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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-01807
Information contained in this preliminary prospectus supplement is subject to
completion or amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the delivery of a final
prospectus supplement and prospectus. This preliminary prospectus supplement and
accompanying prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
OCTOBER 27, 1997
PROSPECTUS SUPPLEMENT
(To Prospectus Dated April 5, 1996)
SMILES(SERVICE MARK) (STOCK MARKET INDEX LINKED EXCHANGEABLE
SECURITIES(SERVICE MARK))
SALOMON INC
RUSSELL 2000(REGISTERED) STOCK MARKET INDEX LINKED EXCHANGEABLE SECURITIES
DUE NOVEMBER , 2004
($10 PRINCIPAL AMOUNT PER SMILES)
GENERAL:
- -- Senior unsecured debt -- Exchangeable for cash at holder's option
securities prior to maturity
- -- No payments prior to maturity -- Issuable and transferable only in minimum
unless exchanged denominations of $10 or integral
multiples thereof
PAYMENT AT MATURITY: PRINCIPAL AMOUNT + SUPPLEMENTAL REDEMPTION AMOUNT
The Supplemental Redemption Amount per Russell 2000 Stock Market Index Linked
Exchangeable Security (each, a 'SMILES') will equal $10 multiplied by the
percentage increase, if any, in the Russell 2000 Index above a benchmark value
of . , which exceeds the closing value of such Index on the date of this
Prospectus Supplement by 10%. The Supplemental Redemption Amount may be ZERO,
but will not be less than zero.
PAYMENT ON EARLY EXCHANGE: PRINCIPAL AMOUNT + EARLY REDEMPTION AMOUNT
Holders may exchange their SMILES for cash on any Business Day from December ,
1997 to November , 2004. The Early Redemption Amount per SMILES due upon any
such exchange will equal $10 multiplied by the percentage increase, if any, in
the Russell 2000 Index above a benchmark value of , which exceeds the
closing value of such Index on the date of this Prospectus Supplement by 10%.
Depending on the level of the Index on the date of any proposed exchange, the
Early Redemption Amount may be ZERO, or LESS THAN ZERO.
For information as to the Supplemental Redemption Amount, the Early Redemption
Amount and certain United States federal income tax consequences to holders of
the SMILES, see 'Description of SMILES--Determination of the Supplemental
Redemption Amount' 'Description of SMILES--Determination of the Early Redemption
Amount' and 'Certain United States Federal Income Tax Considerations' in this
Prospectus Supplement.
SEE 'RISKS FACTORS RELATING TO THE SMILES' BEGINNING ON PAGE S-8 FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE
PURCHASERS.
Application will be made to list the SMILES on the Chicago Board Options
Exchange under the symbol 'RXS'. 'SMILES' and 'Stock Market Index Linked
Exchangeable Securities' are service marks of Salomon Brothers Inc.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION OR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS TO
TO PUBLIC(1) DISCOUNT(1) COMPANY(2)
Per SMILES.......... $10.00 $ $
Total(3)............ $ $ $
- --------------------------------------------------------------------------------
(1) The price to public and underwriting discounts for investors purchasing
$ principal amount of SMILES or more in any single transaction will be
$ per SMILES and $ per SMILES, respectively.
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the Underwriters an option, exercisable within 30
days of the date of this Prospectus Supplement, to purchase up to an
aggregate of $ principal amount of SMILES at the price to public less
the underwriting discounts, for the purpose of covering over-allotments, if
any. If the Underwriters exercise such option in full, the total price to
public, underwriting discounts and proceeds to Company will be, subject to
note 1 above, $ , $ and $ , respectively. See 'Plan of
Distribution'.
The SMILES are offered subject to receipt and acceptance by the Underwriters, to
prior sale 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 SMILES 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 November , 1997.
The Company or one or more of its subsidiaries may from time to time (including
in the initial offering) purchase or acquire a position in the SMILES and may,
at its option, hold, resell or retire such SMILES. Salomon Brothers Inc, an
indirect wholly-owned subsidiary of the Company, expects to offer and sell
previously-issued SMILES in the course of its business as a broker-dealer.
Salomon Brothers Inc may act as principal or agent in such transactions. This
Prospectus Supplement and the accompanying Prospectus may be used by the Company
or any of its subsidiaries, including Salomon Brothers Inc, in connection with
such transactions. Such sales, if any, will be made at varying prices related to
prevailing market prices at the time of sale.
SALOMON BROTHERS INC
OPPENHEIMER & CO., INC.
PRUDENTIAL SECURITIES INCORPORATED
The date of this Prospectus Supplement is , 1997.
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CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SMILES, INCLUDING
PURCHASES OF THE SMILES TO STABILIZE THEIR MARKET PRICE, PURCHASES OF THE SMILES
TO COVER ALL OR SOME OF A SHORT POSITION IN THE SMILES MAINTAINED BY THE
UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE 'PLAN OF DISTRIBUTION'.
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SUMMARY INFORMATION--Q&A
This summary includes questions and answers that highlight selected
information from the Prospectus and Prospectus Supplement to help you understand
the SMILES. You should carefully read the Prospectus and Prospectus Supplement
to fully understand the terms of the SMILES, the Russell 2000(Registered) Index
(the 'Russell 2000 Index' or the 'Index'), as well as the principal tax and
other considerations that are important to you in making a decision about
whether to invest in the SMILES. You should, in particular, carefully review the
'Risk Factors' section, which highlights certain risks, to determine whether an
investment in the SMILES is appropriate for you.
WHAT ARE THE SMILES?
The SMILES are a series of senior debt securities issued by Salomon Inc
(the 'Company') and are not secured by collateral. The SMILES will rank equally
with all other unsecured and unsubordinated debt of the Company. The SMILES
mature on November , 2004 and do not provide for earlier redemption by the
Company. Unless the SMILES are exchanged by the holder prior to maturity, we
will make no payments on the SMILES until maturity.
Each SMILES represents a principal amount of $10. You may transfer the
SMILES only in whole denominations of $10 and integral multiples thereof. You
will not have the right to receive physical certificates evidencing your
ownership except under limited circumstances. Instead, we will issue the SMILES
in the form of a global certificate, which will be held by The Depository Trust
Company ('DTC'), or its nominee. Direct and indirect participants in DTC will
record beneficial ownership of the SMILES by individual investors. You should
refer to the section 'Description of SMILES--Book Entry System' in this
Prospectus Supplement.
WHAT WILL I RECEIVE AT MATURITY OF THE SMILES?
We have designed the SMILES for investors who want to protect their
investment by receiving at least the principal amount of their investment at
maturity and who also want to participate in a possible increase in the Russell
2000 Index. At maturity, you will receive a payment on each SMILES equal to the
sum of two amounts: the Principal Amount ($10) and the 'Supplemental Redemption
Amount', which is based on the percentage increase, if any, in the Russell 2000
Index. You will not receive less than the Principal Amount.
PRINCIPAL AMOUNT
The Principal Amount per SMILES is $10.
SUPPLEMENTAL REDEMPTION AMOUNT
The Supplemental Redemption Amount per SMILES will equal:
EIV - BIV
$10 X -----------
BIV
EIV = Ending Index Value
BIV = Benchmark Index Value
'ENDING INDEX VALUE' means the average of the values of the Russell 2000
Index at the close of the market on five business days before the maturity of
the SMILES. We may calculate the Ending Index Value by reference to fewer than
five or even a single day's closing value if, during the period prior to the
maturity date of the SMILES, there is a disruption in the trading of the
securities comprising the Russell 2000 Index or certain instruments linked to
the Russell 2000 Index.
'BENCHMARK INDEX VALUE' equals . and was determined as described
herein. The closing value of the Russell 2000 Index on the date of this
Prospectus Supplement was . (the 'Starting Index Value') and the
Benchmark Index Value exceeds the Starting Index Value by 10%.
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For more specific information about the Supplemental Redemption Amount,
including details concerning possible changes in the timing or method of
determination of the relevant Index values as a result of certain market events,
please see the section 'Description of SMILES' in this Prospectus Supplement.
We will pay you a Supplemental Redemption Amount only if the Ending Index
Value is more than 10% greater than the Starting Index Value. IF THE ENDING
INDEX VALUE IS LESS THAN, EQUAL TO, OR NO MORE THAN 10% GREATER THAN THE
STARTING INDEX VALUE, THE SUPPLEMENTAL REDEMPTION AMOUNT WILL BE ZERO. The
Ending Index Value will be calculated only as described herein, and you will not
receive any value for earlier increases in the Index if the Index falls in value
during the Calculation Period (as defined below). We will pay you the principal
amount of the SMILES regardless of whether any Supplemental Redemption Amount is
payable.
SUPPLEMENTAL REDEMPTION AMOUNT--EXAMPLES
Here are two examples of Supplemental Redemption Amount calculations:
Example 1: Russell 2000 Index is below the Benchmark Index Value at maturity.
Hypothetical Starting Index Value: 454.55
Hypothetical Benchmark Index Value: 500.00
Hypothetical Ending Index Value: 475.0]
475.00 - 500.00
Supplemental Redemption Amount (Per SMILES) = $10 X ----------------- = $ -0.50
500.00
(Supplemental Redemption
Amount cannot be
less than zero)
Total payment at maturity (Per SMILES) = $10 + $0 = $10
Example 2: Russell 2000 Index is above the Benchmark Index Value at maturity.
Hypothetical Starting Index Value: 454.55
Hypothetical Benchmark Index Value: 500.00
Hypothetical Ending Index Value: 600.00
600.00 - 500.00
Supplemental Redemption Amount (Per SMILES) = $10 X ----------------- = $2.00
500.00
(Supplemental Redemption
Amount cannot be
less than zero)
Total payment at maturity (Per SMILES) = $10 + $2.00 = $12.00
WHAT WILL I RECEIVE UPON EXCHANGE OF THE SMILES?
We have designed the SMILES to give investors the option of exchanging
their SMILES for cash prior to maturity, while still participating in any
possible increase in the Russell 2000 Index prior to the date of exchange. Upon
early exchange, you will receive a payment on each SMILES equal to the sum of
two amounts: the Principal Amount ($10) and the 'Early Redemption Amount' which
is based on the percentage increase, if any, in the Russell 2000 Index.
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PRINCIPAL AMOUNT
The Principal Amount per SMILES is $10.
EARLY REDEMPTION AMOUNT
The Early Redemption Amount per SMILES will equal:
XIV - BIV
$10 X -----------
BIV
XIV = Exchange Index Value
BIV = Benchmark Index Value
'EXCHANGE INDEX VALUE' means the value of the Russell 2000 Index at the
close of the market on the date of the exchange of a SMILES by the holder.
'BENCHMARK INDEX VALUE' EQUALS and was determined as described
herein. The closing value of the Russell 2000 Index on the date of this
Prospectus Supplement was (the 'Starting Index Value') and the
Benchmark Index Value exceeds the Starting Index Value by 10%.
For more specific information about the Early Redemption Amount, including
details concerning possible changes in the timing or method of determination of
the relevant Index values as a result of certain market events, please see the
section 'Description of SMILES' in this Prospectus Supplement.
We will pay you an Early Redemption Amount only if the Exchange Index Value
is more than 10% greater than the Starting Index Value. IF THE EXCHANGE INDEX
VALUE IS LESS THAN, EQUAL TO, OR LESS THAN 10% GREATER THAN THE STARTING INDEX
VALUE, THE EARLY REDEMPTION AMOUNT WILL BE LESS THAN ZERO AND THE AMOUNT PAYABLE
UPON EXCHANGE WILL BE LESS THAN THE PRINCIPAL AMOUNT OF THE SECURITY.
EARLY REDEMPTION AMOUNT--EXAMPLES
Here are two examples of Early Redemption Amount calculations:
Example 1: Russell 2000 Index is below the Benchmark Index Value on the date of
exchange.
Hypothetical Starting Index Value: 454.55
Hypothetical Benchmark Index Value: 500.00
Hypothetical Exchange Index Value: 475.00
475.00 - 500.00
Supplemental Redemption Amount (Per SMILES) = $10 X ----------------- = $ -0.50
500.00
(Early Redemption
Amount MAY be
less than zero)
Total payment upon exchange (Per SMILES) = $10 + $ -0.50 = $9.50
Example 2: Russell 2000 Index is above the Benchmark Index Value at on the date
of exchange.
Hypothetical Starting Index Value: 454.55
Hypothetical Benchmark Index Value: 500.00
Hypothetical Exchange Index Value: 600.00
600.00 - 500.00
Early Redemption Amount (Per SMILES) = $10 X ----------------- = $2.00
500.00
Total payment upon exchange (Per SMILES) = $10 + $2.00 = $12.00
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WHO PUBLISHES THE INDEX AND WHAT DOES THE INDEX MEASURE?
The Russell 2000 Index is published by Frank Russell Company ('Russell')
and is designed to track the performance of 2,000 common stocks of corporations
with small market capitalizations relative to those of other stocks that are
publicly traded in the U.S. equity markets. Market capitalization is a measure
of the value of a corporation's stock in the public market, and is determined by
multiplying the number of shares of stock outstanding by the current price of a
share. As of August 31, 1997, the market capitalization of the issuers whose
stocks comprise the Russell 2000 Index ranged from approximately $90 million to
$2.36 billion, with the average market capitalization being $540 million. The
issuers of stocks that comprise the Russell 2000 Index are domiciled in the U.S.
and its territories and their stocks are traded on the New York Stock Exchange
(the 'NYSE'), on the American Stock Exchange (the 'AMEX'), or in the
over-the-counter market.
HOW HAS THE INDEX PERFORMED HISTORICALLY?
We have provided a table showing the closing values of the Russell 2000
Index on the last business day of each quarter from 1979 to the present, as
published by Russell.
You can find this table in the section 'The Russell 2000 Index--Historical
Data on the Index' in this Prospectus Supplement. We have provided this
historical information to help you evaluate the behavior of the Russell 2000
Index in various economic environments; however, past performance of the Russell
2000 Index is not necessarily indicative of how the Index will perform in the
future.
WHAT ABOUT TAXES?
You will be required to pay taxes on ordinary income from the SMILES over
their term based upon an estimated yield for the SMILES, even though you will
not receive any payments from us until maturity. We have determined this
estimated yield, in accordance with regulations issued by the Treasury
Department, solely in order for you to figure out the amount of taxes that you
will owe each year as a result of owning a SMILES. This estimate is neither a
prediction nor a guarantee of what the actual Supplemental Redemption Amount
will be, or that the actual Supplemental Redemption Amount will even exceed
zero. We have determined that this estimated yield will equal per annum
(compounded semiannually).
Based upon this estimated yield, if you pay your taxes on a calendar year
basis and if you buy a SMILES for $10 and hold the SMILES until maturity, you
will be required to pay taxes on the following amounts of ordinary income from
the SMILES each year: in 1997, in 1998, in 1999,
in 2000, in 2001, in 2002, in 2003 and
in 2004. However, in 2004, the amount of ordinary income that you will
be required to pay taxes on from owning a SMILES may be greater or less than ,
depending upon the amount you receive at maturity. Also, if the sum of the
principal amount and the Supplemental Redemption Amount is less than ,
you may have a loss which you could deduct against other income you may have in
2004. For further information, see 'Certain United States Federal Income Tax
Considerations' in this Prospectus Supplement.
WILL THE SMILES BE LISTED ON A STOCK EXCHANGE?
Application will be made to list the SMILES on the Chicago Board Options
Exchange (the 'CBOE') under the symbol 'RXS'. You should be aware that the
listing of the SMILES on the CBOE will not necessarily ensure that a liquid
trading market will be available for the SMILES. You should review the section
'Risk Factors--Uncertain Trading Market' in this Prospectus Supplement.
WHAT IS THE ROLE OF OUR SUBSIDIARY, SALOMON BROTHERS INC?
Our subsidiary, Salomon Brothers Inc, is one of the underwriters for the
offering and sale of the SMILES. In connection with this offering, Salomon
Brothers Inc may stabilize or maintain the market price of the SMILES. After the
initial offering, it may also buy and sell SMILES to create a secondary market
for holders of the SMILES. However, Salomon Brothers Inc will not be obligated
to engage in any of these market activities, or continue them once it has
started.
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Salomon Brothers Inc will also be our agent (the 'Calculation Agent') for
purposes of calculating the Starting Index Value, the Benchmark Index Value, the
Ending Index Value, any Exchange Index Value, the Supplemental Redemption Amount
and any Early Redemption Amount and in determining whether a Market Disruption
Event (as defined below) has occurred. Potential conflicts of interest may exist
between Salomon Brothers Inc and the holders of the SMILES.
CAN YOU TELL ME MORE ABOUT THE COMPANY?
Salomon Inc conducts global investment banking and global securities and
commodities trading. For information about the Company see the section 'Salomon
Inc' in this Prospectus Supplement. You should also read the other documents the
Company has filed with the SEC, which are identified in the section
'Incorporation of Certain Documents by Reference' in this Prospectus Supplement.
ARE THERE ANY RISKS ASSOCIATED WITH MY INVESTMENT?
Yes, the SMILES are subject to certain risks. Please refer to the section
'Risk Factors Relating to the SMILES' in this Prospectus Supplement.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the Securities and
Exchange Commission (the 'SEC') 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, 1996; (ii) the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997; and (iii) the
Company's Current Reports on Form 8-K dated January 21, 1997, March 17, 1997,
April 15, 1997, July 17, 1997, September 24, 1997, September 28, 1997 and
October 21, 1997. See 'Incorporation of Certain Documents by Reference' in the
Prospectus. Such documents may also be accessed electronically by means of the
Commission's home page on the world wide web on the internet at 'http://
www.sec.gov'.
SALOMON INC
Salomon Inc conducts global investment banking and global securities and
commodities trading. 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.
RECENT DEVELOPMENTS
On September 24, 1997, Salomon Inc and Travelers Group Inc. ('Travelers')
announced that they had entered into an Agreement and Plan of Merger dated as of
September 24, 1997, pursuant to which a wholly owned subsidiary of Travelers
will merge (the 'Merger') with and into Salomon Inc and Salomon Inc will become
a wholly owned subsidiary of Travelers. The Merger, which is subject to
customary closing conditions, including certain regulatory approvals (including
under the Hart-Scott-Rodino Antitrust Improvements Act) and the approval by the
stockholders of Salomon Inc. After the Merger, it is anticipated that Salomon
and Smith Barney Holdings Inc. will merge to form Salomon Smith Barney Holdings
Inc. The Merger will be a tax-free exchange and will be accounted for on a
'pooling of interests' basis.
On October 21, 1997, the Company announced third quarter 1997 net income of
$206 million, compared to income from continuing operations of $140 million (net
income of $112 million including discontinued operations) in the same period a
year ago. Fully diluted earnings per share from continuing operations were $4.79
and $5.98 for the six month periods ended June 30, 1997 and 1996, respectively.
Book value per common share was $43.93 at September 30, 1997.
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RISK FACTORS RELATING TO THE SMILES
An investment in the SMILES entails significant risks not associated with
similar investments in a conventional security, including the following.
COMPARISON TO OTHER SECURITIES
The Supplemental Redemption Amount may be Zero. The Benchmark Index Value
exceeds the closing value of the Russell 2000 Index on the date of this
Prospectus Supplement (i.e. the Starting Index Value) by 10%. You should be
aware that if the Ending Index Value at maturity does not exceed the Starting
Index Value by more than 10%, the Supplemental Redemption Amount will be ZERO.
This will be true even if the value of the Russell 2000 Index was higher than
the Benchmark Index Value at some time during the life of the SMILES but later
falls below the Benchmark Index Value. If the Supplemental Redemption Amount is
zero, we will pay you only the principal amount of your SMILES at maturity.
Because the Ending Index Value will be based upon the closing value of the
Russell 2000 Index on the first five Calculation Days during the Calculation
Period (each as defined below), a significant increase in the Index subsequent
to issuance may be substantially or entirely offset by subsequent decreases in
the value of the Index during or prior to the Calculation Period.
The Early Redemption Amount may be Zero or less than Zero. We will pay you
an Early Redemption Amount only if the Exchange Index Value is more than 10%
greater than the Starting Index Value. IF THE EXCHANGE INDEX VALUE IS LESS THAN,
EQUAL TO, OR LESS THAN 10% GREATER THAN THE STARTING INDEX VALUE, THE EARLY
REDEMPTION AMOUNT WILL BE LESS THAN ZERO AND THE AMOUNT PAYABLE UPON EXCHANGE
WILL BE LESS THAN THE PRINCIPAL AMOUNT OF THE SMILES. This will be true even if
the value of the Russell 2000 Index was higher than the Benchmark Index Value at
some time during the life of the SMILES but has fallen below the Benchmark Index
Value at the time of exchange.
No Interest. The SMILES do not bear periodic payments of interest.
Yield May Be Lower than the Yield on a Standard Debt Security of Comparable
Maturity. The amount we pay you at maturity or upon earlier exchange may be
less than the return you could earn on other investments. Because the Ending
Index Value or Exchange Index Value of the Russell 2000 Index may be less than,
equal to or only slightly greater than the Starting Index Value, the effective
yield to maturity on the SMILES (which is linked to the amount by which such
Ending Index Value or Exchange Index Value exceeds the Starting Index Value) may
be less than that which would be payable on a conventional fixed-rate debt
security of the Company. In addition, any such return may not fully compensate
the holder for any opportunity cost implied by inflation and other factors
relating to the time value of money.
Return Does Not Reflect Dividends. Russell calculates the Index by
reference to the prices of the common stocks comprising the Index without taking
into consideration the value of dividends paid on those stocks. Therefore, the
return you earn on the SMILES, if any, will not be the same as the return that
you would have earned if you actually owned each of the stocks underlying the
Index and received the dividends paid on those stocks.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
Application will be made to list the SMILES on the CBOE. However, there can
be no assurance as to whether there will be a secondary market in the SMILES or
if there were to be such a secondary market, whether such market would be liquid
or illiquid. The SMILES are novel and innovative securities and there is
currently no secondary market for the SMILES. It is expected that any secondary
market for the SMILES will be affected by the creditworthiness of the Company
and by a number of factors, including, but not limited to, the volatility of the
Russell 2000 Index, dividend rates on the stocks underlying the Index, the time
remaining to the maturity of the SMILES and market interest rates. In addition,
the Ending Index Value and any Exchange Index Value will depend on a number of
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interrelated factors, including economic, financial and political events, over
which the Company has no control. The value of the SMILES prior to maturity is
expected to depend primarily on the extent of the appreciation or depreciation
of the Index and market interest rates. The price at which a holder will be able
to sell the SMILES prior to maturity may be at a discount, which could be
substantial, from the par amount thereof, if, at such time, the Index is less
than, equal to, or not sufficiently above the Starting Index Value.
FACTORS AFFECTING THE TRADING VALUE OF THE SMILES
The market value of the SMILES will be affected by the value of the Index
and by a number of other factors. Some of these factors are interrelated in
complex ways; as a result, the effect of any one factor may be offset or
magnified by the effect of another factor. The following discussion describes
the expected impact on the market value of the SMILES given a change in a
specific factor, assuming all other conditions remain constant.
Index Value. The market value of the SMILES will likely depend
substantially on the value of the Index relative to the Benchmark Index
Value (which is 10% greater than the Starting Index Value). If you choose
to sell your SMILES when the value of the Index is below the Benchmark
Index Value, you may receive less than the $10 principal amount per SMILES.
Political, economic and other developments that affect the stocks
underlying the Index may also affect the value of the Index and the value
of the SMILES.
Interest Rates. Because the SMILES repay, at a minimum, the principal
amount at maturity, we expect that the trading value of the SMILES will be
affected by changes in interest rates. In general, if U.S. interest rates
increase, the trading value of the SMILES may be adversely affected. If
U.S. interest rates decrease, the trading value of the SMILES may be
favorably affected. Changes in interest rates may also affect the U.S.
economy and, in turn, the value of the Index. Rising interest rates may
lower the value of the Index and, thus, the SMILES. Falling interest rates
may increase the value of the Index and, thus, may increase the value of
the SMILES.
Volatility of the Index. Volatility is the term used to describe the
size and frequency of market fluctuations. If the volatility of the Index
increases, the trading value of the SMILES may be favorably affected. If
the volatility of the Index decreases, the trading value of the SMILES may
be adversely affected.
Time Remaining to Maturity. The SMILES may trade at a value above
that which would be expected based on the level of interest rates and the
Index due to a 'time premium' resulting from expectations concerning the
value of the Index during the period prior to maturity of the SMILES.
However, as the time remaining to maturity of the SMILES decreases, this
time premium may decrease, adversely affecting the trading value of the
SMILES.
Dividend Yields. If dividend yields on the underlying stocks
comprising the Index increase, the value of the SMILES may be adversely
affected. Conversely, if dividend yields on the stocks comprising the Index
decrease, the value of the SMILES may be favorably affected.
Company Credit Ratings. Real or anticipated changes in the Company's
credit ratings may affect the market value of the SMILES.
The impact of one of the factors specified above, such as an increase in
interest rates, may offset some or all of any change in the trading value of the
SMILES attributable to another factor, such as an increase in the Index value.
In general, assuming all relevant factors are held constant, the effect on
the trading value of the SMILES of a given change in most of the factors listed
above will be less if it occurs later in the term of the SMILES than if it
occurs earlier in the term of the SMILES except that the effect on the trading
value of the SMILES of a given increase in the value the Index may be greater if
it occurs later in the term of the SMILES than if it occurs earlier in the term
of the SMILES.
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SMALL CAPITALIZATION STOCKS
The underlying stocks that constitute the Index have been issued by
corporations domiciled in the U.S. and its territories and traded on the NYSE,
the AMEX or in the over-the-counter market. If a Successor Index is substituted
for the Index as described below, such Successor Index would also be based upon
stocks issued by corporations domiciled in the U.S. and its territories and
traded on the NYSE, the AMEX or in the over-the-counter market. You should be
aware that investments in securities indexed to the value of small
capitalization companies involve certain risks. In general, the corporations
issuing the stocks comprising the Index have smaller market capitalizations,
less trading liquidity and greater price volatility than the issuers of stocks
that comprise other larger capitalization indexes (such as the Standard & Poor's
500 Index) which are designed to measure the broad movement of the U.S. stock
markets. These factors could adversely affect the value of the Index and the
SMILES.
AFFILIATION OF THE COMPANY AND CALCULATION AGENT
Because the Calculation Agent is an affiliate of the Company, potential
conflicts of interest may exist between the Calculation Agent and the holders of
the SMILES, including with respect to certain determinations and judgments that
the Calculation Agent must make in determining the Index values or whether a
Market Disruption Event has occurred. See 'Description of SMILES--Adjustment to
the Index; Market Disruption Events,' and '--Discontinuance of the Russell 2000
Index' below. Salomon Brothers Inc, as a registered broker-dealer, is required
to maintain policies and procedures regarding the handling and use of
confidential proprietary information, and such policies and procedures will be
in effect throughout the term of the SMILES to restrict the use of information
relating to the calculation of the Index values that the Calculation Agent may
be required to make prior to their dissemination. Salomon Brothers Inc is
obligated to carry out its duties and functions as Calculation Agent in good
faith and using its reasonable judgment.
POTENTIAL FEDERAL INCOME TAX CONSEQUENCES
Because the SMILES will be treated as contingent payment debt obligations
of the Company, and because by accepting a SMILES holders thereof agree to this
treatment of the SMILES, U.S. holders of a SMILES will be required to include
original issue discount for U.S. federal income tax purposes ('Tax OID') in
gross income on a constant yield basis over the term of such SMILES. Such Tax
OID will be includible in a U.S. holder's gross income for U.S. federal income
tax purposes (as ordinary income) over the life of the SMILES, even though no
payments are to be made on the SMILES except at maturity. The amount of Tax OID
is calculated based (in part) on an assumed amount payable at maturity. This
assumed amount is neither a prediction nor guarantee of the actual amount
payable at maturity. Furthermore, if the amount actually paid at maturity is, in
fact, less than the assumed amount payable at maturity, a U.S. holder will have
recognized taxable income in periods prior to maturity that exceed such holder's
economic income from the holding of the SMILES during such periods (with an
offsetting ordinary loss at the maturity of the SMILES). A U.S. holder will also
be required to treat any gain recognized upon a sale of a SMILES as ordinary
income (rather than capital gain). See 'Certain United States Federal Income Tax
Considerations'.
OTHER CONSIDERATIONS
If a bankruptcy proceeding is commenced in respect of the Company, the
claim of a holder of SMILES may, under Section 502(b)(2) of Title 11 of the
United States Code, be limited to the par amount of such SMILES.
------------------------------
It is suggested that prospective investors who consider purchasing the
SMILES should reach an investment decision only after carefully considering the
suitability of the SMILES in light of their particular circumstances.
Investors should also consider the tax consequences of investing in the
SMILES. See 'Certain United States Federal Income Tax Consequences' below.
S-10
<PAGE>
DESCRIPTION OF SMILES
The following description of the particular terms of the SMILES offered
hereby (referred to in the Prospectus as the 'Offered Securities') supplements
the description of the general terms and provisions of the Debt Securities set
forth in the Prospectus, to which description reference is hereby made. The
following summary of the SMILES is qualified in its entirety by reference to the
Senior Debt Indenture referred to in the Prospectus.
GENERAL
The Russell 2000 Stock Market Index Linked Exchangeable Securities(Service
Mark) Due November 2004 (each a 'SMILES') are a series of Debt Securities issued
under the Senior Debt(Service Mark) Indenture described in the accompanying
Prospectus. The aggregate number of SMILES issued will be limited to
, subject to the over-allotment option granted by the Company to the
Underwriters (See 'Plan of Distribution'). The SMILES will mature on November
, 2004, will constitute part of the senior debt of the Company and will rank
pari passu with all other unsecured and unsubordinated debt of the Company. The
SMILES will be issued only in fully registered form and in denominations of $10
and integral multiples thereof.
The 'Trustee' under the Senior Debt Indenture will be The Bank of New York
under an indenture dated as of October 27, 1993, as amended from time to time. A
copy of the Senior Debt Indenture under which The Bank of New York serves as
Trustee has been filed with the Commission as an exhibit to the Registration
Statement of which the accompanying Prospectus forms a part and is hereby
incorporated by reference as part of the Registration Statement. Section numbers
in the Senior Debt Indenture take the form '1.01', '2.01' and so forth, rather
than '101', '201' and so forth. Section references in the accompanying
Prospectus should be read accordingly.
Reference is made to the accompanying Prospectus for a detailed summary of
additional provisions of the SMILES and of the Senior Debt Indenture under which
the SMILES will be issued. For a discussion of certain federal income tax
consequences to holders of the SMILES, see 'Certain United States Federal Income
Tax Considerations'.
INTEREST
The SMILES will not bear periodic payments of interest.
REDEMPTION; DEFEASANCE
The SMILES are not subject to redemption by the Company prior to maturity
and are not subject to the defeasance provisions described in the accompanying
Prospectus under 'Description of Debt Securities--Defeasance'.
PAYMENT AT MATURITY
At maturity (including as a result of acceleration or otherwise), a holder
of a SMILES will be entitled to receive the principal amount thereof plus a
Supplemental Redemption Amount, if any, as provided below. If the Ending Index
Value does not exceed the Benchmark Index Value, the holder of a SMILES will be
entitled to receive only the principal amount of $10 per SMILES.
DETERMINATION OF THE SUPPLEMENTAL REDEMPTION AMOUNT
The Supplemental Redemption Amount for a SMILES will be determined by the
Calculation Agent and will equal:
Ending Index Value - Benchmark Index Value
Principal amount ($10 per SMILES) X ------------------------------------------
Benchmark Index Value
S-11
<PAGE>
provided that in no event will the Supplemental Redemption Amount be less than
zero. As indicated in the formula above, the Supplemental Redemption Amount for
the SMILES will be calculated using the principal amount of the SMILES.
The Benchmark Index Value equals . The Benchmark Index Value
was determined on the date on which the SMILES were priced for sale to the
public (the 'Pricing Date', which is also the date of this Prospectus
Supplement) by multiplying the Starting Index Value of . (the
closing value of the Russell 2000 Index on the Pricing Date) by a factor of
110%. The Ending Index Value will be determined by the Calculation Agent and
will equal the average (arithmetic mean) of the closing values of the Russell
2000 Index determined on each of the first five Calculation Days during the
Calculation Period. If there are fewer than five Calculation Days, then the
Ending Index Value will equal the average (arithmetic mean) of the closing
values of the Russell 2000 Index on such Calculation Days, and if there is only
one Calculation Day, then the Ending Index Value will equal the closing value of
the Index on such Calculation Day. If no Calculation Days occur during the
Calculation Period due to the occurrence of one or more Market Disruption
Events, then the Ending Index Value will equal the closing value of the Russell
2000 Index determined on the last scheduled Index Business Day in the
Calculation Period, regardless of the occurrence of a Market Disruption Event on
such day. The 'Calculation Period' means the period from and including the
seventh scheduled Index Business Day prior to maturity to and including the
second scheduled Index Business Day prior to maturity. 'Calculation Day' means
any Index Business Day during the Calculation Period on which a Market
Disruption Event has not occurred. For purposes of determining the Ending Index
Value, an 'Index Business Day' is a Trading Day and the Index or any Successor
Index, as defined below, is calculated and published. A 'Trading Day' means a
day, as determined by the Calculation Agent, on which trading is generally
conducted (i) on the NYSE, AMEX, and the NASDAQ National Market, (ii) on the
Chicago Mercantile Exchange (the 'CME'), (iii) on the CBOE and (iv) in the
over-the-counter market for equity securities in the United States. All
determinations made by the Calculation Agent shall be at the sole discretion of
the Calculation Agent and, absent a determination by the Calculation Agent of a
manifest error, shall be conclusive for all purposes and binding on the Company
and beneficial owners of the SMILES.
HYPOTHETICAL RETURNS
The following table illustrates, for a range of hypothetical Ending Index
Values and assuming a Hypothetical Starting Index Value of 500.00, (i) the total
amount payable at maturity for each $10 principal amount of SMILES, (ii) the
total rate of return to beneficial owners of the SMILES, (iii) the pretax
annualized rate of return to beneficial owners of SMILES, and (iv) the pretax
annualized rate of return of an investment in the stocks underlying the Index
(which includes an assumed aggregate dividend yield of 1.15% per annum, as more
fully described below).
<TABLE>
<CAPTION>
TOTAL AMOUNT
PAYABLE AT PRETAX PRETAX ANNUALIZED
MATURITY ANNUALIZED RATE OF RETURN OF
PER $10 CUMULATIVE RATE OF RATE STOCKS UNDERLYING
HYPOTHETICAL PERCENTAGE CHANGE PRINCIPAL RETURN ON OF RETURN ON THE
ENDING OVER THE STARTING AMOUNT OF THE THE RUSSELL
INDEX VALUE INDEX VALUE SMILES SMILES SMILES(1) INDEX(1)(2)
- -------------- ----------------- ------------ ------------------ ------------- -----------------
<S> <C> <C> <C> <C> <C>
200.00...... -60.00% $10.00 0.00% 0.00% -11.69%
250.00...... -50.00% $10.00 0.00% 0.00% -8.61%
300.00...... -40.00% $10.00 0.00% 0.00% -6.08%
350.00...... -30.00% $10.00 0.00% 0.00% -3.92%
400.00...... -20.00% $10.00 0.00% 0.00% -2.03%
450.00...... -10.00% $10.00 0.00% 0.00% -0.36%
500.00(3)... 0.00% $10.00 0.00% 0.00% 1.15%
550.00(4)... 10.00% $10.00 0.00% 0.00% 2.52%
600.00...... 20.00% $10.91 9.09% 1.25% 3.77%
</TABLE>
S-12
<PAGE>
<TABLE>
<CAPTION>
TOTAL AMOUNT
PAYABLE AT PRETAX PRETAX ANNUALIZED
MATURITY ANNUALIZED RATE OF RETURN OF
PER $10 CUMULATIVE RATE OF RATE STOCKS UNDERLYING
HYPOTHETICAL PERCENTAGE CHANGE PRINCIPAL RETURN ON OF RETURN ON THE
ENDING OVER THE STARTING AMOUNT OF THE THE RUSSELL
INDEX VALUE INDEX VALUE SMILES SMILES SMILES(1) INDEX(1)(2)
- -------------- ----------------- ------------ ------------------ ------------- -----------------
<S> <C> <C> <C> <C> <C>
650.00...... 30.00% $11.82 18.18% 2.40% 4.93%
700.00...... 40.00% $12.73 27.27% 3.48% 6.01%
750.00...... 50.00% $13.64 36.36% 4.48% 7.02%
800.00...... 60.00% $14.55 45.45% 5.43% 7.96%
850.00...... 70.00% $15.45 54.55% 6.32% 8.85%
900.00...... 80.00% $16.36 63.64% 7.16% 9.69%
950.00...... 90.00% $17.27 72.73% 7.96% 10.49%
1,000.00...... 100.00% $18.18 81.82% 8.73% 11.25%
1,050.00...... 110.00% $19.09 90.91% 9.45% 11.98%
1,100.00...... 120.00% $20.00 100.00% 10.15% 12.67%
1,150.00...... 130.00% $20.91 109.09% 10.82% 13.33%
1,200.00...... 140.00% $21.82 118.18% 11.46% 13.97%
1,250.00...... 150.00% $22.73 127.27% 12.08% 14.58%
</TABLE>
- ------------------
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes (i) an investment of a fixed amount in the
stocks underlying the Index with the allocation of such amount reflecting
the current relative weights of such stocks in the Index; (ii) a percentage
change in the aggregate price of such stocks that equals the percentage
change in the Index from the Starting Index Value to the relevant
hypothetical Ending Index Value; (iii) a constant dividend yield of 1.15%
per annum, paid quarterly from the date of initial delivery of SMILES,
applied to the value of the Index at the end of each such quarter assuming
such value increases or decreases linearly from the Starting Index Value to
the applicable hypothetical Ending Index Value; (iv) no transaction fees or
expenses; (v) a term for the SMILES from November , 1997 to November ,
2004; and (vi) a final Index value equal to the Ending Index Value. The
aggregate dividend yield of the stocks underlying the Index as of September
23, 1997 was approximately 1.15%.
(3) This is the Hypothetical Starting Index Value. The actual closing value of
the Russell 2000 Index on October 24, 1997 was 447.65.
(4) This is the Hypothetical Benchmark Index Value, which is calculated by
multiplying the Hypothetical Starting Index Value by a factor of 110%.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the total and pretax
annualized rate of return resulting therefrom will depend entirely on the actual
Ending Index Value determined by the Calculation Agent as provided herein.
Historical data regarding the Index is included in this Prospectus Supplement
under 'The Russell Index--Historical Data on the Index'.
EXCHANGE RIGHT
On any Exchange Date (as defined below), the holder of a SMILES will be
entitled upon (i) completion by the holder and delivery of the Trustee and the
Calculation Agent of an Official Notice of Exchange (in the form of Annex A
attached hereto) prior to 11:00 a.m. New York City time on such date and (ii)
delivery on such date of such SMILES to the Trustee, to exchange each such
SMILES for an amount in dollars equal to the sum of (i) the principal amount of
such SMILES and (ii) the Early Redemption Amount. Such payment will be made
three Business Days after the Exchange Date,
S-13
<PAGE>
subject to delivery of any such SMILES to the Trustee on the Exchange Date.
'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. Upon an exercise of
the Exchange Right or at maturity, the Company shall, or shall cause the
Calculation Agent to, deliver to the Trustee for delivery to the holders the
cash to which the holders are entitled. All dollar amounts resulting from the
calculation of the payment amounts due upon exchange or at maturity will be
rounded on a per SMILES basis to the nearest cent with one-half cent being
rounded upwards.
An 'Exchange Date' will be any Trading Day that falls during the period
beginning December , 1997 and ending on the eighth scheduled Trading Day prior
to maturity. The 'Determination Date' with respect to any Exchange Date shall be
such Exchange Date, unless there is a Market Disruption Event on such Trading
Day. If a Market Disruption Event occurs on any such Trading Day, the
Determination Date shall be the immediately succeeding Trading Day during which
no Market Disruption Event shall have occurred; provided that if a Market
Disruption Event has occurred on each of the five Trading Days immediately
succeeding such Exchange Date, then the relevant Determination Date will be
deemed to be the earlier of (x) such fifth succeeding Trading Day or (y) the
second scheduled Trading Day prior to the maturity date, notwithstanding the
occurrence of a Market Disruption Event on such day (an 'Extended Determination
Date'). With respect to any such Extended Determination Date on which a Market
Disruption Event occurs, the Calculation Agent will determine the value of the
Russell 2000 Index on such Extended Determination Date in accordance with the
formula for and method of calculating the Russell 2000 Index last in effect
prior to the commencement of the Market Disruption Event, using the closing
price (or, if trading in the relevant securities has been materially suspended
or materially limited, its good faith estimate of the closing price that would
have prevailed but for such suspension or limitation) on such Trading Day of
each security most recently comprising the Russell 2000 Index.
DETERMINATION OF THE EARLY REDEMPTION AMOUNT
The Early Redemption Amount for a SMILES will be determined by the
Calculation Agent and will equal:
Exchange Index Value - Benchmark Index Value
Principal amount ($10 per SMILES) X --------------------------------------------
Benchmark Index Value
The Benchmark Index Value equals . The Benchmark Index Value
was determined on the Pricing Date by multiplying the Starting Index Value of
(the closing value of the Russell 2000 Index on the Pricing Date) by
a factor of 110%. The Exchange Index Value will be determined by the Calculation
Agent and will equal the closing value of the Russell 2000 Index on the relevant
Determination Date. The Early Redemption Amount with respect to any Exchange
Date may be less than zero, in which case a holder exchanging its SMILES on such
Exchange Date will receive less than the principal amount thereof.
ADJUSTMENTS TO THE INDEX; MARKET DISRUPTION EVENTS
If at any time the method of calculating the Russell 2000 Index or any
Successor Index, or the value thereof, is changed in any material respect, or if
the Russell 2000 Index or any Successor Index is in any other way modified so
that such Index does not, in the opinion of the Calculation Agent, fairly
represent the value of the Index had such changes or modifications not been
made, then, from and after such time, the Calculation Agent shall, at the close
of business in New York, New York, on each date that the closing value with
respect to the Ending Index Value or any Exchange Index Value is to be
calculated, make such adjustments as, in the good faith judgment of the
Calculation Agent, may be necessary in order to arrive at a calculation of a
value of a stock index comparable to the Russell 2000 Index or any Successor
Index as if such changes or modifications had not been made, and calculate such
closing value with reference to the Index, as adjusted. Accordingly, if the
method of calculating the
S-14
<PAGE>
Index is modified so that the value of such Index is a fraction or a multiple of
what it would have been if it had not been modified (e.g., due to a split in the
Index), then the Calculation Agent shall adjust such Index in order to arrive at
a value of the Index as if it had not been modified (e.g., as if such split had
not occurred).
'Market Disruption Event' means either of the following events, as
determined by the Calculation Agent:
(a) the suspension or material limitation of trading in 20% or more of
the underlying stocks which then comprise the Russell 2000 Index or any
Successor Index, in each case, for more than two hours, or during the
one-half hour period preceding the close of trading on the applicable
exchange or in the applicable market. For purposes of this definition,
limitations on trading during significant market fluctuations imposed
pursuant to New York Stock Exchange Rule 80A (or any applicable rule or
regulation enacted or promulgated by the NYSE, any other self regulatory
organization or the SEC of similar scope, as determined by the Calculation
Agent) shall be considered 'material'.
(b) the suspension or material limitation, in each case, for more than
two hours of trading (whether by reason of movements in price otherwise
exceeding levels permitted by the relevant exchange or otherwise) in (A)
futures contracts related to the Index which are traded on the CME or (B)
option contracts related to the Index which are traded on the CBOE.
For purposes of determining whether a Market Disruption Event has occurred:
(1) a limitation on the hours or number of days of trading will not constitute a
Market Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange, (2) a decision to permanently
discontinue trading in the relevant futures or options contract will not
constitute a Market Disruption Event, (3) a suspension in trading in a futures
or options contract on the Index by a major securities market by reason of (x) a
price change violating limits set by such securities market, (y) an imbalance of
orders relating to such contracts or (z) a disparity in bid and ask quotes
relating to such contracts will constitute a suspension or material limitation
of trading in futures or options contracts related to the Russell 2000 Index or
any Successor Index, and, (4) a 'suspension or material limitation of trading'
on an exchange or in a market will not include any time when such market or
exchange is closed for trading under ordinary circumstances. Under certain
circumstances, the duties of Salomon Brothers Inc as Calculation Agent in
determining the existence of Market Disruption Events could conflict with the
interests of Salomon Brothers Inc as an affiliate of the issuer of the SMILES.
Based on the information currently available to the Company, on April 3,
1992, no trading took place on the CME, as a flood that severely affected the
operations of many of the CME's member institutions caused the CME to suspend
trading (including trading in futures or options contracts on the Index) for the
entire day. If such suspension had occurred during the term of the SMILES, it
would have constituted a Market Disruption Event. Other than the foregoing
event, to the Company's knowledge no circumstances have arisen since the
inception of the Index that could have constituted a Market Disruption Event.
The existence or non-existence of such circumstances, however, is not
necessarily indicative of the likelihood of such circumstances arising or not
arising in the future.
DISCONTINUANCE OF THE INDEX
If Russell discontinues publication of the Index and Russell or another
entity publishes a successor or substitute index that the Calculation Agent
determines, in its sole discretion, to be comparable to such Index (any such
index being referred to herein as a 'Successor Index'), then, upon the
Calculation Agent's notification of such determination to the Trustee and the
Company, the Calculation Agent will substitute the Successor Index as calculated
by Russell or such other entity for the Russell 2000 Index for all purposes with
respect to the SMILES. All references herein to the Russell 2000 Index shall be
deemed to include any Successor Index, unless the context requires otherwise.
Upon any selection by
S-15
<PAGE>
the Calculation Agent of a Successor Index, the Company shall cause notice
thereof to be given to holders of the SMILES.
If Russell discontinues publication of the Index and a Successor Index is
not selected by the Calculation Agent or is no longer published on any of the
Calculation Days, the value to be substituted for the Index for any such
Calculation Day used to calculate the Supplemental Redemption Amount at maturity
or any Early Redemption Amount will be a value computed by the Calculation Agent
for each Calculation Day in accordance with the procedures last used to
calculate the Index prior to such discontinuance. If a Successor Index is
selected or the Calculation Agent calculates a value as a substitute for the
Index as described below, such Successor Index or value shall be substituted for
the Index for all purposes, including for purposes of determining whether a
Market Disruption Event exists. If the Calculation Agent calculates a value as a
substitute for the Index, 'Index Business Day' shall mean any day on which the
Calculation Agent is able to calculate such value.
If Russell discontinues publication of the Index prior to the period during
which the Supplemental Redemption Amount or any Early Redemption Amount is to be
determined and the Calculation Agent determines that no Successor Index is
available at such time, then on each Business Day until the earlier to occur of
(a) the determination of the Ending Index Value or any Exchange Index Value and
(b) a determination by the Calculation Agent that a Successor Index is
available, the Calculation Agent shall determine the value that would be used in
computing the Supplemental Redemption Amount or any Early Redemption Amount as
described in the preceding paragraph as if such day were a Calculation Day. The
Calculation Agent will cause notice of each such value to be published not less
often than once each month in The Wall Street Journal (or another newspaper of
general circulation), and arrange for information with respect to such values to
be made available by telephone. Notwithstanding these alternative arrangements,
discontinuance of the publication of the Index may adversely affect trading in
the SMILES.
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any SMILES shall have occurred
and be continuing, the amount declared due and payable upon any acceleration of
the SMILES will be determined by the Calculation Agent and will be equal to, for
each SMILES, the principal amount plus the Supplemental Redemption Amount, if
any, calculated as though the date of early repayment were the stated maturity
date of the SMILES. See 'Description of SMILES--Determination of the
Supplemental Redemption Amount' in this Prospectus Supplement. If a bankruptcy
proceeding is commenced in respect of the Company, the claim of the beneficial
owner of a SMILES may be limited, under Section 502(b) (2) of Title 11 of the
United States Code, to the principal amount of the SMILES plus an additional
amount of contingent interest calculated as though the date of the commencement
of the proceeding were the maturity date of the SMILES.
BOOK-ENTRY SYSTEM
Upon issuance, all SMILES will be represented by one or more fully
registered global securities (the 'Global Securities'). Each such Global
Security will be deposited with, or on behalf of, The Depository Trust Company
(the 'Depositary'), and registered in the name of the Depositary or a nominee
thereof. Unless and until it is exchanged in whole or in part for SMILES in
definitive form, no Global Security may 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 of the Depositary or a nominee of such successor.
Participants in the Euroclear and Cedel clearance systems may hold beneficial
interests in the SMILES through the accounts each such system maintains as a
participant in the Depositary.
The Depositary has advised the Company as follows: the Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
banking organization within the meaning of the
S-16
<PAGE>
New York Banking Law, 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 the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. The Depositary was created to hold
securities of its participants and to facilitate the clearance and settlement of
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 securities certificates. The Depositary's participants
include securities brokers and dealers (including the Underwriters), banks,
trust companies, clearing corporations, and certain other organizations, some of
whom (and/or their representatives) own DTC.
Access to the Depositary's book-entry 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.
A further description of the Depositary's procedures with respect to the
Global Securities is set forth in the Prospectus under 'Description of Debt
Securities--Global Securities.' The Depositary has confirmed to the Company, the
Underwriters and the Trustee that it intends to follow such procedures.
CALCULATION AGENT
The 'Calculation Agent' for the SMILES will be Salomon Brothers Inc. All
determinations made by the Calculation Agent shall be at the sole discretion of
the Calculation Agent and shall, in the absence of manifest error, be conclusive
for all purposes and binding on the Company and holders of the SMILES. Because
the Calculation Agent is an affiliate of the Company, potential conflicts of
interest may exist between the Calculation Agent and the holders of the SMILES,
including with respect to certain determinations and judgments that the
Calculation Agent must make in determining the Index values or whether a Market
Disruption Event has occurred. See '--Adjustment of the Index; Market Disruption
Events' and '--Discontinuance of the Index' above. Salomon Brothers Inc is
obligated to carry out its duties and functions as Calculation Agent in good
faith and using its reasonable judgment.
S-17
<PAGE>
THE RUSSELL 2000 INDEX
GENERAL
Unless otherwise stated, all information herein on the Index is derived
from Russell or other publicly available sources. Such information reflects the
policies of Russell as stated in such sources and such policies are subject to
change by Russell. Russell is under no obligation to continue to publish the
Index and may discontinue publication of the Index at any time. Neither the
Company nor the Underwriters takes any responsibility for the accuracy or
completeness of such information.
The Index is an index calculated, published and disseminated by Russell,
and measures the composite price performance of stocks of 2,000 companies
domiciled in the U.S. and its territories. All 2,000 stocks are traded on either
the NYSE or the AMEX or in the over-the-counter market and form a part of the
Russell 3000(Registered) Index. The Russell 3000 Index is composed of the 3,000
largest U.S. companies as determined by market capitalization and represents
approximately 98% of the investable U.S. equity market. As of August 31, 1997,
the average market capitalization of companies included in the Russell 3000
Index was $3.12 billion.
The Index consists of the smallest 2,000 companies included in the Russell
3000 Index and represents approximately 9.51% of the total market capitalization
of the Russell 3000 Index. The Index is designed to track the performance of the
small capitalization segment of the U.S. equity market. As of August 31, 1997,
the market capitalization of the stocks in the Russell 2000 Index ranged from
approximately $90 million to $2.36 billion, with the average market
capitalization being $540 million.
Only common stocks belonging to corporations domiciled in the U.S. and its
territories are eligible for inclusion in the Russell 3000 Index and the Index.
Stocks traded on U.S. exchanges but domiciled in other countries are excluded.
Preferred stock, convertible preferred stock, participating preferred stock,
paired shares, warrants and rights are also excluded. Trust receipts, Royalty
Trusts, limited liability companies, OTC Bulletin Board companies, pink sheets,
closed-end mutual funds, and limited partnerships that are traded on U.S.
exchanges, are also ineligible for inclusion. Real Estate Investment Trusts and
Beneficial Trusts are eligible for inclusion, however. Generally, only one class
of securities of a company is allowed in the Russell 3000 Index, although
exceptions to this general rule have been made where Russell has determined that
each class of securities acts independent of the other.
The primary criterion used to determine the initial list of securities
eligible for the Russell 3000 Index is total market capitalization, which is
defined as the price of the shares times the total number of shares outstanding.
Based on closing values on May 31 of each year, Russell reconstitutes the
composition of the Russell 3000 Index using the then existing market
capitalizations of eligible companies. As of June 30 of each year, the Index is
adjusted to reflect the reconstitution of the Russell 3000 Index for that year.
Publication of the Index began on January 1, 1987.
As a capitalization-weighted index, the Russell 2000 Index reflects changes
in the capitalization (market value) of the component stocks relative to the
capitalization on a base date. The current Index value is calculated by adding
the market values of the Index's component stocks, which are derived by
multiplying the price of each stock by the number of shares outstanding, to
arrive at the total market capitalization of the 2,000 stocks. The total market
capitalization is then divided by a divisor, which represents the 'adjusted'
capitalization of the Index on the base date of December 31, 1986. To calculate
the Index, last sale prices will be used for exchange-traded and NASDAQ stocks.
If a component stock is not open for trading, the most recently traded price for
that security will be used in calculating the Index. In order to provide
continuity for the Index's value, the divisor is adjusted periodically to
reflect such events as changes in the number of common shares outstanding for
component stocks, company additions or deletions, corporate restructurings and
other capitalization changes.
S-18
<PAGE>
All disclosure contained in this Prospectus Supplement regarding the Index,
or its publisher, is derived from publicly available information. All copyrights
and other intellectual property rights relating to the Index are owned by
Russell. Russell has no relationship with the Company or the SMILES; it does not
sponsor, endorse, authorize, sell or promote the SMILES, and has no obligation
or liability in connection with the administration, marketing or trading of the
SMILES. None of the Company, the Calculation Agent, the Trustee under the Senior
Debt Indenture and the Underwriters accepts any responsibility for the
calculation, maintenance or publication of the Russell 2000 Index or any
Successor Index.
Below is a breakdown of the component stocks of the Index by industry group
as of August 31, 1997:
NUMBER
OF PERCENTAGE
COMPANIES MARKET
--------- ----------
Technology............................ 258 13.4%
Health Care........................... 214 9.9%
Consumer Discretionary and Services... 376 16.1%
Consumer Staples...................... 57 2.8%
Integrated Oils....................... 7 0.5%
Other Energy.......................... 65 3.9%
Materials and Processing.............. 196 9.9%
Producer Durables..................... 153 8.6%
Auto and Transportation............... 81 4.1%
Financial Services, including REITS... 424 23.3%
Utilities............................. 108 6.4%
Other................................. 25 1.3%
-------- ---------
Total............................ 1,964 100%(1)
-------- ---------
-------- ---------
- ------------------
(1) 100.2% was rounded down to 100%.
Source: Russell.
Note: The Index included fewer than 2,000 stocks (1,964) as of August 31,
1997 due to company attrition (e.g. mergers, bankruptcies, etc.).
As of August 31, 1997, the ten largest holdings in the Index represented
1.9% of the aggregate market capitalization of the Index. Twenty-three of the
1,964 stocks in the Index were also components of the Standard & Poor's 500
Index. These 23 stocks represented 2.1% of the Russell 2000 Index market
capitalization. The dividend yield on the Index as of September 23, 1997 was
1.15%.
HISTORICAL DATA ON THE INDEX
The following table sets forth the closing level of the Index at the end of
each quarter, in the period from March 1979 through September 1997. All
historical data presented in the following table relating to periods prior to
January 1, 1987 (the date Russell commenced publication of the Index) are
presented as if the Index had existed during such periods and such closing
levels have been calculated hypothetically on the same basis that the Index is
calculated. All historical data presented in the following table relating to
periods after January 1, 1987 are based on actual data from the Index. These
historical data on the Index are not necessarily indicative of the future
performance of the Index or what the value of the SMILES may be. Any historical
upward or downward trend in the closing level of the
S-19
<PAGE>
Index during any period set forth below is not an indication that the Index is
more or less likely to decline at any time during the term of the SMILES.
QUARTER-END CLOSING LEVEL
-----------------------------------------
MARCH JUNE SEPTEMBER DECEMBER
------ ------ --------- --------
1979.... 46.94 49.62 54.68 55.91
1980.... 48.27 57.47 69.94 74.80
1981.... 80.25 82.56 67.55 73.67
1982.... 66.21 64.67 70.84 88.90
1983.... 103.77 124.17 117.43 112.27
1984.... 104.10 100.30 105.17 101.49
1985.... 114.92 118.38 112.65 129.87
1986.... 147.63 154.23 134.73 135.00
1987.... 166.79 164.75 170.81 120.42
1988.... 142.15 151.30 149.09 147.36
1989.... 157.90 167.43 178.21 168.31
1990.... 163.64 169.12 126.74 132.20
1991.... 171.01 167.61 180.16 189.94
1992.... 203.69 188.64 192.92 221.01
1993.... 229.21 233.35 252.95 258.59
1994.... 251.06 240.29 256.12 250.36
1995.... 260.77 283.63 310.38 315.97
1996.... 330.77 346.61 346.39 362.61
1997.... 342.56 396.37 453.82
The closing value of the Index on October 24, 1997 was 447.65.
S-20
<PAGE>
The following graph sets forth the historical performance of the Index
based on the closing value thereof at the end of each quarter from March 1979
through September 1997. Past movements of the Index are not necessarily
indicative of future Index values.
[PERFORMANCE GRAPH OMITTED -- UNDERLYING HISTORICAL DATA
SET FORTH ON PAGE S-20]
LICENSE AGREEMENT
The Russell 2000 Index is a trademark of Russell and has been licensed for
use by the Company. The SMILES are not sponsored, endorsed, sold or promoted by
Russell. Russell makes no representation or warranty, express or implied, to the
owners of the SMILES or any member of the public regarding the advisability of
investing in securities generally or in the SMILES particularly or the ability
of the Russell 2000 Index to track general stock market performance or a segment
of the same. Russell's publication of the Russell 2000 Index in no way suggests
or implies an opinion by Russell as to the advisability of investment in any or
all of the securities upon which the Russell 2000 Index is based. Russell's only
relationship to the Company is the licensing of certain trademarks and trade
names of Russell and of the Russell 2000 Index which is determined, composed and
calculated by Russell without regard to the Company or the SMILES. Russell is
not responsible for and has not reviewed the SMILES nor any associated
literature or publications and Russell makes no representation or warranty
express or implied as to their accuracy or completeness, or otherwise. Russell
reserves the right, at any time and without notice, to alter, amend, terminate
or in any way change the Russell 2000 Index. Russell has no obligation or
liability in connection with the administration, marketing or trading of the
SMILES.
RUSSELL DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
RUSSELL 2000 INDEX OR ANY DATA INCLUDED THEREIN AND RUSSELL SHALL HAVE NO
LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. RUSSELL MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE COMPANY,
INVESTORS, OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE
S-21
<PAGE>
USE OF THE RUSSELL 2000 INDEX OR ANY DATA INCLUDED THEREIN. RUSSELL MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
RUSSELL 2000 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL RUSSELL HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain United States federal income
tax considerations that may be relevant to a holder of a SMILES that is a
'United States holder' (as defined below). This summary is based on laws,
regulations, rulings and decisions now in effect, all of which are subject to
change (possibly with retroactive effect) and to differing interpretations.
Furthermore, there can be no assurance that the Internal Revenue Service would
not take a position contrary to those expressed herein. This summary deals only
with United States holders that will hold SMILES as capital assets, and does not
address all aspects of U.S. federal income taxation that may be applicable to
investors in light of their particular circumstances, or to investors subject to
special treatment under U.S. federal income tax law (including, but not limited
to, financial institutions, tax-exempt entities, insurance companies or dealers
in securities or currencies, persons having a functional currency other than the
U.S. dollar, persons holding the SMILES as a position in a 'straddle' or
conversion transaction, or as part of a 'synthetic security' or other integrated
financial transaction). This summary also does not address the state, local or
foreign tax consequences of an investment in the SMILES.
Investors should consult their own tax advisors in determining the tax
consequences to them of holding SMILES, including the application to their
particular situation of the U.S. federal income tax considerations discussed
below.
The term 'U.S holder' means a holder of a SMILES who is a citizen or
resident of the United States, or that is a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, an estate the income of which is subject to
United States federal income taxation regardless of its source or a trust if (i)
a U.S. court is able to exercise primary supervision over the trust's
administration and (ii) one or more U.S. fiduciaries have the authority to
control all of the trust's substantial decisions.
Each SMILES will be treated by the Company for U.S. federal income tax
purposes as a single debt instrument issued by the Company that is subject to
U.S. Treasury regulations governing contingent debt instruments (the 'Contingent
Debt Regulations'). Moreover, each holder, by accepting a SMILES, agrees to this
treatment of such SMILES and to report all income (or loss) with respect to the
SMILES in accordance with the Contingent Debt Regulations. The remainder of this
summary assumes the treatment of the SMILES as a single debt instrument subject
to the Contingent Debt Regulations and the holder's agreement thereto. A U.S.
holder of a SMILES will recognize income (or loss) on a SMILES in accordance
with the Contingent Debt Regulations. The Contingent Debt Regulations require
the application of a 'noncontingent bond' method to determine accruals of
income, gain, loss and deduction with respect to a contingent debt obligation.
As described in more detail in the second succeeding paragraph, under the
noncontingent bond method, a U.S. holder of a SMILES will be required for tax
purposes to include in income each year an accrual of interest at the rate of
percent (the 'comparable yield'). Solely, for purposes of determining the
comparable yield pursuant to the Contingent Debt Regulations, a holder of a
SMILES will be assumed to be entitled to receive, in respect of such SMILES, a
payment of $ on the maturity date (the 'Assumed Supplemental Redemption
Amount'). The Assumed Supplemental Redemption Amount is calculated as the amount
required to produce the comparable yield of a SMILES, taking into account the
SMILES's Issue Price.
S-22
<PAGE>
The comparable yield and the Assumed Supplemental Redemption Amount are
used to determine accruals of interest for tax purposes only and are not
assurances or predictions by the Company with respect to the actual yield of, or
payment to be made in respect of, a SMILES. The comparable yield and the Assumed
Supplemental Redemption Amount do not necessarily represent the Company's
expectations regarding such yield or the amount of such payment.
Each SMILES will be issued at par. However, there will be original issue
discount on each SMILES for U.S. federal income tax purposes ('Tax OID'),
because Tax OID must be accrued at the comparable yield. Under the Tax OID rules
of the Internal Revenue Code of 1986, as amended (the 'Code'), and the Treasury
regulations promulgated thereunder, a U.S. holder of a SMILES, whether such
holder uses the cash or the accrual method of tax accounting, will be required
to include as ordinary interest income the sum of the 'daily portions' of Tax
OID on the SMILES for all days during the taxable year that the U.S. holder owns
the SMILES. As a result, a U.S. holder of a SMILES that employs the cash method
of accounting will be required to include amounts in respect of Tax OID accruing
on a SMILES in taxable income each year, even though cash payment on the SMILES
is only at maturity.
The daily portions of Tax OID on a SMILES are determined by allocating to
each day in any accrual period a ratable portion of the Tax OID allocable to
that accrual period. In the case of an initial holder, the amount of Tax OID on
a SMILES allocable to each accrual period is determined by multiplying the
'adjusted issue price' (as defined below) of a SMILES at the beginning of the
accrual period by the comparable yield of a SMILES (appropriately adjusted to
reflect the length of the accrual period). The 'adjusted issue price' of a
SMILES at the beginning of any accrual period will generally be the sum of its
Issue Price and the amount of Tax OID allocable to all prior accrual periods.
When a U.S. holder sells, exchanges or otherwise disposes of a SMILES
(including the redemption of the SMILES at maturity) (a 'disposition'), the U.S.
holder's gain (or loss) on such disposition will equal the difference between
the amount received by the U.S. holder for the SMILES and the U.S. holder's tax
basis in the SMILES. Upon a SMILES's maturity, if there is a payment of a
Supplemental Redemption Amount and such Supplemental Redemption Amount exceeds
the Assumed Supplemental Redemption Amount, the U.S. holder will be required to
include such excess in income as ordinary interest on the maturity date.
Alternatively, if there is a payment of a Supplemental Redemption Amount and
such Supplemental Redemption Amount is less than the Assumed Supplemental
Redemption Amount, the shortfall will be treated as an offset to any interest
otherwise includible in income by the U.S. holder with respect to the SMILES for
the taxable year in which the maturity date occurs but only to the extent of the
amount of such includible interest. Any remaining portion of such short fall may
be recognized and deducted by the U.S. holder as an ordinary loss. A U.S.
holder's tax basis (i.e., adjusted cost) in a SMILES will be equal to the U.S.
holder's original purchase price for such SMILES, plus any Tax OID accrued by
the U.S. holder. Any gain realized by a U.S. holder on a disposition will be
treated as ordinary interest income. Any loss realized by a U.S. holder on a
disposition will be treated as ordinary loss, to the extent of the U.S. holder's
Tax OID inclusions with respect to the SMILES up to the date of disposition. Any
loss realized in excess of such amount generally will be treated as a capital
loss. An individual U.S. holder generally will be allowed a deduction for any
such ordinary loss without regard to the two-percent miscellaneous itemized
deduction rule of section 67 of the Code. Any capital loss recognized by a U.S.
holder will be a long-term capital loss if such U.S. holder has held such SMILES
for more than one year, and a short-term capital loss in other cases.
A U.S. holder that purchases a SMILES in the secondary market for an amount
that differs from the SMILES's adjusted issue price at the time of purchase will
be required to accrue Tax OID on the SMILES in accordance with the comparable
yield and Assumed Supplemental Redemption Amount, even if market conditions have
changed since the date of issuance. If the difference between a U.S. holder's
purchase price for a SMILES and the adjusted issue price of the SMILES is
attributable to a change in expectations as to the payment to be made by the
Company on the maturity date (the 'Maturity Date Payment'), the U.S. holder will
be required to allocate that difference to the Maturity
S-23
<PAGE>
Date Payment. Adjustments allocated to the Maturity Date Payment are taken into
account at the time the Maturity Date Payment is made. If the purchaser's basis
in a SMILES is greater than the adjusted issue price of the SMILES, the excess
is treated as a 'negative adjustment' that reduces the Maturity Date Payment; if
the purchaser's basis in a SMILES is less than the adjusted issue price of the
SMILES, the difference is treated as a 'positive adjustment' that increases the
Maturity Date Payment. Any negative or positive adjustment of the kind described
above made by a U.S. holder of a SMILES will decrease or increase, respectively,
the U.S. holder's basis in the SMILES, in a manner otherwise consistent with the
operation of the general premium and market discount rules.
Certain U.S. holders may receive Forms 1099-OID reporting Tax OID accruals
on a SMILES. Those forms may not, however, reflect the effects of any positive
or negative adjustments resulting from the U.S. holder's purchase of the SMILES
in the secondary market at a price that differs from its adjusted issue price on
the date of purchase. U.S. holders are urged to consult their tax advisors as to
whether, and how, such adjustments should be made to the amounts reported on any
Form 1099-OID.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A U.S. holder may be subject to information reporting and to backup
withholding at a rate of 31 percent with respect to payments made on a SMILES,
or the proceeds of the sale of a SMILES before maturity, unless such U.S. holder
provides proof of an applicable exemption or a correct taxpayer identification
number, and otherwise complies with applicable requirements of the information
reporting and backup withholding rules.
USE OF PROCEEDS AND HEDGING
The net proceeds to be received by the Company from the sale of the SMILES
will be used for general corporate purposes and, in part, by the Company or one
or more of its affiliates (including Salomon Brothers Inc) in connection with
hedging the Company's obligations under the SMILES. On or prior to the date of
this Prospectus Supplement, the Company, through its subsidiaries (including
Salomon Brothers Inc) and others, will hedge its anticipated exposure in
connection with the SMILES by the purchase and sale of exchange-traded and
over-the-counter options on, or other derivative or synthetic instruments
related to the Russell 2000 Index, individual stocks included in the Index,
futures contracts on the Index and options on such futures contracts. From time
to time after the initial offering and prior to the maturity of the SMILES,
depending on market conditions (including the value of the Index), in connection
with hedging with respect to the SMILES, the Company expects that it or one or
more of its subsidiaries will increase or decrease their initial hedging
positions using dynamic hedging techniques and may take long or short positions
in the Index, individual stocks included in the Index, listed or
over-the-counter options in, or other derivative or synthetic instruments
related to, the Index and such individual stocks. In addition, the Company or
one or more of its subsidiaries may purchase or otherwise acquire a long or
short position in SMILES from time to time and may, in their sole discretion,
hold, resell or retire such SMILES. The Company or one or more of its
subsidiaries may also take 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 have a long hedge position in the
Index, individual stocks included in the Index or options contracts in, or other
derivative or synthetic instruments related to, the Index and such underlying
stocks, the Company or one or more of its subsidiaries may liquidate a portion
of their holdings at or about the time of the maturity of the SMILES. Depending,
among other things, on future market conditions, the aggregate amount and the
composition of such positions are likely to vary over time. Profits or losses
from any such position cannot be ascertained until such position is closed out
and any offsetting position or positions are taken into account. Although the
Company has no reason to believe that its hedging activity will have a material
impact on the price of such options, stocks, futures contracts and options on
futures contracts or on the value of the Index, there can be no assurance that
the Company will not affect such prices or value as a result of its hedging
activities. See also 'Use of Proceeds' in the accompanying Prospectus.
S-24
<PAGE>
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in an Underwriting Agreement
(the 'Underwriting Agreement') between the Company and the Underwriters named
therein (the 'Underwriters'), the Company has agreed to sell to each
Underwriter, and each of the Underwriters has severally agreed to purchase from
the Company, the principal amount of SMILES set forth opposite its name below:
PRINCIPAL AMOUNT
UNDERWRITERS OF SMILES
-------------------------------------- ----------------
Salomon Brothers Inc.................. $
Oppenheimer & Co., Inc................
Prudential Securities Incorporated....
----------------
Total.......................... $
----------------
----------------
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
SMILES if any are purchased.
The Company has been advised that the Underwriters propose to offer the
SMILES to the public initially at the public offering price set forth on the
cover page of this Prospectus Supplement (except that the price will be
$ per SMILES for the purchase of $ or more principal amount of
SMILES in any single transaction) and to certain dealers at a price that
represents a concession not in excess of $ per SMILES, and that the
Underwriters may allow, and each such dealer may reallow, to other dealers a
concession not exceeding $ per SMILES. After the initial public offering,
the public offering price and such concessions may be changed from time to time.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus Supplement (or if such 30th day is not a
Business Day, on the next Business Day thereafter), to purchase up to an
additional $ principal amount of SMILES from the Company at the same
price per SMILES as the initial SMILES to be purchased by the Underwriters. The
Underwriters may exercise such option only for the purpose of covering
over-allotments, if any, incurred in connection with the sale of SMILES offered
hereby.
The Company has been advised by the Underwriters that they may make a
market in the SMILES, subject to applicable laws and regulations. However, the
Underwriters are not obligated to do so and may discontinue any such
market-making at any time without notice. No assurance can be given that an
active public market for the SMILES will develop.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments the
Underwriters may be required to make in respect thereof.
The SMILES may be offered to investors outside the United States. The
Underwriters have further agreed that any offers and sales made outside the
United States will be made in compliance with any selling restrictions
applicable in the jurisdictions where such offers and sales are made.
Salomon Brothers Inc is an indirect wholly-owned subsidiary of the Company.
Accordingly, the offering is being made pursuant to the provisions of Rule 2720
of the Conduct Rules of the National Association of Securities Dealers, Inc.
In connection with this offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the SMILES. Such
transactions may include stabilization transactions effected in accordance with
Rule 104 of Regulation M under the Securities Exchange Act of 1934, as amended,
pursuant to which such persons may bid for or purchase SMILES for the purposes
of stabilizing their market price. The Underwriters also may create a short
position for their respective accounts by selling more SMILES in connection with
this offering than they are committed to purchase from the Company, and in such
S-25
<PAGE>
case may purchase SMILES in the open market following completion of this
offering to cover all or a portion of such short position. The Underwriters may
also cover all or a portion of such short position, up to an aggregate of
$ aggregate principal amount of SMILES, by exercising the Underwriters'
over-allotment option referred to above. In addition, Salomon Brothers Inc, on
behalf of the Underwriters, may impose 'penalty bids' under contractual
arrangements between the Underwriters whereby it may reclaim from an Underwriter
(or dealer participating in this offering) for the account of the Underwriters,
the selling concession with respect to SMILES that are distributed in this
offering but subsequently purchased for the account of the Underwriters in the
open market. Any of the transactions described in this paragraph may result in
the maintenance of the price of the SMILES at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph is required, and, if they are undertaken, they may be discontinued at
any time.
The Company or one or more its subsidiaries may from time to time
(including in the initial offering) purchase or acquire a position in the SMILES
and may, at its option, hold, resell or retire such SMILES. Salomon Brothers Inc
expects to offer and sell previously-issued SMILES in the course of its business
as a broker-dealer. Salomon Brothers Inc may act as principal or agent in such
transactions. This Prospects Supplement and the accompanying Prospects may be
used by the Company or any of its subsidiaries, including Salomon Brothers Inc,
in connection with such transactions. Such sales, if any, will be made at
varying prices related to prevailing market prices at the time of sale.
In the ordinary course of their respective businesses, certain of the
Underwriters and their respective affiliates have engaged and may in the future
engage in commercial and investment banking transactions with the Company and
its affiliates.
LEGAL OPINIONS
The validity of the SMILES will be passed upon for the Company and for the
Underwriters by Cleary, Gottlieb, Steen & Hamilton, New York, New York.
S-26
<PAGE>
INDEX OF DEFINED TERMS
PAGE
AMEX........................................ S-6
Assumed Supplemental Redemption Amount...... S-22
Benchmark Index Value....................... S-3
Business Day................................ S-14
Calculation Agent........................... S-7
Calculation Day............................. S-12
Calculation Period.......................... S-12
CBOE........................................ S-6
Company..................................... S-3
comparable yield............................ S-22
Contingent Debt Regulations................. S-22
Depositary.................................. S-16
Determination Date.......................... S-14
disposition................................. S-23
DTC......................................... S-3
Early Redemption Amount..................... S-5
Ending Index Value.......................... S-3
Exchange Act................................ S-7
Exchange Date............................... S-14
Exchange Index Value........................ S-5
Extended Determination Date................. S-14
Global Securities........................... S-16
Index....................................... S-3
Index Business Day.......................... S-12
Market Disruption Event..................... S-15
Maturity Date Payment....................... S-23
Merger...................................... S-7
NYSE........................................ S-6
Pricing Date................................ S-12
Principal Amount............................ S-3
Russell..................................... S-6
Russell 2000 Index.......................... S-3
Salomon Brothers............................ S-7
SEC......................................... S-7
SMILES...................................... Cover
Starting Index Value........................ S-3
Successor Index............................. S-15
Supplemental Redemption Amount.............. S-3
Tax OID..................................... S-10
Trading Day................................. S-12
Travelers................................... S-7
Underwriters................................ S-25
Underwriting Agreement...................... S-25
S-27
<PAGE>
ANNEX A
OFFICIAL NOTICE OF EXCHANGE
Dated: On or after December , 1997
The Bank of New York
101 Barclay Street, 21st Floor
New York, New York 10286
Salomon Inc
Seven World Trade Center
New York, New York 10048
Salomon Brothers Inc, as Calculation Agent
Seven World Trade Center
New York, New York 10048
Attn: Kevin Beauregard
Fax: (212) 783-1098
Dear Sirs:
The undersigned holder of the Russell 2000 Stock Market Index Linked
Exchangeable Securities(Service Mark) Due November 2004 of Salomon Inc (the
'SMILES') hereby irrevocably elects to exercise with respect to the number of
SMILES indicated below, as of the date hereof (or, if this letter is received
after 11:00 a.m. on any Trading Day, as of the next Trading Day, provided that
such day is on or prior to the eighth scheduled Trading Day prior to November
, 2004), the Exchange Right as described in the Prospectus Supplement dated
November , 1997 and the Prospectus dated April 5, 1996. Capitalized terms not
defined herein have the meanings given to such terms in the Prospectus
Supplement. Please date and acknowledge receipt of this notice in the place
provided below on the date of receipt, and fax a copy to the fax number
indicated. Upon receipt of this notice, the Company will deliver three Business
Days after the Determination Date with respect to such Exchange Date, an amount
in dollars with respect to each SMILES being exchanged, as determined by the
Calculation Agent, equal to the sum of the (A) the principal amount of such
SMILES and (B) the Early Redemption Amount, which shall be computed as described
in the Prospectus Supplement.
Very truly yours,
_________________________________________
Name of Holder
By:______________________________________
Title
_________________________________________
Fax No.
_________________________________________
Number of SMILES surrendered for exchange
S-28
<PAGE>
Receipt of the above Official Notice of Exchange is hereby acknowledged.
THE BANK OF NEW YORK
By: ________________________________________________________
Title
Date and time of acknowledgment ____________________________
SALOMON INC, as ISSUER
SALOMON Brothers Inc, as Calculation Agent
By SALOMON BROTHERS INC, as Calculation Agent
By: ________________________________________________________
Title
Date and time of acknowledgment ____________________________
S-29
<PAGE>
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.
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SALOMON BROTHERS INC
- --------------------------------------------------------------------------------
The date of this Prospectus is April 5, 1996.
<PAGE>
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>
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.
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<PAGE>
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.
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993 1992 1991
---- ----- ---- ---- ----
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
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 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.
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<PAGE>
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 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
5
<PAGE>
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 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
6
<PAGE>
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.
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
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<PAGE>
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 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.
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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 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
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'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.
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
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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).
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
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continuing; (iv) the Successor Corporation waives any right to redeem 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).
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.
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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 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
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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 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
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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 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.
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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, 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
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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 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
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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.
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
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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.
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.
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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).
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.
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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 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.
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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 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.
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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 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
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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 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,
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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 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
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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.
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.
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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 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.
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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 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
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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 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
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<PAGE>
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 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
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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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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION 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 THE 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 AN
OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Summary Information--Q&A............................ S-3
Incorporation of Certain Documents by Reference..... S-7
Salomon Inc......................................... S-7
Recent Developments................................. S-7
Risk Factors Relating to the SMILES................. S-8
Description of the SMILES........................... S-11
The Russell 2000 Index.............................. S-18
Certain United States Federal Income Tax
Considerations.................................... S-22
Use of Proceeds and Hedging......................... S-24
Plan of Distribution................................ S-25
Legal Opinions...................................... S-26
Index of Defined Terms.............................. S-27
PROSPECTUS
(Selected Provisions)
Available Information............................... 2
Incorporation of Certain Documents by Reference..... 2
Salomon Inc......................................... 3
Use of Proceeds..................................... 3
Ratio of Earnings to Fixed Charges and Preferred
Dividends......................................... 4
Description of Debt Securities...................... 4
Description of Warrants............................. 22
Limitations on Issuance of Bearer Securities and
Bearer Warrants................................... 28
Plan of Distribution................................ 29
ERISA Matters....................................... 30
Experts............................................. 31
SMILES(SERVICE MARK)
SALOMON INC
RUSSELL 2000 STOCK MARKET INDEX
LINKED EXCHANGEABLE SECURITIES(SERVICE MARK)
DUE NOVEMBER , 2004
SALOMON BROTHERS INC
OPPENHEIMER & CO., INC.
PRUDENTIAL SECURITIES INCORPORATED
PROSPECTUS SUPPLEMENT
DATED , 1997
