the office or agency of the Company
maintained for that purpose in The Borough of Manhattan, in The City
of New York and payment of interest on (and, if the Company elects not
to deliver Cincinnati Bell Common Shares and/or other securities upon
exchange at Maturity, the cash equivalent thereof payable upon
exchange for the principal amount of) this DECS will be made in such
coin or currency of the United States of America as at the time of
payment is legal tender
F-3
<PAGE>
for payment of public and private debts; provided, however, that at
the option of the Company payment of interest may be made by check
mailed to the address of the person entitled thereto as such address
shall appear on the register for the DECS.
ADDITIONAL PROVISIONS OF THIS DECS ARE CONTAINED ON THE
REVERSE HEREOF AND SUCH PROVISIONS SHALL HAVE THE SAME EFFECT AS
THOUGH FULLY SET FORTH IN THIS PLACE.
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee for this DECS by manual
signature, this DECS shall not be entitled to any benefit under the
Indenture, or be valid or obligatory for any purpose. "DECS" and "Debt
Exchangeable for Common Stock" are service marks of Salomon Brothers
Inc.
IN WITNESS WHEREOF, Salomon Inc has caused this instrument
to be duly executed under its corporate seal.
Dated: SALOMON INC
--------------------
Name:
Title:
Attest:
Name:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debt Securities issued under the within-mentioned
Indenture.
CITIBANK, N.A., as Trustee
By:
------------------------------
Authorized Officer
F-4
<PAGE>
[Form of Reverse of DECS]
SALOMON INC
% Exchangeable Note Due February 1, 2001
(Subject to Exchange at Maturity into Common Shares,
Par Value $1.00 Per Share, of Cincinnati Bell Inc.)
This DECS is one of a duly authorized issue of debentures,
notes or other evidences of indebtedness (hereinafter called the "Debt
Securities") of the Company of the series hereinafter specified, which
series is limited in aggregate principal amount to $ , all such Debt
Securities issued and to be issued under an indenture dated as of
December 1, 1988, as supplemented by the First Supplemental Indenture
dated September 7, 1990, the Second Supplemental Indenture thereto
dated June 12, 1991, the Third Supplemental Indenture thereto dated
July 1, 1992, the Fourth Supplemental Indenture thereto dated October
29, 1992, the Fifth Supplemental Indenture thereto dated December 14,
1993, the Sixth Supplemental Indenture thereto dated December 29,
1994, the Seventh Supplemental Indenture thereto dated February 1,
1996, the Eighth Supplemental Indenture thereto dated May 8, 1996 and
the Ninth Supplemental Indenture thereto dated November , 1996 (as
so supplemented and as may be further supplemented from time to time,
the "Indenture") between the Company and Citibank, N.A., as trustee
(herein called the "Trustee", which term includes any successor
Trustee under the Indenture), pursuant to which the Company has
designated Citibank, N.A. as Trustee for the DECS, to which Indenture
and all other indentures supplemental thereto reference is hereby made
for a statement of the rights and limitation of rights thereunder of
the Holders of the Debt Securities and of the rights, obligations,
duties and immunities of the Trustee for each series of Debt
Securities and of the Company, and the terms upon which the Debt
Securities are and are to be authenticated and delivered. As provided
in the Indenture, the Debt Securities may be issued in one or more
series, which different series may be issued in various aggregate
principal amounts, may be denominated in currencies other than U.S.
Dollars (including composite currencies), may mature at different
times, may bear interest, if any, at different rates, may be subject
to different redemption provisions, if any, may be subject to
different sinking fund or other purchase provisions, if any, may be
subject to different covenants and Events of Default and may otherwise
vary as in the Indenture provided or permitted. This DECS is one of a
series of the Debt Securities designated as % Exchangeable Notes Due
February 1, 2001.
The DECS may not be redeemed and are not entitled to the
benefit of any sinking fund.
The provisions contained in the Indenture for defeasance of
the Company's obligations upon compliance by the Company with certain
conditions set forth therein will not be applicable to the DECS.
Certain provisions contained in the Indenture pertaining to
satisfaction and discharge of the entire principal of all the Debt
Securities of any series upon compliance by the Company with certain
conditions set forth therein will not be applicable to the DECS. The
<PAGE>
Ninth Supplemental Indenture provides that the Company may under
certain circumstances discharge its obligations under the Indenture by
delivering to the Trustee Cincinnati Bell Common Shares, other
securities and/or cash.
If an Event of Default with respect to the DECS, as defined
in the Indenture, shall occur and be continuing, the principal of all
DECS may be declared due and payable and therefore will result in the
mandatory exchange of the principal amount thereof for Cincinnati Bell
Common Shares (or, at the Company's option, cash and/or such other
consideration as permitted or required herein), all in the manner and
with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Debt
Securities of each series under the Indenture at any time by the
Company with the consent of the Holders of not less than a majority in
aggregate principal amount of the Debt Securities at the time
outstanding of each series to be affected thereby. The Indenture also
contains provisions permitting the Holders of specified percentages in
aggregate principal amount of the Debt Securities of any series at the
time outstanding, on behalf of the Holders of all the Debt Securities
of such series, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the
Indenture and their consequences with respect to such series. Any such
consent or waiver by the Holder of this DECS shall be conclusive and
binding upon such Holder and upon all future Holders of this DECS and
of any DECS issued upon the transfer hereof or in exchange herefor or
in lieu hereof whether or not notation of such consent or waiver is
made upon this DECS.
No reference herein to the Indenture and no provision of
this DECS or of the Indenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal
of and interest on this DECS at the times, place and rate, and in the
manner, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, this DECS is transferable on the
register for the DECS, upon surrender of this DECS for registration of
transfer at the office or agency of the Company to be maintained for
that purpose in The City of New York, New York, or at any other office
or agency of the Company maintained for that purpose, duly endorsed
by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Registrar for the DECS duly
executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new DECS, of authorized
denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees. No service charge
shall be made for any such transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the registration of
such transfer or exchange, other than certain exchanges not involving
any transfer.
Certain capitalized terms used in this DECS but not defined
herein have the meanings set forth in the Indenture.
R-2
<PAGE>
THIS DECS SHALL FOR ALL PURPOSES BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
The Company, the Trustee for the DECS and any agent of the
Company or such Trustee may treat the person in whose name this DECS
is registered as the owner hereof for the purpose of receiving payment
as herein provided and for all other purposes, whether or not this
DECS be overdue, and neither the Company, such Trustee nor any such
agent shall be affected by notice to the contrary.
R-3
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM - as tenants in UNIF GIFT MIN - Custodian
common (Cust) (Minor)
Under Uniform Gifts
TEN ENT - as tenants by to Minors Act
the entireties
------------------------------
JT TEN - as joint (State)
tenants with
right of
survivorship
and not as
tenants in
common
Additional abbreviations may also be used
though not in the above list.
----------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sell(s),
assign(s) and transfer(s) unto
Please insert Social Security
or Taxpayer I.D. or other
Identifying Number of Assignee
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
Please Print or Type Name and Address Including Postal Zip Code of Assignee
- - ---------------------------------------------------------------------------
the within DECS and all rights thereunder, hereby irrevocably
constituting and appointing
attorney
- - -------------------------------------------------------------------
to transfer said DECS on the books of Salomon Inc with full power
of substitution in the premises.
Dated:
--------------------- ----------------------------------
Signature
----------------------------------
NOTICE: The signature to this
assignment must correspond with
the name as it appears upon the
face of the within DECS in
every particular, without
alteration or enlargement or
any change whatsoever.
R-4
Filed Pursuant to Rule 424(b)(2)
Registration Statement Nos. 333-01807,
33-41932, 33-49136, 33-57922, 33-51269,
33-54929
THIS PROSPECTUS SUPPLEMENT RELATES TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND IS SUBJECT TO COMPLETION
OR AMENDMENT.
SUBJECT TO COMPLETION
OCTOBER 22, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus Dated April 5, 1996)
3,000,000 DECS(SM)
(DEBT EXCHANGEABLE FOR COMMON STOCK(SM))
SALOMON INC
% EXCHANGEABLE NOTES DUE FEBRUARY 1, 2001
(SUBJECT TO EXCHANGE INTO COMMON SHARES, PAR VALUE $1.00 PER SHARE, OF
CINCINNATI BELL INC.)
The principal amount of each of the % Exchangeable Notes Due February 1,
2001 (each, a "DECS"), of Salomon Inc, a Delaware corporation (the "Company"),
being offered hereby will be $ (the last sale price of the common shares, par
value $1.00 per share (the "Common Shares"), of Cincinnati Bell Inc., an Ohio
corporation ("Cincinnati Bell"), on , 1996, as reported on the New York
Stock Exchange Composite Tape) (the "Initial Price"). The DECS will mature on
February 1, 2001. Interest on the DECS, at the rate of % of the principal
amount per annum, is payable quarterly on February 1, May 1, August 1 and
November 1, beginning February 1, 1997. The DECS are not subject to redemption
or any sinking fund prior to maturity.
At maturity (including as a result of acceleration or otherwise), the principal
amount of each DECS will be mandatorily exchanged by the Company into a number
of Common Shares (or, at the Company's option, the cash equivalent) at the
Exchange Rate (as defined herein). The Exchange Rate is equal to, subject to
certain adjustments, (a) if the Maturity Price (as defined below) is greater
than or equal to $ , Common Shares per DECS, (b) if the Maturity Price
is less than $ but is greater than the Initial Price, a fraction equal to the
Initial Price divided by the Maturity Price of one Common Share per DECS and (c)
if the Maturity Price is less than or equal to the Initial Price, one Common
Share per DECS. The "Maturity Price" means the average Closing Price (as defined
herein) per Common Share on the 20 Trading Days (as defined herein) immediately
prior to maturity, except as otherwise described herein. Accordingly, the value
of the Common Shares to be received by holders of the DECS (or the cash
equivalent) at maturity will not necessarily equal the principal amount thereof.
The DECS will be unsecured obligations of the Company ranking pari passu with
all of its other unsecured and unsubordinated indebtedness. Cincinnati Bell will
have no obligations with respect to the DECS. See "Description of the DECS."
SEE "RISK FACTORS RELATING TO DECS" BEGINNING ON PAGE S-3 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE PURCHASERS.
Attached hereto is a prospectus of Cincinnati Bell relating to the Common Shares
that may be received by holders of DECS at maturity. The Common Shares are
listed on the New York Stock Exchange ("NYSE") and the Cincinnati Stock Exchange
("CSE") under the symbol "CSN." Application has been made to list the DECS on
the NYSE.
For a discussion of certain United States federal income tax consequences for
holders of DECS, see "Certain United States Federal Income Tax Considerations."
"DECS" and "Debt Exchangeable for Common Stock" are service marks of Salomon
Brothers Inc.
The Cincinnati Bell Pension Plans Trust is concurrently offering for sale in a
separate offering and pursuant to a separate prospectus (the "Pension Trust
Offering") 2,000,000 Common Shares owned by the Cincinnati Bell Pension Plans
Trust, plus up to an additional 300,000 Common Shares solely to cover
over-allotments. The closings of the offering of the DECS offered hereby and the
Pension Trust Offering are not conditioned upon each other.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT COMPANY(1)(2)
<S> <C> <C> <C>
Per DECS...................................... $ $ $
Total (3)..................................... $ $ $
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from the issue date.
(2) The Western and Southern Life Insurance Company and its wholly owned
subsidiary, Waslic Company II, have agreed to reimburse expenses payable by
the Company, estimated at $275,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an aggregate of 450,000 additional DECS at the Price to Public, less
Underwriting Discount, solely to cover over-allotments, if any. If the
Underwriters exercise such option in full, the total Price to Public,
Underwriting Discount and Proceeds to the Company will be $ , $ and
$ , respectively. See "Plan of Distribution."
The DECS are offered subject to receipt and acceptance by the Underwriters, to
prior sales and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the DECS will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of The
Depository Trust Company, on or about , 1996.
The Company or one or more of its subsidiaries may from time to time purchase or
acquire a position in the DECS and may, at its option, hold or resell such DECS.
Salomon Brothers Inc, an indirect wholly owned subsidiary of the Company,
expects to offer and sell previously issued DECS in the course of its business
as a broker-dealer. Salomon Brothers Inc may act as principal or agent in such
transactions. Such sales, if any, will be made at varying prices related to
prevailing market prices at the time of sale.
Joint Book-Running Managers
SALOMON BROTHERS INC MORGAN STANLEY & CO.
INCORPORATED
The date of this Prospectus Supplement is , 1996.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING AND THE PENSION TRUST OFFERING, THE
UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICE OF THE DECS OR THE COMMON SHARES AT LEVELS ABOVE THOSE WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON
THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the Securities and
Exchange Commission (the "Commission") pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (File No. 1-4346), are
incorporated herein by reference: (i) the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, (ii) the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996 and (iii) the
Company's Current Reports on Form 8-K dated January 23, 1996, February 1, 1996,
February 12, 1996, April 23, 1996, April 29, 1996, May 30, 1996, June 5, 1996,
June 26, 1996, June 28, 1996, July 23, 1996, September 12, 1996 and October 22,
1996. See "Incorporation of Certain Documents By Reference" in the Prospectus of
Salomon Inc accompanying this Prospectus Supplement.
S-2
<PAGE> 3
RISK FACTORS RELATING TO DECS
As described in more detail below, the trading price of the DECS may vary
considerably prior to maturity (including by acceleration or otherwise,
"Maturity") due to, among other things, fluctuations in the market price of the
Common Shares and other events that are difficult to predict and beyond the
Company's control.
COMPARISON TO OTHER DEBT SECURITIES; RELATIONSHIP TO COMMON SHARES
The terms of the DECS differ from those of ordinary debt securities in that
the value of the Common Shares (or cash equivalent thereof) that a holder of the
DECS will receive upon mandatory exchange of the principal amount thereof at
Maturity (the "Amount Receivable at Maturity") is not fixed, but is based on the
market price of the Common Shares as specified in the Exchange Rate (as defined
under "Description of the DECS"). There can be no assurance that the Amount
Receivable at Maturity will be equal to or greater than the principal amount of
the DECS. For example, if the Maturity Price of the Common Shares is less than
the Initial Price, the Amount Receivable at Maturity will be less than the
principal amount paid for the DECS, in which case an investment in the DECS
would result in a loss and, if Cincinnati Bell is insolvent or bankrupt, could
result in a total loss. Holders of DECS, therefore, bear the full risk of a
decline in the value of the Common Shares prior to Maturity.
In addition, the opportunity for equity appreciation afforded by an
investment in the DECS is less than the opportunity for equity appreciation
afforded by an investment in the Common Shares because the Amount Receivable at
Maturity will only exceed the principal amount of such DECS if the Maturity
Price exceeds the Threshold Appreciation Price (as defined under "Description of
the DECS"), which represents an appreciation of % of the Initial Price.
Moreover, holders of the DECS will only be entitled to receive upon exchange at
Maturity % of any appreciation of the value of the Common Shares in excess
of the Threshold Appreciation Price. See "Description of the DECS" for an
illustration of the Amount Receivable at Maturity that a DECS holder would
receive at various Maturity Prices. Because the market price of the Common
Shares is subject to market fluctuations, the Amount Receivable at Maturity may
be more or less than the principal amount of the DECS.
It is impossible to predict whether the price of the Common Shares will
rise or fall. Trading prices of the Common Shares will be influenced by
Cincinnati Bell's operational results and by complex and interrelated political,
economic, financial and other factors that can affect the capital markets
generally, the stock exchanges on which the Common Shares are traded and the
market segment of which Cincinnati Bell is a part. See the prospectus relating
to Cincinnati Bell and for the Common Shares attached hereto. Trading prices of
the Common Shares also may be influenced if the Company, another market
participant or a principal shareholder of Cincinnati Bell hereafter issues
securities with terms similar to those of the DECS or otherwise transfers Common
Shares.
IMPACT OF THE DECS ON THE MARKET FOR THE COMMON SHARES
It is not possible to predict accurately how or whether the DECS will trade
in the secondary market or whether such market will be liquid. Any market that
develops for the DECS is likely to influence and be influenced by the market for
the Common Shares. For example, the price of the Common Shares could become more
volatile and could be depressed by investors' anticipation of the potential
distribution into the market, upon the maturity of the DECS, of the additional
number of Common Shares held by Waslic Company II ("Waslic"), a wholly owned
subsidiary of The Western and Southern Life Insurance Company ("Western &
Southern") which may be delivered by Waslic upon the maturity of the DECS
(currently constituting approximately 4.5% of the outstanding Common Shares).
See "Relationship Among Waslic, Western & Southern and Cincinnati Bell." The
price of the Common Shares could also be affected by possible sales of the
Common Shares by investors who view the DECS as a more attractive means of
equity participation in Cincinnati Bell
S-3
<PAGE> 4
and by hedging or arbitrage trading activity that may develop involving the DECS
and the Common Shares.
DILUTION OF COMMON SHARES
The Amount Receivable at Maturity is subject to adjustment for certain
events arising from stock splits and combinations, stock dividends (other than
ordinary stock dividends) and certain other actions of Cincinnati Bell that
modify its capital structure. See "Description of the DECS -- Dilution
Adjustments; Other Adjustment Events." Such Amount Receivable at Maturity may
not be adjusted for other events, such as offerings of Common Shares for cash or
in connection with acquisitions, that may adversely affect the price of the
Common Shares and, because of the relationship of such Amount Receivable at
Maturity to the price of the Common Shares, such other events may adversely
affect the trading price of the DECS. There can be no assurance that Cincinnati
Bell will not make offerings of Common Shares or take such other action in the
future or as to the amount of such offerings, if any.
In addition, until such time, if any, as the Company shall deliver Common
Shares to holders of the DECS at Maturity thereof, holders of the DECS will not
be entitled to any rights with respect to the Common Shares (including, without
limitation, voting rights and the rights to receive any dividends or other
distributions in respect thereof).
NO OBLIGATION ON THE PART OF WASLIC OR CINCINNATI BELL WITH RESPECT TO THE DECS
In connection with the sale of the DECS offered hereby, the Company expects
to purchase from Waslic an exchangeable note (the "Waslic DECS") in the same
principal amount as the DECS that will obligate Waslic to deliver to the Company
at or prior to Maturity a number of Common Shares (or, at Waslic's option, the
cash equivalent) that are expected to have the same value as the Amount
Receivable at Maturity. Nevertheless, the purchase and sale of the Waslic DECS
is a commercial transaction and does not create any rights in, or for the
benefit of, any third party, including any holder of DECS. The Company has no
obligation to retain the Waslic DECS and investors in the DECS will have no
recourse to Waslic in the event of a default under the DECS offered hereby.
The Company has no affiliation with Waslic, Western & Southern or
Cincinnati Bell and none of Waslic, Western & Southern or Cincinnati Bell has
any obligation with respect to the DECS or the Amount Receivable at Maturity,
including any obligation to take the needs of the Company or of holders of the
DECS into consideration for any reason. Cincinnati Bell will not receive any of
the proceeds of the offering of the DECS made hereby and is not responsible for,
and has not participated in, the decision to issue the DECS or the determination
of the time of, the prices for or quantities of DECS to be issued. None of
Waslic, Western & Southern or Cincinnati Bell is involved with the
administration or trading of the DECS or the determination or calculation of the
Amount Receivable at Maturity.
In the event Waslic does not perform under the Waslic DECS, the Company
will be required to otherwise acquire Common Shares for delivery to the holders
of the DECS (or, at the option of the Company, to pay the cash equivalent).
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
It is not possible to predict how the DECS will trade in the secondary
market or whether such market will be liquid or illiquid. DECS are novel and
innovative securities, and there is currently no secondary market for the DECS.
The Underwriters currently intend, but are not obligated, to make a market in
the DECS. There can be no assurance that a secondary market will develop or, if
a secondary market does develop, that it will provide the holders of the DECS
with liquidity or that it will continue for the life of the DECS.
S-4
<PAGE> 5
Application has been made to list the DECS on the NYSE. However, if the
DECS are listed, there can be no assurance that the DECS will not later be
delisted or that trading on the DECS on the NYSE will not be suspended. In the
event of a delisting or suspension of trading on such exchange, the Company will
apply for listing of the DECS on another national securities exchange or for
quotation on another trading market. If the DECS are not listed or traded on any
securities exchange or trading market, or if trading of the DECS is suspended,
pricing information for the DECS may be more difficult to obtain, and the
liquidity of the DECS may be adversely affected.
UNCERTAINTY OF FEDERAL INCOME TAX CONSEQUENCES
No statutory, judicial or administrative authority directly addresses the
characterization of the DECS or instruments similar to the DECS for U.S. federal
income tax purposes. As a result, significant aspects of the U.S. federal income
tax consequences of an investment in the DECS are not certain. No ruling is
being requested from the Internal Revenue Service with respect to the DECS and
no assurance can be given that the Internal Revenue Service will agree with the
conclusions expressed under "Certain United States Federal Income Tax
Considerations."
RISK FACTORS RELATING TO CINCINNATI BELL
Investors in the DECS should carefully consider the information in the
prospectus of Cincinnati Bell attached hereto, including the information
contained therein under "Risk Factors" beginning on page 8 of such prospectus.
SALOMON INC
Salomon Inc conducts global investment banking, global securities and
commodities trading, and U.S. oil refining and gathering activities. Investment
banking activities are conducted by Salomon Brothers Holding Company Inc and its
subsidiaries, including Salomon Brothers Inc ("Salomon Brothers"). Salomon
Brothers provides capital raising, advisory, trading and risk management
services to its customers, and executes proprietary trading strategies on its
own behalf. Salomon Inc's commodities trading activities are conducted by the
Company's wholly owned subsidiary, Phibro Inc. and its subsidiaries. Oil
refining and gathering activities are conducted by Basis Petroleum, Inc.
CINCINNATI BELL
Cincinnati Bell is a major U.S. diversified telecommunications company with
principal businesses in three industry segments. The telephone operations
segment, Cincinnati Bell Telephone Company ("CBT"), provides telecommunications
services and products, which include local service, network access and toll
telephone services in the Greater Cincinnati area. The information systems
segment, Cincinnati Bell Information Systems Inc. ("CBIS"), provides data
processing and software development services primarily to the U.S.
telecommunications industry. The telephone marketing services segment, MATRIXX
Marketing Inc. ("MATRIXX"), provides telephone marketing, research, fulfillment,
database management, interactive voice response and Internet services primarily
to large corporations such as AT&T Corp. and DIRECTV Inc. Cincinnati Bell also
provides long distance and directory services, markets communications equipment
and has a minority interest in a partnership which operates cellular telephone
systems.
Cincinnati Bell is a leader in each of its principal businesses. CBT is the
leading local telephone company in the Greater Cincinnati area; CBIS is the
leading provider of billing and customer care services to the wireless
telecommunications market in North America; and MATRIXX is the largest
independent provider of outsourced telephone marketing services based on annual
revenues.
Cincinnati Bell's revenues and operating income excluding special items for
1995 were approximately $1.3 billion and $225 million, respectively,
representing increases of 9% and 32% over
S-5
<PAGE> 6
1994. Cincinnati Bell's revenues and operating income excluding special items
for the first half of 1996 were $738 million and $136 million, respectively,
representing increases of 11% and 23% over the first half of 1995.
The three principal businesses and other interests of Cincinnati Bell are
the products of a focused strategy first initiated in 1983 to expand from a
local exchange telecommunications company into a broader, more diversified
company providing value-added customer care services in high growth and
converging communications markets. By leveraging the combined knowledge,
capabilities and experience of its principal subsidiaries, Cincinnati Bell seeks
to take advantage of the opportunities arising from the growing communications
market and the growing trend of outsourcing information and telephone marketing
services. Cincinnati Bell's ability to provide unique insight into the customer
care requirements of outsourcing clients of both CBIS and MATRIXX is enhanced by
the knowledge and expertise developed by serving CBT, a full service
telecommunications provider.
In addition to the growth opportunities and synergies created by working
together, each business -- CBT, CBIS and MATRIXX -- has growth strategies in its
respective markets. CBT's strategy is to leverage off its well regarded brand
name, excellent service record and tradition of quality to be a full service
provider of bundled communications, information and entertainment services.
CBIS's strategy is to utilize the scale of its data processing operations and
its extensive industry knowledge and experience to be the leading provider of
customer care and billing services and network provisioning and management
systems to the communications industry. MATRIXX's strategy is to focus on
developing long-term strategic outsourcing relationships for telephone marketing
support of large clients in the telecommunications, technology, financial
services, consumer products and direct response industries.
RECENT DEVELOPMENTS CONCERNING
CINCINNATI BELL
For additional information about recent developments concerning Cincinnati
Bell, see "Recent Developments" in the prospectus of Cincinnati Bell attached
hereto.
------------------------------
For additional information about Cincinnati Bell, see the prospectus of
Cincinnati Bell attached hereto. Cincinnati Bell is subject to the informational
requirements of the Exchange Act, and in accordance therewith files reports,
proxy statements and other information with the Commission. The prospectus of
Cincinnati Bell attached hereto incorporates the 1995 Annual Report on Form 10-K
of Cincinnati Bell, the Quarterly Reports on Form 10-Q of Cincinnati Bell for
the quarters ended March 31 and June 30, 1996 and the description of Rights set
forth in Cincinnati Bell's Registration Statement on Form 8-A declared effective
November 5, 1986, and all documents filed by Cincinnati Bell pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of such
prospectus and prior to the termination of this DECS offering. Such documents
may be inspected and copied at the public reference facilities maintained by the
Commission in Washington, D.C. and at its regional offices and at the offices of
the NYSE and the CSE, on which the Common Shares are listed. Such documents,
without exhibits, also may be obtained by writing to the Secretary of Cincinnati
Bell, Cincinnati Bell Inc., 201 East Fourth Street, Cincinnati, Ohio 45202
(telephone number (513) 397-9900). See "Available Information" and
"Incorporation of Certain Documents by Reference" in the prospectus of
Cincinnati Bell attached hereto.
Cincinnati Bell is not affiliated with the Company, will not receive any
proceeds from the sale of the DECS and will have no obligations with respect to
the DECS. The prospectus of Cincinnati Bell is attached hereto and delivered to
prospective purchasers of DECS together with this Prospectus Supplement and
accompanying Prospectus for convenience of reference only. The prospectus of
Cincinnati Bell does not constitute a part of this Prospectus Supplement or the
accompanying Prospectus, nor is it incorporated by reference herein.
S-6
<PAGE> 7
RELATIONSHIP AMONG WASLIC, WESTERN & SOUTHERN AND CINCINNATI BELL
In connection with the sale of the DECS offered hereby, the Company expects
to purchase the Waslic DECS from Waslic. Under the terms of the Waslic DECS,
Waslic may deliver to the Company a number of Common Shares (or, at Waslic's
option, the cash equivalent) that are expected to have the same value as the
Amount Receivable at Maturity.
Waslic and Western & Southern currently own, or have voting power or
investment power with respect to, an aggregate of 6,452,696 Common Shares or
approximately 9.6% of the issued and outstanding Common Shares. Waslic acquired
3,157,896 of such Common Shares upon conversion of Cincinnati Bell's 7.25%
Cumulative Convertible Voting Preferred Shares, no par value (the "Preferred
Shares"), and the remainder in open market purchases. Pursuant to a Registration
Rights Agreement relating to the Preferred Shares, Cincinnati Bell has agreed to
indemnify Waslic and Western & Southern against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments Waslic and
Western & Southern may be required to make in respect thereof, in connection
with the offering of the DECS. In addition, certain of The Touchstone Funds,
which are mutual funds managed by an affiliate of Western & Southern, and
certain investment advisory clients of Fort Washington Advisors, Inc., a wholly
owned subsidiary of Western & Southern, hold an aggregate of 11,308 Common
Shares. Touchstone Advisors, Inc., a wholly owned subsidiary of Western &
Southern, is the adviser to The Touchstone Funds. John F. Barrett, a director of
Cincinnati Bell since 1992, is President and Chief Executive Officer of Western
& Southern, and Phillip R. Cox, a director of Cincinnati Bell since 1993, is a
trustee of The Touchstone Funds.
In connection with the offering of the DECS, Cincinnati Bell has agreed to
indemnify the Company against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act"). Waslic and
Western & Southern have agreed to indemnify the Company against certain
liabilities, including liabilities under the Securities Act, and have agreed to
pay the expenses of the Company incurred in connection with the offering of the
DECS. The Company has no affiliation with Waslic, Western & Southern or
Cincinnati Bell and none of Waslic, Western & Southern or Cincinnati Bell has
any obligation with respect to the DECS. See "Risk Factors Relating to
DECS -- No Obligation on the Part of Waslic or Cincinnati Bell with Respect to
the DECS."
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<PAGE> 8
PRICE RANGE AND DIVIDEND HISTORY
OF CINCINNATI BELL COMMON SHARES
The Common Shares are traded under the symbol "CSN" on the NYSE and on the
CSE. The following table sets forth for the indicated calendar quarters the high
and low sales prices for the Common Shares, as reported on the NYSE consolidated
transaction system, and the dividends paid per Common Share since January 1,
1994.
<TABLE>
<CAPTION>
SALES PRICES
-------------- DIVIDENDS
HIGH LOW PAID
---- --- ---------
<S> <C> <C> <C>
1994
First Quarter................................................ $18 7/8 $151/2 $0.20
Second Quarter............................................... $17 1/2 $153/8 $0.20
Third Quarter................................................ $20 1/8 $16 $0.20
Fourth Quarter............................................... $19 1/2 $163/4 $0.20
1995
First Quarter................................................ $22 1/8 $167/8 $0.20
Second Quarter............................................... $26 1/4 $207/8 $0.20
Third Quarter................................................ $28 1/8 $243/4 $0.20
Fourth Quarter............................................... $35 1/4 $261/8 $0.20
1996
First Quarter................................................ $53 $321/4 $0.20
Second Quarter............................................... $57 3/4 $467/8 $0.20
Third Quarter................................................ $53 1/4 $453/8 $0.20
Fourth Quarter (through October 22, 1996).................... $53 1/8 $49 $0.20(1)
</TABLE>
- - ---------------
(1) Cincinnati Bell declared a dividend on September 16, 1996, payable on
November 1, 1996, to shareholders of record on October 2, 1996.
As of September 30, 1996, there were approximately 18,532 holders of record
of Common Shares and 67,393,953 Common Shares outstanding, including 8,171,378
shares held by or for the account of Cincinnati Bell, its subsidiaries and its
employee benefit plans.
For a recent sales price of the Common Shares, see the cover page of this
Prospectus Supplement.
The Company makes no representation as to the amount of dividends, if any,
that Cincinnati Bell will pay in the future. In any event, holders of the DECS
will not be entitled to receive any dividends that may be payable on the Common
Shares until such time as the Company, if it so elects, delivers Common Shares
at Maturity of the DECS, and then only with respect to dividends having a record
date on or after the date of delivery of such Common Shares. See "Description of
the DECS."
USE OF PROCEEDS
The net proceeds to be received by the Company from the offering of the
DECS will be used for general corporate purposes, including to purchase the
Waslic DECS.
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<PAGE> 9
DESCRIPTION OF THE DECS
The following description of the particular terms of the DECS supplements,
and to the extent inconsistent therewith replaces, the description of the
general terms and provisions of the Debt Securities set forth in the
accompanying Prospectus, to which description reference is hereby made.
GENERAL
The DECS are a series of Debt Securities (as defined in the Prospectus), to
be issued under the Senior Debt Indenture dated as of December 1, 1988, as
supplemented from time to time (the "Indenture"), between the Company and
Citibank, N.A., a national banking association, as Trustee (the "Trustee").
The DECS will constitute Senior Indebtedness (as defined in the Prospectus)
of the Company, will be unsecured and will rank on a parity with all other
unsecured and unsubordinated indebtedness of the Company. The aggregate number
of DECS to be issued will be 3,000,000 plus such additional number of DECS as
may be issued pursuant to the over-allotment option granted by the Company to
the Underwriters. See "Plan of Distribution." The DECS will mature on February
1, 2001 (the "Stated Maturity"). In the future, the Company may issue additional
Debt Securities or other securities with terms similar to those of the DECS.
Each DECS, which will be issued with a principal amount of $ ,
will bear interest at the annual rate of % of the principal amount per annum
(or $ per annum) from the date of original issuance, or from the most
recent Interest Payment Date (as defined below) to which interest has been paid
or provided for until the principal amount thereof is exchanged at maturity
(including by acceleration or otherwise, "Maturity") pursuant to the terms of
the DECS. Interest on the DECS will be payable quarterly in arrears on February
1, May 1, August 1 and November 1, commencing February 1, 1997 (each, an
"Interest Payment Date"), to the persons in whose names the DECS are registered
at the close of business on the fifteenth day of the calendar month immediately
preceding such Interest Payment Date, provided that interest payable at Maturity
shall be payable to the person to whom the principal is payable. Interest on the
DECS will be computed on the basis of a 360-day year of twelve 30-day months. If
an Interest Payment Date falls on a day that is not a Business Day (as defined
below), the interest payment to be made on such Interest Payment Date will be
made on the next succeeding Business Day with the same force and effect as if
made on such Interest Payment Date, and no additional interest will accrue as a
result of such delayed payment.
At Maturity, the principal amount of each DECS will be mandatorily
exchanged by the Company into a number of Common Shares (or the equivalent
amount of cash) at the Exchange Rate (as defined below). The "Exchange Rate" is
equal to (a) if the Maturity Price (as defined below) is greater than or equal
to $ (the "Threshold Appreciation Price"), Common Shares per DECS,
(b) if the Maturity Price is less than the Threshold Appreciation Price but is
greater than the Initial Price, a fraction equal to the Initial Price divided by
the Maturity Price of one Common Share per DECS and (c) if the Maturity Price is
less than or equal to the Initial Price, one Common Share per DECS. ACCORDINGLY,
THE VALUE OF THE COMMON SHARES TO BE RECEIVED BY HOLDERS OF THE DECS (OR, AS
DISCUSSED BELOW, THE CASH EQUIVALENT TO BE RECEIVED IN LIEU OF SUCH SHARES) AT
MATURITY WILL NOT NECESSARILY EQUAL THE PRINCIPAL AMOUNT OF SUCH DECS. The
numbers of Common Shares per DECS specified in clauses (a) and (c) above of the
Exchange Rate definition are hereinafter referred to as the "Share Components."
Any Common Shares delivered by the Company to the holders of the DECS that are
not affiliated with Cincinnati Bell shall be free of any transfer restrictions
and the holders of the DECS will be responsible for the payment of any and all
brokerage costs upon the subsequent sale of such shares. No fractional Common
Shares will be issued at Maturity as provided under "-- Fractional Shares"
below. The Company may at its option deliver cash, in lieu of delivering such
Common Shares. The amount of cash deliverable in respect of each DECS will be
equal to the
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<PAGE> 10
product of the number of Common Shares otherwise deliverable in respect of such
DECS on the date of Maturity multiplied by the Maturity Price. In the event the
Company elects to deliver cash in lieu of Common Shares at Maturity, it will be
obligated pursuant to the Indenture to deliver cash to all holders of DECS. On
or prior to the fourth Business Day prior to February 1, 2001, the Company will
notify the Trustee, which in turn will notify The Depository Trust Company, and
publish a notice in a daily newspaper of national circulation stating whether
the principal amount of each DECS will be exchanged for Common Shares or cash.
Notwithstanding the foregoing, (i) in the case of certain dilution events,
the Exchange Rate will be subject to adjustment, and (ii) in the case of certain
adjustment events, the consideration received by holders of DECS at Maturity
will be Common Shares, other securities and/or cash. See "-- Dilution
Adjustments; Other Adjustment Events" below.
The "Maturity Price" is defined as the average Closing Price per Common
Share on the 20 Trading Days immediately prior to (but not including) the date
of Maturity; provided, however, that if there are not 20 Trading Days for the
Common Shares following the 60th calendar day immediately prior to, but not
including, the date of Maturity, "Maturity Price" will be defined as the market
value per Common Share as of Maturity as determined by a nationally recognized
investment banking firm retained for such purpose by the Company. The "Closing
Price" of any security on any date of determination means the closing sale price
(or, if no closing sale price is reported, the last reported sale price) of such
security (regular way) on the NYSE on such date or, if such security is not
listed for trading on the NYSE on any such date, as reported in the composite
transactions for the principal United States securities exchange on which such
security is so listed, or if such security is not so listed on a United States
national or regional securities exchange, as reported by the Nasdaq Stock
Market, or, if such security is not so reported, the last quoted bid price for
such security in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or if such security is not so quoted,
the average of the mid-point of the last bid and ask prices for such security
from each of at least three nationally recognized investment banking firms. A
"Trading Day" is defined as a day on which the security the Closing Price of
which is being determined (A) is not suspended from trading on any national or
regional securities exchange or association or over-the-counter market at the
close of business and (B) has traded at least once on the national or regional
securities exchange or association or over-the-counter market that is the
primary market for the trading of such security. "Business Day" means any day
that is not a Saturday, a Sunday or a day on which the NYSE, banking
institutions or trust companies in The City of New York are authorized or
obligated by law or executive order to close.
For illustrative purposes only, the following chart shows the number of
Common Shares or the amount of cash that a holder of DECS would receive for each
DECS at various Maturity Prices. The table assumes that there will be no
adjustments to the Exchange Rate or in the consideration received by holders of
DECS described under "-- Dilution Adjustments; Other Adjustment Events" below.
There can be no assurance that the Maturity Price will be within the range set
forth below. Given the Initial Price of $ per DECS and the Threshold
Appreciation Price of $ , a DECS holder would receive at Maturity the
following number of Common Shares or amount of cash (if the Company elects to
pay the DECS in cash):
<TABLE>
<CAPTION>
MATURITY PRICE OF NUMBER OF AMOUNT OF
COMMON SHARES COMMON SHARES CASH
- - ----------------- ------------- ---------
<S> <C> <C>
$ $
</TABLE>
As the foregoing chart illustrates, if at Maturity, the Maturity Price is
greater than or equal to $ , the Company will be obligated to deliver
Common Shares per DECS, resulting
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<PAGE> 11
in the Company receiving percent of the appreciation in market value above
$ and the DECS holder receiving percent of the appreciation in market
value above $ . If at Maturity, the Maturity Price is greater than
$ and less than $ , the Company will be obligated to deliver
only a fraction of a Common Share having a market value equal to $ ,
resulting in the Company retaining all appreciation in the market value of the
Common Shares from $ to $ . If at Maturity, the Maturity Price
is less than or equal to $ , the Company will be obligated to deliver
one Common Share per DECS, regardless of the market price of such share,
resulting in the DECS holder realizing the entire loss on the decline in market
value of the Common Shares.
Interest on the DECS will be payable, and delivery of Common Shares (or, at
the option of the Company, their cash equivalent) in exchange for the DECS at
Maturity will be made upon surrender of such DECS, at the office or agency of
the Company maintained for such purposes; provided, however, that payment of
interest may be made at the option of the Company by check mailed to the persons
in whose names the DECS are registered at the close of business on the fifteenth
day of the calendar month immediately preceding the relevant Interest Payment
Date. See "-- Book-Entry System." Initially such office will be the principal
corporate trust office of the Trustee, in the City and State of New York.
The DECS will be transferable at any time or from time to time at the
aforementioned office. No service charge will be made to the holder for any such
transfer except for any tax or governmental charge incidental thereto.
The Company does not currently own a significant number of Common Shares.
The Indenture does not contain any restriction on the ability of the Company to
sell, pledge or convey all or any portion of any Common Shares that may be
acquired by it or its subsidiaries in the future, and no Common Shares will be
pledged or otherwise held in escrow for use at Maturity of the DECS.
Consequently, in the event of a bankruptcy, insolvency or liquidation of the
Company or its subsidiaries, the Common Shares, if any, owned by the Company or
its subsidiaries will be subject to the claims of the creditors of the Company
or its subsidiaries, respectively. In addition, as described herein, the Company
will have the option, exercisable in its sole discretion, to satisfy its
obligations pursuant to the mandatory exchange for the principal amount of each
DECS at Maturity by delivering to holders of the DECS either the number of
Common Shares specified above or cash in an amount equal to the product of such
number of shares multiplied by the Maturity Price. As a result, there can be no
assurance that the Company will elect at Maturity to deliver Common Shares or,
if it so elects, that it will use all or any portion of its holdings of Common
Shares at that time, if any, to make such delivery. Holders of the DECS will not
be entitled to any rights with respect to Common Shares (including, without
limitation, voting rights and rights to receive any dividends or other
distributions in respect thereof) until such time, if any, as the Company shall
have delivered Common Shares to holders of the DECS at Maturity thereof and the
applicable record date, if any, for the exercise of such rights occurs after
such date.
DILUTION ADJUSTMENTS; OTHER ADJUSTMENT EVENTS
The Exchange Rate is subject to adjustment if Cincinnati Bell shall (i) pay
a stock dividend (other than an Ordinary Share Dividend (as defined below)) or
make a distribution with respect to Common Shares in shares of such stock, (ii)
subdivide or split its outstanding Common Shares, (iii) combine its outstanding
Common Shares into a smaller number of shares, (iv) issue by reclassification
(other than a reclassification upon an Adjustment Event, described below) of its
Common Shares any common shares of Cincinnati Bell or (v) issue rights or
warrants to all holders of Common Shares entitling them to subscribe for or
purchase Common Shares at a price per share less than the Market Price of the
Common Shares (other than rights to purchase Common Shares pursuant to a plan
for the reinvestment of dividends or interest). In the case of the events
referred to in clauses (i), (ii), (iii) and (iv) above, the Exchange Rate shall
be adjusted by adjusting each of the Share Components of the Exchange Rate in
effect immediately prior to such event so that a
S-11
<PAGE> 12
holder of any DECS shall be entitled to receive, upon mandatory exchange of the
principal amount of such DECS at Maturity pursuant to either Share Component of
the Exchange Rate, the number of Common Shares (or, in the case of a
reclassification referred to in clause (iv) above, the number of other common
shares of Cincinnati Bell issued pursuant thereto) which such holder of such
DECS would have owned or been entitled to receive immediately following such
event had such DECS been exchanged pursuant to either Share Component of the
Exchange Rate immediately prior to such event or any record date with respect
thereto. In the case of the event referred to in clause (v) above, the Exchange
Rate shall be adjusted by multiplying each of the Share Components of the
Exchange Rate in effect immediately prior to the date of issuance of the rights
or warrants referred to in clause (v) above, by a fraction, of which the
numerator shall be (A) the number of Common Shares outstanding on the date of
issuance of such rights or warrants immediately prior to such issuance, plus (B)
the number of additional Common Shares offered for subscription or purchase
pursuant to such rights or warrants, and of which the denominator shall be (x)
the number of Common Shares outstanding on the date of issuance of such rights
or warrants immediately prior to such issuance, plus (y) the number of
additional Common Shares which the aggregate offering price of the total number
of Common Shares so offered for subscription or purchase pursuant to such rights
or warrants would purchase at the Market Price (as defined below), which number
of additional shares shall be determined by multiplying such total number of
shares by the exercise price of such rights or warrants and dividing the product
so obtained by such Market Price. To the extent that such rights or warrants
expire prior to the Maturity of the DECS and Common Shares are not delivered
pursuant to such rights or warrants prior to such expiration, the Exchange Rate
shall be readjusted to the Exchange Rate which would then be in effect had such
adjustments for the issuance of such rights or warrants been made upon the basis
of delivery of only the number of Common Shares actually delivered pursuant to
such rights or warrants. Any Common Shares issuable in payment of a dividend
shall be deemed to have been issued immediately prior to the close of business
on the record date for such dividend for purposes of calculating the number of
outstanding Common Shares under this paragraph.
"Market Price" means, as of any date of determination the average Closing
Price per Common Share on the 20 Trading Days immediately prior to the date of
determination; provided, however, that if there are not 20 Trading Days for the
Common Shares occurring later than the 60th calendar day immediately prior to,
but not including, such date, such market price shall be determined as the
market value per Common Share as of such date as determined by a nationally
recognized investment banking firm retained for such purpose by the Company.
All adjustments to the Exchange Rate will be calculated to the nearest
1/10,000th of a Common Share (or, if there is not a nearest 1/10,000th of a
share, to the next lower 1/10,000th of a share). No adjustment in the Exchange
Rate shall be required unless such adjustment would require an increase or
decrease of at least one percent therein; provided, however, that any
adjustments which by reason of the foregoing are not required to be made shall
be carried forward and taken into account in any subsequent adjustment. If an
adjustment is made to the Exchange Rate pursuant to clauses (i), (ii), (iii),
(iv) or (v) above, an adjustment shall also be made to the Maturity Price solely
to determine which of clauses (a), (b) or (c) of the Exchange Rate definition
will apply at Maturity. The required adjustment to the Maturity Price shall be
made at Maturity by multiplying the original Maturity Price by the cumulative
number or fraction determined pursuant to the Exchange Rate adjustment procedure
described above. In the case of the reclassification of any Common Shares into
any common shares of Cincinnati Bell other than Common Shares, such common
shares shall be deemed Common Shares solely to determine the Maturity Price and
to apply the Exchange Rate at Maturity. Each such adjustment to the Exchange
Rate and the Maturity Price shall be made successively.
In the event of (i) any dividend or distribution by Cincinnati Bell to all
holders of Common Shares of evidences of its indebtedness or other assets
(excluding any Ordinary Share Dividends and other dividends or distributions
referred to in clause (i) of the first paragraph under this caption "-- Dilution
Adjustments; Other Adjustment Events," any common shares issued pursuant to a
S-12
<PAGE> 13
reclassification referred to in clause (iv) of such paragraph and Ordinary Cash
Dividends (as defined below)) or any issuance by Cincinnati Bell to all holders
of Common Shares of rights or warrants (other than rights or warrants referred
to in clause (v) of the first paragraph under this caption "-- Dilution
Adjustments; Other Adjustment Events"), (ii) any consolidation or merger of
Cincinnati Bell with or into another entity (other than a merger or
consolidation in which Cincinnati Bell is the continuing corporation and in
which the Common Shares outstanding immediately prior to the merger or
consolidation are not exchanged for cash, securities or other property of
Cincinnati Bell or another corporation), (iii) any sale, transfer, lease or
conveyance to another corporation of the property of Cincinnati Bell as an
entirety or substantially as an entirety, (iv) any statutory exchange of
securities of Cincinnati Bell with another corporation (other than in connection
with a merger or acquisition) or (v) any liquidation, dissolution or winding up
of Cincinnati Bell (any such event, an "Adjustment Event"), each Holder of a
DECS will receive at Maturity, in lieu of or (in the case of an Adjustment Event
described in clause (i) above) in addition to, Common Shares as described above,
cash in an amount equal to (A) if the Maturity Price is greater than or equal to
the Threshold Appreciation Price, multiplied by the Transaction Value (as
defined below), (B) if the Maturity Price is less than the Threshold
Appreciation Price but is greater than the Initial Price, the product of (x) the
Initial Price divided by the Maturity Price multiplied by (y) the Transaction
Value and (C) if the Maturity Price is less than or equal to the Initial Price,
the Transaction Value. Following an Adjustment Event, the Maturity Price, as
such term is used in this paragraph and throughout the definition of Exchange
Rate, shall be deemed to equal (A) the Maturity Price of the Common Shares, as
adjusted, plus (B) the Transaction Value.
Notwithstanding the foregoing, with respect to any securities received in
an Adjustment Event that (A) are (i) listed on a United States national
securities exchange, (ii) reported on a United States national securities system
subject to last sale reporting, (iii) traded in the over-the-counter market and
reported on the National Quotation Bureau or similar organization or (iv) for
which bid and ask prices are available from at least three nationally recognized
investment banking firms and (B) are either (x) perpetual equity securities or
(y) non-perpetual equity or debt securities with a stated maturity after the
Stated Maturity of the DECS ("Reported Securities"), the Company may, at its
option, in lieu of delivering the amount of cash deliverable in respect of
Reported Securities received in an Adjustment Event, as determined in accordance
with the previous paragraph, deliver a number of such Reported Securities with a
value equal to such cash amount, as determined in accordance with clause (ii) of
the definition of Transaction Value, as applicable; provided, however, that (i)
if such option is exercised, the Company shall deliver Reported Securities in
respect of all, but not less than all, cash amounts that would otherwise be
deliverable in respect of Reported Securities received in an Adjustment Event,
(ii) the Company may not exercise such option if the Company has elected to
deliver cash in lieu of Common Shares deliverable upon Maturity, if any, and
(iii) the Company must exercise such option if the Company does not elect to
deliver cash in lieu of Common Shares deliverable upon Maturity, if any. If the
Company elects to deliver Reported Securities, each Holder of a DECS will be
responsible for the payment of any and all brokerage and other transaction costs
upon the sale of such Reported Securities. If, following any Adjustment Event,
any Reported Security ceases to qualify as a Reported Security, then (x) the
Company may no longer elect to deliver such Reported Security in lieu of an
equivalent amount of cash and (y) notwithstanding clause (ii) of the definition
of Transaction Value, the Transaction Value of such Reported Security shall mean
the fair market value of such Reported Security on the date such security ceases
to qualify as a Reported Security, as determined by a nationally recognized
investment banking firm retained for this purpose by the Company.
The kind and amount of securities into which the DECS shall be exchangeable
after consummation of an Adjustment Event shall be subject to adjustment
following the date of consummation of such Adjustment Event in the same manner
and upon the occurrence of the same type of events as described under this
caption "-- Dilution Adjustments; Other Adjustment Events" with respect to
Common Shares and Cincinnati Bell.
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<PAGE> 14
For purposes of the foregoing, the term "Ordinary Cash Dividend" means,
with respect to any consecutive 365-day period, any dividend with respect to
Common Shares paid in cash to the extent that the amount of such dividend,
together with (i) the aggregate amount of all other dividends on the Common
Shares paid in cash plus (ii) the aggregate value of all Ordinary Share
Dividends on Common Shares (with each Ordinary Share Dividend valued at the
Market Price of Common Shares on the record date for such dividend) during such
365-day period, does not exceed on a per share basis 10% of the average of the
Closing Prices of the Common Shares over such 365-day period. The term "Ordinary
Share Dividend" means, with respect to any calendar quarter, any dividend with
respect to Common Shares paid in such shares to the extent that the value of
such dividend, together with (i) the aggregate amount of all dividends on the
Common Shares paid in cash plus (ii) the aggregate value of all other dividends
on Common Shares paid in such shares (with each share dividend valued at the
Market Price of Common Shares on the record date for such dividend) during such
calendar quarter, does not exceed on a per share basis 0.4% of the average of
the Closing Prices of the Common Shares over such calendar quarter.
The term "Transaction Value" means (i) for any cash received in any
Adjustment Event, the amount of cash received per Common Share, (ii) for any
Reported Securities received in any Adjustment Event, an amount equal to the
average Closing Price per security of such Reported Securities on the 20 Trading
Days immediately prior to Maturity multiplied by the number of such Reported
Securities received for each Common Share and (iii) for any property received in
any Adjustment Event other than cash or such Reported Securities, an amount
equal to the fair market value of the property received per Common Share on the
date such property is received, as determined by a nationally recognized
investment banking firm retained for this purpose by the Company; provided,
however, that in the case of clause (ii), (x) with respect to securities that
are Reported Securities by virtue of only clause (iv) of the definition of
Reported Securities in the third preceding paragraph, Transaction Value with
respect to any such Reported Security means the average of the mid-point of the
last bid and ask prices for such Reported Security as of Maturity from each of
at least three nationally recognized investment banking firms retained for such
purpose by the Company multiplied by the number of such Reported Securities
received for each Common Share and (y) with respect to all other Reported
Securities, if there are not 20 Trading Days for any particular Reported
Security occurring after the 60th calendar day immediately prior to, but not
including, the date of Maturity, Transaction Value with respect to such Reported
Security means the market value per security of such Reported Security as of
Maturity as determined by a nationally recognized investment banking firm
retained for such purpose by the Company multiplied by the number of such
Reported Securities received for each Common Share.
No adjustments will be made for certain other events, such as offerings of
Common Shares by Cincinnati Bell for cash or in connection with acquisitions.
The Company is required, within ten Business Days following the occurrence
of an event that requires an adjustment to the Exchange Rate or the occurrence
of an Adjustment Event (or, in either case, if the Company is not aware of such
occurrence, as soon as practicable after becoming so aware), to provide written
notice to the Trustee and to each holder of DECS of the occurrence of such event
including a statement in reasonable detail setting forth the method by which the
adjustment to the Exchange Rate or change in the consideration to be received by
holders of DECS following the Adjustment Event was determined and setting forth
the revised Exchange Rate or consideration, as the case may be; provided,
however, that, in respect of any adjustment to the Maturity Price, such notice
will only disclose the factor by which the Maturity Price is to be multiplied in
order to determine which clause of the Exchange Rate definition will apply at
Maturity.
FRACTIONAL SHARES
No fractional Common Shares or Reported Securities will be issued if the
Company exchanges the DECS for Common Shares. If more than one DECS is
surrendered for exchange at one time by the same holder, the number of full
Common Shares or Reported Securities which shall be delivered
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<PAGE> 15
upon exchange, in whole or in part, as the case may be, will be computed on the
basis of the aggregate number of DECS so surrendered at Maturity. In lieu of any
fractional share or security otherwise issuable in respect of all DECS of any
holder which are exchanged at Maturity, such holder will be entitled to receive
an amount in cash equal to the value of such fractional share or security at the
Maturity Price.
REDEMPTION
The DECS may not be redeemed and do not contain sinking fund or other
mandatory redemption provisions. The DECS are not subject to payment prior to
the date of Maturity at the option of the holder.
SATISFACTION AND DISCHARGE OF THE INDENTURE; DEFEASANCE
The Indenture will generally cease to be of any further effect (the
"satisfaction and discharge" of the Indenture) with respect to the DECS if (a)
the Company has delivered to the Trustee for cancellation all of the DECS (with
certain limited exceptions) or (b) all the DECS not theretofore delivered to the
Trustee for cancellation shall have become due and payable and the Company shall
have deposited with the Trustee as trust assets the entire amount in Common
Shares, securities and/or cash, as applicable, sufficient to pay all such DECS,
including the principal and any accrued interest thereon (and if, in either
case, the Company shall also pay or cause to be paid all other sums payable
under the Indenture by the Company and certain other requirements are
satisfied). The Indenture is not subject to satisfaction and discharge with
respect to the DECS in any other circumstances, and the DECS are not subject to
the defeasance option described in the accompanying Prospectus.
BOOK-ENTRY SYSTEM
It is expected that the DECS will be issued in the form of one or more
global securities (the "Global Securities") deposited with The Depository Trust
Company (the "Depositary") and registered in the name of a nominee of the
Depositary.
The Depositary has advised the Company and the Underwriters as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Exchange Act. The
Depositary was created to hold securities of persons who have accounts with the
Depositary ("participants") and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of certificates. Such participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the Depositary's book-entry system also is
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Upon the issuance of a Global Security, the Depositary or its nominee will
credit the respective DECS represented by such Global Security to the accounts
of participants. The accounts to be credited shall be designated by the
Underwriters. Ownership of beneficial interests in the Global Securities will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interests by participants in such Global Securities will
be shown on, and the transfer of those ownership interests will be effected only
through, records maintained by the Depositary or its nominee for such Global
Securities. Ownership of beneficial interests in such Global Securities by
persons that hold through participants will be shown on, and the transfer of
that ownership interest within such participant will be effected only through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical
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delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the DECS for all
purposes under the Indenture. Except as set forth below, owners of beneficial
interests in such Global Securities will not be entitled to have the DECS
registered in their names, will not receive or be entitled to receive physical
delivery of the DECS in definitive form and will not be considered the owners or
holders thereof under the Indenture.
Payment of principal of and any interest on the DECS registered in the name
of or held by the Depositary or its nominee will be made to the Depositary or
its nominee, as the case may be, as the registered owner or the holder of the
Global Security. None of the Company, the Trustee, any Paying Agent or any
securities registrar for the DECS will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in a Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Company expects that the Depositary, upon receipt of any payment of
principal or interest in respect of a permanent Global Security, will credit
immediately participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of such Global
Security as shown on the records of the Depositary. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants.
A Global Security may not be transferred except as a whole by the
Depositary to a nominee or a successor of the Depositary. If the Depositary is
at any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Company within ninety days, the Company will
issue DECS in definitive registered form in exchange for the Global Security
representing such DECS. In addition, the Company may at any time and in its sole
discretion determine not to have any DECS represented by one or more Global
Securities and, in such event, will issue DECS in definitive form in exchange
for all of the Global Securities representing the DECS. Further, if the Company
so specifies with respect to the DECS, an owner of a beneficial interest in a
Global Security representing DECS may, on terms acceptable to the Company and
the Depositary for such Global Security, receive DECS in definitive form. In any
such instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery in definitive form of DECS represented by such
Global Security equal in number to that represented by such beneficial interest
and to have such DECS registered in its name.
SAME-DAY FUNDS SETTLEMENT SYSTEM AND PAYMENT
Settlement for the DECS will be made by the Underwriters in immediately
available funds. All payments of principal and interest on the Global Securities
will be made by the Company in immediately available funds.
The DECS will trade in the Depositary's Same-Day Funds Settlement System
until Maturity, and secondary market trading activity in the DECS will therefore
be required by the Depositary to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in the DECS.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is based upon the advice of special tax counsel to
the Company, Cleary, Gottlieb, Steen & Hamilton, as to certain of the material
U.S. federal income tax conse-
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<PAGE> 17
quences that may be relevant to a citizen or resident of the United States, a
corporation, partnership or other entity created or organized under the laws of
the United States and an estate or trust the income of which is subject to U.S.
federal income taxation regardless of its source (any of the foregoing, a "U.S.
person") who is the beneficial owner of a DECS (a "U.S. Holder"). All references
to "holders" (including U.S. Holders) are to beneficial owners of the DECS. This
summary is based on U.S. federal income tax laws, regulations, rulings and
decisions in effect as of the date of this Prospectus Supplement, all of which
are subject to change at any time (possibly with retroactive effect). As the law
is technical and complex, the discussion below necessarily represents only a
general summary.
This summary addresses the U.S. federal income tax consequences to holders
who are initial holders of the DECS, who purchase the DECS at par and who will
hold the DECS and, if applicable, the Common Shares as capital assets. This
summary does not address all aspects of federal income taxation that may be
relevant to a particular holder in light of his or its individual investment
circumstances or to certain types of holders subject to special treatment under
the U.S. federal income tax laws, such as dealers in securities or foreign
currency, financial institutions, insurance companies, tax-exempt organizations
and taxpayers holding the DECS as part of a "straddle," "hedge," "conversion
transaction," "synthetic security," or other integrated investment. Moreover,
the effect of any applicable state, local or foreign tax laws is not discussed.
No statutory, judicial or administrative authority directly addresses the
characterization of the DECS or instruments similar to the DECS for U.S. federal
income tax purposes. As a result, significant aspects of the U.S. federal income
tax consequences of an investment in the DECS are not certain. No ruling is
being requested from the Internal Revenue Service (the "IRS") with respect to
the DECS and no assurance can be given that the IRS will agree with the
conclusions expressed herein. ACCORDINGLY, A PROSPECTIVE INVESTOR (INCLUDING A
TAX-EXEMPT INVESTOR) IN THE DECS SHOULD CONSULT ITS TAX ADVISOR IN DETERMINING
THE TAX CONSEQUENCES OF AN INVESTMENT IN THE DECS, INCLUDING THE APPLICATION OF
STATE, LOCAL OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
Pursuant to the terms of the Indenture, the Company and every holder of a
DECS will be obligated (in the absence of an administrative determination or
judicial ruling to the contrary) to characterize a DECS for all tax purposes as
a forward purchase contract to purchase Common Shares at Maturity (including as
a result of acceleration or otherwise), under the terms of which contract (a) at
the time of issuance of the DECS the holder deposits irrevocably with the
Company a fixed amount of cash equal to the purchase price of the DECS to assure
the fulfillment of the holder's purchase obligation described in clause (c)
below, which deposit will unconditionally and irrevocably be applied at Maturity
to satisfy such obligation, (b) until Maturity the Company will be obligated to
pay interest on such deposit at a rate equal to the stated rate of interest on
the DECS as compensation to the holder for the Company's use of such cash
deposit during the term of the DECS, and (c) at Maturity such cash deposit
unconditionally and irrevocably will be applied by the Company in full
satisfaction of the holder's obligation under the forward purchase contract, and
the Company will deliver to the holder the number of Common Shares that the
holder is entitled to receive at that time pursuant to the terms of the DECS
(subject to the Company's right to deliver cash in lieu of the Common Shares).
(Prospective investors should note that cash proceeds of this offering will not
be segregated by the Company during the term of the DECS, but instead will be
commingled with the Company's other assets and applied in a manner consistent
with the "Use of Proceeds" discussion above.) Consistent with the above
characterization, (i) amounts paid to the Company in respect of the original
issue of a DECS will be treated as allocable in their entirety to the amount of
the cash deposit attributable to such DECS, and (ii) amounts denominated as
interest that are payable with respect to the DECS will be characterized as
interest payable on the amount of such deposit, includible annually in the
income of a U.S. Holder as interest income in accordance with such holder's
method of accounting.
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<PAGE> 18
Under the above characterization of the DECS, a holder's tax basis in a
DECS generally will equal the holder's cost for that DECS. Upon the sale or
other taxable disposition of a DECS, a U.S. Holder generally will recognize gain
or loss equal to the difference between the amount realized on the sale or other
taxable disposition and the U.S. Holder's tax basis in the DECS. Such gain or
loss generally will be long-term capital gain or loss if the U.S. Holder has
held the DECS for more than one year at the time of disposition.
Under the above characterization of the DECS, if the Company delivers
Common Shares at Maturity, a U.S. Holder will recognize no gain or loss on the
purchase of the Common Shares against application of the monies received by the
Company in respect of the DECS. A U.S. Holder will have a tax basis in such
stock equal to the U.S. Holder's tax basis in the DECS (less the portion of the
tax basis of the DECS allocable to any fractional share, as described in the
next sentence). A U.S. Holder will recognize gain or loss (which will be
short-term capital gain or loss) with respect to cash received in lieu of
fractional shares, in an amount equal to the difference between the cash
received and the portion of the basis of the DECS allocable to fractional shares
(based on the relative number of fractional shares and full shares delivered to
the holder). If at Maturity the Company pays the DECS in cash, a U.S. Holder
will recognize capital gain or loss equal to any difference between the amount
of cash received from the Company and the U.S. Holder's tax basis in the DECS at
that time. Such gain or loss generally will be long-term capital gain or loss if
the U.S. Holder has held the DECS for more than one year at Maturity.
Due to the absence of authority as to the proper characterization of the
DECS, 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 federal income tax consequences of owning a
DECS under Treasury regulations promulgated in June 1996 governing contingent
payment debt instruments (the "Contingent Payment Regulations"). The Contingent
Payment Regulations apply to debt instruments issued on or after August 13,
1996. The Contingent Payment Regulations are complex, but very generally apply
the original issue discount rules of the Internal Revenue Code to a contingent
payment debt instrument by requiring that original issue discount be accrued
every year at a "comparable yield" for the issuer of the instrument, determined
at the time of issuance of the obligation. In addition, the Contingent Payment
Regulations require that a projected payment schedule, which results in such a
"comparable yield", be determined, and that adjustments to income accruals be
made to account for differences between actual payments and projected amounts.
To the extent that the comparable yield as so determined exceeds the interest
actually paid on a contingent debt instrument, the owner of that instrument will
recognize ordinary interest income in excess of the cash the owner receives. In
addition, any gain realized on the sale, exchange or redemption of a contingent
payment debt instrument will be treated as ordinary income. Any loss realized on
such sale, exchange or redemption will be treated as an ordinary loss to the
extent the holder's original issue discount inclusions with respect to the
obligation exceed prior reversals of such inclusions required by the adjustment
mechanism described above. Any loss realized in excess of such amount generally
will be treated as a capital loss.
The Company believes that the Contingent Payment Regulations do not apply
to the DECS, because those Regulations apply only to debt instruments that
provide for contingent payments. The DECS are payable by the delivery of Common
Shares (unless the Company exercises its option to deliver cash at Maturity) and
provide economic returns that are indexed to the performance of Common Shares.
The DECS therefore offer no assurance that a holder's investment will be
returned to the holder at Maturity. Accordingly, the Company believes that the
DECS properly are characterized for tax purposes, not as debt instruments, but
as forward purchase contracts in respect of which holders have deposited a fixed
amount of cash with the Company, on which interest is payable at a fixed rate.
If, however, the IRS were successfully to maintain that the Contingent Payment
Regulations applied to the DECS, then, among other matters, (i) gain realized by
a holder on the sale or other taxable disposition of a DECS (including as a
result of payments made at
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<PAGE> 19
Maturity) generally would be characterized as ordinary income, rather than as
short- or long-term capital gain (depending on whether the DECS had been held
for more than one year at the time of such disposition), and (ii) a U.S. Holder
would recognize ordinary income, or ordinary or capital loss (as the case may
be, under the rules summarized above) on the receipt of Common Shares, rather
than capital gain or loss upon the ultimate sale of such stock.
Even if the Contingent Payment Regulations do not apply to the DECS, it is
possible that the IRS could seek to characterize the DECS in a manner that
results in tax consequences to initial holders of the DECS different from those
reflected in the Indenture and described above. Under alternative
characterizations of the DECS, it is possible, for example, that a DECS could be
treated as including a forward contract and one or more options.
NON-UNITED STATES PERSONS
In the case of a holder of the DECS that is not a U.S. person, payments
made with respect to the DECS should not be subject to U.S. withholding tax,
provided that such holder complies with applicable certification requirements.
Any capital gain realized upon the sale or other disposition of the DECS by a
holder that is not a U.S. person will generally not be subject to U.S. federal
income tax if (i) such gain is not effectively connected with a U.S. trade or
business of such holder and (ii) in the case of an individual, such individual
is not present in the United States for 183 days or more in the taxable year of
the sale or other disposition or the gain is not attributable to a fixed place
of business maintained by such individual in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A holder of the DECS may be subject to information reporting and to backup
withholding at a rate of 31 percent of certain amounts paid to the holder unless
such holder provides proof of an applicable exemption or a correct taxpayer
identification number, and otherwise complies with applicable requirements of
the backup withholding rules. Any 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.
ERISA CONSIDERATIONS
In addition to the matters discussed under the caption "ERISA Matters" in
the accompanying Prospectus, any fiduciary of an employee benefit plan subject
to the fiduciary responsibility provisions of the Employee Retirement Income
Security Act of 1974, as amended, or Section 4975 of the Internal Revenue Code
considering the purchase of the DECS should consider whether such a purchase
might be deemed to constitute a direct or indirect transaction with Waslic or
Western & Southern or purchase of a security of Cincinnati Bell. In addition to
the exemptions listed under the caption "ERISA Matters" in the accompanying
Prospectus pursuant to which a "Plan" could purchase the "Offered Securities"
(each as defined in the accompanying Prospectus), Prohibited Transaction Class
Exemption 96-23 (an exemption for certain transactions determined by an in-house
asset manager) could apply to the purchase of the DECS.
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<PAGE> 20
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among the Company, Cincinnati Bell and the
Underwriters named below, the Company has agreed to sell to the Underwriters,
and the Underwriters have agreed to purchase, the aggregate number of DECS set
forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS DECS
------------ ----------
<S> <C>
Salomon Brothers Inc.............................................. 1,500,000
Morgan Stanley & Co. Incorporated................................. 1,500,000
----------
Total........................................................... 3,000,000
==========
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, that the obligations of
the Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the DECS offered hereby if any
of the DECS are purchased.
The Company has been advised by the Underwriters that they propose to offer
the DECS directly to the public initially at the public offering price set forth
on the cover of this Prospectus Supplement and to certain dealers at such prices
less a concession not in excess of $ per DECS. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per DECS to other
dealers. After the initial public offering, such public offering price and such
concession and reallowance may be changed.
Cincinnati Bell, Waslic, Western & Southern and the directors and executive
officers of Cincinnati Bell have agreed not to (i) offer, pledge, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, any Common Shares or any
securities convertible into or exercisable or exchangeable for Common Shares or
(ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Shares, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Shares or such other securities, in cash or
otherwise, for a period of at least 90 days from the date of this Prospectus
Supplement without the prior written consent of the Underwriters; provided,
however, that (x) Cincinnati Bell may issue, or grant options for, Common Shares
pursuant to any stock plan for employees or directors, or any qualified employee
benefit plan, in effect on the date of this Prospectus Supplement, or pursuant
to any stock options outstanding on the date of this Prospectus Supplement, and
any defined contribution qualified employee benefit plan in effect on the date
of this Prospectus Supplement may sell Common Shares to satisfy plan liquidity
needs, (y) such officers and directors, which may include John T. LaMacchia,
James F. Orr and Brian C. Henry, may sell up to 200,000 Common Shares in the
aggregate so long as no one individual sells more than 15% or 5,000 Common
Shares (whichever is greater) of his or her respective holdings and (z) such
agreement will not affect the ability of Waslic to engage in any of the
transactions described in clause (i) or (ii) above in connection with the
offering of the Waslic DECS or any exchange at maturity pursuant to the terms of
the Waslic DECS. If any such consent is given it would not necessarily be
preceded or followed by a public announcement thereof.
Cincinnati Bell and the Cincinnati Bell Pension Plans Trust have entered
into a separate underwriting agreement with the group of underwriters named
therein providing for the offer and sale of 2,000,000 Common Shares owned by the
Cincinnati Bell Pension Plans Trust. The closings of the offering of the DECS
and the Pension Trust Offering are not conditioned upon each other.
The Company has granted to the Underwriters an option, exercisable for the
30-day period after the date of this Prospectus Supplement, to purchase up to an
additional 450,000 DECS from the Company, at the same price per DECS as the
initial DECS to be purchased by the Underwriters. The
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Underwriters may exercise such option only for the purpose of covering
over-allotments, if any, incurred in connection with the sale of DECS offered
hereby. To the extent that the Underwriters exercise such option, each
Underwriter will have a firm commitment, subject to certain conditions, to
purchase the same proportion of the DECS as the number of DECS to be purchased
and offered by such Underwriter in the above table bears to the total number of
initial DECS to be purchased by the Underwriters.
The DECS will be a new issue of securities with no established trading
market. Application has been made to list the DECS on the NYSE, and the
Underwriters intend to make a market in the DECS, subject to applicable laws and
regulations. However, the Underwriters are not obligated to do so and any such
market-making may be discontinued at any time at the sole discretion of the
Underwriters without notice. Accordingly, no assurance can be given as to the
liquidity of such market.
The Underwriting Agreement provides that the Company and Cincinnati Bell
will indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act, or contribute to payments the Underwriters
may be required to make in respect thereof. The Underwriting Agreement also
provides that Cincinnati Bell will indemnify the Company against certain
liabilities, including liabilities under the Securities Act, or contribute to
payments the Company may be required to make in respect thereof.
Pursuant to a Purchase Agreement among Waslic, Western & Southern and the
Company (the "Purchase Agreement"), the Company has agreed, subject to the terms
and conditions set forth therein, to purchase from Waslic a number of Waslic
DECS equal to the aggregate number of DECS to be purchased by the Underwriters
from the Company pursuant to the Underwriting Agreement (including any DECS to
be purchased by the Underwriters upon exercise of the over-allotment option).
Pursuant to the terms of the Waslic DECS, Waslic will be obligated to deliver to
the Company at or prior to maturity of the DECS a number of Common Shares (or,
at Waslic's option, the cash equivalent) that is expected to have the same value
as the Common Shares delivered pursuant to the DECS.
Salomon Brothers is an indirect wholly owned subsidiary of the Company. The
participation of Salomon Brothers in the offer and sale of the DECS complies
with the requirements of Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc. regarding the underwriting by Salomon
Brothers of the securities of its parent.
In the ordinary course of their respective businesses, certain of the
Underwriters and their respective affiliates have engaged in and may in the
future engage in commercial and investment banking transactions with the
Company, Cincinnati Bell, Waslic, Western & Southern and their respective
affiliates.
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<PAGE> 22
PROSPECTUS
SALOMON INC
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK AND
WARRANTS
Salomon Inc (the "Company") intends to issue from time to time (i) debt
securities ("Debt Securities"), which may be subordinated to other indebtedness
of the Company; (ii) warrants ("Debt Warrants") to purchase Debt Securities;
(iii) shares of preferred stock, without par value (the "Preferred Stock"); (iv)
warrants to purchase shares of Preferred Stock (the "Preferred Stock Warrants");
(v) depositary shares representing entitlement to all rights and preferences of
a fraction of a share of Preferred Stock of a specified series (the "Depositary
Shares"); (vi) Common Stock of the Company, par value $1.00 per share (the
"Common Stock"); (vii) warrants to purchase shares of Common Stock (the "Common
Stock Warrants"); or (viii) warrants ("Index Warrants") representing the right
to receive, upon exercise, an amount in cash or a number of securities that will
be determined by reference to prices, yields, levels or other specified
objective measures (any such measure, an "Index"), or changes in an Index or
differences between two or more indexes all having an aggregate initial public
offering price or purchase price of up to $10,000,000,000, or the equivalent
thereof in one or more foreign or composite currencies, including the European
Currency Unit ("ECU"). The Debt Warrants, Preferred Stock Warrants and Common
Stock Warrants are referred to herein collectively as "Warrants", and the Debt
Securities, Preferred Stock, Depositary Shares, Common Stock, the Warrants and
the Index Warrants are referred to herein collectively as the "Offered
Securities". The Offered Securities may be offered separately or as units with
other Offered Securities, in separate series in amounts, at prices and on terms
to be determined at or prior to the time of sale. The sale of other securities
under the Registration Statement of which this Prospectus forms a part or under
a Registration Statement to which this Prospectus relates will reduce the amount
of Offered Securities which may be sold hereunder.
The specific terms of the Offered Securities with respect to which this
Prospectus is being delivered will be set forth in an accompanying supplement to
this Prospectus (a "Prospectus Supplement"), together with the terms of the
offering of the Offered Securities and the initial price and the net proceeds to
the Company from the sale thereof. The Prospectus Supplement will include, with
regard to the particular Offered Securities, the following information: (i) in
the case of Debt Securities, the specific designation, aggregate principal
amount, ranking, authorized denomination, maturity, rate or method of
calculation of interest and dates for payment thereof, any exchangeability,
conversion, redemption, prepayment, or sinking fund provisions, the currency or
currency unit in which principal, premium or interest is payable, the
designation of the trustee acting under the applicable indenture and the initial
offering price; (ii) in the case of Preferred Stock, the designation, number of
shares, liquidation preference per share, initial public offering price,
dividend rate (or method of calculation thereof), dates on which dividends shall
be payable and dates from which dividends shall accrue, any redemption or
sinking fund provisions, any conversion or exchange provisions and whether the
Company has elected to offer the Preferred Stock in the form of Depositary
Shares; (iii) in the case of Common Stock, the number of shares and the terms of
the offering and sale thereof; (iv) in the case of Warrants, the number and
terms thereof, the designation, description and the number of securities
issuable upon exercise, the exercise price, the terms of the offering and sale
thereof and where applicable, the duration and detachability thereof; (v) in the
case of Index Warrants, the aggregate amount and offering price of such Index
Warrants, certain information regarding the relevant Index or Indexes and the
related assets by reference to which an Index is determined (the "Underlying
Assets"), certain information regarding exercisability and certain information
regarding payment and distribution; and (vi) in the case of all Offered
Securities, whether such Offered Securities will be offered separately or as a
unit with other Offered Securities. The Prospectus Supplement will also contain
information, where applicable, about material United States federal income tax
considerations relating to, and any listing on a securities exchange of, the
Offered Securities covered by such Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS, ANY PROSPECTUS SUPPLEMENT OR ANY
PRICING SUPPLEMENT THERETO. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The Offered Securities may be sold by the Company directly to purchasers,
through agents designated from time to time, through underwriting syndicates led
by one or more managing underwriters or through one or more underwriters. The
Company expects that any such agents, managing underwriters or underwriters in
the United States will include Salomon Brothers Inc. If underwriters or agents
are involved in any offering of the Offered Securities, the names of the
underwriters or agents will be set forth in the applicable Prospectus
Supplement. If an underwriter, agent or dealer is involved in any offering of
the Offered Securities, the underwriter's discount, agent's commission or
dealer's purchase price will be set forth in, or may be calculated from the
information set forth in, the applicable Prospectus Supplement, and the net
proceeds to the Company from such offering will be the public offering price of
such Securities less such discount in the case of an offering through an
underwriter, or the purchase price of such Offered Securities less such
commission in the case of an offering through an agent, and less, in each case,
the other expenses of the Company associated with the issuance and distribution
of such Offered Securities.
The Company or one or more of its subsidiaries may from time to time purchase or
acquire a position in the Offered Securities and may at its option, hold,
resell, cancel or exercise, if applicable, such Offered Securities. Salomon
Brothers Inc expects to offer and sell previously issued Offered Securities in
the course of its business as a broker-dealer and may act as principal or agent
in such transactions. This Prospectus and the related Prospectus Supplements and
Pricing Supplements may be used by the Company or any of its subsidiaries,
including Salomon Brothers Inc, in connection with such transactions.
This Prospectus may not be used to consummate sales of Offered Securities unless
accompanied by a Prospectus Supplement.
- - ------------------------------------------------------
SALOMON BROTHERS INC
- - --------------------------------------------------------------------------------
The date of this Prospectus is April 5, 1996.
<PAGE> 23
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information concerning the Company 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, and at the Commission's Regional Offices
at Seven World Trade Center, 13th Floor, New York, New York 10048, and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained upon written request addressed to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, reports, proxy statements and other information
concerning the Company may be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005 and at the offices of
the American Stock Exchange, 86 Trinity Place, New York, New York 10006.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the Offered Securities. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement and to the exhibits thereto. Statements contained herein
concerning the provisions of certain documents are not necessarily complete, and
in each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the Commission pursuant
to Section 13 of the Exchange Act (File No. 1-4346), are incorporated herein by
reference: (i) the Annual Report on Form 10-K for the year ended December 31,
1995 (the "1995 10-K"); and (ii) the Current Reports on Form 8-K dated January
23, 1996, February 1, 1996 and February 12, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Offered Securities shall be deemed to be
incorporated by reference in this Prospectus.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS IS DELIVERED, ON THE WRITTEN
OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE, EXCEPT THE EXHIBITS TO SUCH DOCUMENTS (UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS).
WRITTEN REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO THE CORPORATE SECRETARY,
SALOMON INC, SEVEN WORLD TRADE CENTER, NEW YORK, NEW YORK 10048. TELEPHONE
REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO THE CORPORATE SECRETARY AT (212)
783-7000.
------------------------
References herein to "U.S. dollars", "U.S.$", "dollar" or "$" are to the
lawful currency of the United States.
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<PAGE> 24
SALOMON INC
Salomon Inc conducts global investment banking, global securities and
commodities trading, and U.S. oil refining and gathering activities. Investment
banking activities are conducted by Salomon Brothers Holding Company Inc and its
subsidiaries ("Salomon Brothers"), including Salomon Brothers Inc. Salomon
Brothers provides capital raising, advisory, trading and risk management
services to its customers, and executes proprietary trading strategies on its
own behalf. Salomon Inc's commodities trading activities are conducted by the
Company's wholly-owned subsidiary, Phibro Inc. and its subsidiaries. Oil
refining and gathering activities are conducted by Basis Petroleum, Inc. At
December 31, 1995, the Company employed 8,439 people.
The Company's principal executive offices are located at Seven World Trade
Center, New York, New York 10048 (telephone (212) 783-7000). Its registered
office in Delaware is c/o Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801.
USE OF PROCEEDS
General. The proceeds to be received by the Company from the sale of the
Offered Securities will be used for general corporate purposes, principally to
fund the business of its operating units and to fund investments in, or
extensions of credit to, its subsidiaries and to lengthen the average maturity
of liabilities, which may include the reduction of short-term liabilities or the
refunding of maturing indebtedness.
Use of Proceeds Relating to Index Warrants. All or a portion of the
proceeds to be received by the Company from the sale of each series of Index
Warrants may be used by the Company or one or more of its subsidiaries to
purchase or maintain positions in all or certain of the Underlying Assets on
which the related Index is based, or options, futures contracts, forward
contracts or swaps, or options on the foregoing, relating to such Index or
Underlying Assets, as the case may be, and, if applicable, to pay the costs and
expenses of hedging any currency, interest rate or other Index-related risk with
respect to such Index Warrants. The Company or one or more of its subsidiaries
may also take hedging positions in other types of appropriate financial
instruments that may become available in the future. To the extent that the
Company or one or more of its subsidiaries has a long hedge position in, options
contracts in, or other derivative or synthetic instruments related to, the
Underlying Assets or Index, the Company or one or more of its subsidiaries may
liquidate all or a portion of its holdings at or about the time of the maturity
of the Index Warrants. Depending on, among other things, future market
conditions, the aggregate amount and composition of such positions are likely to
vary over time. The remainder of the proceeds from the sale of Index Warrants
will be used by the Company or its subsidiaries for general corporate purposes,
as described above.
RATIO OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
The following table sets forth the Company's ratios of earnings to fixed
charges and earnings to fixed charges and preferred dividends for each of the
years 1995, 1994, 1993, 1992 and 1991.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges............... 1.12 0.83* 1.32 1.25 1.16
Ratio of Earnings to Fixed Charges and Preferred
Dividends...................................... 1.10 0.81* 1.30 1.21 1.14
</TABLE>
Such ratios were calculated by dividing fixed charges and tax equivalent
preferred dividends into the sum of earnings before taxes and fixed charges.
Fixed charges consist largely of interest expense, including capitalized
interest, and a portion of rental expense representative of the interest factor.
Tax equivalent preferred dividends represent the pretax earnings necessary to
cover
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<PAGE> 25
preferred stock dividend requirements, assuming such earnings are taxed at the
Company's consolidated effective income tax rate.
- - ---------------
* For the year ended December 31, 1994, earnings as defined were inadequate to
cover fixed charges and fixed charges, including preferred dividends. The
amount by which fixed charges exceed earnings as defined for the year ended
December 31, 1994 was $834 million. The amount by which fixed charges,
including preferred dividends, exceeded earnings as defined for the year ended
December 31, 1994 was $963 million.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will constitute either senior or subordinated debt of
the Company and will be issued, in the case of Debt Securities that will be
senior debt, under a senior debt indenture (as amended from time to time, the
"Senior Debt Indenture") and, in the case of Debt Securities that will be
subordinated debt, under a subordinated debt indenture (as amended from time to
time, the "Subordinated Debt Indenture"). The Senior Debt Indenture and the
Subordinated Debt Indenture are sometimes hereinafter referred to individually
as an "Indenture" and collectively as the "Indentures." The institutions named
as trustees under the Indentures are hereinafter referred to individually as a
"Trustee" and collectively as the "Trustees." Forms of the Indentures have been
filed with the Commission and are incorporated by reference as part of the
Registration Statement. The following summaries of certain provisions of the
Indentures and the Debt Securities do not purport to be complete and such
summaries are subject to the detailed provisions of the applicable Indenture to
which reference is hereby made for a full description of such provisions,
including the definition of certain terms used, and for other information
regarding the Debt Securities. Numerical references in parentheses below are to
sections in the applicable Indenture or, if no Indenture is specified, to
sections in each of the Indentures. Wherever particular sections or defined
terms of the applicable Indenture are referred to, such sections or defined
terms are incorporated herein by reference as part of the statement made, and
the statement is qualified in its entirety by such reference.
Unless otherwise provided in the applicable Prospectus Supplement, the
Trustee under the Senior Debt Indenture will be Citibank, N.A., a national
banking association, under an indenture dated as of December 1, 1988, as amended
from time to time, and the Trustee under the Subordinated Debt Indenture will be
Bankers Trust Company, a New York banking corporation, under an indenture dated
as of December 1, 1988, as amended from time to time. Copies of the respective
Indentures under which Citibank, N.A. and Bankers Trust Company serve as
Trustees have been filed with the Commission and are incorporated by reference
as part of the Registration Statement.
GENERAL
Neither of the Indentures limits the amount of Debt Securities that may be
issued thereunder, and each Indenture provides that Debt Securities may be
issued from time to time in series (Section 301). The Debt Securities to be
issued under either of the Indentures will be unsecured senior or subordinated
obligations of the Company as set forth below. Debt Securities of a series may
be issuable as individual securities in registered form without coupons
("Registered Securities") or in bearer form with or without coupons attached
("Bearer Securities") or as one or more global securities in registered or
bearer form (each a "Global Security").
Reference is made to the Prospectus Supplement for a description of the
following terms of the Debt Securities in respect of which this Prospectus is
being delivered: (i) the title and series of such Debt Securities, whether such
Debt Securities will be senior or subordinated debt of the Company and under
which indenture such Debt Securities are being issued; (ii) the limit, if any,
upon the aggregate principal amount of such Debt Securities; (iii) the dates on
which or periods during which
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<PAGE> 26
such Debt Securities may be issued and the dates on which, or the range of dates
within which, the principal of (and premium, if any, on) such Debt Securities
will be payable; (iv) the rate or rates or the method of determination thereof,
at which such Debt Securities will bear interest, if any; the date or dates from
which such interest will accrue; the dates on which such interest will be
payable; and, in the case of Registered Securities, the Regular Record Dates for
the interest payable on such Interest Payment Dates; (v) the obligation, if any,
of the Company to redeem or purchase such Debt Securities pursuant to any
sinking fund or analogous provisions, or at the option of a Holder, and the
periods within which or the dates on which, the prices at which and the terms
and conditions upon which such Debt Securities will be redeemed or repurchased,
in whole or in part, pursuant to such obligation; (vi) the periods within which
or the dates on which, the prices at which and the terms and conditions upon
which such Debt Securities may be redeemed, if any, in whole or in part, at the
option of the Company; (vii) the terms, if any, upon which the Debt Securities
may be convertible into or exchanged for Common Stock, Preferred Stock, other
Debt Securities, or warrants for Debt Securities, Preferred Stock, Common Stock
or indebtedness or other securities of any kind of the Company or any other
issuer or obligor and the terms and conditions upon which such conversion or
exchange shall be effected, including the initial conversion or exchange price
or rate, the conversion or exchange period, and any other additional provisions;
(viii) if other than denominations of $1,000 and any integral multiple thereof,
the denominations in which such Debt Securities will be issuable; (ix) whether
such Debt Securities are to be issued as Discount Securities (as defined below)
and the amount of discount with which such Debt Securities will be issued; (x)
provisions, if any, for the defeasance of such Debt Securities; (xi) whether
such Debt Securities are to be issued as Registered Securities or Bearer
Securities or both and, if Bearer Securities are to be issued, whether Coupons
will be attached thereto, whether Bearer Securities of the series may be
exchanged for Registered Securities having the same terms and the circumstances
under which and the place or places at which any such exchanges, if permitted,
may be made; (xii) whether such Debt Securities are to be issued in whole or in
part in the form of one or more Global Securities and, if so, the identity of
the Depositary (as defined below) for such Global Security or Securities; (xiii)
if a temporary Debt Security is to be issued with respect to such Debt
Securities, whether any interest thereon payable on an Interest Payment Date
prior to the issuance of a definitive Debt Security of the series will be
credited to the account of the Persons entitled thereto on such Interest Payment
Date; (xiv) if a temporary Global Security is to be issued with respect to such
Debt Securities, the terms upon which beneficial interests in such temporary
Global Security may be exchanged in whole or in part for beneficial interests in
a definitive Global Security or for individual Debt Securities of the series and
the terms upon which beneficial interests in a definitive Global Security, if
any, may be exchanged for individual Debt Securities having the same terms; (xv)
if other than United States dollars, the foreign or composite currency in which
such Debt Securities are to be denominated, or in which payment of the principal
of (and premium, if any) and any interest on such Debt Securities will be made
and the circumstances, if any, when such currency of payment may be changed;
(xvi) if the principal of (and premium, if any) or any interest on such Debt
Securities are to be payable, at the election of the Company or a Holder, in a
currency other than that in which such Debt Securities are denominated or stated
to be payable, the periods within which, and the terms and conditions upon
which, such election may be made and the time and the manner of determining the
exchange rate between the currency in which such Debt Securities are denominated
or stated to be payable and the currency in which such Debt Securities are to be
paid pursuant to such election; (xvii) if the amount of payments of principal of
(and premium, if any) or any interest on such Debt Securities may be determined
with reference to an index based on a currency or currencies other than that in
which such Debt Securities are stated to be payable, the manner in which such
amounts shall be determined; (xviii) if the amount of payments of principal of
(and premium, if any) or any interest on such Debt Securities may be determined
with reference to an index based on the prices, changes in prices, or
differences between prices, of securities, currencies, intangibles, goods,
articles or commodities application of a formula, the manner in which such
amounts shall be determined; (xix) any additional Events of Default (as defined
below) or restrictive covenants provided for with respect to such Debt
Securities; (xx) whether and under what circumstances the Company will pay
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<PAGE> 27
additional interest on such Debt Securities held by a Person who is not a U.S.
Person in respect of any tax, assessment or governmental charge withheld or
deducted and, if so, whether the Company will have the option to redeem such
Debt Securities under such circumstances; (xxi) whether and under what
circumstances the Company will be obligated to redeem such Debt Securities if
certain events occur involving United States information reporting requirements;
(xxii) the terms and conditions, if any, upon which such Debt Securities series
may or shall be convertible into or exchangeable or exercisable for or payable
in, among other things, other securities, instruments, contracts, currencies,
commodities or other forms of property, rights or interests or any combination
of the foregoing; and (xxiii) any other terms of such Debt Securities not
inconsistent with the provisions of the Indenture under which they are issued
(Section 301).
Unless otherwise indicated in the applicable Prospectus Supplement, Debt
Securities will be issued only as Registered Securities in denominations of
$1,000 and any integral multiple thereof and will be payable only in United
States dollars (Section 302).
If Bearer Securities are issued, the Federal income tax consequences and
other special considerations applicable to such Bearer Securities will be
described in the Prospectus Supplement relating thereto.
If the amount of payments of principal of (and premium, if any) or any
interest on Debt Securities is determined with reference to any type of index or
formula or changes in prices of particular securities, currencies, intangibles,
goods, articles or commodities, the Federal income tax consequences, specific
terms and other information with respect to such Debt Securities and such index
or formula, securities, currencies, intangibles, goods, articles or commodities
will be described in the Prospectus Supplement relating thereto.
If the principal of (and premium, if any) or any interest on Debt
Securities are payable in a foreign or composite currency, the restrictions,
elections, Federal income tax consequences, specific terms and other information
with respect to such Debt Securities and such currency will be described in the
Prospectus Supplement relating thereto.
Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate that at the time of
issuance is below market rates ("Discount Securities"). Debt Securities may be
variable rate debt securities that may be exchangeable for fixed rate debt
securities. Federal income tax consequences and other special considerations
applicable to any such Debt Securities will be described in the Prospectus
Supplement relating thereto.
Unless otherwise provided in the applicable Prospectus Supplement, the
principal of (and premium, if any) and any interest on Debt Securities will be
payable (in the case of Registered Securities) at the corporate trust office or
agency of the applicable Trustee in the City and State of New York or (in the
case of Bearer Securities) at the principal London office of the applicable
Trustee; provided, however, that payment of interest on Registered Securities
may be made at the option of the Company by check mailed to the Registered
Holders thereof or, if so provided in the applicable Prospectus Supplement, at
the option of a Holder by wire transfer to an account designated by such Holder
(Section 307). Except as otherwise provided in the applicable Prospectus
Supplement, no payment on a Bearer Security will be made by mail to an address
in the United States or by wire transfer to an account maintained by the Holder
thereof in the United States.
Unless otherwise provided in the applicable Prospectus Supplement,
Registered Securities may be transferred or exchanged at the corporate trust
office or agency of the applicable Trustee in the City and State of New York,
subject to the limitations provided in the applicable Indenture, without the
payment of any service charge, other than any tax or governmental charge payable
in connection therewith (Section 305). Bearer Securities will be transferable by
delivery. Provisions with respect to the exchange of Bearer Securities will be
described in the applicable Prospectus Supplement.
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<PAGE> 28
All moneys paid by the Company to a Paying Agent for the payment of
principal of (and premium, if any) or any interest on any Debt Security that
remain unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will be repaid to the Company, and
the Holder of such Debt Security or any Coupon appertaining thereto will
thereafter look only to the Company for payment thereof (Section 1204).
Unless otherwise indicated in the applicable Prospectus Supplement, the
covenants contained in the Indenture and the Debt Securities would not afford
Holders protection in the event of a highly leveraged or other similar
transaction that may adversely affect Holders.
GLOBAL SECURITIES
Debt Securities having the same issue date and the same terms may be issued
in whole or in part in the form of one or more Global Securities that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the Prospectus Supplement relating to such Debt Securities. Global Securities
may be issued in either registered or bearer form and in either temporary or
definitive form. Unless and until it is exchanged in whole or in part for the
individual Debt Securities represented thereby, a Global Security may not be
transferred except as a whole by the Depositary for such Global Security to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor of such Depositary or a nominee of such successor (Sections 303
and 305).
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will apply
to all depositary arrangements for Debt Securities.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual Debt Securities represented by
such Global Security to the accounts of institutions that have accounts with
such Depositary ("participants"). The accounts to be credited shall be
designated by the underwriters of such Debt Securities or, if such Debt
Securities are offered and sold directly by the Company or through one or more
agents, by the Company or such agent or agents. Ownership of beneficial
interests in a Global Security will be limited to participants or Persons that
may hold beneficial interests through participants. Ownership of beneficial
interests in a Global Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the Depositary
for such Global Security or by participants or Persons that hold through
participants. The laws of some states require that certain purchasers of
securities take physical delivery of such securities. Such limits and such laws
may limit the market for beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
owner of such Global Security, such Depositary or such nominee, as the case may
be, will be considered the sole Holder of the individual Debt Securities
represented by such Global Security for all purposes under the Indenture
governing such Debt Securities. Except as set forth below, owners of beneficial
interests in a Global Security will not be entitled to have any of the
individual Debt Securities represented by such Global Security registered in
their names, will not receive or be entitled to receive physical delivery of any
such Debt Securities and will not be considered the Holders thereof under the
Indenture governing such Debt Securities.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Securities and Bearer Warrants" below, payments of principal of (and
premium, if any) and any interest on individual Debt Securities represented by a
Global Security will be made to the Depositary or its nominee, as the case may
be, as the Holder of such Global Security. None of the Company, the Trustee for
such Debt Securities, any Paying Agent or the Security Registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments
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<PAGE> 29
made on account of beneficial interests in such Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
The Company expects that the Depositary for any Debt Securities, upon
receipt of any payment of principal, premium or interest in respect of a
definitive Global Security representing any of such Debt Securities, will credit
immediately participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of such Global
Security as shown on the records of such Depositary. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name", and
will be the responsibility of such participants. Receipt by owners of beneficial
interests in a temporary Global Security of payments of principal, premium or
interest in respect thereof will be subject to the restrictions discussed under
"Limitations on Issuance of Bearer Securities and Bearer Warrants" below.
If the Depositary for any Debt Securities is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within ninety days, the Company will issue individual Debt
Securities in exchange for the Global Security or Securities representing such
Debt Securities. In addition, the Company may at any time and in its sole
discretion determine not to have certain Debt Securities represented by one or
more Global Securities and, in such event, will issue individual Debt Securities
in exchange for the Global Security or Securities representing such Debt
Securities. Further, if the Company so specifies with respect to any Debt
Securities, an owner of a beneficial interest in a Global Security representing
such Debt Securities may, on terms acceptable to the Company and the Depositary
for such Global Security, receive individual Debt Securities in exchange for
such beneficial interest. In any such instance, an owner of a beneficial
interest in a Global Security will be entitled to physical delivery of
individual Debt Securities represented by such Global Security equal in
principal amount to such beneficial interest and to have such Debt Securities
registered in its name (if the Debt Securities are issuable as Registered
Securities). Individual Debt Securities so issued will be issued (i) as
Registered Securities in denominations, unless otherwise specified by the
Company, of $1,000 and integral multiples thereof if the Debt Securities are
issuable as Registered Securities, (ii) as Bearer Securities in the denomination
or denominations specified by the Company if the Debt Securities are issuable as
Bearer Securities or (iii) as either Registered or Bearer Securities, if the
Debt Securities are issuable in either form (Section 305). See, however,
"Limitations on Issuance of Bearer Securities and Bearer Warrants" below for a
description of certain restrictions on the issuance of individual Bearer
Securities in exchange for beneficial interests in a Global Security.
SENIOR DEBT
The Debt Securities and Coupons that will constitute part of the senior
debt of the Company will be issued under the Senior Debt Indenture and will rank
pari passu with all other unsecured debt of the Company except subordinated
debt.
SUBORDINATED DEBT
The Debt Securities and Coupons that will constitute part of the
subordinated debt of the Company will be issued under the Subordinated Debt
Indenture and will be subordinate and junior in the right of payment, to the
extent and in the manner set forth in the Subordinated Debt Indenture, to all
"Senior Indebtedness" of the Company. The Subordinated Debt Indenture defines
"Senior Indebtedness" as the following indebtedness or obligations, whether
outstanding at the date of such Indenture or thereafter incurred, assumed,
guaranteed or otherwise created, unless in the instrument creating or evidencing
any such indebtedness or obligation or pursuant to which the same is outstanding
it is provided that such indebtedness or obligation is not superior in right of
payment to the subordinated Debt Securities and any appurtenant Coupons: (a) all
indebtedness of the
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<PAGE> 30
Company (including indebtedness of others guaranteed by the Company), other than
the subordinated Debt Securities and any appurtenant Coupons and other than the
debt securities issuable under the indenture dated as of July 1, 1986 between
the Company and Bank of New York, as trustee, that (i) is for money borrowed,
(ii) arises in connection with the acquisition of any business, properties,
securities or assets of any kind, other than in the ordinary course of the
Company's business as heretofore conducted or (iii) is secured, in whole or in
part, by real or personal property, (b) obligations of the Company (including
obligations of others guaranteed by the Company) as lessee under leases required
to be capitalized on the balance sheet of the lessee under generally accepted
accounting principles and leases of property or assets made as part of any sale
and lease-back transaction and (c) amendments, renewals, extensions,
modifications and refundings of any such indebtedness or obligation
(Subordinated Debt Indenture, Section 101). The subordinated Debt Securities and
any appurtenant Coupons will not be superior in right of payment to the debt
securities issuable under the indenture dated as of July 1, 1986 between the
Company and Bank of New York, as trustee (Subordinated Debt Indenture, Section
1601).
In the event (a) of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
respect of the Company or a substantial part of its property, or (b) that (i) a
default shall have occurred with respect to the payment of principal of (and
premium, if any) or any interest on or other monetary amounts due and payable on
any Senior Indebtedness, or (ii) there shall have occurred an event of default
(other than a default in the payment of principal, premium, if any, or interest,
or other monetary amounts due and payable) with respect to any Senior
Indebtedness, as defined therein or in the instrument under which the same is
outstanding, permitting the holder or holders thereof to accelerate the maturity
thereof (with notice or lapse of time, or both), and such event of default shall
have continued beyond the period of grace, if any, in respect thereof, and such
default or event of default shall not have been cured or waived or shall not
have ceased to exist, or (c) that the principal of and accrued interest on the
subordinated Debt Securities issued under the Subordinated Debt Indenture shall
have been declared due and payable upon an Event of Default pursuant to Section
502 thereof and such declaration shall not have been rescinded and annulled as
provided therein, then the holders of all Senior Indebtedness shall first be
entitled to receive payment of the full amount due thereon, or provision shall
be made for such payment in money or money's worth, before the Holders of any of
the subordinated Debt Securities or Coupons issued under the Subordinated Debt
Indenture are entitled to receive a payment on account of the principal of (and
premium, if any) or any interest on the indebtedness evidenced by such Debt
Securities or such Coupons (Subordinated Debt Indenture, Section 1601). If this
Prospectus is being delivered in connection with a series of subordinated Debt
Securities, the related Prospectus Supplement will set forth the amount of
Senior Indebtedness outstanding as of the most recent practicable date.
LIMITATION ON LIENS
The Senior Debt Indenture provides that the Company will not, and will not
permit any Restricted Subsidiary to, incur, issue, assume, guarantee or suffer
to exist any indebtedness for borrowed money if the payment of such indebtedness
is secured by a pledge of, lien on or security interest in any shares of stock
of any Restricted Subsidiary without effectively providing for the equal and
ratable securing of the payment of the Debt Securities issued thereunder (Senior
Debt Indenture, Section 1205). The term "Restricted Subsidiary" is defined in
the Senior Debt Indenture to mean each of Salomon Brothers Inc, Phibro Inc. and,
with respect to the Company's Medium-Term Notes Series D and E, Philipp
Brothers, Inc. and any Subsidiary of the Company owning, directly or indirectly,
any of the common stock of, or succeeding to any substantial part of the
business now conducted by, any of such corporations.
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<PAGE> 31
EVENTS OF DEFAULT
The following will constitute Events of Default under each Indenture with
respect to any series of Debt Securities issued thereunder: (i) default in the
payment of the principal of (and premium, if any, on) any Debt Security of such
series when due; (ii) default for 30 days in the payment of any interest on any
Debt Security of such series or of any related Coupon when due; (iii) default in
the deposit of any sinking fund payment, when and as due by the terms of any
Debt Security of such series; (iv) default in the performance of any other
covenant in such Indenture, continued for 60 days after written notice thereof
by the applicable Trustee or the Holders of at least 25% in principal amount of
the Debt Securities of such series then Outstanding; and (v) certain events of
bankruptcy, insolvency or reorganization (Section 501). Any additional Events of
Default provided with respect to a series of Debt Securities will be set forth
in the applicable Prospectus Supplement. No Event of Default with respect to a
particular series of Debt Securities issued under either Indenture necessarily
constitutes an Event of Default with respect to any other series of Debt
Securities.
Each Indenture provides that if an Event of Default specified therein shall
occur and be continuing with respect to a series of Debt Securities issued
thereunder, either the Trustee thereunder or the Holders of at least 25% in
principal amount of the Debt Securities of such series then Outstanding may
declare the principal of and all accrued interest on all Debt Securities of such
series (or, in the case of Discount Securities, an amount equal to such portion
of the principal amount thereof as will be specified in the related Prospectus
Supplement) to be due and payable. In certain cases, the Holders of a majority
in principal amount of the Debt Securities then Outstanding of a series may, on
behalf of the Holders of all such Debt Securities, rescind and annul such
declaration and its consequences (Section 502).
Each Indenture contains a provision entitling the Trustee thereunder,
subject to the duty of such Trustee during the continuance of a default to act
with the required standard of care, to be indemnified by the Holders of the Debt
Securities or any Coupons of any series thereunder before proceeding to exercise
any right or power under such Indenture with respect to such series at the
request of such Holders (Section 603). Each Indenture provides that no Holder of
a Debt Security or any Coupon of any series thereunder may institute any
proceeding, judicial or otherwise, to enforce such Indenture except in the case
of failure of the Trustee thereunder, for 60 days, to act after it receives (i)
written notice of such default, (ii) a written request to enforce such Indenture
by the Holders of at least 25% in aggregate principal amount of the Debt
Securities then Outstanding of such series (and the Trustee receives no
direction inconsistent with such written request from the Holders of a majority
in aggregate principal amount of the Debt Securities then outstanding of such
series) and (iii) an offer of reasonable indemnity (Section 507). This provision
will not prevent any Holder of any such Debt Security from enforcing payment of
the principal thereof (and premium, if any, thereon) and any interest thereon or
of any such Coupon from enforcing payment thereof at the respective due dates
thereof (Section 508). The Holders of a majority in aggregate principal amount
of the Debt Securities then Outstanding of any series may direct the time,
method and place of conducting any proceedings for any remedy available to the
applicable Trustee or of exercising any trust or power conferred on it with
respect to the Debt Securities of such series. However, such Trustee may refuse
to follow any direction that conflicts with law or the applicable Indenture or
that would be unjustly prejudicial to Holders not joining therein (Section 512).
Each Indenture provides that the Trustee thereunder will, within 90 days
after the occurrence of a default with respect to any series of Debt Securities
thereunder known to it, give to the Holders of Debt Securities and Coupons of
such series notice of such default, unless such default shall have been cured or
waived; but, except in the case of a default in the payment of the principal of
(and premium, if any) or any interest on any Debt Security or of any Coupon of
such series or in the payment of any sinking fund installment with respect to
Debt Securities of such series, the Trustee shall be protected in withholding
such notice if it determines in good faith that the withholding of such notice
is in the interest of the Holders of such Debt Securities and Coupons (Section
602).
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The Company will be required to file annually with each Trustee a
certificate of an appropriate officer of the Company as to the absence of
certain defaults under the terms of the appropriate Indenture (Senior Debt
Indenture, Section 1206; Subordinated Debt Indenture, Section 1205).
MODIFICATION AND WAIVER
Each Indenture contains provisions for convening meetings of Holders to
consider matters affecting their interests (Article Nine).
Modifications of and amendments to each Indenture may be made by the
Company and the Trustee thereunder with the consent of the Holders of a majority
in principal amount of the Debt Securities then Outstanding of each series
issued thereunder that is affected by such modification or amendment, voting
separately; provided, however, that no such modification or amendment may,
without the consent of the Holder of each Outstanding Debt Security affected
thereby: (i) change the Stated Maturity of the principal of, or any installment
of interest or additional amounts payable on, any Debt Security or Coupon; (ii)
reduce the principal amount (including the amount payable on a Discount Security
upon the acceleration of the Maturity thereof) of, or any interest on or any
premium payable upon redemption of, or additional amounts payable on, any Debt
Security or Coupon; (iii) change the currency or composite currency of
denomination or payment of the principal of (and premium, if any, on) or any
interest or additional amounts payable on any Debt Security or Coupon; (iv)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Debt Security or Coupon; (v) reduce the percentage of the
principal amount of the Outstanding Debt Securities of any series, the consent
of the Holders of which is required for modification or amendment of the
applicable Indenture with respect to waiver of compliance with certain
provisions of the applicable Indenture or waiver of certain defaults; (vi) limit
the Company's obligation to maintain a Paying Agent outside the United States
for Bearer Securities; or (vii) limit the obligation of the Company to redeem
certain Bearer Securities if certain events occur involving United States
information reporting requirements (Section 1102).
The Subordinated Debt Indenture may not be amended to alter or impair the
subordination of the subordinated Debt Securities issued thereunder without the
consent of each holder of Senior Indebtedness then outstanding (Subordinated
Debt Indenture, Section 1107).
The Holders of a majority in principal amount of the Outstanding Debt
Securities of each series may, on behalf of all Holders of Debt Securities of
that series, waive, insofar as that series is concerned, compliance by the
Company with certain restrictive provisions of the applicable Indenture before
the time for such compliance (Senior Debt Indenture, Section 1207; Subordinated
Debt Indenture, Section 1206). The Holders of a majority in principal amount of
the Outstanding Debt Securities of each series may, on behalf of all Holders of
Debt Securities of that series, waive any past default under the applicable
Indenture with respect to Debt Securities of that series, except a default in
the payment of the principal of (and premium, if any) or any interest on any
such Debt Security or in the payment of any Coupon of that series and except a
default in respect of a covenant or provision the modification or amendment of
which would require the consent of the Holder of each Outstanding Debt Security
affected thereby (Section 513).
CONSOLIDATION, MERGER AND TRANSFER OR LEASE OF ASSETS
Each Indenture provides that the Company may not consolidate with or merge
into any corporation, or transfer or lease its assets substantially as an
entirety to any Person, unless (i) the successor corporation or transferee or
lessee (the "Successor Corporation") is a corporation organized under the laws
of the United States or any political subdivision thereof; (ii) the Successor
Corporation assumes the Company's obligations under the applicable Indenture and
on the Debt Securities and any Coupons issued thereunder; (iii) after giving
effect to the transaction no Event of Default and no event that, after notice or
lapse of time, or both, would become an Event of Default shall have occurred and
be continuing; (iv) the Successor Corporation waives any right to redeem
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any Bearer Security under circumstances in which the Successor Corporation would
be entitled to redeem such Bearer Security but the Company would not have been
so entitled if such consolidation, merger, transfer or lease had not occurred;
and (v) certain other conditions are met (Section 1001).
DEFEASANCE
If so specified in the applicable Prospectus Supplement with respect to
Debt Securities of any series that are Registered Securities payable only in
United States dollars, the Company, at its option, (i) will be discharged from
any and all obligations in respect of the Debt Securities of such series (except
for certain obligations to register the transfer or exchange of Debt Securities
of such series, replace stolen, lost or mutilated Debt Securities of such
series, maintain paying agencies and hold moneys for payment in trust) or (ii)
will not be subject to provisions of the applicable Indenture described above
under "Limitation on Liens" and "Consolidation, Merger and Transfer or Lease of
Assets" with respect to the Debt Securities of such series, in each case if the
Company deposits with the applicable Trustee, in trust, money or U.S. Government
Obligations that through the payment of interest thereon and principal thereof
in accordance with their terms will provide money in an amount sufficient to pay
all the principal of (and premium, if any) and any interest on the Debt
Securities of such series on the dates such payments are due in accordance with
the terms of such Debt Securities. To exercise any such option under either of
the Indentures, the Company is required to deliver to the applicable Trustee an
opinion of counsel to the effect that (1) the deposit and related defeasance
would not cause the Holders of the Debt Securities of such series to recognize
income, gain or loss for Federal income tax purposes and, in the case of a
discharge pursuant to clause (i) above, a ruling to such effect received from or
published by the United States Internal Revenue Service, and (2) if the Debt
Securities of such series are then listed on the New York Stock Exchange, such
Debt Securities would not be delisted from the New York Stock Exchange as a
result of the exercise of such option (Sections 1501 and 1502). Defeasance
provisions, if any, with respect to any other Debt Securities of any series will
be described in the applicable Prospectus Supplement.
REPLACEMENT DEBT SECURITIES
Unless otherwise provided in the applicable Prospectus Supplement, if a
Debt Security of any series or any related Coupon is mutilated, destroyed, lost
or stolen, it may be replaced at the corporate trust office or agency of the
applicable Trustee in the City and State of New York (in the case of Registered
Securities) or at the principal London office of the applicable Trustee (in the
case of Bearer Securities and Coupons) upon payment by the Holder of such
expenses as may be incurred by the Company and the applicable Trustee in
connection therewith and the furnishing of such evidence and indemnity as the
Company and such Trustee may require. Mutilated Debt Securities and Coupons must
be surrendered before new Debt Securities (with or without Coupons) will be
issued (Section 306).
NOTICES
Unless otherwise provided in the applicable Prospectus Supplement, any
notice required to be given to a Holder of a Debt Security of any series that is
a Registered Security will be mailed to the last address of such Holder set
forth in the applicable Security Register. Any notice required to be given to a
Holder of a Debt Security that is a Bearer Security will be published in a daily
morning newspaper of general circulation in the city or cities specified in the
Prospectus Supplement relating to such Bearer Security (Section 105).
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CONCERNING THE TRUSTEES
The Company and certain of its subsidiaries maintain lines of credit and
have other customary banking relationships with Citibank, N.A. and Bankers Trust
Company, and certain of their respective affiliates, and may have such
relationships with other Trustees and their affiliates.
DESCRIPTION OF PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. The particular terms of the Preferred Stock
offered by any Prospectus Supplement and the extent, if any, to which such
general terms do not apply to such Preferred Stock will be described in such
Prospectus Supplement. The description of the terms of the Preferred Stock set
forth below and in any Prospectus Supplement does not purport to be complete and
is subject to and qualified in its entirety by reference to the Company's
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
including the Certificate of Designations (the "Certificate of Designations")
relating to the applicable series of Preferred Stock. The Certificate of
Incorporation and any such Certificate of Designations have been or will be
filed as an exhibit to or will be incorporated by reference in the Registration
Statement of which this Prospectus forms a part.
GENERAL
As of the date of this Prospectus, the Company is authorized by its
Certificate of Incorporation to issue (unless otherwise indicated in the
Prospectus Supplement) 5,000,000 shares of preferred stock, without par value,
which may be issued from time to time in one or more series and, subject to the
provisions of the Certificate of Incorporation applicable to all series of
preferred stock, shall have such designations, voting powers, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as shall be stated in the resolution or
resolutions providing for the issue thereof adopted by the Company's Board of
Directors (the "Board of Directors") or a duly authorized committee thereof.
As of the date of this Prospectus, there are 560,000 shares of Series A
Cumulative Convertible Preferred Stock, 225,000 shares of 9.50% Cumulative
Preferred Stock, Series C, 400,000 shares of 8.08% Cumulative Preferred, Series
D and 500,000 shares of 8.40% Cumulative Preferred Stock, Series E, of the
Company outstanding. The 8.40% Cumulative Preferred Stock, Series E, the 8.08%
Cumulative Preferred Stock, Series D, the 9.50% Cumulative Preferred Stock,
Series C and the Series A Cumulative Convertible Preferred Stock rank on parity
as to the payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up. There are currently reserved for issuance up to
2,500,000 shares of Series B Junior Participating Preferred Stock of the
Company, which shares are issuable upon the exercise of certain preferred share
purchase rights (collectively, the "Rights"). The Rights will become exercisable
only if a person or group acquires or (unless exercisability is delayed by the
Board of Directors) announces an offer to acquire 20% or more (which percentage
may be reduced to not less than 10% by the Board of Directors prior to the time
the Rights become exercisable) of the outstanding shares of Common Stock of the
Company. Shares of Series B Junior Participating Preferred Stock issued upon the
exercise of the Rights will rank junior to all shares of any other class of the
Company's preferred stock, including the Preferred Stock offered hereby, with
respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up.
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise specified in the applicable
Prospectus Supplement. Reference is made to the Prospectus Supplement relating
to the particular series of Preferred Stock offered thereby for specific terms,
including: (i) the designation, stated value and liquidation preference of such
Preferred Stock and the number of shares offered; (ii) the initial public
offering price at which such shares will be issued; (iii) the dividend rate or
rates (or method of calculation), the date or dates
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from which dividends shall accrue, and whether such dividends shall be
cumulative, noncumulative or partially cumulative and, if cumulative or
partially cumulative, the dates from which dividends shall commence to cumulate;
(iv) any redemption or sinking fund provisions; (v) the amount that shares of
such series shall be entitled to receive in the event of any liquidation,
dissolution or winding up of the Company; (vi) the terms and conditions, if any,
on which shares of such series shall be convertible into or exchangeable for
shares of stock of any other class or classes, or other series of the same
class, of the Company; (vii) the voting rights, if any, of shares of such series
in addition to those set forth in "Voting Rights" below; (viii) the status as to
reissuance or sale of shares of such series redeemed, purchased or otherwise
reacquired, or surrendered to the Company on conversion or exchange; (ix) the
conditions and restrictions, if any, on the payment of dividends or on the
making of other distributions on, or the purchase, redemption or other
acquisition by the Company or any subsidiary, of the Common Stock or of any
other class of stock of the Company ranking junior to the shares of such series
as to dividends or upon liquidation; (x) the conditions and restrictions, if
any, on the creation of indebtedness of the Company, or any subsidiary, or on
the issue of any additional stock ranking on a parity with or prior to the
shares of such series as to dividends or upon liquidation; and (xi) any
additional dividend, liquidation, redemption, sinking or retirement fund and
other rights, preferences, privileges, limitations and restrictions of such
Preferred Stock.
The Preferred Stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the applicable Prospectus Supplement, the shares
of each series of Preferred Stock will upon issuance rank on a parity in all
respects with the outstanding shares of the Company's Series A Cumulative
Convertible Preferred Stock, the 9.50% Cumulative Preferred Stock, Series C, the
8.08% Cumulative Preferred Stock, Series D, the 8.40% Cumulative Preferred
Stock, Series E and each other then-outstanding series of Preferred Stock of the
Company other than the Series B Junior Participating Preferred Stock, which when
issued will rank junior to all shares of any other class of the Preferred Stock.
The Preferred Stock will have no preemptive rights to subscribe for any
additional securities which may be issued by the Company.
DIVIDENDS
The holders of the Preferred Stock, before any dividends may be declared or
paid to the holders of shares of the Common Stock or of any other capital stock
of the Company ranking junior to the Preferred Stock as to the payment of
dividends, will be entitled to receive, when and as declared by the Board of
Directors or a duly authorized committee thereof, out of the net profits or net
assets of the Company legally available therefor, dividends payable quarterly on
March 31, June 30, September 30 and December 31 of each year at such rates as
will be specified in the applicable Prospectus Supplement. Such rates may be
fixed or variable or both. If variable, the formula used for determining the
dividend rate for each dividend period will be specified in the applicable
Prospectus Supplement. Dividends will be payable to the holders of record as
they appear on the stock transfer records of the Company on such record dates
(not more than 60 days prior to a dividend payment date) as will be fixed by the
Board of Directors or a duly authorized committee thereof. Dividends will be
paid in the form of cash.
Dividends on any series of Preferred Stock may be cumulative, partially
cumulative or noncumulative, as specified in the applicable Prospectus
Supplement. If the Board of Directors fails to declare a dividend payable on a
dividend payment date on any Preferred Stock for which dividends are
noncumulative ("Noncumulative Preferred Stock"), then the holders of such
Noncumulative Preferred Stock will have no right to receive a dividend in
respect of the dividend period relating to such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such Noncumulative Preferred Stock are declared or
paid on any future dividend payment dates. If dividends on any series of
Preferred Stock are not paid in full or declared in full and sums set apart for
the payment thereof, then no dividends shall be declared and paid on any such
stock unless declared and paid ratably on all shares of each series of
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Preferred Stock then outstanding, including dividends accrued or in arrears, if
any, in proportion to the respective amounts that would be payable per share if
all such dividends were declared and paid in full.
The Prospectus Supplement relating to a series of Preferred Stock will
specify the conditions and restrictions, if any, on the payment of dividends or
on the making of other distributions on, or the purchase, redemption or other
acquisition by the Company or any subsidiary of, the Common Stock or of any
other class of stock of the Company ranking junior to the shares of such series
as to dividends or upon liquidation and any other preferences, rights,
restrictions and qualifications that are not inconsistent with the Certificate
of Incorporation.
LIQUIDATION RIGHTS
Upon any liquidation, dissolution or winding up of the Company (whether
voluntary or involuntary) the holders of Preferred Stock will be entitled to
receive out of the assets of the Company available for distribution to its
stockholders, whether from capital, surplus or earnings, the amount specified in
the applicable Prospectus Supplement for such series, together with all
dividends accrued and unpaid before any distribution of the assets will be made
to the holders of Common Stock or any other class or series of shares ranking
junior to such Preferred Stock upon liquidation, dissolution or winding up, and
will be entitled to no other or further distribution. If upon any liquidation,
dissolution or winding up of the Company, the assets distributable among the
holders of the Preferred Stock shall be insufficient to permit the payment in
full to the holders of the Preferred Stock of all amounts payable to all such
holders, then the entire assets of the Company thus distributable will be
distributed ratably among the holders of the Preferred Stock in proportion to
the respective amounts that would be payable per share if such assets were
sufficient to permit payment in full.
Neither the consolidation, merger or other business combination of the
Company with or into any other individual, firm, corporation or other entity nor
the sale, lease, exchange or conveyance of all or any part of the property,
assets or business of the Company will be deemed to be a liquidation,
dissolution or winding up of the Company.
REDEMPTION
If so specified in the Prospectus Supplement, any series of Preferred Stock
may be redeemable, in whole or in part, at the option of the Company or pursuant
to a retirement or sinking fund or otherwise, on terms and at the times and the
redemption prices specified in the applicable Prospectus Supplement. If less
than all shares of a series of Preferred Stock at the time outstanding are to be
redeemed, the shares of such series to be redeemed will be selected pro rata or
by lot, in such manner as may be prescribed by resolution of the Board of
Directors.
Notice of any redemption of Preferred Stock at the option of the Company
shall be given by publication in a newspaper of general circulation in the
Borough of Manhattan, The City of New York, such publication to be made not less
than 30 nor more than 60 days prior to the redemption date. A similar notice
will be mailed by the Company, postage prepaid, not less than 30 nor more than
60 days prior to such redemption date, addressed to the respective holders of
record of shares of Preferred Stock at the addresses shown on the stock transfer
records of the Company, but the mailing of such notice will not be a condition
of such redemption. In order to facilitate the redemption of shares of Preferred
Stock, the Board of Directors may fix a record date for the determination of
shares of Preferred Stock to be redeemed, and such record date will be not more
than 60 days nor less than 30 days prior to the redemption date.
Prior to the redemption date, the Company will deposit money for the
payment of the redemption price with a bank or trust company doing business in
the Borough of Manhattan, The City of New York, and having a capital and surplus
of at least $10,000,000. Unless the Company fails to make such deposit, on the
redemption date, all dividends on the Preferred Stock called for
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redemption will cease to accrue and all rights of the holders of such Preferred
Stock as stockholders of the Company shall cease, except the right to receive
the redemption price (but without interest). Unless otherwise specified in the
applicable Prospectus Supplement, any monies so deposited which remain unclaimed
by the holders of such Preferred Stock at the end of six years after the
redemption date will become the property of, and be paid by such bank or trust
company to, the Company.
CONVERSION RIGHTS
The terms and conditions, if any, on which shares of the Preferred Stock
are convertible into any other class of the Company's securities will be set
forth in the Prospectus Supplement relating thereto. Such terms will include the
designation of the security into which such shares are convertible, the
conversion price, the conversion period, provisions as to whether conversion
will be at the option of the holder or the Company, the events requiring an
adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of the Preferred Stock. In the case of conversion of the
Preferred Stock into Common Stock or into any other security of the Company for
which there exists an established public trading market at the time of such
conversion, such terms may include provisions under which the amount of such
security to be received by the holders of the Preferred Stock would be
calculated according to the market price of such security as of a time stated in
the Prospectus Supplement.
VOTING RIGHTS
Except as indicated below or in the applicable Prospectus Supplement or as
otherwise from time to time required by law, holders of the Preferred Stock will
have no voting rights.
So long as any shares of Preferred Stock are outstanding, without first
obtaining the consent or approval of the holders of at least two-thirds of the
number of then-outstanding shares of Preferred Stock, and all other series of
the Company's preferred stock (the Preferred Stock and such other series of
preferred stock collectively, the "Outstanding Preferred Stock"), voting as a
single class, given in person or by proxy at a meeting at which the holders of
such shares are entitled to vote separately as a class, the Company will not:
(i) authorize shares of any class or series of stock having any preference or
priority as to dividends or upon liquidation ("Senior Stock") over the
Outstanding Preferred Stock; (ii) reclassify any shares of stock of the Company
into shares of Senior Stock; (iii) authorize any security exchangeable for,
convertible into or evidencing the right to purchase any shares of Senior Stock;
(iv) amend, alter or repeal the Certificate of Incorporation to alter or change
the preferences, rights or powers of the Outstanding Preferred Stock so as to
affect the Outstanding Preferred Stock adversely unless any such amendment,
alteration or repeal would alter or change the preferences, rights or powers of
one or more, but not all, of the series of the Outstanding Preferred Stock at
the time outstanding, in which case the consent or approval of the holders of at
least two-thirds of the number of the outstanding shares of each such series so
affected will be required in lieu of (or if such consent is required by law, in
addition to) the consent or approval of the holders of at least two-thirds of
the number of shares of Outstanding Preferred Stock voting as a class; or (v)
effect the voluntary liquidation, dissolution or winding up of the Company, or
the sale, lease or exchange of all or substantially all of the assets, property
or business of the Company, or the merger or consolidation of the Company with
or into any other corporation (except a wholly-owned subsidiary of the Company);
provided, however, that no separate vote of the holders of the Outstanding
Preferred Stock as a class will be required in the case of a merger or
consolidation or a sale, exchange or conveyance of all or substantially all of
the assets, property or business of the Company (such transactions being
referred to as a "reorganization") if (A) the resulting, surviving or acquiring
corporation after such reorganization will have no stock either authorized or
outstanding (except such stock of the Company as may have been authorized or
outstanding immediately preceding such reorganization, or such stock of the
resulting, surviving or acquiring corporation as may be issued in exchange
therefor) ranking prior to, or on a parity with,
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the Outstanding Preferred Stock or the stock of the resulting, surviving or
acquiring corporation issued in exchange therefor and (B) each holder of shares
of Outstanding Preferred Stock immediately preceding such reorganization will
receive in exchange therefor the same number of shares of stock, with
substantially the same preferences, rights and powers, of the resulting,
surviving or acquiring Corporation.
Unless the Company obtains the consent or approval of the holders of a
majority of shares of the Outstanding Preferred Stock, given in person or by
proxy at a meeting at which the holders of such shares are entitled to vote
separately as a class, the Company may not amend the provisions of the
Certificate of Incorporation in order to increase the amount of the authorized
preferred stock or to authorize any other stock ranking prior to or on a parity
with the Outstanding Preferred Stock either as to payment of dividends or
distribution of assets upon liquidation, dissolution or winding up.
Each share of Preferred Stock will be entitled to one vote on matters on
which holders of the Preferred Stock are entitled to vote. Since each share of
Outstanding Preferred Stock will be entitled to one vote, the voting power of
any series of Preferred Stock on matters on which holders of such series and
holders of other series of Outstanding Preferred Stock are entitled to vote as a
single class will depend on the number of shares of Outstanding Preferred Stock,
not the aggregate liquidation preference or initial offering price of the shares
of such series.
DESCRIPTION OF DEPOSITARY SHARES
The following summary and the summary in any Prospectus Supplement of the
terms and provisions of the Depositary Shares and Depositary Receipts does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Deposit Agreement relating to the applicable series of
Preferred Stock, which has been or will be filed as an exhibit to or
incorporated by reference in the Registration Statement of which this Prospectus
is a part.
GENERAL
The Company may, at its option, elect to offer fractional interests in
shares of Preferred Stock, rather than full shares of Preferred Stock. In the
event such option is exercised, the Company will provide for the issuance by a
depositary of depositary receipts ("Depositary Receipts") evidencing depositary
shares ("Depositary Shares"). Each Depositary Receipt will represent a
fractional interest (to be specified in the applicable Prospectus Supplement) in
a share of a particular series of the Preferred Stock as more fully described
below.
In the event that the Company offers fractional shares of any series of
Preferred Stock, such shares of the Preferred Stock, if any, will be deposited
under a separate deposit agreement (a "Deposit Agreement") among the Company, a
bank or trust company selected by the Company and having its principal office in
the United States and having a combined capital and surplus of at least
$50,000,000 (the "Depositary") and the holders from time to time of the
Depositary Receipts issued by the Depositary thereunder. The applicable
Prospectus Supplement will set forth the name and address of the Depositary.
Subject to the terms of the Deposit Agreement, each owner of a Depositary Share
will be entitled, in proportion to the applicable fractional interest in a share
of Preferred Stock underlying such Depositary Share, to all the rights and
preferences of the Preferred Stock underlying such Depositary Share (including
dividend, voting, redemption and liquidation rights).
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary may, upon the written order of the Company, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts but
not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without
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unreasonable delay, and temporary Depositary Receipts will be exchangeable for
definitive Depositary Receipts at the Company's expense.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Stock deposited under a
Deposit Agreement to the record holders of Depositary Shares representing such
Preferred Stock in proportion to the numbers of such Depositary Shares owned by
such holders on the relevant record date. The Depositary will distribute only
such amount, however, as can be distributed without attributing to any holder of
Depositary Shares a fraction of one cent, and any balance not so distributable
will be held by the Depositary (without liability for interest thereon) and will
be added to and treated as part of the next sum received by the Depositary for
distribution to record holders of Depositary Receipts then outstanding.
In the event of a distribution other than in cash in respect of Preferred
Stock deposited under a Deposit Agreement, the Depositary will distribute the
property received by it to the record holders of the Depositary Shares entitled
thereto, in proportion, as nearly as may be practicable, to the numbers of
Depositary Shares owned by such holders on the relevant record date, unless the
Depositary determines that it is not feasible to make such distribution, in
which case the Depositary may, with the approval of the Company, adopt such
method as it deems equitable and practicable to effect such distribution,
including the sale of such property and distribution of the net proceeds from
such sale to such holders.
Each Deposit Agreement will also contain provisions relating to the manner
in which any subscription or similar rights offered by the Company to holders of
the Preferred Stock deposited under such Deposit Agreement will be made
available to holders of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
If the Preferred Stock deposited under a Deposit Agreement is subject to
redemption in whole or in part, the related Depositary Shares will be redeemed
from the proceeds received by the Depositary as a result of any such redemption
of such Preferred Stock held by the Depositary. Whenever the Company redeems
shares of Preferred Stock held by the Depositary, the Depositary will redeem as
of the same redemption date the number of Depositary Shares representing the
shares of Preferred Stock so redeemed. The Depositary will mail the notice of
redemption not less than 30 and not more than 60 days prior to the date fixed
for redemption to the record holders of the Depositary Shares to be so redeemed.
The redemption price per Depositary Share will be equal to the applicable
fraction of the redemption price per share payable with respect to such
Preferred Stock. If less than all the Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed will be selected by lot or pro rata as may be
determined by the Depositary.
Notice of redemption having been given as described above, from and after
the date fixed for redemption, unless the Company shall have failed to redeem
the shares of Preferred Stock so called for redemption, the Depositary Shares so
called for redemption will no longer be deemed to be outstanding, and all rights
of the holders of such Depositary Shares will cease, except for the right to
receive the monies payable upon such redemption and any money or other property
to which the holders of such Depositary Shares were entitled upon such
redemption, upon surrender to the Depositary of the Depositary Receipts
evidencing such Depositary Shares.
CONVERSION OF DEPOSITARY SHARES
If the Preferred Stock deposited under a Deposit Agreement is convertible
into any other class of the Company's securities, the related Depositary Shares
also will have such conversion rights. The terms and conditions on which such
Depositary Shares are convertible will be set forth in the Prospectus Supplement
relating thereto. The conversion price per Depositary Share will be equal to the
applicable fraction of the conversion price per share applicable to such
Preferred Stock.
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VOTING RIGHTS
As soon as practicable after receipt of notice of any meeting at which the
holders of the Preferred Stock deposited under a Deposit Agreement are entitled
to vote, the Depositary will mail the information contained in such notice of
meeting to the holders of the Depositary Shares relating to such Preferred
Shares as of the record date for such meeting. Each such record holder of
Depositary Shares will be entitled, subject to any applicable restrictions, to
instruct the Depositary as to the exercise of the voting rights pertaining to
the amount of the Preferred Stock represented by such record holder's Depositary
Shares. The Depositary will endeavor, insofar as practicable, to vote the amount
of the Preferred Stock represented by such Depositary Shares in accordance with
any such instructions, and the Company will agree to take all action which may
be deemed necessary by the Depositary in order to enable the Depositary to do
so. The Depositary will abstain from voting shares of the Preferred Stock
deposited under a Deposit Agreement to the extent that it does not receive
specific instructions from the holders of Depositary Shares representing such
Preferred Stock.
WITHDRAWAL OF STOCK
Upon surrender of Depositary Receipts at the principal office of the
relevant Depositary (unless the related Depositary Shares have previously been
called for redemption), and subject to the terms of the related Deposit
Agreement, the owner of the Depositary Shares evidenced thereby is entitled to
delivery of whole shares of Preferred Stock and all money and other property, if
any, represented by such Depositary Shares. Partial shares of Preferred Stock
will not be issued. If the Depositary Receipts delivered by the holder evidence
a number of Depositary Shares in excess of the number of Depositary Shares
representing the number of whole shares of Preferred Stock to be withdrawn, the
relevant Depositary will deliver to such holder at the same time a new
Depositary Receipt evidencing such excess number of Depositary Shares. Holders
of shares of Preferred Stock thus withdrawn will not thereafter be entitled to
deposit such shares under a Deposit Agreement or to receive Depositary Shares
therefor. The Company does not expect that there will be any public trading
market for the Preferred Stock, except as represented by the Depositary Shares.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing any Depositary Shares and any
provision of a Deposit Agreement may at any time and from time to time be
amended by agreement between the Company and the Depositary. However, any
amendment which materially and adversely alters the rights of the existing
holders of Depositary Shares will not be effective unless such amendment has
been approved by the holders of at least a majority of the Depositary Shares
then outstanding under such Deposit Agreement. Each Deposit Agreement will
provide that each holder of Depositary Shares at the time any such amendment
becomes effective which continues to hold such Depositary Shares will be deemed
to have consented to such amendment and will be bound thereby. No such amendment
may impair the right, subject to the terms of the related Deposit Agreement, of
any owner of any Depositary Shares issued under such Deposit Agreement to
surrender the Depositary Receipt evidencing such Depositary Shares with
instructions to the Depositary to deliver to the holder the whole shares of
Preferred Stock represented by such Depositary Shares and all money and other
property, if any, represented thereby, except in order to comply with mandatory
provisions of applicable law. A Deposit Agreement may be terminated by the
Company or the Depositary only if (i) all outstanding Depositary Shares relating
thereto have been redeemed or (ii) there has been a final distribution in
respect of the Preferred Stock of the relevant series in connection with any
liquidation, dissolution or winding up of the Company and such distribution has
been distributed to the holders of the related Depositary Shares.
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CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of any Depositary in connection with the initial deposit of
Preferred Stock and the initial issuance of the relevant Depositary Shares and
any redemption of such Preferred Stock. Holders of Depositary Shares will pay
other transfer and other taxes and governmental charges and certain other
charges as are provided in the relevant Deposit Agreement to be for their
accounts.
MISCELLANEOUS
Each Depositary will forward to the holders of the Depositary Shares all
reports and communications from the Company which are delivered to such
Depositary and which the Company is required to furnish to the holders of the
Preferred Stock. In addition, each Depositary will make available for inspection
by holders of the Depositary Shares at the principal office of such Depositary,
and at such other places as it may from time to time deem advisable, any reports
and communications received from the Company which are received by such
Depositary as the holder of Preferred Stock.
Neither any Depositary nor the Company will assume any obligation or will
be subject to any liability under a Deposit Agreement to holders of the
Depositary Shares other than for its negligence or willful misconduct. Neither
any Depositary nor the Company will be liable if it is prevented or delayed by
law or any circumstance beyond its control in performing its obligations under a
Deposit Agreement. The obligations of the Company and any Depositary under a
Deposit Agreement will be limited to performance in good faith of their duties
thereunder, and they will not be obligated to prosecute or defend any legal
proceeding in respect of any Depositary Shares or Preferred Stock unless
satisfactory indemnity is furnished. The Company and any Depositary may rely on
written advice of counsel or accountants, on information provided by persons
presenting Preferred Stock for deposit, holders of Depositary Shares or other
persons believed in good faith to be competent to give such information and on
documents believed to be genuine and to have been signed or presented by the
proper party or parties.
RESIGNATION AND REMOVAL OF DEPOSITARY
A Depositary may resign at any time by delivering to the Company notice of
its election to do so, and the Company may at any time remove any Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its principal
office in the United States of America and having a combined capital and surplus
of at least $50,000,000.
FEDERAL INCOME TAX CONSEQUENCES
Owners of the Depositary Shares will be treated for Federal income tax
purposes as if they were owners of the Preferred Stock represented by such
Depositary Shares.
BOOK-ENTRY PROCEDURES AND SETTLEMENT FOR PREFERRED STOCK AND DEPOSITARY SHARES
The Preferred Stock or Depositary Shares may be issued in certificated or
book-entry form, as specified in the applicable Prospectus Supplement. Preferred
Stock or Depositary Shares issued in book-entry form from the perspective of the
beneficial owners thereof (the "Shareholders") will be issued in the form of a
single global stock certificate or Depositary Receipt registered in the name of
the nominee of the depository, The Depository Trust Company ("DTC", which term,
as used herein, includes any successor or alternate depository selected by the
Company).
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DTC is a limited-purpose trust company which was created to hold securities
for its participating organizations (the "Participants") and to facilitate the
clearance and settlement of securities transactions between Participants in such
securities through electronic book-entry changes in accounts of its
Participants. Participants include securities brokers and dealers, banks and
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants"). Persons
who are not Participants may beneficially own securities held by DTC only
through Participants or Indirect Participants.
DTC's nominee for all purposes will be considered the sole owner or holder
of the Preferred Stock or Depositary Shares held in book-entry form. Owners of
beneficial interests in the global stock certificate or Depositary Receipt will
not be entitled to have Preferred Stock or Depositary Shares registered in their
names, will not receive or be entitled to receive physical delivery of Preferred
Stock or Depositary Shares in definitive form and will not be considered the
holders thereof under the Certificate of Incorporation or any Deposit Agreement.
Neither the Company nor the Depository will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the global stock certificate or Depositary
Receipt, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
A Shareholder's ownership of Preferred Stock or Depositary Shares will be
recorded on or through the records of the brokerage firm or other entity that
maintains such Shareholder's account. In turn, the total number of shares of
Preferred Stock or Depositary Shares held by an individual brokerage firm for
its clients will be maintained on the records of DTC in the name of such
brokerage firm or other entity (or in the name of a Participant that acts as
agent for the Shareholder's brokerage firm or other entity if such firm or other
entity is not a Participant). Therefore, a Shareholder must rely upon the
records of such brokerage firm or other entity to evidence such Shareholder's
ownership of Preferred Stock or Depositary Shares. Transfer of ownership of any
Preferred Stock or Depositary Shares may be effected only through the brokerage
firm or other entity that maintains a Shareholder's account.
Dividends or other distributions payable in respect of Preferred Stock or
Depositary Shares will be paid by the Company or the Depositary, as the case may
be, to DTC. DTC will be responsible for crediting the amount of payments that it
receives from the Company or the Depositary, as the case may be, to the accounts
of the Participants in accordance with each of their respective standard
procedures. Each Participant will be responsible for disbursing such payments to
the Shareholders that it represents and to each brokerage firm or other entity
for which it acts as agent. Each such brokerage firm or other entity will be
responsible for disbursing funds to the Shareholders that it represents. It is
suggested that any purchaser of Preferred Stock or Depositary Shares with
accounts at more than one brokerage firm or other entity only effect
transactions in the Preferred Stock or Depositary Shares through the brokerage
firm or firms or other entity or entities that hold such purchaser's Preferred
Stock or Depositary Shares.
If DTC is at any time unwilling or unable to continue as depository in
respect of a global certificate or Depositary Receipt and a successor depository
is not appointed by the Company or the Depositary, as the case may be, within 90
days, the Company will issue Preferred Stock or Depositary Shares, as the case
may be, in definitive form in exchange for the global stock certificate or
Depositary Receipt. In addition, the Company may at any time determine not to
have the Preferred Stock or Depositary Shares represented by a global stock
certificate or Depositary Receipt, as the case may be, and, in such event, will
issue Preferred Stock or Depositary Shares in definitive form in exchange for
such global stock certificate or Depositary Receipt. In either instance, an
owner of a beneficial interest in the global stock certificate or Depositary
Receipt will be entitled to have Preferred Stock or Depositary Shares equal in
aggregate amount to such beneficial interest
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registered in its name and will be entitled to physical delivery of such
Preferred Stock or Depositary Shares in definitive form. The registered owner of
such Preferred Stock or Depositary Shares will be entitled to receive the
dividends or other distributions or, if applicable, the redemption price payable
in respect of such Preferred Stock or Depositary Shares, upon surrender of such
Preferred Stock or Depositary Shares to the Company or the Depositary, as the
case may be, in accordance with the procedures set forth in the Certificate of
Incorporation or Deposit Agreement, respectively.
DESCRIPTION OF COMMON STOCK
As of the date of this Prospectus, the Company's Certificate of
Incorporation authorizes the issuance of 250,000,000 shares of Common Stock,
$1.00 par value per share. As of December 31, 1995, 106,447,726 shares of Common
Stock were outstanding.
The following description of the capital stock of the Company is subject to
the detailed provisions of the Company's Certificate of Incorporation and bylaws
as currently in effect (the "Bylaws"). This description does not purport to be
complete or to give full effect to the terms of the provisions of statutory or
common law and is subject to, and qualified in its entirety by reference to, the
Certificate of Incorporation and the Bylaws, each of which has been filed as an
exhibit to or will be incorporated by reference in the Registration Statement of
which this Prospectus is a part.
Subject to the rights of the holders of any outstanding shares of preferred
stock, holders of Common Stock are entitled to receive such dividends, in cash,
securities, or property, as may from time to time be declared by the Board of
Directors. Subject to the provisions of the Bylaws with respect to the closing
of the transfer books and the fixing of a record date, holders of shares of
Common Stock are entitled to one vote per share of Common Stock held on all
matters requiring a vote of the holders of Common Stock. In the event of any
liquidation, dissolution or winding up of the Company, either voluntary or
involuntary, after payment shall have been made to the holders of preferred
stock of the full amount to which they shall be entitled, the holders of Common
Stock shall be entitled to share ratably, according to the number of shares held
by them, in all remaining assets of the Company available for distribution.
Shares of Common Stock are not redeemable and have no subscription, conversion
or preemptive rights.
The outstanding shares of Common Stock are listed on the New York Stock
Exchange and trade under the symbol "SB". The transfer agent and registrar for
the Common Stock is First Chicago Trust Company.
DESCRIPTION OF WARRANTS
The following description of the terms of the Warrants sets forth certain
general terms and provisions of the Warrants to which any Prospectus Supplement
may relate. The particular terms of the Warrants offered by any Prospectus
Supplement and the extent, if any, to which such general provisions may apply to
the Warrants so offered will be described in the Prospectus Supplement relating
to such Warrants.
The Company may issue Warrants for the purchase of Debt Securities,
Preferred Stock or Common Stock. Warrants may be issued independently or
together with Debt Securities, Preferred Stock or Common Stock offered by any
Prospectus Supplement and may be attached to or separate from any such Offered
Securities. Each series of Warrants will be issued under a separate warrant
agreement (a "Warrant Agreement") to be entered into between the Company and a
bank or trust company, as warrant agent (the "Warrant Agent"). The Warrant Agent
will act solely as the agent of the Company under the applicable Warrant
Agreement and in connection with the certificates for the Warrants (the "Warrant
Certificates"), if any, of such series, and will not assume any obligation or
relationship of agency or trust for or with any holders of such Warrant
Certificates or beneficial owners of Warrants. Copies of the form of Warrant
Agreement, including the respective forms of Warrant Certificates, have
previously been filed with the Commission and are incorporated by
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reference as part of the Registration Statement. The following summaries of
certain provisions of the forms of Warrant Agreements and Warrant Certificates
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Warrant Agreements and the
Warrant Certificates.
DEBT WARRANTS
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Debt Warrants, if any, offered thereby for the terms of
such Warrants, including, where applicable: (i) the title of such Debt Warrants;
(ii) the aggregate number of such Debt Warrants; (iii) the offering price, if
any; (iv) the currency or currencies in which such Debt Warrants are being
offered; (v) the designation, aggregate principal amount, currency or
currencies, denominations and other terms of the series of Debt Securities
purchasable upon exercise of such Debt Warrants; (vi) if applicable, the
designation and terms of the series of Debt Securities with which such Debt
Warrants are being offered and the number of such Debt Warrants being offered
with each such Debt Security; (vii) if applicable, the date on and after which
such Debt Warrants and the related series of Debt Securities will be
transferable separately; (viii) the principal amount of the Debt Securities
purchasable upon exercise of each such Debt Warrant and the price at which and
currency or currencies in which such principal amount of Debt Securities may be
purchased upon such exercise (which price may be payable in cash, securities or
other property); (ix) the date on which the right to exercise such Debt Warrants
shall commence and the date (the "Expiration Date") on which such right shall
expire; (x) whether such Warrants are to be issuable as Registered Warrants or
Bearer Warrants (each, as defined below); (xi) whether such Debt Warrants are
extendable and the period or periods of such extendability; (xii) the terms upon
which any Bearer Warrants of such series may be exchanged for Registered
Warrants of such series; (xiii) whether such Debt Warrants will be issued in
certificated or uncertificated form; (xiv) United States Federal income tax
consequences; (xv) the antidilution provisions of such Debt Warrants, if any;
(xvi) the redemption or call provisions, if any, applicable to such Debt
Warrants; (xvii) any additional terms of the Debt Warrants, including terms,
procedures and limitations relating to the exchange of such Debt Warrants; and
(xviii) any other terms of such Debt Warrants not inconsistent with the
applicable Warrant Agreement.
Warrants for Debt Securities will be issuable in registered form
("Registered Warrants") and may be issuable in bearer form ("Bearer Warrants").
Registered Warrants of any series will be exchangeable into Registered Warrants
of the same series representing in the aggregate the number of Debt Warrants
surrendered for exchange. Warrant Certificates, to the extent exchangeable, may
be presented for exchange, and Registered Warrants may be presented for
transfer, at the corporate trust office of the Warrant Agent for such series of
Debt Warrants (or any other office indicated in the Prospectus Supplement
relating to such series of Debt Warrants). Prior to the exercise of their Debt
Warrants, holders of Debt Warrants will not have any of the rights of Holders of
the Debt Securities of the series purchasable upon such exercise, including the
right to receive payments of principal of, premium, if any, or interest, if any,
on, the Debt Securities purchasable upon such exercise, or to enforce any of the
covenants in the applicable Indenture. Bearer Warrants will be transferable by
delivery. The applicable Prospectus Supplement will describe the terms of
exchange applicable to any Bearer Warrants.
Each Debt Warrant will entitle the holder thereof to purchase such
principal amount of the related series of Debt Securities at such exercise price
as shall in each case be set forth in, or calculable as set forth in, the
Prospectus Supplement relating to such Debt Warrant. Registered Warrants of a
series may be exercised at the corporate trust office of the Warrant Agent for
such series (or any other office indicated in the Prospectus Supplement relating
to such series) at any time prior to 5:00 P.M., New York City time (unless
otherwise indicated in the related Prospectus Supplement), on the Expiration
Date set forth in the Prospectus Supplement relating to such series of Debt
Warrants. After the close of business on the Expiration Date relating to such
series of Debt
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Warrants (or such later date to which such Expiration Date may be extended by
the Company), unexercised Debt Warrants of such series will become void.
Registered Warrants of a series may be exercised by delivery to the
appropriate Warrant Agent of payment, as provided in the Prospectus Supplement
relating to such series of Debt Warrants, of the consideration required to
purchase the principal amount of the series of Debt Securities purchasable upon
such exercise, together with certain information as set forth on the reverse
side of the Warrant Certificate evidencing such Debt Warrants. Such Debt
Warrants will be deemed to have been exercised upon receipt of the exercise
price, subject to the receipt of the Warrant Certificate evidencing such Debt
Warrants within five business days. Upon receipt of such payment and such
Warrant Certificate, properly completed and duly executed, at the corporate
trust office of the appropriate Warrant Agent (or any other office indicated in
the Prospectus Supplement relating to such series of Warrants), the Company
will, as soon as practicable, issue and deliver the principal amount of the
series of Debt Securities purchasable upon such exercise. Only Registered
Securities will be issued and delivered upon exercise of Registered Warrants. If
fewer than all of the Debt Warrants represented by a Registered Warrant are
exercised, a new Registered Warrant will be issued and delivered for the
remaining amount of Warrants. Special provisions relating to the exercise of any
Bearer Warrants will be described in the related Prospectus Supplement.
STOCK WARRANTS
The Prospectus Supplement relating to any particular issue of Preferred
Stock Warrants or Common Stock Warrants will describe the terms of such Stock
Warrants, including the following: (i) the title of such Stock Warrants; (ii)
the aggregate number of such Stock Warrants; (iii) the offering price for such
Stock Warrants, if any; (iv) the currency or currency units in which the
offering price, if any, and the exercise price are payable; (v) the designation
and terms of the Common Stock or Preferred Stock purchasable upon exercise of
such Stock Warrants; (vi) if applicable, the designation and terms of such
Offered Securities with which such Stock Warrants are issued and the number of
such Stock Warrants issued with each such Offered Security; (vii) if applicable,
the date from and after which such Stock Warrants and any such Offered
Securities issued therewith will be transferable separately; (viii) the number
of shares of Common Stock or Preferred Stock purchasable upon exercise of a
Stock Warrant and the price at which such shares may be purchased upon exercise;
(ix) the date on which the right to exercise such Stock Warrants shall commence
and the Expiration Date; (x) if applicable, the minimum or maximum amount of
such Stock Warrants that may be exercised at any one time; (xi) whether such
Stock Warrants are extendable and the period or periods of such extendability;
(xii) United States federal income tax consequences; (xiii) the antidilution
provisions of such Stock Warrants, if any; (xiv) the redemption or call
provisions, if any applicable to such Stock Warrants; (xv) any additional terms
of the Stock Warrants, including terms, procedures and limitations relating to
the exchange of such Stock Warrants; and (xvi) any other terms of such Stock
Warrants not inconsistent with the applicable Warrant Agreement.
DESCRIPTION OF INDEX WARRANTS
The following description of the terms of the Index Warrants sets forth
certain general terms and provisions of the Index Warrants to which any
Prospectus Supplement may relate. The particular terms of the Index Warrants
offered by any Prospectus Supplement and the extent, if any, to which such
general provisions do not apply to the Index Warrants so offered will be
described in such Prospectus Supplement.
Each series of Index Warrants will be issued under a separate index warrant
agreement (each, an "Index Warrant Agreement") to be entered into between the
Company and a bank or trust company, as warrant agent (the "Index Warrant
Agent"), all as described in the Prospectus Supplement relating to such Index
Warrants. A single bank or trust company may act as Index
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Warrant Agent for more than one series of Index Warrants. The Index Warrant
Agent will act solely as the agent of the Company under the applicable Index
Warrant Agreement and will not assume any obligation or relationship of agency
or trust for or with any owners of such Index Warrants. A copy of the form of
Index Warrant Agreement, including the form of index warrant certificate (the
"Index Warrant Certificate," or, if issued in global form, the "Index Warrant
Global Certificate"), is filed as an exhibit to or incorporated by reference in
the Registration Statement. The following summaries of certain provisions of the
Index Warrants and the form of Index Warrant Agreement do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Index Warrant Agreement and the Index Warrant
Certificate or Index Warrant Global Certificate.
GENERAL
The Index Warrant Agreement does not limit the number of Index Warrants
that may be issued thereunder. The Company will have the right to "reopen" a
previous series of Index Warrants and to issue additional Index Warrants of such
series.
Each Index Warrant will entitle the holder (each, a "Holder") to receive
from the Company, upon exercise, including any automatic exercise, an amount in
cash or a number of securities that will be determined by reference to prices,
yields, levels or other specified objective measure (any such measure, an
"Index"), or changes in an Index or differences between two or more Indexes. The
assets by reference to which an Index is determined (the "Underlying Assets")
may be one or more specified securities or securities indexes or one or more
foreign currencies or foreign currency indexes, or a combination thereof. The
Prospectus Supplement for a series of Index Warrants will set forth the formula
or methodology pursuant to which the amount payable or distributable on the
Index Warrants will be determined by reference to the relevant Index or Indexes.
Certain Index Warrants will, if specified in the Prospectus Supplement,
entitle the Holder to receive from the Company, upon automatic exercise at
expiration and under certain other circumstances, a minimum or maximum amount.
The Prospectus Supplement applicable to any series of Index Warrants will
set forth any circumstances in which the payment or distribution, or the
determination of the payment or distribution, on the Index Warrants may be
postponed and the period for which such payment or distribution or determination
may be postponed. Conversely, the Index Warrants may be subject to early
exercise or cancellation in certain circumstances described in the applicable
Prospectus Supplement. The amount due, or the means by which the amount due, on
the Index Warrants may be determined after any such delay or postponement, or
early exercise or cancellation will be set forth in the applicable Prospectus
Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
Company will be under no obligation to, nor will it, purchase or take delivery
of or sell or deliver any securities or currencies (including the Underlying
Assets), other than the payment of any cash or distribution of any securities
due on the Index Warrants, from or to Holders pursuant to the Index Warrants.
Unless otherwise specified in the Prospectus Supplement, the Index Warrants
will be deemed to be automatically exercised upon expiration. Upon such
automatic exercise, Holders will be entitled to receive in cash or securities,
depending on the terms of the applicable Prospectus Supplement, the cash amount
or the number of securities due, if any, on such exercise of the Index Warrants.
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Index Warrants offered thereby for the terms of such Index
Warrants, including, where applicable: (i) the aggregate number of such Index
Warrants; (ii) the offering price of such Index Warrants; (iii) the Index or
Indexes by reference to which payment or distribution on such Index Warrants
will be determined; (iv) certain information regarding the Underlying Assets;
(v) the amount due, or the
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means by which the amount due may be calculated, on exercise of the Index
Warrants, including automatic exercise, or upon cancellation; (vi) the date on
which the Index Warrants may first be exercised and the date on which they
expire; (vii) any minimum number of Index Warrants exercisable at any one time;
(viii) any maximum number of Index Warrants that may, subject to the Company's
election, be exercised by all Holders (or by any person or entity) on any day;
(ix) any provisions permitting a Holder to condition an exercise of Index
Warrants; (x) the method by which the Index Warrants may be exercised; (xi) the
currency in which the Index Warrants will be denominated and in which payments
on the Index Warrants will be made or the securities that may be distributed in
respect of the Index Warrants; (xii) the method of making any foreign currency
translation applicable to payments or distributions on the Index Warrants;
(xiii) the method of providing for a substitute Index or Indexes or otherwise
determining the amount payable in connection with the exercise of Index Warrants
if an Index changes or is no longer available; (xiv) the time or times at which
amounts will be payable in respect of such Index Warrants following exercise or
automatic exercise; (xv) any national securities exchange on, or self-regulatory
organization with, which such Index Warrants will be listed; (xvi) any
provisions for issuing such Index Warrants in certificated form; (xvii) if such
Index Warrants are not issued in book-entry form, the place or places at and the
procedures by which payments or distributions on the Index Warrants will be
made; and (xviii) any other terms of such Index Warrants.
Prospective purchasers of Index Warrants should be aware of special United
States federal income tax considerations applicable to instruments such as the
Index Warrants. The Prospectus Supplement relating to each series of Index
Warrants will describe such tax considerations. The summary of United States
federal income tax considerations contained in the Prospectus Supplement will be
presented for informational purposes only, however, and will not be intended as
legal or tax advice to prospective purchasers. Prospective purchasers of Index
Warrants are urged to consult their own tax advisors prior to any acquisition of
Index Warrants.
BOOK-ENTRY PROCEDURES AND SETTLEMENT FOR INDEX WARRANTS
Subject to the rules of the Depository, and unless otherwise specified in
the Prospectus Supplement, the Index Warrants offered thereby will be issued in
the form of a single Index Warrant Global Certificate that will be deposited
with, or on behalf of, a depository (the "Depository"), which shall be, unless
otherwise specified in the applicable Prospectus Supplement, the Depository
Trust Company, New York, New York ("DTC"). Index Warrants will be registered in
the name of the Depository or a nominee of the Depository. Unless and until it
is exchanged in whole or in part for the individual Index Warrants represented
thereby, an Index Warrant Global Certificate may not be transferred except as a
whole by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor of the Depository or a nominee of
such successor.
The Company anticipates that the following provisions will apply to all
depository arrangements.
Upon the issuance of an Index Warrant Global Certificate, the Depository
will credit, on its book-entry registration and transfer system, the respective
numbers of the individual Index Warrants represented by such Index Warrant
Global Certificate to the accounts of institutions that have accounts with the
Depository ("participants"). The accounts to be credited shall be designated by
the underwriters of such Index Warrants or, if such Index Warrants are offered
and sold directly by the Company or through one or more agents, by the Company
or such agent or agents. Ownership of beneficial interests in an Index Warrant
Global Certificate will be limited to participants or persons that may hold
beneficial interests through participants. Ownership of beneficial interests in
an Index Warrant Global Certificate will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the Depository
for such Index Warrant Global Certificate or by participants or persons that
hold through participants. The laws of some states require that certain
purchasers of securities take physical delivery of such securities. Such limits
and such laws may limit the market for beneficial interests in an Index Warrant
Global Certificate.
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<PAGE> 48
The Depository's nominee for all purposes will be considered the sole owner
or holder of the Index Warrants under the related Index Warrant Agreement.
Except as set forth below, owners of beneficial interests in the Index Warrant
Global Certificate will not be entitled to have any of the individual Index
Warrants represented by such Index Warrant Global Certificate registered in
their names, will not receive or be entitled to receive physical delivery of any
such Index Warrants, and will not be considered the holders thereof under the
related Index Warrant Agreement.
Neither the Company nor the Index Warrant Agent will have any
responsibility or liability for any aspect of the records relating to or
payments or distributions made on account of beneficial ownership interests in
the Index Warrant Global Certificate or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
If the Depository is at any time unwilling or unable to continue as
depository and a successor depository is not appointed by the Company within 90
days, the Company will issue individual Index Warrant Certificates in exchange
for the Index Warrant Global Certificate. In addition, the Company may at any
time and in its sole discretion determine not to have certain Index Warrants
represented by an Index Warrant Global Certificate and, in such event, will
issue individual Index Warrant Certificates in exchange for such Global
Certificate. Further, if the Company so specifies with respect to any Index
Warrants, an owner of a beneficial interest in an Index Warrant Global
Certificate may, on such terms acceptable to the Company and the Depository,
receive individual Index Warrant in exchange for such beneficial interest. In
any such instance, an owner of a beneficial interest in the Index Warrant Global
Certificate will be entitled to have Index Warrants equal in aggregate number to
such beneficial interest registered in its name and will be entitled to physical
delivery of such Index Warrants. The registered owner of such Index Warrants
will be entitled to receive any amounts payable in respect of such Index
Warrants, upon surrender of such Index Warrants to the Index Warrant Agent in
accordance with the procedures set forth in the Prospectus Supplement.
LISTING
Unless otherwise indicated in the Prospectus Supplement, the Index Warrants
will be listed on a national securities exchange or with a self-regulatory
organization, the rules and regulations of which are filed with the Commission
pursuant to Section 19(b) of the Exchange Act (a "Self-Regulatory
Organization"), in each case as specified in the Prospectus Supplement. It is
expected that such Self-Regulatory Organization will cease trading a series of
Index Warrants as of the close of business on the related expiration date of
such Index Warrants.
MODIFICATION
The Index Warrant Agreement and the terms of the related Index Warrants may
be amended by the Company and the Index Warrant Agent, without the consent of
the holders of any Index Warrants, for the purpose of curing any ambiguity or of
curing, correcting or supplementing any defective or inconsistent provision
contained therein, maintaining the listing of such Index Warrants on any
national securities exchange or with any other Self-Regulatory Organization or
registration of such Index Warrants under the Exchange Act, permitting the
issuance of individual Index Warrant certificates to Holders, reflecting the
issuance by the Company of additional Index Warrants of the same series or
reflecting the appointment of a successor depository, or for any other purpose
which the Company may deem necessary or desirable and which will not materially
and adversely affect the interests of the Holders.
The Company and the Index Warrant Agent also may modify or amend the Index
Warrant Agreement and the terms of the related Index Warrants, with the consent
of the holders of not less than a majority in number of the then outstanding
Warrants affected by such modification or amendment, for any purposes; provided,
however, that no such modification or amendment that changes the amount to be
paid or the securities to be distributed to the Holder or the manner in
27
<PAGE> 49
which such amount is to be determined, shortens the period of time during which
the Index Warrants may be exercised, or otherwise materially and adversely
affects the exercise rights of the holders of the Index Warrants or reduces the
percentage of the number of outstanding Index Warrants the consent of whose
holders is required for modification or amendment of the Index Warrant Agreement
or the terms of the related Index Warrants, may be made without the consent of
each Holder affected thereby.
MERGER, CONSOLIDATION, SALE OR OTHER DISPOSITION
If at any time there is a merger or consolidation involving the Company or
a sale, transfer, conveyance (other than by way of lease) or other disposition
of all or substantially all of the assets of the Company, then the successor or
assuming corporation will succeed to and be substituted for the Company under
the Index Warrant Agreement and the related Index Warrants, with the same effect
as if it had been named in such Index Warrant Agreement and Index Warrants as
the Company. The Company will thereupon be relieved of any further obligation
under such Index Warrant Agreement and Index Warrants and may at any time
thereafter be dissolved, wound up or liquidated.
ENFORCEABILITY OF RIGHTS BY HOLDERS
Any Holder may, without the consent of the Index Warrant Agent or any other
Holder, enforce by appropriate legal action on his own behalf his right to
exercise, and to receive payment for, his Index Warrants.
SPECIAL CONSIDERATIONS RELATING TO INDEX WARRANTS
The Index Warrants involve a high degree of risk, including risks arising
from fluctuations in the values of the Underlying Assets, risks relating to the
Index or Indexes by which payments or distributions on the Index Warrants are
calculated, general risks applicable to the securities or currency markets on
which the Underlying Assets are traded and, in the case of certain Index
Warrants, foreign exchange, interest rate, issuer and other risks. Purchasers
should recognize that their Index Warrants, other than Index Warrants having a
minimum expiration value, may expire worthless. Purchasers should be prepared to
sustain a total loss of the purchase price of their Index Warrants, and are
advised to consider carefully the information set forth herein and under "Risk
Factors Relating to the Index Warrants" in the applicable Prospectus Supplement.
Prospective purchasers of the Index Warrants should be experienced with respect
to options and options transactions and understand the risks of the Index (and,
if applicable, foreign currency transactions), and should reach an investment
decision only after careful consideration, with their advisers, of the
suitability of the Index Warrants in light of their particular financial
circumstances, the information set forth herein under "Description of Index
Warrants," and the information regarding the Index Warrants, the Index and the
Underlying Assets set forth in the Prospectus Supplement.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES AND BEARER WARRANTS
In compliance with United States Federal income tax laws and regulations
the Company and any underwriter, agent or dealer participating in the offering
of any Bearer Security will agree that, in connection with the original issuance
of such Bearer Security and during the period ending 40 days after the issue
date of such Bearer Security, they will not offer, sell or deliver such Bearer
Security, directly or indirectly, to a U.S. Person or to any person within the
United States, except to the extent permitted under U.S. Treasury regulations.
Bearer Securities will bear a legend to the following effect: "Any United
States Person who holds this obligation will be subject to limitations under the
United States income tax laws, including the limitations provided in Sections
165(j) and 1287(a) of the Internal Revenue Code." The sections referred to in
the legend provide that, with certain exceptions, a United States taxpayer
28
<PAGE> 50
who holds Bearer Securities will not be allowed to deduct any loss with respect
to, and will not be eligible for capital gain treatment with respect to any gain
realized on a sale, exchange, redemption or other disposition of, such Bearer
Securities.
As used herein, "United States" means the United States of America and its
possessions, and "United States Person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States, or an estate or trust the income of
which is subject to United States Federal income taxation regardless of its
source.
Pending the availability of a definitive Global Security or individual
Bearer Securities, as the case may be, Debt Securities that are issuable as
Bearer Securities may initially be represented by a single temporary Global
Security, without interest coupons, to be deposited with a common depositary in
London for Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of the Euroclear System ("Euroclear"), and Centrale de Livraison de
Valeurs Mobilieres S.A. ("CEDEL") for credit to the accounts designated by or on
behalf of the purchasers thereof. Following the availability of a definitive
Global Security in bearer form, without coupons attached, or individual Bearer
Securities and subject to any further limitations described in the applicable
Prospectus Supplement, the temporary Global Security will be exchangeable for
interests in such definitive Global Security or for such individual Bearer
Securities, respectively, only upon receipt of a "Certificate of Non-U.S.
Beneficial Ownership". A "Certificate of Non-U.S. Beneficial Ownership" is a
certificate to the effect that a beneficial interest in a temporary Global
Security or Bearer Warrant is owned by a person that is not a U.S. Person or is
owned by or through a financial institution in compliance with applicable U.S.
Treasury regulations. In no event will a definitive Bearer Security be delivered
to a purchaser without the receipt of a Certificate of Non-U.S. Beneficial
Ownership. No Bearer Security will be delivered in or to the United States. If
so specified in the applicable Prospectus Supplement, interest on a temporary
Global Security will be paid to each of Euroclear and CEDEL with respect to that
portion of such temporary Global Security held for its account, but only upon
receipt as of the relevant Interest Payment Date of a Certificate of Non-U.S.
Beneficial Ownership.
Limitations on the offer, sale, delivery and exercise of Bearer Warrants
(including a requirement that a Certificate of Non-U.S. Beneficial Ownership be
delivered upon exercise of a Bearer Warrant) will be described in the Prospectus
Supplement relating to such Bearer Warrants.
PLAN OF DISTRIBUTION
The Company may sell Offered Securities in any of three ways: (i) through
underwriters or dealers; (ii) directly to one or more purchasers; or (iii)
through agents. The applicable Prospectus Supplement will set forth the terms of
the offering of any Offered Securities, including the names of any underwriters,
the purchase price of such Offered Securities and the proceeds to the Company
from such sale, any underwriting discounts and other items constituting
underwriters' compensation, any initial public offering price, any discounts or
concessions allowed or reallowed or paid to dealers, any securities exchanges on
which such Offered Securities may be listed and any restrictions on the sale and
delivery of Offered Securities in bearer form.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
Such Offered Securities may be offered to the public either through underwriting
syndicates represented by managing underwriters or by underwriters without a
syndicate. The Company expects that such managing underwriters or underwriters
in the United States will include Salomon Brothers Inc. Unless otherwise set
forth in the applicable Prospectus Supplement, the obligations of the
underwriters to purchase such Offered Securities will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all of
such Offered Securities if any of such
29
<PAGE> 51
Offered Securities are purchased. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
Offered Securities may also be offered and sold, if so indicated in the
Prospectus Supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, by one or
more firms ("remarketing firms") acting as principals for their own accounts or
as agents for the Company. Any remarketing firm will be identified and the terms
of its agreement, if any, with the Company and its compensation will be
described in the Prospectus Supplement. Remarketing firms may be deemed to be
underwriters in connection with the Offered Securities remarketed thereby.
Offered Securities may also be sold directly by the Company or through
agents designated by the Company from time to time. Any agent involved in the
offer or sale of Offered Securities will be named, and any commissions payable
by the Company to such agent will be set forth, in the applicable Prospectus
Supplement. Unless otherwise indicated in the applicable Prospectus Supplement,
any such agent will act on a best efforts basis for the period of its
appointment.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Offered Securities at the public offering price set
forth in such Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a future date specified in such Prospectus
Supplement. Such contracts will be subject only to those conditions set forth in
the applicable Prospectus Supplement, and such Prospectus Supplement will set
forth the commissions payable for solicitation of such contracts.
Any underwriters, dealers or agents participating in the distribution of
Offered Securities may be deemed to be underwriters and any discounts or
commissions received by them on the sale or resale of Offered Securities may be
deemed to be underwriting discounts and commissions under the Securities Act.
Agents and underwriters may be entitled under agreements entered into with the
Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments that the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be customers of, engage in transactions
with, or perform services for, the Company or its affiliates in the ordinary
course of business.
Salomon Brothers Inc is an indirect wholly owned subsidiary of the Company.
Salomon Brothers Inc's participation in the offer and sale of Offered Securities
complies with the requirements of Schedule E of the By-Laws of the National
Association of Securities Dealers, Inc. regarding the underwriting by Salomon
Brothers Inc of securities of its parent. Salomon Brothers Inc may act as an
underwriter in an "at the market" equity offering pursuant to Rule 415(a)(4)
under the Securities Act and may make a market in the Offered Securities but is
not obligated to do so.
ERISA MATTERS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans ("Plans") that are
subject to ERISA and on persons who are fiduciaries with respect to such Plans.
In accordance with ERISA's general fiduciary requirements, a fiduciary with
respect to any such Plan who is considering the purchase of the Offered
Securities on behalf of such Plan should determine whether such purchase is
permitted under the governing Plan documents and is prudent and appropriate for
the Plan in view of its overall investment policy and the composition and
diversification of its portfolio. Other provisions of ERISA and Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code"), prohibit certain
transactions involving the assets of a Plan and persons who have certain
specified relationships to the Plan ("parties in interest" within the meaning of
ERISA or "disqualified persons" within the meaning of Section 4975 of the Code).
Thus, a Plan fiduciary considering the
30
<PAGE> 52
purchase of the Offered Securities should consider whether such a purchase might
constitute or result in a prohibited transaction under ERISA or Section 4975 of
the Code.
The Company, directly or through its affiliates, may be considered a "party
in interest" or a "disqualified person" with respect to many Plans that are
subject to ERISA. The purchase of Offered Securities by a Plan that is subject
to the fiduciary responsibility provisions of ERISA or the prohibited
transaction provisions of Section 4975 of the Code (including individual
retirement accounts and other plans described in Section 4975(e)(1) of the Code)
and with respect to which the Company is a party in interest or a disqualified
person may constitute or result in a prohibited transaction under ERISA or
Section 4975 of the Code, unless such Offered Securities are acquired pursuant
to and in accordance with an applicable exemption, such as Prohibited
Transaction Class Exemption ("PTCE") 84-14 (an exemption for certain
transactions determined by an independent qualified professional asset manager),
PTCE 91-38 (an exemption for certain transactions involving bank collective
investment funds), PTCE 90-1 (an exemption for certain transactions involving
insurance company pooled separate accounts), or PTCE 95-60 (an exemption for
certain transactions involving insurance company general accounts). ANY PENSION
OR OTHER EMPLOYEE BENEFIT PLAN PROPOSING TO ACQUIRE ANY OFFERED SECURITIES
SHOULD CONSULT WITH ITS COUNSEL.
EXPERTS
The financial statements and related schedules included in the 1995 10-K
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference in this Prospectus in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
LEGAL OPINIONS
Certain legal matters relating to the Securities will be passed upon for
the Company by Cravath, Swaine & Moore, New York, New York, and for any agents
or underwriters by Cleary, Gottlieb, Steen & Hamilton, New York, New York.
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<PAGE> 53
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED
HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF
WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Incorporation of Certain Documents by
Reference.......................... S-2
Risk Factors Relating to DECS........ S-3
Salomon Inc.......................... S-5
Cincinnati Bell...................... S-5
Recent Developments Concerning
Cincinnati Bell.................... S-6
Relationship Among Waslic, Western &
Southern and Cincinnati Bell....... S-7
Price Range and Dividend History of
Cincinnati Bell Common Shares...... S-8
Use of Proceeds...................... S-8
Description of the DECS.............. S-9
Certain United States Federal Income
Tax Considerations................. S-16
ERISA Considerations................. S-19
Plan of Distribution................. S-20
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
Salomon Inc.......................... 3
Use of Proceeds...................... 3
Ratio of Earnings to Fixed Charges
and Earnings to Fixed Charges and
Preferred Dividends................ 3
Description of Debt Securities....... 4
Description of Preferred Stock....... 13
Description of Depositary Shares..... 17
Description of Common Stock.......... 22
Description of Warrants.............. 22
Description of Index Warrants........ 24
Limitations on Issuance of Bearer
Securities and Bearer Warrants..... 28
Plan of Distribution................. 29
ERISA Matters........................ 30
Experts.............................. 31
Legal Opinions....................... 31
</TABLE>
3,000,000 DECS(SM)
(DEBT EXCHANGEABLE FOR
COMMON STOCK(SM))
SALOMON INC
% EXCHANGEABLE NOTES
DUE FEBRUARY 1, 2001
SALOMON BROTHERS INC
MORGAN STANLEY & CO.
INCORPORATED
PROSPECTUS SUPPLEMENT
DATED , 1996
